SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number 1-2578
OHIO EDISON COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-0437786
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
76 SOUTH MAIN STREET, AKRON, OHIO 44308
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-736-3402
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Each registered on
Common Stock, $9 par value New York Stock Exchange
Rights to Purchase Common Stock and
Chicago Stock Exchange
Cumulative Preferred Stock, $100 par value
3.90% Series
4.40% Series All series registered on
4.44% Series New York Stock Exchange
4.56% Series and
Chicago Stock Exchange
Cumulative Preferred Stock, $25 par value Registered on
7.75% Series New York Stock Exchange
and
Chicago Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. X
---
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days:
Yes X No
--- ---
State the aggregate market value of the voting stock held by non-
affiliates of the registrant: $3,354,747,946 as of March 7, 1997.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date:
CLASS OUTSTANDING AT MARCH 26, 1997
----- -----------------------------
Common Stock, $9 par value 152,569,437
Documents incorporated by reference (to the extent indicated
herein):
PART OF FORM 10-K INTO WHICH
DOCUMENT DOCUMENT IS INCORPORATED
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Annual Report to Stockholders for the
fiscal year ended December 31, 1996
(Pages 12-30) Part II
Proxy Statement for 1997 Annual Meeting
of Stockholders to be held April 24, 1997 Part III
TABLE OF CONTENTS
Page
----
Part I
Item 1. Business..................................... 1
The Company................................ 1
Merger Agreement........................... 1
Utility Regulation......................... 2
PUCO Rate Matters.......................... 2
PPUC Rate Matters.......................... 2
FERC Rate Matters.......................... 3
Fuel Recovery Procedures................... 3
Capital Requirements....................... 3
Central Area Power Coordination Group...... 5
Nuclear Regulation......................... 5
Nuclear Insurance.......................... 6
Environmental Matters...................... 7
Air Regulation........................... 7
Water Regulation......................... 8
Waste Disposal........................... 8
Summary.................................. 8
Fuel Supply................................ 8
System Capacity and Reserves............... 9
Regional Reliability....................... 10
Competition................................ 10
Research and Development................... 10
Executive Officers......................... 11
Item 2. Properties................................... 11
Item 3. Legal Proceedings............................ 13
Item 4. Submission of Matters to a Vote of
Security Holders........................... 13
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters............ 13
Item 6. Selected Financial Data...................... 13
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................. 13
Item 8. Financial Statements and Supplementary Data.. 13
Item 9. Changes In and Disagreements with
Accountants on Accounting and Financial
Disclosure................................. 13
Part III
Item 10. Directors and Executive Officers of the
Registrant................................. 13
Item 11. Executive Compensation....................... 13
Item 12. Security Ownership of Certain Beneficial
Owners and Management...................... 13
Item 13. Certain Relationships and Related
Transactions............................... 14
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K.................... 14
PART I
ITEM 1. BUSINESS
The Company
Ohio Edison Company (Company) was organized under the laws of
the State of Ohio in 1930 and owns property and does business as an
electric public utility in that state. The Company also has
ownership interests in certain generating facilities located in the
Commonwealth of Pennsylvania.
The Company furnishes electric service to communities in a
7,500 square mile area of central and northeastern Ohio. It also
provides transmission services and electric energy for resale to
certain municipalities in the Company's service area and
transmission services to certain rural cooperatives. The Company
also engages in the sale, purchase and interchange of electric
energy with other electric companies. The area it serves has a
population of approximately 2,537,000.
The Company owns all of the outstanding common stock of
Pennsylvania Power Company (Penn Power), a Pennsylvania
corporation, which furnishes electric service to communities in a
1,500 square mile area of western Pennsylvania. Penn Power also
provides transmission services and electric energy for resale to
certain municipalities in Pennsylvania. The area served by Penn
Power has a population of approximately 343,000.
Merger Agreement
On September 13, 1996, the Company and Centerior Energy
Corporation, an Ohio corporation, entered into an Agreement and
Plan of Merger. Under the Merger Agreement, the Company and
Centerior will form FirstEnergy Corp., a holding company which will
directly hold all of the issued and outstanding common stock of the
Company and all of the issued and outstanding common stock of
Centerior's direct subsidiaries, which include among others, The
Cleveland Electric Illuminating Company (CEI) and The Toledo Edison
Company (Toledo). Penn Power will remain a wholly owned subsidiary
of the Company. As a result of the Merger, the respective common
stock shareholders of the Company and Centerior will own all of the
outstanding shares of FirstEnergy Common Stock. All other classes
of capital stock of the Company and its subsidiaries and of the
subsidiaries of Centerior will be unaffected by the Merger and will
remain outstanding.
The Merger has been approved by the respective Boards of
Directors of the Company and Centerior and is expected to close
promptly after all of the conditions to the consummation of the
Merger, including the receipt of all necessary regulatory
approvals, are fulfilled or waived. An important condition already
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met was the approval by the Public Utilities Commission of Ohio
(PUCO) of FirstEnergy's Rate Reduction and Economic Development
Plan for CEI and Toledo in January 1997. This regulatory plan,
which is similar to the regulatory plan approved by the PUCO for
the Company (see "Utility Regulation-PUCO Rate Matters"), provides
for a $310 million reduction in base electric rates for CEI and
Toledo in 2006. The plan also requires additional depreciation (or
revaluation) of generating assets and additional amortization of
regulatory assets of at least $2 billion more than the amounts that
would have been recognized through December 31, 2005, without the
plan, and limits annual earnings on common stock for CEI and
Toledo. Shareholder meetings to vote on the Merger are scheduled to
be held on March 27, 1997. The receipt of all necessary regulatory
approvals, including approvals from the Federal Energy Regulatory
Commission (FERC), the Securities and Exchange Commission and the
Nuclear Regulatory Commission (NRC), are expected to take
approximately twelve to eighteen months from the date of the Merger
Agreement. The Pennsylvania Public Utility Commission (PPUC)
approved the merger on February 13, 1997.
Utility Regulation
The Company and Penn Power (Companies) are subject to broad
regulation as to rates and other matters by the PUCO and the PPUC.
With respect to their wholesale and interstate electric operations
and rates, the Companies are subject to regulation, including
regulation of their accounting policies and practices, by the FERC.
Under Ohio law, municipalities may regulate rates, subject to
appeal to the PUCO if not acceptable to the utility.
In 1986, a law was passed which extended the jurisdiction of
the PUCO to nonutility affiliates of holding companies exempt under
Section 3(a)(1) and 3(a)(2) of the Public Utility Holding Company
Act of 1935 (1935 Act) to the extent that the activities of such
affiliates affect or relate to the cost of providing electric
utility service in Ohio. The law, among other things, requires PUCO
approval of investments in, or the transfer of assets to,
nonutility affiliates. Investments in such affiliates are limited
to 15% of the aggregate capitalization of the holding company on a
consolidated basis. The Company is an exempt holding company under
Section 3(a)(2) of the 1935 Act, but the law has not had any effect
on its operations as they are currently conducted.
The Energy Policy Act of 1992 (1992 Act) amended portions of
the 1935 Act, providing independent power producers and other
nonregulated generating facilities easier entry into electric
generation markets. The 1992 Act also amended portions of the
Federal Power Act, authorizing the FERC, under certain
circumstances, to mandate access to utility-owned transmission
facilities. Following the enactment of the 1992 Act, the FERC has
ordered all utilities to file open access tariffs applicable to
transmission facilities, including provisions which require
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utilities to offer comparable services on a nondiscriminatory
basis.
PUCO Rate Matters
The Company's Rate Reduction and Economic Development Plan was
approved by the PUCO in 1995. The regulatory plan is designed to
enhance and accelerate economic development within the Company's
service area and to assure the Company's customers of long-term
competitive pricing for energy services.
The regulatory plan maintains current base electric rates for
the Company through December 31, 2005, unless additional revenues
are needed to recover the costs of changes in environmental,
regulatory or tax laws or regulations. As part of the regulatory
plan, transition rate credits were implemented for customers, which
are expected to reduce operating revenues by approximately $600
million during the regulatory plan period. The regulatory plan also
established a revised fuel recovery rate formula which eliminated
the automatic pass-through of fuel costs to the Company's retail
customers (see "Fuel Recovery Procedures").
All of the Company's regulatory assets are being recovered
under provisions of the regulatory plan. In addition, the PUCO
authorized the Company to recognize additional depreciation expense
related to its generating assets and additional amortization of
regulatory assets during the ten-year regulatory plan period of at
least $2 billion more than the amount that would have been
recognized if the regulatory plan were not in effect. These
additional amounts are being recovered through current rates. Among
other provisions, the regulatory plan also limits the Company's
annual earnings on common stock to a 13.21% return under a formula
adopted by the PUCO; any amounts otherwise earned in excess of the
limitation would be credited to the Company's retail customers in
a future period.
PPUC Rate Matters
Penn Power's Rate Stability and Economic Development Plan was
approved by the PPUC in the second quarter of 1996. This regulatory
plan maintains current base electric rates for Penn Power through
June 20, 2006 and revised its fuel recovery method (see "Fuel
Recovery Procedures"). All of Penn Power's regulatory assets are
being recovered under provisions of the regulatory plan. In
addition, the PPUC has authorized Penn Power to recognize
additional depreciation expense related to its generating assets
and additional amortization of regulatory assets during the ten-
year regulatory plan period of at least $358 million more than the
amounts that would have been recognized if the regulatory plan were
not in effect. These additional amounts are being recovered through
current rates.
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In December 1996, Pennsylvania enacted "The Electricity
Generation Customer Choice and Competition Act," which will permit
residents, including Penn Power's customers, to choose their
electric generation supplier, while transmission and distribution
services will continue to be supplied by their current providers.
Customer choice would be phased in over three years, beginning in
1999, after a two-year pilot program. The new Pennsylvania law also
establishes procedures and standards for the recovery of stranded
costs over an eight to nine-year period in the form of a transition
charge on customer billings, and allows utilities to seek PPUC
approval to securitize, or refinance, stranded costs which have
been determined by the PPUC to be recoverable. Penn Power believes
that this legislation will continue to provide for cost recovery in
a manner which meets the criteria for application of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects
of Certain Types of Regulation."
FERC Rate Matters
Rates for the Companies' respective wholesale customers are
regulated by the FERC. The Company's tariff for its customers was
approved by the FERC in 1989. Penn Power has agreements to sell
power to four wholesale customers; two of the agreements expire in
March 1998, and the other two will be in effect until September
1999. A former municipal customer of Penn Power signed a contract
with another energy supplier in November 1995. Penn Power and the
former customer have reached a settlement of Penn Power's proposed
transmission rate which was approved by the FERC on March 13, 1997.
Fuel Recovery Procedures
In accordance with its regulatory plan, the Company's Electric
Fuel Component (EFC) rate has been frozen until December 31, 2005,
subject only to limited periodic adjustments. The rate is adjusted
annually based on changes in the GDP Implicit Price Deflator,
unless significant changes in environmental, regulatory or tax laws
or regulations increase or decrease the cost of fuel. Such changes
in laws, regulations and/or taxes would require PUCO approval to be
reflected as an adjustment to the EFC rate. Furthermore, for the
period through July 1, 1999, the EFC rate will be limited to the
average fuel cost rate of certain utilities within the state.
Commencing July 1, 2000, the EFC rate will be limited to 97% of the
average fuel cost rate of these companies. The average fuel cost
rate for these utilities may be adjusted by the PUCO to reflect any
significant changes in the Phase II environmental compliance plans
of such companies involving capital additions or equipment
utilization.
Under its regulatory plan, Penn Power eliminated its energy
cost rate (ECR) for the recovery of fuel and net purchased power
costs as a separate component of customer charges. Energy
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costs were rolled into Penn Power's base electric rates at their
projected 1996-1997 level.
Capital Requirements
The Companies' total construction costs, excluding nuclear
fuel, amounted to approximately $122 million in 1996. Such costs
included expenditures for the betterment of existing facilities and
for the construction of transmission lines, distribution lines,
substations and other additions. For the years 1997-2001, such
construction costs are estimated to be approximately $600 million,
of which approximately $135 million is applicable to 1997. See
"Environmental Matters" below with regard to possible environment-
related expenditures not included in this estimate.
During the 1997-2001 period, maturities of, and sinking fund
requirements for, long-term debt and preferred stock will require
expenditures by the Companies of over $900 million, of which
approximately $164 million is applicable to 1997. These
requirements are expected to be met with internally generated cash.
Nuclear fuel purchases are financed through OES Fuel (a wholly
owned subsidiary of the Company) commercial paper and loans, both
of which are supported by a $225 million long-term bank credit
agreement. Investments for additional nuclear fuel during the 1997-
2001 period are estimated to be approximately $194 million, of
which approximately $45 million applies to 1997. During the same
periods, the Companies' nuclear fuel investments are expected to be
reduced by approximately $185 million and $43 million,
respectively, as the nuclear fuel is consumed. Also, the Companies
have operating lease commitments (net of PNBV Capital Trust income)
of approximately $424 million for the 1997-2001 period, of which
approximately $75 million relates to 1997. The Companies recover
the cost of nuclear fuel consumed and operating leases through
their electric rates.
Short-term borrowings outstanding at December 31, 1996,
consisted of $229.5 million of bank borrowings and $120.0 million
of OES Capital, Incorporated commercial paper. OES Capital is a
wholly owned subsidiary of the Company whose borrowings are secured
by customer accounts receivable. OES Capital can borrow up to $120
million under a receivables financing agreement at rates based on
certain bank commercial paper. The Companies also had $27 million
available under revolving lines of credit as of December 31, 1996.
In addition, $16.5 million was available through bank facilities
that provide for borrowings on a short-term basis at the banks'
discretion.
Based on their present plans, the Companies could provide for
their cash requirements in 1997 from the following sources: funds
to be received from operations; available cash and temporary
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cash investments (approximately $5 million as of December 31,
1996); the issuance of long-term debt (for refunding purposes) and
funds available under revolving credit arrangements.
The extent and type of future financings will depend on the
need for external funds as well as market conditions, the
maintenance of an appropriate capital structure and the ability of
the Companies to comply with coverage requirements in order to
issue first mortgage bonds and preferred stock. The Companies will
continue to monitor financial market conditions and, where
appropriate, may take advantage of economic opportunities to refund
debt and preferred stock to the extent that their financial
resources permit.
The coverage requirements contained in the first mortgage
indentures under which the Companies issue first mortgage bonds
provide that, except for certain refunding purposes, the Companies
may not issue first mortgage bonds unless applicable net earnings
(before income taxes), calculated as provided in the indentures,
for any period of twelve consecutive months within the fifteen
calendar months preceding the month in which such additional bonds
are issued, are at least twice annual interest requirements on
outstanding first mortgage bonds, including those being issued. The
Companies' respective articles of incorporation prohibit the sale
of preferred stock unless applicable gross income, calculated as
provided in the articles of incorporation, is equal to at least 1-
1/2 times the aggregate of the annual interest requirements on
indebtedness and annual dividend requirements on preferred stock
outstanding immediately thereafter.
With respect to the issuance of first mortgage bonds under the
Company's first mortgage indenture, the availability of property
additions is more restrictive than the earnings test at the present
time and would limit the amount of first mortgage bonds issuable
against property additions to $397 million. The Company is
currently able to issue $900 million principal amount of first
mortgage bonds against previously retired bonds without the need to
meet the above restrictions. Based upon earnings for 1996, the
Company would be permitted, under the earnings coverage test
contained in its charter, to issue at least $1.3 billion of
preferred stock at an assumed dividend rate of 9%. If the Company
were to issue additional debt at or prior to the time it issued
preferred stock, the amount of preferred stock which would be
issuable would be reduced.
To the extent that coverage requirements or market conditions
restrict the Companies' abilities to issue desired amounts of first
mortgage bonds or preferred stock, the Companies may seek other
methods of financing. Such financings could include the sale of
common stock and preference stock or of such other types of
securities as might be authorized by applicable regulatory
authorities which would not otherwise be sold and could result in
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annual interest charges and/or dividend requirements in excess of
those that would otherwise be incurred.
Central Area Power Coordination Group (CAPCO)
In September 1967, the CAPCO companies, consisting of the
Company, Penn Power, CEI, Duquesne Light Company (Duquesne) and
Toledo, announced a program for joint development of power
generation and transmission facilities. Included in the program are
Unit 7 at the W. H. Sammis Plant, Units 1, 2 and 3 at the Bruce
Mansfield Plant, Units 1 and 2 at the Beaver Valley Power Station
and the Perry Nuclear Power Plant, each now in service.
The present CAPCO Basic Operating Agreement provides, among
other things, for coordinated maintenance responsibilities among
the CAPCO companies, a limited and qualified mutual backup
arrangement in the event of outage of CAPCO units and certain
capacity and energy transactions among the CAPCO companies.
The agreements among the CAPCO companies generally treat the
Companies as a single system as between them and the other three
CAPCO companies, but, in agreements between the CAPCO companies and
others, all five companies are treated as separate entities.
Subject to any rights that might arise among the CAPCO companies as
such, each member company, severally and not jointly, is obligated
to pay only its proportionate share of the costs associated with
the facilities and the cost of required fuel. The CAPCO companies
have agreed that any modification of their arrangements or of their
agreed-upon programs requires their unanimous consent. Should any
member become unable to continue to pay its share of the costs
associated with a CAPCO facility, each of the other CAPCO companies
could be adversely affected in varying degrees because it may
become necessary for the remaining members to assume such costs for
the account of the defaulting member.
Under the agreements governing the construction and operation
of CAPCO generating units, the responsibility is assigned to a
specific CAPCO company. CEI has such responsibilities for Perry,
and Duquesne is responsible for Beaver Valley Units 1 and 2. The
Company monitors activities in connection with these units but must
rely to a significant degree on the operating company for necessary
information. The Company in its oversight role as a practical
matter cannot be privy to every detail; it is the operating company
that must directly supervise activities and then exercise its
reporting responsibilities to the co-owners. The Company critically
reviews the information given to it by the operating company, but
it cannot be absolutely certain that things it would have
considered significant have been reported or that it always would
have reached exactly the same conclusion about matters that are
reported. In addition, the time that is necessarily part of the
compiling and analyzing process creates a lag between the
occurrence of events and the time the Company becomes aware of
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their significance. The Companies have similar responsibilities to
the other CAPCO companies with respect to W.H. Sammis Unit 7 and
Bruce Mansfield Units 1, 2 and 3.
Nuclear Regulation
The construction and operation of nuclear generating units are
subject to the regulatory jurisdiction of the NRC including the
issuance by it of construction permits and operating licenses. The
NRC's procedures with respect to application for construction
permits and operating licenses afford opportunities for interested
parties to request public hearings on health, safety, environmental
and antitrust issues. In this connection, the NRC may require
substantial changes in operation or the installation of additional
equipment to meet safety or environmental standards with resulting
delay and added costs. The possibility also exists for
modification, denial or revocation of licenses or permits. Full
power operating licenses were issued for Beaver Valley Unit 1,
Perry and Beaver Valley Unit 2 on July 1, 1976, November 13, 1986
and August 14, 1987, respectively.
The NRC has promulgated and continues to promulgate
regulations related to the safe operation of nuclear power plants.
The Companies cannot predict what additional regulations will be
promulgated or design changes required or the effect that any such
regulations or design changes, or the consideration thereof, may
have upon the Beaver Valley and Perry plants. Although the
Companies have no reason to anticipate an accident at any nuclear
plant in which they have an interest, if such an accident did
happen, it could have a material but presently undeterminable
adverse effect on the Company's consolidated financial position. In
addition, such an accident at any operating nuclear plant, whether
or not owned by the Companies, could result in regulations or
requirements that could affect the operation or licensing of plants
that the Companies do own with a consequent but presently
undeterminable adverse impact, and could affect the Companies'
abilities to raise funds in the capital markets.
Nuclear Insurance
The Price-Anderson Act limits the public liability which can
be assessed with respect to a nuclear power plant to $8.92 billion
(assuming 110 units licensed to operate) for a single nuclear
incident, which amount is covered by: (i) private insurance
amounting to $200 million; and (ii) $8.72 billion provided by an
industry retrospective rating plan required by the NRC pursuant
thereto. Under such retrospective rating plan, in the event of a
nuclear incident at any unit in the United States resulting in
losses in excess of private insurance, up to $75.5 million (but not
more than $10 million per unit per year in the event of more than
one incident) must be contributed for each nuclear unit licensed to
operate in the country by the licensees thereof to cover
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liabilities arising out of the incident. Based on their present
ownership and leasehold interests in the Beaver Valley Station and
the Perry Plant, the Companies' maximum potential assessment under
these provisions (assuming the other CAPCO companies were to
contribute their proportionate share of any assessments under the
retrospective rating plan) would be $102.8 million per incident but
not more than $13 million in any one year for each incident.
In addition to the public liability insurance provided
pursuant to the Price-Anderson Act, the Companies have also
obtained insurance coverage in limited amounts for economic loss
and property damage arising out of nuclear incidents. The Companies
are members of Nuclear Electric Insurance Limited (NEIL) which
provides coverage (NEIL I) for the extra expense of replacement
power incurred due to prolonged accidental outages of nuclear
units. Under NEIL I, the Companies have policies, renewable yearly,
corresponding to their respective interests in the Beaver Valley
Station and the Perry Plant, which provide an aggregate indemnity
of up to approximately $315 million for replacement power costs
incurred during an outage after an initial 21-week waiting period.
Members of NEIL I pay annual premiums and are subject to
assessments if losses exceed the accumulated funds available to the
insurer. The Companies' present maximum aggregate assessment for
incidents at any covered nuclear facility occurring during a policy
year would be approximately $3.1 million.
The Companies are insured as to their respective interests in
the Beaver Valley Station and Perry Plant under property damage
insurance provided by American Nuclear Insurers, Mutual Atomic
Energy Liability Underwriters and NEIL to the operating company for
each plant. Under these arrangements, $2.75 billion of coverage for
decontamination costs, decommissioning costs, debris removal and
repair and/or replacement of property is provided for the Beaver
Valley Station and the Perry Plant. The Companies pay annual
premiums for this coverage and are liable for retrospective
assessments of up to approximately $13.4 million during a policy
year.
The Companies intend to maintain insurance against nuclear
risks as described above as long as it is available. To the extent
that replacement power, property damage, decontamination,
decommissioning, repair and replacement costs and other such costs
arising from a nuclear incident at any of the Companies' plants
exceed the policy limits of the insurance in effect with respect to
that plant, to the extent a nuclear incident is determined not to
be covered by the Companies' insurance policies, or to the extent
such insurance becomes unavailable in the future, the Companies
would remain at risk for such costs.
The NRC requires nuclear power plant licensees to obtain
minimum property insurance coverage of $1.06 billion or the amount
generally available from private sources, whichever is less. The
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proceeds of this insurance are required to be used first to ensure
that the licensed reactor is in a safe and stable condition and can
be maintained in that condition so as to prevent any significant
risk to the public health and safety. Within 30 days of
stabilization, the licensee is required to prepare and submit to
the NRC a cleanup plan for approval. The plan is required to
identify all cleanup operations necessary to decontaminate the
reactor sufficiently to permit the resumption of operations or to
commence decommissioning. Any property insurance proceeds not
already expended to place the reactor in a safe and stable
condition must be used first to complete those decontamination
operations that are ordered by the NRC. The Companies are unable to
predict what effect these requirements may have on the availability
of insurance proceeds to the Companies for the Companies'
bondholders.
Environmental Matters
Various federal, state and local authorities regulate the
Companies with regard to air and water quality and other
environmental matters. The Companies have estimated capital
expenditures for environmental compliance of approximately $14
million, which is included in the construction estimate given under
"Capital Requirements" for 1997 through 2001.
Air Regulation
Under the provisions of the Clean Air Act of 1970, both the
State of Ohio and the Commonwealth of Pennsylvania adopted ambient
air quality standards, and related emission limits, including
limits for sulfur dioxide (SO2) and particulates. In addition, the
U.S. Environmental Protection Agency (EPA) promulgated an SO2
regulatory plan for Ohio which became effective for the Company's
plants in 1977. Generating plants to be constructed in the future
and some future modifications of existing facilities will be
covered not only by the applicable state standards but also by EPA
emission performance standards for new sources. In both Ohio and
Pennsylvania the construction or modification of emission sources
requires approval from appropriate environmental authorities, and
the facilities involved may not be operated unless a permit or
variance to do so has been issued by those same authorities.
The Companies are in compliance with the current SO2 and
nitrogen oxides (NOx) reduction requirements under the Clean Air
Act Amendments of 1990. SO2 reductions through the year 1999 will
be achieved by burning lower-sulfur fuel, generating more
electricity from lower-emitting plants, and/or purchasing emission
allowances. Plans for complying with reductions required for the
year 2000 and thereafter have not been finalized. EPA is conducting
additional studies which could indicate the need for additional NOx
reductions from the Companies' Pennsylvania facilities by the year
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2003. The cost of such reductions, if required, may be substantial.
The Companies continue to evaluate their compliance plans and other
compliance options.
The Companies are required to meet federally approved SO2
regulations. Violations of such regulations can result in shutdown
of the generating unit involved and/or civil or criminal penalties
of up to $25,000 for each day the unit is in violation. The EPA has
an interim enforcement policy for SO2 regulations in Ohio that
allows for compliance based on a 30-day averaging period. The EPA
has proposed regulations that could change the interim enforcement
policy, including the method of determining compliance with
emission limits. The Companies cannot predict what action the EPA
may take in the future with respect to proposed regulations or the
interim enforcement policy.
In December 1996, EPA proposed changes in the National Ambient
Air Quality Standard for ozone and proposed a new standard for
previously unregulated ultra-fine particulate matter. Final
regulations for both of these standards are expected later in 1997.
The cost of compliance with these regulations may be substantial
and depends on the final provisions of the proposed regulations and
the manner in which they are implemented by the states in which the
Companies operated affected facilities.
Water Regulation
Various water quality regulations, the majority of which are
the result of the federal Clean Water Act and its amendments, apply
to the Companies' plants. In addition, Ohio and Pennsylvania have
water quality standards applicable to the Companies' operations. As
provided in the Clean Water Act, authority to grant federal
National Pollutant Discharge Elimination System (NPDES) water
discharge permits can be assumed by a state. Ohio and Pennsylvania
have assumed such authority.
Waste Disposal
As a result of the Resource Conservation and Recovery Act of
1976, as amended, and the Toxic Substances Control Act of 1976,
federal and state hazardous waste regulations have been
promulgated. These regulations may result in significantly
increased costs to dispose of waste materials. The ultimate effect
of these requirements cannot presently be determined.
Summary
Environmental controls are still in the process of development
and require, in many instances, balancing the needs for additional
quantities of energy in future years and the need to protect the
environment. As a result, the Companies cannot now estimate the
precise effect of existing and potential regulations
- 11 -
and legislation upon any of their existing and proposed facilities
and operations or upon their ability to issue additional first
mortgage bonds under their respective mortgages. These mortgages
contain covenants by the Companies to observe and conform to all
valid governmental requirements at the time applicable unless in
course of contest, and provisions which, in effect, prevent the
issuance of additional bonds if there is a completed default under
the mortgage. The provisions of each of the mortgages, in effect,
also require, in the opinion of counsel for the respective
Companies, that certification of property additions as the basis
for the issuance of bonds or other action under the mortgages be
accompanied by an opinion of counsel that the company certifying
such property additions has all governmental permissions at the
time necessary for its then current ownership and operation of such
property additions. The Companies intend to contest any
requirements they deem unreasonable or impossible for compliance or
otherwise contrary to the public interest. Developments in these
and other areas of regulation may require the Companies to modify,
supplement or replace equipment and facilities, and may delay or
impede the construction and operation of new facilities, at costs
which could be substantial.
Fuel Supply
The Companies' sources of generation during 1996 were 76.7%
coal and 23.3% nuclear. Approximately two-thirds of the Company's
annual coal purchase requirements are supplied under long-term
contracts. These contracts have minimum annual tonnage levels of
approximately 5,300,000 tons (including the Company's portion of
the coal purchase contract relating to the Bruce Mansfield Plant
discussed below). This contract coal is produced primarily from
mines located in Ohio, Pennsylvania, Kentucky and West Virginia;
the contracts expire at various times through February 28, 2003.
The Companies estimate their 1997 coal requirements to be
approximately 10,300,000 tons (including their respective shares of
the coal requirements of CAPCO's W. H. Sammis Unit 7 and the Bruce
Mansfield Plant). See "Environmental Matters" for factors
pertaining to meeting environmental regulations affecting coal-
fired generating units.
The Companies, together with the other CAPCO companies, have
each severally guaranteed (the Company's and Penn Power's composite
percentages being approximately 46.8% and 6.7%, respectively)
certain debt and lease obligations in connection with a coal supply
contract for the Bruce Mansfield Plant (see Note 6 of Notes to
Consolidated Financial Statements). As of December 31, 1996, the
Companies' shares of the guarantees were $58.3 million. The price
under the coal supply contract, which includes certain minimum
payments, has been determined to be sufficient to satisfy the debt
and lease obligations. This contract expires December 31, 1999.
- 12 -
The Companies' fuel costs (excluding disposal costs) for each
of the five years ended December 31, 1996, were as follows:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Cost of fuel consumed per
million BTUs:
Coal $1.32 $1.36 $1.36 $1.37 $1.40
Nuclear $ .52 $ .65 $ .75 $ .76 $ .83
Average fuel cost per kilowatt-hour
generated (cents) 1.16 1.22 1.26 1.31 1.31
OES Fuel is the sole lessor for the Companies' nuclear fuel
requirements (see "Capital Requirements" and Note 4F of Notes to
Consolidated Financial Statements).
The Companies and OES Fuel have contracts for the supply of
uranium sufficient to meet projected needs through 2000 and
conversion services sufficient to meet projected needs through
2001. Fabrication services for fuel assemblies have been contracted
by the CAPCO companies for the next three reloads for Beaver Valley
Unit 1, one reload for Beaver Valley Unit 2 (through approximately
2000 and 1998, respectively), and the next five reloads for Perry
(through approximately 2004). The Companies have a contract with
U.S. Enrichment Corporation for the majority of their enrichment
requirements for nuclear fuel through 2014.
Prior to the expiration of existing commitments, the Companies
intend to make additional arrangements for the supply of uranium
and for the subsequent conversion, enrichment, fabrication,
reprocessing and/or waste disposal services, the specific prices
and availability of which are not known at this time. Due to the
present lack of availability of domestic reprocessing services, to
the continuing absence of any program to begin development of such
reprocessing capability and questions as to the economics of
reprocessing, the Companies are calculating nuclear fuel costs
based on the assumption that spent fuel will not be reprocessed.
On-site spent fuel storage facilities for the Perry Plant are
expected to be adequate through 2010; facilities at Beaver Valley
Units 1 and 2 are expected to be adequate through 2011 and 2005,
respectively. After on-site storage capacity is exhausted,
additional storage capacity will have to be obtained which could
result in significant additional costs unless reprocessing services
or permanent waste disposal facilities become available. The
Federal Nuclear Waste Policy Act of 1982 provides for the
construction of facilities for the disposal of high-level nuclear
wastes, including spent fuel from nuclear power plants operated by
electric utilities; however, the selection of a suitable site has
become embroiled in the political process. Duquesne and CEI have
each previously entered into contracts with the U.S. Department of
Energy for the disposal of spent fuel from the Beaver Valley Power
Station and the Perry Plant, respectively.
- 13 -
System Capacity and Reserves
The 1996 net maximum hourly demand on the Companies of
6,067,000 kilowatts (kW) (including 450,000 kW of firm power sales
which extend through 2005 as discussed under "Competition")
occurred on August 6, 1996. The seasonal capability of the
Companies (including 932,000 kW of net firm and capacity purchases)
on that day was 6,557,000 kW. Of that system capability, 5.9% was
available to serve additional load and term power sales to other
utilities. Based on existing capacity plans, the load forecast made
in October 1996 and anticipated term power sales to other
utilities, the capacity margins during the 1997-2001 period are
expected to range from about 6% to 10%.
Regional Reliability
The Company participates with 26 other electric companies
operating in nine states in the East Central Area Reliability
Coordination Agreement (ECAR), which was organized for the purpose
of furthering the reliability of bulk power supply in the area
through coordination of the planning and operation by the ECAR
members of their bulk power supply facilities. The ECAR members
have established principles and procedures regarding matters
affecting the reliability of the bulk power supply within the ECAR
region. Procedures have been adopted regarding: i) the evaluation
and simulated testing of systems' performance; ii) the
establishment of minimum levels of daily operating reserves; iii)
the development of a program regarding emergency procedures during
conditions of declining system frequency; and iv) the basis for
uniform rating of generating equipment.
Competition
The Companies compete with other utilities for intersystem
bulk power sales and for sales to municipalities and cooperatives.
The Companies compete with suppliers of natural gas and other forms
of energy in connection with their industrial and commercial sales
and in the home climate control market, both with respect to new
customers and conversions, and with all other suppliers of
electricity. To date, there has been no substantial cogeneration by
the Companies' customers.
Technological advances and regulatory changes are driving
forces toward increasing competition in the energy market. The
Pennsylvania pilot program, which will allow residents to choose
their electric generation supplier (see "Utility Regulation-PPUC
Rate Matters") is one such regulatory change. In addition, many
large electricity users continue to push for some form of retail
wheeling, which would enable retail customers to purchase
electricity from producers other than the local utility. In
February 1996, the PUCO approved a change allowing large industrial
- 14 -
customers that have interruptible service contracts to buy their
power from other sources when they have been advised by their local
utility that service will be interrupted. Also, in Ohio, the
General Assembly has formed a twelve member, bipartisan committee
to study electric utility deregulation. While the General Assembly
and Federal Authorities consider full retail wheeling, the debate
could place downward pressure on the Companies' prices in the
future. The Companies are actively involved in these debates, but
are unable to predict the ultimate outcome.
In an effort to more fully utilize their facilities and hold
down rates to their other customers, the Companies have entered
into a long-term power sales agreement with another utility.
Currently, the Companies are selling 450,000 kW annually under this
contract through December 31, 2005. The Companies have the option
to reduce this commitment by 150,000 kW, with three years' advance
notice.
Research and Development
The Company participates in funding the Electric Power
Research Institute (EPRI), which was formed for the purpose of
expanding electric research and development under the voluntary
sponsorship of the nation's electric utility industry - public,
private and cooperative. Its goal is to mutually benefit utilities
and their customers by promoting the development of new and
improved technologies to help the utility industry meet present and
future electric energy needs in environmentally and economically
acceptable ways. EPRI conducts research on all aspects of electric
power production and use, including fuels, generating, delivery,
energy management and conservation, environmental effects and
energy analysis. The major portion of EPRI research and development
projects is directed toward practical solutions and their
applications to problems currently facing the electric utility
industry. In 1996, approximately 75% of the Company's research and
development expenditures were related to EPRI.
Executive Officers
The executive officers are elected at the annual organization
meeting of the Board of Directors, held immediately after the
annual meeting of stockholders, and hold office until the next such
organization meeting, unless the Board of Directors shall otherwise
determine, or unless a resignation is submitted.
- 15 -
Position Held During
Name Age Past Five Years Dates
- ------------- --- ------------------------------- ----------
W. R. Holland 60 Chairman of the Board and Chief
Executive Officer 1996-present
President and Chief Executive
Officer 1993-1996
President and Chief Operating
Officer *-1993
H. P. Burg 50 President, Chief Operating
Officer and Chief Financial
Officer 1996-present
Senior Vice President and Chief
Financial Officer *-1996
A. J. Alexander 45 Executive Vice President and
General Counsel 1996-present
Senior Vice President and
General Counsel *-1996
R. J. McWhorter 64 Senior Vice President-Generation
and Transmission *-present
E. T. Carey 54 Vice President-Regional
Operations and Customer
Service 1995-present
Vice President-Marketing and
Customer Service Support 1994-1995
Manager, Performance
Initiatives 1993-1994
Division Manager *-1993
A. R. Garfield 58 Vice President-System
Operations *-present
J. A. Gill 59 Vice President-Administration *-present
G. L. Pipitone 46 Vice President-Generation and
Transmission 1996-present
D. L. Yeager 62 Vice President-Special Projects *-present
N. C. Ashcom 49 Secretary 1994-present
Assistant Secretary *-1994
R. H. Marsh 46 Treasurer *-present
H. L. Wagner 44 Comptroller *-present
*Indicates position held at least since January 1, 1992.
- 16 -
At December 31, 1996, the Company had 3,258 employees and Penn
Power had 1,015 employees for a total of 4,273 employees for the
Companies.
ITEM 2.PROPERTIES
The Companies' respective first mortgage indentures
constitute, in the opinion of the Companies' counsel, direct first
liens on substantially all of the respective Companies' physical
property, subject only to excepted encumbrances, as defined in the
indentures. See Notes 3 and 4 to the Consolidated Financial
Statements for information concerning leases and financing
encumbrances affecting certain of the Companies' properties.
The Companies own, individually or together with one or more
of the other CAPCO companies as tenants in common, and/or lease,
the generating units in service as of March 1, 1997, shown on the
table below.
- 17 -
<TABLE>
<CAPTION>
Net Demonstrated Interest
-------------------------
Capacity (kW) Penn
---------------------
Companies' Ohio Edison Power
Plant-Location Unit Total Entitlement Owned Leased Owned
- ---------------------- ---- ----- ----------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Coal-Fired Units
R.E. Burger 3-5 406,000 406,000 100.00% - -
Shadyside, OH
B. Mansfield- 1 780,000 501,000 60.00% - 4.20%
Shippingport, PA 2 780,000 360,000 39.30% - 6.80%
3 800,000 335,000 35.60% - 6.28%
New Castle- 3-5 333,000 333,000 - - 100.00%
W. Pittsburg, PA
Niles-Niles, OH 1-2 216,000 216,000 100.00% - -
W.H. Sammis- 1-6 1,620,000 1,620,000 100.00% - -
Stratton, OH 7 600,000 413,000 48.00% - 20.80%
Nuclear Units
Beaver Valley- 1 810,000 425,000 35.00% - 17.50%
Shippingport, PA 2 820,000 343,000 20.22% 21.66% -
Perry- 1,194,000 421,000 17.42%* 12.58% 5.24%
N. Perry Village, OH
Oil/Gas-Fired Units
Edgewater-Lorain, OH 4 100,000 100,000 100.00% - -
West Lorain-Lorain, OH 1 120,000 120,000 100.00% - -
Other 164,000 164,000 84.82% - 15.18%
---------
Total 5,757,000
=========
<FN>
* Represents portion leased from a wholly owned subsidiary of the Company.
</TABLE>
- 18 -
Prolonged outages of existing generating units might make it
necessary for the Companies, depending upon the demand for electric
service upon their system, to use to a greater extent than
otherwise, less efficient and less economic generating units, or
purchased power, and in some cases may require the reduction of
load during peak periods under the Companies' interruptible
programs, all to an extent not presently determinable.
The Companies' generating plants and load centers are
connected by a transmission system consisting of elements having
various voltage ratings ranging from 23 kilovolts (kV) to 345 kV.
The Companies' overhead and underground transmission lines
aggregate 4,607 miles.
The Companies' electric distribution systems include 26,463
miles of overhead pole line and underground conduit carrying
primary, secondary and street lighting circuits. They own,
individually or together with one or more of the other CAPCO
companies as tenants in common, 448 substations with a total
installed transformer capacity of 24,849,513 kilovolt-amperes, of
which 70 are transmission substations, including 9 located at
generating plants.
The Company's transmission lines also interconnect with those
of American Electric Power Company, CEI, The Dayton Power and Light
Company, Duquesne, Monongahela Power Company and Toledo; Penn
Power's interconnect with those of Duquesne and West Penn Power
Company. These interconnections make possible utilization by the
Company and Penn Power of generating capacity constructed as a part
of the CAPCO program, as well as providing opportunities for the
sale of power to other utilities.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK-
HOLDER MATTERS
ITEM 6.SELECTED FINANCIAL DATA
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- 19 -
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Items 5 through 8 is
incorporated herein by reference to the Price Range of Common
Stock, Classification of Holders of Common Stock as of December 31,
1996, Selected Financial Data, Management's Discussion and Analysis
of Results of Operations and Financial Condition, and Consolidated
Financial Statements included on pages 13 through 30 in the
Company's 1996 Annual Report to Stockholders (Exhibit 13).
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10, with respect to
Identification of Directors and with respect to reports required to
be filed under Section 16 of the Securities Exchange Act of 1934,
is incorporated herein by reference to the Company's 1997 Proxy
Statement filed with the Securities and Exchange Commission (SEC)
pursuant to Regulation 14A and, with respect to Identification of
Executive Officers, to "Part I, Item 1. Business- Executive
Officers" herein.
ITEM 11.EXECUTIVE COMPENSATION
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Items 11, 12 and 13 is
incorporated herein by reference to the Company's 1997 Proxy
Statement filed with the SEC pursuant to Regulation 14A.
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
Included in Part II of this report and incorporated herein by
reference to the Company's 1996 Annual Report to Stockholders
(Exhibit 13 below) at the pages indicated.
- 20 -
Page No.
--------
Report of Independent Public Accountants..................... 12
Consolidated Statements of Income-Three Years Ended
December 31, 1996.......................................... 17
Consolidated Balance Sheets-December 31, 1996 and 1995....... 18
Consolidated Statements of Retained Earnings-Three
Years Ended December 31, 1996.............................. 19
Consolidated Statements of Capital Stock and Other
Paid-In Capital-
Three Years Ended December 31, 1996..................... 19
Consolidated Statements of Capitalization-December 31,
1996 and 1995.............................................. 20-21
Consolidated Statements of Cash Flows-Three Years
Ended December 31, 1996.................................... 22
Consolidated Statements of Taxes-Three Years Ended
December 31, 1996.......................................... 23
Notes to Consolidated Financial Statements................... 24-30
2. Financial Statement Schedules
Included in Part IV of this report:
Page No.
--------
Report of Independent Public Accountants..................... 29
Schedule - Three Years Ended December 31, 1996:
II - Consolidated Valuation and Qualifying Accounts.... 30
Schedules other than the schedule listed above are omitted for
the reason that they are not required or are not applicable, or the
required information is shown in the financial statements or notes
thereto.
3. Exhibits
Exhibit
Number
- -------
2-1 - Agreement and Plan of Merger, dated as of
September 13, 1996, between Ohio Edison Company
and Centerior Energy Corporation. (September 17,
1996 Form 8-K, Exhibit 2-1.)
3-1 - Amended Articles of Incorporation, Effective June
21, 1994, constituting the Company's Articles of
Incorporation. (1994 Form 10-K, Exhibit 3-1.)
3-2 - Code of Regulations of the Company as amended
April 24, 1986. (Registration No. 33-5081,
Exhibit (4)(d).)
- 21 -
Exhibit
Number
- -------
(B) 4-1 - Indenture dated as of August 1, 1930 between the
Company and Bankers Trust Company, as Trustee, as
amended and supplemented by Supplemental
Indentures:
Dated as of File Reference Exhibit No.
- ------------------ ------------------- -----------
March 3, 1931 2-1725 B-1,B-1(a),B-1(b)
November 1, 1935 2-2721 B-4
January 1, 1937 2-3402 B-5
September 1, 193 Form 8-A B-6
June 13, 1939 2-5462 7(a)-7
August 1, 1974 Form 8-A, August 28, 1974 2(b)
July 1, 1976 Form 8-A, July 28, 1976 2(b)
December 1, 1976 Form 8-A, December 15, 1976 2(b)
June 15, 1977 Form 8-A, June 27, 1977 2(b)
Supplemental Indentures:
Dated as of File Reference Exhibit No.
- ------------------ ------------------- -----------
September 1, 1944 2-61146 2(b)(2)
April 1, 1945 2-61146 2(b)(2)
September 1, 1948 2-61146 2(b)(2)
May 1, 1950 2-61146 2(b)(2)
January 1, 1954 2-61146 2(b)(2)
May 1, 1955 2-61146 2(b)(2)
August 1, 1956 2-61146 2(b)(2)
March 1, 1958 2-61146 2(b)(2)
April 1, 1959 2-61146 2(b)(2)
June 1, 1961 2-61146 2(b)(2)
September 1, 1969 2-34351 2(b)(2)
May 1, 1970 2-37146 2(b)(2)
September 1, 1970 2-38172 2(b)(2)
June 1, 1971 2-40379 2(b)(2)
August 1, 1972 2-44803 2(b)(2)
September 1, 1973 2-48867 2(b)(2)
May 15, 1978 2-66957 2(b)(4)
February 1, 1980 2-66957 2(b)(5)
April 15, 1980 2-66957 2(b)(6)
June 15, 1980 2-68023 (b)(4)(b)(5)
October 1, 1981 2-74059 (4)(d)
October 15, 1981 2-75917 (4)(e)
February 15, 1982 2-75917 (4)(e)
July 1, 1982 2-89360 (4)(d)
March 1, 1983 2-89360 (4)(e)
- 22 -
Exhibit
Number
- -------
Supplemental Indentures: (Cont'd)
Dated as of File Reference Exhibit No.
- ------------------ ------------------- -----------
March 1, 1984 2-89360 (4)(f)
September 15, 1984 2-92918 (4)(d)
September 27, 1984 33-2576 (4)(d)
November 8, 1984 33-2576 (4)(d)
December 1, 1984 33-2576 (4)(d)
December 5, 1984 33-2576 (4)(e)
January 30, 1985 33-2576 (4)(e)
February 25, 1985 33-2576 (4)(e)
July 1, 1985 33-2576 (4)(e)
October 1, 1985 33-2576 (4)(e)
January 15, 1986 33-8791 (4)(d)
May 20, 1986 33-8791 (4)(d)
June 3, 1986 33-8791 (4)(e)
October 1, 1986 33-29827 (4)(d)
July 15, 1989 33-34663 (4)(d)
August 25, 1989 33-34663 (4)(d)
February 15, 1991 33-39713 (4)(d)
May 1, 1991 33-45751 (4)(d)
May 15, 1991 33-45751 (4)(d)
September 15, 1991 33-45751 (4)(d)
April 1, 1992 33-48931 (4)(d)
June 15, 1992 33-48931 (4)(d)
September 15, 1992 33-48931 (4)(e)
April 1, 1993 33-51139 (4)(d)
June 15, 1993 33-51139 (4)(d)
September 15, 1993 33-51139 (4)(d)
November 15, 1993 1-2578 (4)(2)
April 1, 1995 1-2578 (4)(2)
May 1, 1995 1-2578 (4)(2)
July 1, 1995 1-2578 (4)(2)
10-1- Administration Agreement between the CAPCO Group dated
as of September 14, 1967. (Registration No. 2-43102,
Exhibit 5(c)(2).)
10-2 - Amendment No. 1 dated January 4, 1974 to Administration
Agreement between the CAPCO Group dated as of September
14, 1967. (Registration No. 2-68906, Exhibit 5(c)(3).)
10-3 - Transmission Facilities Agreement between the CAPCO
Group dated as of September 14, 1967. (Registration No.
2-43102, Exhibit 5(c)(3).)
- 23 -
Exhibit
Number
- -------
10-4 - Amendment No. 1 dated as of January 1, 1993 to
Transmission Facilities Agreement between the CAPCO
Group dated as of September 14, 1967. (1993 Form 10-K,
Exhibit 10-4.)
10-5 - Agreement for the Termination or Construction of Certain
Agreements effective September 1, 1980 among the CAPCO
Group. (Registration No. 2-68906, Exhibit 10-4.)
10-6 - Amendment dated as of December 23, 1993 to Agreement for
the Termination or Construction of Certain Agreements
effective September 1, 1980 among the CAPCO Group. (1993
Form 10-K, Exhibit 10-6.)
10-7 - CAPCO Basic Operating Agreement, as amended September 1,
1980. (Registration No. 2-68906, Exhibit 10-5.)
10-8 - Amendment No. 1 dated August 1, 1981, and Amendment No.
2 dated September 1, 1982 to CAPCO Basic Operating
Agreement, as amended September 1, 1980. (September 30,
1981 Form 10-Q, Exhibit 20-1 and 1982 Form 10-K,
Exhibit 19-3, respectively.)
10-9 - Amendment No. 3 dated July 1, 1984 to CAPCO Basic
Operating Agreement, as amended September 1, 1980. (1985
Form 10-K, Exhibit 10-7.)
10-10 - Basic Operating Agreement between the CAPCO Companies
as amended October 1, 1991. (1991 Form 10-K, Exhibit 10-
8.)
10-11 - Basic Operating Agreement between the CAPCO Companies
as amended January 1, 1993. (1993 Form 10-K, Exhibit 10-
11.)
10-12 - Memorandum of Agreement effective as of September 1,
1980 among the CAPCO Group. (1982 Form 10-K, Exhibit 19-
2.)
10-13 - Operating Agreement for Beaver Valley Power Station
Units Nos. 1 and 2 as Amended and Restated September 15,
1987, by and between the CAPCO Companies. (1987 Form 10-
K, Exhibit 10-15.)
10-14 - Construction Agreement with respect to Perry Plant
between the CAPCO Group dated as of July 22, 1974.
(Registration No. 2-52251 of Toledo Edison Company,
Exhibit 5(yy).)
- 24 -
Exhibit
Number
- -------
10-15 - Participation Agreement No. 1 relating to the financing
of the development of certain coal mines, dated as of
October 1, 1973, among Quarto Mining Company, the CAPCO
Group, Energy Properties, Inc., General Electric Credit
Corporation, the Loan Participants listed in Schedules
A and B thereto, Central National Bank of Cleveland, as
Owner Trustee, National City Bank, as Loan Trustee, and
Owner Trustee, National City Bank, as Loan Trustee, and
National City Bank, as Bond Trustee. (Registration No.
2-61146, Exhibit 5(e)(1).)
10-16 - Amendment No. 1 dated as of September 15, 1978 to
Participation Agreement No. 1 dated as of October 1,
1973 among Quarto Mining Company, the CAPCO Group,
Energy Properties, Inc., General Electric Credit
Corporation, the Loan Participants listed in Schedules
A and B thereto, Central National Bank of Cleveland as
Owner Trustee, National City Bank as Loan Trustee and
National City Bank as Bond Trustee. (Registration No. 2-
68906 of Pennsylvania Power Company, Exhibit 5(e)(2).)
10-17 - Participation Agreement No. 2 relating to the financing
of the development of certain coal mines, dated as of
August 1, 1974, among Quarto Mining Company, the CAPCO
Group, Energy Properties, Inc., General Electric Credit
Corporation, the Loan Participants listed in Schedules
A and B thereto, Central National Bank of Cleveland, as
Owner Trustee, National City Bank, as Loan Trustee, and
National City Bank, as Bond Trustee. (Registration No.
2-53059, Exhibit 5(h)(2).)
10-18 - Amendment No. 1 dated as of September 15, 1978 to
Participation Agreement No. 2 dated as of August 1, 1974
among Quarto Mining Company, the CAPCO Group, Energy
Properties, Inc., General Electric Credit Corporation,
the Loan Participants listed in Schedules A and B
thereto, Central National Bank of Cleveland as Owner
Trustee, National City Bank as Loan Trustee and National
City Bank as Bond Trustee. (Registration No. 2-68906 of
Pennsylvania Power Company, Exhibit 5(e)(4).)
10-19 - Participation Agreement No. 3 dated as of September 15,
1978 among Quarto Mining Company, the CAPCO Companies,
Energy Properties, Inc., General Electric Credit
Corporation, the Loan Participants listed in Schedules
A and B thereto, Central National Bank of Cleveland as
Owner Trustee, and National City Bank as Loan Trustee
and Bond Trustee. (Registration No. 2-68906 of
Pennsylvania Power Company, Exhibit 5(e)(5).)
- 25 -
Exhibit
Number
- -------
10-20 - Participation Agreement No. 4 dated as of October 31,
1980 among Quarto Mining Company, the CAPCO Group, the
Loan Participants listed in Schedule A thereto and
National City Bank as Bond Trustee. (Registration No. 2-
68906 of Pennsylvania Power Company, Exhibit 10-16.)
10-21 - Participation Agreement dated as of May 1, 1986, among
Quarto Mining Company, the CAPCO Companies, the Loan
Participants thereto, and National City Bank as Bond
Trustee. (1986 Form 10-K, Exhibit 10-22.)
10-22 - Participation Agreement No. 6 dated as of December 1,
1991 among Quarto Mining Company, The Cleveland Electric
Illuminating Company, Duquesne Light Company, Ohio
Edison Company, Pennsylvania Power Company, the Toledo
Edison Company, the Loan Participants listed in Schedule
A thereto, National City Bank, as Mortgage Bond Trustee
and National City Bank, as Refunding Bond Trustee. (1991
Form 10-K, Exhibit 10-19.)
10-23 - Agreement entered into as of October 20, 1981 among the
CAPCO Companies regarding the use of Quarto coal at
Mansfield Units 1, 2 and 3. (1981 Form 10-K, Exhibit 20-
1.)
10-24 - Restated Option Agreement dated as of May 1, 1983 by and
between the North American Coal Corporation and the
CAPCO Companies. (1983 Form 10-K, Exhibit 19-1.)
10-25 - Trust Indenture and Mortgage dated as of October 1, 1973
between Quarto Mining Company and National City Bank, as
Bond Trustee, together with Guaranty dated as of October
1, 1973 with respect thereto by the CAPCO Group.
(Registration No. 2-61146, Exhibit 5(e)(5).)
10-26 - Amendment No. 1 dated August 1, 1974 to Trust Indenture
and Mortgage dated as of October 1, 1973 between Quarto
Mining Company and National City Bank, as Bond Trustee,
together with Amendment No. 1 dated August 1, 1974 to
Guaranty dated as of October 1, 1973 with respect
thereto by the CAPCO Group. (Registration No. 2-53059,
Exhibit 5(h)(2).)
10-27 - Amendment No. 2 dated as of September 15, 1978 to the
Trust Indenture and Mortgage dated as of October 1,
1973, as amended, between Quarto Mining Company and
National City Bank, as Bond Trustee, together with
Amendment No. 2 dated as of September 15, 1978 to
- 26 -
Exhibit
Number
- -------
Guaranty dated as ofOctober 1, 1973 with respect to the
CAPCO Group. (Registration No. 2-68906 of Pennsylvania
Power Company, Exhibits 5(e)(11) and 5(e)(12).)
10-28 - Amendment No. 3 dated as of October 31, 1980, to Trust
Indenture and Mortgage dated as of October 1, 1973, as
amended between Quarto Mining Company and National City
Bank as Bond Trustee. (Registration No. 2-68906 of
Pennsylvania Power Company, Exhibit 10-16.)
10-29 - Amendment No. 4 dated as of July 1, 1985 to the Trust
Indenture and Mortgage dated as of October 1, 1973, as
amended between Quarto Mining Company and National City
Bank as Bond Trustee. (1985 Form 10-K, Exhibit 10-28.)
10-30 - Amendment No. 5 dated as of May 1, 1986, to the Trust
Indenture and Mortgage between Quarto and National City
Bank as Bond Trustee. (1986 Form 10-K, Exhibit 10-30.)
10-31 - Amendment No. 6 dated as of December 1, 1991, to the
Trust Indenture and Mortgage dated as of October 1,
1973, between Quarto Mining Company and National City
Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-28.)
10-32 - Trust Indenture dated as of December 1, 1991, between
Quarto Mining Company and National City Bank, as Bond
Trustee. (1991 Form 10-K, Exhibit 10-29.)
10-33 - Amendment No. 3 dated as of October 31, 1980 to the Bond
Guaranty dated as of October 1, 1973, as amended, with
respect to the CAPCO Group. (Registration No. 2- 68906
of Pennsylvania Power Company, Exhibit 10-16.)
10-34 - Amendment No. 4 dated as of July 1, 1985 to the Bond
Guaranty dated as of October 1, 1973, as amended, by the
CAPCO Companies to National City Bank as Bond Trustee.
(1985 Form 10-K, Exhibit 10-30.)
10-35 - Amendment No. 5 dated as of May 1, 1986, to the Bond
Guaranty by the CAPCO Companies to National City Bank as
Bond Trustee. (1986 Form 10-K, Exhibit 10-33.)
10-36 - Amendment No. 6A dated as of December 1, 1991, to the
Bond Guaranty dated as of October 1, 1973, by The
Cleveland Electric Illuminating Company, Duquesne Light
Company, Ohio Edison Company, Pennsylvania Power
Company, the Toledo Edison Company to National City
Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-33.)
- 27 -
Exhibit
Number
- -------
10-37 - Amendment No. 6B dated as of December 30, 1991, to the
Bond Guaranty dated as of October 1, 1973 by The
Cleveland Electric Illuminating Company, Duquesne Light
Company, Ohio Edison Company, Pennsylvania Power
Company, the Toledo Edison Company to National City
Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-34.)
10-38 - Bond Guaranty dated as of December 1, 1991, by The
Cleveland Electric Illuminating Company, Duquesne Light
Company, Ohio Edison Company, Pennsylvania Power
Company, the Toledo Edison Company to National City
Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-35.)
10-39 - Open end Mortgage dated as of October 1, 1973 between
Quarto Mining Company and the CAPCO Companies and
Amendment No. 1 thereto, dated as of September 15, 1978.
(Registration No. 2-68906 of Pennsylvania Power Company,
Exhibit 10-23.)
10-40 - Repayment and Security Agreement and Assignment of Lease
dated as of October 1, 1973 between Quarto Mining
Company and Ohio Edison Company as Agent for the CAPCO
Companies and Amendment No. 1 thereto, dated as of
September 15, 1978. (1980 Form 10-K, Exhibit 20-2.)
10-41 - Restructuring Agreement dated as of April 1, 1985 among
Quarto Mining Company, the Company and the other CAPCO
Companies, Energy Properties, Inc., General Electric
Credit Corporation, the Loan Participants signatories
thereto, Central National Bank of Cleveland, as Owner
Trustee and National City Bank as Loan Trustee and Bond
Trustee. (1985 Form 10-K, Exhibit 10-33.)
10-42 - Unsecured Note Guaranty dated as of July 1, 1985 by the
CAPCO Companies to General Electric Credit Corporation.
(1985 Form 10-K, Exhibit 10-34.)
10-43 - Memorandum of Understanding dated March 31, 1985 among
the CAPCO Companies. (1985 Form 10-K, Exhibit 10-35.)
(C)10-44- Ohio Edison System Executive Supplemental Life Insurance
Plan. (1995 Form 10-K, Exhibit 10-44.)
(C)10-45- Ohio Edison System Executive Incentive Compensation
Plan. (1995 Form 10-K, Exhibit 10-45.)
(C)10-46- Ohio Edison System Restated and Amended Executive
Deferred Compensation Plan. (1995 Form 10-K, Exhibit 10-
46.)
- 28 -
Exhibit
Number
- -------
(C)10-47- Ohio Edison System Restated and Amended Supplemental
Executive Retirement Plan. (1995 Form 10-K, Exhibit 10-
47.)
(C)10-48- Severance pay agreement between Ohio Edison Company and
W. R. Holland. (1995 Form 10-K, Exhibit 10-48.)
(C)10-49- Severance pay agreement between Ohio Edison Company and
H. P. Burg. (1995 Form 10-K, Exhibit 10-49.)
(C)10-50- Severance pay agreement between Ohio Edison Company and
A. J. Alexander. (1995 Form 10-K, Exhibit 10-50.)
(C)10-51- Severance pay agreement between Ohio Edison Company and
J. A. Gill. (1995 Form 10-K, Exhibit 10-51.)
(D)10-52- Participation Agreement dated as of March 16, 1987 among
Perry One Alpha Limited Partnership, as Owner
Participant, the Original Loan Participants listed in
Schedule 1 Hereto, as Original Loan Participants, PNPP
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1986 Form 10-K, Exhibit 28-1.)
(D)10-53- Amendment No. 1 dated as of September 1, 1987 to
Participation Agreement dated as of March 16, 1987 among
Perry One Alpha Limited Partnership, as Owner
Participant, the Original Loan Participants listed in
Schedule 1 thereto, as Original Loan Participants, PNPP
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company (now The Bank of New York), as Indenture
Trustee, and Ohio Edison Company, as Lessee. (1991 Form
10-K, Exhibit 10-46.)
(D)10-54- Amendment No. 3 dated as of May 16, 1988 to
Participation Agreement dated as of March 16, 1987, as
amended among Perry One Alpha Limited Partnership, as
Owner Participant, PNPP Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee, and Ohio Edison Company,
as Lessee. (1992 Form 10-K, Exhibit 10-47.)
(D)10-55- Amendment No. 4 dated as of November 1, 1991 to
Participation Agreement dated as of March 16, 1987 among
Perry One Alpha Limited Partnership, as Owner
Participant, PNPP Funding Corporation, as Funding
Corporation, PNPP II Funding Corporation, as New Funding
- 29 -
Exhibit
Number
- -------
Corporation, The First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture Trustee and
Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit
10-47.)
(D)10-56- Amendment No. 5 dated as of November 24, 1992 to
Participation Agreement dated as of March 16, 1987, as
amended, among Perry One Alpha Limited Partnership, as
Owner Participant, PNPP Funding Corporation, as Funding
Corporation, PNPPII Funding Corporation, as New Funding
Corporation, The First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture Trustee and
Ohio Edison Company as Lessee. (1992 Form 10-K, Exhibit
10-49.)
(D)10-57- Amendment No. 6 dated as of January 12, 1993 to
Participation Agreement dated as of March 16, 1987 among
Perry One Alpha Limited Partnership, as Owner
Participant, PNPP Funding Corporation, as Funding
Corporation, PNPP II Funding Corporation, as New Funding
Corporation, The First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture Trustee and
Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit
10-50.)
(D)10-58- Amendment No. 7 dated as of October 12, 1994 to
Participation Agreement dated as of March 16, 1987 as
amended, among Perry One Alpha Limited Partnership, as
Owner Participant, PNPP Funding Corporation, as Funding
Corporation, PNPP II Funding Corporation, as New Funding
Corporation, The First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture Trustee and
Ohio Edison Company, as Lessee. (1994 Form 10-K, Exhibit
10-54.)
(D)10-59- Facility Lease dated as of March 16, 1987 between The
First National Bank of Boston, as Owner Trustee, with
Perry One Alpha Limited Partnership, Lessor, and Ohio
Edison Company, Lessee. (1986 Form 10-K, Exhibit 28-2.)
(D)10-60- Amendment No. 1 dated as of September 1, 1987 to
Facility Lease dated as of March 16, 1987 between The
First National Bank of Boston, as Owner Trustee, Lessor
and Ohio Edison Company, Lessee. (1991 Form 10-K,
Exhibit 10-49.)
(D)10-61- Amendment No. 2 dated as of November 1, 1991, to
Facility Lease dated as of March 16, 1987, between The
First National Bank of Boston, as Owner Trustee, Lessor
- 30 -
Exhibit
Number
- -------
and Ohio Edison Company, Lessee. (1991 Form 10-K,
Exhibit 10-50.)
(D)10-62- Amendment No. 3 dated as of November 24, 1992 to
Facility Lease dated as of March 16, 1987, as amended,
between The First National Bank of Boston, as Owner
Trustee, with Perry One Alpha Limited Partnership, as
Owner Participant and Ohio Edison Company, as Lessee.
(1992 Form 10-K, Exhibit 10-54.)
(D)10-63- Amendment No. 4 dated as of January 12, 1993 to Facility
Lease dated as of March 16, 1987 as amended, between,
The First National Bank of Boston, as Owner Trustee,
with Perry One Alpha Limited Partnership, as Owner
Participant, and Ohio Edison Company, as Lessee. (1994
Form 10-K, Exhibit 10-59.)
(D)10-64- Amendment No. 5 dated as of October 12, 1994 to Facility
Lease dated as of March 16, 1987 as amended, between,
The First National Bank of Boston, as Owner Trustee,
with Perry One Alpha Limited Partnership, as Owner
Participant, and Ohio Edison Company, as Lessee. (1994
Form 10-K, Exhibit 10-60.)
(D)10-65- Letter Agreement dated as of March 19, 1987 between Ohio
Edison Company, Lessee, and The First National Bank of
Boston, as Owner Trustee under a Trust dated March 16,
1987 with Chase Manhattan Realty Leasing Corporation,
required by Section 3(d) of the Facility Lease. (1986
Form 10-K, Exhibit 28-3.)
(D)10-66- Ground Lease dated as of March 16, 1987 between Ohio
Edison Company, Ground Lessor, and The First National
Bank of Boston, as Owner Trustee under a Trust
Agreement, dated as of March 16, 1987, with the Owner
Participant, Tenant. (1986 Form 10-K, Exhibit 28-4.)
(D)10-67- Trust Agreement dated as of March 16, 1987 between Perry
One Alpha Limited Partnership, as Owner Participant, and
The First National Bank of Boston. (1986 Form 10-K,
Exhibit 28-5.)
(D)10-68- Trust Indenture, Mortgage, Security Agreement and
Assignment of Facility Lease dated as of March 16, 1987
between The First National Bank of Boston, as Owner
Trustee under a Trust Agreement dated as of March 16,
1987 with Perry One Alpha Limited Partnership, and
Irving Trust Company, as Indenture Trustee. (1986 Form
10-K, Exhibit 28-6.)
- 31 -
Exhibit
Number
- -------
(D)10-69- Supplemental Indenture No. 1 dated as of September 1,
1987 to Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease dated as of March 16,
1987 between The First National Bank of Boston as Owner
Trustee and Irving Trust Company (now The Bank of New
York), as Indenture Trustee. (1991 Form 10-K, Exhibit
10-55.)
(D)10-70- Supplemental Indenture No. 2 dated as of November 1,
1991 to Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease dated as of March 16,
1987 between The First National Bank of Boston, as Owner
Trustee and The Bank of New York, as Indenture Trustee.
(1991 Form 10-K, Exhibit 10-56.)
(D)10-71- Tax Indemnification Agreement dated as of March 16, 1987
between Perry One, Inc. and PARock Limited Partnership
as General Partners and Ohio Edison Company, as Lessee.
(1986 Form 10-K, Exhibit 28-7.)
(D)10-72- Amendment No. 1 dated as of November 1, 1991 to Tax
Indemnification Agreement dated as of March 16, 1987
between Perry One, Inc. and Parock Limited Partnership
and Ohio Edison Company. (1991 Form 10-K, Exhibit 10-
58.)
(D)10-73- Amendment No. 2 dated as of January 12, 1993 to Tax
Indemnification Agreement dated as of March 16, 1987
between Perry One, Inc. and Parock Limited Partnership
and Ohio Edison Company. (1994 Form 10-K, Exhibit 10-
69.)
(D)10-74- Amendment No. 3 dated as of October 12, 1994 to Tax
Indemnification Agreement dated as of March 16, 1987
between Perry One, Inc. and Parock Limited Partnership
and Ohio Edison Company. (1994 Form 10-K, Exhibit 10-
70.)
(D)10-75- Partial Mortgage Release dated as of March 19, 1987
under the Indenture between Ohio Edison Company and
Bankers Trust Company, as Trustee, dated as of the 1st
day of August, 1930. (1986 Form 10-K, Exhibit 28-8.)
(D)10-76- Assignment, Assumption and Further Agreement dated as
of March 16, 1987 among The First National Bank of
Boston, as Owner Trustee under a Trust Agreement, dated
as of March 16, 1987, with Perry One Alpha Limited
Partnership, The Cleveland Electric Illuminating
- 32 -
Exhibit
Number
- -------
Company, Duquesne Light Company, Ohio Edison Company,
Pennsylvania Power Company and Toledo Edison Company.
(1986 Form 10-K, Exhibit 28-9.)
(D)10-77- Additional Support Agreement dated as of March 16, 1987
between The First National Bank of Boston, as Owner
Trustee under a Trust Agreement, dated as of March 16,
1987, with Perry One Alpha Limited Partnership, and Ohio
Edison Company. (1986 Form 10-K, Exhibit 28-10.)
(D)10-78- Bill of Sale, Instrument of Transfer and Severance
Agreement dated as of March 19, 1987 between Ohio Edison
Company, Seller, and The First National Bank of Boston,
as Owner Trustee under a Trust Agreement, dated as of
March 16, 1987, with Perry One Alpha Limited
Partnership. (1986 Form 10-K, Exhibit 28- 11.)
(D)10-79- Easement dated as of March 16, 1987 from Ohio Edison
Company, Grantor, to The First National Bank of Boston,
as Owner Trustee under a Trust Agreement, dated as of
March 16, 1987, with Perry One Alpha Limited
Partnership, Grantee. (1986 Form 10-K, File Exhibit
28-12.)
10-80- Participation Agreement dated as of March 16, 1987 among
Security Pacific Capital Leasing Corporation, as Owner
Participant, the Original Loan Participants listed in
Schedule 1 Hereto, as Original Loan Participants, PNPP
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1986 Form 10-K, as Exhibit 28-13.)
10-81- Amendment No. 1 dated as of September 1, 1987 to
Participation Agreement dated as of March 16, 1987 among
Security Pacific Capital Leasing Corporation, as Owner
Participant, The Original Loan Participants Listed in
Schedule 1 thereto, as Original Loan Participants, PNPP
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1991 Form 10-K, Exhibit 10-65.)
10-82- Amendment No. 4 dated as of November 1, 1991, to
Participation Agreement dated as of March 16, 1987 among
Security Pacific Capital Leasing Corporation, as Owner
Participant, PNPP Funding Corporation, as Funding
Corporation, PNPP II Funding Corporation, as New Funding
Corporation, The First National Bank of Boston, as Owner
- 33 -
Exhibit
Number
- -------
Trustee, The Bank of New York, as Indenture Trustee and
Ohio Edison Company, as Lessee. (1991 Form 10-K,
Exhibit 10-66.)
10-83- Amendment No. 5 dated as of November 24, 1992 to
Participation Agreement dated as of March 16, 1987 as
amended among Security Pacific Capital Leasing
Corporation, as Owner Participant, PNPP Funding
Corporation, as Funding Corporation, PNPP II Funding
Corporation, as New Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank of
New York, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1992 Form 10-K, Exhibit 10-71.)
10-84- Amendment No. 6 dated as of January 12, 1993 to
Participation Agreement dated as of March 16, 1987 as
amended among Security Pacific Capital Leasing
Corporation, as Owner Participant, PNPP Funding
Corporation, as Funding Corporation, PNPP II Funding
Corporation, as New Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank of
New York, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1994 Form 10-K, Exhibit 10-80.)
10-85- Amendment No. 7 dated as of October 12, 1994 to
Participation Agreement dated as of March 16, 1987 as
amended among Security Pacific Capital Leasing
Corporation, as Owner Participant, PNPP Funding
Corporation, as Funding Corporation, PNPP II Funding
Corporation, as New Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank of
New York, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1994 Form 10-K, Exhibit 10-81.)
10-86- Facility Lease dated as of March 16, 1987 between The
First National Bank of Boston, as Owner Trustee, with
Security Pacific Capital Leasing Corporation, Lessor,
and Ohio Edison Company, as Lessee. (1986 Form 10-K,
Exhibit 28-14.)
10-87- Amendment No. 1 dated as of September 1, 1987 to
Facility Lease dated as of March 16, 1987 between The
First National Bank of Boston as Owner Trustee, Lessor
and Ohio Edison Company, Lessee. (1991 Form 10-K,
Exhibit 10-68.)
- 34 -
Exhibit
Number
- -------
10-88- Amendment No. 2 dated as of November 1, 1991 to Facility
Lease dated as of March 16, 1987 between The First
National Bank of Boston as Owner Trustee, Lessor and
Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit
10-69.)
10-89- Amendment No. 3 dated as of November 24, 1992 to
Facility Lease dated as of March 16, 1987, as amended,
between, The First National Bank of Boston, as Owner
Trustee, with Security Pacific Capital Leasing
Corporation, as Owner Participant and Ohio Edison
Company, as Lessee. (1992 Form 10-K, Exhibit 10-75.)
10-90- Amendment No. 4 dated as of January 12, 1993 to Facility
Lease dated as of March 16, 1987 as amended between, The
First National Bank of Boston, as Owner Trustee, with
Security Pacific Capital Leasing Corporation, as Owner
Participant, and Ohio Edison Company, as Lessee. (1992
Form 10-K, Exhibit 10-76.)
10-91- Amendment No. 5 dated as of October 12, 1994 to Facility
Lease dated as of March 16, 1987 as amended between, The
First National Bank of Boston, as Owner Trustee, with
Security Pacific Capital Leasing Corporation, as Owner
Participant, and Ohio Edison Company, as Lessee. (1994
Form 10-K, Exhibit 10-87.)
10-92- Letter Agreement dated as of March 19, 1987 between Ohio
Edison Company, as Lessee, and The First National Bank
of Boston, as Owner Trustee under a Trust, dated as of
March 16, 1987, with Security Pacific Capital Leasing
Corporation, required by Section 3(d) of the Facility
Lease. (1986 Form 10-K, Exhibit 28-15.)
10-93- Ground Lease dated as of March 16, 1987 between Ohio
Edison Company, Ground Lessor, and The First National
Bank of Boston, as Owner Trustee under a Trust
Agreement, dated as of March 16, 1987, with Perry One
Alpha Limited Partnership, Tenant. (1986 Form 10-K,
Exhibit 28-16.)
10-94- Trust Agreement dated as of March 16, 1987 between
Security Pacific Capital Leasing Corporation, as Owner
Participant, and The First National Bank of Boston.
(1986 Form 10-K, Exhibit 28-17.)
- 35 -
Exhibit
Number
- -------
10-95- Trust Indenture, Mortgage, Security Agreement and
Assignment of Facility Lease dated as of March 16, 1987
between The First National Bank of Boston, as Owner
Trustee under a Trust Agreement, dated as of March 16,
1987, with Security Pacific Capital Leasing Corporation,
and Irving Trust Company, as Indenture Trustee. (1986
Form 10-K, Exhibit 28-18.)
10-96- Supplemental Indenture No. 1 dated as of September 1,
1987 to Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease dated as of March 16,
1987 between The First National Bank of Boston, as Owner
Trustee and Irving Trust Company (now The Bank of New
York), as Indenture Trustee. (1991 Form 10-K, Exhibit
10-74.)
10-97- Supplemental Indenture No. 2 dated as of November 1,
1991 to Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease dated as of March 16,
1987 between The First National Bank of Boston, as Owner
Trustee and The Bank of New York, as Indenture Trustee.
(1991 Form 10-K, Exhibit 10-75.)
10-98- Tax Indemnification Agreement dated as of March 16, 1987
between Security Pacific Capital Leasing Corporation, as
Owner Participant, and Ohio Edison Company, as Lessee.
(1986 Form 10-K, Exhibit 28-19.)
10-99- Amendment No. 1 dated as of November 1, 1991 to Tax
Indemnification Agreement dated as of March 16, 1987
between Security Pacific Capital Leasing Corporation and
Ohio Edison Company. (1991 Form 10-K, Exhibit 10-77.)
10-100- Amendment No. 2 dated as of January 12, 1993 to Tax
Indemnification Agreement dated as of March 16, 1987
between Security Pacific Capital Leasing Corporation and
Ohio Edison Company. (1994 Form 10-K, Exhibit 10-96.)
10-101- Amendment No. 3 dated as of October 12, 1994 to Tax
Indemnification Agreement dated as of March 16, 1987
between Security Pacific Capital Leasing Corporation and
Ohio Edison Company. (1994 Form 10-K, Exhibit 10-97.)
10-102- Assignment, Assumption and Further Agreement dated as
of March 16, 1987 among The First National Bank of
Boston, as Owner Trustee under a Trust Agreement, dated
as of March 16, 1987, with Security Pacific Capital
Leasing Corporation, The Cleveland Electric Illuminating
- 36 -
Exhibit
Number
- -------
Company, Duquesne Light Company, Ohio Edison Company,
Pennsylvania Power Company and Toledo Edison Company.
(1986 Form 10-K, Exhibit 28-20.)
10-103- Additional Support Agreement dated as of March 16, 1987
between The First National Bank of Boston, as Owner
Trustee under a Trust Agreement, dated as of March 16,
1987, with Security Pacific Capital Leasing Corporation,
and Ohio Edison Company. (1986 Form 10-K, Exhibit 28-
21.)
10-104- Bill of Sale, Instrument of Transfer and Severance
Agreement dated as of March 19, 1987 between Ohio Edison
Company, Seller, and The First National Bank of Boston,
as Owner Trustee under a Trust Agreement, dated as of
March 16, 1987, with Security Pacific Capital Leasing
Corporation, Buyer. (1986 Form 10-K, Exhibit 28-22.)
10-105- Easement dated as of March 16, 1987 from Ohio Edison
Company, Grantor, to The First National Bank of Boston,
as Owner Trustee under a Trust Agreement, dated as of
March 16, 1987, with Security Pacific Capital Leasing
Corporation, Grantee. (1986 Form 10-K, Exhibit 28-23.)
10-106- Refinancing Agreement dated as of November 1, 1991 among
Perry One Alpha Limited Partnership, as Owner
Participant, PNPP Funding Corporation, as Funding
Corporation, PNPP II Funding Corporation, as New Funding
Corporation, The First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture Trustee, The
Bank of New York, as Collateral Trust Trustee, The Bank
of New York, as New Collateral Trust Trustee and Ohio
Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-
82.)
10-107- Refinancing Agreement dated as of November 1, 1991 among
Security Pacific Leasing Corporation, as Owner
Participant, PNPP Funding Corporation, as Funding
Corporation, PNPP II Funding Corporation, as New Funding
Corporation, The First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture Trustee, The
Bank of New York, as Collateral Trust Trustee, The Bank
of New York, as New Collateral Trust Trustee and Ohio
Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-
83.)
- 37 -
Exhibit
Number
- -------
10-108- Ohio Edison Company Master Decommissioning Trust
Agreement for Perry Nuclear Power Plant Unit One, Perry
Nuclear Power Plant Unit Two, Beaver Valley Power
Station Unit One and Beaver Valley Power Station Unit
Two dated July 1, 1993. (1993 Form 10-K, Exhibit 10-94.)
10-109- Nuclear Fuel Lease dated as of March 31, 1989, between
OES Fuel, Incorporated, as Lessor, and Ohio Edison
Company, as Lessee. (1989 Form 10-K, Exhibit 10-62.)
10-110- Receivables Purchase Agreement dated as November 28,
1989, as amended and restated as of April 23, 1993,
between OES Capital, Incorporated, Corporate Asset
Funding Company, Inc. and Citicorp North America, Inc.
(1994 Form 10-K, Exhibit 10-106.)
10-111- Guarantee Agreement entered into by Ohio Edison Company
dated as of January 17, 1991. (1990 Form 10-K, Exhibit
10-64).
10-112- Transfer and Assignment Agreement among Ohio Edison
Company and Chemical Bank, as trustee under the OE Power
Contract Trust. (1990 Form 10-K, Exhibit 10-65).
10-113- Renunciation of Payments and Assignment among Ohio
Edison Company, Monongahela Power Company, West Penn
Power Company, and the Potomac Edison Company dated as
of January 4, 1991. (1990 Form 10-K, Exhibit 10-66).
10-114- Transfer and Assignment Agreement dated May 20, 1994
among Ohio Edison Company and Chemical Bank, as trustee
under the OE Power Contract Trust. (1994 Form 10-K,
Exhibit 10-110.)
10-115- Renunciation of Payments and Assignment among Ohio
Edison Company, Monongahela Power Company, West Penn
Power Company, and the Potomac Edison Company dated as
of May 20, 1994. (1994 Form 10-K, Exhibit 10-111.)
10-116 Transfer and Assignment Agreement dated October 12, 1994
among Ohio Edison Company and Chemical Bank, as trustee
under the OE Power Contract Trust. (1994 Form 10-K,
Exhibit 10-112.)
10-117- Renunciation of Payments and Assignment among Ohio
Edison Company, Monongahela Power Company, West Penn
Power Company, and the Potomac Edison Company dated as
of October 12, 1994. (1994 Form 10-K, Exhibit 10-113.)
- 38 -
Exhibit
Number
- -------
(E)10-118- Participation Agreement dated as of September 15, 1987,
among Beaver Valley Two Pi Limited Partnership, as Owner
Participant, the Original Loan Participants listed in
Schedule 1 Thereto, as Original Loan Participants, BVPS
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1987 Form 10-K, Exhibit 28-1.)
(E)10-119- Amendment No. 1 dated as of February 1, 1988, to
Participation Agreement dated as of September 15, 1987,
among Beaver Valley Two Pi Limited Partnership, as Owner
Participant, the Original Loan Participants listed in
Schedule 1 Thereto, as Original Loan Participants, BVPS
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1987 Form 10-K, Exhibit 28-2.)
(E)10-120- Amendment No. 3 dated as of March 16, 1988 to
Participation Agreement dated as of September 15, 1987,
as amended, among eaver Valley Two Pi Limited
Partnership, as Owner Participant, BVPS Funding
Corporation, The First National Bank of Boston, as Owner
Trustee, Irving Trust Company, as Indenture Trustee and
Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit
10-99.)
(E)10-121- Amendment No. 4 dated as of November 5, 1992 to
Participation Agreement dated as of September 15, 1987,
as amended, among Beaver Valley Two Pi Limited
Partnership, as Owner Participant, BVPS Funding
Corporation, BVPS II Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank of
New York, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1992 Form 10-K, Exhibit 10-100.)
(E)10-122- Amendment No. 5 dated as of September 30, 1994 to
Participation Agreement dated as of September 15, 1987,
as amended, among Beaver Valley Two Pi Limited
Partnership, as Owner Participant, BVPS Funding
Corporation, BVPS II Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank of
New York, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1994 Form 10-K, Exhibit 10-118.)
(E)10-123- Facility Lease dated as of September 15, 1987, between
The First National Bank of Boston, as Owner Trustee,
with Beaver Valley Two Pi Limited Partnership, Lessor,
- 39 -
Exhibit
Number
- -------
and Ohio Edison Company, Lessee. (1987 Form 10-K,
Exhibit 28-3.)
(E)10-124- Amendment No. 1 dated as of February 1, 1988, to
Facility Lease dated as of September 15, 1987, between
The First National Bank of Boston, as Owner Trustee,
with Beaver Valley Two Pi Limited Partnership, Lessor,
and Ohio Edison Company, Lessee. (1987 Form 10-K,
Exhibit 28-4.)
(E)10-125- Amendment No. 2 dated as of November 5, 1992 to Facility
Lease dated as of September 15, 1987, as amended,
between The First National Bank of Boston, as Owner
Trustee, with Beaver Valley Two Pi Limited Partnership,
as Owner Participant, and Ohio Edison Company, as
Lessee. (1992 Form 10-K, Exhibit 10-103.)
(E)10-126- Amendment No. 3 dated as of September 30, 1994 to
Facility Lease dated as of September 15, 1987, as
amended, between The First National Bank of Boston, as
Owner Trustee, with Beaver Valley Two Pi Limited
Partnership, as Owner Participant, and Ohio Edison
Company, as Lessee. (1994 Form 10-K, Exhibit 10-122.)
(E)10-127- Ground Lease and Easement Agreement dated as of
September 15, 1987, between Ohio Edison Company, Ground
Lessor, and The First National Bank of Boston, as Owner
Trustee under a Trust Agreement, dated as of September
15, 1987, with Beaver Valley Two Pi Limited Partnership,
Tenant. (1987 Form 10-K, Exhibit 28- 5.)
(E)10-128- Trust Agreement dated as of September 15, 1987, between
Beaver Valley Two Pi Limited Partnership, as Owner
Participant, and The First National Bank of Boston.
(1987 Form 10-K, Exhibit 28-6.)
(E)10-129- Trust Indenture, Mortgage, Security Agreement and
Assignment of Facility Lease dated as of September 15,
1987, between The First National Bank of Boston, as
Owner Trustee under a Trust Agreement dated as of
September 15, 1987, with Beaver Valley Two Pi Limited
Partnership, and Irving Trust Company, as Indenture
Trustee. (1987 Form 10-K, Exhibit 28-7.)
(E)10-130- Supplemental Indenture No. 1 dated as of February 1,
1988 to Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease dated as of
September 15, 1987 between The First National Bank of
Boston, as Owner Trustee under a Trust Agreement dated
- 40 -
Exhibit
Number
- -------
as of September 15, 1987 with Beaver Valley Two Pi
Limited Partnership and Irving Trust Company, as
Indenture Trustee. (1987 Form 10-K, Exhibit 28-8.)
(E)10-131- Tax Indemnification Agreement dated as of September 15,
1987, between Beaver Valley Two Pi Inc. and PARock
Limited Partnership as General Partners and Ohio Edison
Company, as Lessee. (1987 Form 10-K, Exhibit 28-9.)
(E)10-132- Amendment No. 1 dated as of November 5, 1992 to Tax
Indemnification Agreement dated as of September 15,
1987, between Beaver Valley Two Pi Inc. and PARock
Limited Partnership as General Partners and Ohio Edison
Company, as Lessee. (1994 Form 10-K, Exhibit 10-128.)
(E)10-133- Amendment No. 2 dated as of September 30, 1994 to Tax
Indemnification Agreement dated as of September 15,
1987, between Beaver Valley Two Pi Inc. and PARock
Limited Partnership as General Partners and Ohio Edison
Company, as Lessee. (1994 Form 10-K, Exhibit 10-129.)
(E)10-134- Tax Indemnification Agreement dated as of September 15,
1987, between HG Power Plant, Inc., as Limited Partner
and Ohio Edison Company, as Lessee. (1987 Form 10-K,
Exhibit 28-10.)
(E)10-135- Amendment No. 1 dated as of November 5, 1992 to Tax
Indemnification Agreement dated as of September 15,
1987, between HG Power Plant, Inc., as Limited Partner
and Ohio Edison Company, as Lessee. (1994 Form 10-K,
Exhibit 10-131.)
(E)10-136- Amendment No. 2 dated as of September 30, 1994 to Tax
Indemnification Agreement dated as of September 15,
1987, between HG Power Plant, Inc., as Limited Partner
and Ohio Edison Company, as Lessee. (1994 Form 10-K,
Exhibit 10-132.)
(E)10-137- Assignment, Assumption and Further Agreement dated as
of September 15, 1987, among The First National Bank of
Boston, as Owner Trustee under a Trust Agreement, dated
as of September 15, 1987, with Beaver Valley Two Pi
Limited Partnership, The Cleveland Electric Illuminating
Company, Duquesne Light Company, Ohio Edison Company,
Pennsylvania Power Company and Toledo Edison Company.
(1987 Form 10-K, Exhibit 28-11.)
- 41 -
Exhibit
Number
- -------
(E)10-138- Additional Support Agreement dated as of September 15,
1987, between The First National Bank of Boston, as
Owner Trustee under a Trust Agreement, dated as of
September 15, 1987, with Beaver Valley Two Pi Limited
Partnership, and Ohio Edison Company. (1987 Form 10-K,
Exhibit 28-12.)
(F)10-139- Participation Agreement dated as of September 15, 1987,
among Chrysler Consortium Corporation, as Owner
Participant, the Original Loan Participants listed in
Schedule 1 Thereto, as Original Loan Participants, BVPS
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee and Ohio Edison Company,
as Lessee. (1987 Form 10-K, Exhibit 28-13.)
(F)10-140- Amendment No. 1 dated as of February 1, 1988, to
Participation Agreement dated as of September 15, 1987,
among Chrysler Consortium Corporation, as Owner
Participant, the Original Loan Participants listed in
Schedule I Thereto, as Original Loan Participants, BVPS
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee, and Ohio Edison Company,
as Lessee. (1987 Form 10-K, Exhibit 28-14.)
(F)10-141- Amendment No. 3 dated as of March 16, 1988 to
Participation Agreement dated as of September 15, 1987,
as amended, among Chrysler Consortium Corporation, as
Owner Participant, BVPS Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving Trust
Company, as Indenture Trustee, and Ohio Edison Company,
as Lessee. (1992 Form 10-K, Exhibit 10-114.)
(F)10-142- Amendment No. 4 dated as of November 5, 1992 to
Participation Agreement dated as of September 15, 1987,
as amended, among Chrysler Consortium Corporation, as
Owner Participant, BVPS Funding Corporation, BVPS II
Funding Corporation, The First National Bank of Boston,
as Owner Trustee, The Bank of New York, as Indenture
Trustee and Ohio Edison Company, as Lessee. (1992 Form
10-K, Exhibit 10-115.)
(F)10-143- Amendment No. 5 dated as of January 12, 1993 to
Participation Agreement dated as of September 15, 1987,
as amended, among Chrysler Consortium Corporation, as
Owner Participant, BVPS Funding Corporation, BVPS II
Funding Corporation, The First National Bank of Boston,
as Owner Trustee, The Bank of New York, as Indenture
- 42 -
Exhibit
Number
- -------
Trustee and Ohio Edison Company, as Lessee. (1994 Form
10-K, Exhibit 10-139.)
(F)10-144- Amendment No. 6 dated as of September 30, 1994 to
Participation Agreement dated as of September 15, 1987,
as amended, among Chrysler Consortium Corporation, as
Owner Participant, BVPS Funding Corporation, BVPS II
Funding Corporation, The First National Bank of Boston,
as Owner Trustee, The Bank of New York, as Indenture
Trustee and Ohio Edison Company, as Lessee. (1994 Form
10-K, Exhibit 10-140.)
(F)10-145- Facility Lease dated as of September 15, 1987, between
The First National Bank of Boston, as Owner Trustee,
with Chrysler Consortium Corporation, Lessor, and Ohio
Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-
15.)
(F)10-146- Amendment No. 1 dated as of February 1, 1988, to
Facility Lease dated as of September 15, 1987, between
The First National Bank of Boston, as Owner Trustee,
with Chrysler Consortium Corporation, Lessor, and Ohio
Edison Company, Lessee. (1987 Form 10-K, Exhibit 28-16.)
(F)10-147- Amendment No. 2 dated as of November 5, 1992 to Facility
Lease dated as of September 15, 1987, as amended,
between The First National Bank of Boston, as Owner
Trustee, with Chrysler Consortium Corporation, as Owner
Participant and Ohio Edison Company, as Lessee. (1992
Form 10-K, Exhibit 118.)
(F)10-148- Amendment No. 3 dated as of January 12, 1993 to Facility
Lease dated as of September 15, 1987, as amended,
between The First National Bank of Boston, as Owner
Trustee, with Chrysler Consortium Corporation, as Owner
Participant, and Ohio Edison Company, as Lessee. (1992
Form 10-K, Exhibit 10-119.)
(F)10-149- Amendment No. 4 dated as of September 30, 1994 to
Facility Lease dated as of September 15, 1987, as
amended, between The First National Bank of Boston, as
Owner Trustee, with Chrysler Consortium Corporation, as
Owner Participant, and Ohio Edison Company, as Lessee.
(1994 Form 10-K, Exhibit 10-145.)
(F)10-150- Ground Lease and Easement Agreement dated as of
September 15, 1987, between Ohio Edison Company, Ground
Lessor, and The First National Bank of Boston, as Owner
Trustee under a Trust Agreement, dated as of September
- 43 -
Exhibit
Number
- -------
15, 1987, with Chrysler Consortium Corporation, Tenant.
(1987 Form 10-K, Exhibit 28-17.)
(F)10-151- Trust Agreement dated as of September 15, 1987, between
Chrysler Consortium Corporation, as Owner Participant,
and The First National Bank of Boston. (1987 Form 10-K,
Exhibit 28-18.)
(F)10-152- Trust Indenture, Mortgage, Security Agreement and
Assignment of Facility Lease dated as of September 15,
1987, between the First National Bank of Boston, as
Owner Trustee under a Trust Agreement, dated as of
September 15, 1987, with Chrysler Consortium Corporation
and Irving Trust Company, as Indenture Trustee. (1987
Form 10-K, Exhibit 28-19.)
(F)10-153- Supplemental Indenture No. 1 dated as of February 1,
1988 to Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease dated as of
September 15, 1987 between The First National Bank of
Boston, as Owner Trustee under a Trust Agreement dated
as of September 15, 1987 with Chrysler Consortium
Corporation and Irving Trust Company, as Indenture
Trustee. (1987 Form 10-K, Exhibit 28-20.)
(F)10-154- Tax Indemnification Agreement dated as of September 15,
1987, between Chrysler Consortium Corporation, as Owner
Participant, and Ohio Edison Company, as Lessee. (1987
Form 10-K, Exhibit 28-21.)
(F)10-155- Amendment No. 1 dated as of November 5, 1992 to Tax
Indemnification Agreement dated as of September 15,
1987, between Chrysler Consortium Corporation, as Owner
Participant, and Ohio Edison Company, as Lessee. (1994
Form 10-K, Exhibit 10-151.)
(F)10-156- Amendment No. 2 dated as of January 12, 1993 to Tax
Indemnification Agreement dated as of September 15,
1987, between Chrysler Consortium Corporation, as Owner
Participant, and Ohio Edison Company, as Lessee. (1994
Form 10-K, Exhibit 10-152.)
(F)10-157- Amendment No. 3 dated as of September 30, 1994 to Tax
Indemnification Agreement dated as of September 15,
1987, between Chrysler Consortium Corporation, as Owner
Participant, and Ohio Edison Company, as Lessee. (1994
Form 10-K, Exhibit 10-153.)
- 44 -
Exhibit
Number
- -------
(F)10-158- Assignment, Assumption and Further Agreement dated as
of September 15, 1987, among The First National Bank of
Boston, as Owner Trustee under a Trust Agreement, dated
as of September 15, 1987, with Chrysler Consortium
Corporation, The Cleveland Electric Illuminating
Company, Duquesne Light Company, Ohio Edison Company,
Pennsylvania Power Company, and Toledo Edison Company.
(1987 Form 10-K, Exhibit 28-22.)
(F)10-159- Additional Support Agreement dated as of September 15,
1987, between The First National Bank of Boston, as
Owner Trustee under a Trust Agreement, dated as of
September 15, 1987, with Chrysler Consortium
Corporation, and Ohio Edison Company. (1987 Form 10-K,
Exhibit 28-23.)
10-160- Operating Agreement dated March 10, 1987 with respect
to Perry Unit No. 1 between the CAPCO Companies. (1987
Form 10-K, Exhibit 28-24.)
10-161- Operating Agreement for Bruce Mansfield Units Nos. 1,
2 and 3 dated as of June 1, 1976, and executed on
September 15, 1987, by and between the CAPCO Companies.
(1987 Form 10-K, Exhibit 28-25.)
10-162- Operating Agreement for W. H. Sammis Unit No. 7 dated
as of September 1, 1971 by and between the CAPCO
Companies. (1987 Form 10-K, Exhibit 28-26.)
10-163- OE-APS Power Interchange Agreement dated March 18, 1987,
by and among Ohio Edison Company and Pennsylvania Power
Company, and Monongahela Power Company and West Penn
Power Company and The Potomac Edison Company. (1987 Form
10-K, Exhibit 28-27.)
10-164- OE-PEPCO Power Supply Agreement dated March 18, 1987,
by and among Ohio Edison Company and Pennsylvania Power
Company and Potomac Electric Power Company. (1987 Form
10-K, Exhibit 28-28.)
10-165- Supplement No. 1 dated as of April 28, 1987, to the OE-
PEPCO Power Supply Agreement dated March 18, 1987, by
and among Ohio Edison Company, Pennsylvania Power
Company, and Potomac Electric Power Company. (1987 Form
10-K, Exhibit 28-29.)
10-166- APS-PEPCO Power Resale Agreement dated March 18, 1987,
by and among Monongahela Power Company, West Penn Power
Company, and The Potomac Edison Company and Potomac
Electric Power Company. (1987 Form 10-K, Exhibit 28-30.)
- 45 -
Exhibit
Number
- -------
(A)12- Consolidated fixed charge ratios.
(A)13- 1996 Annual Report to Stockholders. (Only those portions
expressly incorporated by reference in this Form 10-K
are to be deemed "filed" with the SEC.)
(A)21- List of Subsidiaries of the Registrant at December 31,
1996.
(A)23- Consent of Independent Public Accountants.
(A)27- Financial Data Schedule.
(A) Provided herein in electronic format as an exhibit.
(B) Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of
Regulation S-K, the Company has not filed as an exhibit
to this Form 10-K any instrument with respect to long-
term debt if the total amount of securities authorized
thereunder does not exceed 10% of the total assets of
the Company and its subsidiaries on a consolidated
basis, but hereby agrees to furnish to the SEC on
request any such instruments.
(C) Management contract or compensatory plan contract or
arrangement filed pursuant to Item 601 of Regulation S-
K.
(D) Substantially similar documents have been entered into
relating to three additional Owner Participants.
(E) Substantially similar documents have been entered into
relating to five additional Owner Participants.
(F) Substantially similar documents have been entered into
relating to two additional Owner Participants.
Note: Reports of the Company on Forms 10-Q and 10-K are
on file with the SEC under number 1-2578.
Pursuant to Rule 14a - 3 (10) of the Securities Exchange
Act of 1934, the Company will furnish any exhibit in
this Report upon the payment of the Company's expenses
in furnishing such exhibit.
- 46 -
Exhibit
Number
- -------
(b) Reports on Form 8-K
The Company filed two reports on Form 8-K since
September 30, 1996. A report dated November 25, 1996,
reported the filing by FirstEnergy Corp. of an
application with the PUCO seeking authority for a
Comprehensive Rate Reduction and Economic Development
Plan, and a report dated January 28, 1997, reported
unaudited consolidated financial results for the year
ended December 31, 1996.
- 47 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Ohio Edison Company:
We have audited, in accordance with generally accepted
auditing standards, the consolidated financial statements included
in Ohio Edison Company's Annual Report to Stockholders incorporated
by reference in this Form 10-K and have issued our report thereon
dated February 7, 1997. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The
schedule listed in Item 14 is the responsibility of the Company's
management and is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the
basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the
basic consolidated financial statements and, in our opinion, fairly
states in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
February 7, 1997
- 48 -
<TABLE>
SCHEDULE II
OHIO EDISON COMPANY
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<CAPTION>
Additions
-----------------------------
Charged Charged
(Credited) (Credited)
Beginning to to Other Ending
Description Balance Income Accounts Deductions Balance
----------- --------- ---------- ---------- ---------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996:
Accumulated provision for
uncollectible accounts $2,528 $6,949 $2,008(a) $9,179(b) $2,306
====== ====== ====== ====== ======
Year Ended December 31, 1995:
Accumulated provision for
uncollectible accounts $2,517 $5,236 $1,836(a) $7,061(b) $2,528
====== ====== ====== ====== ======
Year Ended December 31, 1994:
Accumulated provision for
uncollectible accounts $6,907 $ (32)(c) $1,998(a) $6,356(b) $2,517
====== ====== ====== ====== ======
<FN>
- ------------------------
(a) Represents recoveries and reinstatements of accounts
previously written off.
(b) Represents the write-off of accounts considered to be
uncollectible.
(c) Includes $4,136,000 reversal of bad debt expense due to
PUCO authorization for automatic surcharge recovery.
</TABLE>
- 49 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
OHIO EDISON COMPANY
BY /s/ W. R. Holland
--------------------------------
W. R. Holland
Chairman of the Board
and Chief Executive Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated:
/s/W. R. Holland /s/H. P. Burg
- ----------------------------- --------------------------------
W. R. Holland H. P. Burg
Chairman of the Board President and Chief
and Chief Executive Officer Operating Officer and
and Director (Principal Director (Principal
Executive Officer) Financial Officer and
Principal Accounting Officer)
/s/Glenn H. Meadows
- ----------------------------- ---------------------------------
Donald C. Blasius Glenn H. Meadows
Director Director
/s/Robert M. Carter /s/Paul J. Powers
- ----------------------------- ---------------------------------
Robert M. Carter Paul J. Powers
Director Director
/s/Carol A. Cartwright /s/Charles W. Rainger
- ----------------------------- --------------------------------
Carol A. Cartwright Charles W. Rainger
Director Director
- 50 -
/s/R. L. Loughhead /s/George M. Smart
- ---------------------------- ---------------------------------
R. L. Loughhead George M. Smart
Director Director
/s/Russell W. Maier /s/Jesse T. Williams, Sr.
- ---------------------------- ---------------------------------
Russell W. Maier Jesse T. Williams, Sr.
Director Director
Date: March 26, 1997
- 51 -
<TABLE> EXHIBIT 12
Page 1
OHIO EDISON COMPANY
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Year Ended December 31,
------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items $276,986 $ 24,523 $303,531 $317,241 $315,170
Interest and other charges, before reduction for
amounts capitalized 296,292 285,169 283,849 273,719 255,572
Provision for income taxes 147,407 32,431 188,886 199,307 201,295
Interest element of rentals charged to income (a) 117,224 104,700 108,463 111,534 114,093
-------- -------- --------- -------- --------
Earnings as defined $837,909 $446,823 $884,729 $901,801 $886,130
======== ======== ======== ======== ========
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest on long-term debt $275,835 $262,861 $259,554 $243,570 $211,935
Other interest expense 13,958 16,445 18,931 22,944 28,211
Subsidiaries' preferred stock dividend requirements 6,499 5,863 5,364 7,205 15,426
Adjustment to subsidiaries' preferred stock dividends
to state on a pre-income tax basis 3,420 7,659 3,294 2,956 2,910
Interest element of rentals charged to income (a) 117,224 104,700 108,463 111,534 114,093
-------- -------- -------- -------- --------
Fixed charges as defined $416,936 $397,528 $395,606 $388,209 $372,575
======== ======== ======== ======== ========
CONSOLIDATED RATIO OF EARNINGS TO FIXED
CHARGES (b) 2.01 1.12 2.24 2.32 2.38
==== ==== ==== ==== ====
<FN>
- ------------------------
(a) Includes the interest element of rentals where determinable plus
1/3 of rental expense where no readily defined interest element can
be determined.
(b) These ratios exclude fixed charges applicable to the guarantee of the
debt of a coal supplier aggregating $9,762,000, $8,565,000, $7,424,000,
$6,315,000 and $5,093,000 for each of the five years ended December 31,
1996, respectively.
</TABLE>
- 1 -
<TABLE>
EXHIBIT 12
Page 2
OHIO EDISON COMPANY
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED AND
PREFERENCE STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS)
<CAPTION>
Year Ended December 31,
------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items $276,986 $ 24,523 $303,531 $317,241 $315,170
Add-
Interest and other charges, before reduction for
amounts capitalized 296,292 285,169 283,849 273,719 255,572
Provision for income taxes 147,407 32,431 188,886 199,307 201,295
Interest element of rentals charged to income (a) 117,224 104,700 108,463 111,534 114,093
-------- -------- -------- -------- --------
Earnings as defined $837,909 $446,823 $884,729 $901,801 $886,130
======== ======== ======== ======== ========
FIXED CHARGES AS DEFINED IN REGULATION S-K PLUS PREFERRED
AND PREFERENCE STOCK DIVIDEND REQUIREMENTS
(PRE-INCOME TAX BASIS):
Interest on long-term debt $275,835 $262,861 $259,554 $243,570 $211,935
Other interest expense 13,958 16,445 18,931 22,944 28,211
Preferred and preference stock dividend requirements 30,425 29,570 27,043 29,699 27,923
Adjustment to preferred and preference stock dividends
to state on a pre-income tax basis 15,854 38,265 16,444 16,745 10,542
Interest element of rentals charged to income (a) 117,224 104,700 108,463 111,534 114,093
-------- -------- -------- -------- --------
Fixed charges as defined plus preferred and
preference stock dividend requirements
(pre-income tax basis) $453,296 $451,841 $430,435 $424,492 $392,704
======== ======== ======== ======== ========
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES PLUS
PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS
(PRE-INCOME TAX BASIS) (b) 1.85 0.99(c) 2.06 2.12 2.26
==== ==== ==== ==== ====
<FN>
- ------------------------------
(a)Includes the interest element of rentals where determinable plus 1/3 of
rental expense where no readily defined interest element can be determined.
(b)These ratios exclude fixed charges applicable to the guarantee of the
debt of a coal supplier aggregating $9,762,000, $8,565,000, $7,424,000,
$6,315,000 and $5,093,000 for each of the five years ended December 31,
1996, respectively.
(c)Earnings as defined were deficient in 1993 by $5,018,000 to cover fixed
charges plus preferred stock dividend requirements (pre-income tax basis).
</TABLE>
- 2 -
<TABLE>
OHIO EDISON COMPANY
SELECTED FINANCIAL DATA
<CAPTION>
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues $2,469,785 $2,465,846 $2,368,191 $2,369,940 $2,332,378
----------------------------------------------------------
Net Income $315,170 $317,241 $303,531 $ 82,724 $276,986
----------------------------------------------------------
Earnings on Common Stock $302,673 $294,747 $281,852 $ 59,017 $253,060
----------------------------------------------------------
Earnings per Share of Common Stock $2.10 $2.05 $1.97 $0.39 $1.70
Dividends Declared per Share of Common Stock $1.50 $1.50 $1.50 $1.50 $1.50
----------------------------------------------------------
Total Assets $8,965,372 $8,823,934 $8,993,964 $8,918,267 $7,830,026
----------------------------------------------------------
Capitalization at December 31:
Common Stockholders' Equity $2,503,359 $2,407,871 $2,317,197 $2,243,292 $2,408,164
Preferred and Preference Stock:
Not Subject to Mandatory Redemption 211,870 211,870 328,240 328,240 354,240
Subject to Mandatory Redemption 155,000 160,000 40,000 45,500 59,862
Long-Term Debt 2,712,760 2,786,256 3,166,593 3,039,263 3,121,647
----------------------------------------------------------
Total Capitalization $5,582,989 $5,565,997 $5,852,030 $5,656,295 $5,943,913
----------------------------------------------------------
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the New York and Chicago stock
exchanges and is traded on other registered exchanges.
1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter High-Low 24-7/8 21-7/8 21-1/2 18-1/2
-----------------------------------------------
Second Quarter High-Low 23 20-1/4 22-5/8 19-3/4
-----------------------------------------------
Third Quarter High-Low 22-1/4 19-1/4 22-7/8 21-1/4
-----------------------------------------------
Fourth Quarter High-Low 23-1/4 19-3/8 23-3/4 22-1/4
-----------------------------------------------
Yearly High-Low 24-7/8 19-1/4 23-3/4 18-1/2
-----------------------------------------------
Prices are based on reports published in The Wall Street Journal for New
-----------------------
York Stock Exchange Composite Transactions.
CLASSIFICATION OF HOLDERS OF COMMON STOCK AS OF DECEMBER 31, 1996
Holders of Record Shares Held
- --------------------------------------------------------------------------------------
Number % Number %
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Individuals 104,603 81.72 47,177,789 30.92
Fiduciaries 21,952 17.15 9,445,428 6.19
Nominees 36 .03 94,562,806 61.98
All Others 1,413 1.10 1,383,414 0.91
----------------------------------------------
Total 128,004 100.00 152,569,437 100.00
----------------------------------------------
<FN>
As of January 31, 1997, there were 127,051 holders of 152,569,437
shares of the Company's Common Stock. Quarterly dividends of 37.5 cents
per share were paid on the Company's Common Stock during 1996 and
1995. Information regarding retained earnings available for payment
of cash dividends is given in Note 4A.
</TABLE>
- 1 -
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Our companies continued to make significant progress
during 1996 in preparing for a more competitive environment in
the electric utility industry. For the second straight year,
we achieved record operating revenues. The higher revenues,
combined with our aggressive cost control efforts, raised
earnings on common stock to $2.10 per share in 1996 compared
with $2.05 last year. The 1996 results reflect accelerated
depreciation and amortization of nuclear and regulatory assets
totaling approximately $178 million under the Company's Rate
Reduction and Economic Development Plan and Penn Power's Rate
Stability and Economic Development Plan. The 1995 results
compared favorably to earnings of $1.97 per share in 1994.
Our ongoing commitment to cost control continues to
produce good results. Operation and maintenance expenses
decreased 6.4% in 1996. A review of the work we do was an
integral part of the Performance Initiatives program that
began in 1993 and continues as a part of our Corporate
Strategy program. Efficiencies continue to be identified which
have resulted in further opportunities for restructuring. In
1996, we reduced our work force by 539 employees, mostly from
restructuring activities in our regions and our generation
group. We expect these actions to result in annual savings of
approximately $32 million. Also, using economic value added-
based justification for capital spending contributed to a $118
million reduction in our construction expenditures in 1996,
compared to our base year of 1993.
For the fourth consecutive year, we achieved record retail
sales. The following table summarizes the sources of changes
in operating revenues for 1996 and 1995 as compared to the
previous year:
1996 1995
---- ----
(In millions)
Increased retail kilowatt-hour sales $ 58.1 $105.1
Reduced average retail electricity
price (46.1) (23.3)
Sales to utilities (4.5) 16.6
Other (3.6) (0.7)
------ ------
Net Increase $ 3.9 $ 97.7
====== ======
- 2 -
An improving local economy helped us achieve record retail
sales of 27.2 billion kilowatt-hours. Our customer base
continues to grow with more than 12,200 new retail customers
added in 1996, after gaining approximately 12,300 customers
the previous year. Residential sales increased 1.8% in 1996,
following a 4.2% gain the previous year. Commercial sales rose
1.3% and 3.9% in 1996 and 1995, respectively. Increases of
5.5% and 6.8% in industrial sales during 1996 and 1995,
respectively, were favorably affected by the resumption of
operations by two major customers in the second half of 1995.
Excluding sales to these customers, industrial sales were 2.6%
higher in 1996 than last year's level, which increased 3.8%
over 1994. Sales to other utilities were up 2.7% in 1996,
following an 18.2% increase the previous year. As a result of
the above factors, total kilowatt-hour sales rose 3.0%,
compared with sales in 1995, which were up 7.5% from 1994.
Nuclear operating costs dropped 14.5% in 1996 due
principally to lower refueling outage cost levels. During
1995, our nuclear expenses fell 4.9% compared with the
previous year--nuclear expenses were higher in 1994 mainly due
to corrective maintenance work at the Perry Plant. The
decrease in other operating costs in 1996 reflects lower
maintenance costs at our fossil-fuel generating units.
Expenses associated with scheduled maintenance outages at
those generating units contributed to a 4.6% increase in other
operating costs during 1995, compared with the previous year.
As a result of those outages, we purchased more power in 1995,
which resulted in the increase in fuel and purchased power
costs, compared to 1994.
Higher depreciation charges in 1996 and 1995 resulted
primarily from $144 million and $27 million, respectively, of
accelerated nuclear depreciation recognized under the
regulatory plans referred to above. A higher level of
depreciable utility plant and an increase in nuclear
decommissioning costs also contributed to the 1995 increase,
compared with the previous year. The comparative changes in
the amortization of net regulatory assets were due to
increased recovery levels in 1996 under our regulatory plans
and the discontinuation of deferral accounting for
postretirement benefits in the second half of 1995.
The increase in other income is principally due to higher
investment income in 1996--primarily through our PNBV Capital
Trust investment, which was effective in the third quarter of
1996. Overall, interest costs were lower in 1996 than in 1995.
Interest on long-term debt decreased due to our economic
refinancings and redemption of higher-cost debt. Other
interest expense increased compared to last year due mainly to
higher levels of short-term borrowing. We also discontinued
deferring nuclear unit interest in the second half of 1995,
- 3 -
consistent with the Company's regulatory plan. Total Company
and subsidiaries' preferred stock dividend requirements were
relatively unchanged from last year's level, taking into
account $2.3 million of premiums paid on preferred stock
redemptions during 1995.
CAPITAL RESOURCES AND LIQUIDITY
We have significantly improved our financial position
over the past five years. Cash generated from operations was
12% higher in 1996 than it was in 1991 due to higher revenues
and aggressive cost controls. At the same time, our average
return on common shareholders' equity improved from 9.9% in
1991 to 12.4% in 1996. By the end of 1996, we were serving
about 63,000 more customers than we were five years ago, with
approximately 2,200 fewer employees. As a result, our
customer/employee ratio has increased by 61% over the past
five years, standing at 259 customers per employee at the end
of 1996, compared with 161 at the end of 1991. In addition,
capital expenditures have dropped substantially during that
period. Expenditures in 1996 were approximately 38% lower than
they were in 1991, and annual depreciation charges have
exceeded property additions since the end of 1987. In fact,
our projections for the next five years indicate that annual
depreciation charges will exceed construction expenditures
(excluding nuclear fuel) by at least three to four times as a
result of our reduced capital requirements and additional
depreciation in accordance with our regulatory plans.
Over the past five years, we have aggressively taken
advantage of opportunities in the financial markets to reduce
our average capital costs. Through refinancing activities, we
have reduced the average cost of outstanding debt from 8.75%
at the end of 1991 to 7.76% at the end of 1996. Our fixed
charge coverage ratios and the percentage of common equity to
total capitalization continue to improve. Our indenture ratio,
which is used to determine the Company's ability to issue
first mortgage bonds, improved from 4.24 at the end of 1991 to
6.48 at the end of 1996. Over the same period, our charter
ratio--a measure of our ability to issue preferred stock--
improved from 1.83 to 2.25, and, our common equity percentage
of capitalization rose from 39% at the end of 1991 to about
45% at the end of 1996.
Our cash requirements in 1997 for operating expenses,
construction expenditures and scheduled debt maturities are
expected to be met without issuing additional securities.
During 1996, we reduced our total debt by approximately $380
million (excluding borrowings to fund the PNBV Capital Trust
investment described in Note 3). We also have cash
requirements of approximately $900 million for the 1997-2001
period ($164 million in 1997) to meet scheduled maturities of
- 4 -
long-term debt and preferred stock--those requirements are
expected to be met with internally generated cash.
We had about $5 million of cash and temporary investments
and $349 million of short-term indebtedness on December 31,
1996. Our borrowing capability included $27 million available
under revolving lines of credit, and $16.5 million of bank
facilities that provide for borrowings on a short-term basis
at the banks' discretion.
Our capital spending for the period 1997-2001 is expected
to be about $600 million (excluding nuclear fuel), of which
approximately $135 million applies to 1997. This spending
level is nearly $400 million lower than actual capital outlays
over the past five years.
Investments for additional nuclear fuel during the 1997-
2001 period are estimated to be approximately $194 million, of
which about $45 million applies to 1997. During the same
periods, our nuclear fuel investments are expected to be
reduced by approximately $185 million and $43 million,
respectively, as the nuclear fuel is consumed. Also, we have
operating lease commitments (net of PNBV Capital Trust income)
of approximately $424 million for the 1997-2001 period, of
which approximately $75 million relates to 1997. We recover
the cost of nuclear fuel consumed and operating leases through
our electric rates.
Reference is made to Note 1 for a discussion of regulatory
assets. In accordance with our regulatory plans, electric
rates include recovery of all regulatory assets, including
accelerated recovery of those regulatory assets.
OUTLOOK
We face many competitive challenges in the years ahead as
the electric utility industry undergoes significant changes,
including becoming less regulated and the entrance of more
energy suppliers into the marketplace. Retail wheeling, which
would allow retail customers to purchase electricity from
other energy producers, will be one of those challenges, if
legislators choose to move in that direction.
In Ohio, the General Assembly has formed a twelve member,
bipartisan committee to study electric utility deregulation.
On December 3, 1996, Pennsylvania enacted "The Electricity
Generation Customer Choice and Competition Act", under which
residents of Pennsylvania, including customers of Penn Power,
will be permitted to choose their electric generation
supplier, while transmission and distribution services will
continue to be supplied by their current providers. Customer
choice will be phased in over three years, beginning in 1999,
- 5 -
after a two year pilot program. The new Pennsylvania law also
establishes procedures and standards for the recovery of
stranded costs over an eight to nine-year period in the form
of a transition charge on customer billings, and allows
utilities to seek Pennsylvania Public Utility Commission
(PPUC) approval to securitize, or refinance, stranded costs
which have been determined by the PPUC to be recoverable. This
legislation continues to provide for cost recovery in a manner
which meets the criteria for application of Statement of
Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation."
Our regulatory plans provide the foundation to position
us to meet the challenges we are facing by significantly
reducing fixed costs and lowering rates to a more competitive
level. For the plans to succeed, it is imperative that we
build on the success of our Performance Initiatives and
Corporate Strategy programs and continue to find ways to
increase revenues, reduce costs and enhance shareholder value.
On September 13, 1996, we entered into an agreement to
merge with Centerior Energy Corporation under a new holding
company called FirstEnergy Corp. The merger is expected to
produce $1 billion in savings during the first ten years of
joint operations through the elimination of duplicative
activities, improved operating efficiencies, lower capital
expenditures, accelerated debt reduction, the coordination of
the companies' work forces and enhanced purchasing power. A
Registration Statement containing a joint proxy
statement/prospectus was filed with the Securities and
Exchange Commission and shareholders' meetings for the
respective companies are scheduled to be held on
March 27,1997. We hope to receive all necessary regulatory
approvals before the end of 1997.
The merger is expected to help us achieve more effective
operation of the nuclear facilities we jointly own. In 1995,
we increased the annual funding for our nuclear
decommissioning obligations. Also, the Financial Accounting
Standards Board (FASB) issued a proposed accounting standard
for nuclear decommissioning costs in February 1996. If the
standard is adopted as proposed: (1) annual provisions for
decommissioning could increase; (2) the net present value of
estimated decommissioning costs could be recorded as a
liability; and (3) income from the external decommissioning
trusts could be reported as investment income. The FASB has
indicated that it plans to issue a revised proposal or final
accounting standard in 1997.
The Clean Air Act Amendments of 1990, discussed in Note
6, require additional emission reductions by 2000. We are
pursuing cost-effective compliance strategies for meeting the
reduction requirements that begin in 2000.
- 6 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES $2,469,785 $2,465,846 $2,368,191
---------- ---------- ----------
OPERATING EXPENSES AND TAXES:
Fuel and purchased power 456,629 465,483 440,936
Nuclear operating costs 247,708 289,717 304,716
Other operating costs 420,523 446,967 427,133
----------- ----------- ------------
Total operation and maintenance expenses 1,124,860 1,202,167 1,172,785
Provision for depreciation 355,780 256,085 220,502
Amortization of net regulatory assets 27,661 5,825 (884)
General taxes 241,998 243,179 237,020
Income taxes 189,417 191,972 181,514
----------- ----------- -----------
Total operating expenses and taxes 1,939,716 1,899,228 1,810,937
----------- ----------- -----------
OPERATING INCOME 530,069 566,618 557,254
OTHER INCOME 37,537 14,424 16,459
----------- ----------- -----------
TOTAL INCOME 567,606 581,042 573,713
----------- ----------- ------------
NET INTEREST AND OTHER CHARGES:
Interest on long-term debt 211,935 243,570 259,554
Deferred nuclear unit interest - (4,250) (8,511)
Allowance for borrowed funds used during
construction and capitalized interest (3,136) (5,668) (5,156)
Other interest expense 28,211 22,944 18,931
Subsidiaries' preferred stock dividend requirements 15,426 7,205 5,364
----------- ----------- ------------
Net interest and other charges 252,436 263,801 270,182
----------- ----------- ------------
NET INCOME 315,170 317,241 303,531
PREFERRED STOCK DIVIDEND REQUIREMENTS 12,497 22,494 21,679
----------- ----------- -----------
EARNINGS ON COMMON STOCK $ 302,673 $ 294,747 $ 281,852
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 144,095 143,692 143,237
=========== =========== ===========
EARNINGS PER SHARE OF COMMON STOCK $2.10 $2.05 $1.97
===== ===== =====
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $1.50 $1.50 $1.50
===== ===== =====
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
- 7 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
At December 31, 1996 1995
- ------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
ASSETS
UTILITY PLANT:
In service, at original cost $8,634,030 $8,556,722
Less--Accumulated provision for depreciation 3,315,344 3,051,148
---------- ----------
5,318,686 5,505,574
---------- ----------
Construction work in progress--
Electric plant 93,413 150,262
Nuclear fuel 5,786 39,613
---------- ----------
99,199 189,875
---------- ----------
5,417,885 5,695,449
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
PNBV Capital Trust (Note 3) 487,979 --
Letter of credit collateralization (Note 3) 277,763 277,763
Other 323,316 252,005
---------- ----------
1,089,058 529,768
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 5,253 29,830
Receivables--
Customers (less accumulated provisions of $2,306,000 and
$2,528,000, respectively, for uncollectible accounts) 247,027 274,692
Other 58,327 54,988
Materials and supplies, at average cost--
Owned 66,177 68,829
Under consignment 44,468 41,080
Prepayments 75,681 82,257
---------- ----------
496,933 551,676
---------- ----------
DEFERRED CHARGES:
Regulatory assets 1,703,111 1,786,543
Unamortized sale and leaseback costs 100,066 103,091
Property taxes 100,802 104,071
Other 57,517 53,336
---------- ----------
1,961,496 2,047,041
---------- ----------
$8,965,372 $8,823,934
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (See Consolidated Statements of Capitalization):
Common stockholders' equity $2,503,359 $2,407,871
Preferred stock--
Not subject to mandatory redemption 160,965 160,965
Subject to mandatory redemption 20,000 25,000
Preferred stock of consolidated subsidiary--
Not subject to mandatory redemption 50,905 50,905
Subject to mandatory redemption 15,000 15,000
Company obligated mandatorily redeemable preferred securities
of subsidiary trust holding solely Company subordinated
debentures 120,000 120,000
Long-term debt 2,712,760 2,786,256
---------- ----------
5,582,989 5,565,997
---------- ----------
CURRENT LIABILITIES:
Currently payable long-term debt and preferred stock 333,667 376,716
Short-term borrowings (Note 5) 349,480 119,965
Accounts payable 93,509 100,536
Accrued taxes 142,909 131,432
Accrued interest 52,855 57,462
Other 131,275 196,482
---------- ----------
1,103,695 982,593
---------- ----------
DEFERRED CREDITS:
Accumulated deferred income taxes 1,777,086 1,772,434
Accumulated deferred investment tax credits 199,835 213,876
Other 301,767 289,034
---------- ----------
2,278,688 2,275,344
---------- ----------
COMMITMENTS, GUARANTEES AND CONTINGENCIES
(Notes 3 and 6 ) ---------- ----------
$8,965,372 $8,823,934
========== ==========
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these balance sheets.
</TABLE>
- 8 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $471,095 $389,600 $322,821
Net income 315,170 317,241 303,531
-------- -------- --------
786,265 706,841 626,352
- ---------------------------------------------------------------------------------------
Cash dividends on preferred stock 12,497 20,234 21,926
Cash dividends on common stock 216,126 215,512 214,826
-------- -------- --------
228,623 235,746 236,752
-------- -------- --------
Balance at end of year (Note 4A) $557,642 $471,095 $389,600
- --------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CAPITAL STOCK AND OTHER PAID-IN CAPITAL
Preferred Stock
-----------------------------------------
Un- Not Subject to Subject to
Common Stock allocated Mandatory Redemption Mandatory Redemption
------------------------------ -------------------- --------------------
Other ESOP Par or Par or
Number Par Paid-In Common Number Stated Number Stated
of Shares Value Capital Stock of Shares Value of Shares Value
----------- ---------- -------- ---------- ---------- -------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 152,569,437 $1,373,125 $727,865 $(180,519) 6,782,399 $378,240 463,616 $ 46,362
Minimum liability for
unfunded retirement
benefits (3,053)
Allocation of ESOP Shares 36 10,143
Redemptions--
Market Auction Series (500,000) (50,000)
11.00% Series (3,616) (362)
13.00% Series (60,000) (6,000)
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 152,569,437 1,373,125 724,848 (170,376) 6,282,399 328,240 400,000 40,000
Minimum liability for
unfunded retirement
benefits 2,446
Allocation of ESOP Shares 1,274 7,720
Sale of 9% Preferred Stock 4,800,000 120,000
Redemptions--
7.24% Series (720) (363,700) (36,370)
7.36% Series (609) (350,000) (35,000)
8.20% Series (932) (450,000) (45,000)
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 152,569,437 1,373,125 726,307 (162,656) 5,118,699 211,870 5,200,000 160,000
Minimum liability for
unfunded retirement
benefits (51)
Allocation of ESOP Shares 1,346 7,646
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 152,569,437 $1,373,125 $727,602 $(155,010) 5,118,699 $211,870 5,200,000 $160,000
===================================================================================================================
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
- 9 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<CAPTION>
At December 31, 1996 1995
- ---------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
COMMON STOCKHOLDERS' EQUITY:
Common stock, $9 par value, authorized 175,000,000 shares-
152,569,437 shares outstanding $1,373,125 $1,373,125
Other paid-in capital 727,602 726,307
Retained earnings (Note 4A) 557,642 471,095
Unallocated employee stock ownership plan common stock-
8,259,053 and 8,663,575 shares, respectively (Note 4B) (155,010) (162,656)
--------- ---------
Total common stockholders' equity 2,503,359 2,407,871
--------- ---------
Number of Shares Optional
Outstanding Redemption Price
------------------ --------------------
1996 1995 Per Share Aggregate
-------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK (Note 4C):
Cumulative, $100 par value-
Authorized 6,000,000 shares
Not Subject to Mandatory Redemption:
3.90% 152,510 152,510 $103.63 $15,804 15,251 15,251
4.40% 176,280 176,280 108.00 19,038 17,628 17,628
4.44% 136,560 136,560 103.50 14,134 13,656 13,656
4.56% 144,300 144,300 103.38 14,917 14,430 14,430
--------- --------- ------- ---------- ----------
609,650 609,650 63,893 60,965 60,965
Cumulative, $25 par value-
Authorized 8,000,000 shares
Not Subject to Mandatory Redemption:
7.75% 4,000,000 4,000,000 100,000 100,000
--------- --------- ---------- ----------
Total not subject to
mandatory redemption 4,609,650 4,609,650 $63,893 160,965 160,965
========= ========= ======= ---------- ----------
Cumulative, $100 par value-
Subject to Mandatory Redemption (Note 4D):
8.45% 250,000 250,000 25,000 25,000
Redemption within one year (5,000) --
--------- --------- ---------- ----------
250,000 250,000 20,000 25,000
========= ========= ---------- ----------
PREFERRED STOCK OF CONSOLIDATED
SUBSIDIARY (Note 4C):
Pennsylvania Power Company
Cumulative, $100 par value-
Authorized 1,200,000 shares
Not Subject to Mandatory Redemption:
4.24% 40,000 40,000 $103.13 $ 4,125 4,000 4,000
4.25% 41,049 41,049 105.00 4,310 4,105 4,105
4.64% 60,000 60,000 102.98 6,179 6,000 6,000
7.64% 60,000 60,000 101.42 6,085 6,000 6,000
7.75% 250,000 250,000 -- -- 25,000 25,000
8.00% 58,000 58,000 102.07 5,920 5,800 5,800
--------- ---------- ------- ---------- ----------
Total not subject to mandatory
redemption 509,049 509,049 $26,619 50,905 50,905
========= ========== ======= ---------- ----------
Subject to Mandatory Redemption
(Note 4D):
7.625% 150,000 150,000 15,000 15,000
========= ========== ---------- ----------
COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
OF SUBSIDIARY TRUST HOLDING
SOLELY COMPANY SUBORDINATED
DEBENTURES (Note 4E):
Cumulative, $25 par value-
Authorized 4,800,000 shares
Subject to Mandatory Redemption:
9.00% 4,800,000 4,800,000 120,000 120,000
========= ========== ---------- ----------
</TABLE>
- 10 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION (Continued)
<CAPTION>
At December 31, 1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <S> <C> <C> <C> <C>
LONG-TERM DEBT (Note 4F):
First mortgage bonds:
Ohio Edison Company- Pennsylvania Power Company-
8.500% due 1996 -- 150,000 9.000% due 1996 -- 50,000
8.750% due 1998 150,000 150,000 9.740% due 1999-2019 20,000 20,000
6.875% due 1999 150,000 150,000 7.500% due 2003 40,000 40,000
6.375% due 2000 80,000 80,000 6.375% due 2004 37,000 50,000
7.375% due 2002 120,000 120,000 6.625% due 2004 20,000 20,000
7.500% due 2002 34,265 34,265 8.500% due 2022 27,250 27,250
8.250% due 2002 125,000 125,000 7.625% due 2023 6,500 19,500
8.625% due 2003 150,000 150,000 ------- -------
6.875% due 2005 80,000 80,000
9.750% due 2019 -- 35,300
8.750% due 2022 50,960 94,210
7.625% due 2023 75,000 75,000
7.875% due 2023 100,000 100,000
--------- ---------
Total first
mortgage bonds 1,115,225 1,343,775 150,750 226,750 1,265,975 1,570,525
--------- --------- ------- ------- ---------- ----------
Secured notes:
Ohio Edison Company- Pennsylvania Power Company-
8.380% due 1996 -- 16,464 4.750% due 1998 850 850
7.930% due 2002 60,467 69,579 6.080% due 2000 23,000 23,000
7.680% due 2005 200,000 200,000 5.400% due 2013 1,000 1,000
6.750% due 2015 40,000 40,000 5.400% due 2017 10,600 10,600
7.450% due 2016 47,725 47,725 7.150% due 2017 17,925 17,925
7.100% due 2018 26,000 26,000 5.900% due 2018 16,800 16,800
7.050% due 2020 60,000 60,000 8.100% due 2018 10,300 10,300
7.000% due 2021 69,500 69,500 8.100% due 2020 5,200 5,200
7.150% due 2021 443 443 7.150% due 2021 14,482 14,482
7.625% due 2023 50,000 50,000 6.150% due 2023 12,700 12,700
8.100% due 2023 30,000 30,000 6.450% due 2027 14,500 14,500
7.750% due 2024 108,000 108,000 5.450% due 2028 6,950 6,950
5.625% due 2029 50,000 50,000 6.000% due 2028 14,250 14,250
5.950% due 2029 56,212 56,212 5,950% due 2029 238 238
5.450% due 2033 14,800 14,800 ------- -------
--------- ---------
813,147 838,723 148,795 148,795 961,942 987,518
--------- --------- ------- -------
OES Fuel-
5.86% weighted
average interest
rate 84,000 97,162
---------- ----------
Total secured notes 1,045,942 1,084,680
---------- ----------
Unsecured notes:
Ohio Edison Company-
7.430% due 1997 100,000 100,000
8.735% due 1997 50,000 50,000
6.088% due 1999 225,000 -
4.900% due 2012 50,000 50,000
4.350% due 2014 50,000 50,000
3.950% due 2015 50,000 50,000
4.400% due 2018 56,000 56,000
3.800% due 2018 57,100 57,100
4.300% due 2032 53,400 53,400
---------- ----------
Total unsecured notes 691,500 466,500
---------- ----------
Capital lease obligations (Note 3) 43,775 48,221
---------- ----------
Net unamortized discount on debt (5,765) (6,954)
---------- ----------
Long-term debt due within one year (328,667) (376,716)
---------- ----------
Total long-term debt 2,712,760 2,786,256
---------- ----------
TOTAL CAPITALIZATION $5,582,989 $5,565,997
==============================================================================================================
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
- 11 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $315,170 $317,241 $ 303,531
Adjustments to reconcile net income to net
cash from operating activities:
Provision for depreciation 355,780 256,085 220,502
Nuclear fuel and lease amortization 52,784 70,849 72,141
Other amortization, net 25,961 5,885 8,422
Deferred income taxes, net 41,365 53,395 21,156
Investment tax credits, net (14,041) (9,951) (8,036)
Allowance for equity funds used
during construction - - (5,277)
Receivables 24,326 (20,452) 32,113
Materials and supplies (736) 12,428 6,865
Accounts payable 962 3,545 (18,261)
Other (41,254) 64,189 61,908
-------- -------- --------
Net cash provided from operating activities 760,317 753,214 695,064
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing--
Preferred stock - 120,000 -
Long-term debt 306,313 254,365 434,759
Short-term borrowings, net 229,515 - 70,516
Redemptions and Repayments--
Preferred stock 1,016 117,528 56,362
Long-term debt 438,916 499,276 483,347
Short-term borrowings, net - 54,677 -
Dividend Payments--
Common stock 218,656 217,192 216,782
Preferred stock 12,560 20,623 21,483
-------- -------- --------
Net cash used for financing activities 135,320 534,931 272,699
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions 148,189 198,103 258,249
PNBV Capital Trust investment 487,979 - -
Letter of credit collateralization deposit - - 277,763
Other 13,406 13,641 22,752
-------- -------- --------
Net cash used for investing activities 649,574 211,744 558,764
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (24,577) 6,539 (136,399)
Cash and cash equivalents at beginning of year 29,830 23,291 159,690
-------- -------- --------
Cash and cash equivalents at end of year $ 5,253 $ 29,830 $ 23,291
======== ======== ========
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash Paid During the Year--
Interest (net of amounts capitalized) $224,541 $254,789 $267,319
Income taxes 157,477 178,643 143,202
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
- 12 -
<TABLE>
OHIO EDISON COMPANY
CONSOLIDATED STATEMENTS OF TAXES
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
GENERAL TAXES:
Real and personal property $ 115,443 $ 118,707 $ 113,484
State gross receipts 104,158 100,591 100,996
Social security and unemployment 14,602 15,787 14,822
Other 7,795 8,094 7,718
---------- ---------- ----------
Total general taxes $ 241,998 $ 243,179 $ 237,020
========== ========== ==========
PROVISION FOR INCOME TAXES:
Currently payable-
Federal $ 164,132 $ 145,511 $ 161,219
State 9,839 10,352 14,547
---------- ---------- ----------
173,971 155,863 175,766
---------- ---------- ----------
Deferred, net-
Federal 37,277 50,631 20,796
State 4,088 2,764 360
---------- ---------- ----------
41,365 53,395 21,156
---------- ---------- ----------
Investment tax credit amortization (14,041) (9,951) (8,036)
---------- ---------- ----------
Total provision for income taxes $ 201,295 $ 199,307 $ 188,886
========== ========== ==========
INCOME STATEMENT CLASSIFICATION
OF PROVISION FOR INCOME TAXES:
Operating income $ 189,417 $ 191,972 $ 181,514
Other income 11,878 7,335 7,372
---------- ---------- ----------
Total provision for income taxes $ 201,295 $ 199,307 $ 188,886
========== ========== ==========
RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT
STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXES:
Book income before provision for income taxes $ 516,465 $ 516,548 $ 492,417
Federal income tax expense at statutory rate $ 180,763 $ 180,792 $ 172,346
Increases (reductions) in taxes resulting from-
Amortization of investment tax credits (14,041) (9,951) (8,036)
State income taxes net of federal income tax benefit 9,053 8,525 9,690
Amortization of tax regulatory assets 26,945 19,690 14,503
Other, net (1,425) 251 383
---------- ---------- ----------
Total provision for income taxes $ 201,295 $ 199,307 $ 188,886
========== ========== ==========
ACCUMULATED DEFERRED INCOME TAXES AT DECEMBER 31:
Property basis differences $1,086,533 $1,047,387 $1,024,737
Allowance for equity funds used during construction 233,345 263,465 278,172
Deferred nuclear expense 262,123 271,114 277,951
Customer receivables for future income taxes 191,537 204,978 237,826
Deferred sale and leaseback costs 78,607 82,381 87,068
Unamortized investment tax credits (72,663) (77,777) (82,491)
Other (2,396) (19,114) (23,939)
---------- ---------- ----------
Net deferred income tax liability $1,777,086 $1,772,434 $1,799,324
========== ========== ==========
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
- 13 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The consolidated financial statements include Ohio Edison
Company (Company) and its wholly owned subsidiaries.
Pennsylvania Power Company (Penn Power) is the Company's
principal operating subsidiary. All significant intercompany
transactions have been eliminated. The Company and Penn Power
(Companies) follow the accounting policies and practices
prescribed by the Public Utilities Commission of Ohio (PUCO),
the Pennsylvania Public Utility Commission (PPUC) and the
Federal Energy Regulatory Commission (FERC). The preparation
of financial statements in conformity with generally accepted
accounting principles requires management to make periodic
estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses.
REVENUES-
The Companies' principal business is providing electric
service to customers in central and northeastern Ohio and
western Pennsylvania. The Companies' retail customers are
metered on a cycle basis. Revenue is recognized for unbilled
electric service through the end of the year.
Receivables from customers include sales to residential,
commercial and industrial customers located in the Companies'
service area and sales to wholesale customers. There was no
material concentration of receivables at December 31, 1996 or
1995, with respect to any particular segment of the Companies'
customers.
REGULATORY PLANS-
The Company's Rate Reduction and Economic Development Plan
was approved by the PUCO in 1995 and Penn Power's Rate
Stability and Economic Development Plan was approved by the
PPUC in the second quarter of 1996. These regulatory plans
maintain current base electric rates for the Company and Penn
Power through December 31, 2005 and June 20, 2006,
respectively, and revised the Companies' fuel cost recovery
methods. As part of the Company's regulatory plan, transition
rate credits were implemented for customers, which are
expected to reduce operating revenues by approximately $600
million during the regulatory plan period.
All of the Companies' regulatory assets are being
recovered under provisions of the regulatory plans. In
addition, the PUCO and the PPUC have authorized the Company
and Penn Power to recognize additional depreciation expense
related to their generating assets and additional amortization
- 14 -
of regulatory assets during the ten-year regulatory plan
periods of at least $2 billion and $358 million, respectively,
more than the amounts that would have been recognized if the
regulatory plans were not in effect. These additional amounts
are being recovered through current rates. Among other
provisions, the Company's regulatory plan also limits the
Company's annual earnings on common stock to a 13.21% return
under a formula adopted by the PUCO; any amounts otherwise
earned in excess of the limitation would be credited to the
Company's retail customers in a future period.
UTILITY PLANT AND DEPRECIATION-
Utility plant reflects the original cost of construction,
including payroll and related costs such as taxes, employee
benefits, administrative and general costs and financing costs
(allowance for funds used during construction).
The Companies provide for depreciation on a straight-line
basis at various rates over the estimated lives of property
included in plant in service. The annual composite rate for
electric plant was approximately 3.0% in 1996, 1995 and 1994.
In addition to the straight-line depreciation recognized in
1996 and 1995, the Companies also recognized additional
capital recovery of $144 million and $27 million,
respectively, as additional depreciation expense in accordance
with their regulatory plans. Such additional charges in the
accumulated provision for depreciation were $171 million and
$27 million as of December 31, 1996 and 1995, respectively.
Annual depreciation expense includes approximately $9.2
million for future decommissioning costs applicable to the
Companies' ownership and leasehold interests in three nuclear
generating units. The Companies' share of the future
obligation to decommission these units is approximately $410
million in current dollars and (using a 2.8% escalation rate)
approximately $865 million in future dollars. The estimated
obligation (based on site-specific studies) and the escalation
rate were developed using information obtained from
consultants. Payments for decommissioning are expected to
begin in 2016, when actual decommissioning work begins. The
Companies have recovered approximately $64 million for
decommissioning through their electric rates from customers
through December 31, 1996; such amounts are reflected in the
reserve for depreciation on the Consolidated Balance Sheet. If
the actual costs of decommissioning the units exceed the funds
accumulated from investing amounts recovered from customers,
the Companies expect that additional amount to be recoverable
from their customers. The Companies have approximately $83.5
million invested in external decommissioning trust funds as of
December 31, 1996. Earnings on these funds are reinvested with
- 15 -
a corresponding increase to the depreciation reserve. The
Companies have also recognized an estimated liability of
approximately $16.6 million related to decontamination and
decommissioning of nuclear enrichment facilities operated by
the United States Department of Energy (DOE), as required by
the Energy Policy Act of 1992.
The Financial Accounting Standards Board (FASB) issued a
proposed accounting standard for nuclear decommissioning costs
in February 1996. If the standard is adopted as proposed: (1)
annual provisions for decommissioning could increase; (2) the
net present value of estimated decommissioning costs could be
recorded as a liability; and (3) income from the external
decommissioning trusts could be reported as investment income.
The FASB has indicated that it plans to issue a revised
proposal or final accounting standard in 1997.
COMMON OWNERSHIP OF GENERATING FACILITIES-
The Companies and other Central Area Power Coordination
Group (CAPCO) companies own, as tenants in common, various
power generating facilities. Each of the companies is
obligated to pay a share of the costs associated with any
jointly owned facility in the same proportion as its interest.
The Companies' portions of operating expenses associated with
jointly owned facilities are included in the corresponding
operating expenses on the Consolidated Statements of Income.
The amounts reflected on the Consolidated Balance Sheet under
utility plant at December 31, 1996, include the following:
- 16 -
<TABLE>
<CAPTION>
Companies'
Utility Accumulated Construction Ownership/
Plant Provision for Work in Leasehold
Generating Units in Service Depreciation Progress Interest
- --------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C>
W.H. Sammis #7 $ 305.5 $ 95.8 $ .1 68.80%
Bruce Mansfield
#1,#2 and #3 782.9 360.1 1.2 50.68%
Beaver Valley
#1 and #2 1,853.7 665.9 3.7 47.11%
Perry 1,632.9 541.2 1.4 35.24%
- --------------------------------------------------------------------------
Total $4,575.0 $1,663.0 $ 6.4
- --------------------------------------------------------------------------
</TABLE>
- 17 -
NUCLEAR FUEL-
Nuclear fuel is recorded at original cost, which
includes material, enrichment, fabrication and interest costs
incurred prior to reactor load. The Companies amortize the
cost of nuclear fuel based on the rate of consumption. The
Companies' electric rates include amounts for the future
disposal of spent nuclear fuel based upon the formula used to
compute payments to the DOE.
INCOME TAXES-
Details of the total provision for income taxes are
shown on the Consolidated Statements of Taxes. Deferred income
taxes result from timing differences in the recognition of
revenues and expenses for tax and accounting purposes.
Investment tax credits, which were deferred when utilized, are
being amortized over the recovery period of the related
property. The liability method is used to account for deferred
income taxes. Deferred income tax liabilities related to tax
and accounting basis differences are recognized at the
statutory income tax rates in effect when the liabilities are
expected to be paid.
RETIREMENT BENEFITS-
The Companies' trusteed, noncontributory defined benefit
pension plan covers almost all full-time employees. Upon
retirement, employees receive a monthly pension based on
length of service and compensation. The Companies use the
projected unit credit method for funding purposes and were not
required to make pension contributions during the three years
ended December 31, 1996.
The following sets forth the funded status of the plan and
amounts recognized on the Consolidated Balance Sheets as of
December 31:
1996 1995
- -------------------------------------------------------------
(In millions)
Actuarial present value of benefit
obligations:
Vested benefits $562.0 $546.9
Nonvested benefits 38.9 36.6
- -------------------------------------------------------------
Accumulated benefit obligation $600.9 $583.5
=============================================================
Plan assets at fair value $946.3 $858.0
Actuarial present value of projected
benefit obligation 688.5 685.2
- -------------------------------------------------------------
- 18 -
Plan assets in excess of projected benefit
obligation 257.8 172.8
Unrecognized net gain (106.2) (43.6)
Unrecognized prior service cost 20.1 24.7
Unrecognized net transition asset (33.9) (41.8)
- -------------------------------------------------------------
Net pension asset $137.8 $112.1
=============================================================
The assets of the plan consist primarily of common stocks,
United States government bonds and corporate bonds. Net
pension costs for the three years ended December 31, 1996,
were computed as follows:
1996 1995 1994
- -------------------------------------------------------------
(In millions)
Service cost-benefits earned
during the period $ 14.2 $ 12.8 $ 15.2
Interest on projected benefit
obligation 49.3 48.1 45.3
Return on plan assets (141.6) (194.5) 8.3
Net deferral (amortization) 52.7 118.7 (89.3)
Voluntary early retirement
program expense 12.5 - 37.3
Gain on plan curtailment (12.8) - -
- -------------------------------------------------------------
Net pension cost $ (25.7) $ (14.9) $ 16.8
=============================================================
The assumed discount rate used in determining the
actuarial present value of the projected benefit obligation
was 7.5% in 1996 and 1995 and 8.5% in 1994. The assumed rate
of increase in future compensation levels used to measure this
obligation was 4.5% in each year. Expected long-term rates of
return on plan assets were assumed to be 10% in each year.
The Companies provide a minimum amount of noncontributory
life insurance to retired employees in addition to optional
contributory insurance. Health care benefits, which include
certain employee deductibles and copayments, are also
available to retired employees, their dependents and, under
certain circumstances, their survivors. The Companies pay
insurance premiums to cover a portion of these benefits in
excess of set limits; all amounts up to the limits are paid by
the Companies. The Companies recognize the expected cost of
providing other postretirement benefits to employees and their
beneficiaries and covered dependents from the time employees
are hired until they become eligible to receive those
benefits.
In accordance with Statement of Financial Accounting
Standards (SFAS) No. 88 "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for
- 19 -
Termination Benefits," the net pension costs shown above and
the postretirement benefit costs shown below include
curtailment effects (significant changes in projected plan
assumptions) relating to the pension and postretirement
benefit plans. The employee terminations reflected in the
Companies' 1996 voluntary early retirement program represent
a plan curtailment that significantly reduces the expected
future employee service years and the related accrual of
defined pension and postretirement benefits. In the pension
plan, the reduction in the benefit obligation increases the
net pension asset and is shown as a plan curtailment gain. In
the postretirement benefit plan, the unrecognized prior
service cost associated with service years no longer expected
to be rendered as a result of the terminations, is shown as a
plan curtailment loss.
The following sets forth the funded status of the plan and
amounts recognized on the Consolidated Balance Sheets as of
December 31:
1996 1995
- --------------------------------------------------------------
(In millions)
Accumulated postretirement
benefit obligation allocation:
Retirees $155.5 $148.2
Fully eligible active plan
participants 10.1 12.6
Other active plan participants 75.5 77.5
- --------------------------------------------------------------
Accumulated postretirement benefit
obligation 241.1 238.3
Plan assets at fair value 2.0 1.3
- --------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan
assets 239.1 237.0
Unrecognized transition obligation (133.5) (152.3)
Unrecognized net loss (7.4) (17.0)
- --------------------------------------------------------------
Net postretirement benefit
liability $ 98.2 $ 67.7
==============================================================
Net periodic postretirement benefit costs for the three
years ended December 31, 1996, were computed as follows:
- 20 -
1996 1995 1994
- --------------------------------------------------------------
(In millions)
Service cost-benefits attributed
to the period $ 4.3 $ 4.5 $ 4.9
Interest cost on accumulated
benefit obligation 17.4 21.1 19.3
Amortization of transition
obligation 8.8 10.2 10.2
Amortization of loss .1 .1 .8
Voluntary early retirement
program expense .5 - 2.8
Loss on plan curtailment 13.1 -
- --------------------------------------------------------------
Net periodic postretirement
benefit cost $44.2 $35.9 $38.0
==============================================================
The health care trend rate assumption is 6.0% in the first
year gradually decreasing to 4.0% for the year 2008 and later.
The discount rates used to compute the accumulated
postretirement benefit obligation were 7.5% in 1996 and 1995
and 8.5% in 1994. An increase in the health care trend rate
assumption by one percentage point in all years would increase
the accumulated postretirement benefit obligation by
approximately $29.9 million and the aggregate annual service
and interest costs by approximately $3.2 million.
SUPPLEMENTAL CASH FLOWS INFORMATION-
All temporary cash investments purchased with an initial
maturity of three months or less are reported as cash
equivalents on the Consolidated Balance Sheets. The Companies
reflect temporary cash investments at cost, which approximates
their market value. Noncash financing and investing activities
included capital lease transactions amounting to $2.0 million,
$1.0 million and $3.6 million for the years 1996, 1995 and
1994, respectively. Commercial paper transactions of OES Fuel
(a wholly owned subsidiary of the Company) that have initial
maturity periods of three months or less are reported net
within financing activities under long-term debt and are
reflected as long-term debt on the Consolidated Balance Sheets
(see Note 4F).
All borrowings with initial maturities of less than one
year are defined as financial instruments under generally
accepted accounting principles and are reported on the
Consolidated Balance Sheets at cost, which approximates their
fair market value. The following sets forth the approximate
fair value and related carrying amounts of all other long-term
debt, preferred stock subject to mandatory redemption and
- 21 -
investments other than cash and cash equivalents as of
December 31:
1996 1995
---------------- ---------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------ -------- -----
(In Millions)
Long-term debt $2,919 $2,963 $3,025 $3,152
Preferred stock $ 160 $ 160 $ 160 $ 163
Investments other than
cash and cash equivalents:
Debt securities
- Maturity (5-10 years) $ 364 $ 364 $ 278 $ 318
- Maturity (more
than 10 years) 387 390 - -
Equity securities 14 14 - -
All other 104 102 75 76
------ ------ ------ ------
$ 869 $ 870 $ 353 $ 394
====== ====== ====== ======
The fair values of long-term debt and preferred stock
reflect the present value of the cash outflows relating to
those securities based on the current call price, the yield to
maturity or the yield to call, as deemed appropriate at the
end of each respective year. The yields assumed were based on
securities with similar characteristics offered by a
corporation with credit ratings similar to the Companies'
ratings.
The fair value of investments other than cash and cash
equivalents represent cost (which approximates fair value) or
the present value of the cash inflows based on the yield to
maturity. The yields assumed were based on financial
instruments with similar characteristics and terms.
Investments other than cash and cash equivalents include
decommissioning trust investments. Unrealized gains and losses
applicable to the decommissioning trust have been recognized
in the trust investment with a corresponding offset to the
reserve for depreciation. The debt and equity securities
referred to above are in the held-to-maturity category. The
Companies have no securities held for trading purposes.
REGULATORY ASSETS-
The Companies recognize, as regulatory assets, costs which
the FERC, PUCO and PPUC have authorized for recovery from
customers in future periods. Without such authorization, the
costs would have been charged to income as incurred. All
regulatory assets are being recovered from customers under the
Companies' respective regulatory plans. Based on those
- 22 -
regulatory plans, the Companies believe they will continue to
be able to bill and collect cost-based rates; accordingly, it
is improbable that the Companies will be required to terminate
application of SFAS No. 71 "Accounting for the Effects of
Certain Types of Regulation" in the foreseeable future. The
Companies also recognized additional cost recovery of $34
million and $11 million in 1996 and 1995, respectively, as
additional regulatory asset amortization in accordance with
their regulatory plans.
Regulatory assets on the Consolidated Balance Sheets are
comprised of the following:
1996 1995
- -----------------------------------------------------------
(In millions)
Nuclear unit expenses $ 733.4 $ 758.4
Customer receivables for future
income taxes 523.0 559.7
Sale and leaseback costs 220.8 231.5
Loss on reacquired debt 95.8 96.7
Employee postretirement
benefit costs 29.2 32.4
Uncollectible customer accounts 29.8 32.5
Perry Unit 2 termination 40.4 39.6
DOE decommissioning and
decontamination costs 18.0 19.3
Other 12.7 16.4
- -----------------------------------------------------------
Total $1,703.1 $1,786.5
===========================================================
2. MERGER AGREEMENT:
On September 13, 1996, the Company and Centerior Energy
Corporation, an Ohio corporation, entered into an Agreement
and Plan of Merger. Under the Merger Agreement, the Company
and Centerior will form FirstEnergy Corp., a holding company
which will directly hold all of the issued and outstanding
common stock of the Company and all of the issued and
outstanding common stock of Centerior's direct subsidiaries,
which include among others, The Cleveland Electric
Illuminating Company (CEI) and The Toledo Edison Company
(Toledo). Penn Power will remain a wholly-owned subsidiary of
the Company. As a result of the Merger, the respective common
stock shareholders of the Company and Centerior will own all
of the outstanding shares of FirstEnergy Common Stock. All
other classes of capital stock of the Company and its
subsidiaries and of the subsidiaries of Centerior will be
unaffected by the Merger and will remain outstanding.
- 23 -
The Merger has been approved by the respective Boards of
Directors of the Company and Centerior and is expected to
close promptly after all of the conditions to the consummation
of the Merger, including the receipt of all necessary
regulatory approvals, are fulfilled or waived. An important
condition already met was the PUCO's approval of FirstEnergy's
Rate Reduction and Economic Development Plan for CEI and
Toledo in January 1997. This regulatory plan, which is similar
to the regulatory plan approved by the PUCO for the Company,
provides for a $310 million reduction in base electric rates
for CEI and Toledo in 2006. The plan also requires additional
depreciation (or revaluation) of generating assets and
additional amortization of regulatory assets of at least $2
billion more than the amounts that would have been recognized
through December 31, 2005, without the plan, and limits annual
earnings on common stock for CEI and Toledo. Shareholder
meetings to vote on the Merger are scheduled to be held in
March 1997. The receipt of all necessary regulatory approvals,
including approvals from the FERC, the Securities and Exchange
Commission and the Nuclear Regulatory Commission, are expected
to take approximately 12 to 18 months from the date of the Merger
Agreement.
3. LEASES:
The Companies lease a portion of their nuclear generating
facilities, certain transmission facilities, office space and
other property and equipment under cancelable and
noncancelable leases.
The Company sold portions of its ownership interests in
Perry Unit 1 and Beaver Valley Unit 2 and entered into
operating leases on the portions sold for basic lease terms of
approximately 29 years. During the terms of the leases the
Company continues to be responsible, to the extent of its
combined ownership and leasehold interest, for costs
associated with the units including construction expenditures,
operation and maintenance expenses, insurance, nuclear fuel,
property taxes and decommissioning. The basic rental payments
are adjusted when applicable federal tax law changes. The
Company has the right, at the end of the respective basic
lease terms, to renew the leases for up to two years. The
Company also has the right to purchase the facilities at the
expiration of the basic lease term or renewal term (if
elected) at a price equal to the fair market value of the
facilities.
OES Finance, Incorporated (OES Finance), a wholly owned
subsidiary of the Company, maintains deposits pledged as
collateral to secure reimbursement obligations relating to
certain letters of credit supporting the Company's obligations
to lessors under the Beaver Valley Unit 2 sale and leaseback
- 24 -
arrangements. The deposits pledged to the financial
institution providing those letters of credit are the sole
property of OES Finance. In the event of liquidation, OES
Finance, as a separate corporate entity, would have to satisfy
its obligations to creditors before any of its assets could be
made available to the Company as sole owner of OES Finance
common stock.
Consistent with the regulatory treatment, the rental
payments for capital and operating leases are charged to
operating expenses on the Consolidated Statements of Income.
Such costs for the three years ended December 31, 1996, are
summarized as follows:
1996 1995 1994
- --------------------------------------------------------------
(In millions)
Operating leases
Interest element $107.6 $104.6 $101.0
Other 18.3 13.9 14.5
Capital leases
Interest element 6.5 7.0 7.5
Other 6.3 6.6 7.0
- --------------------------------------------------------------
Total rental payments $138.7 $132.1 $130.0
==============================================================
The future minimum lease payments as of December 31, 1996,
are:
Operating Leases
------------------------------
Capital Lease PNBV Capital
Leases Payments Trust Income Net
- --------------------------------------------------------------
(In millions)
1997 $ 14.9 $ 113.9 $ 38.7 $ 75.2
1998 13.1 120.8 38.4 82.4
1999 11.2 125.7 38.0 87.7
2000 9.9 124.9 37.6 87.3
2001 9.4 127.5 36.2 91.3
Years thereafter 85.1 2,110.4 283.9 1,826.5
- --------------------------------------------------------------
Total minimum
lease payments 143.6 $2,723.2 $472.8 $2,250.4
=================================
Executory costs 37.6
- ---------------------------
Net minimum lease
payments 106.0
Interest portion 62.2
- ---------------------------
- 25 -
Present value of net
minimum lease
payments 43.8
Less current portion 5.7
- ---------------------------
Noncurrent portion $ 38.1
===========================
The Company invested (through funds available under
various credit facilities) in the PNBV Capital Trust in the
third quarter of 1996. The Trust was established to purchase
a portion of the lease obligation bonds issued on behalf of
lessors in the Company's Perry Unit 1 and Beaver Valley Unit
2 sale and leaseback transactions.The PNBV Capital Trust
income shown in the table above effectively reduces the
Company's lease costs related to those transactions.
4. CAPITALIZATION:
(A) RETAINED EARNINGS-
Under the Company's first mortgage indenture, the
Company's consolidated retained earnings unrestricted for
payment of cash dividends on the Company's common stock were
$490.8 million at December 31, 1996.
(B) EMPLOYEE STOCK OWNERSHIP PLAN-
The Companies fund the matching contribution for their
401(k) savings plan through an ESOP Trust. All full-time
employees eligible for participation in the 401(k) savings
plan are covered by the ESOP. The ESOP borrowed $200 million
from the Company and acquired 10,654,114 shares of the
Company's common stock through market purchases. Dividends on
ESOP shares are used to service the debt. Shares are released
from the ESOP on a pro-rata basis as debt service payments are
made. In 1996, 1995 and 1994, 404,522 shares, 412,914 shares
and 532,250 shares, respectively, were allocated to employees
with the corresponding expense recognized based on the shares
allocated method. The fair value of 8,259,053 shares
unallocated as of December 31, 1996, was approximately $187.9
million. Total ESOP-related compensation expense was
calculated as follows:
- 26 -
- ------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------
(In millions)
Base compensation $ 9.0 $ 9.0 $10.2
Dividends on common stock
held by the ESOP and
used to service debt (2.9) (2.5) (2.0)
- ------------------------------------------------------------
Net expense $ 6.1 $ 6.5 $ 8.2
============================================================
(C) PREFERRED STOCK-
Penn Power's 7.625% and 7.75% series of preferred stock
have restrictions which prevent early redemption prior to
October 1997 and July 2003, respectively. The Company's 8.45%
series of preferred stock has no optional redemption
provision, and its 7.75% series is not redeemable before April
1998. All other preferred stock may be redeemed by the
Companies in whole, or in part, with 30-60 days' notice.
(D) PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION-
The Company's 8.45% series of preferred stock has an
annual sinking fund requirement for 50,000 shares beginning on
September 16, 1997. Penn Power's 7.625% series has an annual
sinking fund requirement for 7,500 shares beginning on October
1, 2002.
The Companies' preferred shares are retired at $100 per
share plus accrued dividends. Annual sinking fund requirements
for each of the next five years are $5 million.
(E) COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY
COMPANY SUBORDINATED DEBENTURES-
Ohio Edison Financing Trust, a wholly owned subsidiary of
the Company, has issued $120 million of 9% Cumulative Trust
Preferred Capital Securities. The Company purchased all of the
Trust's Common Securities and simultaneously issued to the
Trust $123.7 million principal amount of 9% Junior
Subordinated Debentures due 2025 in exchange for the proceeds
that the Trust received from its sale of Preferred and Common
Securities. The sole assets of the Trust are the Subordinated
Debentures whose interest and other payment dates coincide
with the distribution and other payment dates on the Trust
Securities. Under certain circumstances the Subordinated
Debentures could be distributed to the holders of the
outstanding Trust Securities in the event the Trust is
- 27 -
liquidated. The Subordinated Debentures may be optionally
redeemed beginning December 31, 2000, by the Company at a
redemption price of $25 per Subordinated Debenture plus
accrued interest, in which event the Trust Securities will be
redeemed on a pro-rata basis at $25 per share plus accumulated
distributions. The Company's obligations under the
Subordinated Debentures along with the related Indenture,
amended and restated Trust Agreement, Guarantee Agreement and
the Agreement for expenses and liabilities constitute a full
and unconditional guarantee by the Company of payments due on
the Preferred Securities.
(F) LONG-TERM DEBT-
The first mortgage indentures and their supplements, which
secure all of the Companies' first mortgage bonds, serve as
direct first mortgage liens on substantially all property and
franchises, other than specifically excepted property, owned
by the Companies.
Based on the amount of bonds authenticated by the
Trustee through December 31, 1996, the Company's annual
sinking and improvement fund requirement for all bonds issued
under the mortgage amounts to $30 million. The Company expects
to deposit funds in 1997 that will be withdrawn upon the
surrender for cancellation of a like principal amount of
bonds, which are specifically authenticated for such purposes
against unfunded property additions or against previously
retired bonds. This method can result in minor increases in
the amount of the annual sinking fund requirement.
Sinking fund requirements for first mortgage bonds and
maturing long-term debt (excluding capital leases) for the
next five years are:
(In Millions)
- -------------------------------------------------------------
1997 323.0
1998 211.5
1999 521.0
2000 169.9
2001 14.5
- -------------------------------------------------------------
The Companies' obligations to repay certain pollution
control revenue bonds are secured by several series of first
mortgage bonds and, in some cases, by subordinate liens on the
related pollution control facilities. Certain pollution
control revenue bonds are entitled to the benefit of
irrevocable bank letters of credit of $338.8 million. To the
extent that drawings are made under those letters of credit to
pay principal of, or interest on, the pollution control
- 28 -
revenue bonds, the Company is entitled to a credit against its
obligation to repay those bonds. The Company pays annual fees
of 0.55% to 0.875% of the amounts of the letters of credit to
the issuing banks and is obligated to reimburse the banks for
any drawings thereunder.
The Company had unsecured borrowings of $225 million at
December 31, 1996, which are supported by a $250 million long-
term revolving credit facility agreement which expires
December 30, 1999. The Company must pay an annual facility fee
of 0.20% on the total credit facility amount. In addition, the
credit agreement provides that the Company maintain unused
first mortgage bond capability for the full credit agreement
amount under the Company's indenture as potential security for
the unsecured borrowings.
Nuclear fuel purchases are financed through the issuance
of OES Fuel commercial paper and loans, both of which are
supported by a $225 million long-term bank credit agreement
which expires March 31, 1999. Accordingly, the commercial
paper and loans are reflected as long-term debt on the
Consolidated Balance Sheets. OES Fuel must pay an annual
facility fee of 0.1875% on the total line of credit and an
annual commitment fee of 0.0625% on any unused amount.
5. SHORT-TERM BORROWINGS AND BANK LINES OF CREDIT:
Short-term borrowings outstanding at December 31, 1996,
consisted of $229.5 million of bank borrowings and $120.0
million of OES Capital, Incorporated commercial paper. OES
Capital is a wholly owned subsidiary of the Company whose
borrowings are secured by customer accounts receivable. OES
Capital can borrow up to $120 million under a receivables
financing agreement at rates based on certain bank commercial
paper and is required to pay an annual fee of 0.31% on the
amount of the entire finance limit. The receivables financing
agreement expires in 1999.
The Companies have lines of credit with domestic banks
that provide for borrowings of up to $52 million under various
interest rate options. Short-term borrowings may be made under
these lines of credit on the Companies' unsecured notes. To
assure the availability of these lines, the Companies are
required to pay annual commitment fees that vary from 0.22% to
0.50%. These lines expire at various times during 1997. The
weighted average interest rates on short-term borrowings
outstanding at December 31, 1996 and 1995, were 5.77% and
5.67%, respectively.
- 29 -
6. COMMITMENTS, GUARANTEES AND CONTINGENCIES:
CONSTRUCTION PROGRAM-
The Companies' current forecasts reflect expenditures of
approximately $600 million for property additions and
improvements from 1997-2001, of which approximately $135
million is applicable to 1997. Investments for additional
nuclear fuel during the 1997-2001 period are estimated to be
approximately $194 million, of which approximately $45 million
applies to 1997. During the same periods, the Companies'
nuclear fuel investments are expected to be reduced by
approximately $185 million and $43 million, respectively, as
the nuclear fuel is consumed.
NUCLEAR INSURANCE-
The Price-Anderson Act limits the public liability
relative to a single incident at a nuclear power plant to
$8.92 billion. The amount is covered by a combination of
private insurance and an industry retrospective rating plan.
Based on their present ownership and leasehold interests in
the Beaver Valley Station and the Perry Plant, the Companies'
maximum potential assessment under the industry retrospective
rating plan (assuming the other CAPCO companies were to
contribute their proportionate share of any assessments under
the retrospective rating plan) would be $102.8 million per
incident but not more than $13 million in any one year for
each incident.
The Companies are also insured as to their respective
interests in the Beaver Valley Station and the Perry Plant
under policies issued to the operating company for each plant.
Under these policies, up to $2.75 billion is provided for
property damage and decontamination and decommissioning costs.
The Companies have also obtained approximately $315 million of
insurance coverage for replacement power costs for their
respective interests in Perry and Beaver Valley. Under these
policies, the Companies can be assessed a maximum of
approximately $16.5 million for incidents at any covered
nuclear facility occurring during a policy year which are in
excess of accumulated funds available to the insurer for
paying losses.
The Companies intend to maintain insurance against nuclear
risks as described above as long as it is available. To the
extent that replacement power, property damage,
decontamination, decommissioning, repair and replacement costs
and other such costs arising from a nuclear incident at any of
the Companies' plants exceed the policy limits of the
insurance in effect with respect to that plant, to the extent
a nuclear incident is determined not to be covered by the
- 30 -
Companies' insurance policies, or to the extent such insurance
becomes unavailable in the future, the Companies would remain
at risk for such costs.
GUARANTEES-
The Companies, together with the other CAPCO companies,
have each severally guaranteed certain debt and lease
obligations in connection with a coal supply contract for the
Bruce Mansfield Plant. As of December 31, 1996, the Companies'
shares of the guarantees (which approximate fair market value)
were $58.3 million. The price under the coal supply contract,
which includes certain minimum payments, has been determined
to be sufficient to satisfy the debt and lease obligations.
The Companies' total payments under the coal supply contract
were $113.8 million, $120.0 million and $99.8 million during
1996, 1995 and 1994, respectively. The Companies' minimum
annual payments are approximately $35 million under the
contract, which expires December 31, 1999.
ENVIRONMENTAL MATTERS-
Various federal, state and local authorities regulate the
Companies with regard to air and water quality and other
environmental matters. The Companies have estimated additional
capital expenditures for environmental compliance of
approximately $14 million, which is included in the
construction forecast provided under "Construction Program"
for 1997 through 2001.
The Companies were in compliance with the sulfur dioxide
(SO2) and nitrogen oxides (NOx) reduction requirements for
1996 under the Clean Air Act Amendments of 1990. SO2
reductions through the year 1999 will be achieved by burning
lower-sulfur fuel, generating more electricity from lower-
emitting plants, and/or purchasing emission allowances. Plans
for complying with reductions required for the year 2000 and
thereafter have not been finalized. The Environmental
Protection Agency (EPA) is conducting additional studies which
could indicate the need for additional NOx reductions from the
Companies' Pennsylvania facilities by the year 2003. The cost
of such reductions, if required, may be substantial. The
Companies continue to evaluate their compliance plans and
other compliance options.
The Companies are required to meet federally approved SO2
regulations. Violations of such regulations can result in
shutdown of the generating unit involved and/or civil or
criminal penalties of up to $25,000 for each day the unit is
in violation. The EPA has an interim enforcement policy for
SO2 regulations in Ohio that allows for compliance based on a
30-day averaging period. The EPA has proposed regulations that
- 31 -
could change the interim enforcement policy, including the
method of determining compliance with emission limits. The
Companies cannot predict what action the EPA may take in the
future with respect to proposed regulations or the interim
enforcement policy.
Legislative, administrative and judicial actions will
continue to change the way that the Companies must operate in
order to comply with environmental laws and regulations. With
respect to any such changes and to the environmental matters
described above, the Companies expect that any resulting
additional capital costs which may be required, as well as any
required increase in operating costs, would ultimately be
recovered from their customers.
- 32 -
<TABLE>
<CAPTION>
7. SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED):
The following summarizes certain consolidated operating results by quarter for 1996 and 1995.
March 31, June 30, September 30, December 31,
Three Months Ended 1996 1996 1996 1996
- ----------------------------------------------------------------------
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $611.6 $599.3 $646.9 $611.9
Operating Expenses
and Taxes 481.1 471.7 500.0 486.8
- -----------------------------------------------------------------------
Operating Income 130.5 127.6 146.9 125.1
Other Income 7.0 10.7 7.1 12.7
Net Interest and
Other Charges 64.1 61.7 61.5 65.1
- -----------------------------------------------------------------------
Net Income $ 73.4 $ 76.6 $ 92.5 $ 72.7
- -----------------------------------------------------------------------
Earnings on
Common Stock $ 70.3 $ 73.5 $ 89.4 $ 69.5
- -----------------------------------------------------------------------
Earnings per Share
of Common Stock $.49 $.51 $.62 $.48
- -----------------------------------------------------------------------
</TABLE>
- 33 -
<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
Three Months Ended 1996 1996 1996 1996
- -----------------------------------------------------------------------
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $587.7 $593.8 $667.0 $617.3
Operating Expenses
and Taxes 453.9 454.4 508.0 482.9
- -----------------------------------------------------------------------
Operating Income 133.8 139.4 159.0 134.4
Other Income 3.0 3.8 1.2 6.4
Net Interest and
Other Charges 65.2 66.1 67.1 65.3
- -----------------------------------------------------------------------
Net Income $ 71.6 $ 77.1 $ 93.1 $ 75.5
- -----------------------------------------------------------------------
Earnings on
Common Stock $ 66.2 $ 71.5 $ 87.7 $ 69.3
- -----------------------------------------------------------------------
Earnings per Share
of Common Stock $.46 $.50 $.61 $.48
- -----------------------------------------------------------------------
- 34 -
Report of Independent Public Accountants
To the Stockholders and Board of Directors of Ohio Edison
Company:
We have audited the accompanying consolidated balance
sheets and consolidated statements of capitalization of Ohio
Edison Company (an Ohio corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated
statements of income, retained earnings, capital stock and
other paid-in capital, cash flows and taxes for each of the
three years in the period ended December 31, 1996. 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 referred to above
present fairly, in all material respects, the financial
position of Ohio Edison Company and subsidiaries as of
December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
February 7, 1997
- 35 -
</TABLE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
AT DECEMBER 31, 1996
Pennsylvania Power Company - Incorporated in Pennsylvania
OES Fuel, Incorporated - Incorporated in Ohio
OES Ventures, Incorporated - Incorporated in Ohio
OES Capital, Incorporated - Incorporated in Ohio
OES Finance, Incorporated - Incorporated in Ohio
OES Nuclear, Incorporated - Incorporated in Ohio
Ohio Edison Financing Trust - Incorporated in Delaware
Ohio Edison Financing Trust II - Incorporated in Delaware
Statement of Differences
------------------------
Exhibit Number 21, List of Subsidiaries of the
Registrant at December 31, 1996, is not included
in the printed document.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by reference
in this Form 10-K, into the Company's previously filed Registration
Statements, File No. 33-49135, No. 33-49259, No. 33-49413, No. 33-
51139, No. 333-01489, No. 333-05277 and No. 333-21011.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
March 26, 1997
- 1 -
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
(Amounts in 1,000's, except earnings per share)
Income tax expense includes $11,878,000 related to other income.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 5,417,885
<OTHER-PROPERTY-AND-INVEST> 1,089,058
<TOTAL-CURRENT-ASSETS> 496,933
<TOTAL-DEFERRED-CHARGES> 1,961,496
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 8,965,372
<COMMON> 1,373,125
<CAPITAL-SURPLUS-PAID-IN> 572,592
<RETAINED-EARNINGS> 557,642
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,503,359
155,000
211,870
<LONG-TERM-DEBT-NET> 2,712,760
<SHORT-TERM-NOTES> 229,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 119,980
<LONG-TERM-DEBT-CURRENT-PORT> 322,960
5,000
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 5,707
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,699,236
<TOT-CAPITALIZATION-AND-LIAB> 8,965,372
<GROSS-OPERATING-REVENUE> 2,469,785
<INCOME-TAX-EXPENSE> 201,295
<OTHER-OPERATING-EXPENSES> 1,750,299
<TOTAL-OPERATING-EXPENSES> 1,939,716
<OPERATING-INCOME-LOSS> 530,069
<OTHER-INCOME-NET> 37,537
<INCOME-BEFORE-INTEREST-EXPEN> 567,606
<TOTAL-INTEREST-EXPENSE> 252,436
<NET-INCOME> 315,170
12,497
<EARNINGS-AVAILABLE-FOR-COMM> 302,673
<COMMON-STOCK-DIVIDENDS> 216,126
<TOTAL-INTEREST-ON-BONDS> 211,935
<CASH-FLOW-OPERATIONS> 760,317
<EPS-PRIMARY> 2.10
<EPS-DILUTED> 2.10
</TABLE>
