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, 1995
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 1-3491
PENNSYLVANIA POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 25-0718810
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1 EAST WASHINGTON STREET
P.O. BOX 891,
NEW CASTLE, PENNSYLVANIA 16103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 652-5531
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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4.24% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
4.25% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
4.64% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
7.64% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
8.00% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
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: None
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date:
$30 par value - 6,290,000 shares outstanding at March 27, 1996.
Documents incorporated by reference PART OF FORM 10-K INTO WHICH
(to the extent indicated herein): DOCUMENT IS INCORPORATED
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1995 Annual Report to Stockholders Part II
(Pages 1-16)
TABLE OF CONTENTS
Page
----
Part I
Item 1. Business 1
The Company 1
Central Area Power Coordination Group 1
Capital Requirements 2
Utility Regulation 3
Nuclear Regulation 4
Nuclear Insurance 4
Environmental Matters 5
Air Regulation 5
Water Regulation 6
Waste Disposal 6
Summary 6
Fuel Supply 7
Nuclear Fuel 7
Capacity and Reserves 8
Regional Reliability 8
Competition 8
Employees 8
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security
Holders 10
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 10
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 10
Part III
Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 12
Summary Executive Compensation Table 12
Long-Term Incentive Plan Table 13
Supplemental Executive Retirement Plan 13
Pension Plan 14
Additional Information Regarding Compensation 14
Compensation of Directors 14
Item 12. Security Ownership of Certain Beneficial
Owners and Management 15
Item 13. Certain Relationships and Related Transactions 15
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 16
PART I
ITEM 1. BUSINESS
The Company
Pennsylvania Power Company (Company) was organized under the laws
of the Commonwealth of Pennsylvania in 1930 and owns property and
does business as an electric public utility in that state. The
Company is authorized to do business and owns property in the State
of Ohio. It is a wholly owned subsidiary of Ohio Edison Company
(Edison), an Ohio corporation which does business as an electric
public utility in Ohio. The Company and Edison are referred to
herein collectively as Companies.
The Company furnishes electric service to communities in a 1,500
square mile area of western Pennsylvania. The Company also provides
transmission services and electric energy for resale to certain
municipalities in Pennsylvania. The area served by the Company has
a population of approximately 342,000.
Central Area Power Coordination Group (CAPCO)
In September 1967, the CAPCO companies, consisting of the
Company, Edison, The Cleveland Electric Illuminating Company (CEI),
Duquesne Light Company (Duquesne) and The Toledo Edison Company,
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,
Unit 1 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
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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 Unit 1. The Companies
monitor activities in connection with these units but must rely to
a significant degree on the operating company for necessary
information. The Companies in their 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 Companies
critically review the information given to them by the operating
company, but they cannot be absolutely certain that things they
would have considered significant have been reported or that they
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 Companies become aware of
their significance. The Company has similar responsibilities to the
other CAPCO companies with respect to Bruce Mansfield Units 1, 2
and 3 and Edison has those responsibilities with respect to W. H.
Sammis Unit 7.
Capital Requirements
The Company's total construction costs, excluding nuclear fuel,
amounted to approximately $30,000,000 in 1995. 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 1996-2000, such construction
costs are estimated to be approximately $105,000,000, of which
approximately $24,000,000 is applicable to 1996. See "Environmental
Matters" below with regard to possible environment-related
expenditures not included in this estimate.
During the 1996-2000 period, maturities of, and sinking fund
requirements for, long-term debt (excluding nuclear fuel) and
preferred stock will require the expenditure by the Company of
approximately $80,000,000, of which approximately $53,000,000 is
applicable to 1996. In addition, the Company optionally redeemed
$10,000,000 of long-term debt in February 1996.
The Company leases its nuclear fuel requirements from OES Fuel,
Incorporated (a wholly owned subsidiary of Edison). Investments for
additional nuclear fuel during the 1996-2000 period are estimated
to be approximately $31,000,000, of which approximately $5,000,000
applies to 1996. During the same periods, the Company's nuclear
fuel investments are expected to be reduced by approximately
$34,000,000 and $7,000,000, respectively, as the nuclear fuel is
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consumed. The Company recovers the cost of nuclear fuel consumed
through its electric rates.
Based on its present plans, the Company could provide for its
cash requirements in 1996 from the following sources: funds to be
received from operations; available cash and temporary cash
investments (approximately $43,000,000 as of December 31, 1995);
funds available under short-term bank credit arrangements presently
aggregating $2,000,000; and the ability to borrow up to $50,000,000
from Edison, if available, under a system funds pool agreement.
Additionally, the Company has $12,000,000 of unused bank facilities
which may be borrowed for up to several days at the banks'
discretion.
For the period 1996-2000, external financings may be used to
provide a portion of the Company's cash requirements. 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 Company to
comply with coverage requirements in order to issue first mortgage
bonds and preferred stock. The Company 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 its financial resources permit.
The coverage requirements contained in the first mortgage
indenture under which the Company issues first mortgage bonds
provide that, except for certain refunding purposes, the Company
may not issue first mortgage bonds unless applicable net earnings
(before income taxes), calculated as provided in the indenture, 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
Company's 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, other
requirements also apply and are more restrictive than the earnings
test at the present time. The Company is currently able to issue
$170,000,000 principal amount of first mortgage bonds, with up to
$109,000,000 of such amount issuable against property additions;
the remainder could be issued against previously retired bonds.
Based upon earnings for 1995, the Company would be permitted, under
the earnings coverage test contained in the Company's charter, to
issue at least $134,000,000 of preferred stock at an assumed
dividend rate of 8.25%. If the Company were to issue additional
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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 Company's ability to issue desired amounts of first
mortgage bonds or preferred stock, the Company may seek other
methods of financing. Such financings could include the sale of
common stock to Edison, or of such other types of securities as
might be authorized by the Pennsylvania Public Utility Commission
(PPUC) which would not otherwise be sold and could result in annual
interest charges and/or dividend requirements in excess of those
that would otherwise be incurred.
Utility Regulation
The Company is subject to broad regulation as to rates and other
matters by the PPUC. With respect to its wholesale and interstate
electric operations and rates, the Company is subject to
regulation, including regulation of its accounting policies and
practices, by the Federal Energy Regulatory Commission (FERC).
The Energy Policy Act of 1992 (1992 Act) amends portions of the
Public Utility Holding Company Act of 1935, providing independent
power producers and other nonregulated generating facilities easier
entry into electric generation markets. The 1992 Act also amends
portions of the Federal Power Act, authorizing the FERC, under
certain circumstances, to mandate access to utility-owned
transmission facilities.
The Company has agreements to sell power to four wholesale
customers; two of the agreements expire in March 1997, and the
other two will be in effect until September 1999. The Company had
sold power to a fifth municipality, which signed a contract with
another energy supplier in November 1995. The Company and the
former customer are in dispute over the proposed transmission rate.
Both parties have filed proposals with the FERC requesting it to
establish final terms. FERC has accepted the proposed transmission
rate, subject to refund upon hearing.
The Company uses a "levelized" energy cost rate (ECR) for the
recovery of fuel and net purchased power costs which are not
otherwise recovered through base rates from its customers. The ECR,
which includes adjustment for any over or under collection from
customers, is recalculated each year.
On March 7, 1996, the Company filed a petition and application
with the PPUC requesting approval of a Rate Stability and Economic
Development Plan (Plan). The Plan, which would remain in effect
unless certain significant events occur, provides for the roll-in
to base rates of the ECR and the freezing of base rates for a ten-
year period. A major component of the Plan is the commitment to
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reduce fixed costs during the ten-year period. The Company expects
to recognize additional depreciation expense related to generating
assets and additional amortization of regulatory assets during the
ten-year Plan period of at least $330,000,000 more than the amount
that would have been recognized if the Plan were not in effect.
Additionally, the Plan provides for an increase in contributions to
the Company's nuclear decommissioning trusts amounting to
$28,000,000 over the ten-year period. The entire $358,000,000 would
be recovered through current rates.
Nuclear Regulation
The construction and operation of nuclear generating units are
subject to the regulatory jurisdiction of the Nuclear Regulatory
Commission (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 and Perry on July 1, 1976 and
November 13, 1986, respectively.
The NRC has promulgated and continues to promulgate regulations
related to the safe operation of nuclear power plants. The Company
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 Beaver
Valley Unit 1 and Perry. Although the Company has no reason to
anticipate an accident at any nuclear plant in which it has an
interest, if such an accident did happen, it could have a material
but presently undeterminable adverse effect on the Company's
financial position. In addition, such an accident at any operating
nuclear plant, whether or not owned by the Company, could result in
regulations or requirements that could affect the operation or
licensing of plants that the Company does own with a consequent but
presently undeterminable adverse impact, and could affect the
Company's ability 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 $8,920,000,000
(assuming 110 units licensed to operate) for a single nuclear
incident, which amount is covered by: (i) private insurance
amounting to $200,000,000; and (ii) $8,720,000,000 provided by an
industry retrospective rating plan required by the NRC pursuant
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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 $75,500,000 (but not
more than $10,000,000 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
liabilities arising out of the incident. Based on its present
ownership interest in Beaver Valley Unit 1 and the Perry Plant, the
Company's 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 $18,000,000 per incident but not more than
$2,300,000 in any one year for each incident.
In addition to the public liability insurance provided pursuant
to the Price-Anderson Act, the Company has also obtained insurance
coverage in limited amounts for economic loss and property damage
arising out of nuclear incidents. The Company is a member 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
Company has policies, renewable yearly, corresponding to its
interest in Beaver Valley Unit 1 and the Perry Plant, which provide
an aggregate indemnity of up to approximately $61,100,000 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 Company's present maximum aggregate
assessment for incidents occurring during a policy year would be
approximately $613,000.
The Company is insured as to its interest in Beaver Valley Unit
1 and the 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, $2,750,000,000 of coverage for
decontamination costs, decommissioning costs, debris removal and
repair and/or replacement of property is provided for Beaver Valley
Unit 1 and the Perry Plant. The Company pays annual premiums for
this coverage and is liable for retrospective assessments of up to
approximately $2,300,000 in any one year for each incident.
The Company intends 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 Company's 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 Company's insurance policies, or to the extent
such insurance becomes unavailable in the future, the Company would
remain at risk for such costs.
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The NRC requires nuclear power plant licensees to obtain minimum
property insurance coverage of $1,060,000,000 or the amount
generally available from private sources, whichever is less. The
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 Company is unable to
predict what effect these requirements may have on the availability
of insurance proceeds to the Company for the Company's bondholders.
Environmental Matters
Various federal, state and local authorities regulate the Company
with regard to air and water quality and other environmental
matters. The Company has estimated capital expenditures for
environmental compliance of approximately $2,000,000, which is
included in the construction estimate given under "Capital
Requirements" for 1996 through 2000.
Air Regulation
Under the provisions of the Clean Air Act of 1970, both the
Commonwealth of Pennsylvania and the State of Ohio 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 W. H. Sammis
Unit 7 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
Pennsylvania and Ohio 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 Company is in compliance with the SO2 and nitrogen oxides
(NOx) reduction requirements for 1995 under the Clean Air Act
Amendments of 1990. SO2 reductions for the years 1995 through 1999
are being 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 EPA is
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conducting additional studies which could indicate the need for
additional NOx reductions from the Company's Pennsylvania
facilities by the year 2003. The cost of such reductions, if
required, may be substantial. The Company continues to evaluate its
compliance plan and other compliance options.
The Company is required to meet federally approved SO2
regulations. Violation 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 Company cannot predict what action the EPA may
take in the future with respect to proposed regulations or the
interim enforcement policy.
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 Company's plants. In addition, Pennsylvania and Ohio have water
quality standards applicable to the Company's 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. Pennsylvania and Ohio
have assumed such authority.
The Ohio Environmental Protection Agency (Ohio EPA) has issued
an NPDES Permit for the W.H. Sammis Plant. The plant is in
compliance with chemical limitations of the permit. The permit
conditions would have required the addition of cooling towers to
the W. H. Sammis Plant, however, the EPA and Ohio EPA have approved
a variance request eliminating the current need for cooling towers.
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.
The Pennsylvania Department of Environmental Resources (DER)
issued regulations dealing with the storage, treatment,
transportation and disposal of residual waste such as coal ash and
scrubber sludge. These regulations impose additional requirements
relating to permitting, ground water monitoring, leachate
collection systems, closure, liability insurance and operating
matters. The Company recently entered into an agreement with the
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Pennsylvania Department of Environmental Protection (formerly DER)
resolving the major repermitting issues for the Bruce Mansfield
Plant's waste disposal facility. As a result of the agreement, the
Company expects that the increased costs of compliance with these
regulations will not be material.
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 Company cannot now estimate the
precise effect of existing and potential regulations and
legislation upon any of its existing and proposed facilities and
operations or upon its ability to issue additional first mortgage
bonds under its mortgage. The mortgage contains covenants by the
Company 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 the mortgage, in effect, also require, in the opinion
of counsel for the Company, that certification of property
additions as the basis for the issuance of bonds or other action
under the mortgage 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 Company intends to
contest any requirements it deems unreasonable or impossible for
compliance or otherwise contrary to the public interest.
Developments in these and other areas of regulation may require the
Company 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 Company's sources of generation during 1995 were 65.6% coal
and 34.4% nuclear. All of the Company's coal supply for the New
Castle Plant is currently supplied through spot purchases of coal
produced from nearby reserves.
The Company estimates its 1996 coal requirement to be 1,200,000
tons (including its share of the coal requirements of CAPCO's W. H.
Sammis Unit 7 and the Bruce Mansfield Plant). The coal requirements
of W. H. Sammis Unit 7 are furnished from mines located in Ohio,
Pennsylvania and West Virginia through spot purchases and Edison
contracts which expire at various times through February 28, 2003.
See "Environmental Matters" for factors pertaining to meeting
environmental regulations affecting coal-fired generating units.
The Company, together with the other CAPCO companies, has several
guarantees (the Company's composite percentage being approximately
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6.7%) of certain debt and lease obligations in connection with a
coal supply contract for the Bruce Mansfield Plant (see Note 7 of
Notes to Financial Statements). As of December 31, 1995, the
Company's share of the guarantees was $9,160,000. 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 extends to December 31, 1999.
The Company's fuel costs (excluding disposal costs) for each of
the five years ended December 31, 1995, were as follows:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Cost of fuel consumed per
million BTUs:
Coal $1.30 $1.34 $1.37 $1.42 $1.41
Nuclear $ .77 $ .88 $ .97 $ .94 $1.05
Average fuel cost per
kilowatt-hour
generated (cents) 1.20 1.29 1.36 1.34 1.41
Nuclear Fuel
OES Fuel is the sole lessor for the Company's nuclear fuel
requirements (see "Capital Requirements" and Note 1 of Notes to
Financial Statements).
The Company 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 four reloads for Beaver Valley
Unit 1 (through approximately 2000), and the next six reloads for
Perry (through approximately 2004). The Company has a contract with
U.S. Enrichment Corporation for the majority of its enrichment
requirements for nuclear fuel through 2014.
Prior to the expiration of existing commitments, the Company
intends 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 Company is 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 Unit 1 are
expected to be adequate through 2011. After on-site storage
capacity is exhausted, additional storage capacity will have to be
obtained which could result in significant additional costs unless
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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
Beaver Valley Unit 1 and the Perry Plant, respectively.
Capacity and Reserves
The 1995 net maximum hourly demand on the Company of 836,000
kilowatts (kW) (including 63,000 kW of firm power sales which
extend through 2005 as discussed under "Competition") occurred on
August 14, 1995. The seasonal capability of the Company on that day
was 818,000 kW. The Company purchased power from Edison to meet the
maximum hourly demand. Based on existing capacity plans, the load
forecast made in October 1995 and anticipated term power sales to
other utilities, the capacity margins during the 1996-2000 period
are expected to range from about 8% to 9%.
Regional Reliability
The Companies participate 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 Company competes with other utilities for intersystem bulk
power sales and for sales to municipalities. The Company competes
with suppliers of natural gas and other forms of energy in
connection with its 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 Company's
customers.
Technological advances and regulatory changes are driving forces
toward increasing competition in the energy market. In addition,
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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. While
regulators appear to be reluctant to pursue full retail wheeling
(primarily because of the adverse impact retail wheeling would have
on small users) the debate could place downward pressure on the
Company's prices in the future.
In an effort to more fully utilize its facilities and hold down
rates to its other customers, the Company has entered into a long-
term power sales agreement with another utility. Currently, the
Company is selling 63,000 kW annually under this contract through
December 31, 2005. The Company has the option to reduce this
commitment by 21,000 kW, with three years advance notice.
Employees
At December 31, 1995, the Company had 1,220 employees.
ITEM 2. PROPERTIES
The Company's First Mortgage Indenture dated as of November 1,
1945, between the Company and Citibank, N.A. (successor to The
First National Bank of the City of New York), as amended and
supplemented, constitutes, in the opinion of the Company's counsel,
a direct first lien on substantially all of the Company's physical
property, subject only to excepted encumbrances, as defined in the
Indenture. See Notes 4 and 5 of Notes to Financial Statements for
information concerning leases and financing encumbrances affecting
certain of the Company's properties.
The Company owns, individually or together with one or
more of the other CAPCO companies as tenants in common, the
generating units in service shown below:
Net Demonstrated
Capacity (kW)
------------------
Company's Ownership
Plant-Location Unit Total Entitlement Interest
- --------------------------- ---- ----- ----------- ---------
Coal-Fired Units
- ----------------
New Castle-West Pittsburg, PA 3-5 333,000 333,000 100.00%
B. Mansfield-Shippingport, PA 1 780,000 33,000 4.20%
2 780,000 53,000 6.80%
3 800,000 50,000 6.28%
W. H. Sammis-Stratton, OH 7 600,000 125,000 20.80%
- 12 -
Nuclear Units
Beaver Valley-Shippingport, PA 1 810,000 142,000 17.50%
Perry-North Perry Village, OH 1,194,000 63,000 5.24%
Oil-Fired Units
Various 164,000 25,000 15.18%
-------
Total 824,000
=======
Prolonged outages of existing generating units might make
it necessary for the Company, depending upon the demand for
electric service upon its 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 Company's interruptible
programs, all to an extent not presently determinable.
The Company's 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 Company's overhead and underground transmission lines aggregate
607 miles.
The Company's electric distribution systems include 5,084
miles of overhead pole line and underground conduit carrying
primary, secondary and street lighting circuits. It owns,
individually or together with one or more of the other CAPCO
companies as tenants in common, 85 substations with a total
installed transformer capacity of 3,925,217 kilovolt-amperes, of
which 17 are transmission substations, including 8 located at
generating plants.
The Company's transmission lines also interconnect with those of
Edison, Duquesne and West Penn Power Company. These
interconnections make possible utilization by the Company 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
STOCKHOLDER MATTERS
- 13 -
The Company is a wholly owned subsidiary of Edison. Quarterly
dividends of $.85 per share were paid on the Company's common stock
during 1995 and 1994.
For information with respect to certain restrictions on the
payment of cash dividends on common stock, see Note 5(a) of Notes
to Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Items 6 through 8 is incorporated
herein by reference to the Selected Financial Data, Management's
Discussion and Analysis of Results of Operations and Financial
Condition, and Financial Statements included on pages 1 through 16
in the Company's 1995 Annual Report to Stockholders.
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 present term of office of each director extends until the
next succeeding annual meeting of stockholders and until his
successor is elected and shall qualify.
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.
H. Peter Burg-Age 49
President of the Company from 1994 to 1995. Senior Vice
President and Chief Financial Officer of Edison since 1989.
Director of the Company since 1988. Mr. Burg is also a director
of Edison.
Robert H. Carlson-Age 69
Retired in 1989 as President and Chief Executive Officer of
Universal-Rundle Corporation, a manufacturer of plumbing
- 14 -
fixtures. Director of the Company since 1983. Mr. Carlson is
also a director of Edison and First Shenango Bancorp, Inc.
Willard R. Holland-Age 59
Chairman of the Board, Chief Executive Officer, and Chief
Financial Officer of the Company and President and Chief
Executive Officer of Edison, since 1993. President and Chief
Operating Officer of Edison from 1991 to 1993. Senior Vice
President from 1988 to 1991 of Detroit Edison Company, an
electric utility. Director of the Company since 1991. Mr.
Holland is also a director of Edison and A. Schulman, Inc.
Charles E. Jones-Age 40
President of the Company since 1995. Division Manager from 1992
to 1995 and Superintendent of Transmission and Distribution from
1989 to 1992 of Edison. Director of the Company since 1995.
Joseph J. Nowak-Age 64
Retired. Consultant during 1993 and Vice President during 1992
of Armco Inc., and Executive Vice President-Operations from 1988
to 1992 of Cyclops Industries, Inc., manufacturers of steel
products. Cyclops Industries, Inc. merged with Armco Inc. in
1992. Director of the Company since 1982.
Jack E. Reed-Age 53
Vice President of the Company since 1992. Manager, Substation
and Distribution, from 1991 to 1992 and Manager, Transmission
and Distribution Maintenance, from 1988 to 1991 of Edison.
Director of the Company since 1992.
Richard L. Werner-Age 64
Chairman of the Board, President, and Chief Executive Officer
since 1977 of Werner Co., Inc., manufacturer of aluminum
extrusions, ladders and scaffolding. Director of the Company
since 1993.
Robert P. Wushinske-Age 56
Secretary and General Counsel of the Company since 1994 and Vice
President and Treasurer of the Company since 1987.
David W. McKean-Age 43
Comptroller of the Company since 1992. Director of Financial
Reporting of Edison from 1985 to 1992.
- 15 -
<TABLE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY EXECUTIVE COMPENSATION TABLE
<CAPTION>
Annual Compensation
Long-Term
Name and Compensation All Other
Principal Position Year Salary Bonus Other(2) Payouts (3) Compensation (4)
------------------ ---- -------- --------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Willard R. Holland 1995 $100,473 $35,907 $ 281 $5,294 $7,701
Chairman of the Board and 1994 92,346 18,500(1) 178 -0- 8,917
Chief Executive Officer 1993 67,280 16,427(1) 892 -0- 4,337
Charles E. Jones (5) 1995 87,920 26,225 2,430 -0- 3,685
President 1994 -0- -0- -0- -0- -0-
1993 -0- -0- -0- -0- -0-
Jack E. Reed 1995 117,619 26,247 28 2,683 6,042
Vice President 1994 109,532 9,666 12 -0- 6,214
1993 103,951 5,267 7,994 -0- 6,518
Robert P. Wushinske 1995 112,738 21,774 113 -0- 5,652
Vice President, Secretary, 1994 103,747 10,170 -0- -0- 5,529
Treasurer, and General
Counsel 1993 97,386 9,222 180 -0- 4,149
<FN>
(1) Reflects 50% of the annual awards under the Executive Incentive
Compensation Plan. The remaining amounts, which were mandatorily
deferred into a Common Stock Equivalent Account, were previously
reported in the Long-Term Incentive Plan Table. Beginning in 1995,
all annual awards are reported in this column as there is no longer
a mandatory deferral.
(2) Consists of reimbursement for income tax obligations on Executive
Indemnity Program premium and on perquisites and other personal
benefits.
(3) These amounts represent cash payouts of the portion of the 1991
Executive Incentive Compensation Plan annual award previously deferred
into a Common Stock Equivalent Account.
- 16 -
(4) For 1995, amount is comprised of (1) matching Edison common stock
contributions under the tax qualified Savings Plan: Holland - $1,201;
Jones - $3,004; Reed - $4,412; Wushinske - $4,410; (2) the current
dollar value of the Company's portion of the premiums paid in 1995 for
insurance policies under the Executive Supplemental Life Plan:
Holland - $3,358; Jones - $666; Reed - $1,576; Wushinske - $1,242;
(3) above market interest earned under the Executive Deferred
Compensation Plan: Holland - $3,142; Jones - $15; Reed - $33;
Wushinske - $0; and (4) a portion of the Executive Indemnity Program
premium reportable as income: Holland - $0; Jones - $0; Reed - $21;
Wushinske - $0.
(5) Mr. Jones became President on May 18, 1995. Amounts do not include
compensation from Edison for capacities served prior to becoming
President of the Company.
</TABLE>
- 17 -
<TABLE>
LONG-TERM INCENTIVE PLAN TABLE
AWARDS IN LAST FISCAL YEAR
<CAPTION>
1995 Target Equivalent Estimated Future Payouts Under
Long-Term Number of Performance or Other Non-Stock Price Based Plan
Incentive Performance Period Until (Number of Performance Shares)
----------------------------------
Name Opportunity Shares Maturation or Payout Below
Threshold Threshold Target Maximum
---- ----------- ------------ -------------------- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
W. R. Holland-CEO $61,009 3,254 4 years -0- 1,627 3,254 4,881
C. E. Jones 4,159 222 4 years -0- 111 222 333
J. E. Reed 11,471 612 4 years -0- 306 612 918
R. P. Wushinske 4,159 222 4 years -0- 111 222 333
</TABLE>
- 18 -
Each executive's 1995 target long-term incentive opportunity was
converted into performance shares equal to an equivalent number of
shares of Edison's common stock based on the average price of such
stock during December 1994, and deferred into a Common Stock
Equivalent Account through 1998. At the end of this four-year
performance period, the Common Stock Equivalent Account attributed
to the deferred award will be valued based on the average price of
Edison's common stock during December 1998 and as if any dividends
that would have been paid on such stock during the performance
period were reinvested on the date paid. This value may be
increased or decreased, as described below, based upon the total
return of Edison's common stock (that is, stock price appreciation
plus reinvested dividends) relative to the Edison Electric
Institute's Index of 100 Investor-owned Electric Utility Companies
during the period. If an executive retires, dies or otherwise
leaves the employment of the Company prior to the end of the four-
year period, the value will be further proportionally decreased
based on the number of months worked during the period. However, an
executive must work at least twelve months during the four-year
period to be eligible for an award payout. The final value of an
executive's account, if any, will be paid to the executive in cash
in early 1999.
The final value of an executive's account may range from $0 to
150% of the target amount. The maximum amount in the above table is
equal to 150% of the target 1995 long-term incentive opportunity
and will be earned if Edison's total shareholder return is in the
top 15% compared to the Index noted above. An amount equal to 100%
of the target 1995 long-term incentive opportunity will be earned
if Edison's total shareholder return is in the 38th percentile
compared to the Index. The threshold amount is equal to 50% of the
target 1995 long-term incentive opportunity and will be earned if
Edison's total shareholder return is in the 60th percentile
compared to the Index. Payouts for a total shareholder return
ranking between the 15th percentile and 60th percentile will be
interpolated. However, there will be no long-term award payouts if
Edison's total shareholder return compared to the Index falls below
the 60th percentile.
Supplemental Executive Retirement Plan
The Company participates in the Ohio Edison System Supplemental
Executive Retirement Plan. Mr. Holland and Mr. Jones are the only
executive officers listed above who are eligible to participate in
the Plan. At normal retirement, eligible senior executives of the
Company who have five or more years of service with the Ohio Edison
System are provided a retirement benefit equal to the greater of 65
percent of their highest annual salary from the Company or 55
percent of the average of their highest three consecutive years of
salary plus annual incentive awards paid after January 1, 1996,
reduced by the executive's pensions under tax-qualified pension
plans of the Company or other employers, any supplementary pension
- 19 -
under the Company's Executive Deferred Compensation Plan, and
social security benefits. Subject to exceptions that might be made
in specific cases, senior executives retiring prior to age 65, or
with less than five years of service, or both, may receive a
similar but reduced benefit. This Plan also provides for disability
and surviving spouse benefits. As of the end of 1995, the estimated
annual retirement benefits at age 65 from all of the above sources
were $65,308 for Mr. Holland and $86,845 for Mr. Jones.
Pension Plan
The Company's trusteed noncontributory Pension Plan covers
substantially all full-time employees including officers of the
Company. Pension benefits are determined using a formula based on
a Pension Plan participant's years of accrued service and average
rate of monthly earnings for the highest 60 months of the last 120
months of accrued service immediately preceding retirement or
termination of service.
Compensation covered by the Pension Plan consists of basic cash
wages and compensation deferred through the Savings Plan up to the
maximum amount permitted under the Internal Revenue Code of 1986,
as adjusted in accordance with regulations. This amount was
$150,000 per year for 1995 and is $150,000 per year for 1996. In
addition, a supplementary pension benefit may be payable to
participants in the Executive Deferred Compensation Plan.
Compensation for 1995 covered by these two plans for the officers
shown in the Executive Compensation Table who are not currently
participants in the Ohio Edison System Supplemental Executive
Retirement Plan is shown under the Salary column of the Table. The
credited years of service for these same officers are as follows:
J. E. Reed-29 years; and R. P. Wushinske-22 years.
The following table shows the estimated annual amounts payable
upon retirement as pension benefits under the Pension Plan and the
supplemental pension benefit under the Executive Deferred
Compensation Plan, based on specified compensation and years of
credited service classifications, assuming continuation of both
such present Plans and employment until age 65. Retirement prior to
age 62 results in a reduction of pension benefits. The amounts
shown are subject to a reduction based on an individual's covered
compensation, date of birth and years of credited service as
defined by the Pension Plan and its optional survivorship
provision.
- 20 -
<TABLE>
Estimated Annual Retirement Payment from the
Pension Plan and the Annual Supplementary Pension
Benefit under the Executive Deferred Compensation Plan
------------------------------------------------------
<CAPTION>
Applicable 15 Years 25 Years 35 Years 45 Years
Annual Earnings Service Service Service Service
- --------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 90,000 $25,700 $40,100 $52,700 $62,600
100,000 28,500 45,500 58,500 69,500
110,000 31,400 50,100 64,400 76,500
120,000 34,200 54,600 70,200 83,400
130,000 37,100 59,200 76,100 90,400
140,000 39,900 63,700 81,900 97,300
- 21 -
Additional Information Regarding Compensation
The Board of Directors has no compensation committee. The Board
of Directors, other than Mr. Holland, establishes the compensation
of Mr. Holland as chief executive officer; Mr. Holland establishes
the compensation of the other executive officers of the Company.
Compensation of Directors
Directors who are not employees of the Companies receive an
annual retainer of $4,200 and 100 shares of Edison Common Stock for
each full year of service. Such directors are also paid a meeting
fee of $375 for each board meeting attended and are reimbursed for
expenses for the attendance thereof, if any. Directors who are also
employees of the Company or of Edison receive no compensation for
serving as directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners at March 27,
1996:
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
Common Stock, Ohio Edison Company 6,290,000 shares 100%
$30 par value 76 South Main Street held directly
Akron, Ohio 44308
(b) Security Ownership of Management at December 31, 1995:
- 22 -
</TABLE>
<TABLE>
<CAPTION>
Title of Class Percent of Class
Edison Nature of Edison Common
Common Stock Beneficial Common Stock
No. of Shares Ownership Stock Equivalents*
-------------- ------------------ --------------------- ------------
<S> <C> <C> <C> <C>
H. P. Burg 9,424 Direct or Indirect Less than one percent 11,203
R. H. Carlson 3,783 " "
W. R. Holland 6,407 " " 29,167
C. E. Jones 2,066 " " 237
J. J. Nowak 997 " "
J. E. Reed 3,919 " " 1,364
R. L. Werner 309
R. P. Wushinske 1,817 " " 237
All directors and
executive officers
as a group 30,232 " " 42,369
<FN>
* Common Stock Equivalents are the cumulative number of performance shares
credited to each executive officer as of December 31, 1995. These
performance shares are the portion of the 1991, 1992, 1993, and 1994
annual incentive awards under the Executive Incentive Compensation Plan
that were deferred for four years, and the 1995 long-term incentive
opportunity that was deferred for four years under such Plan. For a
detailed explanation of the Plan, see the footnote to the Long-Term
Incentive Plan Table. Such performance shares do not have voting rights
or other rights associated with ownership.
</TABLE>
- 23 -
(c) Changes in Control: Not applicable
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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 1995 Annual Report to
Stockholders (Exhibit 13 below) at the pages indicated.
Page No.
--------
Statements of Income-Three Years Ended December 31, 1995 4
Balance Sheets-December 31, 1995 and 1994 5
Statements of Capitalization-December 31, 1995 and 1994 6
Statements of Retained Earnings-Three Years Ended
December 31, 1995 7
Statements of Capital Stock and Other Paid-In Capital-
Three Years Ended December 31, 1995 7
Statements of Cash Flows-Three Years Ended
December 31, 1995 8
Statements of Taxes-Three Years Ended December 31, 1995 9
Notes to Financial Statements 10-16
Report of Independent Public Accountants 16
2. Financial Statement Schedules
Included in Part IV of this report:
Page No.
--------
Report of Independent Public Accountants 23
Schedule - Three Years Ended December 31, 1995:
II - Valuation and Qualifying Accounts 24
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.
- 24 -
3. Exhibits
Exhibit
Number
- -------
3-1 - Agreement of Merger and Consolidation dated April 1,
1929, among Pennsylvania Power Company ("Penn Power"),
Harmony Electric Company and Peoples Power Company
(consummated May 31, 1930), copies of Letters Patent
issued thereon, together with the Election Return and
Treasurer's Return, relative to decrease of capital
stock; Election Return authorizing change of capital
stock and increase of indebtedness; Election Return
authorizing change of capital stock; Election Return
authorizing increase of capital stock; Election Return
establishing 4.24% Preferred Stock; Certificate with
respect to the establishment of the 4.64% Preferred
Stock; Election Returns and Certificates of Actual Sale
in connection with the purchase by Penn Power of all
the property of Pine-Mercer Electric Company, Industry
Borough Electric Company, Ohio Township Electric
Company, and Shippingport Borough Electric Company;
Certificate of Change of Location of Penn Power's
principal office; Certificate of Consent authorizing
increase in authorized Common Stock; Certificate of
Consent with respect to the removal of limitations on
the authorized amount of indebtedness of Penn Power;
Election Returns and Certificates of Actual Sale in
connection with the purchase by Penn Power of all the
property of Borolak Public Service Company, Eastfax
Public Service Company, Norango Public Service Company,
Sadwick Public Service Company, Sosango Public Service
Company, Surrick Public Service Company, Wesango Public
Service Company, and Westfax Public Service Company;
Certificate of Change of Location of Penn Power's
principal office; Amendment to the Charter extending
the territory in which Penn Power may operate in the
Borough of Shippingport, Beaver County, Pennsylvania;
Certificate of Consent authorizing increase in
authorized Common Stock; Certificate with respect to
the establishment of the 8% Preferred Stock;
Certificate accepting Business Corporation Law of
Pennsylvania for government and regulation of affairs
of Penn Power; Articles of Amendment incorporating
certain protective provisions relating to Preferred
Stock, increasing amount of authorized Preferred Stock
and authorizing future increases in amounts of
authorized Preferred Stock without a vote of the
holders of Preferred Stock; Articles of Amendment
increasing the authorized number of shares of Common
Stock; Statement Affecting Class or Series of Shares
- 25 -
Exhibit
Number
- -------
with respect to the establishment of the 7.64%
Preferred Stock; Articles of Amendment increasing the
authorized number of shares of Common Stock; Articles
of Amendment increasing the number of authorized shares
of Preferred Stock; Statement Affecting Class or Series
of Shares with respect to the establishment of the
8.48% Preferred Stock; Articles of Amendment
authorizing sinking fund requirements for Preferred
Stock; Statement Affecting Class or Series of Shares
with respect to the establishment of the 11% Preferred
Stock; Articles of Amendment increasing the authorized
number of shares of Common Stock; Statement Affecting
Class or Series of Shares with respect to the
establishment of the 9.16% Preferred Stock; Articles of
Amendment increasing authorized number of shares of
Common Stock; Articles of Amendment increasing
authorized number of shares of Preferred Stock;
Statement Affecting Class or Series of Shares with
respect to the establishment of the 8.24% Preferred
Stock; Statement Affecting Class or Series of Shares
with respect to the establishment of the 10.50%
Preferred Stock; Articles of Amendment increasing
authorized number of shares of Common Stock; Articles
of Amendment increasing authorized number of shares of
Preferred Stock; Statement Affecting Class or Series of
Shares with respect to the establishment of the 15.00%
Preferred Stock; Statement Affecting Class or Series of
Shares with respect to the establishment of the 11.50%
Preferred Stock; Articles of Amendment increasing
authorized number of shares of Preferred Stock;
Statement Affecting Class or Series of Shares with
respect to the establishment of the 13.00% Preferred
Stock; Statement Affecting Class or Series of Shares
with respect to the establishment of the 11.50%
Preferred Stock, Series B; Articles of Amendment
effective April 2, 1987, adding a standard of care
for, and limiting the personal liability of, officers
and directors; Articles of Amendment effective April 1,
1992, setting forth corporate purposes of the Company;
Statement With Respect to Shares with respect to the
establishment of the 7.625% Preferred Stock and
Statement with Respect to Shares with respect to the
establishment of the 7.75% Preferred Stock.(Physically
filed and designated respectively, as follows: in Form
A-2, Registration No. 2-3889, as Exhibit A-1; in Form
1-MD for 1938, File No.2-3889, as Exhibit (a)-1; in
Form 1-MD for 1945, File No. 2-3889, as Exhibit A; in
Form U-1, File No. 70-2310, as Exhibit A-3 (d); in
Form 8-K for March 1951, File No. 1-3491, as Exhibit B;
- 26 -
Exhibit
Number
- -------
in Form 8-K for June 1958, File No. 1-3491B, as Exhibit
1; in Form 10-K for 1959 as Exhibits 1, 2, 3 and 4; in
Form 8-K for March 1960, File No. 1-3491B as Exhibit A;
in Form U-1, File No. 70-3971, as Exhibit A-2; in Form
U-1, File No. 70-4055, as Exhibit A-2; as Exhibits 1
through 8 in Form 8-K for January 1962, File No. 1-
3491; as Exhibit A in Form 8-K for August 1963, File
No. 1-3491; as Exhibits A and B in Form 8-K for
September 1969, File No. 1-3491; as Exhibit B in Form
8-K for April 1971, File No. 1-3491; as Exhibit B in
Form 8-K for September 1971, File No. 1-3491; in Form
U-1, File No. 70-5264, as Exhibit A-2; as Exhibit A in
Form 8-K for September 1972, File No. 1-3491; as
Exhibit A in Form 8-K for December 1972, File No. 1-
3491; as Exhibit A in Form 8-K for March 1973, File No.
1-3491; as Exhibit A in Form 8-K for December 1973,
File No. 1-3491; as Exhibits A and C in Form 8-K for
February 1974, File No. 1-3491; as Exhibits A and B in
Form 8-K for January 1975, File No. 1-3491; as Exhibit
F in Form 8-K for May 1975, File No. 1-3491; as Exhibit
A in Form 8-K for April 1976, File No. 1-3491; as
Exhibit G in Form 10-Q for quarter ended June 30, 1977,
File No. 1-3491; as Exhibit C in Form 10-K for 1977,
File No. 1-3491; as Exhibit A in Form 10-K for 1977,
File No. 1-3491; as Exhibit D in Form 10-Q for quarter
ended June 30, 1980, File No. 1-3491; as Exhibit (4) in
Form 10-Q for quarter ended June 30, 1981, File No. 1-
3491; as Exhibit 4 in Form 10-Q for quarter ended
June 30, 1982, File No. 1-3491; as Exhibit 4 in Form
10-Q for quarter ended September 30, 1982, File No. 1-
3491; as Exhibit 4 in Form 10-Q for quarter ended
September 30, 1983, File No. 1-3491; as Exhibit 4 in
Form 10-Q for quarter ended March 31, 1984, File No. 1-
3491; as Exhibit 4 in Form 10-Q for quarter ended
June 30, 1984, File No. 1-3491; as Exhibit 4 in Form
10-Q for quarter ended September 30, 1985, File No. 1-
3491; as Exhibit 3-2 in Form 10-K for 1987 File No. 1-
3491; as Exhibit 3-2 in Form 10-K for 1992 File
No. 1-3491; as Exhibit 19-2 in Form 10-K for 1992 File
No. 1-3491; and as Exhibit 3-2 in Form 10-K for 1993
File No. 1-3491.)
3-2 - By-Laws of the Company as amended March 25, 1992.(1992
Form 10-K, Exhibit 3-3, File No. 1-3491.)
4-1*- Indenture dated as of November 1, 1945, between the
Company and The First National Bank of the City of New
York (now Citibank, N.A.), as Trustee, as supplemented
and amended by Supplemental Indentures dated as of
- 27 -
Exhibit
Number
- -------
May 1, 1948, March 1, 1950, February 1, 1952,
October 1, 1957, September 1, 1962, June 1, 1963,
June 1, 1969, May 1, 1970, April 1, 1971, October 1,
1971, May 1, 1972, December 1, 1974, October 1, 1975,
September 1, 1976, April 15, 1978, June 28, 1979,
January 1, 1980, June 1, 1981, January 14, 1982,
August 1, 1982, December 15, 1982, December 1, 1983,
September 6, 1984, December 1, 1984, May 30, 1985,
October 29, 1985, August 1, 1987, May 1, 1988,
November 1, 1989, December 1, 1990, September 1, 1991,
May 1, 1992, July 15, 1992, August 1, 1992, and May 1,
1993, July 1, 1993, August 31, 1993, September 1, 1993,
September 15, 1993, October 1, 1993, November 1, 1993
and August 1, 1994. (Physically filed and designated as
Exhibits 2(b) (1)-1 through 2(b) (l)-15 in Registration
Statement File No. 2-60837; as Exhibits 2(b) (2), 2(b)
(3), and 2 (b) (4) in Registration Statement File No.
2-68906; as Exhibit 4-2 in Form 10-K for 1981 File No.
1-3491; as Exhibit 19-1 in Form 10-K for 1982 File No.
1-3491; as Exhibit 19-1 in Form 10-K for 1983 File No.
1-3491; as Exhibit 19-1 in Form 10-K for 1984 File No.
1-3491; as Exhibit 19-1 in Form 10-K for 1985 File No.
1-3491; as Exhibit 19-1 in Form 10-K for 1987 File No.
1-3491; as Exhibit 19-1 in Form 10-K for 1988 File No.
1-3491; as Exhibit 19 in Form 10-K for 1989 File No. 1-
3491; as Exhibit 19 in Form 10-K for 1990 File No. 1-
3491; as Exhibit 19 in Form 10-K for 1991 File No. 1-
3491; as Exhibit 19-1 in Form 10-K for 1992 File
No. 1-3491; as Exhibit 4-2 in Form 10-K for 1993 File
No. 1-3491; and as Exhibit 4-2 in Form 10-K for 1994
File No. 1-3491.)
(A) 4-2 - Supplemental Indenture dated as of September 1, 1995,
between the Company and Citibank, N.A., as Trustee.
10-1 - Administration Agreement between the CAPCO Group dated
as of September 14, 1967. (Registration Statement of
Ohio Edison Company, File 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 Statement No. 2-
68906, Exhibit 5 (c) (3).)
* 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
- 28 -
Exhibit
Number
- -------
total amount of securities authorized thereunder does
not exceed 10% of the total assets of the Company, but
hereby agrees to furnish to the Commission on request
any such instruments.
10-3 - Transmission Facilities Agreement between the CAPCO
Group dated as of September 14, 1967. (Registration
Statement of Ohio Edison Company, File No. 2-43102,
Exhibit 5 (c) (3).)
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, Ohio Edison Company.)
10-5 - Agreement for the Termination or Construction of
Certain Agreements effective September 1, 1980 among
the CAPCO Group. (Registration Statement 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, Ohio Edison
Company.)
10-7 - CAPCO Basic Operating Agreement, as amended
September 1, 1980. (Registration Statement No. 2-68906,
as 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, File No. 1-2578, of Ohio Edison Company.)
10-9 - Amendment No. 3 dated as of July 1, 1984, to CAPCO
Basic Operating Agreement as amended September 1, 1980.
(1985 Form 10-K, Exhibit 10-7, File No. 1-2578, of Ohio
Edison Company.)
10-10 - Basic Operating Agreement between the CAPCO Companies
as amended October 1, 1991. (1991 Form 10-K, Exhibit
10-8, File No. 1-2578, of Ohio Edison Company.)
10-11 - Basic Operating Agreement between the CAPCO Companies,
as amended January 1, 1993. (1993 Form 10-K,
Exhibit 10-11, Ohio Edison Company.)
- 29 -
Exhibit
Number
- -------
- --------------------
* 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, but hereby agrees to
furnish to the Commission on request any such instruments.
10-11 - Basic Operating Agreement between the CAPCO Companies,
as amended January 1, 1993. (1993 Form 10-K, Exhibit 10-11, Ohio
Edison Company.)
10-12 - Memorandum of Agreement effective as of September 1,
1980, among the CAPCO Group. (1991 Form 10-K, Exhibit
19-2, Ohio Edison Company.)
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, File No. 1-2578, of
Ohio Edison Company.)
10-14 - Construction Agreement with respect to Perry Plant
between the CAPCO Group dated as of July 22, 1974.
(Registration Statement of Toledo Edison Company, File
No. 2-52251, as Exhibit 5 (yy).)
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
National City Bank, as Bond Trustee. (Registration
Statement of Ohio Edison Company, File 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
Statement No. 2-68906, Exhibit 5 (e) (2).)
10-17 - Participation Agreement No. 2 relating to the financing
of the development of certain coal mines, dated as of
- 30 -
Exhibit
Number
- -------
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. (Ohio Edison Company, File 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
Statement No. 2-68906, Exhibit 5 (e) (4).)
10-19 - Participation Agreement No. 3 relating to the financing
of the development of certain coal mines, dated as of
September 15, 1978, 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 Statement No. 2-68906, Exhibit 5 (e)
(5).)
10-20 - Participation Agreement No. 4 relating to the financing
of the development of certain coal mines, 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 Statement No. 2-68906, Exhibit 10-16.)
10-21 - Participation Agreement No. 5 dated as of May 1, 1986,
among Quarto Mining Company, the CAPCO Companies, the
Loan Participants listed in Schedule A thereto, and
National City Bank, as Bond Trustee. (1986 Form 10-K,
Exhibit 10-22, File No. 1-2578, Ohio Edison Company.)
10-22 - Participation Agreement No. 6 dated as of December 1,
1991, among Quarto Mining Company, the CAPCO Companies,
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, File No. 1-2578, Ohio Edison
Company.)
- 31 -
Exhibit
Number
- -------
10-23 - Agreement entered into as of October 20, 1981, among
the CAPCO Companies regarding the use of Quarto Coal at
Mansfield Units Nos. 1, 2 and 3. (1981 Form 10-K,
Exhibit 20-1, File No. 1-2578, Ohio Edison Company.)
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, File
No. 1-2578, Ohio Edison Company.)
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 Statement of Ohio Edison Company,
File 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 Statement of Ohio Edison Company, File
No. 2-53059, Exhibit 5 (h) (2).)
10-27 - Amendment No. 2 dated as of September 15, 1978, to
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 Bond
Guaranty dated as of October 1, 1973, as amended,
between the CAPCO Group and National City Bank, as Bond
Trustee. (Registration Statement No. 2-68906, 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 Statement No.
2-68906, Exhibit 10-16.)
10-29 - Amendment No. 4 dated as of July 1, 1985, to 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, File No. 1-2578, Ohio Edison Company.)
- 32 -
Exhibit
Number
- -------
10-30 - Amendment No. 5 dated as of May 1, 1986, to Trust
Indenture and Mortgage dated as of October 1, 1973, as
amended, between Quarto Mining Company and National
City Bank, as Bond Trustee. (1986 Form 10-K, Exhibit
10-30, File No. 1-2578, Ohio Edison Company.)
10-31 - Amendment No. 6 dated as of December 1, 1991, to Trust
Indenture and Mortgage dated as of October 1, 1973, as
amended, between Quarto Mining Company and National
City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit
10-28, File No. 1-2578, Ohio Edison Company.)
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, File No. 1-
2578, Ohio Edison Company.)
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
Statement No. 2-68906, 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 , File No. 1-
2578, Ohio Edison Company.)
10-35 - Amendment No. 5 dated as of May 1, 1986, to the Bond
Guaranty dated as of October 1, 1973, as amended, by
the CAPCO Companies to National City Bank, as Bond
Trustee. (1986 Form 10-K, Exhibit 10-33, File No. 1-
2578, Ohio Edison Company.)
10-36 - Amendment No. 6A dated as of December 1, 1991, to the
Bond Guaranty dated as of October 1, 1973, as amended,
by the CAPCO Companies to National City Bank, as Bond
Trustee. (1991 Form 10-K, Exhibit 10-33, File No. 1-
2578, Ohio Edison Company.)
10-37 - Amendment No. 6B dated as of December 30, 1991, to the
Bond Guaranty dated as of October 1, 1973, as amended,
by the CAPCO Companies to National City Bank, as Bond
Trustee. (1991 Form 10-K, Exhibit 10-34, File No. 1-
2578, Ohio Edison Company.)
10-38 - Bond Guaranty dated as of December 1, 1991, by the
CAPCO Companies to National City Bank, as Bond Trustee.
(1991 Form 10-K, Exhibit 10-35, File No. 1-2578, Ohio
Edison Company.)
- 33 -
Exhibit
Number
- -------
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 Statement No. 2-68906, Exhibit 10-23.)
10-40 - Restructuring Agreement dated as of April 1, 1985,
among Quarto Mining Company, the CAPCO Companies,
Energy Properties, Inc., General Electric Credit
Corporation, the Loan Participants listed in schedules
thereto, Central National Bank of Cleveland, as Owner
Trustee, National City Bank, as Loan Trustee, and
National City Bank, as Bond Trustee. (1985 Form 10-K,
Exhibit 10-33, File No. 1-2578, Ohio Edison Company.)
10-41 - 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, File No.
1-2578, Ohio Edison Company.)
10-42 - Memorandum of Understanding dated as of March 31, 1985,
among the CAPCO Companies. (1985 Form 10-K, Exhibit 10-
35, File No. 1-2578, Ohio Edison Company.)
(B) 10-43 - Ohio Edison System Executive Supplemental Life
Insurance Plan. (1995 Form 10-K, Exhibit 10-44, File
No. 1-2578, Ohio Edison Company.)
(B) 10-44 - Ohio Edison System Executive Incentive Compensation
Plan. (1995 Form 10-K, Exhibit 10-45, File No. 1-2578,
Ohio Edison Company.)
(B) 10-45 - Ohio Edison System Restated and Amended Executive
Deferred Compensation Plan. (1995 Form 10-K, Exhibit
10-46, File No. 1-2578, Ohio Edison Company.)
(B) 10-46 - Ohio Edison System Restated and Amended Supplemental
Executive Retirement Plan. (1995 Form 10-K, Exhibit 10-
47, File No. 1-2578, Ohio Edison Company.)
10-47 - Operating Agreement for Perry Unit No. 1 dated March
10, 1987, by and between the CAPCO Companies. (1987
Form 10-K, Exhibit 28-24, File No. 1-2578, Ohio Edison
Company.)
10-48 - 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, File No. 1-2578, Ohio
Edison Company.)
- 34 -
Exhibit
Number
- -------
10-49 - 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, File No. 1-
2578, Ohio Edison Company.)
10-50 - 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, File No. 1-2578, of
Ohio Edison Company.)
10-51 - 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, File No. 1-2578, of Ohio Edison
Company.)
10-52 - 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, File No. 1-2578, of Ohio Edison
Company.)
10-53 - 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,
File No. 1-2578, of Ohio Edison Company.)
10-54 - Pennsylvania Power Company Master Decommissioning Trust
Agreement for Beaver Valley Power Station and Perry
Nuclear Power Plant dated as of April 21, 1995.
(Quarter ended June 30, 1995 Form 10-Q, Exhibit 10,
File No. 1-3491.)
10-55 - Nuclear Fuel Lease dated as of March 31, 1989, between
OES Fuel, Incorporated, as Lessor, and Pennsylvania
Power Company, as Lessee. (1989 Form 10-K, Exhibit 10-
39, File No. 1-3491.)
(A) 12 - Fixed Charge Ratios
(A) 13 - 1995 Annual Report to Stockholders. (Only those
portions expressly incorporated by reference in this
Form 10-K are to be deemed "filed" with the Securities
and Exchange Commission.)
- 35 -
Exhibit
Number
- -------
(A) 23 - Consent of Independent Public Accountants.
(A) 27 - Financial Data Schedule
(A) Provided herein in electronic format as an exhibit.
(B) Management contract or compensatory plan contract or
arrangement filed pursuant to Item 601 of Regulation S-K.
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.
(b) Reports on Form 8-K
The Company filed one report on Form 8-K since
September 30, 1995. A report dated March 8, 1996, reported the
filing of a petition and application with the Pennsylvania Public
Utility Commission for authority to implement the Company's Rate
Stability and Economic Development Plan.
- 36 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Pennsylvania Power
Company:
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in Pennsylvania Power
Company's Annual Report to Stockholders incorporated by reference
in this Form 10-K and have issued our report thereon dated February
8, 1996. 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 financial
statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic 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 financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
February 8, 1996
- 37 -
<TABLE> SCHEDULE II
PENNSYLVANIA POWER COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
Additions
-----------------------
Charged
Beginning Charged to Other Ending
Description Balance to Income Accounts Deductions Balance
----------- --------- --------- -------- ---------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995:
Accumulated provision for
uncollectible accounts $ 515 $ 1,140 $ 344 (a) $ 1,436 (b) $ 563
======== ======= ===== ======== ======
Year Ended December 31, 1994:
Accumulated provision for
uncollectible accounts $ 559 $ 1,020 $ 328 (a) $ 1,392 (b) $ 515
======== ======= ===== ======== ======
Year Ended December 31, 1993:
Accumulated provision for
uncollectible accounts $ 429 $ 1,050 $ 288 (a) $ 1,208 (b) $ 559
======== ======= ===== ======= ======
<FN>
- ------------------------
(a) Represents recoveries and reinstatements of accounts previously written off.
(b) Represents the write-off of accounts considered to be uncollectible.
</TABLE>
- 38 -
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.
PENNSYLVANIA POWER COMPANY
BY /s/Willard R. Holland
-------------------------------
Willard R. Holland
Chairman of the Board and
Chief Executive Officer
Date: March 27, 1996
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/Willard R. Holland /s/Robert P. Wushinske
- -------------------------------- -------------------------------
Willard R. Holland Robert P. Wushinske
Chairman of the Board and Chief Vice President and Treasurer
Executive Officer (Principal (Principal Accounting
Executive Financial Officer) (Officer)
/s/H. Peter Burg /s/Joseph J. Nowak
- -------------------------------- --------------------------------
H. Peter Burg Joseph J. Nowak
Director Director
/s/Robert H. Carlson /s/Jack E. Reed
- -------------------------------- --------------------------------
Robert H. Carlson Jack E. Reed
Director Director
- 39 -
/s/Charles E. Jones
- -------------------------------- --------------------------------
Charles E. Jones Richard L. Werner
Director Director
Date: March 27, 1996
- 40 -
[CONFORMED WITH RECORDATION DATA]
=================================================================
PENNSYLVANIA POWER COMPANY
to
CITIBANK, N.A.,
As Trustee
-------------
Forty-fourth Supplemental
Indenture
Providing among other things for
FIRST MORTGAGE BONDS
Guarantee Series of 1995 due 2028
Dated as of September 1, 1995
=================================================================
FORTY-FOURTH SUPPLEMENTAL INDENTURE, dated as of
September 1, 1995, made and entered into by and between
PENNSYLVANIA POWER COMPANY, a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania, with its
principal place of business in New Castle, Lawrence County,
Pennsylvania (hereinafter sometimes referred to as the "Company")
and CITIBANK, N.A., a national banking association incorporated
and existing under the laws of the United States of America, with
its principal office in the Borough of Manhattan, The City,
County and State of New York (hereinafter sometimes referred to
as the "Trustee"), as trustee under the Indenture dated as of
November 1, 1945 between the Company and CITIBANK, N.A.
(successor to The First National Bank of The City of New York),
as trustee, as supplemented and amended by Supplemental
Indentures between the Company and the Trustee, dated as of May
1, 1948, as of March 1, 1950, as of February 1, 1952, as of
October 1, 1957, as of September 1, 1962, as of June 1, 1963, as
of June 1, 1969, as of May 1, 1970, as of April 1, 1971, as of
October 1, 1971, as of May 1, 1972, as of December 1, 1974, as of
October 1, 1975, as of September 1, 1976, as of April 15, 1978,
as of June 28, 1979, as of January 1, 1980, as of June 1, 1981,
as of January 14, 1982, as of August 1, 1982, as of December 15,
1982, as of December 1, 1983, as of September 6, 1984, as of
December 1, 1984, as of May 30, 1985, as of October 29, 1985, as
of August 1, 1987, as of May 1, 1988, as of November 1, 1989, as
of December 1, 1990, as of September 1, 1991, as of May 1, 1992,
as of July 15, 1992, as of August 1, 1992, as of May 1, 1993, as
of July 1, 1993, as of August 31, 1993, as of September 1, 1993,
as of September 15, 1993, as of October 1, 1993, as of
November 1, 1993, and as of August 1, 1994 (said Indenture as so
supplemented and amended, and as hereby supplemented and amended,
being hereinafter sometimes referred to as the "Indenture");
WHEREAS, the Company and the Trustee have executed and
delivered the Indenture for the purpose of securing an issue of
bonds of the First Series described therein and such additional
bonds as may from time to time be issued under and in accordance
with the terms of the Indenture, the aggregate principal amount
of bonds to be secured thereby being not limited, and the
Indenture fully describes and sets forth the property conveyed
thereby and is filed with the Secretary of the Commonwealth of
Pennsylvania and the Secretary of State of the State of Ohio and
will be of record in the office of the recorder of deeds of each
county in the Commonwealth of Pennsylvania and the State of Ohio
in which this Forty-Fourth Supplemental Indenture is to be
recorded and is on file at the corporate trust office of the
Trustee, above referred to; and
WHEREAS the Indenture provides for the issuance of
bonds thereunder in one or more series and the Company, by
appropriate corporate action in conformity with the terms of the
Indenture, has duly determined to create one such series of bonds
under the Indenture to be designated as "First Mortgage Bonds,
Guarantee Series of 1995 due 2028" (hereinafter sometimes
referred to as the "bonds of the Guarantee Series"), the bonds of
which are to bear interest at the annual rate of 6% per annum and
are to mature on September 1, 2028;
AND WHEREAS each of the bonds of the Guarantee Series
and the Trustee's Authentication Certificate thereon are to be
substantially in the following form, to wit:
[FORM OF BOND OF THE GUARANTEE SERIES]
[FACE]
This Bond is not transferable except to a successor
trustee under the Trust Indenture, dated as of September 1, 1995,
between the Beaver County Industrial Development Authority and
PNC Bank, National Association, as Trustee, or in connection with
the exercise of the rights and remedies of the holder hereof
consequent upon a "default" as defined in the Indenture referred
to herein.
PENNSYLVANIA POWER COMPANY
First Mortgage Bond, Guarantee Series of 1995 due 2028
$ No.
Pennsylvania Power Company, a Pennsylvania corporation
(hereinafter called the "Company"), for value received, hereby
promises to pay to , or registered
assigns, the principal sum of $ on September 1, 2028,
and to pay the registered holder hereof interest on said sum from
the Initial Interest Accrual Date (hereinbelow defined) at the
rate of 6 per centum per annum. The principal of and interest on
this bond shall be payable at the office or agency of the Company
in the Borough of Manhattan, The City, County and State of New
York, designated for that purpose, in any coin or currency of the
United States of America which at the time of payment is legal
tender for public and private debts.
The provisions of this bond are continued on the
reverse hereof and such continued provisions shall for all
purposes have the same effect as though fully set forth at this
place.
This bond shall not be valid or become obligatory for
any purpose unless and until it shall have been authenticated by
the execution by the Trustee or its successor in trust under the
Indenture of the certificate hereon.
- 2 -
IN WITNESS WHEREOF, PENNSYLVANIA POWER COMPANY has
caused this bond to be executed in its name by its President or
one of its Vice Presidents by his or her signature or a facsimile
thereof, and its corporate seal or a facsimile thereof to be
affixed hereto or imprinted hereon and attested by its Secretary
or one of its Assistant Secretaries by his or her signature or a
facsimile thereof.
Dated:
PENNSYLVANIA POWER COMPANY
By .......................
President
Attest:
.........................
Secretary
[FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series designated therein,
described in the within-mentioned Indenture.
CITIBANK, N.A.
AS TRUSTEE,
By ........................
Authorized Officer
- 3 -
[FORM OF BOND OF THE GUARANTEE SERIES]
[REVERSE]
PENNSYLVANIA POWER COMPANY
First Mortgage Bond, Guarantee Series of 1995 due 2028
This bond is one of the bonds issued and to be issued
from time to time under and in accordance with and all secured by
an indenture of mortgage or deed of trust dated as of November 1,
1945, and indentures supplemental thereto, given by the Company
to Citibank, N.A. (successor to The First National Bank of The
City of New York), as trustee (hereinafter referred to as the
"Trustee"), to which indenture and indentures supplemental
thereto (hereinafter referred to collectively as the "Indenture")
reference is hereby made for a description of the property
mortgaged and pledged, the nature and extent of the security and
the rights, duties and immunities thereunder of the Trustee and
the rights of the holders of the bonds and coupons and of the
Trustee and of the Company in respect of such security, and the
limitations on such rights. By the terms of the Indenture, the
bonds to be secured thereby are issuable in series which may vary
as to date, amount, date of maturity, rate of interest, terms of
redemption and in other respects as in the Indenture provided.
The Indenture contains provisions permitting the
Company and the Trustee, with the consent of the holders of not
less than seventy-five per centum in principal amount of the
bonds (exclusive of bonds disqualified by reason of the Company's
interest therein) at the time outstanding, including, if more
than one series of bonds shall be at the time outstanding, not
less than sixty per centum in principal amount of each series
affected, to effect, by an indenture supplemental to the
Indenture, modifications or alterations of the Indenture and of
the rights and obligations of the Company and the rights of the
holders of the bonds and coupons; provided, however, that no such
-------- -------
modification or alteration shall be made without the written
approval or consent of the holder hereof which will (a) extend
the maturity of this bond or reduce the rate or extend the time
of payment of interest hereon or reduce the amount of the
principal hereof or reduce any premium payable on the redemption
hereof, or (b) permit the creation of any lien, not otherwise
permitted, prior to or on a parity with the lien of the
Indenture, or (c) reduce the percentage of the principal amount
of the bonds upon the approval or consent of the holders of which
modifications or alterations may be made as aforesaid.
The bonds of this series shall be redeemed in whole, by
payment of the principal amount thereof plus accrued interest
thereon, if any, to the date fixed for redemption, upon receipt
- 4 -
by the Trustee of a written advice from the trustee under the
Trust Indenture (the "Revenue Bond Indenture") dated as of
September 1, 1995, between the Beaver County Industrial
Development Authority and PNC Bank, National Association, as
trustee (such trustee and any successor trustee being hereinafter
referred to as the "Revenue Bond Trustee"), securing $14,250,000
of Pollution Control Revenue Refunding Bonds, 1995 Series A
(Pennsylvania Power Company Beaver Valley Project), stating that
the principal amount of all the pollution control revenue
refunding bonds then outstanding under the Revenue Bond Indenture
has been declared due and payable pursuant to the provisions of
Section 8.02 of the Revenue Bond Indenture, specifying the date
of the accelerated maturity of such pollution control revenue
refunding bonds and the date from which interest on the pollution
control revenue refunding bonds issued under the Revenue Bond
Indenture has then accrued, stating such declaration of maturity
has not been annulled and demanding payment of the principal
amount hereof plus accrued interest hereon to the date fixed for
such redemption. As provided in the Supplemental Indenture
establishing the terms and provisions of the bonds of this
series, the date fixed for such redemption shall be not earlier
than the date specified in the aforesaid written advice as the
date of the accelerated maturity of the pollution control revenue
refunding bonds then outstanding under the Revenue Bond Indenture
and not later than the 45th day after the receipt by the Trustee
of such advice, unless such 45th day is earlier than such date of
accelerated maturity. The date fixed for such redemption shall
be specified in a notice of redemption to be given not less than
30 days prior to the date so fixed for such redemption. Upon
mailing of such notice of redemption, the date from which unpaid
interest on the aforesaid pollution control revenue refunding
bonds has then accrued (as specified by the Revenue Bond Trustee)
shall become the initial interest accrual date (the "Initial
Interest Accrual Date") with respect to the bonds of this series,
and the date which is six months after the Initial Interest
Accrual Date shall be the first interest payment date for the
bonds of this series, provided, however, on any demand for
-------- -------
payment of the principal amount hereof at maturity as a result of
the principal of the aforesaid pollution control revenue
refunding bonds becoming due and payable on the maturity date of
the bonds of this series, the date from which unpaid interest on
the aforesaid pollution control revenue refunding bonds has then
accrued shall become the Initial Interest Accrual Date with
respect to the bonds of this series, such date to be as stated in
a written notice from the Revenue Bond Trustee to the Trustee.
As provided in said Supplemental Indenture, the aforementioned
notice of redemption shall become null and void for all purposes
under the Indenture (including the fixing of the Initial Interest
Accrual Date with respect to the bonds of this series) upon
receipt by the Trustee of written notice from the Revenue Bond
Trustee of the annulment of the acceleration of the maturity of
the pollution control revenue refunding bonds then outstanding
- 5 -
under the Revenue Bond Indenture and of the rescission of the
aforesaid written advice prior to the redemption date specified
in such notice of redemption, and thereupon no redemption of the
bonds of this series and no payment in respect thereof as
specified in such notice of redemption shall be effected or
required. But no such rescission shall extend to any subsequent
written advice from the Revenue Bond Trustee or impair any right
consequent on such subsequent written notice.
Bonds of this series are not otherwise redeemable prior
to their maturity.
In case of certain defaults as specified in the
Indenture, the principal of this bond may be declared or may
become due and payable on the conditions, at the time, in the
manner and with the effect provided in the Indenture.
No recourse shall be had for the payment of the
principal of or interest on this bond, or for any claim based
hereon, or otherwise in respect hereof or of the Indenture, to or
against any incorporator, stockholder, director or officer, past,
present or future, as such, of the Company, or of any predecessor
or successor company, either directly or through the Company, or
such predecessor or successor company, or otherwise, under any
constitution or statute or rule of law, or by the enforcement of
any assessment or penalty, or otherwise, all such liability of
incorporators, stockholders, directors and officers, as such,
being waived and released by the holder and owner hereof by the
acceptance of this bond and being likewise waived and released by
the terms of the Indenture.
The bonds of this series are issuable only as
registered bonds without coupons in denominations of $1,000 and
authorized multiples thereof. Except as may be stated in any
legend written on the face of this bond, this bond is
transferable by the registered holder hereof, in person or by
attorney duly authorized, at the corporate trust office of the
Trustee, in the Borough of Manhattan, The City, County and State
of New York, or at such other place or places as the Company may
designate by resolution of the Board of Directors, but only in
the manner and upon the conditions prescribed in the Indenture,
upon the surrender and cancellation of this bond and the payment
of charges for transfer, and upon any such transfer a new
registered bond or bonds, without coupons, of the same series and
maturity date and for the same aggregate principal amount, in
authorized denominations, will be issued to the transferee in
exchange herefor. The Company, the Trustee and any agent
designated to make transfers or exchanges of bonds of this series
may deem and treat the person in whose name this bond is
registered as the absolute owner for all purposes including the
purpose of the receipt of payment. Registered bonds of this
series shall be exchangeable at said corporate trust office of
- 6 -
the Trustee, or at such other place or places as the Company may
designate by resolution of the Board of Directors, for registered
bonds of other authorized denominations having the same aggregate
principal amount, in the manner and upon the conditions
prescribed in the Indenture. Neither the Company nor the Trustee
nor any other agent designated for such purpose shall be required
to make transfers or exchanges of bonds of this series during the
period between any interest payment date for such series and the
record date next preceding such interest payment date.
Notwithstanding any provisions of the Indenture, no charge shall
be made upon any transfer or exchange of bonds of this series
other than for any tax or taxes or other governmental charge
required to be paid by the Company.
[END OF FORM OF BOND OF THE GUARANTEE SERIES]
AND WHEREAS all acts and things necessary to make the
bonds of the Guarantee Series, when authenticated by the Trustee
and issued as in the Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute the Indenture
a valid, binding and legal instrument for the security thereof,
have been done and performed, and the creation, execution and
delivery of the Indenture and the creation, execution and issue
of the bonds of the Guarantee Series subject to the terms hereof
and of the Indenture, have in all respects been duly authorized;
NOW THEREFORE, in consideration of the premises, and of
the acceptance and purchase by holders thereof of the bonds
issued and to be issued under the Indenture, and the sum of One
Dollar duly paid by the Trustee to the Company, and of other good
and valuable considerations, the receipt of which is hereby
acknowledged, and for the purpose of securing the due and
punctual payment of the principal of and premium, if any, and
interest on all bonds now outstanding under the Indenture and the
$14,250,000 principal amount of bonds of the Guarantee Series
proposed presently to be issued and all other bonds which shall
be issued under the Indenture, and for the purpose of securing
the faithful performance and observance of all covenants and
conditions therein and in any supplemental indenture set forth,
the Company has given, granted, bargained, sold, released,
transferred, assigned, hypothecated, pledged, mortgaged,
confirmed, created a security interest in, set over, warranted,
aliened and conveyed and by these presents does give, grant,
bargain, sell, release, transfer, assign, hypothecate, pledge,
mortgage, confirm, create a security interest in, set over,
warrant, alien and convey unto Citibank, N.A., as Trustee as
provided in the Indenture, and its successor or successors in the
trust thereby and hereby created and to its or their assigns
forever, all the right, title and interest of the Company in and
to the property described in Schedule A (which is identified by
the signature of an officer of each party hereto at the end
thereof) hereto annexed and made a part hereof, together (subject
- 7 -
to the provisions of Article X of the Indenture) with the tolls,
rents, revenues, issues, earnings, income, products and profits
thereof, and does hereby confirm that the Company will not cause
or consent to a partition, whether voluntary or through legal
proceedings, of property, whether herein described or heretofore
or hereafter acquired, in which its ownership shall be as a
tenant in common except as permitted by and in conformity with
the provisions of the Indenture and particularly of said Article
X thereof.
TOGETHER WITH all and singular the tenements,
hereditaments and appurtenances belonging or in any wise
appertaining to the premises, property, franchises and rights, or
any thereof, referred to in the Indenture (and not therein
expressly excepted) with the reversion and reversions, remainder
and remainders and (subject to the provisions of Article X of the
Indenture) the tolls, rents, revenues, issues, earnings, income,
products and profits thereof, and all the estate, right, title
and interest and claim whatsoever, at law as well as in equity,
which the Company now has or may hereafter acquire in and to such
premises, property, franchises and rights and every part and
parcel thereof described in the aforesaid Schedule A, subject to
"excepted encumbrances" of the original Indenture.
TO HAVE AND TO HOLD all said premises, property,
franchises and rights hereby conveyed, assigned, pledged, or
mortgaged, or intended so to be, unto the Trustee, its successor
or successors in trust, and their assigns forever.
BUT IN TRUST, NEVERTHELESS, with power of sale, for the
equal and proportionate benefit and security of the holders of
all bonds now or hereafter authenticated and delivered under the
Indenture, and interest coupons appurtenant thereto, pursuant to
the provisions thereof, and for the enforcement of the payment of
said bonds and coupons when payable and the performance of and
compliance with the covenants and conditions of the Indenture,
without any preference, distinction or priority as to lien or
otherwise of any bond or bonds over others by reason of the
difference in time of the actual authentication, delivery, issue,
sale or negotiation thereof or for any other reason whatsoever,
except as otherwise expressly provided in the Indenture; and so
that each and every bond now or hereafter authenticated and
delivered thereunder shall have the same lien, and so that the
principal of and premium, if any, and interest on every such
bond, shall, subject to the terms of the Indenture, be equally
and proportionately secured thereby and hereby, as if it had been
made, executed, authenticated, delivered, sold and negotiated
simultaneously with the execution and delivery of the Indenture.
AND IT IS EXPRESSLY DECLARED that all bonds
authenticated and delivered and secured thereunder and hereunder
are to be issued, authenticated and delivered, and all said
- 8 -
premises, property, franchises and rights hereby and by the
Indenture conveyed, assigned, pledged or mortgaged, or intended
so to be (including all the right, title and interest of the
Company in and to any and all premises, property, franchises and
rights of every kind and description, real, personal and mixed,
tangible and intangible, thereafter acquired by the Company and
whether or not specifically described in the Indenture, except
any therein expressly excepted), are to be dealt with and
disposed of, under, upon and subject to the terms, conditions,
stipulations, covenants, agreements, trusts, uses and purposes in
the Indenture expressed, and it is hereby agreed as follows:
Section 1. There is hereby created a series of bonds
designated Guarantee Series of 1995 due 2028, which shall also
bear the descriptive title "First Mortgage Bond" and the form of
such series shall be substantially as hereinbefore set forth.
Bonds of the Guarantee Series shall mature on September 1, 2028.
The bonds of the Guarantee Series may be issued only as
registered bonds without coupons in denominations of $1,000 or
such multiples thereof as the Board of Directors shall approve,
and delivery to the Trustee for authentication shall be
conclusive evidence of such approval. The serial numbers of
bonds of the Guarantee Series shall be such as may be approved by
any officer of the Company, the execution thereof by any such
officer, by facsimile signature or otherwise, to be conclusive
evidence of such approval. Bonds of the Guarantee Series shall
bear interest from the Initial Interest Accrual Date (as defined
in the form of the bonds of the Guarantee Series hereinabove set
forth) at the rate of 6% per annum. Principal or redemption
price of and interest on said bonds shall be payable in any coin
or currency of the United States of America which at the time of
payment is legal tender for public and private debts at the
office or agency of the Company in the Borough of Manhattan, The
City, County and State of New York, designated for that purpose.
Bonds of the Guarantee Series shall be redeemable,
exchangeable and transferable as and to the extent set forth in
the form thereof hereinbefore set forth.
The bonds of the Guarantee Series shall be redeemable
as set forth in the form thereof hereinbefore set forth in whole,
prior to maturity, upon notice given by mailing the same, postage
pre-paid, at least thirty days and not more than forty-five days
prior to the date fixed for redemption to each registered holder
of a bond to be redeemed at the last address of such holder
appearing on the registry books. The Trustee shall within five
business days of receiving the written advice specified in the
form of bond of the Guarantee Series provided for herein mail a
copy thereof to the Company stamped or otherwise marked to
indicate the date of receipt by the Trustee. The Company shall
fix a redemption date for the redemption so demanded and shall
mail to the Trustee notice of such date at least thirty-five days
- 9 -
prior thereto. Subject to the foregoing sentence, the redemption
date so fixed may be any day not earlier than the date specified
in the aforesaid written advice as the date of the accelerated
maturity of the pollution control revenue refunding bonds then
outstanding under the Revenue Bond Indenture and not later than
the forty-fifth day after receipt by the Trustee of such advice,
unless such forty-fifth day is earlier than such date of
accelerated maturity. If the Trustee does not receive such
notice from the Company within thirteen days after receipt by the
Trustee of the aforesaid written advice, the redemption date
shall be deemed fixed as the forty-fifth day after such receipt.
The Trustee shall mail notice of the redemption date to the
Revenue Bond Trustee not less than thirty days prior to such
redemption date, provided, however, that the Trustee shall mail
-------- -------
no such notice (and no redemption shall be made) if prior to the
mailing of such notice the Trustee shall have received written
notice from the Revenue Bond Trustee of the annulment of the
acceleration of the maturity of the pollution control revenue
refunding bonds then outstanding under the Revenue Bond Indenture
and of the rescission of the aforesaid written advice. The terms
"Revenue Bond Trustee" and "Revenue Bond Indenture" as they
relate to the bonds of the Guarantee Series shall have the
meanings specified in the form thereof hereinabove set forth.
Redemption of the bonds of the Guarantee Series shall be at the
principal amount thereof, plus accrued interest thereon to the
date fixed for redemption and such amount shall become due and
payable on the date fixed for such redemption. Anything in this
paragraph contained to the contrary notwithstanding, if, after
mailing notice of the date fixed for redemption but prior to such
date, the Trustee shall have been advised in writing by the
Revenue Bond Trustee that the acceleration of the maturity of the
pollution control revenue refunding bonds then outstanding under
the Revenue Bond Indenture has been annulled and that the
aforesaid written advice has been rescinded, the aforesaid
written advice shall thereupon, without further act of the
Trustee or the Company, be rescinded and become null and void for
all purposes hereunder (including the fixing of the Initial
Interest Accrual Date as provided in the form of the bonds of the
Guarantee Series provided for herein) and no redemption of the
bonds of the Guarantee Series and no payments in respect thereof
as specified in the aforesaid written notice shall be effected or
required. But no such rescission shall extend to any subsequent
written advice from the Revenue Bond Trustee or impair any right
consequent on such subsequent written advice.
SECTION 2. Bonds of the Guarantee Series shall be
deemed to be paid and no longer outstanding under the Indenture
to the extent that pollution control revenue refunding bonds
which are outstanding from time to time under the Revenue Bond
Indenture are paid or deemed to be paid and are no longer
outstanding and the Trustee has been notified to such effect by
the Company.
- 10 -
SECTION 3. The Company covenants and agrees that the
provisions of Section 3 of the Fifth Supplemental Indenture dated
as of September 1, 1962, which are to remain in effect so long as
any bonds of the Sixth Series shall be outstanding under the
Indenture, shall remain in full force and effect so long as any
bonds of the Guarantee Series shall be outstanding under the
Indenture.
SECTION 4. As supplemented and amended by this
Supplemental Indenture, the Indenture is in all respects ratified
and confirmed, and the Indenture and this Supplemental Indenture
shall be read, taken and construed as one and the same
instrument.
SECTION 5. Nothing in this Supplemental Indenture
contained shall, or shall be construed to, confer upon any person
other than a holder of bonds issued under the Indenture, the
Company and the Trustee any right or interest to avail himself of
any benefit under any provision of the Indenture or of this
Supplemental Indenture.
SECTION 6. The Trustee assumes no responsibility for
or in respect of the validity or sufficiency of this Supplemental
Indenture or the due execution hereof by the Company or for or in
respect of the recitals and statements contained herein, all of
which recitals and statements are made solely by the Company.
SECTION 7. This Supplemental Indenture may be executed
in several counterparts and all such counterparts executed and
delivered, each as an original, shall constitute but one and the
same instrument.
PENNSYLVANIA POWER COMPANY hereby constitutes and
appoints Robert P. Wushinske to be its attorney for it and in its
name as and for its corporate act and deed to acknowledge this
Supplemental Indenture before any person having authority to take
such acknowledgment, to the intent that the same may be duly
recorded.
CITIBANK, N.A. hereby constitutes and appoints
P. DeFelice to be its attorney for it and in its name as and for
its corporate act and deed to acknowledge this Supplemental
Indenture before any person having authority to take such
acknowledgment, to the intent that the same may be duly recorded.
IN WITNESS WHEREOF, PENNSYLVANIA POWER COMPANY has
caused its corporate name to be hereunto affixed, and this
instrument to be signed and sealed by its President or a Vice
President, and its corporate seal to be attested by its Secretary
or an Assistant Secretary for and on its behalf, in the city of
New Castle, County of Lawrence and Commonwealth of Pennsylvania
and CITIBANK, N.A., in token of its acceptance of the trust, has
- 11 -
caused its corporate name to be hereunto affixed, and this
instrument to be signed by a Vice President and its corporate
seal to be affixed and attested by one of its Vice Presidents in
the City of New York, County of New York and State of New York,
all as of the day and year first above written.
PENNSYLVANIA POWER COMPANY
By: /s/ Robert P. Wushinske
-----------------------
Robert P. Wushinske
Vice President
ATTEST:
By: /s/ Randy Scilla
---------------------------
Randy Scilla
Assistant Secretary
[Seal]
Signed, sealed and delivered by
PENNSYLVANIA POWER COMPANY
in the presence of:
/s/ D. W. McKean
- -----------------------------
D. W. McKean
/s/ Angeline Comparone
- -----------------------------
Angeline Comparone
- 12 -
CITIBANK, N.A.
as Trustee as aforesaid,
By: /s/ P. DeFelice
-------------------
P. DeFelice
Vice President
ATTEST:
By: /s/ Arthur W. Aslanian
---------------------------
Arthur W. Aslanian
Vice President
[Seal]
Signed, sealed and delivered by
CITIBANK, N.A.
in the presence of:
/s/ Carol Ng
- ------------------------------
Carol Ng
/s/ Nancy Forte
- ------------------------------
Nancy Forte
- 13 -
COMMONWEALTH OF PENNSYLVANIA )
: ss.:
COUNTY OF LAWRENCE )
BE IT REMEMBERED that, on the 25th day of September,
1995, before me, the undersigned, a Notary Public in said County
of Lawrence, Commonwealth of Pennsylvania, personally appeared
Randy Scilla, who being duly sworn according to law, doth depose
and say that he was personally present and did see the common or
corporate seal of the above named PENNSYLVANIA POWER COMPANY
affixed to the foregoing Supplemental Indenture; that the seal so
affixed is the common or corporate seal of the said Pennsylvania
Power Company and was so affixed by the authority of the said
corporation as the act and deed thereof; that the above named
Robert P. Wushinske is a Vice President of said corporation and
did sign the said Supplemental Indenture as such in the presence
of this deponent; that this deponent is an Assistant Secretary of
Pennsylvania Power Company, and that the name of this deponent
above signed in attestation of the due execution of the said
Supplemental Indenture is in this deponent's own proper
handwriting.
Sworn to and subscribed before me this 25th day of
September, 1995.
/s/ Randy Scilla
----------------------
[SEAL]
/s/ Sylvia M. Rashid
----------------------
NOTARIAL SEAL
SYLVIA M. RASHID, Notary Public
New Castle, Lawrence Co., PA
My Commission Expires March 11, 1997
COMMONWEALTH OF PENNSYLVANIA)
: ss.:
COUNTY OF LAWRENCE )
I HEREBY CERTIFY that, on this 25th day of September,
1995, before me, the subscriber, a Notary Public in and for the
State and County aforesaid, personally appeared Robert P.
Wushinske, the attorney for PENNSYLVANIA POWER COMPANY, and the
attorney named in the foregoing Supplemental Indenture and, by
virtue and in pursuance of the authority therein conferred upon
him, acknowledged the said Supplemental Indenture to be the act
and deed of said Pennsylvania Power Company.
- 14 -
WITNESS my hand and notarial seal the day and year
aforesaid.
[SEAL]
/s/ Sylvia M. Rashid
---------------------------
NOTARIAL SEAL
SYLVIA M. RASHID, Notary Public
New Castle, Lawrence Co., PA
My Commission Expires March 11, 1997
COMMONWEALTH OF PENNSYLVANIA )
: ss.:
COUNTY OF LAWRENCE )
On the 25th day of September, 1995, before me,
personally came Robert P. Wushinske, to me known, who, being by
me duly sworn, did depose and say that he resides at R.D. 2,
Means Road, New Wilmington, Pennsylvania 16142; that he is a Vice
President of PENNSYLVANIA POWER COMPANY, one of the corporations
described in and which executed the above instrument; that he
knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was affixed by order
of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
WITNESS my hand and notarial seal the day and year
aforesaid.
[SEAL]
/s/ Sylvia M. Rashid
------------------------
NOTARIAL SEAL
SYLVIA M. RASHID, Notary Public
New Castle, Lawrence Co., PA
My Commission Expires March 11, 1997
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that, on the 22nd day of September,
1995, before me, the undersigned, a Notary Public in said County
of New York, State of New York, personally appeared Arthur W.
Aslanian, who being duly sworn according to law, doth depose and
say that he was personally present and did see the common or
corporate seal of the above named CITIBANK, N.A. affixed to the
foregoing Supplemental Indenture; that the seal so affixed is the
common or corporate seal of the said CITIBANK, N.A. and was so
affixed by the authority of the said association as the act and
- 15 -
deed thereof; that the above named P. DeFelice is one of the Vice
Presidents of said association and did sign the said Supplemental
Indenture as such in the presence of this deponent; that this
deponent is a Vice President of said CITIBANK, N.A., and that the
name of this deponent above signed in attestation of the due
execution of the said Supplemental Indenture is in this
deponent's own proper handwriting.
Sworn to and subscribed before me this 22nd day of
September, 1995.
/s/ Arthur W. Aslanian
-----------------------
[SEAL]
/s/ Jeffry Berger
-----------------------
JEFFRY BERGER
Notary Public, State of New York
No. 01BE5015814
Qualified in Kings County
Commission Expires July 26, 1997
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I HEREBY CERTIFY that, on this 22nd day of September,
1995, before me, the subscriber, a Notary Public in and for the
State and County aforesaid, personally appeared P. DeFelice, the
attorney for CITIBANK, N.A., and the attorney named in the
foregoing Supplemental Indenture and, by virtue and in pursuance
of the authority therein conferred upon him, acknowledged the
execution of said Supplemental Indenture to be the act and deed
of said CITIBANK, N.A.
WITNESS my hand and notarial seal the day and year
aforesaid.
/s/ Jeffry Berger
------------------------
[SEAL] JEFFRY BERGER
Notary Public, State of New York
No. 01BE5015814
Qualified in Kings County
Commission Expires July 26, 1997
- 16 -
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 22nd day of September, 1995, before me,
personally came P. DeFelice, to me known, who being by me duly
sworn, did depose and say that he resides at 47-09 169th Street,
Flushing, New York; that he is a Vice President of CITIBANK,
N.A., one of the parties described in and which executed the
above instrument; that he knows the seal of said association;
that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of
said association, and that he signed his name thereto by like
authority.
WITNESS my hand and notarial seal the day and year
aforesaid.
/s/ Jeffry Berger
[SEAL] ------------------------
JEFFRY BERGER
Notary Public, State of New York
No. 01BE5015814
Qualified in Kings County
Commission Expires July 26, 1997
Citibank, N.A. hereby certifies that its precise name
and address as Trustee hereunder are:
CITIBANK, N.A.
111 Wall Street
Borough of Manhattan
City, County and State
of New York 10043
CITIBANK, N.A.
By /s/ P. DeFelice
-----------------------
P. DeFelice
Vice President
- 17 -
SCHEDULE A
Detailed Description of Additional Properties
STEAM PRODUCTION
Bruce Mansfield Generating Station - Unit No. 1 -
Pennsylvania Power Company's portion (4.20%) of low nox
burners.
NUCLEAR PRODUCTION
Beaver Valley Power Station - Unit No. 1 - Pennsylvania
Power Company's portion (17.5%) of spent fuel storage racks.
DISTRIBUTION SUBSTATION
Werner Substitution - A 69,000/12,470 volt substation
and associated equipment located in Sugar Grove Township,
Mercer County, Pennsylvania.
OTHER REAL PROPERTY
An undivided 5.76% interest as tenant in common in a
parcel of land containing 57.350 acres, located in
Shippingport Borough, Beaver County, Pennsylvania, recorded
in Beaver County Deed Book 1618, Page 578, on October 6,
1994.
An undivided 5.76% interest as tenant in common in a
parcel of land containing 134.71 acres, located in Greene
Township, Beaver County, Pennsylvania, recorded in Beaver
County Deed Book 1628, Page 582, on December 20, 1994.
An undivided 5.76% interest as tenant in common in a
parcel of land containing 4.00 acres, located in Greene
Township, Beaver County, Pennsylvania, recorded in Beaver
County Deed Book 1643, Page 740, on March 14, 1995.
An undivided 5.76% interest as tenant in common in a
parcel of land containing 94.266 acres, located in Greene
Township, Beaver County, Pennsylvania, recorded in Beaver
County Deed Book 1643, Page 740, on March 30, 1995.
- 18 -
An undivided 5.76% interest as tenant in common in a
parcel of land containing 113.04 acres, located in Greene
Township, Beaver County, Pennsylvania, recorded in Beaver
County Deed Book 1645, Page 890, on April 27, 1995.
Signed for identification
/s/ Randy Scilla
---------------------------
Randy Scilla
Assistant Secretary
PENNSYLVANIA POWER COMPANY
/s/ P. DeFelice
---------------------------
P. DeFelice
Vice President
CITIBANK, N.A.
- 19 -
RECORDING AND FILING DATA
Forty-fourth Supplemental Indenture
Recorded in the Offices of the Recorders of Deeds as follows:
Mortgage Book
-------------------------
Name of County Date Volume No. Page No.
- -------------- ---- ---------- --------
PENNSYLVANIA
Allegheny September 29, 1995 15218 570
Beaver September 29, 1995 1389 348
Butler September 29, 1995 2562 1005
Crawford September 29, 1995 281 1077
Lawrence September 29, 1995 1232 460
Mercer September 29, 1995 95 MR 12490
Venango September 29, 1995 39 884
OHIO
Belmont October 4, 1995 644 194
Clark October 4, 1995 442 183
Jefferson October 4, 1995 75 761
Lake October 4, 1995 1165 1
Lorain October 4, 1995 1157 362
Monroe October 4, 1995 16 318
Trumbull October 4, 1995 964 1094
Filed with the Secretary of the Commonwealth of
Pennsylvania on September 28, 1995, as part of amendment to
Financing Statement--File No. 00900172.
Filed with the Secretary of the State of Ohio on
October 4, 1995, as part of Financing Statement No. AM19732.
Filed in Belmont County, Ohio, on October 4, 1995, as
part of Financing Statement No. 92791.
Filed in Clark County, Ohio, on October 4, 1995, as
part of Financing Statement No. 9503856.
Filed in Jefferson County, Ohio, on October 4, 1995, as
part of Financing Statement No. 14571.
Filed in Lake County, Ohio, on October 4, 1995, as part
of Financing Statement No. 95182593.
Filed in Lorain County, Ohio, on October 4, 1995, as
part of Financing Statement No. 275446.
Filed in Trumbull County, Ohio, on October 4, 1995, as
part of Financing Statement No. 284980.
- 20 -
<TABLE> EXHIBIT 12
Page 1
PENNSYLVANIA POWER COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items $ 40,197 $30,956 $15,664 $31,260 $ 38,930
Add-
Interest before reduction for amounts capitalized 44,695 37,028 35,262 34,947 31,350
Provision for income taxes 24,805 21,079 12,865 24,333 32,591
Interest element of rentals charged to income (a) 2,770 2,121 1,662 1,652 1,865
-------- ------- ------- ------- --------
Earnings as defined $112,467 $91,184 $65,453 $92,192 $104,736
======== ======= ======= ======= ========
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest on long-term debt $ 37,867 $35,707 $33,208 $32,130 $ 28,937
Interest on nuclear fuel obligations 1,013 457 401 519 407
Other interest expense 5,815 864 1,653 2,298 2,006
Interest element of rentals charged to income (a) 2,770 2,121 1,662 1,652 1,865
-------- ------- ------- ------- --------
Fixed charges as defined $ 47,465 $39,149 $36,924 $36,599 $ 33,215
======== ======= ======= ======= ========
RATIO OF EARNINGS TO FIXED CHARGES (b) 2.37 2.33 1.77 2.52 3.15
==== ==== ==== ==== ====
<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 $1,735,000, $1,227,000, $1,078,000,
$935,000 and $795,000 for each of the five years ended December 31,
1995, respectively.
</TABLE>
<TABLE>
EXHIBIT 12
Page 2
PENNSYLVANIA POWER COMPANY
RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED
STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS)
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items $ 40,197 $30,956 $15,664 $31,260 $ 38,930
Add-
Interest before reduction for amounts capitalized 44,695 37,028 35,262 34,947 31,350
Provision for income taxes 24,805 21,079 12,865 24,333 32,591
Interest element of rentals charged to income (a) 2,770 2,121 1,662 1,652 1,865
-------- ------- ------- ------- --------
Earnings as defined $112,467 $91,184 $65,453 $92,192 $104,736
======== ======= ======= ======= ========
FIXED CHARGES AS DEFINED IN REGULATION S-K
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS
(PRE-INCOME TAX BASIS):
Interest on long-term debt $ 37,867 $35,707 $33,208 $32,130 $ 28,937
Interest on nuclear fuel obligations 1,013 457 401 519 407
Other interest expense 5,815 864 1,653 2,298 2,006
Preferred stock dividend requirements 7,722 6,499 5,863 5,364 4,775
Adjustment to preferred stock dividends
to state on a pre-income tax basis 4,721 4,376 4,757 4,121 3,939
Interest element of rentals charged to income (a) 2,770 2,121 1,662 1,652 1,865
-------- ------- ------- ------- --------
Fixed charges as defined plus preferred
stock dividend requirements (pre-income
tax basis) $ 59,908 $50,024 $47,544 $46,084 $ 41,929
======== ======= ======= ======= ========
RATIO OF EARNINGS TO FIXED CHARGES PLUS
PREFERRED STOCK DIVIDEND REQUIREMENTS
(PRE-INCOME TAX BASIS) (b) 1.88 1.82 1.38 2.00 2.50
==== ==== ==== ==== ====
<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 $1,735,000, $1,227,000, $1,078,000,
$935,000 and $795,000 for each of the five years ended December 31,
1995, respectively.
</TABLE>
<TABLE>
SELECTED FINANCIAL DATA Pennsylvania Power Company
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993 1992 1991
---------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 314,642 $ 301,965 $ 292,084 $ 315,458 $ 321,845
========== ========== ========== ========== ==========
Operating Income $ 67,317 $ 63,668 $ 62,777 $ 66,525 $ 81,102
========== ========== ========== ========== ==========
Net Income $ 38,930 $ 31,260 $ 21,317 $ 30,956 $ 40,197
========== ========== ========== ========== ==========
Earnings on Common Stock $ 34,155 $ 25,896 $ 15,454 $ 24,457 $ 32,475
========== ========== ========== ========== ==========
Return on Average Common Equity 12.9% 10.0% 5.9% 9.2% 12.2%
==== ==== === === ====
Cash Dividends on Common Stock $ 21,386 $ 21,386 $ 21,386 $ 27,676 $ 27,676
========== ========== ========== ========== ==========
Total Assets $1,146,404 $1,193,198 $1,180,983 $ 986,158 $1,022,099
========== ========== ========== ========== ==========
CAPITALIZATION:
Common Stockholder's Equity $ 271,920 $ 258,973 $ 254,782 $ 261,518 $ 266,058
Preferred Stock-
Not Subject to Mandatory Redemption 50,905 50,905 50,905 41,905 41,905
Subject to Mandatory Redemption 15,000 15,000 20,500 30,362 34,282
Long-Term Debt 338,670 424,457 440,555 398,630 408,443
---------- ---------- ---------- ---------- ----------
Total Capitalization $ 676,495 $ 749,335 $ 766,742 $ 732,415 $ 750,688
========== ========== ========== ========== ==========
CAPITALIZATION RATIOS:
Common Stockholder's Equity 40.2% 34.6% 33.2% 35.7% 35.4%
Preferred Stock-
Not Subject to Mandatory Redemption 7.5 6.8 6.6 5.7 5.6
Subject to Mandatory Redemption 2.2 2.0 2.7 4.2 4.6
Long-Term Debt 50.1 56.6 57.5 54.4 54.4
----- ----- ----- ----- -----
Total Capitalization 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
KILOWATT-HOUR SALES (Millions):
Residential 1,195 1,178 1,105 1,050 1,061
Commercial 938 891 831 782 772
Industrial 1,558 1,293 1,212 1,674 1,823
Other 151 148 139 138 138
----- ----- ----- ----- -----
Subtotal 3,842 3,510 3,287 3,644 3,794
Parent Company 250 468 469 786 556
Other Utilities 685 466 748 906 790
----- ----- ----- ----- -----
Total 4,777 4,444 4,504 5,336 5,140
===== ===== ===== ===== =====
CUSTOMERS SERVED:
Residential 126,480 124,951 123,316 121,879 120,537
Commercial 16,317 15,966 15,593 15,348 15,127
Industrial 223 219 221 235 243
Other 97 98 97 100 100
------- ------- ------- ------- -------
Total 143,117 141,234 139,227 137,562 136,007
======= ======= ======= ======= =======
Average Annual Residential
Kilowatt-Hours Used 9,505 9,501 9,017 8,672 8,839
Cost of Fuel per Million Btu $ 1.12 $ 1.20 $ 1.28 $ 1.26 $ 1.32
Peak Load (Megawatts) 836 710 690 734 739
Generating Capability:
Coal 72.1% 72.1% 74.6% 74.6% 74.6%
Oil 3.0 3.0 2.8 2.8 2.8
Nuclear 24.9 24.9 22.6 22.6 22.6
----- ----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
SOURCES OF ELECTRIC GENERATION:
Coal 65.6% 69.6% 76.8% 68.3% 72.9%
Nuclear 34.4 30.4 23.2 31.7 27.1
----- ----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
NUMBER OF EMPLOYEES 1,220 1,255 1,355 1,432 1,432
===== ===== ===== ===== =====
</TABLE>
- - 1 -
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
We continued making significant progress in 1995 as our Company
prepares for the rapidly changing environment within the electric
utility industry.
For the second consecutive year, our net income increased
substantially compared to the prior year. The 1993 results were
adversely affected by a $17,029,000 after-tax write-off for the
termination of Perry Unit 2 and a charge related to a fuel cost
recovery issue. The effect of the 1993 write-off was partially
offset by a $5,653,000 after-tax credit from the cumulative effect
of a change in accounting to accrue metered but unbilled revenue
(see Note 2).
We are achieving good results from our ongoing cost-control
efforts. Total operation and maintenance expenses in 1995 were
lower than any year since 1988.
Higher operating revenues in 1995 are due to increased retail
sales. The following table summarizes the sources of changes in
operating revenues for 1995 and 1994 as compared to the previous
year:
1995 1994
- -----------------------------------------------------------------
(In millions)
Increased retail kilowatt-hour sales $18.6 $15.7
Reduced average retail electric price (5.1) (3.8)
Sales to utilities (0.8) (2.5)
Other - 0.5
- -----------------------------------------------------------------
Net Increase $12.7 $ 9.9
=================================================================
The 1995 start-up of Caparo Steel Company, which purchased the
assets of Sharon Steel Corporation, and an improving local economy
helped us achieve a 9.8% increase in retail sales, following a 6.8%
gain in 1994. Our customer base continues to grow with nearly 1,900
new retail customers added in 1995, after gaining over 2,000
customers the previous year. Increased weather-related demand
during the second half of 1995 contributed to a 1.5% increase in
residential sales, which rose 6.6% the previous year. Commercial
sales followed the same trend, increasing 5.3% and 7.2% in 1995 and
1994, respectively. Industrial sales increased 20.5% during the
year. Excluding Caparo, industrial sales rose 6.3% in 1995 after
increasing 6.7% the previous year. Sales to other utilities were
- 2 -
relatively flat in 1995 after falling 23.2% in 1994. As a result of
these factors, total kilowatt-hour sales were up 7.5% compared with
1994 sales, which were 1.3% lower than the prior year.
Because of higher kilowatt-hour sales, we spent 5.9% more on
fuel and purchased power in 1995. The 1993 amount included a
$4,950,000 charge related to a fuel cost recovery issue. During the
same period, our nuclear expenses fell 2.2% compared to the
previous year--nuclear expenses were higher in 1994 mainly due to
corrective maintenance work at the Perry Plant. The comparative
decrease in other operating costs reflects a charge in 1994 of
approximately $8,400,000 for a voluntary retirement program offered
to qualifying employees in 1994.
Higher depreciation charges in 1995 resulted primarily from a
higher level of depreciable utility plant and an increase in the
accrual for nuclear decommissioning costs. The change in net
amortization of regulatory assets was because we stopped deferring
postretirement benefit costs and provided a reserve in 1994 against
the amounts which had been deferred in 1993. The reserve was
provided due to contradictory court decisions in Pennsylvania which
make future recovery of these costs uncertain. General taxes in
1995 included an adjustment for property taxes.
Interest on long-term debt fell in 1995 compared to 1994 due
to the redemption of more than $43,000,000 of first mortgage bonds
with a weighted average interest rate of 8.09% and the refinancing
of certain pollution control notes in 1995 and late 1994. Preferred
stock dividend requirements were down in 1995 due to the redemption
of preferred stock in the second half of 1994. The 1994 amount also
included a $325,000 charge for premiums paid on preferred stock
redeemed in that year.
CAPITAL RESOURCES AND LIQUIDITY
We have significantly improved our financial position over the
past five years. Cash generated from operations was 34% higher in
1995 than it was in 1990 due to higher retail sales and aggressive
cost controls. Also, we have enhanced our fixed charge coverage
ratios and the percentage of common equity to total capitalization.
Our SEC ratio of earnings to fixed charges improved to 3.15 at the
end of 1995 from 1.88 at the end of 1990. The Company's indenture
ratio, which is used to determine the ability to issue first
mortgage bonds, increased from 2.71 at the end of 1990 to 3.91 at
the end of 1995. Over the same period, the charter ratio, a measure
of our ability to issue preferred stock, improved from 1.32 to
1.97, and our common equity percentage of capitalization rose from
approximately 34% at the end of 1990 to slightly over 40% at the
end of 1995.
For the third straight year, we improved our cash position
compared to the end of the prior year. All cash requirements for
- 3 -
the year were met with internally generated funds and all of our
financing activities during the year were for redemption and
refinancing purposes.
We had about $43,000,000 of cash and temporary investments and
no short-term indebtedness on December 31, 1995. We also had
$2,000,000 of unused short-term bank lines of credit, and
$12,000,000 of bank facilities that provide for borrowings on a
short-term basis at the banks' discretion.
At the end of 1995, we had the capability to issue $157,000,000
principal amount of first mortgage bonds and $134,000,000 of
preferred stock (assuming no additional debt was issued). However,
our cash requirements in 1996 for operations and scheduled debt
maturities are expected to be met without issuing additional
securities. During 1995, we reduced our total debt by approximately
$50,000,000. We expect to pay off in excess of $80,000,000 of debt
over the next five years with internal cash, including more than
$53,000,000 in 1996.
During 1995, our capital spending (excluding nuclear fuel)
totaled approximately $30,000,000. Our capital spending for the
period 1996-2000 is expected to be about $105,000,000 (excluding
nuclear fuel), of which approximately $24,000,000 applies to 1996.
This five year spending level is more than $35,000,000 lower than
actual capital outlays over the past five years.
Investments for additional nuclear fuel during the 1996-2000
period are estimated to be approximately $31,000,000, of which
about $5,000,000 applies to 1996. During the same periods, our
nuclear fuel investments are expected to be reduced by
approximately $34,000,000 and $7,000,000, respectively, as the
nuclear fuel is consumed.
One of our former municipal customers signed a contract with
another energy supplier in November 1995. The Company and the
former customer are in dispute over our proposed transmission rate.
Both parties have filed proposals with the Federal Energy
Regulatory Commission requesting it to establish final terms. No
ruling has yet been issued. Sales to this municipality were
approximately $1,500,000 in 1995.
OUTLOOK
Many competitive challenges lie ahead as the electric utility
industry becomes less regulated and more energy suppliers enter the
marketplace. Retail wheeling, which would allow retail customers to
purchase electricity from other energy producers, would be one of
those challenges, if legislators choose to move in that direction.
It is imperative that we continue to find ways to increase revenues
and reduce costs. Effective operation of the nuclear facilities we
jointly own will also help us meet these competitive challenges.
- 4 -
In 1995, we increased our accrual of the nuclear
decommissioning obligation. As discussed in Note 1, the Financial
Accounting Standards Board (FASB) is reviewing the accounting for
decommissioning costs regarding the recognition, measurement and
classification of decommissioning costs in the financial statements
of electric utilities. The FASB issued its proposed accounting
standard in February 1996.
The Clean Air Act Amendments of 1990, discussed in Note 7,
require additional emission reductions by 2000. We are pursuing
cost-effective compliance strategies for meeting the reduction
requirements that begin in 2000.
Through our Performance Initiatives program -- an ongoing
effort to control costs and encourage continuous improvement
throughout our Company -- we have identified substantial savings
that will better position us to successfully compete in the future.
In addition, we are moving forward on a Corporate Strategy program
which focuses on our core business by outlining specific strategies
in key areas of our business. Through these programs we continue to
identify opportunities for revenue enhancement and cost reduction.
Our focus is to exceed customers' service expectations by providing
superior value and high-quality products and services at
competitive prices in order to maximize the value of shareholder
investment in the Company.
- 5 -
<TABLE>
STATEMENTS OF INCOME Pennsylvania Power Company
- --------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended December 31, 1995 1994 1993
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
OPERATING REVENUES $314,642 $301,965 $292,084
-------- -------- --------
OPERATING EXPENSES AND TAXES:
Fuel and purchased power 63,059 59,529 67,312
Nuclear operating costs 32,759 33,480 30,162
Other operating costs 58,959 65,424 61,125
-------- -------- --------
Total operation and maintenance expenses 154,777 158,433 158,599
Provision for depreciation 33,152 29,108 29,260
Amortization (deferral) of net regulatory assets - 4,339 (4,339)
General taxes 28,278 23,137 22,591
Income taxes 31,118 23,280 23,196
-------- -------- --------
Total operating expenses and taxes 247,325 238,297 229,307
-------- -------- --------
OPERATING INCOME 67,317 63,668 62,777
-------- -------- --------
OTHER INCOME AND EXPENSE:
Perry Unit 2 termination (Note 3) - - (24,458)
Income tax benefit from Perry Unit 2 termination - - 10,293
Other 2,213 1,811 1,542
-------- -------- --------
Total other income (expense) 2,213 1,811 (12,623)
-------- -------- --------
TOTAL INCOME 69,530 65,479 50,154
-------- -------- --------
NET INTEREST:
Interest on long-term debt 28,937 32,130 33,208
Interest on nuclear fuel obligations 407 519 401
Allowance for borrowed funds used during construction (750) (728) (772)
Other interest expense 2,006 2,298 1,653
-------- -------- --------
Net interest 30,600 34,219 34,490
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING 38,930 31,260 15,664
Cumulative effect to January 1, 1993, of a change in
accounting for unbilled revenues (net of income taxes
of $4,108,000) (Note 2) - - 5,653
-------- -------- --------
NET INCOME 38,930 31,260 21,317
PREFERRED STOCK DIVIDEND REQUIREMENTS 4,775 5,364 5,863
-------- -------- --------
EARNINGS ON COMMON STOCK $ 34,155 $ 25,896 $ 15,454
======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
- 6 -
<TABLE>
BALANCE SHEETS Pennsylvania Power Company
- ---------------------------------------------------------------------------------------------------
<CAPTION>
At December 31, 1995 1994
-------- --------
(In thousands)
<S> <C> <C>
ASSETS
UTILITY PLANT:
In service, at original cost $1,215,274 $1,215,831
Less-Accumulated provision for depreciation 426,974 410,508
---------- ----------
788,300 805,323
---------- ----------
Construction work in progress-
Electric plant 10,997 11,226
Nuclear fuel 7,858 12,389
---------- ----------
18,855 23,615
---------- ----------
807,155 828,938
---------- ----------
OTHER PROPERTY AND INVESTMENTS 14,550 8,777
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents 20,984 17,200
Notes receivable from parent company (Note 6) 22,000 25,000
Accounts receivable-
Customers (less accumulated provisions of $563,000 and $515,000,
respectively, for uncollectible accounts) 35,987 32,745
Parent company 14,965 20,777
Other 15,329 12,823
Materials and supplies, at average cost 15,588 17,039
Prepayments 2,113 2,048
---------- ----------
126,966 127,632
---------- ----------
DEFERRED CHARGES:
Regulatory assets 189,900 215,002
Other 7,833 12,849
---------- ----------
197,733 227,851
---------- ----------
$1,146,404 $1,193,198
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (See Statements of Capitalization):
Common stockholder's equity $ 271,920 $ 258,973
Preferred stock-
Not subject to mandatory redemption 50,905 50,905
Subject to mandatory redemption 15,000 15,000
Long-term debt-
Associated companies 11,648 15,155
Other 327,022 409,302
---------- ----------
676,495 749,335
---------- ----------
CURRENT LIABILITIES:
Currently payable long-term debt-
Associated companies 6,180 9,318
Other 53,817 15,126
Accounts payable-
Associated companies 10,593 9,440
Other 26,013 25,276
Accrued taxes 16,221 15,421
Accrued interest 8,487 10,108
Other 28,345 21,473
---------- ----------
149,656 106,162
---------- ----------
DEFERRED CREDITS:
Accumulated deferred income taxes 260,458 277,542
Accumulated deferred investment tax credits 30,521 32,209
Other 29,274 27,950
---------- ----------
320,253 337,701
---------- ----------
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Notes 4 & 7) ---------- ----------
$1,146,404 $1,193,198
========== ==========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
balance sheets.
</TABLE>
- 7 -
<TABLE>
STATEMENTS OF CAPITALIZATION Pennsylvania Power Company
- ---------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
<CAPTION>
At December 31, 1995 1994
-------- --------
<S> <C> <C>
COMMON STOCKHOLDER'S EQUITY:
Common stock, $30 par value, 6,500,000 shares authorized, 6,290,000
shares outstanding $188,700 $188,700
Other paid-in capital (422) (600)
Retained earnings (Note 5a) 83,642 70,873
-------- --------
Total common stockholder's equity 271,920 258,973
-------- --------
Number of Shares Optional
Outstanding Redemption Price
---------------- --------------------
1995 1994 Per Share Aggregate
------ ------ --------- ---------
<C> <C> <C> <C>
PREFERRED STOCK (Note 5b):
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 5c):
7.625% 150,000 150,000 15,000 15,000
======= ======= -------- --------
LONG-TERM DEBT (Note 5d):
First mortgage bonds-
9.000% due 1996 50,000 50,000
9.740% due 1999-2019 20,000 20,000
7.500% due 2003 40,000 40,000
6.375% due 2004 50,000 50,000
6.625% due 2004 20,000 20,000
8.500% due 2022 27,250 50,000
7.625% due 2023 19,500 40,000
-------- --------
Total first mortgage bonds 226,750 270,000
-------- --------
Secured notes-
4.750% due 1998 850 850
6.080% due 2000 23,000 23,000
5.400% due 2013 1,000 1,000
8.125% due 2015 - 14,250
5.400% due 2017 10,600 10,600
7.150% due 2017 17,925 17,925
5.900% due 2018 16,800 16,800
8.100% due 2018 10,300 10,300
8.100% due 2020 5,200 5,200
7.150% due 2021 14,482 14,482
6.150% due 2023 12,700 12,700
6.450% due 2027 14,500 14,500
5.450% due 2028 6,950 6,950
6.000% due 2028 14,250 -
5.950% due 2029 238 238
--------- --------
Total secured notes 148,795 148,795
--------- --------
Other obligations-
Nuclear fuel 17,828 24,120
Capital leases (Note 4) 6,309 7,456
--------- --------
Total other obligations 24,137 31,576
--------- --------
Net unamortized discount on debt (1,015) (1,470)
--------- --------
Long-term debt due within one year (59,997) (24,444)
--------- --------
Total long-term debt 338,670 424,457
--------- --------
TOTAL CAPITALIZATION $676,495 $749,335
========= ========
<FN>
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
- 8 -
<TABLE>
STATEMENTS OF RETAINED EARNINGS Pennsylvania Power Company
- -------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended December 31, 1995 1994 1993
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 70,873 $ 66,392 $ 72,777
Net income 38,930 31,260 21,317
-------- -------- --------
109,803 97,652 94,094
-------- -------- --------
Cash dividends on common stock 21,386 21,386 21,386
Cash dividends on preferred stock 4,775 5,035 5,639
Premium on redemption of preferred stock - 358 677
-------- -------- --------
26,161 26,779 27,702
-------- -------- --------
Balance at end of year (Note 5a) $ 83,642 $ 70,873 $ 66,392
======== ======== ========
</TABLE>
<TABLE>
STATEMENTS OF CAPITAL STOCK AND OTHER PAID-IN CAPITAL
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Preferred Stock
--------------------------------------------
Not Subject to Subject to
Common Stock Mandatory Redemption Mandatory Redemption
------------------------ --------------------- --------------------
Other
Number Par Paid-In Number Par Number Par
of Shares Value Capital of Shares Value of Shares Value
--------- ------- -------- --------- ------- --------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 6,290,000 $188,700 $ 41 419,049 $41,905 336,616 $33,662
Sale of 7.75%
Preferred Stock (345) 250,000 25,000
Redemptions-
8.24% Series (45,000) (4,500)
8.48% Series (6) (80,000) (8,000)
9.16% Series (80,000) (8,000)
11.00% Series (8,000) (800)
11.50% Series (60,000) (6,000)
13.00% Series (10,000) (1,000)
--------- -------- ------ ------- ------- ------- -------
Balance, December 31, 1993 6,290,000 188,700 (310) 509,049 50,905 213,616 21,362
Minimum liability for
unfunded retirement
benefits (290)
Redemptions-
11.00% Series (3,616) (362)
13.00% Series (60,000) (6,000)
--------- -------- ------ -------- ------- ------- -------
Balance, December 31, 1994 6,290,000 188,700 (600) 509,049 50,905 150,000 15,000
Minimum liability for
unfunded retirement
benefits 178
--------- -------- ------ -------- ------- ------- -------
Balance, December 31, 1995 6,290,000 $188,700 $(422) 509,049 $50,905 150,000 $15,000
========= ======== ===== ======== ======= ======= =======
<FN>
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
- 9 -
<TABLE>
STATEMENTS OF CASH FLOWS Pennsylvania Power Company
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended December 31, 1995 1994 1993
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 38,930 $ 31,260 $ 21,317
Adjustments to reconcile net income to net cash from operating
activities:
Provision for depreciation 33,152 29,108 29,260
Nuclear fuel and lease amortization 11,337 10,656 8,812
Deferred income taxes, net 8,144 7,578 10,261
Investment tax credits, net (1,688) (1,351) (1,361)
Allowance for equity funds used during construction - (408) (237)
Deferred fuel costs, net 155 (4,091) 199
Cumulative effect of an accounting change for
unbilled revenues - - (5,653)
Perry Unit 2 termination - - 24,458
Receivables 64 (1,059) (5,974)
Materials and supplies 1,451 (601) 4,666
Accounts payable 1,848 (1,686) 4,196
Other 11,003 35,390 (6,178)
------- ------- ------
Net cash provided from operating activities 104,396 104,796 83,766
-------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Preferred stock - - 24,654
Long-term debt 13,528 11,868 149,867
Redemptions and Repayments-
Preferred stock - 6,687 28,970
Long-term debt 67,337 23,655 145,809
Notes payable, net - - 15,000
Dividend Payments-
Common stock 21,386 21,386 21,386
Preferred stock 4,775 5,035 5,639
-------- -------- --------
Net cash used for financing activities 79,970 44,895 42,283
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions 29,705 30,072 31,328
Loan to parent - 25,000 -
Loan payment from parent (3,000) - -
Sale of utility property to parent (4,249) - -
Other (1,814) 448 999
-------- -------- --------
Net cash used for investing activities 20,642 55,520 32,327
-------- -------- --------
Net increase in cash and cash equivalents 3,784 4,381 9,156
Cash and cash equivalents at beginning of year 17,200 12,819 3,663
-------- -------- --------
Cash and cash equivalents at end of year $ 20,984 $ 17,200 $ 12,819
======== ======== ========
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid during the year-
Interest (net of amounts capitalized) $ 30,215 $ 31,738 $ 32,391
Income taxes 26,605 19,873 10,403
<FN>
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
- 10 -
<TABLE>
STATEMENTS OF TAXES Pennsylvania Power Company
- --------------------------------------------------------------------------------------------------------
<CAPTION>
For the Years Ended December 31, 1995 1994 1993
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
GENERAL TAXES:
State gross receipts $ 11,680 $ 11,024 $ 10,754
Real and personal property 11,222 6,699 6,712
State capital stock 2,499 2,440 2,000
Social security and unemployment 2,440 2,590 2,643
Other 437 384 482
-------- -------- --------
Total general taxes $ 28,278 $ 23,137 $ 22,591
======== ======== ========
PROVISION FOR INCOME TAXES:
Currently payable-
Federal $ 20,352 $ 11,040 $ 3,292
State 5,783 7,066 716
-------- -------- --------
26,135 18,106 4,008
-------- -------- --------
Deferred, net-
Federal 6,222 8,088 10,035
State 1,922 (510) 4,291
-------- -------- --------
8,144 7,578 14,326
-------- -------- --------
Investment tax credit amortization (1,688) (1,351) (1,361)
-------- -------- --------
Total provision for income taxes $ 32,591 $ 24,333 $ 16,973
======== ======== ========
INCOME STATEMENT CLASSIFICATION OF PROVISION FOR INCOME TAXES:
Operating expenses $ 31,118 $ 23,280 $ 23,196
Other income 1,473 1,053 (10,331)
Cumulative effect of a change in accounting - - 4,108
-------- -------- --------
Total provision for income taxes $ 32,591 $ 24,333 $ 16,973
======== ======== ========
RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT STATUTORY RATE
TO TOTAL PROVISION FOR INCOME TAXES:
Book income before provision for income taxes $ 71,521 $ 55,593 $ 38,290
======== ======== ========
Federal income tax expense at statutory rate $ 25,032 $ 19,458 $ 13,402
Increases (reductions) in taxes resulting from:
State income taxes, net of federal income tax benefit 5,008 4,261 3,255
Amortization of investment tax credits (1,688) (1,351) (1,361)
Amortization of tax regulatory assets 4,398 2,231 2,376
Other, net (159) (266) (699)
-------- -------- --------
Total provision for income taxes $ 32,591 $ 24,333 $ 16,973
======== ======== ========
ACCUMULATED DEFERRED INCOME TAXES AT DECEMBER 31:
Property basis differences $178,589 $178,345 $171,581
Allowance for equity funds used during construction 38,894 39,921 41,091
Deferred nuclear expense 8,681 8,914 8,914
Customer receivables for future income taxes 43,801 55,498 56,736
Unamortized investment tax credits (12,510) (13,557) (14,124)
Other 3,003 8,421 9,121
-------- -------- --------
Net deferred income tax liability $260,458 $277,542 $273,319
======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of these statements.
</TABLE>
- 11 -
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company, a wholly owned subsidiary of Ohio Edison Company
(Edison), follows the accounting policies and practices prescribed
by 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 estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses during the reporting period.
REVENUES-The Company's principal business is providing electric
service to customers in western Pennsylvania. The Company's retail
customers are metered on a cycle basis. Revenue is recognized for
unbilled electric service through the end of the year (see Note 2).
Receivables from customers include sales to residential,
commercial and industrial customers located in the Company's
service area and sales to wholesale customers. There was no
material concentration of receivables at December 31, 1995 or 1994,
with respect to any particular segment of the Company's customers.
FUEL COSTS-The Company recovers fuel and net purchased power
costs not otherwise recovered through base rates from its customers
through an annual "levelized" energy cost rate (ECR). The ECR,
which includes adjustment for any over or under collection from
customers, is recalculated each year. Accordingly, the Company
defers the difference between actual energy costs and the amounts
currently recovered from its customers.
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 Company provides 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 2.7% in 1995, 1994 and 1993.
Annual depreciation expense includes approximately $1,100,000
for future decommissioning costs applicable to the Company's
ownership interest in two nuclear generating units. The Company's
share of the future obligation to decommission these units is
approximately $72,000,000 in current dollars and (using a 2.8%
escalation rate) approximately $142,000,000 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 Company has
- 12 -
recovered approximately $3,000,000 for decommissioning through its
electric rates from customers through December 31, 1995; such
amounts are reflected in the reserve for depreciation on the
Balance Sheet. If the actual costs of decommissioning the units
exceed the funds accumulated from investing amounts recovered from
customers, the Company expects that additional amount will be
recoverable from its customers. The Company has approximately
$4,400,000 invested in external decommissioning trust funds as of
December 31, 1995. Earnings on these funds are reinvested with a
corresponding increase to the depreciation reserve. The Company
has also recognized an estimated liability of approximately
$3,900,000 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 Company recovers these costs through its ECR.
The Financial Accounting Standards Board (FASB) is reviewing
the accounting for nuclear decommissioning costs. If current
electric utility industry accounting practices for decommissioning
are changed: (1) annual provisions for decommissioning could
increase; (2) the full estimated cost for decommissioning could be
recorded as a liability rather than as accumulated depreciation;
and (3) income from the external decommissioning trusts could be
reported as investment income. The FASB issued its proposed
accounting standard in February 1996.
COMMON OWNERSHIP OF GENERATING FACILITIES-The Company 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 Company's portion of operating expenses associated with jointly
owned facilities is included in the corresponding operating
expenses on the Statements of Income. The amounts reflected on the
Balance Sheet under utility plant at December 31, 1995, include the
following:
Utility Accumulated Construc- Company's
Plant Provision tion Owner-
Generating in for Work in ship
Units Service Depreciation Progress Interest
- ------------------------------------------------------------------
(In thousands)
W. H. Sammis #7 $ 56,900 $ 18,500 $ 300 20.80%
Bruce Mansfield
#1, #2 and #3 93,200 40,900 400 5.76%
Beaver Valley #1 225,000 95,000 1,100 17.50%
Perry #1 338,800 66,300 1,100 5.24%
- ------------------------------------------------------------------
Total $713,900 $220,700 $2,900
==================================================================
- 13 -
NUCLEAR FUEL-OES Fuel, Incorporated (OES Fuel), a wholly owned
subsidiary of Edison, is the sole lessor for the Company's nuclear
fuel requirements.
Minimum lease payments during the next five years are estimated
to be as follows:
- -------------------------------------------------------------------
1996 $6,180,000
1997 5,443,000
1998 3,827,000
1999 1,076,000
2000 647,000
- -------------------------------------------------------------------
The Company amortizes the cost of nuclear fuel based on the
rate of consumption. The Company's 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 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.
The Company is included in Edison's consolidated federal income
tax return. The consolidated tax liability is allocated on a
"stand-alone" company basis, with the Company recognizing any tax
losses or credits it contributed to the consolidated return.
RETIREMENT BENEFITS-The Company's 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 Company uses the projected
unit credit method for funding purposes and was not required to
make pension contributions during the three years ended
December 31, 1995.
- 14 -
The following sets forth the funded status of the plan and
amounts recognized on the Balance Sheets as of December 31:
1995 1994
- -----------------------------------------------------------------
(In thousands)
Actuarial present value of benefit
obligations:
Vested benefits $ 98,529 $ 83,789
Nonvested benefits 8,479 5,862
- -----------------------------------------------------------------
Accumulated benefit obligation $107,008 $ 89,651
=================================================================
Plan assets at fair value $136,336 $114,881
Actuarial present value of projected
benefit obligation 131,375 108,498
- -----------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 4,961 6,383
Unrecognized net gain (3,447) (1,281)
Unrecognized prior service cost 5,057 2,347
Unrecognized net transition asset (7,372) (8,426)
- ---------------------------------------------------------------
Net pension liability $ 801 $ 977
===============================================================
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, 1995, were computed as
follows:
1995 1994 1993
- -----------------------------------------------------------------
(In thousands)
Service cost-benefits earned
during the period $ 2,856 $ 3,294 $ 2,802
Interest on projected benefit
obligation 8,823 8,158 7,281
Return on plan assets (30,963) 1,346 (15,653)
Net deferral (amortization) 19,108 (14,092) 2,366
Voluntary early retirement
program expense - 9,134 3,930
- -----------------------------------------------------------------
Net pension cost $ (176) $ 7,840 $ 726
=================================================================
The assumed discount rates used in determining the actuarial
present value of the projected benefit obligation were 7.5% in 1995
and 1993, 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 1995 and 1994 and 11% in 1993.
- 15 -
The Company provides 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 Company pays insurance premiums to cover a portion
of these benefits in excess of set limits; all amounts up to the
limits are paid by the Company. The Company recognizes 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. The
following sets forth the funded status of the plan and amounts
recognized on the Balance Sheets as of December 31:
1995 1994
- ------------------------------------------------------------------
(In thousands)
Accumulated postretirement benefit
obligation allocation:
Retirees $23,371 $28,056
Fully eligible active plan participants 1,378 1,817
Other active plan participants 18,988 18,263
- -------------------------------------------------------------------
Accumulated postretirement benefit
obligation 43,737 48,136
Plan assets at fair value 160 -
- -------------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan assets 43,577 48,136
Unrecognized transition obligation (23,047) (30,588)
Unrecognized net loss (5,995) (6,911)
- -------------------------------------------------------------------
Net postretirement benefit liability $14,535 $10,637
===================================================================
Net periodic postretirement benefit costs for the three years
ended December 31, 1995 were computed as follows:
1995 1994 1993
- ------------------------------------------------------------------
(In thousands)
Service cost-benefits attributed
to the period $1,090 $1,109 $ 866
Interest cost on accumulated
benefit obligation 3,988 3,496 3,129
Amortization of transition obligation 1,699 1,699 1,699
Amortization of loss 111 196 -
Voluntary early retirement
program expense - 669 1,112
- ------------------------------------------------------------------
Net periodic postretirement
benefit cost $6,888 $7,169 $6,806
==================================================================
- 16 -
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 1995 and 1993 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 $6,300,000 and the aggregate
annual service and interest costs by approximately $800,000.
The PPUC authorized the Company to defer the incremental costs,
resulting from a new accounting standard for postretirement
benefits, for future recovery from its retail customers. Similar
authorizations relating to some other utilities regulated by the
PPUC were appealed by the Office of Consumer Advocate to the
Commonwealth Court of Pennsylvania. The Commonwealth Court has
issued conflicting opinions and both cases have been appealed to
the Pennsylvania Supreme Court. Due to the uncertainty resulting
from these conflicting opinions, the Company provided a reserve in
the fourth quarter of 1994 of $8,728,000 ($5,066,000 after-tax)
against the full amount deferred.
TRANSACTIONS WITH AFFILIATED COMPANIES-Transactions with
affiliated companies are included on the Statements of Income as
follows:
1995 1994 1993
- -------------------------------------------------------------------
(In thousands)
Operating revenues:
Electric sales to Edison $ 4,374 $ 8,884 $ 8,781
Bruce Mansfield Plant
administrative and general
charges to Edison 6,118 6,038 5,652
Other transactions with
Edison 318 342 355
- -------------------------------------------------------------------
$10,810 $15,264 $14,788
===================================================================
Fuel and purchased power:
Power purchased from Edison $15,129 $12,673 $ 8,667
Nuclear fuel leased from
OES Fuel 12,006 11,529 10,356
- -------------------------------------------------------------------
$27,135 $24,202 $19,023
===================================================================
Other operating costs:
Rental of transmission
lines from Edison $ 1,057 $ 1,102 $ 1,042
Data processing services
from Edison 2,572 2,706 3,307
Other transactions with Edison 3,987 3,908 4,345
- -------------------------------------------------------------------
$ 7,616 $ 7,716 $ 8,694
===================================================================
- 17 -
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 Balance Sheets. The
Company reflects temporary cash investments at cost, which
approximates their market value. Noncash financing and investing
activities included capital lease transactions amounting to
$3,744,000, $7,566,000 and $2,357,000 for the years 1995, 1994 and
1993, respectively.
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 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 investments other than cash and cash equivalents as
of December 31:
1995 1994
- --------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
(In millions)
Long-term debt $376 $385 $419 $384
- ------------------------------------------------------------
Preferred stock $ 15 $ 13 $ 15 $ 12
- ------------------------------------------------------------
Investments other than
cash and cash
equivalents $ 6 $ 6 $ 5 $ 5
- ------------------------------------------------------------
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 Company's 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 consist primarily of decommissioning trust investments
of approximately $4,400,000. 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 Company has no securities held for trading
purposes.
- 18 -
REGULATORY ASSETS-The Company recognizes, as regulatory assets,
costs which the FERC and PPUC have authorized for recovery from
customers in future periods. Without such authorization, the costs
would have been charged to income as incurred. The Company's rates
currently exclude approximately $61,000,000 of deferred costs. In
accordance with expected rate treatment based on PPUC precedent, it
is improbable that the Company will be required to terminate
application of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation," in the
foreseeable future.
Regulatory assets on the Balance Sheets are comprised of the
following:
1995 1994
- ------------------------------------------------------------------
(In thousands)
Currently being recovered through rates:
Customer receivables for future
income taxes $106,862 $132,012
Loss on reacquired debt 11,009 11,967
DOE decommissioning and
decontamination costs 4,170 4,582
Deferred fuel costs 7,040 7,195
- -------------------------------------------------------------------
129,081 155,756
- -------------------------------------------------------------------
Not currently recovered through rates:
Nuclear unit expenses 21,180 21,180
Perry Unit 2 termination 39,639 38,066
- -------------------------------------------------------------------
60,819 59,246
- -------------------------------------------------------------------
Total $189,900 $215,002
===================================================================
2. CHANGE IN ACCOUNTING FOR
UNBILLED REVENUES:
On January 1, 1993, the Company changed its accounting policy
to recognize revenue relating to metered sales which remain
unbilled at the end of the accounting period. This change was made
to more closely match the Company's revenues with the costs of
services provided. The cumulative effect to January 1, 1993, was
$5,653,000 (net of $4,108,000 of income taxes).
3. PERRY UNIT 2 TERMINATION:
In December 1993, the Company announced that it would not
participate in further construction of Perry Unit 2 and abandoned
Perry Unit 2 as a possible electric generating plant. The Company
expects its Perry Unit 2 investment to be recoverable from its PPUC
- 19 -
jurisdictional customers based on Section 520 of the Pennsylvania
Public Utility Code. Due to the anticipated delay in commencement
of recovery and taking into account the expected PPUC rate
treatment, the Company recognized an impairment to its Perry Unit
2 investment of $24,458,000 in 1993, reducing net income by
$14,165,000.
4. LEASES:
The Company leases certain transmission facilities, office
space and other property and equipment under cancelable and
noncancelable leases. Consistent with the regulatory treatment, the
rental payments for capital and operating leases are charged to
operating expenses on the Statements of Income. Such costs for the
three years ended December 31, 1995, are summarized as follows:
1995 1994 1993
- ----------------------------------------------------------------
(In thousands)
Operating leases
Interest element $ 289 $ 208 $ 171
Other 1,006 893 912
Capital leases
Interest element 818 945 1,070
Other 1,250 1,314 1,273
- -----------------------------------------------------------------
Total rental payments $3,363 $3,360 $3,426
=================================================================
The future minimum lease payments as of December 31, 1995, are:
Capital Operating
Leases Leases
- ---------------------------------------------------------------
(In thousands)
1996 $ 1,850 $ 247
1997 1,580 243
1998 1,352 239
1999 1,179 209
2000 1,079 199
Years thereafter 12,594 3,580
- ---------------------------------------------------------------
Total minimum lease payments 19,634 $4,717
======
Executory costs 4,042
- -------------------------------------------------
Net minimum lease payments 15,592
Interest portion 9,283
- -------------------------------------------------
Present value of net minimum
lease payments 6,309
Less current portion 817
- -------------------------------------------------
Noncurrent portion $ 5,492
=================================================
- 20 -
5. CAPITALIZATION:
(a) RETAINED EARNINGS-Under the Company's Charter, the
Company's retained earnings unrestricted for payment of cash
dividends on the Company's common stock were $72,076,000 at
December 31, 1995.
(b) PREFERRED STOCK-The Company's 7.625% and 7.75% series of
preferred stock have restrictions which prevent early redemption
prior to October 1997 and July 2003, respectively. All other
preferred stock may be redeemed by the Company in whole, or in
part, with 30-60 days' notice.
(c) PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION-The
Company's 7.625% series has an annual sinking fund requirement for
7,500 shares beginning on October 1, 2002.
(d) LONG-TERM DEBT-The first mortgage indenture and its
supplements, which secure all of the Company's first mortgage
bonds, serve as direct first mortgage liens on substantially all
property and franchises, other than specifically excepted property,
owned by the Company.Maturing long-term debt (excluding capital
leases) during the next five years are $53,000,000 in 1996,
$850,000 in 1998, $487,000 in 1999 and $23,974,000 in 2000. Amounts
for 1996 include $3,000,000 of first mortgage bonds optionally
redeemed in January 1996.
The Company's obligations to repay certain pollution control
revenue bonds are secured by series of first mortgage bonds and, in
some cases, by subordinate liens on the related pollution control
facilities.
6. SHORT-TERM FINANCING ARRANGEMENTS:
The Company has lines of credit with banks that provide for
borrowings of up to $2,000,000 under various interest rate options.
Short-term borrowings may be made under these lines of credit on
the Company's unsecured notes. To assure the availability of these
lines, the Company is required to pay annual commitment fees of
0.50%. These lines expire at various times during 1996.
The Company also has a credit agreement with Edison whereby
either company can borrow funds from the other by issuing unsecured
notes at the prevailing prime or similar interest rate. Under the
terms of this agreement the maximum borrowing is limited only by
the availability of funds; however, the Company's borrowing under
this agreement is currently limited by the PPUC to a total of
$50,000,000. Either company can terminate the agreement with six
months' notice.
- 21 -
7. COMMITMENTS, GUARANTEES AND CONTINGENCIES:
CONSTRUCTION PROGRAM-The Company's current forecast reflects
expenditures of approximately $105,000,000 for property additions
and improvements from 1996 through 2000, of which approximately
$24,000,000 is applicable to 1996. Investments for additional
nuclear fuel during the 1996-2000 period are estimated to be
approximately $31,000,000, of which approximately $5,000,000
applies to 1996. During the same periods, the Company's nuclear
fuel investments are expected to be reduced by approximately
$34,000,000 and $7,000,000, 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
$8,920,000,000. The amount is covered by a combination of private
insurance and an industry retrospective rating plan. Based on its
present ownership interests in Beaver Valley Unit 1 and the Perry
Plant, the Company's 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
$18,000,000 per incident but not more than $2,300,000 in any one
year for each incident.
The Company is also insured as to its interest in Beaver Valley
Unit 1 and the Perry Plant under policies issued to the operating
company for each plant. Under these policies, up to $2,750,000,000
is provided for property damage and decontamination and
decommissioning costs. The Company has also obtained approximately
$61,100,000 of insurance coverage for replacement power costs for
its interests in Perry and Beaver Valley Unit 1. Under these
policies, the Company can be assessed a maximum of approximately
$2,900,000 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 Company intends to maintain insurance against nuclear risks
as described above so 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 Company's 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 Company's insurance policies, or to the extent
such insurance becomes unavailable in the future, the Company would
remain at risk for such costs.
GUARANTEES-The Company, together with the other CAPCO
companies, has severally guaranteed certain debt and lease
obligations in connection with a coal supply contract for the Bruce
Mansfield Plant. As of December 31, 1995, the Company's share of
- 22 -
the guarantee (which approximates fair market value) was
$9,160,000. 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 Company's
total payments under the coal supply contract amounted to
$9,793,000, $10,071,000 and $13,230,000 during 1995, 1994, and
1993, respectively. Under the coal supply contract, the Company's
minimum payments in each year during the period 1996 through 1999
are approximately $4,000,000.
ENVIRONMENTAL MATTERS-Various federal, state and local
authorities regulate the Company with regard to air and water
quality and other environmental matters. The Company has estimated
additional capital expenditures for environmental compliance of
approximately $2,000,000, which is included in the construction
forecast under "Construction Program" for 1996 through 2000.
The Company is in compliance with the sulfur dioxide (SO2) and
nitrogen oxides (NOx) reductions required for 1995 under the Clean
Air Act Amendments of 1990. SO2 reductions for the years 1995
through 1999 are being achieved by burning lower-sulfur fuel,
generating more electricity from lower-emitting plants, and/or
purchasing emission allowances. Plans for complying with the
reductions required for the year 2000 and thereafter have not been
finalized. The Environmental Protection Agency is conducting
additional studies which could indicate the need for additional NOx
reductions from the Company's Pennsylvania facilities by the year
2003. The cost of such reductions, if required, may be substantial.
The Company continues to evaluate its compliance plan and other
compliance options.
Legislative, administrative and judicial actions will continue
to change the way that the Company 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
Company expects that any resulting additional capital costs which
may be required, as well as any required increase in
operating costs, would ultimately be recovered from its customers.
- 23 -
8. SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED):
The following summarizes certain operating results by quarter
for 1995 and 1994.
March 31, June 30, Sept. 30, Dec. 31,
Three Months Ended 1995 1995 1995 1995
- ------------------------------------------------------------------
(In thousands)
Operating Revenues $73,916 $77,622 $81,318 $81,786
Operating Expenses
and Taxes 57,075 60,834 65,783 63,633
- ------------------------------------------------------------------
Operating Income 16,841 16,788 15,535 18,153
Other Income 756 479 334 644
Net Interest 8,191 7,648 7,433 7,328
- ------------------------------------------------------------------
Net Income $ 9,406 $ 9,619 $ 8,436 $11,469
==================================================================
Earnings on Common
Stock $ 8,246 $ 8,318 $ 7,279 $10,312
March 31, June 30, Sept. 30, Dec. 31,
Three Months Ended 1994 1994 1994 1994
- ------------------------------------------------------------------
(In thousands)
Operating Revenues $78,358 $74,700 $77,055 $71,852
Operating Expenses
and Taxes 60,172 60,997 57,437 59,691
- ------------------------------------------------------------------
Operating Income 18,186 13,703 19,618 12,161
Other Income 414 522 408 467
Net Interest 8,443 8,448 8,802 8,526
- ------------------------------------------------------------------
Net Income $10,157 $ 5,777 $11,224 $ 4,102
==================================================================
Earnings on Common
Stock $ 8,801 $ 4,096 $10,057 $ 2,942
==================================================================
- 24 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Pennsylvania Power
Company:
We have audited the accompanying balance sheets and statements
of capitalization of Pennsylvania Power Company (a Pennsylvania
corporation and wholly owned subsidiary of Ohio Edison Company) as
of December 31, 1995 and 1994, and the related 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, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Pennsylvania Power Company as of December 31, 1995 and 1994, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for
unbilled revenues.
Arthur Andersen LLP
Cleveland, Ohio
February 8, 1996
- 25 -
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. 33-47372, No. 33-62450 and No.
33-65156.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
March 27, 1996
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