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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to __________
Commission File Number 1-1401
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PECO ENERGY COMPANY
(formerly known as Philadelphia Electric Company)
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of incorporation or organization)
P.O. Box 8699
2301 Market Street, Philadelphia, PA
(Address of principal executive offices)
23-0970240
(I.R.S. Employer Identification No.)
19101
(Zip Code)
(215) 841-4000
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
PECO Energy Company (Securities below are registered on the New York and
Philadelphia Stock Exchanges)
First and Refunding Mortgage Bonds:
4-1/2% Series due 1994 7-1/2% Series due 1999 7-1/8% Series due 2023
8-3/4% Series due 1994 5-5/8% Series due 2001 7-3/4% Series 2 due 2023
6-1/8% Series due 1997 6-1/2% Series due 2003 7-1/4% Series due 2024
5-3/8% Series due 1998 6-3/8% Series due 2005
Cumulative Preferred Stock - without par value:
$9.875 Series $7.75 Series $4.30 Series
$7.96 Series $7.00 Series $3.80 Series
$7.85 Series $4.68 Series
$7.80 Series $4.40 Series
Common Stock - without par value
PECO Energy Power Company (a wholly owned subsidiary) Debentures 4-1/2%
Series due 1995 (Registered on the Philadelphia Stock Exchange)
Securities registered pursuant to Section 12(g) of the Act:
PECO Energy Company
Cumulative Preferred Stock - without par value:
$7.48 Series $6.12 Series
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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 and (2) has been
subject to such filing requirements for the past 90 days.
Yes _____X_____ No __________
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 the 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)
The aggregate market value of the registrant's common stock (only
voting stock) held by non-affiliates of the registrant was $6,393,737,314
at January 31, 1994.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date.
Common Stock - without par value: 221,520,099 shares outstanding at
January 31, 1994.
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DOCUMENTS INCORPORATED BY REFERENCE (In Part)
Annual Report of PECO Energy Company to Shareholders for the year 1993
is incorporated in part in Parts I, II and IV hereof, as specified herein.
Proxy Statement of PECO Energy Company in connection with its 1994 Annual
Meeting of Shareholders is incorporated in part in Part III hereof, as
specified herein.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
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<S> <C> <C>
PART I
ITEM 1. BUSINESS.................................................... 1
The Company................................................. 1
Electric Operations......................................... 1
General................................................... 1
Limerick Generating Station............................... 4
Peach Bottom Atomic Power Station ........................ 6
Salem Generating Station ................................. 7
Fuel ....................................................... 7
Nuclear .................................................. 8
Coal...................................................... 10
Oil....................................................... 10
Natural Gas .............................................. 10
Gas Operations.............................................. 11
Segment Information......................................... 11
Rate Matters................................................ 12
Construction................................................ 14
Capital Requirements and Financing Activities............... 15
Employee Matters............................................ 17
Environmental Regulations................................... 17
Water .................................................... 17
Air....................................................... 18
Solid and Hazardous Waste................................. 19
Costs .................................................... 21
Competition................................................. 22
Executive Officers of the Registrant ....................... 23
ITEM 2. PROPERTIES.................................................. 25
ITEM 3. LEGAL PROCEEDINGS........................................... 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........ 28
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS....................................... 28
ITEM 6. SELECTED FINANCIAL DATA .................................... 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ...................... 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE ...................... 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 29
ITEM 11. EXECUTIVE COMPENSATION...................................... 29
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT ............................................... 29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............. 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K ................................................. 30
Financial Statements and Financial Statement Schedules...... 30
REPORT OF INDEPENDENT ACCOUNTANTS........................... 31
SCHEDULE V - UTILITY PLANT.................................. 32
SCHEDULE VI - ACCUMULATED DEPRECIATION OF UTILITY PLANT .... 35
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS........... 38
Exhibits.................................................... 39
Reports on Form 8-K......................................... 42
SIGNATURES
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PART I
ITEM 1. BUSINESS
The Company
PECO Energy Company (Company), formerly known as Philadelphia Electric
Company, incorporated in Pennsylvania in 1929, is an operating utility
which provides electric and gas service to the public in southeastern
Pennsylvania. Two subsidiaries own, and a third subsidiary operates, the
Conowingo Hydro-Electric Project (Conowingo Project), and one distribution
subsidiary provides electric service to the public in certain areas of
northeastern Maryland adjacent to the Conowingo Project.
The total area served by the Company and its subsidiaries covers 2,475
square miles. Electric service is supplied in an area of 2,340 square
miles with a population of about 3,700,000, including 1,600,000 in the
City of Philadelphia. Approximately 95% of the electric service area and
64% of retail kilowatthour (kWh) sales are in the suburbs around
Philadelphia and in northeastern Maryland, and 5% of the service area and
36% of such sales are in the City of Philadelphia. In 1993, approximately
60% of the Company's electric output was generated from nuclear sources.
The Company estimates for 1994 that 59% of its electric output will be
generated from nuclear sources (see "Fuel"). Natural gas service is
supplied in a 1,475-square-mile area of southeastern Pennsylvania adjacent
to Philadelphia with a population of 1,900,000. The Company and its
subsidiaries hold franchises to the extent necessary to operate in the
areas served.
The Company is subject to regulation by the Pennsylvania Public
Utility Commission (PUC) as to rates, issuances of securities and certain
other aspects of the Company's operations and by the Federal Energy
Regulatory Commission (FERC) as to wholesale and interstate electric rates
and as to licensing jurisdiction over the Company's Muddy Run Pumped
Storage Project. Specific operations of the Company are also subject to
the jurisdiction of various other federal, state, regional and local
agencies, including the United States Nuclear Regulatory Commission (NRC),
the United States Environmental Protection Agency (EPA), the United States
Department of Energy (DOE), the Delaware River Basin Commission and the
Pennsylvania Department of Environmental Resources (PDER). The Company's
utility subsidiaries are subject to similar regulation, including the
licensing jurisdiction of the FERC over the Conowingo Project. Due to its
ownership of subsidiary-company stock, the Company is a holding company as
defined by the Public Utility Holding Company Act of 1935 (1935 Act);
however, it is predominantly an operating company and, by filing an
exemption statement annually, is exempt from all provisions of the 1935
Act, except Section 9(a)(2) relating to the acquisition of securities of a
public utility company.
Electric Operations
General
During 1993, 90.4% of the Company's operating revenues and 94.3% of
its operating income were from electric operations. Electric sales and
operating revenues for 1993 by classes of customers are set forth below:
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<TABLE>
<CAPTION>
Operating
Sales Revenues
(millions of kWh) (millions of $)
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<S> <C> <C>
Residential................... 10,657 $1,354.1
Small commercial and
industrial.................. 5,773 678.9
Large commercial and
industrial.................. 15,935 1,164.0
Other......................... 771 161.2
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Service territory........... 33,136 3,358.2
Interchange sales ............ 457 14.3
Sales to other utilities...... 8,670 232.9
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Total....................... 42,263 $3,605.4
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</TABLE>
In 1993, 97.7% of the Company's service territory operating revenues
were from Company sales in Pennsylvania and 2.3% were from sales by the
Company's wholly owned subsidiary Conowingo Power Company (COPCO) in
Maryland. On February 15, 1994, the Company announced that it is
evaluating strategic alternatives with respect to COPCO, including the
possible sale of COPCO to other companies. The Company has made no
determination at this time to sell COPCO and may, in fact, retain
ownership of COPCO. See "Rate Matters."
For 1993, sales to other utilities consisted of negotiated agreements
to sell 799 megawatts (MW) of near-term excess capacity and/or associated
energy. See "Rate Matters." All of these agreements are either for
ongoing, short-duration purchases of energy only or expire during 1994.
The Company expects to renew these agreements or negotiate new agreements
in 1994.
The net installed electric generating capacity (summer rating) of the
Company and its subsidiaries at December 31, 1993 was as follows:
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<TABLE>
<CAPTION>
Type of Capacity Megawatts % of Total
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<S> <C> <C>
Nuclear................................. 3,938 44.4%
Mine-mouth, coal-fired.................. 709 8.0
Service-area, coal-fired................ 690 7.8
Oil-fired............................... 1,176 13.2
Gas-fired............................... 201 2.3
Hydro (includes pumped storage)......... 1,350 15.2
Internal combustion..................... 813 9.1
----------------------
Total............................... 8,877(1)(2) 100.0%
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</TABLE>
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(1) Includes capacity sold to other utilities.
(2) See "Fuel" for sources of fuels used in electric generation.
The maximum hourly demand on the Company's system was 7,100 MW which
occurred on July 8, 1993. The Company estimates its generating reserve
margin for 1994 to be 28%. This is based on the most recent annual
peak-load forecast, which assumes normal peak weather conditions and the
sale to other utilities of 400 MW of capacity not included in rate base.
The Company is a member of the Pennsylvania-New Jersey-Maryland
Interconnection (PJM), which fully integrates, on the basis of relative
cost of generation, the bulk-power generating and transmission operations
of eleven investor-owned electric utilities serving more than 22 million
people in a 50,000-square-mile territory. In addition, PJM companies
coordinate planning and install facilities to obtain the greatest
practicable degree of reliability, compatible economy, and other
advantages from the pooling of their respective electric system loads,
transmission facilities and generating capacity. PJM uses the
split-savings method in pricing and accounting to provide an economic
method of energy interchange among its members. Under this arrangement,
PJM energy is exchanged among PJM member utilities at a price which
represents the average of the producer's cost of generating the
electricity dispatched and the buyer's replacement cost, or the cost
avoided by making the purchase.
The maximum PJM demand of 46,429 MW occurred on July 8, 1993 when
PJM's installed capacity (summer rating) was 55,440 MW. The Company's
installed capacity for 1994-97 is expected to be sufficient to supply its
PJM reserve margin share during that period.
The Company has made arrangements for the purchase of other companies'
power during 1994. The source of the amount reserved each week depends on
the availability of excess coal-fired capacity, PJM's import capability
from these companies and the Company's economic need for additional power.
The Company's nuclear energy is generated by Limerick Generating
Station (Limerick) Units No. 1 and No. 2 and Peach Bottom Atomic Power
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Station (Peach Bottom) Units No. 2 and No. 3, which are operated by the
Company, and by Salem Generating Station (Salem) Units No. 1 and No. 2,
which are operated by Public Service Electric and Gas Company (PSE&G). The
Company owns 100% of Limerick, 42.49% of Peach Bottom and 42.59% of Salem.
Limerick Units No. 1 and No. 2 each has a capacity of 1,055 MW; Peach
Bottom Unit No. 2 has a capacity of 1,051 MW, of which the Company is
entitled to 447 MW; Peach Bottom Unit No. 3 has a capacity of 1,035 MW, of
which the Company is entitled to 439 MW; and Salem Units No. 1 and No. 2
each has a capacity of 1,106 MW, of which the Company is entitled to 471
MW of each unit.
The Price-Anderson Act, as amended (Price-Anderson Act), sets the
limit of liability of approximately $9.4 billion for claims that could
arise from an incident involving any licensed nuclear facility in the
nation. The limit is subject to increase to reflect the effects of
inflation and changes in the number of licensed reactors. All utilities
with nuclear generating units, including the Company, have obtained
coverage for these potential claims through a combination of private
insurances of $200 million and mandatory participation in a financial
protection pool. Under the Price-Anderson Act, all nuclear reactor
licensees can be assessed up to $76 million per reactor per incident,
payable at no more than $10 million per reactor per incident per year.
This assessment is subject to inflation, state premium taxes and an
additional surcharge of 5% if the total amount of claims and legal costs
exceeds the basic assessment. If the damages from an incident at a
licensed nuclear facility exceed $9.4 billion, the President of the United
States is to submit to Congress a plan for providing additional
compensation to the injured parties. Congress could impose further
revenue-raising measures on the nuclear industry to pay claims. The
Price-Anderson Act and the extensive regulation of nuclear safety by the
NRC do not preempt claims under state law for personal, property or
punitive damages related to radiation hazards.
Although the NRC requires the maintenance of property insurance on
nuclear power plants in the amount of $1.06 billion or the amount
available from private sources, whichever is less, the Company maintains
coverage in the amount of its $2.75 billion proportionate share for each
station. The Company's insurance policies provide coverage for
decontamination liability expense, premature decommissioning, and loss or
damage to its nuclear facilities. These policies require that insurance
proceeds first be applied to assure that the facility, following
an accident, is in a safe and stable condition and can be maintained in
such condition. Within 30 days of stablizing the reactor, the licensee
must submit a report to the NRC which provides a clean-up plan including
the identification of all clean-up operations necessary to decontaminate
the reactor to either permit the resumption of operations or
decommissioning of the facility. Under the Company's insurance policies,
proceeds not already expended to place the reactor in a stable condition
must be used to decontaminate the facility. If the decision is made to
decommission the facility, a portion of the insurance proceeds must be
allocated to a fund which the Company is required by the NRC to maintain
to provide funds for decommissioning the facility. These proceeds would be
paid to the fund to make up any difference between the amount of money in
the fund at the time of the early decommissioning and the amount that
would be in the fund if contributions had been made over the normal life
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of the facility. The Company is unable to predict what effect these
requirements may have on when insurance proceeds would be made available
to the Company for the Company's bondholders and the amount of such
proceeds which would be available. Under the terms of the various
insurance agreements, the Company could be assessed up to $35 million for
losses incurred at any plant insured by the insurance companies. The
Company is self-insured to the extent that any losses may exceed the
amount of insurance maintained. Any such losses, if not recovered through
the ratemaking process, could have a material adverse effect on the
Company's financial condition.
The Company is a member of an industry mutual insurance company which
provides replacement power cost insurance in the event of a major
accidental outage at a nuclear station. The policy contains a twenty-one
week waiting period before recovery of costs can commence. The premium for
this coverage is subject to an assessment for adverse loss experience. The
Company's maximum share of any assessment is $17 million per year.
NRC regulations require that licensees of nuclear generating
facilities must demonstrate that funds will be available in certain
minimum amounts, established by a formula provided in the regulations, at
the end of the life of the facility to decommission the facility. The PUC,
based on estimates of decommissioning costs for each of the nuclear
facilities in which the Company has an ownership interest, permits the
Company to collect from its customers and deposit in segregated accounts
amounts which, together with earnings thereon, will be necessary to
decommission such nuclear facilities. The Company's ownership portion of
decommissioning costs is approximately $643 million, expressed in 1990
dollars, which the Company believes would be substantially unchanged at
December 31, 1993. The Company believes that the ultimate cost of
decommissioning these facilities will continue to be recoverable through
rates, but such recovery is not assured.
Limerick Generating Station
Limerick Unit No. 1 achieved a capacity factor of 95% in 1993 and 68%
in 1992. Limerick Unit No. 2 achieved a capacity factor of 81% in 1993 and
91% in 1992. Limerick Units No. 1 and No. 2 are each on a 24-month
refueling cycle. The last refueling outages for Units No. 1 and No. 2 were
in 1994 and 1993, respectively.
On November 5, 1993, the NRC issued its periodic Systematic Assessment
of Licensee Performance (SALP) Report for Limerick for the period March
15, 1992 to September 25, 1993. The Report was issued under the revised
SALP process in which the number of assessment areas has been reduced from
seven to four: Operations, Engineering, Maintenance, and Plant Support.
The area of Plant Support includes: radiological controls, security,
emergency preparedness, fire protection, chemistry and housekeeping.
Limerick received ratings of "1," the highest of the three rating
categories, in the two functional areas of Operations and Engineering. The
areas of Maintenance and Plant Support received ratings of "2." The NRC
stated that overall, it observed an excellent level of performance at
Limerick. It noted continued strong performance in the Operations and
Engineering areas and improvement in the Maintenance area. The NRC noted,
however, that in the Maintenance area, personnel errors, a weakness from
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the last SALP period, continued throughout the SALP period. Although the
NRC recognized the implementation of initiatives by the Company to improve
maintenance performance, it stated that such initiatives had not been in
place long enough to be judged effective. In the area of Plant Support,
the NRC stated that security, emergency preparedness, fire protection,
chemistry and housekeeping continue to be very effective and contributed
to safe plant performance. The NRC noted, however, performance weaknesses
in the radiation controls area through the SALP period. The Company has
taken and is taking actions to address the weaknesses discussed in the
SALP Report.
By letter dated December 8, 1992, the NRC imposed a civil penalty of
$25,000 on the Company based upon a decision by a United States Department
of Labor Administrative Law Judge (ALJ) that the Company's security
subcontractor unlawfully discriminated against one of its former
employees. The ALJ concluded that the employee was required to undergo a
psychological evaluation and subsequently was discharged by the security
subcontractor in retaliation for raising safety concerns regarding
security operations at Limerick. The security subcontractor is appealing
the decision of the ALJ to the Secretary of Labor. The Company has not
paid the NRC penalty pending the final decision in the matter.
On July 24, 1992, the NRC issued an information notice alerting
utilities owning boiling water reactors (BWRs) to potential inaccuracies
in water-level instrumentation during and after rapid depressurization
events. On May 28, 1993, the NRC issued a bulletin requesting utilities
owning BWRs to, among other things, install certain hardware modifications
at the next cold shutdown of the BWR after July 30, 1993 to ensure
accurate functioning of the water-level instrumentation. These hardware
modifications were made on Peach Bottom Unit No. 2 in August 1993, Peach
Bottom Unit No. 3 in November 1993 and Limerick Unit No. 1 in September
1993. The hardware modifications for Limerick Unit No. 2 will be made
during the next cold shutdown of that unit.
The NRC has raised concerns that the Thermo-Lag 330 fire barrier
systems used to protect cables and equipment may not provide the necessary
level of fire protection and requested licensees to describe short- and
long-term measures being taken to address this concern. The Company has
informed the NRC that it has taken short-term compensatory actions to
address the inadequacies of the Thermo-Lag barriers installed at Limerick
and Peach Bottom and is participating in an industry-coordinated program
to provide long-term corrective solutions. By letter dated December 21,
1992, the NRC stated that the Company's interim actions were acceptable.
By letter dated December 22, 1993, the NRC requested additional
information on the Company's long-term measures to address Thermo-Lag 330
fire barrier issues. The Company provided a response outlining its
Thermo-Lag program and committing to provide a status report to the NRC by
September 30, 1994. The Company cannot predict, at this time, what effect
this matter will have on the operations of Limerick and Peach Bottom.
Water for the operation of Limerick is drawn from the Schuylkill River
adjacent to Limerick and from the Perkiomen Creek, a tributary of the
Schuylkill River. During certain periods of the year, generally the summer
months but possibly for as much as six months or more in some years, the
Company would not be able to operate Limerick without the use of
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supplemental cooling water due to existing regulatory water withdrawal
constraints applicable to the Schuylkill River and the Perkiomen Creek.
Supplemental cooling water for Limerick is provided by a supplemental
cooling water system which draws water from the Delaware River. The
supplemental cooling water system for Limerick includes the following
components: (1) the Point Pleasant Pumping Station (to withdraw water from
the Delaware River) and a two and one-half-mile transmission main from the
Point Pleasant Pumping Station to the Bradshaw Reservoir (Point Pleasant
Project); (2) the Bradshaw Reservoir, a 25-million-gallon reservoir and
pumping station which receives water from the Point Pleasant Project and
acts as a dividing point for water for Limerick and for the public supply
systems of two Montgomery County water authorities; (3) a seven-mile
pipeline between the Bradshaw Reservoir and the east branch of the
Perkiomen Creek (East Branch); (4) a water treatment facility to provide
disinfection of Delaware River water; (5) approximately 24 miles of the
East Branch and the main branch of the Perkiomen Creek; (6) a pumping
station on the main branch of the Perkiomen Creek; and (7) an eight-mile
transmission main from the pumping station on the Perkiomen Creek to
Limerick.
Opposition to the Point Pleasant Project from various groups,
including Bucks County and the Neshaminy Water Resources Authority (NWRA),
a municipal authority created by Bucks County which had contracted to
construct the Point Pleasant Project, resulted in protracted litigation in
the Court of Common Pleas of Bucks County (Court of Common Pleas) and
numerous appeals of the decisions of that court. In May 1988, the Bucks
County Commissioners voted to end their opposition to the Point Pleasant
Project and enacted an ordinance to enable Bucks County to acquire and
manage the NWRA's projects, including the Point Pleasant Project. On May
26, 1988, in an action brought by Bucks County against the NWRA and its
board members to enforce the ordinance, the Court of Common Pleas ordered
the NWRA to transfer its projects, including the Point Pleasant Project,
to Bucks County. Certain intervenors appealed to the Commonwealth Court,
which dismissed the appeal on procedural grounds. The intervenors have
filed a petition in the Court of Common Pleas to cure the procedural
defect.
All permits for the construction and operation of the supplemental
cooling water system have been obtained. As described below, the issuances
of certain permits have been appealed. Certain of the permits relating to
operation of the system must be renewed periodically.
On July 14, 1988, the PDER issued a National Pollutant Discharge
Elimination System (NPDES) permit to the Company relating to the discharge
of Delaware River water into the East Branch. The Company filed an appeal
with respect to the temperature constraints and the limitations on
discharges of certain impurities of the NPDES permit with the
Environmental Hearing Board (EHB) on August 12, 1988. Certain
environmental groups also filed permit appeals with the EHB. In order to
comply with the conditions of its NPDES permit, the Company installed a
water treatment facility to provide seasonal cooling and disinfection of
the Delaware River water discharged into the East Branch. On March 31,
1992, the Company and PDER agreed to a settlement of the Company's appeal
by entering into a Consent Adjudication, which is subject to approval by
the EHB. The Consent Adjudication would resolve all issues in the
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Company's appeal but would not affect the appeal by certain environmental
groups from the NPDES permit. No action on the Company's Consent
Adjudication has been taken by the EHB.
In July 1993, the PDER reissued the Company's NPDES permit. The
reissued permit has conditions that are in certain instances less
stringent than those set forth in the original permit.
On February 12, 1988, the PDER extended various existing permits and
issued new stream encroachment permits and water allocation permits with
respect to the supplemental cooling water system. Intervenors appealed the
February 12, 1988 order to the EHB, which dismissed all appeals except
certain appeals relating to the erosive impact of the supplemental cooling
water system on the East Branch. These appeals have been stayed pending
disposition of other litigation concerning the erosion issue, which was
concluded in April 1992. In addition, appeals by an intervenor from
interim permit extension decisions of the PDER on June 26, 1987 and an
appeal of a 1982 water quality certification remain pending before the EHB
but have been inactive.
The Company has also entered into an agreement which expires on
December 31, 1994 with a municipality to secure a backup source of water
for the interim operation of Limerick should water from the supplemental
cooling water system not be available; however, this backup source is
capable of providing only enough cooling water to operate both Limerick
units simultaneously at 70% of rated capacity for short periods of time.
Peach Bottom Atomic Power Station
Peach Bottom Unit No. 2 achieved a capacity factor of 84% in 1993 and
61% in 1992. Peach Bottom Unit No. 3 achieved a capacity factor of 70% in
1993 and 78% in 1992. Peach Bottom Units No. 2 and No. 3 are each on a
24-month refueling cycle. The last refueling outages for Units No. 2 and
No. 3 were in 1992 and 1993, respectively.
On March 19, 1993, the NRC issued its periodic SALP Report on the
performance of activities at Peach Bottom for the period August 4, 1991
through October 31, 1992. Peach Bottom received ratings of "1" in the
area of Emergency Preparedness and the area of Security and Safeguards.
The areas of Plant Operations and Radiological Controls received ratings
of "2, Improving." Each of the other three functional areas
(Maintenance/Surveillance; Engineering/Technical Support; and Safety
Assessment/Quality Verification) received ratings of "2." Except for the
ratings in the areas of Plant Operations and Radiological Controls (each
previously rated "2"), these were the same ratings as those received in
the prior SALP Report. The SALP Report stated that management continued to
maintain a strong safety perspective throughout the assessment period and
fostered broad-based performance improvements that led to stronger
programs in most functional areas. The SALP Report further stated that
many of the programmatic weaknesses identified during the previous
assessment period have either been eliminated or performance has been
improved. For example, the SALP Report stated that fundamental problems
with the quality of root-cause analysis noted during the last two periods
have been resolved and that Peach Bottom's root-cause analysis
capabilities now constitute a strength. In addition, the SALP Report
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stated that licensed operators staffing and training continued to
strengthen, contributing to improved Plant Operations performance. The
SALP Report noted, however, that while overall progress in improving
performance was clearly evident throughout the period, several weaknesses
warranting continued management attention were identified. Among the areas
identified for improvement were plant performance monitoring and
engineering and technical support.
During 1983 outages, cracks in the piping of the residual heat removal
and reactor recirculating water systems were discovered at Peach Bottom
Unit No. 3 resulting from a generic problem with BWRs. Repairs, which
involved the replacement of piping, required extended outages at the Unit.
In February 1989, the Company, on behalf of the co-owners of Peach Bottom,
filed a proof of loss with Nuclear Electric Insurance Limited (NEIL) for
replacement power costs associated with Unit No. 3 outages. On January 19,
1993, the arbitrators issued a decision in favor of NEIL and denied the
Company's claim. On April 19, 1993, the Company filed a motion in the
United States District Court for the Southern District of New York to
vacate the arbitration decision.
On May 21, 1992, the Company filed a request with the NRC to amend its
Facility Operating Licenses for Peach Bottom Units No. 2 and No. 3 to
extend the expiration dates to August 2013 and July 2014, respectively, 40
years from the dates of issuance. The current operating licenses expire 40
years from the dates of issuance of the construction permits for the
Units. If the NRC grants the Company's request, the operating license for
Unit No. 2 will be extended approximately five years, six months and the
operating license for Unit No. 3 will be extended approximately six years,
five months.
By letter dated June 23, 1993, the Company submitted a request to the
NRC to rerate the authorized maximum reactor core power levels of both
Peach Bottom units by 5% to 3,458 megawatts thermal (Mwt) from the current
limits of 3,293 Mwt. The analyses and evaluations supporting this request
were completed using generic guidelines approved by the NRC. If the
request is approved, the associated hardware changes will be made on Unit
No. 2 during the planned fall 1994 refueling outage and on Unit No. 3
during the planned fall 1995 refueling outage.
In addition to the matters discussed above, see "Electric Operations-
Limerick Generating Station" for a discussion of certain matters which
affect both Peach Bottom and Limerick.
Salem Generating Station
Salem Unit No. 1 achieved a capacity factor of 60% in 1993 and 54% in
1992. Salem Unit No. 2 achieved a capacity factor of 57% in 1993 and 49%
in 1992. Salem Units No. 1 and No. 2 are each on an 18-month refueling
cycle. The last refueling outages for Units No. 1 and No. 2 were in 1993.
The Company has been informed by PSE&G that on September 1, 1993, the
NRC furnished PSE&G with its periodic SALP Report for Salem. The operating
period reviewed was from December 29, 1991 through June 19, 1993. Salem
received ratings of "1" in the areas of Radiological Controls and
Security. The area of Emergency Preparedness received a rating of "1,
9
<PAGE>
<PAGE> 12
Declining." The areas of Plant Operations; Maintenance/ Surveillance;
Engineering/Technical Support; and Safety Assessment/ Quality Verification
received ratings of "2." The NRC concluded that PSE&G's performance
during the period was good and noted an improvement over the last rating
period in the area of Radiological Controls. The NRC noted, however, that
Salem had a number of substantial operational challenges during the period
and that additional management attention is warranted to reduce the
frequency of such operational challenges.
The Company has been informed by PSE&G that, by letter dated March 9,
1994, the NRC imposed a civil penalty of $50,000 for eight violations for
failure to follow procedures at Salem related to the control of
maintenance of work activities. The NRC stated that, while none of the
violations were significant from a nuclear safety perspective, some of the
violations demonstrated the potential to cause physical harm to
individuals. In addition, the NRC stated that collectively, the violations
demonstrated that weaknesses exist in the maintenance and control of work
process activities, which could, under other circumstances, adversely
affect the operability of safety related equipment at Salem. The NRC
required PSE&G to respond to the alleged violations within 30 days and
document the specific corrective actions that have been and will be taken.
In order to improve Salem's materiel condition, plant and personnel
performance and address the NRC's concerns expressed in its October 1990
SALP Report, the Salem owners, including the Company, are in the process
of augmenting plans to improve Salem's materiel condition, upgrade
procedures and enhance personnel performance. The Company's share of the
plan's capital requirements for 1994 and for 1995-97 are reflected in the
Company's most recent estimates of capital expenditures for plant
additions and improvements for such periods. The planned improvements are
being managed by PSE&G as a discrete project and are expected to coincide
with plant operating schedules.
In addition to the matters discussed above, see "Environmental
Regulations-Water" for a discussion of possible installation of cooling
towers at Salem.
Fuel
The following table shows the Company's sources of electric output for
1993 and as estimated for 1994:
10
<PAGE>
<PAGE> 13
<TABLE>
<CAPTION>
1993 1994 (Est.)
--------------------
<S> <C> <C>
Nuclear....................................................... 60.2% 58.7%
Mine-mouth, coal-fired........................................ 10.6 10.8
Service-area, coal-fired...................................... 5.9 9.5
Oil-fired..................................................... 5.2 2.6
Gas-fired..................................................... 1.4 1.3
Hydro (includes pumped storage)............................... 2.2 2.7
Internal combustion........................................... 0.1 0.1
Purchased, interchange and nonutility generated............... 14.4 14.3
------------------
100.0% 100.0%
==================
</TABLE>
The following table shows the Company's average fuel cost used to
generate electricity:
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nuclear
Cost per million Btu(1)..................... $ 0.84(2) $ 0.79(2) $ 0.64 $ 0.53 $ 0.56
Coal
Mine-mouth plants
Cost per ton.............................. 34.95 36.93 37.26 33.75 30.53
Cost per million Btu...................... 1.43 1.52 1.51 1.36 1.24
Service-area plants
Cost per ton.............................. 48.31 51.67 50.24 45.25 43.38
Cost per million Btu...................... 1.90 2.06 2.00 1.78 1.66
Oil
Residual
Cost per barrel........................... 19.12 21.70 19.42 15.94 15.87
Cost per million Btu...................... 3.08 3.44 3.11 2.53 2.50
Distillate
Cost per barrel........................... 23.36 30.37 29.90 24.96 27.21
Cost per million Btu...................... 3.98 5.20 5.12 4.26 4.15
Gas
Cost per mcf.............................. - - - 3.05 2.86
Cost per million Btu...................... - - - 2.96 2.77
</TABLE>
----------
(1) British thermal unit.
(2) Reflects reclassification of spent-fuel cost for comparative purposes.
Nuclear
The cycle of production and utilization of nuclear fuel includes the
mining and milling of uranium ore; the conversion of uranium concentrates
11
<PAGE>
<PAGE> 14
to uranium hexafluoride; the enrichment of the uranium hexafluoride; the
fabrication of fuel assemblies; and the utilization of the nuclear fuel in
the generating station reactor. The Company has contracts for uranium
concentrates which will satisfy the fuel requirements of Limerick and
Peach Bottom through 1996. The Company's contracts for uranium
concentrates are allocated to Limerick and Peach Bottom on an as-needed
basis. PSE&G has informed the Company that it presently has under contract
sufficient uranium concentrates to fully meet the current projected
requirements for Salem through 2000 and 60% of the requirements through
2002. The following table summarizes the years through which the Company
and PSE&G have contracted for the other segments of the nuclear fuel
supply cycle.
<TABLE>
<CAPTION>
Conversion Enrichment Fabrication
--------------------------------------
<S> <C> <C> <C>
Limerick Unit No. 1............. 1997 2014(1) 1996
Limerick Unit No. 2............. 1997 2014(1) 1997
Peach Bottom Unit No. 2......... 1997 2008(1) 1999
Peach Bottom Unit No. 3......... 1997 2008(1) 1998
Salem Unit No. 1................ 2000 (2) 2004
Salem Unit No. 2................ 2000 (2) 2005
</TABLE>
----------
(1) The Company has exercised its option to remain uncommitted under the
United States Enrichment Corporation (USEC) enrichment contract from
2000 to 2002. This action, however, does not exclude USEC enrichment
services from consideration in this period. The Company does not
anticipate any difficulties in obtaining necessary enrichment services
for its Limerick and Peach Bottom Units.
(2) Represents 100% of enrichment requirements through 1998 and 30%
through 2001. Similar to the Company's actions discussed in note (1)
above, the Company has been informed by PSE&G that PSE&G has exercised
its option to remain uncommitted under its USEC enrichment contract
from 1999 to 2002.
On March 1, 1993, the Company entered into an agreement with the Long
Island Power Authority (LIPA) and other parties, subsequently revised on
September 14, 1993, to receive $46 million as compensation for accepting
slightly irradiated fuel from the Shoreham Nuclear Power Station on Long
Island, New York, for use at Limerick. The Company is to receive the $46
million in installments as the shipments of nuclear fuel are accepted. The
first of the 33 shipments arrived at Limerick on September 28, 1993.
Nineteen shipments of fuel were completed prior to the suspension of
shipments to accommodate the refueling outage of Limerick Unit No. 1.
Shipments of the remaining fuel are scheduled to resume after completion
of the refueling outage. The Company estimates that the acquisition of the
fuel will result in benefits to the Company's customers of $70 million
over the next 12 to 15 years due to reduced fuel-purchase requirements.
The fuel will be stored at Limerick's spent-fuel pool pending its use at
Limerick beginning in 1994 and extending beyond 2005. On September 21,
1993, the State of New Jersey filed suit in the United States District
Court for the District of New Jersey (New Jersey District Court) seeking a
12
<PAGE>
<PAGE> 15
stay of shipments of fuel because of alleged failures of federal agencies
to fully review the proposed shipping plan under the National
Environmental Policy Act (NEPA) and the Coastal Zone Management Act
(CZMA). The New Jersey District Court refused to halt the shipments and
New Jersey has appealed to the United States Court of Appeals for the
Third Circuit (Appeals Court). The Appeals Court affirmed the New Jersey
District Court decision to dismiss the suit and subsequently denied a
request for rehearing. New Jersey has also requested that the NRC halt
shipments until the NRC further reviews the fuel transfer under the NEPA
and CZMA. The NRC has refused these requests.
The commercial reprocessing and recycling of the plutonium produced in
the United States nuclear power programs have been delayed indefinitely.
There are no commercial facilities for the reprocessing of spent nuclear
fuel currently in operation in the United States, nor has the NRC licensed
any such facilities. The spent-fuel storage pools for Limerick have
sufficient capacity to permit storage through 1999. Reracking of the
spent-fuel storage pools at Limerick, which will extend storage capacity
to approximately 2010, is in the preliminary stages. The new configuration
will be designed to accommodate rod consolidation. Spent-fuel racks at
Peach Bottom have storage capacity until 1998 for Unit No. 2 and 1999 for
Unit No. 3. Options for expansion of storage capacity at both Limerick and
Peach Bottom beyond the pertinent dates, including the viability of rod
consolidation, are being investigated. The Company has been informed by
PSE&G that the spent-fuel storage capacity at Salem will permit storage of
spent fuel through March 1998 for Salem Unit No. 1 and March 2002 for
Salem Unit No. 2. PSE&G has developed an integrated strategy to meet the
longer-term spent-fuel storage needs for Salem. PSE&G plans to replace the
existing high-density racks in the spent-fuel storage pools of Salem Units
No. 1 and No. 2 with maximum density racks. The reracking project
commenced in early 1992 and is expected to extend the storage capability
of Salem Units No. 1 and No. 2 through March 2008 and March 2012,
respectively.
Under the Nuclear Waste Policy Act of 1982 (NWPA), the federal
government was to begin accepting spent fuel for permanent off-site
storage no later than 1998. The DOE has stated that there is no legal
obligation under the NWPA to begin accepting spent fuel absent an
operational repository or other facility constructed under the NWPA. The
DOE acknowledges, however, that it may have created the expectation of
such a commitment on the part of utilities by issuing certain regulations
and projected waste acceptance schedules. The DOE has stated that it will
not be able to open a permanent, high-level nuclear waste repository until
2010, at the earliest. The DOE stated that the delay was a result of its
seeking new data about the suitability of the proposed repository site at
Yucca Mountain, Nevada, opposition to this location for the repository and
the DOE's revision of its civilian nuclear waste program. The DOE stated
that it would seek legislation from Congress for the construction of a
temporary storage facility which would accept spent nuclear fuel from
utilities beginning in 1998 or soon thereafter. Although progress is being
made at Yucca Mountain and several communities have expressed interest in
providing a temporary storage site, the Company cannot predict when the
temporary federal storage facilities or permanent repository will become
available. The DOE is exploring options to address delays in the currently
projected waste acceptance schedules. The options under consideration by
13
<PAGE>
<PAGE> 16
the DOE include offsetting a portion of the financial burden associated
with the costs of continued on-site storage of spent fuel after 1998 and
the issuance by the DOE to utilities of multi-purpose canisters for
on-site storage. Under the NWPA, the DOE is authorized to assess utilities
for the cost of nuclear fuel disposal. The current cost of such disposal
is one mill per kWh of net nuclear generation. The 1993 charge collected
by the Company from its customers for spent-fuel disposal was $23 million.
The DOE may revise this charge as necessary for full-cost recovery of
nuclear fuel disposal.
The National Energy Policy Act of 1992 (Energy Act) states, among
other things, that utilities with nuclear reactors must pay for the
decommissioning and decontamination of the DOE nuclear fuel enrichment
facilities. The total costs to domestic utilities are estimated to be $150
million per year for 15 years, of which the Company's share is $5 million
per year. The Energy Act provides that these costs are to be recoverable
in the same manner as other fuel costs. The Company has recorded the
liability and a related regulatory asset of $69 million for such costs at
December 31, 1993. The Company is currently recovering these costs through
the Energy Cost Adjustment (ECA).
The Company believes that the ultimate costs of decommissioning and
decontamination, spent-fuel disposal and any assessment under the Energy
Act will continue to be recoverable through rates, although such recovery
is not assured.
Coal
The Company has a 20.99% ownership interest in Keystone Station
(Keystone) and a 20.72% ownership interest in Conemaugh Station
(Conemaugh), coal-fired, mine-mouth generating stations in western
Pennsylvania, operated by Pennsylvania Electric Company. A majority of
Keystone's fuel requirements is supplied by one coal company under a
contract which expires on December 31, 2004. The contract calls for
varying amounts of coal purchases as follows: between 3,000,000 and
3,500,000 tons for each of the years 1994 through 1999; and a total of
6,500,000 tons for the years 2000 through 2004. At December 31, 1993,
approximately 63% of Conemaugh's fuel requirements were secured by a
long-term contract and several short-term contracts.
The Company customarily enters into medium-term contracts for a
significant portion of its coal requirements and makes spot purchases for
the balance of coal required by its Philadelphia-area, coal-fired units at
Eddystone Station (Eddystone) and Cromby Station (Cromby). At January 1,
1994, the Company had contracts with two suppliers for 600,000 tons per
year or approximately 55% of expected annual requirements. One contract
expires on September 30, 1994 and the other expires on December 31, 1994
with an option to extend for one additional year if the Company and the
supplier so agree.
The coal requirements of each station not covered by existing
contracts are met through additional short-term contracts or spot
purchases from local suppliers.
Oil
The Company customarily enters into yearly purchase orders with its
various oil suppliers for the bulk of its requirements and makes spot
purchases for the balance. At present, the Company's purchase orders are
14
<PAGE>
<PAGE> 17
sufficient to meet the estimated residual fuel oil needs of its oil-fired
generating units through April 1994, when current orders end and new
yearly orders begin. Purchase orders for distillate fuel oil are expected
to meet the Company's needs through September 1994, when current orders
end and new yearly orders begin.
Natural Gas
The Company supplies natural gas for Cromby Unit No. 2 under a City
Gate Sales tariff approved by the PUC and through spot purchases made on
the open market. A limited amount of natural gas is used in auxiliary
boilers and pollution control equipment at Eddystone. In 1993, the Company
began converting Eddystone Units No. 3 and No. 4 to allow the use of oil
or natural gas.
Gas Operations
During 1993, 9.6% of the Company's operating revenues and 5.7% of its
operating income were from gas operations. Gas sales and operating
revenues for 1993 by classes of customers are set forth below:
<TABLE>
<CAPTION>
Operating
Sales Revenues
(mmcf) (millions of $)
-------------------------
<S> <C> <C>
Residential................................. 1,637 $ 15.0
House heating............................... 30,687 205.5
Commercial and industrial................... 22,943 124.2
Other....................................... 5,656 15.2
--------------------
Total gas sales........................... 60,923 359.9
Gas transported for customers............... 22,946 22.8
--------------------
Total gas sales and transported......... 83,869 $382.7
====================
</TABLE>
The Company's natural gas supply is provided by purchases from a
number of suppliers for terms ranging from 2 to 10 years. These purchases
are delivered under several long-term firm transportation contracts with
Texas Eastern Transmission Corporation (Texas Eastern) and
Transcontinental Gas Pipe Line Corporation (Transcontinental). The
Company's aggregate annual entitlement under these firm contracts is 69.3
million dekatherms. Peak gas is provided by the Company's liquefied
natural gas facility and propane-air plant (see "ITEM 2. PROPERTIES").
Through service agreements with Texas Eastern, Transcontinental,
Equitrans, Inc. and CNG Transmission Corporation, underground storage
capacity of 17.2 million dekatherms is under contract to the Company.
Natural gas from underground storage represents approximately 40% of the
Company's anticipated 1993-94 heating season supplies.
15
<PAGE>
<PAGE> 18
The FERC, under Order 636, has "restructured" the interstate gas
pipeline industry with the last pipeline companies implementing their
restructurings on November 1, 1993. The Company has replaced pipeline
bundled supply contracts with separate contracts for pipeline
transportation capacity and for gas supplies to be transported on the
pipeline systems. The FERC decided that interstate pipeline companies
should recover virtually all their costs of providing transportation
service in the form of fixed "reservation charges" that do not vary with
throughput on the pipeline systems. The FERC also has authorized pipeline
tariff provisions that reduce the pipelines' liability for failure to meet
delivery commitments. These federal regulatory changes have increased, and
are expected to continue to increase, the market and regulatory risks of
the Company's gas distribution operations.
The FERC's restructuring initiative is also creating "transition
costs," which principally consist of "gas supply realignment costs,"
reflecting contractual liabilities to natural gas producers caused by
pipeline companies' inability to continue to purchase natural gas for
resale under traditional bundled supply contracts. The FERC is authorizing
pipeline companies to recover these costs from their distribution
customers, such as the Company. In 1993, the PUC reversed a policy which
might have precluded the Company from fully recovering these costs from
its customers. The PUC will now permit the opportunity for full rate
recovery and the Company has filed with the PUC to begin recovery of such
costs.
The Company's wholly owned subsidiary Eastern Pennsylvania Exploration
Company is a party to several joint ventures formed to find and produce
natural gas in the Gulf Coast area and the Appalachian region. For 1993,
the Company's total net investment in connection with such programs
amounted to approximately $600,000. These joint ventures do not contribute
significantly to the Company's natural gas supply.
Segment Information
Segment information is incorporated herein by reference to note 16 of
Notes to Consolidated Financial Statements included in the Company's
Annual Report to Shareholders for the year 1993.
Rate Matters
In 1993, approximately 93% of the Company's electric sales revenue and
100% of its gas sales revenue were derived pursuant to rates regulated by
the PUC. The PUC establishes through regulatory proceedings the base rates
which the Company may charge for electric and gas service in Pennsylvania.
In addition, the PUC regulates various fuel and tax adjustment clauses
applicable to customers' bills. The Company's wholesale electric rates are
regulated by the FERC. The retail rates of COPCO are regulated by the
Maryland Public Service Commission (MdPSC).
The Company's last base-rate case, intended primarily to recover costs
associated with Limerick Unit No. 2 and associated common facilities, was
filed in 1989. As part of the base-rate case, the Company voluntarily
excluded 400 MW of capacity from base rates. As part of the order dated
April 19, 1990, the PUC concluded that the Company had an additional 399
16
<PAGE>
<PAGE> 19
MW of near-term excess capacity for which the Company was denied a return
on common equity. As a result, the Company has 799 MW of near-term excess
capacity and associated energy which are available for off-system sales.
For information concerning the Company's present arrangements for
off-system sales, see "Electric Operations-General."
On April 5, 1991, the PUC approved the settlement of all appeals
arising from the Limerick Unit No. 2 rate case. The settlement allows the
Company to retain for shareholders any proceeds above the average energy
cost for sales of up to 399 MW of capacity and/or associated energy.
Beginning on April 1, 1994, the settlement provides for the Company to
share in the benefits which result from the operation of both Limerick
Unit No. 1 and Unit No. 2 through the retention of 16.5% of the energy
savings. Through 1994, the Company's potential benefit from the sale of up
to 399 MW of capacity and/or associated energy and the retained Limerick
energy savings is limited to $106 million per year, with any excess
accruing to customers. Beginning in 1995, in addition to retaining the
first $106 million, the Company will share in any excess above $106
million with the Company's share of the excess being 10% in 1995, 20% in
1996 and 30% in 1997 and thereafter. As a part of the settlement, the
Company agreed not to file an electric base-rate increase before April
1994, except as allowed by the PUC or for emergency or single-issue rate
filings to recover costs associated with new legislation or regulations.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires the
recognition of the expected costs of the benefits during the years
employees render service, but not later than the date eligible for
retirement, under the prescribed accrual method. For 1992 and prior, the
Company recognized these costs on a pay-as-you-go basis. The Company is
currently recovering in base rates the pay-as-you-go costs. The transition
obligation resulting from the adoption of SFAS No. 106 was $505 million as
of January 1, 1993, which represents the previously unrecognized
accumulated non-pension post-retirement benefits obligation. The
transition obligation is being amortized on a straight-line basis over an
allowed 20-year period. The annual accrual for non-pension postretirement
benefits costs (including amortization of the transition obligation) is
$83 million. The Company's comparable pay-as-you-go costs for these
benefits were $31 million in 1993. On September 11, 1992, the Company
filed with the PUC a request for a 1.5% electric base-rate increase
designed to recover the costs associated with the implementation of SFAS
No. 106. On March 25, 1993, the PUC issued a policy statement for
implementation of SFAS No. 106 which states that the PUC "intends to move
all jurisdictional utilities to SFAS No. 106 accrual accounting for
ratemaking purposes within approximately five years and to allow the
recovery in base rates of all deferred amounts in approximately 20 years
to the extent that costs are prudently incurred and examined in a
base-rate proceeding prior to rate recognition."
On September 2, 1993, the PUC issued an order denying the Company
current recovery of SFAS No. 106 costs, stating that the settlement of all
appeals arising from the PUC's 1990 Limerick Unit No. 2 order precluded
the Company from seeking an increase in electric base rates for these
costs before April 1, 1994. The September 2, 1993 order authorized the
17
<PAGE>
<PAGE> 20
Company to defer the additional SFAS No. 106 expense as a regulatory asset
in accordance with the PUC policy statement. On September 30, 1993, the
Company filed with the Commonwealth Court of Pennsylvania (Commonwealth
Court) a petition for review of the PUC's final order.
The Company's future earnings will be adversely affected to the extent
that the Company is not ultimately permitted to recover the additional
non-pension postretirement benefits costs resulting from the adoption of
SFAS No. 106 through the ratemaking process. While non-pension
postretirement benefits costs traditionally have been reflected in rates
on a pay-as-you-go basis, recovery of the deferred costs through the
ratemaking process is not assured. For additional information concerning
SFAS No. 106, see notes 2, 4 and 6 of Notes to Consolidated Financial
Statements included in the Company's Annual Report to Shareholders for the
year 1993.
In accordance with a Declaratory Order of the PUC, the Company
deferred approximately $91 million of operating and maintenance expenses,
depreciation and accrued carrying charges on its capital investment in
Limerick Unit No. 2 and 50% of Limerick common facilities during the
period from January 8, 1990, the commercial operation date of Limerick
Unit No. 2, until April 20, 1990, the effective date of the Limerick Unit
No. 2 rate order. Recovery of such costs deferred pursuant to the
Declaratory Order will be addressed by the PUC in a subsequent electric
rate case, although such recovery is not assured. Disallowance by the PUC
of all or part of these costs deferred pending regulatory approval would
result in an immediate charge to expense.
The Company and COPCO recover fuel and gas costs through base rates
and various automatic adjustment clauses. Regulatory audits of the
operation of the adjustment clauses are conducted to determine if refunds
to or recoupments from customers are necessary as a result of over- or
under-collections of fuel costs. In addition, the PUC may investigate
outages of electric generating units which exceed 120 days to determine
whether to deny the recovery of replacement power costs.
For Pennsylvania electric retail customers, the Company's ECA provides
for recovery of 100% of the difference between the Company's costs of
fuel, energy interchange and purchased power and the costs billed to
customers in base rates. On February 25, 1994, the Company filed its new
ECA to become effective April 1, 1994. The ECA filing proposes a change
from a credit value of 7.600 mills per kWh to a credit value of 5.647
mills per kWh, which represents an increase in annual revenue of
approximately $64 million. The approval of the ECA is pending before the
PUC. The ECA also incorporates a nuclear performance standard which allows
for financial bonuses or penalties depending on whether the Company's
system nuclear capacity factor exceeds or falls below a specified range.
If the capacity factor is within the range of 60% to 70%, there is no
bonus or penalty. If the capacity factor exceeds 70%, then progressive
bonuses are allowed. If the capacity factor falls below 60%, then
progressive penalties are imposed. The bonuses or penalties are based upon
average system replacement energy costs. For the year ended December 31,
1993, the Company's system nuclear capacity factor was 78%, which entitled
the Company to a bonus of approximately $10 million.
18
<PAGE>
<PAGE> 21
On May 28, 1993, the Company filed Purchased Gas Cost (PGC) No. 10
rates for the period December 1, 1993 through November 30, 1994, which
reflect a $0.97 per thousand cubic feet (mcf) increase in natural gas
sales rates. On October 28, 1993, the PUC voted to approve the Joint
Stipulation for Partial Settlement setting a $0.85 per mcf increase, which
represents an increase in annual revenue of $49.9 million, and to exclude
from the final PGC No. 10 rates $1.3 million relating to one issue
involving an Office of Consumer Advocate (OCA) allegation that such amount
represented excess peak-day capacity. On November 4, 1993, the Company and
the OCA reached an agreement to defer the issue of recovery of the $1.3
million to the next PGC proceeding. The agreement is pending before the
PUC.
The Company is authorized under a general order of the PUC to add a
State Tax Adjustment Surcharge to customers' bills to reflect the cost of
increases or decreases in certain state taxes not recovered in base rates.
On November 1, 1991, the FERC issued an order denying in part a waiver
of certain fuel adjustment clause regulations which the Company had filed
and directing refunds and a recalculation of fuel adjustment clause
charges. These recalculations affect the fuel charges billed to COPCO, at
the wholesale level, by the Company and its wholly owned subsidiary
Susquehanna Electric Company (SECO). In 1992, the Company refunded $1.3
million to COPCO. On August 27, 1993, the Company received FERC approval
of the amount refunded.
On October 2, 1990, the PUC issued an order initiating an
investigation into Demand-Side Management (DSM) by electric utilities.
Generally, DSM programs involve utilities providing assistance or
incentives to customers to encourage them to conserve energy and reduce
peak demand. On December 1, 1993, the PUC issued an order establishing a
special DSM cost-recovery mechanism for a five-year period. The order will
permit surcharge recovery of DSM program costs and allow utilities to earn
an incentive on kWh saved from DSM. The order will also permit utilities
to defer "lost revenues," with interest, for eventual recovery in the
next base-rate case. The OCA and the Pennsylvania Energy Office have filed
Petitions for Reconsideration and Clarification of the PUC's order and a
coalition of large industrial customers has filed an appeal with the
Commonwealth Court arguing that the PUC's order violates Pennsylvania
public utility laws. In accordance with the PUC's Declaratory Order, the
Company filed its DSM program plan with the PUC on March 14, 1994.
On September 14, 1993, the MdPSC instituted a proceeding to
investigate the strategic electric acquisition practices and long-range
electric supply planning of COPCO. The investigation is the result of an
order by the MdPSC on January 27, 1992 in connection with COPCO's last
base-rate case requiring that COPCO perform a study of its power supply
alternatives. Currently, COPCO purchases all of its power from the Company
and SECO, representing approximately 2% of the Company's annual revenues.
On January 26, 1993, COPCO filed its study with the MdPSC. Following a
review of the study by the MdPSC's Technical Staff and receipt of comments
from other parties, the MdPSC concluded that the above-mentioned
proceeding should be initiated to address several issues, including
competitive bidding of COPCO's power supply. Hearings are scheduled to
commence in September 1994.
19
<PAGE>
<PAGE> 22
On October 6, 1993, the Company filed with the FERC a proposed change
to the Tripartite Agreement under which the Company and SECO provide
electricity at wholesale to COPCO. The filing proposes to add an exit fee
for the recovery from COPCO of the stranded investment costs that the
Company would incur if COPCO were to purchase all or part of its power
supply needs from a source other than the Company. The exit fee is
calculated using a formula, based in part on the Company's existing fixed
charges to COPCO, installed generating capacity and current discount rate.
On December 2, 1993, the FERC issued an order that accepted and suspended
the Company's filing and set the matter for hearings, which are scheduled
to commence in August 1994.
On November 17, 1993, the Company filed with the FERC a transmission
service tariff to make available its transmission system to enable
third-party suppliers to sell power at wholesale to COPCO. On January 14,
1994, the FERC issued a deficiency letter requesting additional
explanation of and support for the Company's filing. The Company's
response is required to be filed by April 8, 1994.
Construction
The Company maintains a construction program designed to meet the
projected requirements of its customers and to provide service
reliability, including the timely replacement of existing facilities. The
Company's current construction program includes no new generating
facilities. During the five years 1989-93, gross property additions
(excluding capital leases) amounted to $3.0 billion and retirements
amounted to $227 million, resulting in a net increase of approximately 23%
in the Company's utility plant. Investment for new plant and equipment in
1993 amounted to $575 million. At December 31, 1993, construction work in
progress, excluding nuclear fuel, aggregated $381 million.
The following table shows the Company's most recent estimates of
capital expenditures for plant additions and improvements for 1994 and for
1995-97. These estimates do not include capital expenditures which may be
required for the possible installation of cooling towers at Salem (see
"Environmental Regulations-Water").
20
<PAGE>
<PAGE> 23
<TABLE>
<CAPTION>
(Millions of Dollars)
---------------------
1994 1995-97
-------------------
<S> <C> <C>
Electric:
Production.................................. $222 $ 527
Nuclear fuel................................ 62 216
Transmission and distribution .............. 157 450
Other electric ............................. 5 9
------------------
Total Electric.......................... 446 1,202
Gas ............................................ 58 174
Other .......................................... 71 102
------------------
Total................................... $575 $1,478
==================
</TABLE>
Nuclear fuel requirements exclude the Company's share of the requirements
for Peach Bottom and Salem which are provided by an independent fuel
company under a capital lease. See note 14 of Notes to Consolidated
Financial Statements included in the Company's Annual Report to
Shareholders for the year 1993.
Capital Requirements and Financing Activities
The following table shows the Company's most recent estimates of
capital requirements for 1994 and for 1995-97.
<TABLE>
<CAPTION>
(Millions of Dollars)
---------------------
1994 1995-97
-----------------
<S> <C> <C>
Construction........................................ $575 $1,478
Long-term debt maturities and sinking funds (1)..... 252 162
----------------
Total Capital Requirements.................. $827 $1,640
================
</TABLE>
----------
(1) Does not include $692 million of term loans that are expected to be
replaced or extended prior to maturity.
The Company expects to meet substantially all of its capital
requirements for 1994 and for 1995-97 with internally generated funds. The
estimates of capital requirements do not include any amounts for
refundings of higher-dividend preferred stock or higher-interest debt,
which refundings are dependent on future market conditions and internal
cash generation.
21
<PAGE>
<PAGE> 24
In 1993, the Company's financing activities consisted of:
<TABLE>
<CAPTION>
(Millions of Dollars)
---------------------
<S> <C>
First and Refunding Mortgage Bonds:
6-5/8% due 2003.........................................$ 250.0
7-3/4% due 2023......................................... 100.0
6-1/2% due 2003......................................... 200.0
7-3/4% due 2023......................................... 250.0
5-3/8% due 1998......................................... 225.0
6-3/8% due 2005......................................... 75.0
7-1/8% due 2023......................................... 200.0
7-1/4% due 2024......................................... 225.0
5-5/8% due 2001......................................... 250.0
Pollution Control Bonds:
Floating Rate due 2012(1)............................... 154.2
Floating Rate due 2016.................................. 42.6
Floating Rate due 2025 ................................. 23.0
Preferred Stock:
$7.48 Cumulative Preferred Stock ....................... 50.0
$6.12 Cumulative Preferred Stock........................ 92.7
---------
Total...............................................$2,137.5
=========
</TABLE>
----------
(1) Secured by First and Refunding Mortgage Bonds.
During 1993, $2.1 billion of long-term debt and preferred stock were
sold to replace debt and preferred stock carrying significantly higher
rates of interest and dividends. Also during 1993, the Company utilized
internally generated cash to repay $154 million of debt and to redeem $45
million of preferred stock.
Under the Company's mortgage (Mortgage), additional mortgage bonds may
not be issued on the basis of property additions or cash deposits unless
earnings before income taxes and interest during 12 consecutive calendar
months of the preceding 15 calendar months from the month in which the
additional mortgage bonds are issued are at least two times the pro forma
annual interest on all mortgage bonds outstanding and then applied for.
For the purpose of this test, the Company has not included Allowance for
Funds Used During Construction which is included in net income in the
Company's consolidated financial statements in accordance with the
prescribed system of accounts. The coverage under the earnings test of the
Mortgage for the 12 months ended December 31, 1993 was 4.20 times.
Earnings coverages under the Mortgage for the calendar years 1992 and 1991
were 3.31 and 3.93 times, respectively. At December 31, 1993, the most
restrictive issuance test of the Mortgage related to available property
additions. At December 31, 1993, the Company had at least $918 million of
available property additions against which $551 million of mortgage bonds
could have been issued. In addition, at December 31, 1993, the Company was
22
<PAGE>
<PAGE> 25
entitled to issue approximately $3.2 billion of mortgage bonds without
regard to the earnings and property additions tests against previously
retired mortgage bonds.
Under the Company's Amended and Restated Articles of Incorporation
(Articles), the issuance of additional preferred stock requires an
affirmative vote of the holders of two-thirds of all preferred shares
outstanding unless certain tests are met. Under the most restrictive of
these tests, additional preferred stock may not be issued without such a
vote unless earnings after income taxes but before interest on debt during
12 consecutive calendar months of the preceding 15 calendar months from
the month in which the additional shares of stock are issued are at least
1.5 times the aggregate of the pro forma annual interest and preferred
stock dividend requirements on all indebtedness and preferred stock.
Coverage under this earnings test of the Articles for the 12 months ended
December 31, 1993 was 2.47 times. Earnings coverage under the Articles for
the calendar years 1992 and 1991 was 2.00 and 1.95 times, respectively.
The following table sets forth the Company's ratios of earnings to
fixed charges and the ratios of earnings to combined fixed charges and
preferred stock dividends for the periods indicated:
<TABLE>
<CAPTION>
1989 1990(1) 1991 1992 1993
---------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.............. 2.08 1.31 2.55 2.43 3.15
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends .................... 1.77 1.04 2.14 2.06 2.67
</TABLE>
----------
(1) Reflects one-time charges against income associated with various
disallowances made by the PUC in the electric rate case for Limerick
Unit No. 2 and the Company's 1990 Early Retirement Plan and a one-time
after-tax addition to income associated with the cumulative effect of
an accounting change for unbilled operating revenues.
For purposes of these ratios, (i) earnings consist of income from
continuing operations before income taxes and fixed charges and (ii) fixed
charges consist of all interest deductions and the financing costs
associated with capital leases.
At December 31, 1993, the Company had a total of $589 million
outstanding under unsecured loan agreements with banks with maturities
ranging from 1994 to 1997. Most of the Company's unsecured debt agreements
contain cross-default provisions to the Company's other debt obligations.
At December 31, 1993, the Company and its subsidiaries had formal and
informal lines of credit with banks aggregating $351 million against which
$119 million of short-term debt was outstanding. The Company does not have
formal compensating balance arrangements with these banks. The Company has
a $150 million commercial paper program, and at December 31, 1993, there
was no commercial paper outstanding.
23
<PAGE>
<PAGE> 26
Employee Matters
The Company and its subsidiaries had 9,391 employees at December 31,
1993.
On June 10 and 11, 1993, the National Labor Relations Board (NLRB)
conducted a certification election in which certain non-management
employees had the opportunity to choose to be represented by the
International Brotherhood of Electrical Workers (IBEW), the Independent
Group Association (IGA) or to continue not to be represented by a union.
On June 12, 1993, the NLRB announced that the Company employees voted to
continue to not be represented by a union. Of the 6,400 employees eligible
to vote, 95.5% cast ballots. Employees cast 3,530 votes for "no union";
1,260 votes for the IBEW; and 719 votes for the IGA. On June 23, 1993, the
NLRB certified the results of the balloting.
Environmental Regulations
Environmental controls at the federal, state, regional and local
levels have a substantial impact on the Company's operations due to the
cost of installation and operation of equipment required for compliance
with such controls. In addition to the matters discussed below, see
"Electric Operations-General" and "Electric Operations-Limerick
Generating Station."
An environmental issue with respect to construction and operation of
electric transmission and distribution lines and other facilities is
whether exposure to electric and magnetic fields (EMF) causes adverse
human health effects. A large number of scientific studies have examined
this question and certain studies have indicated an association between
exposure to EMF and adverse health effects, including certain types of
cancer. However, the scientific community still has not reached a
consensus on the issue. Additional research intended to provide a better
understanding of EMF is continuing. The Company supports further research
in this area and is funding, monitoring and participating in such
studies. The Company cannot predict at this time what effect, if any, this
matter will have on future operations.
Water
The Company has received NPDES permits as required under federal and
state laws for the discharge of effluents from its generating stations.
These permits must be renewed periodically and, as necessary, the Company
has filed applications for renewal.
In 1991, the Company completed the modification of the cooling water
intake screens at Eddystone Units No. 1 and No. 2 to satisfy the
requirements of the PDER and the EPA. At the request of the PDER and the
Pennsylvania Fish Commission, the Company extended the fish impingement
study concerning Eddystone Units No. 3 and No. 4 intake screens until
November 1992 to determine whether any additional requirements were
necessary to comply with federal water pollution standards. In April 1993,
the final report on the impingement study was submitted to the PDER. The
final report concluded that no further actions were required concerning
Eddystone Units No. 3 and No. 4.
24
<PAGE>
<PAGE> 27
The Company has been informed by PSE&G that, on October 3, 1990, the
New Jersey Department of Environmental Protection (now the New Jersey
Department of Environmental Protection and Energy (NJDEPE)) issued a draft
New Jersey discharge to surface water permit for Salem Units No. 1 and No.
2. The draft permit incorporated numerous new and more stringent terms and
conditions than the existing water discharge permit for Salem, including
the immediate shutdown of both Salem units pending retrofitting with
cooling towers. In response to the 1990 draft permit, PSE&G submitted
extensive written comments to the NJDEPE regarding the ecological effects
of Salem's operations, and the nature, scope, and costs of retrofitting
Salem with cooling towers. The estimated cost of cooling towers, including
the cost of replacement power during the construction periods, based on
natural draft and forced draft technologies, ranges from $720 million to
$2 billion of which the Company's share would be 42.59%. PSE&G's comments
demonstrated that Salem was not having and would not have an adverse
environmental impact and that the construction of cooling towers would be
an inappropriate solution. To resolve the NJDEPE's concerns, PSE&G also
developed and submitted a supplement to the permit renewal application
setting forth alternative measures to the installation of cooling towers
that would protect aquatic life in the Delaware Estuary and provide
broad-ranging ecological benefits. PSE&G proposed intake screen
modifications to reduce fish losses, a study of deterrent systems to
divert fish from the intake and a limit on intake flow of 3.024 billion
gallons per day. In addition, PSE&G proposed conservation measures,
including the restoration of up to 10,000 acres of degraded wetlands and
the installation of fish ladders to allow fish to reach upstream spawning
areas. Finally, PSE&G proposed a comprehensive biological monitoring
program to expand existing knowledge of the Delaware Estuary and to
monitor station impacts. In June 1993, the NJDEPE issued a revised draft
permit for Salem which contained the alternative measures proposed by
PSE&G with certain modifications. The public comment period on the revised
draft permit closed January 15, 1994. The NJDEPE has received a
significant number of comments on the draft permit from a wide variety of
interests. These comments include a number of suggestions to the NJDEPE
for changes in permit terms. In addition, the comments to the NJDEPE
include a variety of claims as to alleged legal defects in the draft
permit, including failure to comply with applicable standards under the
Clean Water Act, failure to assure consistency with applicable Coastal
Zone Management Plans, failure to comply with requirements of the Delaware
River Basin Commission, and failure to comply with procedural requirements
of New Jersey and federal law. On January 15, 1994, PSE&G filed extensive
comments with the NJDEPE to respond to comments opposing the issuance of
the final permit with terms materially different than those found in the
draft permit. The NJDEPE has stated that it intends to issue a final
permit in the second quarter of 1994, but no assurances can be given as to
when or in what manner the NJDEPE will act on the issuance of a final
permit. The EPA has authority to veto the issuance of a final permit by
the NJDEPE. Action by the EPA cannot be predicted. Certain environmental
groups have also petitioned the EPA to veto any final permit that does not
require cooling towers and to withdraw the NJDEPE's permitting authority
under the Clean Water Act. If a final permit embodying the alternative
measures is issued, additional permits from various agencies will be
required for implementation. No assurance can be given as to the issuance
of such permits. The estimated costs of compliance with the revised draft
25
<PAGE>
<PAGE> 28
permit is approximately $75 million of which the Company's share would be
42.59% or $32 million.
Air
Air quality regulations promulgated by the PDER and the City of
Philadelphia in accordance with the federal Clean Air Act impose
restrictions on emission of particulates, sulfur dioxide (SO2) and other
pollutants and require permits for operation of emission sources. Such
permits have been obtained by the Company and must be renewed
periodically. Under the Clean Air Act Amendments of 1990 (Amendments) new
permits will have to be obtained.
The Amendments establish a comprehensive and complex national program
to substantially reduce air pollution over the next decades. The
Amendments include a two-phase program to reduce acid rain effects by
significantly reducing emissions of SO2 and nitrogen oxides (NOx) from
electric power plants. A flue-gas desulfurization system (scrubbers) is
being installed at Conemaugh to reduce SO2 emissions to meet the 1995
Phase I requirements. The Company's share of the capital costs to
construct the scrubbers and make other related improvements at Conemaugh
are estimated to be $78 million. Keystone is not covered by the Phase I
SO2 and NOx limits of the Amendments. Capital expenditures in amounts
similar to those required for Conemaugh, however, may also be necessary
for Keystone to meet, by January 1, 2000, the Phase II SO2 and NOx limits.
The Company's service-area, coal-fired generating units at Eddystone
and Cromby are equipped with scrubbers and their emissions meet the SO2
limits of both Phase I and Phase II of the Amendments. The Company,
however, will be required to comply with the NOx emission limitations of
the Amendments by May 31, 1995 for these units, all of which are in an
ozone nonattainment area. The Company estimates that installing low-NOx
burners, which is one of the possible technologies and lowest in cost, on
all of its oil and gas sources would require a capital expenditure of $21
million. The cost of compliance could be less if the Company is not
required to make modifications to all of its units or implements a system
which permits credits or averaging among sources. If, however, further
technological improvements are required, the cost of compliance could be
substantially higher. As a result of its prior investments in scrubbers
for Eddystone and Cromby and its investment in nuclear generating
capacity, the Company believes that compliance with the Amendments will
have less impact on the Company's electric rates than on the rates of
other Pennsylvania utilities which are more dependent on coal-fired
generation.
Many other provisions of the Amendments will affect the Company's
business. The Amendments establish stringent new control measures for
areas which are designated as not meeting national ambient air quality
standards; establish limits on the purchase and operation of motor
vehicles and require increased use of alternative fuels; provide for
stringent controls on emissions of toxic air pollutants and the possible
future designation of some utility emissions as toxic; establish new
permit and monitoring requirements for sources of air emissions; and
provide for significantly increased enforcement power, and civil and
criminal penalties.
26
<PAGE>
<PAGE> 29
Solid and Hazardous Waste
The Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986
(collectively CERCLA) authorize the EPA to cause "potentially responsible
parties" (PRPs) to conduct (or for the EPA to conduct at the PRPs'
expense) remedial action at waste disposal sites that pose a hazard to
human health or the environment. Parties contributing hazardous substances
to a site or owning or operating a site typically are viewed as jointly
and severally liable for conducting or paying for remediation and for
reimbursing the government for related costs incurred. PRPs may agree to
allocate liability among themselves, or a court may perform that
allocation according to equitable factors deemed appropriate.
By notice issued in November 1986, the EPA notified over 800 entities,
including the Company, that they may be PRPs under CERCLA with respect to
releases of radioactive and/or toxic substances from the Maxey Flats
disposal site, a low-level radioactive waste disposal site near Moorehead,
Kentucky, where certain of the Company's wastes were deposited.
Approximately 90 PRPs, including the Company, formed a steering committee
and entered into an administrative consent order with the EPA to conduct a
remedial investigation and feasibility study (RI/FS), which was
substantially revised based on the EPA comments. In September 1991,
following public review and comments, the EPA issued a Record of Decision
in which it selected a natural stabilization remedy for the Maxey Flats
disposal site. The steering committee has preliminarily estimated that
implementing the EPA proposed remedy at the Maxey Flats site would cost
$60- $70 million in 1993 dollars. Negotiations are continuing between the
EPA and the steering committee to determine the role of the steering
committee in implementing the selected remedy and the share of any costs
which will be allocated to the PRPs represented by the steering committee.
On March 17, 1993, the private PRPs, together with several federal PRPs,
and the Commonwealth of Kentucky made offers to the EPA to perform and
fund a portion of the remedial activities at the site. In a letter dated
September 2, 1993, the EPA notified the federal and private PRPs and the
Commonwealth of Kentucky that their respective offers to perform and fund
a portion of the remedial activities at the site form the basis of further
negotiations for implementing the remedial plan and such negotiations have
commenced. The Company cannot predict what cost it may incur as part of
the cleanup of the site. The Company's share of the cost of the RI/FS
(estimated to be $4.5 million net of contributions by the Department of
Defense and the DOE) will be based on its percentage of waste deposited at
the site, which is presently estimated by the steering committee to be
1.07%.
By notice issued in December 1987, the EPA notified several entities,
including the Company, that they may be PRPs under CERCLA with respect to
wastes resulting from the treatment and disposal of transformers and/or
miscellaneous electrical equipment at a site located in Philadelphia,
Pennsylvania (the Metal Bank of America site), during the period 1970-72.
Several of the PRPs, including the Company, have formed a steering
committee to investigate the nature and extent of possible involvement in
this matter. On May 29, 1991, a Consent Order was issued by the EPA
pursuant to which the members of the steering committee agree to perform
the RI/FS as described in the work plan issued with the Consent Order. The
27
<PAGE>
<PAGE> 30
remedial investigation is currently proceeding at the site in accordance
with the work plan approved under the Consent Order. During the course of
the site investigation, it became necessary to perform additional sampling
and analytical work and to modify the scope of the work to address
concerns raised by the EPA and its contractors and to properly
characterize the site. Due to these changes, it is currently estimated
that the technical, administrative and legal costs necessary for
investigation of the site and preparation of the RI/FS may total between
$4 and $5 million and the schedule for the RI/FS will be extended. The
Company's share of such costs will be approximately 30%.
The EPA has notified the Company that it is a PRP for part of the
cleanup costs at a site (Berks Associates/Douglassville site) where wastes
generated by the Company may have been deposited by others and has
requested extensive information on the characteristics of the material
sent to the site and the processes which generated the material. In August
1991, the EPA filed suit in the United States District Court for the
Eastern District of Pennsylvania (Eastern District Court) against 36 named
PRPs, not including the Company, seeking a declaration that these PRPs are
jointly and severally liable for cleanup of the Berks
Associates/Douglassville site and for costs already expended by the EPA on
the site. Simultaneously, the EPA issued an Administrative Order against
the same named defendants, not including the Company, which requires the
PRPs named in the Administrative Order to commence cleanup of a portion of
the site. It is estimated that the cleanup of this portion of the site
will cost approximately $2 million. Although the Company was not named as
a respondent in the Administrative Order issued by the EPA, it joined a
group of the named respondents and several other PRPs who were not named
as respondents, and contributed money to the group to conduct the cleanup
activities required by the Administrative Order. On September 29, 1992,
the Company, along with 169 other parties, was served with a third-party
complaint joining these parties as additional defendants. Subsequently, an
additional 150 parties were joined as defendants. On June 30, 1993, the
EPA issued a further Administrative Order which directed certain
defendants to implement a remedial plan which calls for incineration of
large quantities of contaminated soil from part of the site at an
estimated cost of $40-60 million. The PRP group, including both named and
additional defendants, are negotiating with the EPA to consider an
alternative remedy for the site which could be implemented at
substantially less cost than the remedy selected by the EPA. The EPA has
deferred the effectiveness of its June 30 Administrative Order while
settlement negotiations are continuing. On October 27, 1993, the PDER
filed a motion to intervene as a plaintiff in the Eastern District Court
suit claiming investigative and remedial cost reimbursement and natural
resource damages. The motion is pending before the Eastern District Court.
The Company has been notified by groups of PRPs at two sites (the
Spectron site and the Metro Container site) that the Company has been
identified as having sent hazardous substances to these sites. The Company
has been requested by these PRPs to contribute to the costs of certain
removal activities undertaken by the PRPs pursuant to consent orders
issued by the EPA. The Company has contributed to the removal costs at one
site. The amount of the Company's contribution, if any, to the other site
has not yet been determined. The EPA has not yet determined if further
cleanup activities will be required at these two sites.
28
<PAGE>
<PAGE> 31
In April 1990, the Company received a notice from the NJDEPE which
alleges that the Company is potentially liable for certain cleanup costs
at the Gloucester Environmental Management Services, Inc. (GEMS) site
located in New Jersey because wastes generated by the Company are alleged
to have been deposited at the site by a third party. The Company has also
been added as a defendant in a suit commenced by the NJDEPE several years
ago, which now names several hundred defendants, and which relates to the
GEMS site. The Company has joined a pre-existing group of PRPs which is
dealing with the NJDEPE on these matters.
On October 16, 1989, the EPA and the NJDEPE commenced a civil action
in the New Jersey District Court against 26 defendants, not including the
Company, alleging the right to collect past and future response costs for
cleanup of the Helen Kramer landfill located in New Jersey. In October
1991, the direct defendants joined the Company and over 100 other parties
as third-party defendants. The third-party complaint alleges that the
Company generated materials containing hazardous substances that were
transported to and disposed at the landfill by a third party.
In July 1992, the Company received a notice from a group of PRPs
performing remediation at the Blosenski Landfill Superfund Site that the
group considers the Company to be a PRP. The PRP group requested the
Company to join the existing PRP group or face legal action by the group
to compel the Company to contribute to past and future clean-up costs. The
Company investigated its involvement with this site and has been unable to
identify a basis for concluding that the Company is liable for remediation
costs at this site. Consequently, the Company has notified the PRP group
that it does not, at this time, intend to join the Blosenski PRP group.
The Blosenski PRP group served the Company with a subpoena seeking certain
information from the Company concerning its involvement with this site.
The Company responded to some of the requests and has objected to others.
In November 1992, the Company received a subpoena from the
non-government parties (party participants) in a consolidated action
relating to the Bridgeport Rental and Oil Services Superfund (BROS) site
requesting information on various haulers. The party participants have
information which they believe connects the Company to the site. At the
invitation of the party participants, the Company is participating in a
"voluntary, informal, non-litigated settlement/mediation process." In
April 1993, the Company received a Request for Information from the EPA
regarding potential use of the BROS site. On May 27, 1993, the Company
filed its response with the EPA. The voluntary participants are presently
engaged in a mediation process with the governmental parties.
In March 1994, the Company received a notice from the EPA that it may
be a di minimus PRP with respect to hazardous substances deposited by a
third party at a site (Jack's Creek/Sitkin Smelting Facility) located in
Mifflin County, Pennsylvania. Currently, the EPA has identified over 590
entities that may be PRPs with respect to this site. The Company is
investigating its involvement with this site.
On March 3, 1989, the Company received a Notice of Violation from the
PDER for soil contamination at one of the Company's maintenance
facilities. The Company suspects that the contamination was caused by
leakage of transformer dielectric fluid. The PDER required the Company to
29
<PAGE>
<PAGE> 32
initiate sampling to determine the scope of the contamination. The Company
conducted sampling and ground water monitoring and submitted the results
to the PDER on November 18, 1991. The Company has identified the presence
of oil and polychlorinated byphenols (PCBs) at the site. On February 19,
1993, the Company submitted to the PDER a revised remedial clean-up
strategy. On March 9, 1993, the PDER accepted the Company's revised
remedial clean-up strategy. The Company is implementing the remedial
clean-up strategy accepted by the PDER, which is expected to cost
approximately $2 million over a period of 3 to 5 years.
In addition, an evaluation of all Company sites for potential
environmental clean-up liability is in progress, including approximately
20 sites where manufactured gas plant activities may have resulted in site
contamination. Past activities at several sites have resulted in actual
site contamination. The Company is presently engaged in performing
detailed evaluations at certain of these sites to define the nature and
extent of the contamination, to determine the necessity of remediation and
to identify possible remediation alternatives. The Company has also
responded to various governmental requests, principally those of the EPA
pursuant to CERCLA, for information with respect to the possible deposit
of Company waste materials at various disposal, processing and other
sites.
In addition, the Company is in the process of complying with the
Resource Conservation and Recovery Act (RCRA) which governs treatment,
storage and disposal of solid and hazardous wastes.
On February 22, 1993, the Company received a draft Corrective Action
Order from the EPA under RCRA. The draft order requires the Company to
investigate the extent of alleged releases of hazardous wastes and to
evaluate corrective measures, if necessary, for a site located along the
Delaware River in Chester, Pennsylvania, which had previously been leased
to Chem Clear, Inc. Chem Clear operated an industrial waste water
pretreatment facility on the site. On June 4, 1993, the Company executed a
final Corrective Action Order in which the Company agreed to investigate
the extent of alleged releases of hazardous wastes and to evaluate
corrective measures, if necessary. The Company estimates that compliance
with the Corrective Action Order will cost $2 million over a period of
five years. Until completion of the required investigation, the Company is
unable to predict the nature and cost of any potential corrective action.
Costs
The Company's budget for capital requirements for 1994 and its most
recent estimate of capital requirements for 1995-97 for compliance with
environmental requirements total $68 million. This estimate does not
include amounts that the Company may be required to spend for its share of
any cooling towers that may be required at Salem or for its share of
scrubbers or other systems at Keystone to comply with the Amendments. In
addition, the Company may be required to make significant additional
expenditures not presently determinable.
At December 31, 1993, the Company had accrued $17 million for various
investigation and remediation costs that can be reasonably estimated. The
Company cannot currently predict whether it will incur other significant
30
<PAGE>
<PAGE> 33
liabilities for additional remediation costs at sites presently identified
or additional sites which may be identified by the Company, environmental
agencies or others.
The Company will ultimately seek to recover through the ratemaking
process all capital costs and any increased operating costs, including
those associated with environmental compliance and remediation, although
such recovery is not assured.
Competition
The Company generally has the right through franchises to provide
electric or gas service to the public within its service areas. The
Company is required by federal and state law to purchase electricity
generated by qualifying facilities (such as cogenerators and small power
producers). Certain businesses within the Company's service territory also
generate all or a portion of their own electrical requirements.
The electric utility industry, in particular power generation to serve
the needs of large users such as municipal customers and for off-system
sales, has become increasingly competitive. Companies that are able to
provide energy at a lower cost are likely to benefit from this
competition. Competitors include cogenerators, independent power producers
and other utilities. Nonutility generation has resulted, and in the future
could result, in the loss of revenues from industrial customers. These
factors will continue to challenge the Company to maintain current revenue
levels.
The Energy Act is designed, among other things, to promote competition
among utility and non-utility generators by amending the 1935 Act to
exempt a new class of independent power producers (exempt wholesale
generators) which are not subject to regulation under the 1935 Act. The
Energy Act also amends the Federal Power Act to allow the FERC to order
wholesale wheeling to provide utilities and non-utility generators with
access to utility transmission facilities. The provisions direct the FERC
to set prices for wheeling to allow utilities to recover all legitimate
verifiable and economic costs for providing wheeling services, including
the cost of expanding their transmission facilities to accommodate
required transmission access. The costs are to be recovered from the
company whose electricity is being wheeled rather than from the utilities'
native-load retail customers. In addition, the Energy Act restricts the
FERC's ability to order wheeling if it would not be in the public interest
or would impair the ability of a utility to provide reliable power to its
existing customers. Although the FERC is prohibited under the Energy Act
from ordering retail wheeling, the prohibition does not extend to state
utility commissions. Retail wheeling would challenge the Company to assure
that it continues to be the provider of service to its large commercial
and industrial customers and that it positions itself to take advantage of
opportunities to expand its customer base by marketing its reliable power
sources.
The Company is currently involved in proceedings before the MdPSC and
the FERC concerning the continued purchase by COPCO of all of its power
from the Company. See "Rate Matters" for a discussion of the MdPSC and
the FERC proceedings.
31
<PAGE>
<PAGE> 34
In September 1993, the Board of Directors of the Company approved a
plan to reorganize the Company's operations to better enable it to meet
the challenges of a competitive environment. The Company's operations will
be divided into five strategic business units by January 1, 1995. The
business units will be Consumer Energy Services Group, Bulk Power
Enterprises Group, Power Generation Group, Nuclear Generation Group, and
Gas Services Group. The plan calls for each business unit to eventually
operate as an individual profit center, separate from the other business
units.
In October, in response to its perception of business risk created by
intensifying competition within the electric utility industry, the
Standard & Poor's (S&P) rating agency tightened the financial ratio
benchmarks it uses to rate electric utility company debt. This action has
affected a significant portion of the investor-owned electric utility
industry. Although the Company's current debt ratings have been affirmed
by S&P, the Company's outlook, along with 47 other electric utilities, has
been changed from "stable" to "negative." The Company and 21 other
electric utilities have had their business positions categorized as
"below average." S&P determined the Company's business position to be
"below average" because it is considered to be a high-cost producer of
electricity with a high dependency on its nuclear generation. Also, the
perceived outlook for the economy of the Company's service territory and
the Northeast in general contributed to this characterization.
Moody's Investors Services (Moody's) has also announced that the
changing electric utility business environment could, over the next three
to five years, lead to bond rating downgrades. Moody's also believes that
business risk in the electric utility industry is rising due to
deregulation and the resulting competition.
The Company's gas business experiences competition from suppliers of
other energy sources, primarily fuel oil and electricity. The Company's
interruptible gas rates provide "flexible" pricing which allows for
monthly rate changes to match the pricing of competing fuel sources,
provided that the rates remain within a PUC-approved range.
32
<PAGE>
<PAGE> 35
Executive Officers of the Registrant
<TABLE>
<CAPTION>
Age at Effective Date of Election
Name Dec. 31, 1993 Position to Present Position
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
J. F. Paquette, Jr...... 59 Chairman and Chief Executive Officer April 16, 1990
C. A. McNeill, Jr. ..... 54 President and Chief Operating Officer April 16, 1990
W. L. Bardeen........... 55 Senior Vice President and Group March 1, 1994
Executive - Consumer Energy
Services Group
J. W. Durham............ 56 Senior Vice President and General Counsel October 24, 1988
W. J. Kaschub........... 51 Senior Vice President-Human Resources June 10, 1991
G. S. King.............. 53 Senior Vice President-Corporate and October 1, 1992
Public Affairs
K. G. Lawrence.......... 46 Senior Vice President-Finance and Chief March 1, 1994
Financial Officer
J. M. Madara, Jr........ 50 Senior Vice President and Group March 1, 1994
Executive - Power Generation Group
D. M. Smith............. 60 Senior Vice President - Nuclear Generation March 1, 1994
Group and Chief Nuclear Officer
A. J. Weigand........... 55 Senior Vice President and Group March 1, 1994
Executive - Bulk Power Enterprises
G. S. Cucchi............ 44 Vice President - Planning and March 1, 1994
Performance
D. R. Helwig............ 42 Vice President-Limerick Generating July 20, 1992
Station
T. P. Hill, Jr.......... 45 Vice President and Controller January 1, 1991
K. C. Holland........... 41 Vice President - Information Systems March 21, 1994
R. B. Horne............. 59 Vice President - Chester County Division March 1, 1994
A. G. Mikalauskas....... 57 Vice President -Transmission and March 1, 1994
Distribution Services
G. C. Miller............ 49 Vice President - Philadelphia, North March 1, 1994
Division
G. R. Rainey............ 44 Vice President-Peach Bottom Atomic November 24, 1993
Power Station
M. T. Riley, Jr......... 56 Vice President - Philadelphia, South March 1, 1994
Division
M. W. Rimerman.......... 64 Vice President-Finance and Treasurer November 26, 1990
C. C. Rogala............ 47 Vice President - Delaware County March 1, 1994
Division
W. H. Smith, III........ 45 Vice President-Planning and Performance May 1, 1992
A. J. Solecki........... 53 Vice President-Support Services March 1, 1993
T. C. Stapleford........ 56 Vice President - Montgomery County March 1, 1994
Division
W. J. Williams.......... 52 Vice President- Bucks County Division March 1, 1994
L. S. Binder............ 56 Secretary July 1, 1978
</TABLE>
33
<PAGE>
<PAGE> 36
The present term of office of each of the above executive officers
extends to the first meeting of the Company's Board of Directors after the
next annual election of Directors (scheduled to be held April 13, 1994).
Prior to his election to his current position with the Company, Mr.
Paquette was Chairman, President and Chief Executive Officer of the
Company.
Prior to his election to his current position with the Company, Mr.
McNeill was Executive Vice President-Nuclear of the Company.
Prior to his election to his current poistion with the Company, Mr.
Bardeen was Senior Vice President - Finance and Chief Financial Officer.
Prior to joining the Company in February 1992, Mr. Bardeen was Vice
President-Finance and Controller for Bell Atlantic Corporation.
Prior to joining the Company in June 1991, Mr. Kaschub was Vice
President of Human Resources with GTE North Incorporated.
Prior to joining the Company in October 1992, Mrs. King served as
Commissioner of the United States Social Security Administration since
August 1989. From March 1988 to August 1989, Mrs. King was Executive Vice
President of Gogal & Associates, a Washington D.C. consulting firm.
Prior to his election to his current position with the Company, Mr.
Lawrence was Vice President-Gas Operations and Vice President-Commercial
Operations.
Prior to his election to his current position with the Company, Mr.
Madara was Vice President-Production, Assistant Manager-Mechanical
Engineering and General Manager-Nuclear Quality Assurance.
Prior to his election to his current position with the Company, Mr. D.
M. Smith was Senior Vice President-Nuclear and Vice President-Peach Bottom
Atomic Power Station.
Prior to his election to his current position with the Company, Mr.
Weigand was Vice President-Transmission and Distribution Systems and Vice
President-Engineering and Production.
Prior to joining the Company in March 1994, Mrs. Holland was Director
of Technology Services and Director of Business Systems and Operations at
SmithKline Beecham, Inc.
Prior to their election to the positions shown above, the following
executive officers held other positions with the Company since January 1,
1989: Mr. Cucchi was Director of System Planning and Performance, Manager
of System Planning and Performance and Supervising Engineer of System
Planning and Performance; Mr. Helwig was Vice President-Nuclear
Engineering and Services, Vice President-Nuclear Services, Assistant to
the Executive Vice President-Nuclear, and General Manager of Nuclear
Quality Assurance; Mr. Hill was Controller and Manager of Rates; Mr. Horne
was Division Manager - Chester County and General Manager - Chester
County; Mr. Mikalauskas was Vice President - Customer and Marketing
Services, Vice President-Commercial Operations and Vice President-Electric
34
<PAGE>
<PAGE> 37
Transmission and Distribution; Mr. Miller was Division Superintendent -
Transmisison and Distribution, Manager - Transmission and Distribution
Services, and General Manager - Philadelphia, North Division; Mr. Rainey
was Vice President-Nuclear Services, Plant Manager-Eddystone Generating
Station and Maintenance Superintendent-Peach Bottom; Mr. Riley was General
Manager - Philadelphia, South Division, Station Manager - Cromby Generating
Station, and Assistant Station Superintendent - Eddystone Generating
Station; Mr. Rimerman was Vice President-Finance and Accounting and Vice
President-Finance; Mr. Rogala was General Manager - Delaware
County Division and Manager - Customer Service Accounts; Mr. W. H. Smith,
III was Manager-Corporate Strategy and Performance, General Manager-Human
Resources, Director-Organization Change Task Force, Manager-Purchasing;
Mr. Solecki was Vice President-Information Systems and General Services;
Mr. Stapleford was General Manager - Montgomery County Division and
Manager - Purchasing; and Mr. Williams was Division Manager - Bucks
County, Manager Transmission, and Distribution Operations and Electric
Superintendent.
There are no family relationships among directors or executive
officers of the Company.
ITEM 2. PROPERTIES
The principal plants and properties of the Company are subject to the
lien of the Mortgage under which the Company's First and Refunding
Mortgage Bonds are issued.
The following table sets forth the Company's net electric generating
capacity by station at December 31, 1993:
35
<PAGE>
<PAGE> 38
<TABLE>
<CAPTION>
Net Generating Estimated
Capacity (1) Retirement
Station Location (Kilowatts) Year
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nuclear
Limerick.................................. Limerick Twp., PA............... 2,110,000 2024, 2029
Peach Bottom.............................. Peach Bottom Twp., PA........... 886,000(2) 2014
Salem..................................... Hancock's Bridge, NJ............ 942,000(2) 2016, 2020
Hydro
Conowingo................................. Harford Co., MD................. 470,000 2014
Pumped Storage
Muddy Run.................................. Lancaster Co., PA............... 880,000 2014
Fossil (Steam Turbines)
Cromby.................................... Phoenixville, PA................ 345,000 2004
Delaware.................................. Philadelphia, PA................ 250,000 (3)
Eddystone................................. Eddystone, PA................... 1,306,000 2009, 2010, 2011
Schuylkill................................ Philadelphia, PA................ 166,000 (3)
Conemaugh................................. New Florence, PA................ 352,000(2) 2005, 2006
Keystone.................................. Shelocta, PA.................... 357,000(2) 2002, 2003
Fossil (Gas Turbines)
Chester................................... Chester, PA..................... 39,000 (3)
Croydon................................... Bristol Twp., PA................ 369,000 (3)
Delaware.................................. Philadelphia, PA................ 54,000 (3)
Eddystone................................. Eddystone, PA................... 56,000 (3)
Falls..................................... Falls Twp., PA.................. 45,000 (3)
Moser..................................... Lower Pottsgrove Twp., PA....... 45,000 (3)
Richmond.................................. Philadelphia, PA................ 96,000 (3)
Schuylkill................................ Philadelphia, PA................ 28,000 (3)
Southwark................................. Philadelphia, PA................ 52,000 (3)
Salem..................................... Hancock's Bridge, NJ............ 16,000(2) 1996
Fossil (Internal Combustion)
Cromby.................................... Phoenixville, PA................ 2,750 (3)
Delaware.................................. Philadelphia, PA................ 2,750 (3)
Schuylkill................................ Philadelphia, PA................ 2,800 (3)
Keystone.................................. Shelocta, PA.................... 2,300(2) 2003
Conemaugh................................. New Florence, PA................ 2,300(2) 2006
---------
Total....................................................................... 8,876,900
=========
</TABLE>
----------
(1) Summer rating.
(2) Company portion.
(3) Retirement dates are under on-going review by the Company. Current
plans call for the continued operation of these plants beyond 1994.
36
<PAGE>
<PAGE> 39
The following table sets forth the Company's major transmission and
distribution lines in service at December 31, 1993:
<TABLE>
<CAPTION>
Voltage in Kilovolts (Kv) Conductor Miles
--------------------------------------------------------------------------
<S> <C>
Transmission:
500 Kv.................................................. 844
220 Kv ................................................. 1,583
132 Kv ................................................. 417
66 Kv.................................................. 441
33 Kv and below........................................ 38
Distribution:
220 Kv.................................................. 109
132 Kv.................................................. 55
66 Kv.................................................. 150
33 Kv and below........................................ 51,958
</TABLE>
At December 31, 1993, the Company's principal electric distribution
system included 12,294 pole-line miles of overhead lines and 19,595 cable
miles of underground cables.
The Company has undertaken a 10-year program to implement a 34 Kv
distribution system for a large portion of outlying suburban areas. These
areas are now primarily served by a combination of 4 Kv distribution
circuits, which are being phased out, and direct connections to 34 Kv
subtransmission lines, which are being converted to 34 Kv distribution
circuits. The new system is designed to improve the Company's ability to
meet the growing load requirements of suburban areas, improve system
reliability and reduce service interruptions.
The following table sets forth the Company's gas pipeline miles at
December 31, 1993:
Pipeline Miles
--------------
Transmission................................................ 35
Distribution................................................ 5,285
Service Piping.............................................. 4,448
-----
Total................................................... 9,768
=====
The Company has a liquefied natural gas facility located in West
Conshohocken, Pennsylvania which has a storage capacity of 1,200,000 mcf
and a sendout capacity of 200,000 mcf/day and a propane-air plant located
in Chester, Pennsylvania, with a tank storage capacity of 1,980,000
gallons and a peaking capability of 30,000 mcf/day. In addition, the
Company owns 19 natural gas city gate stations at various locations
throughout its gas service territory.
The Company owns an office building in downtown Philadelphia, in which
it maintains its headquarters, and also owns or leases elsewhere in its
37
<PAGE>
<PAGE> 40
service area a number of properties which are used for office, service and
other purposes. Information regarding rental and lease commitments is
incorporated herein by reference to note 14 of Notes to Consolidated
Financial Statements included in the Company's Annual Report to
Shareholders for the year 1993.
The Company maintains property insurance against loss or damage to its
principal plants and properties by fire or other perils, subject to
certain exceptions. Although it is impossible to determine the total
amount of the loss that may result from an occurrence at a nuclear
generating station, the Company maintains its $2.75 billion proportionate
share for each station. Under the terms of the various insurance
agreements, the Company could be assessed up to $35 million for property
losses incurred at any plant insured by the insurance companies (see
"ITEM 1. BUSINESS-Electric Operations"). The Company is self-insured to
the extent that any losses may exceed the amount of insurance maintained.
Any such losses, if not recovered through the ratemaking process, could
have a material adverse effect on the Company's financial condition.
ITEM 3. LEGAL PROCEEDINGS
On April 11, 1991, 33 former employees of the Company filed an amended
class action suit against the Company in the Eastern District Court on
behalf of approximately 141 persons who retired from the Company between
January and April 1990. The lawsuit, filed under the Employee Retirement
Income Security Act (ERISA), alleges that the Company fraudulently and/or
negligently misrepresented or concealed facts concerning the Company's
1990 Early Retirement Plan and thus induced the plaintiffs to retire or
not to defer retirement immediately before the initiation of the Early
Retirement Plan, thereby depriving the plaintiffs of substantial pension
and salary benefits. On June 6, 1991, the plaintiffs filed amended
complaints adding additional plaintiffs. The lawsuit names the Company,
the Company's Service Annuity Plan (SAP) and two Company officers as
defendants. The plaintiffs seek approximately $20 million in damages
representing, among other things, increased pension benefits and nine
months' salary pursuant to the terms of the Early Retirement Plan, as well
as punitive damages. On July 29, 1992, the Eastern District Court granted
the Company's motion for summary judgment and entered judgment in favor of
the Company. On May 26, 1993, the Appeals Court reversed the grant of
summary judgment and remanded the case to the Eastern District Court. On
October 18, 1993, the Company filed a petition for a writ of certiorari to
the United States Supreme Court, asking the Court to hear the case, which
petition was denied. The ultimate outcome of this matter is not expected
to have a material adverse effect on the Company's financial condition.
On May 2, 1991, 37 former employees of the Company filed an amended
class action suit against the Company, the SAP and three former Company
officers in the Eastern District Court on behalf of 147 former employees
who retired from the Company from January through June 1987. The lawsuit
was filed under ERISA and concerns the August 1, 1987 amendment to the
SAP. The plaintiffs claim that the Company concealed or misrepresented the
fact that the amendment to the SAP was planned to increase retirement
benefits and, as a consequence, they retired prior to the amendment to the
SAP and were deprived of significant retirement benefits. The complaint
does not specify any dollar amount of damages. On July 29, 1992, the
Eastern District Court granted the Company's motion for summary judgment
38
<PAGE>
<PAGE> 41
and entered judgment in favor of the Company. On May 26, 1993, the Appeals
Court reversed the grant of summary judgment and remanded the case to the
Eastern District Court. On October 18, 1993, the Company filed a petition
for a writ of certiorari to the United States Supreme Court, asking the
Court to hear the case, which petition was denied. The ultimate outcome of
this matter is not expected to have a material adverse effect on the
Company's financial condition.
On May 25, 1993, the Company received a letter from attorneys on
behalf of a shareholder demanding that the Company's Board of Directors
commence legal action against certain Company officers and directors with
respect to the Company's credit and collections practices. The basis of
the demand is the findings and conclusions contained in the Credit and
Collection section of the May 1991 PUC Management Audit Report prepared by
Ernst & Young. At its June 28, 1993 meeting, the Board of Directors
appointed a Special Committee of Directors to consider whether such legal
action is the best interests of the Company and its shareholders. On March
14, 1994, upon the recommendation of the report of the Special Committee,
the Board of Directors adopted a resolution refusing the shareholder demand
set forth in the May 25, 1993 demand letter, and authorizing and directing
officers of the Company to take all steps necessary to terminate the
derivative suit discussed below.
On July 26, 1993, attorneys on behalf of two shareholders filed a
shareholder derivative action in the Court of Common Pleas of Philadelphia
County against several of the Company's present and former officers
alleging mismanagement, waste of corporate assets and breach of fiduciary
duty in connection with the Company's credit and collections practices. A
similar suit by the same plaintiffs previously had been withdrawn while on
appeal after dismissal by the court for failure to first serve a demand on
the Company's Board of Directors. This action is also based on the
findings and conclusions contained in the Credit and Collection section of
the May 1991 PUC Management Audit Report prepared by Ernst & Young. The
plaintiffs seek, among other things, an unspecified amount of damages and
the awarding to the plaintiffs of the costs and disbursements of the
action, including attorneys' fees. On September 30, 1993, the Company
filed preliminary objections asking that the action be dismissed on the
grounds that it is premature. On December 6, 1993, the court denied the
Company's preliminary objections. Any monetary damages which may be
recovered, net of expenses, would be paid to the Company because the
lawsuit is brought derivatively by shareholders on behalf of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
39
<PAGE>
<PAGE> 42
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed on the New York and Philadelphia
Stock Exchanges. At January 31, 1994, there were 219,644 owners of record
of the Company's common stock. The information with respect to the prices
of and dividends on the Company's common stock for each quarterly period
during 1992 and 1993 is incorporated herein by reference to "Operating
Statistics" in the Company's Annual Report to Shareholders for the year
1993.
The book value of the Company's common stock at December 31, 1993 was
$19.25 per share.
Dividends may be declared on common stock out of funds legally
available for dividends whenever full dividends on all series of preferred
stock outstanding at the time have been paid or declared and set apart for
payment for all past quarter-yearly dividend periods. No dividends may be
declared on common stock, however, at any time when the Company has failed
to satisfy the sinking fund obligations with respect to certain series of
the Company's preferred stock. Future dividends on common stock will
depend upon earnings, the Company's financial condition and other factors,
including the availability of cash.
The Company's Articles prohibit payment of any dividend on, or other
distribution to the holders of, common stock if, after giving effect
thereto, the capital of the Company represented by its common stock
together with its Other Paid-In Capital and Retained Earnings is, in the
aggregate, less than the involuntary liquidating value of its then
outstanding preferred stock. At December 31, 1993, such capital ($4.26
billion) amounted to about 7 times the liquidating value of the
outstanding preferred stock ($609 million).
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for each of the last five years for the
Company and its subsidiaries is incorporated herein by reference to
"Financial Statistics" and "Operating Statistics" in the Company's
Annual Report to Shareholders for the year 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information with respect to this caption is incorporated herein by
reference to "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report to Shareholders
for the year 1993.
40
<PAGE>
<PAGE> 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information with respect to this caption is incorporated herein by
reference to "Consolidated Financial Statements" and "Financial
Statistics" in the Company's Annual Report to Shareholders for the year
1993.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
41
<PAGE>
<PAGE> 44
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors.
The information required for Directors is included in the Proxy
Statement of the Company in connection with its 1994 Annual Meeting of
Shareholders to be held April 13, 1994, under the heading "Proposal 1.
Election of Directors" and is incorporated herein by reference.
(b) Identification of Executive Officers.
The information required for Executive Officers is set forth in "ITEM
1. BUSINESS-Executive Officers of the Registrant" of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information with respect to this caption is included in the Proxy
Statement of the Company in connection with its 1994 Annual Meeting of
Shareholders to be held April 13, 1994, under the heading "Proposal 1.
Election of Directors" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information with respect to this caption is included in the Proxy
Statement of the Company in connection with its 1994 Annual Meeting of
Shareholders to be held April 13, 1994, under the heading "Proposal 1.
Election of Directors" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to this caption is included in the Proxy
Statement of the Company in connection with its 1994 Annual Meeting of
Shareholders to be held April 13, 1994, under the heading "Proposal 1.
Election of Directors" and is incorporated herein by reference.
42
<PAGE>
<PAGE> 45
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements and Financial Statement Schedules
<TABLE>
<CAPTION>
Reference (Page)
--------------------------------
Form 10-K Annual Report
Index Annual Report to Shareholders
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Data incorporated by reference from the Annual Report to
Shareholders for the year 1993:
Report of Independent Accountants....................... - 18
Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991...................... - 19
Consolidated Balance Sheets as of December 31, 1993 and
1992.................................................. - 20
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991................ - 22
Consolidated Statements of Changes in Common
Shareholders' Equity and Preferred Stock for the years
ended December 31, 1993, 1992 and 1991................ - 23
Notes to Consolidated Financial Statements.............. - 24
Data submitted herewith:
Report of Independent Accountants....................... 31 -
Schedule V - Utility Plant for the years ended
December 31, 1993, 1992 and 1991........ 32 -
Schedule VI - Accumulated Depreciation of Utility
Plant for the years ended December 31,
1993, 1992 and 1991..................... 35 -
Schedule VIII - Valuation and Qualifying Accounts for
the years ended December 31, 1993, 1992
and 1991................................ 38 -
</TABLE>
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
consolidated financial statements and notes thereto.
With the exception of the consolidated financial statements and the
independent accountants' report listed in the above index and the
information referred to in Items 1, 2, 5, 6, 7 and 8, all of which is
included in the Company's Annual Report to Shareholders for the year 1993
and incorporated by reference into this Form 10-K Annual Report, the
Annual Report to Shareholders for the year 1993 is not to be deemed
"filed" as part of this Form 10-K.
43
<PAGE>
<PAGE> 46
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
PECO Energy Company:
Our report on the consolidated financial statements of PECO Energy
Company has been incorporated by reference in this Form 10-K from page 18
of the 1993 Annual Report to Shareholders of PECO Energy Company. In
connection with our audits of such financial statements, we have also
audited the related financial statement schedules listed in the index in
Item 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required
to be included therein.
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1994
44
<PAGE>
<PAGE> 47
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE V-UTILITY PLANT
(Thousands of Dollars)
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- ------------------------------------------------------------------------------------------------------------------------------
Balance at Balance at
Beginning of Additions Other End of
Classification Period at Cost Retirements Changes Period
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UTILITY PLANT IN SERVICE AND HELD FOR FUTURE USE
ELECTRIC
Plant in Service
Intangible......................................... $ 30,982
Production......................................... 9,711,722
Transmission....................................... 760,348
Distribution....................................... 2,498,925
General............................................ 91,812
-------------------------------------------------------------------
TOTAL ELECTRIC PLANT IN SERVICE...................... 13,093,789
-------------------------------------------------------------------
Plant Held for Future Use............................ 8,299
-------------------------------------------------------------------
TOTAL ELECTRIC UTILITY PLANT........................... 13,102,088
-------------------------------------------------------------------
GAS
Plant in Service
Intangible......................................... 50
Production......................................... 12,875
Storage............................................ 16,294
Distribution....................................... 808,624
General............................................ 5,360
-------------------------------------------------------------------
TOTAL GAS PLANT IN SERVICE........................... 843,203
-------------------------------------------------------------------
Plant Held for Future Use ........................... 2
-------------------------------------------------------------------
TOTAL GAS UTILITY PLANT................................ 843,205
-------------------------------------------------------------------
COMMON
Plant in Service
Intangible......................................... 20,890
Land and Land Rights............................... 4,345
Structures and Improvements........................ 126,643
Office Furniture and Equipment..................... 20,707
Transportation .................................... 15,305
Tools and Miscellaneous Equipment.................. 15,469
-------------------------------------------------------------------
TOTAL COMMON PLANT IN SERVICE........................ 203,359
-------------------------------------------------------------------
Plant Held for Future Use............................ 388
-------------------------------------------------------------------
TOTAL COMMON UTILITY PLANT............................. 203,747
-------------------------------------------------------------------
TOTAL UTILITY PLANT IN SERVICE AND HELD FOR FUTURE USE... 14,149,040
-------------------------------------------------------------------
CONSTRUCTION WORK IN PROGRESS
Electric............................................. 318,641
Gas.................................................. 13,531
Common............................................... 49,075
-------------------------------------------------------------------
TOTAL CONSTRUCTION WORK IN PROGRESS ..................... 381,247
-------------------------------------------------------------------
NUCLEAR FUEL (NET OF AMORTIZATION)....................... 179,529
-------------------------------------------------------------------
TOTAL UTILITY PLANT IN SERVICE, HELD FOR FUTURE USE,
CONSTRUCTION WORK IN PROGRESS AND NUCLEAR FUEL......... 14,709,816
-------------------------------------------------------------------
CAPITALIZED LEASES
Nuclear Fuel......................................... 193,674
Electric Plant....................................... 1,028
-------------------------------------------------------------------
TOTAL LEASED PLANT....................................... 194,702
-------------------------------------------------------------------
TOTAL.................................................... $14,488,553 $507,653 $31,895 $(59,793) $14,904,518
===================================================================
<FN>
- ----------
(1) There were no project additions in excess of 2% of total assets.
Note: The detailed information required by Columns B, C, D and E is omitted since neither the total additions nor the total
deductions amount to more than 10% of the closing balance of total utility plant.
</TABLE>
45
<PAGE>
<PAGE> 48
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE V- UTILITY PLANT
(Thousands of Dollars)
FOR THE YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- --------------------------------------------------------------------------------------------------------------------------------
Balance at Balance at
Beginning of Additions Other End of
Classification Period at Cost Retirements Changes Period
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UTILITY PLANT IN SERVICE AND HELD FOR FUTURE USE
ELECTRIC
Plant in Service
Intangible......................................... $ 3,566
Production......................................... 9,572,437
Transmission....................................... 755,289
Distribution....................................... 2,381,028
General............................................ 77,064
--------------------------------------------------------------------
TOTAL ELECTRIC PLANT IN SERVICE...................... 12,789,384
--------------------------------------------------------------------
Plant Held for Future Use............................ 8,005
--------------------------------------------------------------------
TOTAL ELECTRIC UTILITY PLANT........................... 12,797,389
--------------------------------------------------------------------
GAS
Plant in Service
Intangible.......................................... 50
Production.......................................... 6,424
Storage............................................. 16,340
Distribution........................................ 754,070
General............................................. 4,822
--------------------------------------------------------------------
TOTAL GAS PLANT IN SERVICE........................... 781,706
--------------------------------------------------------------------
Plant Held for Future Use ........................... 2
--------------------------------------------------------------------
TOTAL GAS UTILITY PLANT................................ 781,708
--------------------------------------------------------------------
COMMON
Plant in Service
Intangible......................................... 677
Land and Land Rights............................... 4,565
Structures and Improvements........................ 117,262
Office Furniture and Equipment..................... 18,003
Transportation Equipment........................... 6,328
Tools and Miscellaneous Equipment.................. 14,838
--------------------------------------------------------------------
TOTAL COMMON UTILITY PLANT IN SERVICE................ 161,673
--------------------------------------------------------------------
Plant Held for Future Use............................ 388
--------------------------------------------------------------------
TOTAL COMMON UTILITY PLANT............................. 162,061
--------------------------------------------------------------------
TOTAL UTILITY PLANT IN SERVICE AND HELD FOR FUTURE USE... 13,741,158
--------------------------------------------------------------------
CONSTRUCTION WORK IN PROGRESS
Electric........................................... 295,139
Gas................................................ 11,813
Common............................................. 41,840
--------------------------------------------------------------------
TOTAL CONSTRUCTION WORK IN PROGRESS ..................... 348,792
--------------------------------------------------------------------
NUCLEAR FUEL (NET OF AMORTIZATION)....................... 188,609
--------------------------------------------------------------------
TOTAL UTILITY PLANT IN SERVICE, HELD FOR FUTURE USE, ....
CONSTRUCTION WORK IN PROGRESS AND NUCLEAR FUEL.......... 14,278,559
--------------------------------------------------------------------
CAPITALIZED LEASES
Nuclear Fuel....................................... 208,761
Electric Plant..................................... 1,233
--------------------------------------------------------------------
TOTAL LEASED PLANT....................................... 209,994
--------------------------------------------------------------------
TOTAL.................................................... $14,089,350 $514,200(1) $60,095 $(54,902) $14,488,553
====================================================================
<FN>
- ----------
(1) There were no project additions in excess of 2% of total assets.
Note: The detailed information required by Columns B, C, D and E is omitted since neither the total additions nor the total
deductions amount to more than 10% of the closing balance of total utility plant.
</TABLE>
46
<PAGE>
<PAGE> 49
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE V-UTILITY PLANT
(Thousands of Dollars)
FOR THE YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- -------------------------------------------------------------------------------------------------------------------------------
Balance at Balance at
Beginning of Additions Other End of
Classification Period at Cost Retirements Changes Period
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UTILITY PLANT IN SERVICE AND HELD FOR FUTURE USE
ELECTRIC
Plant in Service
Intangible......................................... $ 3,566
Production......................................... 9,414,766
Transmission....................................... 710,398
Distribution....................................... 2,249,816
General............................................ 66,153
-------------------------------------------------------------------
TOTAL ELECTRIC PLANT IN SERVICE...................... 12,444,699
-------------------------------------------------------------------
Plant Held for Future Use............................ 6,675
-------------------------------------------------------------------
TOTAL ELECTRIC UTILITY PLANT........................... 12,451,374
-------------------------------------------------------------------
GAS
Plant in Service
Intangible......................................... 50
Production......................................... 6,426
Storage............................................ 16,170
Distribution....................................... 692,150
General............................................ 2,495
-------------------------------------------------------------------
TOTAL GAS PLANT IN SERVICE........................... 717,291
-------------------------------------------------------------------
Plant Held for Future Use ........................... 2
-------------------------------------------------------------------
TOTAL GAS UTILITY PLANT................................ 717,293
-------------------------------------------------------------------
COMMON
Plant in Service
Intangible......................................... 677
Land and Land Rights............................... 4,565
Structures and Improvements........................ 112,631
Office Furniture and Equipment..................... 20,179
Transportation Equipment........................... 5,783
Tools and Miscellaneous Equipment.................. 14,612
-------------------------------------------------------------------
TOTAL COMMON UTILITY PLANT IN SERVICE................ 158,447
-------------------------------------------------------------------
Plant Held for Future Use............................ 388
-------------------------------------------------------------------
TOTAL COMMON UTILITY PLANT............................. 158,835
-------------------------------------------------------------------
TOTAL UTILITY PLANT IN SERVICE AND HELD FOR FUTURE USE... 13,327,502
-------------------------------------------------------------------
CONSTRUCTION WORK IN PROGRESS
Electric............................................. 323,398
Gas.................................................. 8,431
Common............................................... 16,704
-------------------------------------------------------------------
TOTAL CONSTRUCTION WORK IN PROGRESS ..................... 348,533
-------------------------------------------------------------------
NUCLEAR FUEL (NET OF AMORTIZATION)....................... 189,566
-------------------------------------------------------------------
TOTAL UTILITY PLANT IN SERVICE, HELD FOR FUTURE USE,
CONSTRUCTION WORK IN PROGRESS AND NUCLEAR FUEL......... 13,865,601
-------------------------------------------------------------------
CAPITALIZED LEASES
Nuclear Fuel......................................... 222,346
Electric Plant....................................... 1,403
-------------------------------------------------------------------
TOTAL LEASED PLANT....................................... 223,749
-------------------------------------------------------------------
TOTAL.................................................... $13,784,066 $420,223 (1) $53,671 $(61,268) $14,089,350
===================================================================
<FN>
- ----------
(1) There were no project additions in excess of 2% of total assets.
Note: The detailed information required by Columns B, C, D and E is omitted since neither the total additions nor the total
deductions amount to more than 10% of the closing balance of total utility plant.
</TABLE>
47
<PAGE>
<PAGE> 50
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE VI-ACCUMULATED DEPRECIATION OF UTILITY PLANT
(Thousands of Dollars)
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- --------------------------------------------------------------------------------------------------------------------------------
Balance Changes Balance
Beginning Add End
Description of Year Depreciation Retirements (Deduct) (1) of Year
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Production.................................. $2,328,260 $313,003 $15,112 $(11,925) $2,614,226
Transmission................................ 268,487 13,336 1,624 116 280,315
Distribution................................ 713,084 56,507 10,062 (9,702) 749,827
General..................................... 23,355 3,446 520 (773) 25,508
-------------------------------------------------------------------------
Total..................................... 3,333,186 386,292 27,318 (22,284) 3,669,876
=========================================================================
GAS
Production.................................. 2,406 473 0 0 2,879
Distribution................................ 174,556 22,248 2,979 (1,836) 191,989
Storage .................................... 12,893 526 44 (1) 13,374
General..................................... 1,122 136 8 0 1,250
-------------------------------------------------------------------------
Total................................... 190,977 23,383 3,031 (1,837) 209,492
-------------------------------------------------------------------------
COMMON.......................................... 63,154 6,680 1,551 (846) 67,437
-------------------------------------------------------------------------
Total................................... $3,587,317 416,355 $31,900 $(24,967) $3,946,805
=========================================================================
</TABLE>
Depreciation charged to transportation ..................... (851)
Amortization of anti-trust.................................. (16)
Amortization of Conowingo Project relicensing costs......... 100
Limerick Unit No. 1 disallowance............................ (10,319)
Limerick Unit No. 2 disallowance............................ (4,424)
Amortization of Limerick Unit No. 1 declaratory
order..................................................... 14,750
Amortization of Limerick 50% common facilities
deferred depreciation and carrying charges................ 7,897
Amortization of nuclear design basis ....................... 1,460
--------
Depreciation charged to operating expenses (2)..............$424,952
========
----------
(1) Other Changes
Limerick disallowance............................ $(14,743)
Removal cost net of salvage...................... (15,257)
Amortization of Conowingo Project
relicensing costs............................. 100
Interest on decommissioning funds................ 5,708
Miscellaneous.................................... (775)
--------
Total Other Changes ......................... $(24,967)
========
(2) Includes the provision for decommissioning nuclear plants of $20,255.
48
<PAGE>
<PAGE> 51
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE VI-ACCUMULATED DEPRECIATION OF UTILITY PLANT
(Thousands of Dollars)
FOR THE YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- --------------------------------------------------------------------------------------------------------------------------------
Balance Changes Balance
Beginning Add End
Description of Year Depreciation Retirements (Deduct) (1) of Year
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Production.................................. $2,065,990 $306,319 $29,512 $(14,537) $2,328,260
Transmission................................ 262,411 13,072 6,655 (341) 268,487
Distribution................................ 677,910 55,685 12,245 (8,266) 713,084
General..................................... 22,086 3,209 1,875 (65) 23,355
-------------------------------------------------------------------------
Total..................................... 3,028,397 378,285 50,287 (23,209) 3,333,186
=========================================================================
GAS
Production.................................. 2,168 280 9 (33) 2,406
Distribution................................ 157,566 21,503 2,791 (1,722) 174,556
Storage..................................... 12,449 530 77 (9) 12,893
General..................................... 1,034 108 20 - 1,122
-------------------------------------------------------------------------
Total................................... 173,217 22,421 2,897 (1,764) 190,977
-------------------------------------------------------------------------
COMMON.......................................... 65,574 4,684 6,910 (194) 63,154
-------------------------------------------------------------------------
Total................................... $3,267,188 405,390 $60,094 $(25,167) $3,587,317
=========================================================================
</TABLE>
Depreciation charged to transportation ..................... (452)
Amortization of anti-trust.................................. (19)
Amortization of Conowingo Project relicensing costs......... 100
Limerick Unit No. 1 disallowance............................ (10,319)
Limerick Unit No. 2 disallowance............................ (4,424)
Amortization of Limerick Unit No. 1 declaratory order....... 14,750
Amortization of Limerick 50% common facilities
deferred depreciation and carrying charges................ 7,897
Amortization of nuclear design basis........................ 856
--------
Depreciation charged to operating expenses (2)..............$413,779
========
----------
(1) Other Changes
Limerick disallowance................................. $(14,743)
Removal cost net of salvage........................... (17,456)
Amortization of Conowingo Project relicensing costs... 100
Interest on decommissioning funds..................... 6,932
--------
Total Other Changes .............................. $(25,167)
========
(2) Includes the provision for decommissioning nuclear plants of $20,255.
49
<PAGE>
<PAGE> 52
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE VI-ACCUMULATED DEPRECIATION OF UTILITY PLANT
(Thousands of Dollars)
FOR THE YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- -------------------------------------------------------------------------------------------------------------------------------
Other
Balance Changes Balance
Beginning of Add End of
Description Year Depreciation Retirements (Deduct) (1) Year
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Production.................................. $1,809,514 $300,434 $29,574 $(14,384) $2,065,990
Transmission................................ 253,410 12,630 3,201 (428) 262,411
Distribution................................ 648,075 53,153 16,352 (6,966) 677,910
General..................................... 20,494 1,807 139 (76) 22,086
-------------------------------------------------------------------------
Total..................................... 2,731,493 368,024 49,266 (21,854) 3,028,397
-------------------------------------------------------------------------
GAS
Production.................................. 1,893 275 - - 2,168
Distribution................................ 144,380 19,585 4,044 (2,355) 157,566
Storage Plant............................... 11,956 519 31 5 12,449
General..................................... 959 75 - - 1,034
-------------------------------------------------------------------------
Total................................... 159,188 20,454 4,075 (2,350) 173,217
-------------------------------------------------------------------------
COMMON.......................................... 60,739 4,738 327 424 65,574
-------------------------------------------------------------------------
Total................................... $2,951,420 393,216 $53,668 $(23,780) $3,267,188
========================================================================
</TABLE>
Depreciation charged to transportation ..................... (632)
Amortization of anti-trust.................................. (34)
Amortization of Conowingo Project relicensing costs......... 100
Limerick Unit No. 1 disallowance............................ (10,319)
Limerick Unit No. 2 disallowance............................ (4,424)
Amortization of Limerick Unit No. 1 declaratory order....... 14,750
Amortization of Limerick 50% common facilities'
deferred depreciation and carrying charges................ 7,897
Other....................................................... 18
--------
Depreciation charged to operating expenses (2)..............$400,572
========
----------
(1) Other Changes:
Limerick disallowances..................................$(14,743)
Removal cost, net of salvage............................ (14,933)
Amortization of Conowingo Project relicensing costs..... 100
Interest on decommissioning funds....................... 5,796
--------
Total Other Changes ................................$(23,780)
========
(2) Includes the provision for decommissioning nuclear plants of $20,027.
50
<PAGE>
<PAGE> 53
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C-Additions Column D Column E
- ---------------------------------------------------------------------------------------------------------------------
Charged to
Balance at Charged to Other Balance at
Beginning of Costs and Accounts Deductions End of
Description Period Expenses -Describe -Describe (1) Period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1993
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS $17,916 $40,758 $ -- $43,588 $15,086
------------------------------------------------------------------------
TOTAL................. $17,916 $40,758 $ -- $43,588 $15,086
========================================================================
FOR THE YEAR ENDED DECEMBER 31, 1992
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS $30,028 $42,195 $ -- $54,307 $17,916
------------------------------------------------------------------------
TOTAL............................. $30,028 $42,195 $ -- $54,307 $17,916
========================================================================
FOR THE YEAR ENDED DECEMBER 31, 1991
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS $30,000 $50,036 $ -- $50,008 $30,028
------------------------------------------------------------------------
TOTAL............................. $30,000 $50,036 $ -- $50,008 $30,028
========================================================================
<FN>
----------
(1) Write-off of individual accounts receivable.
</TABLE>
51
<PAGE>
<PAGE> 54
Exhibits
Certain of the following exhibits have been filed with the Securities
and Exchange Commission (Commission) pursuant to the requirements of the
Acts administered by the Commission. Such exhibits are identified by the
references following the listing of each such exhibit and are incorporated
herein by reference under Rule 24 of the Commission's Rules of Practice.
Certain other instruments which would otherwise be required to be listed
below have not been so listed because such instruments do not authorize
securities in an amount which exceeds 10% of the total assets of the
Company and its subsidiaries on a consolidated basis and the Company agrees
to furnish a copy of any such instrument to the Commission upon request.
Exhibit No. Description
- --------------------------
3-1 Amended and Restated Articles of Incorporation of PECO Energy
Company.
3-2 Bylaws of the Company, adopted February 26, 1990 and amended
January 24, 1994.
4-1 First and Refunding Mortgage dated May 1, 1923 between The
Counties Gas and Electric Company (predecessor to the Company)
and Fidelity Trust Company, Trustee (First Fidelity Bank,
National Association, successor), (Registration No. 2-2881,
Exhibit B-1).
4-2 Supplemental Indentures to the Company's First and Refunding
Mortgage:
52
<PAGE>
<PAGE> 55
Dated as of File Reference Exhibit No.
- ------------------------------------------------------------------------------
September 1, 1926 2-2881 B-1(a)
May 1, 1927 2-2881 B-1(b)
May 1, 1927 2-2881 B-1(c)
November 1, 1927 2-2881 B-1(d)
January 31, 1931 2-2881 B-1(e)
February 1, 1931 2-2881 B-1(f)
March 1, 1937 2-2881 B-1(g)
December 1, 1941 2-4863 B-1(h)
November 1, 1944 2-5472 B-1(i)
December 1, 1946 2-6821 7-1(j)
February 1, 1948 2-7381 7-1(k)
January 1, 1952 2-9329 4(b)-13
May 1, 1953 2-10201 4(b)-14
December 1, 1953 2-10568 4(b)-15
April 1, 1955 2-11536 2(b)-16
September 1, 1957 2-13562 2(b)-17
May 1, 1958 2-14020 2(b)-18
December 1, 1958 2-14528 2(b)-19
October 1, 1959 2-15609 2(b)-20
May 1, 1964 2-25628 4(b)-21
October 15, 1966 2-25628 4(b)-22
June 1, 1967 2-26430 2(b)-23
October 1, 1967 2-28242 2(b)-23
March 1, 1968 2-34051 2(b)-24
September 10, 1968 2-34051 2(b)-25
August 15, 1969 2-35939 2(b)-26
February 1, 1970 2-37020 2(b)-27
May 1, 1970 2-38849 2(b)-28
December 15, 1970 2-41081 2(b)-29
August 1, 1971 2-42402 2(b)-30
December 15, 1971 2-44195 2(b)-31
June 15, 1972 2-46625 2(b)-32
January 15, 1973 2-49842 2(b)-33
January 15, 1974 2-49849 2(b)-34
October 15, 1974 2-51887 2(b)-35
April 15, 1975 2-54182 2(b)-36
August 1, 1975 2-55423 2(b)-37
March 1, 1976 2-56749 2(b)-38
August 1, 1976 2-58198 2(b)-39
February 1, 1977 2-58198 2(b)-40
March 15, 1977 2-59177 2(b)-41
July 15, 1977 2-60743 2(b)-42
March 15, 1978 2-65604 2(b)-43
October 15, 1979 2-69086 (b)(1)-49
October 15, 1980 2-72802 4-45
March 1, 1981 2-72802 4-46
March 1, 1981 2-72802 4-47
July 1, 1981 2-76238 4-48
53
<PAGE>
<PAGE> 56
Dated as of File Reference Exhibit No.
- -----------------------------------------------------------------------------
September 15, 1981 2-76238 4-49
April 1, 1982 2-79269 4-50
October 1, 1982 2-83875 4-51
June 15, 1983 1983 Form 10-K 4-2(a)
November 15, 1984 1984 Form 10-K 4-2(a)
December 1, 1984 1984 Form 10-K 4-2(b)
May 15, 1985 1985 Form 10-K 4-2(a)
October 1, 1985 1985 Form 10-K 4-2(b)
November 15, 1985 1985 Form 10-K 4-2(c)
November 15, 1985 1985 Form 10-K 4-2(d)
June 1, 1986 1986 Form 10-K 4-2(a)
November 1, 1986 1986 Form 10-K 4-2(b)
November 1, 1986 1986 Form 10-K 4-2(c)
April 1, 1987 33-14613 4(c)-62
July 15, 1987 Form 8-K dated July 21, 1987 4(c)-63
July 15, 1987 Form 8-K dated July 21, 1987 4(c)-64
August 1, 1987 33-17438 4(c)-65
October 15, 1987 Form 8-K dated October 7, 1987 4(c)-66
October 15, 1987 Form 8-K dated October 7, 1987 4(c)-67
April 15, 1988 Form 8-K dated April 11, 1988 4(e)-68
April 15, 1988 Form 8-K dated April 11, 1988 4(e)-69
June 15, 1989 33-31289 4(e)-70
October 1, 1989 Form 8-K dated October 6, 1989 4(e)-71
October 1, 1989 Form 8-K dated October 6, 1989 4(e)-72
October 1, 1989 Form 8-K dated October 18, 1989 4(e)-73
October 15, 1990 1990 Form 10-K 4(e)-74
October 15, 1990 1990 Form 10-K 4(e)-75
April 1, 1991 1991 Form 10-K 4(e)-76
December 1, 1991 1991 Form 10-K 4(e)-77
January 15, 1992 Form 8-K dated January 27, 1992 4(e)-78
April 1, 1992 March 31, 1992 Form 10-Q 4(e)-79
April 1, 1992 March 31, 1992 Form 10-Q 4(e)-80
June 1, 1992 June 30, 1992 Form 10-Q 4(e)-81
June 1, 1992 June 30, 1992 Form 10-Q 4(e)-82
July 15, 1992 June 30, 1992 Form 10-Q 4(e)-83
September 1, 1992 1992 Form 10-K 4(e)-84
September 1, 1992 1992 Form 10-K 4(e)-85
March 1, 1993 1992 Form 10-K 4(e)-86
March 1, 1993 1992 Form 10-K 4(e)-87
May 1, 1993 March 31, 1993 Form 10-Q 4(e)-88
May 1, 1993 March 31, 1993 Form 10-Q 4(e)-89
May 1, 1993 March 31, 1993 Form 10-Q 4(e)-90
August 15, 1993 Form 8-A dated August 19, 1993 4(e)-91
August 15, 1993 Form 8-A dated August 19, 1993 4(e)-92
August 15, 1993 Form 8-A dated August 19, 1993 4(e)-93
November 1, 1993 Form 8-A dated October 27, 1993 4(e)-94
November 1, 1993 Form 8-A dated October 27, 1993 4(e)-95
54
<PAGE>
<PAGE> 57
4-3 Deposit Agreement with respect to $7.96 Cumulative Preferred
Stock (Form 8-K dated October 20, 1992, Exhibit 4-5).
4-4 PECO Energy Company Dividend Reinvestment and Stock Purchase
Plan, as amended January 28, 1994 (Post-Effective Amendment
No. 1 to Registration No. 33-43523, Exhibit 28).
10-1 Pennsylvania-New Jersey-Maryland Interconnection Agreement
dated September 26, 1956 (Registration No. 2-13340, Exhibit
13-40) and agreements supplemental thereto:
Dated as of File Reference Exhibit No.
-----------------------------------------------------------------------------
March 1, 1965 2-38342 5-1(a)
January 1, 1971 2-40368 5-1(b)
June 1, 1974 2-51887 5-1(c)
September 1, 1977 1989 Form 10-K 10-1(a)
October 1, 1980 1989 Form 10-K 10-1(b)
June 1, 1981 1989 Form 10-K 10-1(c)
10-2 Agreement, dated November 24, 1971, between Atlantic City
Electric Company, Delmarva Power & Light Company, Public
Service Electric and Gas Company and the Company for ownership
of Salem Nuclear Generating Station (1988 Form 10-K, Exhibit
10-3); supplemental agreement dated September 1, 1975; and
supplemental agreement dated January 26, 1977 (1991 Form 10-K,
Exhibit 10-3).
10-3 Agreement, dated November 24, 1971, between Atlantic City
Electric Company, Delmarva Power & Light Company, Public
Service Electric and Gas Company and the Company for ownership
of Peach Bottom Atomic Power Station; supplemental agreement
dated September 1, 1975; and supplemental agreement dated
January 26, 1977 (1988 Form 10-K, Exhibit 10-4).
10-4 Deferred Compensation and Supplemental Pension Benefit Plan
(1981 Form 10-K, Exhibit 10-16).*
10-5 Philadelphia Electric Company Stock Price Appreciation Plan,
effective June 1, 1988 (1988 Form 10-K, Exhibit 4-7).*
10-6 Philadelphia Electric Company 1989 Long-Term Incentive Plan
(Registration No. 33-30317, Exhibit 28).*
12-1 Ratio of Earnings to Fixed Charges.
12-2 Ratio of Earnings to Combined Fixed Charges and Preferred
Dividends.
55
<PAGE>
<PAGE> 58
13 Management's Discussion and Analysis of Financial Condition
and Results of Operations, Consolidated Financial Statements,
Notes to Consolidated Financial Statements, Financial
Statistics, and Operating Statistics of the Annual Report to
Shareholders for the year 1993.
22 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Powers of Attorney.
----------
* Compensatory plans or arrangements in which directors or officers of the
Company participate and which are not available to all employees.
Reports on Form 8-K
During the quarter ended December 31, 1993, the Company filed a
Current Report on Form 8-K, dated December 28, 1993 reporting information
under "ITEM 5. OTHER EVENTS" relating to the Company's name change.
Subsequent to December 31, 1993, the Company filed no Current Reports
on Form 8-K.
56
<PAGE>
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, PECO ENERGY COMPANY, has duly caused
this annual report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Philadelphia, and Commonwealth
of Pennsylvania, on the 16th day of March 1994.
PECO ENERGY COMPANY
By /s/ J. F. PAQUETTE, JR.
------------------------------------------
J. F. Paquette, Jr., Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this annual report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ J. F. PAQUETTE, JR. Chairman of the Board and
- ---------------------------------- Director (Principal Executive
J. F. Paquette, Jr. Officer) March 16, 1994
/s/ C. A. MCNEILL, JR. President and Director
- ---------------------------------- (Principal Operating Officer) March 16, 1994
C. A. McNeill, Jr.
/s/ K. G. LAWRENCE Senior Vice President
- ---------------------------------- (Principal Financial and
K. G. Lawrence Accounting Officer) March 16, 1994
This annual report has also been signed below by C. A. McNeill, Jr.,
Attorney-in-Fact, on behalf of the following Directors on the date
indicated:
SUSAN W. CATHERWOOD ROBERT D. HARRISON
M. WALTER D'ALESSIO JOSEPH C. LADD
R. G. GILMORE EDITHE J. LEVIT
R. H. GLANTON KINNAIRD R. MCKEE
JAMES A. HAGEN JOSEPH J. MCLAUGHLIN
NELSON G. HARRIS JOHN M. PALMS
RONALD RUBIN
By /s/ C. A. MCNEILL, JR.
----------------------------
C. A. McNeill, Jr., March 16, 1994
Attorney-in-Fact
</TABLE>
<PAGE>
<PAGE>
<PAGE> 60
EXHIBIT INDEX
Exhibit 3-1 Amended and Restated Articles of Incorporation of
PECO Energy Company.
Exhibit 3-2 Bylaws of the Company, adopted February 26, 1990
and amended January 24, 1994.
Exhibit 12-1 Ratio of Earnings to Fixed Charges.
Exhibit 12-2 Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends.
Exhibit 13 MD&A, Notes to Consolidated Financial Statements,
Financial Statistics, and Operating Statistics of
the Annual Report to Shareholders for the year 1993.
Exhibit 22 Subsidiaries of the Registrant.
Exhibit 23 Consent of Independent Accountants.
Exhibit 24 Powers of Attorney.
<PAGE>
<PAGE>
<PAGE> 61
EXHIBIT 3-1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PECO ENERGY COMPANY
ARTICLE I. The name of the Corporation is:
PECO ENERGY COMPANY
ARTICLE II. The address of the registered office of the
Corporation in this Commonwealth is:
2301 Market Street
Philadelphia, Pennsylvania 19101
ARTICLE III. The purpose or purposes for which the
Corporation is incorporated under the Business Corporation Law of
the Commonwealth of Pennsylvania are to engage in, and do any
lawful act concerning, any or all lawful business for which
corporations may be incorporated under said Business Corporation
Law, including but not limited to:
(1) The supply of light, heat or power to the public
by any means.
(2) The production, generation, manufacture,
transmission, transportation, storage, distribution or
furnishing of natural or artificial gas, electricity or
steam or air conditioning or refrigerating service, or any
combination thereof to or for the public.
(3) The diverting, pumping or impounding of water for
the development or furnishing of hydroelectric power to or
for the public.
(4) Manufacturing, processing, owning, using and
dealing in personal property of every class or description,
engaging in research and development, the furnishing of
services, and acquiring, owning, using and disposing of real
property of every nature whatsoever.
ARTICLE IV.
CAPITAL STOCK
The aggregate number of shares which the Corporation shall
have authority to issue is 615,000,000 shares, divided into
500,000,000 shares of Common Stock, without par value
(hereinafter called the "Common Stock"), 100,000,000 shares of
Series Preference Stock, without par value (hereinafter called
the "Preference Stock"), and 15,000,000 shares of Series
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Preferred Stock, without par value (hereinafter called the
"Preferred Stock") (the Preference Stock and the Preferred Stock
are hereinafter collectively called the "Senior Stock"). The
board of directors shall have the full authority permitted by law
to determine the voting rights, if any, and designations,
preferences, limitations, and special rights of any class or any
series of any class of the Senior Stock that may be desired to
the extent not determined by the articles.
The following is a statement of the voting rights,
designations, preferences, limitations, and the special rights
granted to or imposed upon the Common Stock and the Senior Stock:
PART 1
PREFERRED STOCK
DIVISION A
GENERAL PROVISIONS
Section 401. Issuance of Preferred Stock in Series. The
shares of the Preferred Stock may be divided into and issued in
series, from time to time, as provided in this division, each of
such series to be distinctly designated. All shares of the
Preferred Stock of all series shall be of equal rank and all
shares of any particular series of the Preferred Stock shall be
identical except as to the date or dates from which dividends
thereon shall he cumulative as provided in Section 402. The
shares of the Preferred Stock of different series may vary as to
the following terms, which shall be fixed in the case of each
such series, at any time prior to the issuance of the shares
thereof, in the manner provided by law:
(1) The annual dividend rate or rates for the
particular series and the date from which dividends shall be
cumulative on all shares of such series issued prior to the
record date for the first dividend for such series;
(2) The redemption price or prices, if any, for and
any special terms and conditions applicable to the
redemption of the particular series;
(3) The amount or amounts per share for the particular
series payable to the holders thereof upon any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, which may be different for voluntary and
involuntary liquidation, dissolution or winding up;
(4) The terms and amount of any sinking fund provided
for the purchase or redemption of shares of the particular
series; and
(5) The conversion, participating or other special
rights, and the qualifications, limitations or restrictions
thereof, if any, of the particular series, including any
features necessary or customarily incident to the issue and
reissue of series having auction or other variable annual
dividend rates.
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Section 402. Dividend Rights and Preferences.
(A) The holders of each series of the Preferred Stock at
the time outstanding shall be entitled to receive, but only when
and as declared by the board of directors, out of funds legally
available for payment of dividends, cumulative preferential
dividends, at the annual dividend rate for the particular series
fixed therefor as provided in this part, payable quarterly on the
first days of February, May, August and November in each year, to
shareholders of record on the respective dates, not exceeding 40
days preceding such dividend payment dates, fixed for the purpose
by the board of directors. No dividends shall be declared on any
series of the Preferred Stock in respect of any quarterly
dividend period unless there shall likewise be declared on all
shares of all series of the Preferred Stock at the time
outstanding, like proportionate dividends, ratably, in proportion
to the respective annual dividend rates fixed therefor, in
respect of the same quarterly dividend period, to the extent that
such shares are entitled to receive dividends for such quarterly
dividend period. The dividends on shares of all series of the
Preferred Stock shall be cumulative. In the case of all shares
of each particular series, the dividends on shares of such series
shall be cumulative:
(1) if issued prior to the record date for the first
dividend on the shares of such series, then from the date
for the particular series fixed therefor as provided in this
part;
(2) if issued during the period commencing immediately
after a record date for a dividend and terminating at the
close of the payment date for such dividend, then from such
dividend payment date; and
(3) otherwise from the quarterly dividend payment date
next preceding the date of issue of such shares;
so that unless dividends on all outstanding shares of each series
of the Preferred Stock, at the annual dividend rate and from the
dates for accumulation thereof fixed as provided in this part
shall have been paid for all past quarterly dividend periods, but
without interest on cumulative dividends, no dividends shall be
paid or declared and no other distribution shall be made on the
Preference Stock or the Common Stock, and no Preference Stock or
Common Stock shall be purchased or otherwise acquired for value
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by the Corporation. The holders of the Preferred Stock of any
series shall not be entitled to receive any dividends thereon
other than the dividends referred to in this section.
(B) Notwithstanding Subsection (A), the annual dividend
rate of a series of the Preferred Stock may vary from time to
time dependent upon facts ascertainable outside of these articles
of incorporation if the manner in which the facts will operate to
fix or change the dividend rate is set forth in the express terms
of the series or upon terms incorporated by reference to an
existing agreement between the Corporation and one or more other
parties or to another document of independent significance,
interest or other compensation may be payable with respect to
cumulative dividend arrearages and the dividend payment dates of
a series having auction or other variable annual dividend rates
may vary from time to time as provided by or pursuant to the
express terms of the series by not more than 47 days before or
after the fixed dividend payment dates provided in Subsection
(A).
(C) So long as any shares of the Preferred Stock of any
series are outstanding, the Corporation shall not pay any
dividends on or make any other distribution to the holders of
shares of its Preference Stock or Common Stock if after giving
effect to such payment or distribution the capital of the
Corporation represented by its Preference Stock and Common Stock
together with its surplus as then stated on its books of account
shall in the aggregate be less than the involuntary liquidating
value of its outstanding Preferred Stock.
Section 403. Redemption.
(A) General Rule. Unless prohibited or restricted in the
express terms of the affected series of the Preferred Stock, the
Corporation, by action of its board of directors, may redeem the
whole or any part of any series of the Preferred Stock, at any
time or from time to time, at the redemption price of the shares
of the particular series fixed therefor as provided in this part,
together with a sum in the case of each share of each series so
to be redeemed, computed at the annual dividend rate for the
series of which the particular share is a part from the date from
which dividends on such share became cumulative to the date fixed
for such redemption, less the aggregate of the dividends
theretofore or on such redemption date paid thereon or declared
and set aside for payment thereon.
(B) Notice. Notice of every such redemption shall be given
by publication at least once in a daily newspaper printed in the
English language and of general circulation in the city of
Philadelphia, Pennsylvania, and in a daily newspaper printed in
the English language of national circulation, the first
publication in such newspapers to be at least 30 days and not
more than 90 days prior to the date fixed for such redemption.
At least 30 days' and not more than 90 days' previous notice of
every such redemption shall also be mailed to the holders of
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record of the shares of the Preferred Stock so to be redeemed, at
their respective addresses as the same shall appear on the books
of the Corporation; but no failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of
the Preferred Stock so to be redeemed.
(C) Partial Redemption. In case of the redemption of a
part only of any series of the Preferred Stock at the time
outstanding, the Corporation shall select by lot or pro rata, in
such manner as the board of directors may determine, the shares
so to be redeemed, unless another method of selection is required
or authorized by the express terms of the series. The board of
directors shall have full power and authority, subject to the
limitations and provisions contained in this part, to prescribe
the manner in which and the terms and conditions upon which the
shares of the Preferred Stock shall be redeemed from time to
time.
(D) Effect of Redemption. If such notice of redemption
shall have been duly given by publication, and if on or before
the redemption date specified in such notice all funds necessary
for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the account
of the holders of the shares to be redeemed, so as to be and
continue to be available therefor, then, notwithstanding that any
certificate for such shares so called for redemption shall not
have been surrendered for cancellation, from and after the date
fixed for redemption, the shares represented thereby shall no
longer be deemed outstanding, the right to receive dividends
thereon shall cease to accrue and all rights with respect to such
shares so called for redemption shall forthwith on such
redemption date cease and terminate, except only the right of the
holders thereof to receive, out of the funds so set aside in
trust, the amount payable upon redemption thereof, without
interest, except that the Corporation may, after giving notice by
publication of any such redemption as provided in Subsection (B)
or after giving to the bank or trust company referred to in this
subsection irrevocable authorization to give such notice by
publication, and, at any time prior to the redemption date
specified in such notice, deposit in trust, for the account of
the holders of the shares to be redeemed, funds necessary for
such redemption with a bank or trust company in good standing,
organized under the laws of the United States of America or of
the Commonwealth of Pennsylvania, doing business in the city of
Philadelphia, Pennsylvania, having capital, surplus and undivided
profits aggregating at least the greater of $2,000,000 or two
times the amount of such deposit, designated in such notice of
redemption, and, upon such deposit in trust, all shares with
respect to which such deposit shall have been made shall no
longer be deemed to be outstanding, and all rights with respect
to such shares shall forthwith cease and terminate, except only
the right of the holders thereof to receive, out of the funds so
deposited in trust, from and after the date of such deposit, the
amount payable upon the redemption thereof, without interest.
Notice of such right shall be included in the notice of
redemption provided for in Subsection (B).
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(E) Purchase Rights Unaffected. Nothing contained in this
section shall limit any legal right of the Corporation to
purchase or otherwise acquire any shares of the Preferred Stock
at not exceeding the price at which the same may be redeemed.
(F) Status of Reacquired Shares. All or any shares of the
Preferred Stock at any time redeemed, purchased or acquired by
the Corporation may thereafter, in the discretion of the board of
directors, be reissued or otherwise disposed of at any time or
from time to time to the extent and in the manner then permitted
by law, subject, however, to the limitations imposed in this part
upon the issue of Preferred Stock or upon the reissue of the
shares of any particular series, or may be restored to the status
of authorized but unissued shares.
Section 404. Liquidation Rights and Preferences. Before
any amount shall be paid to, or any assets distributed among, the
holders of the Preference Stock or the Common Stock upon any
liquidation, dissolution or winding up of the Corporation, the
holders of each series of the Preferred Stock at the time
outstanding shall be entitled to be paid in cash the amount for
the particular series fixed therefor as provided in this part,
together with a sum in the case of each such share of each
series, computed at the annual dividend rate for the series of
which the particular share is a part, from the date from which
dividends on such share became cumulative to the date fixed for
the payment of such distributive amount, less the aggregate of
the dividends theretofore or on such date paid thereon or
declared and set aside for payment thereon; but no payments on
account of such distributive amounts shall be made to the holders
of any series of the Preferred Stock unless there shall likewise
be paid at the same time to the holders of each other series of
the Preferred Stock at the time outstanding like proportionate
distributive amounts, ratably, in proportion to the full
distributive amounts to which they are respectively entitled as
provided in this part. The holders of the Preferred Stock of any
series shall not be entitled to receive any amounts with respect
thereto upon any liquidation, dissolution or winding up of the
Corporation other than the amounts referred to in this section.
Neither the consolidation or merger of the Corporation with or
into any other corporation or corporations, nor the consummation
of any plan of share exchange, nor the sale or transfer by the
Corporation of all or any part of its assets, by division or
otherwise, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for the purposes of this section.
Section 405. Restrictions on Corporate Action.
(A) Actions Requiring Two-Thirds Vote. So long as any
shares of the Preferred Stock of any series are outstanding, the
Corporation shall not, without the consent (given in writing or
by vote at a meeting called for that purpose in accordance with
the provisions of Section 407(A)) of the holders of shares of the
Preferred Stock of all series then outstanding entitled to cast
at least two-thirds of the votes which all holders of Preferred
Stock of all series then outstanding are entitled to cast thereon:
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(1) Create or authorize any kind of stock (other than
a series of the Preferred Stock) ranking prior to or on a
parity with the Preferred Stock, or create or authorize any
obligation or security convertible into shares of stock of
any such kind; or
(2) Amend, alter, change or repeal any of the express
terms of the Preferred Stock or of any series of the
Preferred Stock then outstanding in a manner prejudicial to
the holders thereof, except that if any such amendment,
alteration, change or repeal would be prejudicial to the
holders of one or more, but not all, of the series of the
Preferred Stock at the time outstanding, only such consent
of the holders of shares of all series so affected entitled
to cast at least two-thirds of the votes which all holders
of shares of all series so affected then outstanding are
entitled to cast thereon shall be required; or
(3) Issue any additional shares of any series of the
Preferred Stock, unless the net earnings of the Corporation
applicable to the payment of dividends on the Preferred
Stock, and unless the net income before interest charges on
its indebtedness in each instance after provision for
depreciation and taxes determined in accordance with
generally accepted accounting principles, for any 12
consecutive calendar months within the 15 calendar months
immediately preceding the calendar month within which such
additional shares of stock shall be issued, shall,
respectively, have been at least two times the dividend
requirements for a 12-month period upon the entire amount of
the Preferred Stock to be outstanding immediately after the
proposed issue of such additional shares of Preferred Stock
(such dividend requirements to be determined, in the case of
outstanding Preferred Stock having auction or other variable
annual dividend rates, at the dividend rate in each case in
effect immediately before the proposed issue, and in the
case of additional shares of Preferred Stock having auction
or other variable annual dividend rates to be outstanding
immediately after the proposed issue of such additional
shares of Preferred Stock, at the initial dividend rate for
such additional shares) and at least one and one-half times
the aggregate of such dividend requirements and of the
interest charges for said period on the entire amount of the
indebtedness to be likewise outstanding (such interest
requirements to be determined, in the case of outstanding
indebtedness having auction or other variable annual
interest rates, at the interest rate in each case in effect
immediately before the proposed issue); but excluding from
each of the foregoing computations interest charges on all
indebtedness which is to be retired through the issue of
such additional shares of Preferred Stock; or
(4) Issue any additional shares of any series of the
Preferred Stock, unless the capital of the Corporation
represented by its Preference Stock and Common Stock
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together with its surplus as then stated on its books of
account shall in the aggregate be at least equal to the
involuntary liquidating value of the Preferred Stock to be
outstanding immediately after the proposed issue of such
additional shares of Preferred Stock.
(B) Increases in Authorized Amount of Preferred Stock. So
long as any shares of the Preferred Stock of any series are
outstanding, the Corporation shall not, without the consent
(given in writing or by vote at a meeting called for that purpose
in accordance with the provisions of Section 407(A)) of the
holders of the Preferred Stock of all series then outstanding
entitled to cast at least a majority of the votes which all
holders of Preferred Stock of all series then outstanding are
entitled to cast thereon, increase the total authorized amount of
the Preferred Stock of all series. Except as otherwise provided
in the express terms of any series of the Preferred Stock, the
number of authorized shares of the Preferred Stock of any series
may be increased without the vote or consent of the holders of
the outstanding shares of the series affected, subject to the
aggregate limit imposed by this article on the authorized number
of shares of the Preferred Stock of all series.
(C) Mergers and Other Fundamental Transactions. So long as
any shares of the Preferred Stock of any series are outstanding,
the Corporation shall not, without the consent (given by a vote
at a meeting called for that purpose in accordance with the
provisions of Section 407(A)) of the holders of the Preferred
Stock of all series present or represented by proxy at such
meeting, at which meeting a quorum as provided in Subsection (D)
shall be present or represented by proxy, entitled to cast at
least a majority of the votes which all holders of Preferred
Stock of all series present or represented by proxy at such
meeting are entitled to cast thereon, merge or consolidate with
or into any other corporation or corporations, or divide, unless
such merger, consolidation or division, or the issuance and
assumption of all securities to be issued or assumed in
connection with any such merger or consolidation, shall have been
ordered, exempted, approved or permitted by the Securities and
Exchange Commission under the provisions of the Public Utility
Holding Company Act of 1935 or by any successor commission or
regulatory authority of the United States of America having
jurisdiction in the premises. The provisions of this subsection
shall not apply to consummation of a plan of share exchange which
does not affect holders of the Preferred Stock, or to a purchase
or other acquisition by the Corporation of franchises or assets
of another corporation in any manner which does not involve a
statutory merger or consolidation, or to a merger of any
corporation with and into the Corporation or to a division
pursuant to any provision of law which authorizes the Corporation
without shareholder action to be the surviving party to a
statutory merger or division if the terms of the merger or
division do not alter any provision of the articles of the
Corporation (except changes that under applicable law and these
articles of incorporation may be made without shareholder action)
nor otherwise affect its outstanding shares.
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(D) Quorum. For the purposes of Subsection (C), the
presence in person or by proxy of the holders of the Preferred
Stock of all series then issued and outstanding entitled to cast
at least a majority of the votes which all holders of Preferred
Stock of all series then issued and outstanding are entitled to
cast shall be necessary to constitute a quorum, except that, if
such quorum shall not have been obtained at such meeting or at
any adjournment thereof within 30 days from the date of such
meeting as originally called, the presence in person or by proxy
of the holders of the Preferred Stock of all series then issued
and outstanding entitled to cast at least one-third of the votes
which all holders of Preferred Stock of all series then issued
and outstanding are entitled to cast shall then be sufficient to
constitute a quorum. In the absence of a quorum, such meeting or
any adjournment thereof may be adjourned by the officer or
officers of the Corporation who shall have called the meeting
from time to time (but at intervals of not less than seven days
unless all shareholders present or represented by proxy shall
agree to a shorter interval) without notice other than
announcement at the meeting until a quorum as provided in this
subsection shall be present or represented by proxy. Nothing in
this subsection shall prevent the application to the Corporation
of any provision of law reducing or eliminating the quorum
required at a meeting of shareholders which has been previously
adjourned because of an absence of a quorum.
Section 406. Voting Rights.
(A) General Rule. The holders of the Preferred Stock shall
have no right to vote and shall not be entitled to notice of any
meeting of shareholders of the Corporation nor to participate in
any such meeting except as otherwise expressly provided in this
division and except for those purposes, if any, for which said
rights cannot be denied or waived under some mandatory provision
of law which shall be controlling. At all meetings of the
holders of Preferred Stock of the Corporation at which such
holders have the right to vote under the express provisions of
this division, each holder of Preferred Stock of each series
shall be entitled to one vote or fraction thereof, for each $100
or fraction thereof, of involuntary liquidating value represented
by the shares of Preferred Stock of such series held by each such
holder.
(B) Voting Upon Default in Dividends. If and when
dividends payable on the Preferred Stock shall be in default in
an amount equivalent to four full quarterly dividends on all
shares of all series of the Preferred Stock then outstanding, and
until all dividends then in default shall have been paid or
declared and set apart for payment, the holders of all shares of
the Preferred Stock, voting separately as one class, shall be
entitled to elect the smallest number of directors necessary to
constitute a majority of the full board of directors, and the
holders of the Common Stock, and except as otherwise provided by
the express terms of the Preference Stock or any series thereof,
the holders of any series of the Preference Stock having voting
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rights for the election of directors generally, voting separately
as a class, shall be entitled to elect the remaining directors of
the Corporation. The terms of office of all persons who may be
directors of the Corporation at the time shall terminate upon the
election of a majority of the board of directors by the holders
of the Preferred Stock, whether or not the holders of the Common
Stock and of any series of the Preference Stock having voting
rights for the election of directors generally, shall then have
elected the remaining directors of the Corporation.
(C) Defeasance of Special Voting Rights. If and when all
dividends then in default on the Preferred Stock then outstanding
shall have been paid or declared and set apart for payment (and
such dividends shall be declared and paid out of any funds
legally available therefor as soon as reasonably practicable),
the Preferred Stock shall thereupon be divested of any special
right with respect to the election of directors provided in
Subsection (B), the voting power of the Preferred Stock and the
Common Stock and of any series of the Preference Stock having
voting rights for the election of directors generally, shall
revert to the status existing before the occurrence of such
default; but always subject to the same provisions for vesting
such special rights in the Preferred Stock in case of further
like default or defaults in dividends thereon. Upon the
termination of any such special right upon payment or setting
apart for payment of all accumulated and defaulted dividends on
such Preferred Stock, the terms of office of all persons who may
have been elected directors of the Corporation by vote of the
holders of the Preferred Stock, as a class, pursuant to such
special right shall forthwith terminate, and the resulting
vacancies shall be filled by the vote of a majority of the
remaining directors.
(D) Vacancies During Special Voting Rights Periods. In the
case any vacancy in the office of a director occurring among the
directors elected by the holders of Preferred Stock, as a class,
pursuant to the provisions of Subsection (B), the remaining
directors elected by the holders of Preferred Stock may elect, by
affirmative vote of a majority thereof, or the remaining director
so elected if there be but one may elect, a successor or
successors to hold office for the unexpired term of the director
or directors whose place or places shall be vacant. Likewise,
except as otherwise provided by the express terms of the
Preference Stock or any series thereof as to directors which are
not then elected by the Preferred Stock, in case of any vacancy
in the office of a director occurring among the directors elected
by the holders of Common Stock and of any series of the
Preference Stock having voting rights for the election of
directors generally, pursuant to the provisions of Subsection
(B), the remaining directors elected by the holders of the Common
Stock and of any series of the Preference Stock having voting
rights for the election of directors generally, may elect, by
affirmative vote of a majority thereof, or the remaining director
so elected if there be but one may elect, a successor or
successors to hold office for the unexpired term of the director
or directors whose place or places shall be vacant.
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(E) Special Meetings of the Holders of Preferred Stock.
Whenever under the provisions of Subsection (B), the right shall
have accrued to the holders of the Preferred Stock to elect
directors, the board of directors shall within ten days after
delivery to the Corporation at its principal office of a request
to such effect signed by any holder of Preferred Stock entitled
to vote, call a special meeting of all shareholders to be held
within 40 days from the delivery of such request for the purpose
of electing directors. At all meetings of shareholders held for
the purpose of electing directors during such times as the
holders of shares of the Preferred Stock shall have the special
right, voting separately as one class, to elect directors
pursuant to Subsection (B), the presence in person or by proxy of
the holders of Common Stock and of any series of the Preference
Stock having voting rights for the election of directors
generally, entitled to cast at least a majority of the votes
which all holders of Common Stock and of any series of the
Preference Stock having voting rights for the election of
directors generally then issued and outstanding are entitled to
cast, shall be required to constitute a quorum of such class or
classes for the election of directors, and the presence in person
or by proxy of the holders of shares of all series of the
Preferred Stock entitled to cast at least a majority of the votes
which all holders of Preferred Stock of all series then issued
and outstanding are entitled to cast shall be required to
constitute a quorum of such class for the election of directors,
except that the absence of a quorum of the holders of stock of
either such class or classes shall not prevent the election at
any such meeting or adjournment thereof of directors by the other
such class or classes if the necessary quorum of the holders of
stock of such class or classes is present in person or by proxy
at such meeting. In the absence of a quorum of the holders of
stock of either such class or classes, those holders of the stock
of such class or classes who are present in person or by proxy
entitled to cast at least a majority of the votes which all
holders of the stock of such class or classes who are present in
person or by proxy are entitled to cast shall have power to
adjourn the election of the directors to be elected by such class
or classes from time to time without notice other than
announcement at the meeting until the requisite amount of holders
of such class or classes shall be present in person or by proxy,
but such adjournment shall not be made to a date beyond the date
for the mailing of notice of the next annual meeting of the
Corporation or special meeting in lieu thereof. Nothing in this
subsection shall prevent the application to the Corporation of
any provision of law reducing or eliminating the quorum required
at a meeting of shareholders which has been previously adjourned
because of an absence of a quorum.
(F) Relative Voting Rights as Between Series of the
Preferred Stock. Except when some mandatory provision of law
shall be controlling and except as otherwise provided in Section
405(A)(2) and, as regards the special rights of any series of the
Preferred Stock, as provided in the express terms of such series,
whenever shares of two or more series of the Preferred Stock are
outstanding, no particular series of the Preferred Stock shall be
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entitled to vote as a separate series on any matter and all
shares of the Preferred Stock of all series shall be deemed to
constitute but one class for any purpose for which a vote of the
shareholders of the Corporation by classes may be required.
(G) General Powers of Corporation Unaffected. From time to
time and without limitation of other rights and powers of the
Corporation as provided by law, the Corporation may reclassify
its capital stock and may create or authorize one or more classes
or kinds of stock ranking prior to or on a parity with or
subordinate to the Preferred Stock or may increase the authorized
amount of the Preferred Stock or of the Preference Stock or the
Common Stock or of any other class of stock of the Corporation or
may amend, alter, change or repeal any of the rights, privileges,
terms and conditions of the Preferred Stock or of any series
thereof then outstanding or of the Preference Stock or of any
series thereof then outstanding or of the Common Stock or of any
other class of stock of the Corporation, upon the affirmative
vote, given at a meeting called for that purpose in accordance
with law, of shareholders then entitled to cast thereon at least
a majority of the votes which all shareholders voting thereon in
person or by proxy are then entitled to cast thereon or upon such
other vote of its shareholders then entitled to vote thereon as
may then be provided by law, if the consent of the holders of the
Preferred Stock (or of any series thereof) required by the
provisions of Section 405(A) and (B), if any such consent be so
required, shall have been obtained.
Section 407. Meetings of Holders of Preferred Stock.
Notice of any meeting of the holders of Preferred Stock or any
series thereof, required or authorized under this part or by law,
setting forth the purpose or purposes of such meeting, shall be
mailed by the Corporation, not less than ten days prior to such
meeting, to all holders of Preferred Stock (at their respective
addresses appearing on the books of the Corporation) entitled to
vote thereat of record as of a date fixed by the board of
directors of the Corporation, not exceeding 90 days in advance of
such meeting, for the purpose of determining the shareholders
entitled to notice of and to vote at such meeting, unless such
notice shall have been waived, either before or after the holding
of such meeting, by all holders of Preferred Stock entitled to
notice thereof and to vote thereat. Any action authorized to be
taken at a meeting called for that purpose in accordance with the
provisions of this subsection may be taken either at a special
meeting, or at any regular or annual meeting if notice of such
proposed action is included in the notice of such regular or
annual meeting.
Section 408. Effective Date of Amendments to Part. Any
amendment to this part which requires governmental approval under
66 Pa.C.S. Ch. 19 (relating to securities and obligations) or any
superseding provision of law shall take effect upon receipt of
such governmental approval.
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DIVISION B
VARIATIONS AMONG SERIES OF PREFERRED STOCK
Section 421. $4.40 Preferred Stock (Series 1). The terms
of the "$4.40 Preferred Stock (Series 1)" may vary from shares of
other series of the Preferred Stock as follows: the dividend
rate shall be $4.40 per annum; the redemption price shall be
$112.50 per share; $100 per share shall be payable upon any
voluntary or involuntary liquidation, dissolution or winding up
of the Corporation. The number of shares of this series
authorized is 274,720 shares.
Section 422. $3.80 Preferred Stock (Series 2). The terms
of the "$3.80 Preferred Stock (Series 2)" may vary from shares of
other series of the Preferred Stock as follows: the dividend
rate shall be $3.80 per annum; the redemption price shall be $106
per share; $100 per share shall be payable upon any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation. The number of shares of this series authorized is
300,000 shares.
Section 423. $4.30 Preferred Stock (Series 3). The terms
of the "$4.30 Preferred Stock (Series 3)" may vary from shares of
other series of the Preferred Stock as follows: the dividend
rate shall be $4.30 per annum; the redemption price shall be $102
per share; $100 per share shall be payable upon any involuntary
liquidation, dissolution or winding up of the Corporation, and
upon any voluntary liquidation, dissolution or winding up of the
Corporation $102 per share shall be payable. The number of
shares of this series authorized is 150,000 shares.
Section 424. $4.68 Preferred Stock (Series 4). The terms
of the "$4.68 Preferred Stock (Series 4)" may vary from shares of
other series of the Preferred Stock as follows: the dividend
rate shall be $4.68 per annum; the redemption price shall be $104
per share; $100 per share shall be payable upon any involuntary
liquidation, dissolution or winding up of the Corporation, and
upon any voluntary liquidation, dissolution or winding up of the
Corporation $104 per share shall be payable. The number of
shares of this series authorized is 150,000 shares.
Section 425. $7.00 Preferred Stock (Series 5).
(A) The terms of the "$7.00 Preferred Stock (Series 5)" may
vary from shares of other series of the Preferred Stock as
follows: the dividend rate shall be $7.00 per annum; the regular
redemption price shall be $101 per share; the sinking fund
redemption price shall be $100 per share; $100 per share shall be
payable upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.
(B) Subject to Subsections (C) and (D), as and for a
sinking fund for the shares of this series, so long as any shares
of this series are outstanding, the Corporation will redeem, in
each 12-month period beginning February 1 (hereinafter in this
section called the "Sinking Fund Period"):
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(1) a number of shares of this series equal to 2% of
the greatest number of shares of this series at any time
outstanding prior to the commencement of the Sinking Fund
Period (the obligation of the Corporation to redeem such
number of such shares in any Sinking Fund Period being
hereinafter in this section referred to as the "Sinking Fund
Obligation" for such period); and
(2) at the option of the Corporation, such additional
number of shares this series, not exceeding a number equal
to 2% of the greatest number of shares of this series at any
time outstanding prior to the commencement of the Sinking
Fund Period, as the Corporation, by resolution of its board
of directors adopted on or before December 31 in such
Sinking Fund Period, shall determine.
(C) The Sinking Fund Obligation for any such period may be
reduced (or satisfied), at the option of the Corporation, by such
number of shares of this series, theretofore acquired by the
Corporation by purchase at a price not exceeding the sinking fund
redemption price (and not theretofore applied in reduction or
satisfaction of the number of shares of this series required to
be redeemed in any such period) as the Corporation, by resolution
of its board of directors, may elect to apply in reduction or
satisfaction of the Sinking Fund Obligation for such period.
(D) The Corporation shall not redeem any shares of this
series for the sinking fund unless all dividends on all series of
Preferred Stock then outstanding for all past quarterly dividend
periods shall have been paid or declared and set aside for
payment and unless the redemption is permissible under applicable
law, but if the Corporation shall for the reasons set forth in
this subsection or any other reason fail to discharge its Sinking
Fund Obligation for any Sinking Fund Period, such Sinking Fund
Obligation, to the extent not discharged, shall become an
additional Sinking Fund Obligation for each such succeeding
Sinking Fund Period until fully discharged.
(E) Any redemption of the shares of this series for the
sinking fund shall be accomplished in the manner and with the
effect provided in Section 403, except that such redemption shall
be at the sinking fund redemption price, in lieu of the regular
redemption price.
(F) The number of shares of this series authorized is
266,720.
Section 426. $7.85 Preferred Stock (Series 7). The terms
of the "$7.85 Preferred Stock (Series 7)" may vary from shares of
other series of the Preferred Stock as follows: the dividend
rate shall be $7.85 per annum; the redemption price shall be $101
per share; $100 per share shall be payable upon any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation. The number of shares of this series authorized is
500,000 shares.
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Section 427. $7.75 Preferred Stock (Series 8). The terms
of the "$7.75 Preferred Stock (Series 8)" may vary from shares of
other series of the Preferred Stock as follows: the dividend
rate shall be $7.75 per annum; the redemption price shall be $101
per share; $100 per share shall be payable upon any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation. The number of shares of this series authorized is
200,000 shares.
Section 428. $7.80 Preferred Stock (Series 9). The terms
of the "$7.80 Preferred Stock (Series 9)" may vary from shares of
other series of the Preferred Stock as follows: the dividend
rate shall be $7.80 per annum; the redemption price shall be $101
per share; $100 per share shall be payable upon any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation. The number of shares of this series authorized is
750,000 shares.
Section 429. $7.325 Preferred Stock (Series 10).
(A) The terms of the "$7.325 Preferred Stock (Series 10)"
may vary from shares of other series of the Preferred Stock as
follows: the dividend rate shall be $7.325 per annum; the
regular redemption price shall be $100 per share, except that
during the 12-month period ending on May 1 in each of the
following years the regular redemption price per share shall be
as follows: 1990 - $102.63, 1991 - $102.34, 1992 - $102.05, 1993
- - $101.75, 1994 - $101.46, 1995 - $101.17, 1996 - $100.87, 1997 -
$100.58 and 1998 -$100.29; the sinking fund redemption price
shall be $100 per share; $100 per share shall be payable upon any
voluntary or involuntary liquidation, dissolution or winding up
of the Corporation.
(B) Subject to Subsection (C), as and for a sinking fund
for the shares of this series, so long as any shares of this
series are outstanding, the Corporation will redeem, on each May
1 (hereinafter in this section called the "Sinking Fund Date") a
number of shares of this series equal to 4% of the greatest
number of shares of this series at any time outstanding prior to
the Sinking Fund Date (the obligation of the Corporation to
redeem such number of such shares on any Sinking Fund Date being
hereinafter in this section referred to as the "Sinking Fund
Obligation" for such date).
(C) The Corporation shall not redeem any shares of this
series for the sinking fund unless all dividends on all series of
Preferred Stock then outstanding for all past quarterly dividend
periods shall have been paid or declared and set aside for
payment and unless the redemption is permissible under applicable
law, but if the Corporation shall for the reasons set forth in
this subsection or any other reason fail to discharge its Sinking
Fund Obligation on any Sinking Fund Date, such Sinking Fund
Obligation, to the extent not discharged, shall become an
additional Sinking Fund Obligation for each succeeding Sinking
Fund Date until fully discharged.
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(D) So long as any shares of this series are outstanding,
the Corporation shall not:
(1) Increase the authorized amount of the shares of
this series.
(2) Reissue as shares of this series any shares of
this series redeemed by the Corporation pursuant to this
section.
(3) Establish or re-establish any unissued shares of
the Preferred Stock of any other series or any unissued
shares of the Preferred Stock which are not part of a then
existing series as shares of this series.
(E) Any redemption of the shares of this series for the
sinking fund shall be accomplished in the manner and with the
effect provided in Section 403, except that such redemption shall
be at the sinking fund redemption price, in lieu of the regular
redemption price.
(F) The number of shares of this series authorized is
420,000 shares.
Section 430. $9.875 Preferred Stock (Series 21).
(A) The terms of the "$9.875 Preferred Stock (Series 21)"
may vary from shares of other series of the Preferred Stock as
follows: the dividend rate shall be $9.875 per annum; the
regular redemption price shall be $100 per share, except that
prior to August 1, 1992 the regular redemption price shall be
$109.875 per share, during the 12-month period from August 1,
1992 until July 31, 1993 the regular redemption price shall be
$105.00 per share and during the 12-month period from August 1,
1993 until July 31, 1994 the regular redemption price shall be
$102.50 per share; the sinking fund redemption price shall be
$100 per share; $100 per share shall be payable upon any
voluntary or involuntary liquidation, dissolution or winding up
of the Corporation.
(B) Prior to August 1, 1992 the Corporation will not redeem
shares of this series if such redemption is a part of or in
anticipation of any refunding operations involving the
application, directly or indirectly, of borrowed funds or the
proceeds of any stock ranking prior to or on a parity with the
shares of this series as to payment of dividends or distributions
on any liquidation, dissolution or winding up, if such borrowed
funds have an interest rate or cost to the Corporation
(calculated in accordance with generally accepted financial
practice), or such stock has a dividend rate or cost to the
Corporation (so calculated), less than the dividend rate per
annum of the shares of this series.
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(C) Subject to Subsections (D) and (E), as and for a
sinking fund for the shares of this series, so long as any shares
of this series are outstanding, the Corporation will redeem, on
each August 1, commencing with August 1, 1993 (hereinafter in
this section called the "Sinking Fund Date"):
(1) 130,000 shares of this series (the obligation of
the Corporation to redeem such number of such shares on any
Sinking Fund Date being hereinafter in this section referred
to as the "Sinking Fund Obligation" for such date), and
(2) at the option of the Corporation, such additional
number of shares this series, not exceeding 130,000 shares,
as the Corporation, by resolution of its board of directors
adopted on or before the June 15 next preceding such Sinking
Fund Date, shall determine, but the exercise of such option
by the board of directors shall not reduce or satisfy any
subsequent Sinking Fund Obligation.
(D) The Sinking Fund Obligation for any Sinking Fund Date
may be reduced (or satisfied), at the option of the Corporation,
by such number of shares of this series, theretofore acquired by
the Corporation by purchase at a price not exceeding the sinking
fund redemption price (and not theretofore applied in reduction
or satisfaction of any Sinking Fund Obligation) as the
Corporation, by resolution of its board of directors, may elect
to apply in reduction or satisfaction of the Sinking Fund
Obligation for such Sinking Fund Date.
(E) The Corporation shall not redeem any shares of this
series for the sinking fund unless all dividends on all series of
Preferred Stock then outstanding for all past quarterly dividend
periods shall have been paid or declared and set aside for
payment and unless the redemption is permissible under applicable
law, but if the Corporation shall for the reasons set forth in
this subsection or any other reason fail to discharge its Sinking
Fund Obligation for any Sinking Fund Date, such Sinking Fund
Obligation, to the extent not discharged, shall become an
additional Sinking Fund Obligation for each such succeeding
Sinking Fund Date until fully discharged.
(F) Any redemption of the shares of this series for the
sinking fund shall be accomplished in the manner and with the
effect provided in Section 403, except that such redemption shall
be at the sinking fund redemption price, in lieu of the regular
redemption price.
(G) The number of shares of this series authorized is
650,000 shares.
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Section 431. $7.96 Preferred Stock (Series 23). The terms
of the $7.96 Preferred Stock (Series 23), in respect in which
shares of such series may vary from shares of the other series of
Preferred Stock shall be as follows:
(A) The dividend rate of the $7.96 Preferred Stock
shall be $7.96 per annum and October 20, 1992 shall be
the date from which dividends shall be cumulative on
all shares issued prior to the record date for the
first dividend for the $7.96 Preferred Stock.
(B) The redemption price (hereinafter referred to
as the "Optional Redemption Price") of the $7.96
Preferred Stock, shall be $100 per share (to which
shall be added the sum equal to the accumulated and
unpaid dividends, computed as provided in Section 403
of Article IV), provided however, that the Company will
not redeem any shares of the $7.96 Preferred Stock
prior to October 1, 1997.
(C) The amount per share for the $7.96 Preferred
Stock, payable to the holders thereof upon any
voluntary or involuntary liquidation, dissolution or
winding-up of the Company (to which shall be added a
sum equal to accumulated and unpaid dividends, computed
as provided in Section 404) shall be $100.
Section 432. $7.48 Preferred Stock (Series 24). The terms
of the $7.48 Preferred Stock (Series 24), in respect in which
shares of such series may vary from shares of the other series of
Preferred Stock shall be as follows:
(A) The dividend rate of the $7.48 Preferred Stock
shall be $7.48 per annum and March 30, 1993 shall be
the date from which dividends shall be cumulative on
all shares issued prior to the record date for the
first dividend for the $7.48 Preferred Stock.
(B) The Company will not redeem any shares of the
$7.48 Preferred Stock prior to April 1, 2003.
Thereafter, the redemption price (hereinafter referred
to as the "Optional Redemption Price") of the $7.48
Preferred Stock, shall be at the applicable Optional
Redemption Price per share set forth in the tabulation
below (to which shall be added the sum equal to the
accumulated and unpaid dividends, computed as provided
in Section 403):
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If Redeemed During Optional If Redeemed During Optional
the 12 Months Redemption the 12 Months Redemption
Beginning April 1, Price Beginning April 1, Price
- ------------------- ---------- ------------------- ----------
2003 $103.74 2009 $101.50
2004 103.37 2010 101.12
2005 102.99 2011 100.75
2006 102.62 2012 100.37
2007 102.24 2013 and thereafter 100.00
2008 101.87
(C) The amount per share for the $7.48 Preferred
Stock, payable to the holders thereof upon any
voluntary or involuntary liquidation, dissolution or
winding-up of the Company (to which shall be added a
sum equal to accumulated and unpaid dividends, computed
as provided in Section 404 of Article IV) shall be
$100.
Section 433. $6.12 Preferred Stock (Series 25). The terms
of the $6.12 Preferred Stock (Series 25), in respect in which
shares of such series may vary from shares of the other series of
Preferred Stock shall be as follows:
(A) The dividend rate of the $6.12 Preferred
Stock shall be $6.12 per annum and June 18, 1993 shall
be the date from which dividends shall be cumulative on
all shares issued prior to the record date for the
first dividend for the $6.12 Preferred Stock.
(B) The $6.12 Preferred Stock, shall be
redeemable in part from time to time, on or after
August 1, 1999, for the Sinking Fund hereinafter
referred to, at a redemption price of $100.00 per
share, together with a sum in the case of each such
share so to be redeemed, computed at the annual
dividend rate for the $6.12 Preferred Stock, from the
date from which dividends on such share became
cumulative to the date fixed for such redemption, less
the aggregate of the dividends theretofore, or on such
redemption date, paid thereon or declared or set aside
for payment thereon (such price, including such sum
equal to such accumulated and unpaid dividends, being
hereinafter called the "Sinking Fund Redemption
Price").
(C) The amount per share for the $6.12 Preferred
Stock, payable to the holders thereof upon any
voluntary or involuntary liquidation, dissolution or
winding-up of the Company (to which shall be added a
sum equal to accumulated and unpaid dividends, computed
as provided in Section 404) shall be $100.
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(D) As and for a Sinking Fund for the 927,000 shares
constituting the $6.12 Preferred Stock, authorized hereby
(and only for such shares), so long as any of such shares
are outstanding, the Company will redeem on each August 1,
commencing with August 1, 1999 (each such August 1 being
hereinafter referred to as a "Sinking Fund Date") (i)
185,400 such shares (the Company's obligation to redeem such
number of such shares on such Sinking Fund Date being
hereinafter referred to as the "Sinking Fund Obligation" for
such Sinking Fund Date), and (ii) at the option of the
Company, an additional number of such shares, not exceeding
185,400 as the Board of Directors shall by resolution
determine on or before the June 15 next preceding such
Sinking Fund Date but the exercise of such option by the
Board of Directors shall not reduce or satisfy any
subsequent Sinking Fund Obligation; provided, however, that
the Sinking Fund Obligation for any such Sinking Fund Date
may be reduced (or satisfied), at the option of the Company,
by such number of such shares, theretofore acquired by the
Company by purchase at a price not exceeding the Sinking
Fund Redemption Price (and not theretofore applied in
reduction or satisfaction of any Sinking Fund Obligation) as
the Company, by resolution of its Board of Directors, may
elect to apply in reduction or satisfaction of the Sinking
Fund Obligation for such Sinking Fund Date; and provided,
further, that the Company shall not redeem any such shares
for the Sinking Fund unless all dividends on all series of
Preferred Stock then outstanding for all past quarter-yearly
dividend periods shall have been paid or declared and set
aside for payment and unless such redemption is permissible
under applicable law, but if the Company shall for the
aforesaid reasons or any other reason fail to discharge its
Sinking Fund Obligation for any Sinking Fund Date, such
Sinking Fund Obligation, to the extent not discharged, shall
become an additional Sinking Fund Obligation for each
succeeding Sinking Fund Date until fully discharged.
(E) Any redemption of the $6.12 Preferred Stock, for
the Sinking Fund shall be accomplished in the manner and
with the effect provided in Section 403 of Article IV, and
such redemption shall be at the Sinking Fund Redemption
Price.
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PART 2
PREFERENCE STOCK
DIVISION A
GENERAL PROVISIONS
Section 443. Vote Required to Increase Class or Series.
Except as otherwise provided in the express terms of any series
of the Preference Stock, the number of authorized shares of the
Preference Stock or of any series thereof may be increased
without a class or series vote or consent of the holders of the
outstanding shares of the class or series affected.
DIVISION B
VARIATIONS AMONG SERIES OF PREFERENCE STOCK
(Reserved)
PART 3
COMMON STOCK
Section 453. Voting Rights. At all meetings of the
shareholders of the Corporation the holders of Common Stock shall
be entitled to one vote for each share of Common Stock held by
them respectively, except as otherwise expressly provided in this
article.
Section 454. Dividend and Other Distribution Rights.
Whenever full dividends or other distributions on all series of
the Senior Stock at the time outstanding having preferential
dividend or other distribution rights shall have been paid or
declared and set apart for payment or otherwise made, then such
dividends (payable in cash or otherwise) or other distributions,
as may be determined by the board of directors may be declared
and paid or otherwise made on the Common Stock, but only out of
funds legally available for the payment of such distributions.
Section 455. Liquidation Rights. In the event of any
liquidation, dissolution or winding up of the Corporation, the
assets and funds of the Corporation available for distribution to
shareholders, after paying or providing for the payment to the
holders of shares of all series of Senior Stock of the full
distributive amounts to which they are respectively entitled, as
provided in this article, shall be divided among and paid to the
holders of Common Stock according to their respective shares.
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PART 4
GENERAL
Section 460. Preemptive Rights. Except as otherwise
provided in the express terms of any class or series of shares,
or in any contract, warrant or other instrument issued by the
Corporation, no holder of shares of the Corporation shall be
entitled, as such, as a matter of right to subscribe for or
purchase any part of any issue of shares or other securities of
the Corporation, of any class, series or kind whatsoever, and
whether issued for cash, property, services, by way of dividends,
or otherwise.
Section 461. Amendments to Terms of Senior Stock. If and
to the extent provided by the express terms of any series of the
Senior Stock, the board of directors may, without the consent of
the holders of the outstanding shares of such series or of the
holders of any other shares of the Corporation (unless otherwise
provided in the express terms of any such other shares), amend
these articles of incorporation so as to change any of the terms
of such series.
ARTICLE V.
MANAGEMENT
The following provisions shall govern the management of the
business and affairs of the Corporation and the rights, powers or
duties of its security holders, directors or officers:
Section 501. Effective Date of Article and Amendments
Thereto. This article and any subsequent amendments thereto
which require governmental approval, if any, under 66 Pa.C.S. Ch.
19 (relating to securities and obligations) or any superseding
provision of law shall take effect upon receipt of such
governmental approval.
Section 502. Classification of Board of Directors. The
board of directors of the Corporation shall be classified in
respect of the time for which they shall severally hold office as
follows:
(1) Each class shall be as nearly equal in number as
possible.
(2) The term of office of at least one class shall
expire in each year.
(3) Except as otherwise provided in Section 406(B) or
in the express terms of any series of the Preference Stock
with respect to the election of directors upon the
occurrence of a default in the payment of dividends or in
the performance of another express requirement of the terms
of such series, the members of each class shall be elected
for a term of three years and until their respective
successors shall have been elected and qualified, except in
the event of their earlier death, resignation or removal.
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Notwithstanding the preceding sentence, at the 1990
Annual Meeting of Shareholders the directors shall be
classified into three classes comprised of directors who
shall serve for terms expiring at the annual meetings of
shareholders in 1991, 1992 and 1993, respectively, and until
their respective successors shall have been elected and
qualified, except in the event of their earlier death,
resignation or removal. At the annual meeting of
shareholders in 1991 and thereafter the shareholders shall
elect, to serve until the third annual meeting of
shareholders following their election, and until their
successors shall have been elected and qualified, except in
the event of their earlier death, resignation or removal,
the number of directors in the class whose term expires at
such annual meeting. This paragraph shall expire at the
adjournment of the annual meeting of shareholders in 1993.
Section 503. Number of Directors. The number of directors
of the Corporation constituting the whole board and the number of
directors constituting each class of directors as provided by
Section 502 shall be fixed solely by resolution of the board of
directors, except as otherwise provided in the express terms of
any class or series of Senior Stock with respect to the election
of directors upon the occurrence of a default in the payment of
dividends or in the performance of another express requirement of
the terms of such Senior Stock.
Section 504. Straight Voting for Directors. The
shareholders of the Corporation shall not have the right to
cumulate their votes for the election of directors of the
Corporation.
Section 505. Liability of Directors and Officers. An
officer of the Corporation shall not be personally liable, as
such, to the Corporation, and a director of the Corporation shall
not be personally liable, as such, for monetary damages
(including, without limitation, any judgment, amount paid in
settlement, penalty, punitive damages or expense of any nature
(including, without limitation, attorneys' fees and
disbursements)) for any action taken, or any failure to take any
action, unless the director or officer has breached or failed to
perform the duties of his or her office under these articles of
incorporation, the bylaws of the Corporation or applicable
provisions of law and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness.
Section 506. Conduct of Officers. In lieu of the standards
of conduct otherwise provided by law, officers of the Corporation
shall be subject to the same standards of conduct, including
standards of care and loyalty and rights of justifiable reliance,
as shall at the time be applicable to directors of the
Corporation.
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Section 507. Interpretation. The provisions of Section 505
shall not apply to the responsibility or liability of a director
or officer, as such, pursuant to any criminal statute or for the
payment of taxes pursuant to local, state or federal law. The
provisions of Sections 505, 506 and this section have been
adopted pursuant to the authority of Sections 1721(e) and 1732(c)
of the Pennsylvania Business Corporation Law of 1988, shall be
deemed to be a contract with each director or officer of the
Corporation who serves as such at any time while Sections 505,
506 and this section are in effect, and Sections 505, 506 and
this section are cumulative of and shall be in addition to and
independent of any and all other limitations on the liabilities
of directors or officers of the Corporation, as such, or rights
of indemnification by the Corporation to which a director or
officer of the Corporation may be entitled, whether such
limitations or rights arise under or are created by any statute,
rule of law, bylaw, agreement, vote of shareholders or
disinterested directors or otherwise. Each person who serves as
a director or officer of the Corporation while Sections 505, 506
and this section are in effect shall be deemed to be doing so in
reliance on such sections. No amendment to or repeal of Sections
505, 506 and this section, nor the adoption of any provisions of
these articles of incorporation inconsistent with such sections,
shall apply to or have any effect on the liability or alleged
liability of any director or officer of the Corporation for or
with respect to any acts or omissions of such director or officer
occurring prior to such amendment, repeal or adoption of an
inconsistent provision. In any action, suit or proceeding
involving the application of Sections 505, 506 and this section,
the party or parties challenging the right of a director or
officer to the benefits of such sections shall have the burden of
proof.
Section 508. Control Transactions.
(A) Subchapter E of Chapter 25 of the Business Corporation
Law of 1988 (relating to control transactions) shall be
applicable to the Corporation.
(B) Subsection (A) shall take effect upon the amendment of
15 Pa.C.S. Section 2524 (relating to definitions) to define "voting
shares" for the purposes of Subchapter 25E as shares of the
Corporation entitled to vote generally in the election of
directors.
Section 509. Business Combinations. Subchapter F of
Chapter 25 of the Business Corporation Law of 1988 (relating to
business combinations) shall be applicable to the Corporation.
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<PAGE> 85
Section 510. Adoption of Bylaws. Except as otherwise
provided in the express terms of any series of the Senior Stock:
(1) The shareholders shall have the power to adopt,
amend or repeal the bylaws of the Corporation only subject
to the procedures and restrictions applicable to amendments
of these articles of incorporation, including any provision
of law requiring as a condition to adoption by the
Corporation that the corporate action be approved also by
the board of directors of the Corporation, and treating a
direction by the board that the matter should be submitted
to the shareholders, or the sufferance by the board that the
matter be so submitted, as insufficient to satisfy the
requirement of independent approval by the board of
directors.
(2) The board of directors of the Corporation shall
have the full authority conferred by law upon the
shareholders of the Corporation to adopt, amend or repeal
the bylaws of the Corporation, including in circumstances
otherwise reserved by statute exclusively to the
shareholders. Any bylaw adopted by the board of directors
under this paragraph shall be consistent with these articles
of incorporation.
ARTICLE VI.
MISCELLANEOUS
Section 601. Headings. The headings of the various
sections of these articles of incorporation are for convenience
of reference only and shall not affect the interpretation of any
of the provisions of these articles.
Section 602. Reserved Power of Amendment. These articles
of incorporation may be amended in the manner and at the time
prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
As filed with the Department of State on March 8, 1994.
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EXHIBIT 3-2
PECO ENERGY COMPANY
B Y L A W S
ARTICLE I
Offices and Fiscal Year
Section 1.01. Registered Office.--The registered office of
the corporation in the Commonwealth of Pennsylvania shall be at
2301 Market Street, Philadelphia, Pennsylvania 19101 until
otherwise established by an amendment of the articles or by the
board of directors and a record of such change is filed with the
Department of State in the manner provided by law.
Section 1.02. Other Offices.--The corporation may also have
offices at such other places within or without the Commonwealth
of Pennsylvania as the board of directors may from time to time
appoint or the business of the corporation may require.
Section 1.03. Fiscal Year.--The fiscal year of the
corporation shall begin on the first day of January in each year.
ARTICLE II
Notice - Waivers - Meetings Generally
Section 2.01. Manner of Giving Notice.
(a) General Rule.--Whenever written notice is required to
be given to any person under the provisions of the Business
Corporation Law or by the articles or these bylaws, it may be
given to the person either personally or by sending a copy
thereof by first class or express mail, postage prepaid, or by
telegram (with messenger services specified), telex or TWX (with
answerback received) or courier service, charges prepaid, or by
facsimile transmission, to the address (or to the telex, TWX or
facsimile transmission telephone number) of the person appearing
on the books of the corporation or, in the case of directors,
supplied by the director to the corporation for the purpose of
notice. If the notice is sent by mail, telegraph or courier
service, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with
a telegraph office or courier service for delivery to that person
or, in the case of telex or TWX, when dispatched or, in the case
of facsimile transmission, when received. A notice of meeting
shall specify the place, day and hour of the meeting and any
other information required by any other provision of the Business
Corporation Law, the articles or these bylaws.
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(b) Adjourned Shareholder Meetings.--When a meeting of
shareholders is adjourned, it shall not be necessary to give any
notice of the adjourned meeting or of the business to be
transacted at an adjourned meeting, other than by announcement at
the meeting at which the adjournment is taken, unless the board
fixes a new record date for the adjourned meeting.
Section 2.02. Notice of Meetings of the Board of
Directors.--Notice of a regular meeting of the board of directors
need not be given. Notice of every special meeting of the board
of directors shall be given to each director by telephone or in
writing at least 24 hours (in the case of notice by telephone,
telex, TWX or facsimile transmission) or 48 hours (in the case of
notice by telegraph, courier service or express mail) or five
days (in the case of notice by first class mail) before the time
at which the meeting is to be held. Every such notice shall
state the time and place of the meeting. Neither the business to
be transacted at, nor the purpose of, any regular or special
meeting of the board need be specified in a notice of the
meeting.
Section 2.03. Notice of Meetings of Shareholders.
(a) General Rule.-- Written notice of every meeting of the
shareholders shall be given by, or at the direction of, the
secretary to each shareholder of record entitled to vote at the
meeting at least ten days prior to the day named for a meeting
called to consider amendment of the articles or adoption of a
plan of merger, consolidation, exchange, asset, transfer,
division or conversion or adoption of a proposal of dissolution,
or five days prior to the day named for the meeting in any other
case. If the secretary neglects or refuses to give notice of a
meeting, the person or persons calling the meeting may do so. In
the case of a special meeting of shareholders, the notice shall
specify the general nature of the business to be transacted.
(b) Notice of Action by Shareholders on Bylaws.--In the
case of a meeting of shareholders that has as one of its purposes
action on the bylaws, written notice shall be given to each
shareholder that the purpose, or one of the purposes, of the
meeting is to consider the adoption, amendment or repeal of the
bylaws. There shall be included in, or enclosed with, the notice
a copy of the proposed amendment or a summary of the changes to
be effected thereby.
Section 2.04. Waiver of Notice.
(a) Written Waiver.--Whenever any written notice is
required to be given under the provisions of the Business
Corporation Law, the articles or these bylaws, a waiver thereof
in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of the notice. Except as
otherwise required by this subsection, neither the business to be
transacted at, nor the purpose of, a meeting need be specified in
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the waiver of notice of the meeting. In the case of a special
meeting of shareholders, the waiver of notice shall specify the
general nature of the business to be transacted.
(b) Waiver by Attendance.--Attendance of a person at any
meeting shall constitute a waiver of notice of the meeting except
where a person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of
any business because the meeting was not lawfully called or
convened.
Section 2.05. Modification of Proposal Contained in
Notice.--Whenever the language of a proposed resolution is
included in a written notice of a meeting required to be given
under the provisions of the Business Corporation Law or the
articles or these bylaws, the meeting considering the resolution
may without further notice adopt it with such clarifying or other
amendments as do not enlarge its original purpose.
Section 2.06. Exception to Requirement of Notice.
(a) General Rule.--Whenever any notice or communication is
required to be given to any person under the provisions of the
Business Corporation Law or by the articles or these bylaws or by
the terms of any agreement or other instrument or as a condition
precedent to taking any corporate action and communication with
that person is then unlawful, the giving of the notice or
communication to that person shall not be required.
(b) Shareholders Without Forwarding Addresses.--Notice or
other communications shall not be sent to any shareholder with
whom the corporation has been unable to communicate for more than
24 consecutive months because communications to the shareholder
are returned unclaimed or the shareholder has otherwise failed to
provide the corporation with a current address. Whenever the
shareholder provides the corporation with a current address, the
corporation shall commence sending notices and other
communications to the shareholder in the same manner as to other
shareholders.
Section 2.07. Use of Conference Telephone and Similar
Equipment.--Any director may participate in any meeting of the
board of directors, and the board of directors may provide by
resolution with respect to a specific meeting or with respect to
a class of meetings that one or more persons may participate in a
meeting of the shareholders of the corporation, by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this section shall
constitute presence in person at the meeting.
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ARTICLE III
Shareholders
Section 3.01. Place of Meeting.--All meetings of the
shareholders of the corporation shall be held at the registered
office of the corporation unless another place is designated by
the board of directors in the notice of a meeting.
Section 3.02. Annual Meeting.--The board of directors may
fix and designate the date and time of the annual meeting of the
shareholders, but if no such date and time is fixed and
designated by the board, the meeting for any calendar year shall
be held on the second Wednesday in April in such year, if not a
legal holiday under the laws of Pennsylvania, and, if a legal
holiday, then on the next succeeding business day, not a
Saturday, at 10:30 o'clock a.m., and at said meeting the
shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought
before the meeting. If the annual meeting shall not have been
called and held within six months after the designated time, any
shareholder may call the meeting at any time thereafter.
Section 3.03. Special Meetings.--Special meetings of the
shareholders may be called at any time by resolution of the board
of directors, which may fix the date, time and place of the
meeting, and shall be called as provided in the terms of the
Preferred Stock. If the board does not fix the date, time or
place of the meeting, it shall be the duty of the secretary to do
so. A date fixed by the secretary shall not be more than 60 days
after the date of the adoption of the resolution of the board
calling the special meeting.
Section 3.04. Quorum and Adjournment.
(a) General Rule.--A meeting of the shareholders of the
corporation duly called shall not be organized for the
transaction of business unless a quorum is present. Except as
otherwise provided in the terms of the Preferred Stock, the
presence of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast on a
particular matter to be acted upon at the meeting shall
constitute a quorum for the purposes of consideration and action
on the matter. Shares of the corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the
board of directors of this corporation, as such, shall not be
counted in determining the total number of outstanding shares for
quorum purposes at any given time.
(b) Withdrawal of a Quorum.--The shareholders present at a
duly organized meeting can continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders
to leave less than a quorum.
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(c) Adjournments Generally.--Any regular or special meeting
of the shareholders, including one at which directors are to be
elected and one which cannot be organized because a quorum has
not attended, may be adjourned for such period and to such place
as the shareholders present and entitled to vote shall direct.
(d) Electing Directors at Adjourned Meeting.--Those
shareholders entitled to vote who attend a meeting called for the
election of directors that has been previously adjourned for lack
of a quorum, although less than a quorum as fixed in this
section, shall nevertheless constitute a quorum for the purpose
of electing directors.
(e) Other Action in Absence of Quorum.--Those shareholders
entitled to vote who attend a meeting of shareholders that has
been previously adjourned for one or more periods aggregating at
least 15 days because of an absence of a quorum, although less
than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set
forth in the notice of the meeting if the notice states that
those shareholders who attend the adjourned meeting shall
nevertheless constitute a quorum for the purpose of acting upon
the matter.
Section 3.05. Action by Shareholders.--Except as otherwise
provided in the Business Corporation Law or the articles or these
bylaws, whenever any corporate action is to be taken by vote of
the shareholders of the corporation, it shall be authorized by a
majority of the votes cast at a duly organized meeting of
shareholders by the holders of shares entitled to vote thereon.
Except as otherwise provided in the terms of the Preferred Stock
or when acting by unanimous consent to remove a director or
directors, the shareholders of the corporation may act only at a
duly organized meeting.
Section 3.06. Organization.--At every meeting of the
shareholders, the chairman of the board, if there be one, or, in
the case of vacancy in office or absence of the chairman of the
board, one of the following officers present in the order stated:
the vice chairman of the board, if there be one, the president,
the vice presidents in their order of rank and seniority, or a
person chose by vote of the shareholders present, shall act as
chairman of the meeting. The secretary or, in the absence of the
secretary, an assistant secretary, or, in the absence of both the
secretary and assistant secretaries, a person appointed by the
chairman of the meeting, shall act as secretary of the meeting.
Section 3.07. Voting Rights of Shareholders.--Unless
otherwise provided in the articles, every shareholder of the
corporation shall be entitled to one vote for every share
standing in the name of the shareholder on the books of the
corporation.
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Section 3.08. Voting and other Action by Proxy.
(a) General Rule.--
(1) Every shareholder entitled to vote at a meeting of
shareholders may authorize another person to act for the
shareholder by proxy.
(2) The presence of, or vote or other action at a
meeting of shareholders by a proxy of a shareholder shall
constitute the presence of, or vote or action by the
shareholder.
(3) Where two or more proxies of a shareholder are
present, the corporation shall, unless otherwise expressly
provided in the proxy, accept as the vote of all shares
represented thereby the vote cast by a majority of them and,
if a majority of the proxies cannot agree whether the shares
represented shall be voted, or upon the manner of voting the
shares, the voting of the shares shall be divided equally
among those persons.
(b) Minimum Requirements.--Every proxy shall be executed in
writing by the shareholder or by the duly authorized attorney-in-
fact of the shareholder and filed with the secretary of the
corporation. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a
proxy shall not be effective until written notice thereof has
been given to the secretary of the corporation. An unrevoked
proxy shall not be valid after three years from the date of its
execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the
maker unless, before the vote is counted or the authority is
exercised, written notice of the death or incapacity is given to
the secretary of the corporation.
(c) Expenses.--The corporation shall pay the reasonable
expenses of solicitation of votes or proxies of shareholders by
or on behalf of the board of directors or its nominees for
election to the board, including solicitation by professional
proxy solicitors and otherwise.
Section 3.09. Voting by Fiduciaries and Pledgees.--Shares
of the corporation standing in the name of a trustee or other
fiduciary and shares held by an assignee for the benefit of
creditors or by a receiver may be voted by the trustee,
fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares
have been transferred into the name of the pledgee, or a nominee
of the pledgee, but nothing in this section shall affect the
validity of a proxy given to a pledgee or nominee.
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Section 3.10. Voting by Joint Holders of Shares.
(a) General Rule.--Where shares of the corporation are held
jointly or as tenants in common by two or more persons, as
fiduciaries or otherwise:
(1) if only one or more of such persons is present in
person or by proxy, all of the shares standing in the names
of such persons shall be deemed to be represented for the
purpose of determining a quorum and the corporation shall
accept as the vote of all the shares the vote cast by a
joint owner or a majority of them; and
(2) if the persons are equally divided upon whether
the shares held by them shall be voted or upon the manner of
voting the shares, the voting of the shares shall be divided
equally among the persons without prejudice to the rights of
the joint owners or the beneficial owners thereof among
themselves.
(b) Exception.--If there has been filed with the secretary
of the corporation a copy, certified by an attorney-at-law to be
correct, of the relevant portions of the agreement under which
the shares are held or the instrument by which the trust or
estate was created or the order of court appointing them or of an
order of court directing the voting of the shares, the persons
specified as having such voting power in the document latest in
date of operative effect so filed, and only those persons, shall
be entitled to vote the shares but only in accordance therewith.
Section 3.11. Voting by Corporations.
(a) Voting by Corporate Shareholders.--Any corporation that
is a shareholder of this corporation may vote at meetings of
shareholders of this corporation by any of its officers or
agents, or by proxy appointed by any officer or agent, unless
some other person, by resolution of the board of directors of the
other corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by
one of its officers has been filed with the secretary of this
corporation, is appointed its general or special proxy in which
case that person shall be entitled to vote the shares.
(b) Controlled Shares.--Shares of this corporation owned,
directly or indirectly, by it and controlled, directly or
indirectly, by the board of directors of this corporation, as
such, shall not be voted at any meeting and shall not be counted
in determining the total number of outstanding shares for voting
purposes at any given time.
Section 3.12. Determination of Shareholders of Record.
(a) Fixing Record Date.--The board of directors may fix a
time prior to the date of any meeting of shareholders as a record
date for the determination of the shareholders entitled to notice
of, or to vote at, the meeting, which time, except as otherwise
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provided in the articles or in the case of an adjourned meeting,
shall be not more than 90 days prior to the date of the meeting
of shareholders. Only shareholders of record on the date fixed
shall be so entitled notwithstanding any transfer of shares on
the books of the corporation after any record date fixed as
provided in this subsection. The board of directors may
similarly fix a record date for the determination of shareholders
of record for any other purpose, except that the record date
fixed to determine the holders of Preferred Stock entitled to
receive dividends thereon shall not precede the respective
dividend payment date by more than 40 days. When a determination
of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply
to any adjournment thereof unless the board fixes a new record
date for the adjourned meeting.
(b) Determining When a Record Date is Not Fixed.--If a
record date is not fixed:
(1) The record date for determining shareholders
entitled to notice of, or to vote at, a meeting of
shareholders shall be at the close of business on the day
next preceding the day on which notice is given.
(2) The record date for determining shareholders for
any other purpose shall be at the close of business on the
day on which the board of directors adopts the resolution
relating thereto.
(c) Certification by Nominee.--The board of directors may
adopt a procedure whereby a shareholder of the corporation may
certify in writing to the corporation that all or a portion of
the shares registered in the name of the shareholder are held for
the account of a specified person or persons. Upon receipt by
the corporation of a certification complying with the procedure,
the persons specified in the certification shall be deemed, for
the purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the
shareholder making the certification.
Section 3.13. Voting Lists.
(a) General Rule.--The officer or agent having charge of
the transfer books for shares of the corporation shall make a
complete list of the shareholders entitled to vote at any meeting
of shareholders, arranged in alphabetical order, with the address
of and the number of shares held by each. The list shall be
produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the
whole time of the meeting for the purposes thereof except that,
if the corporation has 5,000 or more shareholders, in lieu of the
making of the list the corporation may make the information
therein available at the meeting by any other means.
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(b) Effect of List.--Failure to comply with the
requirements of this section shall not affect the validity of any
action taken at a meeting prior to a demand at the meeting by any
shareholder entitled to vote thereat to examine the list. The
original share register or transfer book, or a duplicate thereof
kept in the Commonwealth of Pennsylvania, shall be prima facie
evidence as to who are the shareholders entitled to examine the
list or share register or transfer book or to vote at any meeting
of shareholders.
Section 3.14. Judges of Election.
(a) Appointment.--In advance of any meeting of shareholders
of the corporation, the board of directors may appoint judges of
election, who need not be shareholders, to act at the meeting or
any adjournment thereof. If judges of election are not so
appointed, the presiding officer of the meeting may, and on the
request of any shareholder shall, appoint judges of election at
the meeting. The number of judges shall be one or three. A
person who is a candidate for an office to be filled at the
meeting shall not act as a judge.
(b) Vacancies.--In case any person appointed as a judge
fails to appear or fails or refuses to act, the vacancy may be
filled by appointment made by the board of directors in advance
of the convening of the meeting or at the meeting by the
presiding officer thereof.
(c) Duties.--The judges of election shall determine the
number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, and
the authenticity, validity and effect of proxies, receive votes
or ballots, hear and determine all challenges and questions in
any way arising in connection with nominations by shareholders or
the right to vote, count and tabulate all votes, determine the
result and do such acts as may be proper to conduct the election
or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith,
to the best of their ability and as expeditiously as is
practical. If there are three judges of election, the decision,
act or certificate of a majority shall be effective in all
respects as the decision, act or certificate of all.
(d) Report.--On request of the presiding officer of the
meeting or of any shareholder, the judges shall make a report in
writing of any challenge or question or matter determined by
them, and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence
of the facts stated therein.
Section 3.15. Minors as Security Holders.--The corporation
may treat a minor who holds shares or obligations of the
corporation as having capacity to receive and to empower others
to receive dividends, interest, principal and other payments or
distributions, to vote or express consent or dissent and to make
elections and exercise rights relating to such shares or
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obligations unless, in the case of payments or distributions on
shares, the corporate officer responsible for maintaining the
list of shareholders or the transfer agent of the corporation or,
in the case of payments or distributions on obligations, the
treasurer or paying officer or agent has received written notice
that the holder is a minor.
ARTICLE IV
Board of Directors
Section 4.01. Powers.
(a) General Rule.--Unless otherwise provided by statute,
all powers vested by law in the corporation shall be exercised by
or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of
directors.
(b) Personal Liability of Directors.--
(1) A director shall not be personally liable, as
such, for monetary damages for any action taken, or any
failure to take any action, unless:
(i) the director has breached or failed to
perform the duties of his or her office under 15
Pa.C.S. Sections 511 and 1721 and 42 Pa.C.S. Section 8363; and
(ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
(2) The provisions of paragraph (1) shall not apply to
the responsibility or liability of a director pursuant to
any criminal statute, or the liability of a director for the
payment of taxes pursuant to local, State or Federal law.
Section 4.02. Qualifications and Selection of Directors.
(a) Qualifications.--Each director of the corporation shall
be a natural person of full age who need not be a resident of the
Commonwealth of Pennsylvania or a shareholder of the corporation.
(b) Notice of Certain Nominations Required.--Nominations
for election of directors may be made by any shareholder entitled
to vote for the election of directors if written notice (the
"Notice") of the shareholder's intent to nominate a director at
the meeting is given by the shareholder and received by the
secretary of the corporation in the manner and within the time
specified in this section. The Notice shall be delivered to the
secretary of the corporation not less than 14 days nor more than
50 days prior to any meeting of the shareholders called for the
election of directors; except that if less than 21 days' notice
of the meeting is given to shareholders, the Notice shall be
delivered to the secretary of the corporation not later than the
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earlier of the seventh day following the day on which notice of
the meeting was first mailed to shareholders or the fourth day
prior to the meeting. In lieu of delivery to the secretary, the
Notice may be mailed to the secretary by certified mail, return
receipt requested, but shall be deemed to have been given only
upon actual receipt by the secretary. The requirements of this
subsection shall not apply to a nomination for directors made to
the shareholders by the board of directors.
(c) Contents of Notice.--The Notice shall be in writing and
shall contain or be accompanied by:
(1) the name and residence address of the nominating
shareholder;
(2) a representation that the shareholder is a holder
of record of voting stock of the corporation and intends to
appear in person or by proxy at the meeting to nominate the
person or persons specified in the Notice;
(3) such information regarding each nominee as would
have been required to be included in a proxy statement filed
pursuant to Regulation 14A of the rules and regulations
established by the Securities and Exchange Commission under
the Securities Exchange Act of 1934 (or pursuant to any
successor act or regulation) had proxies been solicited with
respect to such nominee by the management or board of
directors of the corporation;
(4) a description of all arrangements or
understandings among the shareholder and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be
made by the shareholder; and
(5) the consent of each nominee to serve as a director
of the corporation if so elected.
(d) Determination of Compliance.--If a judge or judges of
election shall not have been appointed pursuant to these bylaws,
the chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that any nomination made at the
meeting was not made in accordance with the procedures of this
section and, in such event, the nomination shall be disregarded.
Any decision by the chairman of the meeting made in good faith
shall be conclusive and binding upon all shareholders of the
corporation for any purpose.
(e) Election of Directors.--Except as otherwise provided in
these bylaws, directors of the corporation shall be elected by
the shareholders. In elections for directors, voting need not be
by ballot, except upon demand made by a shareholder entitled to
vote at the election and before voting begins. The candidates
receiving the highest number of votes from each class or group of
classes, if any, entitled to elect directors separately up to the
number of directors to be elected by the class or group of
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classes shall be elected. If at any meeting of shareholders,
directors of more than one class are to be elected, each class of
directors shall be elected in a separate election.
Section 4.03. Number and Term of Office.
(a) Number.--The board of directors shall consist of such
number of directors as may be determined from time to time by
resolution of the board of directors.
(b) Term of Office.--Each director shall hold office until
the expiration of the term for which he or she was selected and
until a successor has been selected and qualified or until his or
her earlier death, resignation or removal. A decrease in the
number of directors shall not have the effect of shortening the
term of any incumbent director.
(c) Resignation.--Any director may resign at any time upon
written notice to the corporation. The resignation shall be
effective upon receipt thereof by the corporation or at such
subsequent time as shall be specified in the notice of
resignation.
(d) Classified Board of Directors.--The directors shall be
classified in respect to the time for which they shall severally
hold office as follows:
(1) Each class shall be as nearly equal in number as
possible.
(2) The term of office of at least one class shall
expire in each year.
(3) Except as otherwise provided in the terms of the
Preferred Stock or in the articles, the members of each
class shall be elected for a period of three years.
Section 4.04. Vacancies.
(a) General Rule.--Except as otherwise provided in the
terms of the Preferred Stock, vacancies in the board of
directors, including vacancies resulting from an increase in the
number of directors, may be filled by a majority vote of the
remaining members of the board though less than a quorum, or by a
sole remaining director, and each person so selected shall be a
director to serve until the next selection of the class for which
such director has been chosen, and until a successor has been
selected and qualified or until his or her earlier death,
resignation or removal.
(b) Action by Resigned Directors.--When one or more
directors resign from the board effective at a future date, the
directors then in office, including those who have so resigned,
shall have power by the applicable vote to fill the vacancies,
the vote thereon to take effect when the resignations become
effective.
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Section 4.05. Removal of Directors.
(a) Removal by the Shareholders.--The entire board of
directors, or any class of the board, or any individual director
may be removed from office by vote of the shareholders entitled
to vote thereon only for cause. In case the board or a class of
the board or any one or more directors are so removed, new
directors may be elected at the same meeting. The repeal of a
provision of the articles or bylaws prohibiting, or the addition
of a provision to the articles or bylaws permitting, the removal
by the shareholders of the board, a class of the board or a
director without assigning any cause shall not apply to any
incumbent director during the balance of the term for which the
director was selected.
(b) Removal by the Board.--The board of directors may
declare vacant the office of a director who has been judicially
declared of unsound mind or who has been convicted of an offense
punishable by imprisonment for a term of more than one year or
if, within 60 days after notice of his or her selection, the
director does not accept the office either in writing or by
attending a meeting of the board of directors.
Section 4.06. Place of Meetings.--Meetings of the board of
directors may be held at such place within or without the
Commonwealth of Pennsylvania as the board of directors may from
time to time appoint or as may be designated in the notice of the
meeting.
Section 4.07. Organization of Meetings.--At every meeting
of the board of directors, the chairman of the board, if there be
one, or, in the case of a vacancy in the office or absence of the
chairman of the board, one of the following officers present in
the order stated: the vice chairman of the board, if there be
one, the president, the vice presidents in their order of rank
and seniority, or a person chosen by a majority of the directors
present, shall act as chairman of the meeting. The secretary or,
in the absence of the secretary, an assistant secretary, or, in
the absence of the secretary and the assistant secretaries, any
person appointed by the chairman of the meeting, shall act as
secretary of the meeting.
Section 4.08. Regular Meetings.--Regular meetings of the
board of directors shall be held at such time and place as shall
be designated from time to time by resolution of the board of
directors.
Section 4.09. Special Meetings.--Special meetings of the
board of directors shall be held whenever called by the chairman
or by two or more of the directors.
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Section 4.10. Quorum of and Action by Directors.
(a) General Rule.--A majority of the directors in office of
the corporation shall be necessary to constitute a quorum for the
transaction of business and the acts of a majority of the
directors present and voting at a meeting at which a quorum is
present shall be the acts of the board of directors.
(b) Action by Written Consent.--Any action required or
permitted to be taken at a meeting of the directors may be taken
without a meeting if, prior or subsequent to the action, a
consent or consents thereto by all of the directors in office is
filed with the secretary of the corporation.
(c) Notation of Dissent.--A director who is present at a
meeting of the board of directors, or of a committee of the
board, at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his or her
dissent is entered in the minutes of the meeting or unless the
director files a written dissent to the action with the secretary
of the meeting before the adjournment thereof or transmits the
dissent in writing to the secretary of the corporation
immediately after the adjournment of the meeting. The right to
dissent shall not apply to a director who voted in favor of the
action. Nothing in this section shall bar a director from
asserting that minutes of the meeting incorrectly omitted his or
her dissent if, promptly upon receipt of a copy of such minutes,
the director notifies the secretary, in writing, of the asserted
omission or inaccuracy.
Section 4.11. Executive and Other Committees.
(a) Establishment and Powers.--The board of directors may,
by resolution adopted by a majority of the directors in office,
establish one or more committees to consist of one or more
directors of the corporation. Any committee, to the extent
provided in the resolution of the board of directors, shall have
and may exercise all of the powers and authority of the board of
directors except that a committee shall not have any power or
authority as to the following:
(1) The submission to shareholders of any action
requiring approval of shareholders under the Business
Corporation Law.
(2) The creation or filling of vacancies in the board
of directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the
board that by its terms is amendable or repealable only by
the board.
(5) Action on matters committed by a resolution of the
board of directors to another committee of the board.
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(b) Alternate Committee Members.--The board may designate
one or more directors as alternate members of any committee who
may replace any absent or disqualified member at any meeting of
the committee or for the purposes of any written action by the
committee. In the absence or disqualification of a member and
alternate member or members of a committee, the member or members
thereof present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint
another director to act at the meeting in the place of the absent
or disqualified member.
(c) Term.--Each committee of the board shall serve at the
pleasure of the board.
(d) Committee Procedures.--The term "board of directors" or
"board," when used in any provision of these bylaws relating to
the organization or procedures of or the manner of taking action
by the board of directors, shall be construed to include and
refer to any executive or other committee of the board.
Section 4.12. Compensation.--The board of directors shall
have the authority to fix the compensation of directors for their
services as directors and a director may be a salaried officer of
the corporation.
ARTICLE V
Officers
Section 5.01. Officers Generally.
(a) Number, Qualifications and Designation.--The officers
of the corporation shall be a president, one or more vice
presidents, a secretary, a treasurer, and such other officers as
may be elected in accordance with the provisions of Section 5.03.
Officers may but need not be directors or shareholders of the
corporation. The president and secretary shall be natural
persons of full age. The treasurer may be a corporation, but if
a natural person shall be of full age. The board of directors
may elect from among the members of the board a chairman of the
board and vice chairman of the board who shall be officers of the
corporation. Any number of offices may be held by the same
person.
(b) Bonding.--The corporation may secure the fidelity of
any or all of its officers by bond or otherwise.
Section 5.02. Election, Term of Office and Resignations.
(a) Election and Term of Office.--The officers of the
corporation, except those elected by delegated authority pursuant
to Section 5.03, shall be elected annually by the board of
directors, and each such officer shall hold office for a term of
one year and until a successor has been selected and qualified or
until his or her earlier death, resignation or removal.
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(b) Resignations.--Any officer may resign at any time upon
written notice to the corporation. The resignation shall be
effective upon receipt thereof by the corporation or at such
subsequent time as may be specified in the notice of resignation.
Section 5.03. Subordinate Officers, Committees and
Agents.--The board of directors may from time to time elect such
other officers and appoint such committees, employees or other
agents as the business of the corporation may require, including
one or more assistant secretaries, and one or more assistant
treasurers, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these
bylaws, or as the board of directors may from time to time
determine. The board of directors may delegate to any officer or
committee the power to elect subordinate officers and to retain
or appoint employees or other agents, or committees thereof, and
to prescribe the authority and duties of such subordinate
officers, committees, employees or other agents.
Section 5.04. Removal of Officers and Agents.--Any officer
or agent of the corporation may be removed by the board of
directors with or without cause. The removal shall be without
prejudice to the contract rights, if any, of any person so
removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
Section 5.05. Vacancies.--A vacancy in any office because
of death, resignation, removal, disqualification, or any other
cause, may be filled by the board of directors or by the officer
or committee to which the power to fill such office has been
delegated pursuant to Section 5.03, as the case may be, and if
the office is one for which these bylaws prescribe a term, shall
be filled for the unexpired portion of the term.
Section 5.06. Authority.
(a) General Rule.--All officers of the corporation, as
between themselves and the corporation, shall have such authority
and perform such duties in the management of the corporation as
may be provided by or pursuant to resolutions or orders of the
board of directors or, in the absence of controlling provisions
in the resolutions or orders of the board of directors, as may be
determined by or pursuant to these bylaws.
(b) Chief Executive Officer--The chairman of the board or
the president, as designated from time to time by resolution of
the board of directors, shall be the chief executive officer of
the corporation.
Section 5.07. The Chairman and Vice Chairman of the
Board.--The chairman of the board, or in the absence of the
chairman, the vice chairman of the board, shall preside at all
meetings of the shareholders and of the board of directors, and
shall perform such other duties as may from time to time be
requested by the board of directors.
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Section 5.08. The President.--The president shall have
general supervision over the business and operations of the
corporation, subject however, to the control of the board of
directors and, if the chairman of the board is the chief
executive officer of the corporation, the chairman of the board.
The president shall sign, execute, and acknowledge, in the name
of the corporation, deeds, mortgages, bonds, contracts or other
instruments, authorized by the board of directors, except in
cases where the signing and execution thereof shall be expressly
delegated by the board of directors, or by these bylaws, to some
other officer or agent of the corporation; and, in general, shall
perform all duties incident to the office of president and such
other duties as from time to time may be assigned by the board of
directors and, if the chairman of the board is the chief
executive officer of the corporation, the chairman of the board.
Section 5.09. The Vice Presidents.--The vice presidents
shall perform the duties of the president in the absence of the
president and such other duties as may from time to time be
assigned to them by the board of directors or the president.
Section 5.10. The Secretary.--The secretary or an assistant
secretary shall attend all meetings of the shareholders and of
the board of directors and shall record all the votes of the
shareholders and of the directors and the minutes of the meetings
of the shareholders and of the board of directors and of
committees of the board in a book or books to be kept for that
purpose; shall see that notices are given and records and reports
properly kept and filed by the corporation as required by law;
shall be the custodian of the seal of the corporation and see
that it is affixed to all documents to be executed on behalf of
the corporation under its seal; and, in general, shall perform
all duties incident to the office of secretary, and such other
duties as may from time to time be assigned by the board of
directors or the president.
Section 5.11. The Treasurer.--The treasurer or an assistant
treasurer shall have or provide for the custody of the funds or
other property of the corporation; shall collect and receive or
provide for the collection and receipt of moneys earned by or in
any manner due to or received by the corporation; shall deposit
all funds in his or her custody as treasurer in such banks or
other places of deposit as the board of directors may from time
to time designate; shall, whenever so required by the board of
directors, render an account showing all transactions as
treasurer, and the financial condition of the corporation; and,
in general, shall discharge such other duties as may from time to
time be assigned by the board of directors or the president.
Section 5.12. Salaries.--The salaries of the officers
elected by the board of directors shall be fixed from time to
time by the board of directors or by such officer as may be
designated by resolution of the board. The salaries or other
compensation of any other officers, employees and other agents
shall be fixed from time to time by the officer or committee to
which the power to elect such officers or to retain or appoint
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such employees or other agents has been delegated pursuant to
Section 5.03. No officer shall be prevented from receiving such
salary or other compensation by reason of the fact that the
officer is also a director of the corporation.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
Section 6.01. Share Certificates.
(a) Form of Certificates.--Certificates for shares of the
corporation shall be in such form as approved by the board of
directors, and shall state that the corporation is incorporated
under the laws of the Commonwealth of Pennsylvania, the name of
the person to whom issued, and the number and class of shares and
the designation of the series (if any) that the certificate
represents. Certificates for shares of the corporation shall set
forth upon the face or back of the certificate (or shall state on
the face or back of the certificate that the corporation will
furnish to any shareholder upon request and without charge), a
full or summary statement of the designations, voting rights,
preferences, limitations and special rights of the shares of each
class or series authorized to be issued so far as they have been
fixed and determined and the authority of the board of directors
to fix and determine the designations, voting rights,
preferences, limitations and special rights of the classes and
series of shares of the corporation.
(b) Share Register.--The share register or transfer books
and blank share certificates shall be kept by the treasurer or by
any transfer agent or registrar designated by the board of
directors for that purpose.
Section 6.02. Issuance.--The share certificates of the
corporation shall be numbered and registered in the share
register or transfer books of the corporation as they are issued.
They shall be executed in such manner as the board of directors
shall determine.
Section 6.03. Transfer.--Transfers of shares shall be made
on the share register or transfer books of the corporation upon
surrender of the certificate therefor, endorsed by the person
named in the certificate or by an attorney lawfully constituted
in writing. No transfer shall be made inconsistent with the
provisions of the Uniform Commercial Code, 13 Pa.C.S. Sections 8101
et seq., and its amendments and supplements.
Section 6.04. Record Holder of Shares.--The corporation
shall be entitled to treat the person in whose name any share or
shares of the corporation stand on the books of the corporation
as the absolute owner thereof, and shall not be bound to
recognize any equitable or other claim to, or interest in, such
share or shares on the part of any other person.
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Section 6.05. Lost, Destroyed or Mutilated Certificates.--
The holder of any shares of the corporation shall immediately
notify the corporation of any loss, destruction or mutilation of
the certificate therefor, and the officers of the corporation
may, in their discretion, cause a new certificate or certificates
to be issued to such holder, in case of mutilation of the
certificate, upon the surrender of the mutilated certificate or,
in case of loss or destruction of the certificate, upon
satisfactory proof of such loss or destruction and, if such
officers shall so determine, the deposit of a bond in such form
and in such sum, and with such surety or sureties, as any of them
may direct.
ARTICLE VII
Indemnification of Directors, Officers and
Other Authorized Representatives
Section 7.01. Scope of Indemnification.
(a) General Rule.--The corporation shall indemnify an
indemnified representative against any liability incurred in
connection with any proceeding in which the indemnified
representative may be involved as a party or otherwise by reason
of the fact that such person is or was serving in an indemnified
capacity, including, without limitation, liabilities resulting
from any actual or alleged breach or neglect of duty, error,
misstatement or misleading statement, negligence, gross
negligence or act giving rise to strict or products liability,
except:
(1) where such indemnification is expressly prohibited
by applicable law;
(2) where the conduct of the indemnified
representative has been finally determined pursuant to
Section 7.06 or otherwise:
(i) to constitute willful misconduct or
recklessness within the meaning of 15 Pa.C.S. Sections 513(b)
and 1746(b) and 42 Pa.C.S. Section 8365(b) or any superseding
provision of law sufficient in the circumstances to bar
indemnification against liabilities arising from the
conduct; or
(ii) to be based upon or attributable to the
receipt by the indemnified representative from the
corporation of a personal benefit to which the
indemnified representative is not legally entitled; or
(3) to the extent such indemnification has been
finally determined in a final adjudication pursuant to
Section 7.06 to be otherwise unlawful.
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(b) Partial Payment.--If an indemnified representative is
entitled to indemnification in respect of a portion, but not all,
of any liabilities to which such person may be subject, the
corporation shall indemnify such indemnified representative to
the maximum extent for such portion of the liabilities.
(c) Presumption.--The termination of a proceeding by
judgment, order, settlement or conviction or upon a plea of nolo
contendere or its equivalent shall not of itself create a
presumption that the indemnified representative is not entitled
to indemnification.
(d) Definitions.--For purposes of this Article:
(1) "indemnified capacity" means any and all past,
present and future service by an indemnified representative
in one or more capacities as a director, officer, employee
or agent of the corporation, or, at the request of the
corporation, as a director, officer, employee, agent
fiduciary or trustee of another corporation, partnership,
joint venture, trust, employee benefit plan or other entity
or enterprise;
(2) "indemnified representative" means any and all
directors and officers of the corporation any other person
designated as an indemnified representative by the board of
directors of the corporation (which may, but need not,
include any person serving at the request of the
corporation, as a director, officer, employee, agent,
fiduciary or trustee of another corporation, partnership,
joint venture, trust, employee benefit plan or other entity
or enterprise);
(3) "liability" means any damage, judgment, amount
paid in settlement, fine, penalty, punitive damages, excise
tax assessed with respect to an employee benefit plan, or
cost or expense, of any nature (including, without
limitation, attorneys' fees and disbursements); and
(4) "proceeding" means any threatened, pending or
completed action, suit, appeal or other proceeding of any
nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether
brought by or in the right of the corporation, a class of
its security holders or otherwise.
Section 7.02. Proceedings Initiated by Indemnified
Representatives.--Notwithstanding any other provision of this
Article, the corporation shall not indemnify under this Article
an indemnified representative for any liability incurred in a
proceeding initiated (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an
intervenor or amicus curiae by the person seeking indemnification
unless such initiation of or participation in the proceeding is
authorized, either before or after its commencement, by the
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affirmative vote of a majority of the directors in office. This
section does not apply to reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under
Section 7.06 or otherwise successfully prosecuting or defending
the rights of an indemnified representative granted by or
pursuant to this Article.
Section 7.03. Advancing Expenses.--The corporation shall
pay the expenses (including attorneys' fees and disbursements)
incurred in good faith by an indemnified representative in
advance of the final disposition of a proceeding described in
Section 7.01 or the initiation of or participation in which is
authorized pursuant to Section 7.02 upon receipt of an
undertaking by or on behalf of the indemnified representative to
repay the amount if it is ultimately determined pursuant to
Section 7.06 that such person is not entitled to be indemnified
by the corporation pursuant to this Article. The financial
ability of an indemnified representative to repay an advance
shall not be a prerequisite to the making of such advance.
Section 7.04. Securing of Indemnification Obligations.--To
further effect, satisfy or secure the indemnification obligations
provided herein or otherwise, the corporation may maintain
insurance, obtain a letter of credit, act as self-insurer, create
a reserve, trust, escrow, cash collateral or other fund or
account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the corporation,
or use any other mechanism or arrangement whatsoever in such
amounts, at such costs, and upon such other terms and conditions
as the board of directors shall deem appropriate. Absent fraud,
the determination of the board of directors with respect to such
amounts, costs, terms and conditions shall be conclusive against
all security holders, officers and directors and shall not be
subject to voidability.
Section 7.05. Payment of Indemnification.--An indemnified
representative shall be entitled to indemnification within 30
days after a written request for indemnification has been
delivered to the secretary of the corporation.
Section 7.06. Arbitration.
(a) General Rule.--Any dispute related to the right to
indemnification, contribution or advancement of expenses as
provided under this Article, except with respect to
indemnification for liabilities arising under the Securities Act
of 1933 that the corporation has undertaken to submit to a court
for adjudication, shall be decided only by arbitration in the
metropolitan area in which the principal executive offices of the
corporation are located at the time, in accordance with the
commercial arbitration rules then in effect of the American
Arbitration Association, before a panel of three arbitrators, one
of whom shall be selected by the corporation, the second of whom
shall be selected by the indemnified representative and the third
of whom shall be selected by the other two arbitrators. In the
absence of the American Arbitration Association, or if for any
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reason arbitration under the arbitration rules of the American
Arbitration Association cannot be initiated, and if one of the
parties fails or refuses to select an arbitrator or the
arbitrators selected by the corporation and the indemnified
representative cannot agree on the selection of the third
arbitrator within 30 days after such time as the corporation and
the indemnified representative have each been notified of the
selection of the other's arbitrator, the necessary arbitrator or
arbitrators shall be selected by the presiding judge of the court
of general jurisdiction in such metropolitan area.
(b) Qualifications of Arbitrators.--Each arbitrator
selected as provided herein is required to be or have been a
director or executive officer of a corporation whose shares of
common stock were listed during at least one year of such service
on the New York Stock Exchange or the American Stock Exchange or
quoted on the National Association of Securities Dealers
Automated Quotations System.
(c) Burden of Proof.--The party or parties challenging the
right of an indemnified representative to the benefits of this
Article shall have the burden of proof.
(d) Expenses.--The corporation shall reimburse an
indemnified representative for the expenses (including attorneys'
fees and disbursements) incurred in successfully prosecuting or
defending such arbitration.
(e) Effect.--Any award entered by the arbitrators shall be
final, binding and nonappealable and judgment may be entered
thereon by any party in accordance with applicable law in any
court of competent jurisdiction, except that the corporation
shall be entitled to interpose as a defense in any such judicial
enforcement proceeding any prior final judicial determination
adverse to the indemnified representative under Section
7.01(a)(2) in a proceeding not directly involving indemnification
under this Article. This arbitration provision shall be
specifically enforceable.
Section 7.07. Contribution.--If the indemnification
provided for in this Article or otherwise is unavailable for any
reason in respect of any liability or portion thereof, the
corporation shall contribute to the liabilities to which the
indemnified representative may be subject in such proportion as
is appropriate to reflect the intent of this Article or
otherwise.
Section 7.08. Mandatory Indemnification of Directors,
Officers, Etc.--To the extent that an authorized representative
of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
Section 1741 or 1742 of the Business Corporation Law or in
defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees and
disbursements) actually and reasonably incurred by such person in
connection therewith.
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Section 7.09. Contract Rights; Amendment or Repeal.--All
rights under this Article shall be deemed a contract between the
corporation and the indemnified representative pursuant to which
the corporation and each indemnified representative intend to be
legally bound. Any repeal, amendment or modification hereof
shall be prospective only and shall not affect any rights or
obligations then existing.
Section 7.10. Scope of Article.--The rights granted by this
Article shall not be deemed exclusive of any other rights to
which those seeking indemnification, contribution or advancement
of expenses may be entitled under any statute, agreement, vote of
shareholders or disinterested directors or otherwise, both as to
action in an indemnified capacity and as to action in any other
capacity. The indemnification, contribution and advancement of
expenses provided by or granted pursuant to this Article shall
continue as to a person who has ceased to be an indemnified
representative in respect of matters arising prior to such time,
and shall inure to the benefit of the heirs, executors,
administrators and person representatives of such a person.
Section 7.11. Reliance on Provisions.--Each person who
shall act as an indemnified representative of the corporation
shall be deemed to be doing so in reliance upon the rights
provided by this Article.
Section 7.12. Interpretation.--The provisions of this
Article are intended to constitute bylaws authorized by 15
Pa.C.S. Sections 513 and 1746 and 42 Pa.C.S. Section 8365.
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ARTICLE VIII
Emergency Bylaws
Section 8.01. Scope of Article.--This Article shall be
applicable during any emergency resulting from a catastrophe as a
result of which a quorum of the board of directors cannot readily
be assembled. To the extent not in conflict with this Article,
these bylaws shall remain in effect during the emergency.
Section 8.02. Special Meetings of the Board.--A special
meeting of the board of directors may be called by any director
by means feasible at the time.
Section 8.03. Emergency Committee of the Board.
(a) Composition.--The emergency committee of the board
shall consist of nine persons standing highest on the following
list who are available and able to act:
Members of the board of directors.
President.
The individual who, immediately prior to the emergency, was
the senior officer in charge of nuclear operations.
The individual who, immediately prior to the emergency, was
the senior officer in charge of other operations.
The individual who, immediately prior to the emergency, was
the senior officer in charge of finance operations.
Other officers.
Where more than one person holds any of the listed ranks, the
order of precedence shall be determined by length of time in
rank. Each member of the emergency committee thus constituted
shall continue to act until replaced by an individual standing
higher on the list. The emergency committee shall continue to
act until a quorum of the board of directors is available and
able to act. If the corporation has no directors, the emergency
committee shall cause a special meeting of shareholders for the
election of directors to be called and held as soon as
practicable.
(b) Powers.--The emergency committee shall have and may
exercise all of the powers and authority of the board of
directors, including the power to fill a vacancy in any office of
the corporation or to designate a temporary replacement for any
officer of the corporation who is unavailable, but shall not have
the power to fill vacancies in the board of directors.
(c) Quorum.--A majority of the members of the emergency
committee in office shall constitute a quorum.
(d) Status.--Each member of the emergency committee who is
not a director shall during his or her service as such be
entitled to the rights and immunities conferred by law, the
articles and these bylaws upon directors of the corporation and
upon persons acting in good faith as a representative of the
corporation during an emergency.
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ARTICLE IX
Miscellaneous
Section 9.01. Corporate Seal.--The corporation shall have a
corporate seal in the form of a circle containing the name of the
corporation, the year of incorporation and such other details as
may be approved by the board of directors.
Section 9.02. Checks.--All checks, notes, bills of exchange
or other orders in writing shall be signed by such person or
persons as the board of directors or any person authorized by
resolution of the board of directors may from time to time
designate.
Section 9.03. Contracts.--Except as otherwise provided in
the Business Corporation Law in the case of transactions that
require action by the shareholders, the board of directors may
authorize any officer or agent to enter into any contract or to
execute or deliver any instrument on behalf of the corporation,
and such authority may be general or confined to specific
instances.
Section 9.04. Interested Directors or Officers; Quorum.
(a) General Rule.--A contract or transaction between the
corporation and one or more of its directors or officers or
between the corporation and another corporation, partnership,
joint venture, trust or other enterprise in which one or more of
its directors or officers are directors or officers or have a
financial or other interest, shall not be void or voidable solely
for that reason, or solely because the director or officer is
present at or participates in the meeting of the board of
directors that authorizes the contract or transaction, or solely
because his, her or their votes are counted for that purpose, if:
(1) the material facts as to the relationship or
interest and as to the contract or transaction are disclosed
or are known to the board of directors and the board
authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors even
though the disinterested directors are less than a quorum;
(2) the material facts as to his or her relationship
or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote
thereon and the contract or transaction is specifically
approved in good faith by vote of those shareholders; or
(3) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified by the board of directors or the shareholders.
(b) Quorum.--Common or interested directors may be counted
in determining the presence of a quorum at a meeting of the board
which authorizes a contract or transaction specified in
subsection (a).
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Section 9.05. Deposits.--All funds of the corporation shall
be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the board
of directors may approve or designate, and all such funds shall
be withdrawn only upon checks signed by such one or more officers
or employees as the board of directors shall from time to time
determine.
Section 9.06. Corporate Records.
(a) Required Records.--The corporation shall keep complete
and accurate books and records of account, minutes of the
proceedings of the incorporators, shareholders and directors and
a share register giving the names and addresses of all
shareholders and the number and class of shares held by each.
The share register shall be kept at either the registered office
of the corporation in the Commonwealth of Pennsylvania or at its
principal place of business wherever situated or at the office of
its registrar or transfer agent. Any books, minutes or other
records may be in written form or any other form capable of being
converted into written form within a reasonable time.
(b) Right of Inspection.--Every shareholder shall, upon
written verified demand stating the purpose thereof, have a right
to examine, in person or by agent or attorney, during the usual
hours for business for any proper purpose, the share register,
books and records of account, and records of the proceedings of
the incorporators, shareholders and directors and to make copies
or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to the interest of the person as a
shareholder. In every instance where an attorney or other agent
is the person who seeks the right of inspection, the demand shall
be accompanied by a verified power of attorney or other writing
that authorizes the attorney or other agent to so act on behalf
of the shareholder. The demand shall be directed to the
corporation at its registered office in the Commonwealth of
Pennsylvania or at its principal place of business wherever
situated.
Section 9.07. Amendment of Bylaws.
(a) General Rule.--Except as otherwise provided in the
express terms of any series of the shares of the corporation:
(1) The shareholders shall have the power to amend or
repeal these bylaws, or to adopt new bylaws, only with the
approval of the board of directors. A direction by the
board that a shareholder proposal with respect to the bylaws
shall be submitted to the shareholders for action thereon,
or the sufferance by the board that such a proposal shall be
so submitted, shall not constitute approval by the board of
directors of the amendment, repeal or new bylaws.
(2) These bylaws may be amended or repealed, or new
bylaws may be adopted, by vote of a majority of the board of
directors of the corporation in office at any regular
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special meeting of directors, including in circumstances
otherwise reserved by statute exclusively to the
shareholders, the board of directors of the corporation
having under the articles of incorporation the full
authority conferred by law upon the shareholders of the
corporation to adopt, amend or repeal these bylaws. Any
bylaw adopted by the board of directors under this paragraph
shall be consistent with the articles of incorporation.
(b) Effective Date.--Any change in these bylaws shall take
effect when adopted unless otherwise provided in the resolution
effecting the change.
As adopted February 26, 1990 and amended February 28, 1994.
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EXHIBIT 12-1
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
SEC METHOD
($000)
12 MONTHS
ENDED
12/31/93
-----------
NET INCOME $590,648
ADD BACK:
- - INCOME TAXES:
OPERATING INCOME 354,391
NON-OPERATING INCOME 11,808
-----------
NET TAXES 366,199
- - FIXED CHARGES:
INTEREST APPLICABLE TO DEBT 436,790
ANNUAL RENTALS 8,361
-----------
TOTAL FIXED CHARGES 445,151
ADJUSTED EARNINGS INCLUDING AFUDC 1,401,998
===========
RATIO OF EARNINGS TO FIXED CHARGES 3.15
===========
<PAGE>
<PAGE>
<PAGE> 114
EXHIBIT 12-2
PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
SEC METHOD
($000)
12 MONTHS
ENDED
12/31/93
------------
NET INCOME $590,648
ADD BACK:
- - INCOME TAXES:
OPERATING INCOME 354,391
NON-OPERATING INCOME 11,808
------------
NET TAXES 366,199
- - FIXED CHARGES:
TOTAL INTEREST 436,790
ANNUAL RENTALS 8,361
------------
TOTAL FIXED CHARGES 445,151
EARNINGS REQUIRED FOR PREFERRED DIVIDENDS:
DIVIDENDS ON PREFERRED STOCK 49,058
ADJUSTMENT TO PREFERRED DIVIDENDS* 30,416
------------
79,474
FIXED CHARGES AND PREFERRED DIVIDENDS $524,625
============
EARNINGS BEFORE INCOME TAXES AND FIXED CHARGE $1,401,998
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
EARNINGS REQUIRED FOR PREFERRED DIVIDEND 2.67
============
* ADDITIONAL CHARGE EQUIVALENT TO EARNINGS REQUIRED
TO ADJUST DIVIDENDS ON PREFERRED STOCK TO A PRE-TAX BASIS
<PAGE>
<PAGE>
<PAGE> 115
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Earnings and Dividends
Earnings per common share in 1993 were $2.45 compared to $1.90 in 1992. The
increase in earnings was primarily due to the settlement of the litigation in
connection with the 1987 shutdown of the Peach Bottom Atomic Power Station
(Peach Bottom), which reduced 1992 earnings by $0.27 per share; more favorable
weather in 1993, which increased earnings by $0.26 per share; and the
Company's on-going debt and preferred stock refinancing and redemption
program, which increased earnings by $0.18 per share. These improvements were
partially offset by non-recurring federal income tax settlements, which
increased 1992 earnings by $0.10 per share, and the higher 1993 federal income
tax rate, which decreased earnings by $0.04 per share.
As a result of its improved financial condition, the Company increased its
annual common stock dividend by 9% to $1.52 per share, effective with the
dividend paid in December 1993.
Operating Revenues
Electric Revenue Increase/(Decrease)
(Millions of Dollars) '93 vs '92 '92 vs '91
Sales $ 100 $ (103)
Tax Adjustment Revenues (19) 48
Fuel Adjustment Revenue (106) (22)
Energy and Capacity Sales 33 12
----------- -----------
$ 8 $ (65)
=========== ==========
1993 vs 1992
Electric revenues increased $8 million in 1993 compared to 1992 primarily as a
result of favorable weather and higher sales to other utilities, partially
offset by the pass-through of lower fuel costs to customers and lower revenues
from large commercial and industrial customers.
Effective April 1, 1993, the Energy Cost Adjustment (ECA) was changed from a
credit value of 3.764 mills per kilowatthour (kWh) to a credit value of 7.600
mills per kWh, which represents a decrease in annual revenue of $123 million.
Gas revenues increased $17 million in 1993 compared to 1992 primarily as a
result of higher interruptible sales resulting from favorable market
conditions and an increase in gas being used at the Company's electric gen-
erating stations.
1992 vs 1991
Electric revenues decreased $65 million in 1992 compared to 1991 primarily as
a result of lower sales to residential customers and large commercial and
industrial customers and the pass-through of lower fuel costs to customers.
This was partially offset by increased sales to house-heating customers and
small commercial and industrial customers. The unusually cool summer of 1992
was the major reason for decreased residential sales.
Gas revenues increased $9 million in 1992 compared to 1991 primarily as a
result of higher sales to house-heating customers due to the cooler weather
and an increase in house-heating customers.
<PAGE>
<PAGE> 116
Fuel and Energy Interchange Expense
1993 vs 1992
Fuel and energy interchange costs decreased $50 million in 1993 compared to
1992 primarily due to the Company's increased nuclear generation, which
reduced higher-cost interchange purchases, and lower cost of fuel. Nuclear
generation utilizes the Company's lowest cost fuel. These decreases were
partially offset by increased output.
1992 vs 1991
Fuel and energy interchange costs decreased $70 million in 1992 compared to
1991 primarily due to lower fuel costs and to slightly lower output.
Other Operating and Maintenance Expenses
1993 vs 1992
Other operating and maintenance expenses decreased $44 million in 1993
compared to 1992 primarily due to lower charges for uncollectible accounts,
lower administrative and general expenses primarily as a result of a reduction
in the number of employees and the 1992 charge for the Nuclear Group Voluntary
Early Retirement Program and Voluntary Separation Package. These decreases
were partially offset by increases in other operating and maintenance charges
related to the Company's generating units.
1992 vs 1991
Other operating and maintenance expenses increased $85 million in 1992
compared to 1991 primarily due to higher charges for uncollectible accounts,
non-recurring maintenance expenditures incurred at the Company's nuclear
generating facilities, the charge for the Nuclear Group Voluntary Early
Retirement Program and Voluntary Separation Package, higher accruals for
environmental liabilities and increases in other administrative and general
expenses.
Depreciation Expense
Depreciation expense increased in both 1993 and 1992 compared to the prior
year primarily due to additions to plant in service.
Allowance for Funds Used During Construction
1993 vs 1992
Allowance for Funds Used During Construction (AFUDC) increased in 1993
compared to 1992 primarily due to an increase in Construction Work in
Progress, partially offset by a decrease in the 1993 AFUDC rate.
1992 vs 1991
AFUDC decreased in 1992 compared to 1991 primarily due to a decrease in the
1992 AFUDC rate.
Income Taxes
As discussed further in note 12 of Notes to Consolidated Financial Statements,
the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which was
adopted in the first quarter of 1993. Adoption of SFAS No. 109 did not have a
material effect upon the Company's results of operations as the Company
expects to receive recovery for taxes when paid.
<PAGE>
<PAGE> 117
1993 vs 1992
Income taxes charged to operations and to other income increased in 1993
compared to 1992 due to the cost associated with the 1992 settlement of the
Peach Bottom co-owners' litigation, higher pre-tax income, lower interest
expense, the reduction in 1992 income taxes as a result of the settlement of
the Company's 1984-1986 federal income tax returns and the change in the
federal income tax rate from 34% to 35% in 1993. These increases were
partially offset by a first-quarter 1993 adjustment of excess deferred federal
income taxes. This adjustment resulted from a change in estimate to ratably
decrease deferred federal income taxes in accord-ance with the tax-rate
decrease mandated by the Tax Reform Act of 1986.
1992 vs 1991
Income taxes charged to operations and to other income decreased in 1992
compared to 1991 primarily due to lower pre-tax income and the cost associated
with the settlement of the Peach Bottom co-owners' litigation.
Other Taxes
1993 vs 1992
Other taxes increased in 1993 compared to 1992 primarily due to a settlement
of the 1990 Pennsylvania Capital Stock Tax and an adjustment of the 1991
Pennsylvania Capital Stock Tax in 1992, and an increase in the real estate tax
base.
1992 vs 1991
Other taxes increased in 1992 compared to 1991 primarily due to the refunds in
1991 of prior years' real estate tax over-collections.
Interest Charges
1993 vs 1992
Interest charges decreased in 1993 compared to 1992 primarily due to the
Company's on-going program to refinance and redeem higher-interest long-term
debt.
1992 vs 1991
Interest charges decreased in 1992 compared to 1991 primarily due to the
Company's on-going program to refinance and redeem higher-interest long-term
debt and lower interest rates on bank borrowings.
Preferred Stock Dividends
Preferred stock dividends decreased in both 1993 and 1992 compared to the
prior year primarily due to the reduced number of preferred shares outstanding
and the refinancing of higher-cost preferred stock.
Liquidity and Capital Resources
The Company's capital requirements are primarily for capital expenditures for
its construction program and for debt service. Capital resources available to
meet these requirements and dividend payments are funded from cash provided by
utility operations and, to the extent necessary, external financing.
The Company meets its short-term liquidity requirements primarily through
bank lines of credit, which were $351.2 million at December 31, 1993, against
which $119.4 million was outstanding, and through a $150 million commercial
paper program. No amounts were outstanding at year-end under the commercial
paper program. The Company believes these sources of short-term liquidity are
adequate.
During 1993 and 1992, the Company met its capital requirements with cash
generated through operations. Net cash provided by operating activities for
1993 was $1.3 billion. For 1994 through 1997, the Company expects that all of
its capital needs will be provided through internally generated funds.
<PAGE>
<PAGE> 118
Construction program expenditures for 1993 were $575 million and are
estimated to be $575 million in 1994 and $1.5 billion for 1995 to 1997. The
estimated expenditures do not include any amounts for cooling towers at Salem
Generating Station (Salem) that may be required for environmental reasons.
The Company does not presently anticipate that construction of the Salem
cooling towers will be required; however, if mandated, the estimated cost to
the Company would be $230 to $300 million and may require external sources of
financing. Certain facilities under construction and to be constructed may
require permits and licenses which the Company has no assurance will be
granted.
The current level of the Company's capital expenditures, as a result of the
completion of its nuclear construction program, has improved the Company's
financial condition. Also contributing to this improvement were the effects of
the Company's cost-containment program, an aggressive bill-collection program
and revenues from sales of capacity and energy to other utilities.
Influenced by favorable financial market conditions, the Company has
continued its aggressive refinancing and redemption program. During 1993, $2.1
billion of long-term debt and preferred stock were sold to replace debt and
preferred stock carrying significantly higher rates of interest and dividends.
Also during 1993, the Company utilized internally generated cash to repay $154
million of debt and to redeem $45 million of preferred stock. These
transactions resulted in a reduction of approximately $49 million in
annualized interest and $6 million in annualized preferred stock dividends.
The ratios under the Company's mortgage indenture and Articles of
Incorporation at December 31, 1993 were 4.20 and 2.47 times, respectively,
compared with minimum issuance requirements of 2.00 and 1.50.
During 1993, Dividend Reinvestment and Stock Purchase Plan requirements were
satisfied by the purchase of shares of common stock on the open market.
Depending on the Company's specific requirements, the Company will decide
whether to issue shares or purchase shares on the open market in the future.
The Company's capital structure as of December 31, 1993 was common equity,
42.6%; preferred stock, 6.1%; and long-term debt, 51.3%; compared to its
capital structure as of December 31, 1992 of common equity, 40.3%; preferred
stock, 6.6%; and long-term debt, 53.1%. The Company anticipates that its
improved financial condition will allow it to further strengthen its balance
sheet.
Outlook
The Company's financial condition and its future operating results are
dependent on a number of factors affecting the Company and the utility
industry in general. These factors include the regulation and operation of
nuclear generating facilities, increased competition, regulatory and
accounting changes and compliance with environmental regulations.
General Business Outlook
The Company's financial condition and future operating results are in part
dependent on the continued successful operation of its nuclear generating
facilities. The Company's nuclear generating facilities represent
approximately 44% of its installed generating capacity. During 1993, the
Company's nuclear plants operated at a 78% weighted average capacity factor
and produced 60% of the Company's output. Substantial nuclear generation is
the most cost-effective way for the Company to meet customer needs and any
commitments for off-system sales. In addition, continued operation of the
nuclear plants above 60% of capacity is necessary to avoid penalties under the
ECA. Additionally, the terms of the 1991 settlement of the Limerick Unit No. 2
<PAGE>
<PAGE> 119
rate case afford the Company the opportunity, through sales to other
utilities and the efficient operation of Limerick, to increase future
earnings. See note 2 of Notes to Consolidated Financial Statements for a
description of the ECA and the terms of the Limerick Unit No. 2 rate case
settlement.
At December 31, 1993, the Company had agreements with other utilities to
sell up to 799 megawatts (mW) of installed generating capacity and/or
associated energy. All of these agreements are either for weekly purchases of
energy only or expire during 1994. The Company expects to renew these
agreements or negotiate new agreements and to sell over $100 million of
capacity and/or energy through such agreements in 1994. The Company's future
results of operations are dependent in part on its ability to successfully
market its excess generating capacity and associated energy.
Annual and quarterly operating results can be affected by weather, which can
have a significant positive or negative impact. For example, 1993 earnings
compared to 1992 were favorably impacted by $0.26 per share due to the summer
being one of the hottest in Company history. Conversely, the Company's
earnings were negatively impacted by $0.35 per share in 1992 compared to 1991
due to one of the coolest summers ever experienced in the Company's service
territory.
Inflation impacts the Company through increased operating costs and
increased capital costs for utility plant. The Company expects that it would
recover any increased operating costs, but in times of high inflation, the
Company could be adversely impacted by the regulatory lag in reflecting these
increased costs in rates. In addition, the replacement costs of the Company's
utility plant are significantly higher than the historical costs reflected in
the financial statements.
The Company expects its level of capital investment in utility plant to
remain relatively stable since it has sufficient electric generating capacity
to meet the anticipated needs of its service territory well into the next
decade. Because of the Company's substantial investment in and reliance on its
nuclear generating units, any changes in regulations by the Nuclear Regulatory
Commission (NRC) requiring additional investments or resulting in increased
operating costs of nuclear generating units could adversely affect the
Company.
The Company's budgeted capital expenditures through 1997 include all costs
of compliance with Phase I of the Clean Air Act of 1990 (Clean Air Act),
including its share of the costs of scrubbers being installed at Conemaugh
Generating Station. As a result of its prior investments in scrubbers for
Eddystone and Cromby and its investment in nuclear generating capacity, the
Company believes that compliance with the Clean Air Act will have less impact
on the Company's electric rates than on the rates of other Pennsylvania
utilities which are more dependent on coal-fired generation.
An evaluation of Company sites for potential environmental clean-up
liability is on-going, including approximately 20 sites where manufactured gas
plant activities may have resulted in site contamination. Past activities at
several sites have resulted in actual site contamination. The Company is
presently engaged in performing detailed evaluations at certain of these sites
to define the nature and extent of the contamination, to determine the
necessity of remediation and to identify possible remedi-ation alternatives.
As of December 31, 1993 and 1992, the Company has accrued $17 and $13 million,
respectively, of study and remediation costs that currently can be reasonably
estimated. The Company cannot currently predict whether it will incur other
significant liabilities for any additional remediation costs at these or
additional sites identified by the Company, environmental agencies or others.
<PAGE>
<PAGE> 120
SFAS No. 112, "Employers' Accounting for Postemploy-ment Benefits," must be
adopted by the first quarter of 1994. The Company cannot currently determine
the effect of this statement upon the results of operations.
The Company would ultimately seek to recover through the ratemaking process
all capital costs and any increased operating costs, including those
associated with NRC regulation of the Company's nuclear generating stations
and environmental compliance and remediation, although such recovery is not
assured.
Regulatory Assets
At December 31, 1993, the Company had deferred on its balance sheet certain
regulatory assets for which current recovery has not yet been approved by the
PUC. These regulatory assets include $91 million of operating and maintenance
expenses, depreciation and accrued carrying charges on its investment in
Limerick Unit No. 2 and 50% of Limerick common facilities, deferred pursuant
to a Declaratory Order of the PUC; $45 million of costs not associated with
construction activity related to the adoption of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions"; and $107 million
recognized for the effect on deferred taxes of the change in the statutory
federal income tax rate from 34% to 35% in 1993. See notes 2, 6 and 12,
respectively, of Notes to Consolidated Financial Statements.
These and other regulatory assets are deferred pursuant to PUC action. Any
deferred costs that are not recovered through base rates would be charged
against income immediately. The Company has announced its intention not to
seek an electric retail base-rate increase in 1994.
Competition
The electric utility industry, in particular power generation to serve the
needs of large users such as municipal customers and for off-system sales, has
become increasingly competitive. Companies that are able to provide energy at
a lower cost are likely to benefit from this competition. Competitors include
co-generators and independent power producers. Nonutility generation has
resulted, and in the future could result, in the loss of revenues from
industrial customers. These factors will continue to challenge the Company to
maintain current revenue levels.
The National Energy Policy Act of 1992 (Energy Act) encourages competition
among utilities and nonutility generators by allowing access to utility
transmission facilities for wholesale wheeling. The Energy Act directs the
Federal Energy Regulatory Commission (FERC) to set prices for wheeling to
allow utilities to recover all legitimate, verifiable and economic costs for
providing wheeling services, including the cost of expanding their
transmission facilities to accommodate required transmission access. Retail
wheeling is prohibited under the Energy Act. Retail wheeling would, however,
challenge the Company to assure that it continues to be the provider of
service to its large commercial and industrial customers and that it positions
itself to take advantage of opportunities to expand its customer base by
marketing its reliable power sources.
The Company is currently involved in deliberations before the Maryland
Public Service Commission (MdPSC) and FERC concerning the continued purchase
by Conowingo Power Company (COPCO), a wholly owned subsidiary of the Company,
of all of its power from the Company. COPCO's purchases from the Company
represent less than 2% of the Company's annual revenues. Hearings on this
matter are to commence in September 1994 and result from a MdPSC order that
COPCO perform a study of its power supply alternatives, including competitive
bidding. The Company has filed with the FERC a proposal to add an exit fee for
the recovery from COPCO of the stranded investment costs, if the power supply
needs of COPCO are obtained from a source other than the Company.
<PAGE>
<PAGE> 121
In September 1993, the Board of Directors of the Company approved a plan to
reorganize the Company's operations to better enable it to meet the challenges
of a competitive environment. The Company's operations will be divided into
five strategic business units by January 1, 1995. The business units will be
Consumer Energy Services Group, Bulk Power Enterprises, Power Generation
Group, Nuclear Generation Group, and Gas Services Group. The plan calls for
each business unit to eventually operate as an individual profit center,
separate from the other business units.
In October, in response to its perception of business risk created by
intensifying competition within the electric utility industry, the Standard &
Poor's (S&P) rating agency tightened the financial ratio benchmarks it uses to
rate electric utility company debt. This action has affected a significant
portion of the investor-owned electric utility industry. Although the
Company's current debt ratings have been affirmed by S&P, the Company's
outlook, along with 47 other electric utilities, has been changed from
"stable" to "negative." The Company and 21 other electric utilities have had
their business positions categorized as "below average." S&P determined the
Company's business position to be "below average" because it is considered to
be a high-cost producer of electricity with a high dependency on its nuclear
generation. Also, the perceived outlook for the economy of the Company's
service territory and the Northeast in general contributed to this
characterization.
Moody's Investors Service (Moody's) has also announced that the changing
electric utility business environment could, over the next three to five
years, lead to bond rating downgrades. Moody's also believes that business
risk in the electric utility industry is rising due to deregulation and the
resulting competition.
For a discussion of other contingencies, see notes 2 and 3 of Notes to
Consolidated Financial Statements.
<PAGE>
<PAGE> 122
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
PECO Energy Company:
We have audited the accompanying consolidated balance sheets of PECO
Energy Company and Subsidiary Companies as of December 31, 1993 and 1992, and
the related consolidated statements of income, cash flows, and changes in
common shareholders' equity and preferred stock for each of the three years in
the period ended December 31, 1993. These financial statements are the
responsibility of the Companies' 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 consolidated financial position of PECO Energy
Company and Subsidiary Companies as of December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Note 4 of the consolidated financial statements, the Company
changed its methods of accounting for non-pension postretirement employee
benefits and income taxes in 1993.
<PAGE>
<PAGE> 123
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1994
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars) For the Years Ended December 31,
<TABLE>
<CAPTION>
Operating Revenues 1993 1992 1991
<S> <C> <C> <C>
Electric $3,605,425 $3,597,141 $3,662,573
Gas 382,704 365,328 356,013
Total Operating Revenues 3,988,129 3,962,469 4,018,586
Operating Expenses
Fuel and Energy Interchange 659,580 709,115 778,674
Other Operating 851,254 906,346 842,375
Maintenance 364,409 353,502 332,269
Depreciation 424,952 413,779 400,572
Income Taxes 354,391 264,483 308,945
Other Taxes 298,132 281,868 274,561
Total Operating Expenses 2,952,718 2,929,093 2,937,396
Operating Income 1,035,411 1,033,376 1,081,190
Other Income and Deductions
Allowance for Other Funds Used
During Construction 11,885 10,461 10,619
Settlement of Peach Bottom Litigation ---- (103,078) ----
Income Taxes (11,808) 40,160 (16,442)
Other, Net 11,980 3,392 28,696
Total Other Income and Deductions 12,057 (49,065) 22,873
Income Before Interest Charges 1,047,468 984,311 1,104,063
Interest Charges
Long-Term Debt 432,707 484,153 545,488
Short-Term Debt 36,002 31,419 36,360
Total Interest Charges 468,709 515,572 581,848
Allowance for Borrowed Funds Used
During Construction (11,889) (10,202) (12,465)
Net Interest Charges 456,820 505,370 569,383
Net Income 590,648 478,941 534,680
Preferred Stock Dividends 49,058 60,731 66,104
Earnings Applicable to Common Stock $ 541,590 $ 418,210 $ 468,576
Average Shares of Common Stock
Outstanding (Thousands) 221,072 220,245 218,234
Earnings Per Average Common
Share (Dollars) $ 2.45 $ 1.90 $ 2.15
Dividends Per Common Share (Dollars) $ 1.43 $ 1.325 $ 1.225
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 124
CONSOLIDATED BALANCE SHEETS
Assets December 31,
(Thousands of Dollars) 1993 1992
Utility Plant, at Original Cost
Electric $13,102,088 $12,797,389
Gas 843,205 781,708
Common 203,747 162,061
14,149,040 13,741,158
Less Accumulated Provision
for Depreciation 3,946,805 3,587,317
10,202,235 10,153,841
Nuclear Fuel, Net 179,529 188,609
Construction Work in Progress 381,247 348,792
Leased Property, Net 194,702 209,994
Net Utility Plant 10,957,713 10,901,236
Current Assets
Cash and Temporary Cash Investments 46,923 50,369
Accounts Receivable, Net
Customers 122,581 138,880
Other 47,768 62,571
Inventories, at Average Cost
Fossil Fuel 67,040 63,688
Materials and Supplies 142,132 156,706
Deferred Income Taxes 30,185 39,285
Other 58,205 38,466
Total Current Assets 514,834 549,965
Deferred Debits and Other Assets
Recoverable Deferred Income Taxes 2,297,368 ----
Deferred Limerick Costs 433,605 455,161
Deferred Non-Pension Postretirement
Benefit Costs 44,691 ----
Investments 218,636 202,422
Loss on Reacquired Debt 343,004 273,120
Other 222,476 196,323
Total Deferred Debits and Other
Assets 3,559,780 1,127,026
Total $15,032,327 $12,578,227
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 125
CONSOLIDATED BALANCE SHEETS
Capitalization and Liabilities December 31,
(Thousands of Dollars) 1993 1992
Capitalization Common Shareholders' Equity
Common Stock $3,488,477 $3,459,131
Other Paid-In Capital 1,214 1,214
Retained Earnings 773,727 561,824
4,263,418 4,022,169
Preferred and Preference Stock
Without Mandatory Redemption 422,472 422,472
With Mandatory Redemption 186,500 231,130
Long-Term Debt 4,884,343 5,203,961
Total Capitalization 9,756,733 9,879,732
Current Liabilities
Notes Payable, Bank 119,350 110,500
Long-Term Debt Due Within One Year 252,263 98,998
Capital Lease Obligations Due Within One Year 60,500 58,998
Accounts Payable 242,239 241,462
Taxes Accrued 24,939 24,334
Deferred Energy Costs 48,691 72,999
Interest Accrued 97,540 15,923
Dividends Payable 18,345 19,459
Other 90,710 87,887
Total Current Liabilities 954,577 830,560
Deferred Credits and Other Liabilities
Capital Lease Obligations 134,202 150,996
Deferred Income Taxes 3,386,136 1,001,939
Unamortized Investment Tax Credits 386,162 302,508
Pension Obligation for Early Retirement Plan 135,286 141,675
Non-Pension Postretirement Benefits Obligation 51,781 ----
Other 227,450 270,817
Total Deferred Credits and Other Liabilities 4,321,017 1,867,935
Commitments and Contingencies (Notes 2 and 3)
Total $15,032,327 $12,578,227
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 126
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
(Thousands of Dollars)
Cash Flows From Operating Activities 1993 1992 1991
<S> <C> <C> <C>
Net Income $590,648 $478,941 $534,680
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 507,069 491,186 499,675
Deferred Income Taxes 139,846 81,943 77,836
Unrecovered Phase-In Plan Revenue ----- 142,267 96,705
Deferred Energy Costs (24,308) 52,959 16,593
Sale of Accounts Receivable ----- ----- 125,000
Amortization of Leased Property 58,400 54,600 59,400
Changes in Working Capital:
Accounts Receivable 31,102 82,151 (70,907)
Inventories 11,222 1,395 (26,926)
Accounts Payable 777 (47,403) 36,326
Other Current Assets and Liabilities (34,694) (136,627) 54,633
Other Items Affecting Operations (18,287) (28,569) 20,073
Net Cash Flows Provided by Operating
Activities 1,261,775 1,172,843 1,423,088
Cash Flows From Investing Activities
Investment in Plant (568,076) (571,829) (473,448)
Increase in Other Investments (16,214) (32,769) (43,827)
Net Cash Flows Used by Investing Activities (584,290) (604,598) (517,275)
Cash Flows From Financing Activities
Change in Short-Term Debt 8,850 10,500 (68,500)
Issuance of Common Stock 29,346 12,465 66,453
Issuance of Preferred Stock 142,700 140,000 ----
Retirement of Preferred Stock (187,330) (224,462) (15,330)
Issuance of Long-Term Debt 1,994,765 1,369,540 278,000
Retirement of Long-Term Debt (2,148,963) (1,504,877) (692,867)
Loss on Reacquired Debt (69,884) (85,380) (58,419)
Dividends on Preferred and Common Stock (366,081) (349,856) (333,319)
Change in Dividends Payable (1,114) (16,607) 8,575
Expenses of Issuing Long-Term Debt and
Preferred Stock (24,820) (11,660) (68)
Capital Lease Payments (58,400) (54,600) (59,400)
Net Cash Flows from Financing Activities (680,931) (614,937) (874,875)
(Decrease) Increase in Cash and
Cash Equivalents (3,446) (46,692) 30,938
Cash and Cash Equivalents at beginning
of period 50,369 97,061 66,123
Cash and Cash Equivalents at end of period $46,923 $50,369 97,061
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 127
CONSOLIDATED STATEMENTS OF CHANGES IN
COMMON STOCKHOLDERS' EQUITY AND PREFERRED STOCK
<TABLE>
<CAPTION>
Other
Common Stock Paid-In Retained Preferred Stock
(All Amounts in Thousands) Shares Amount Capital Earnings Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991 216,953 $3,380,213 $1,214 $243,106 7,534 $753,394
Net Income 534,680
Cash Dividends Declared
Preferred Stock
(at specified annual rates) (65,966)
Common Stock ($1.225 per share) (267,353)
Expenses of Capital Stock Activity (68)
Issuance of Stock
Dividend Reinvestment and
Stock Purchase Plan 2,925 63,207
Long-Term Incentive Plan 152 3,246
Redemptions (153) (15,330)
Balance, December 31, 1991 220,030 3,446,666 1,214 444,399 7,381 738,064
Net Income 478,941
Cash Dividends Declared
Preferred Stock
(at specified annual rates) (58,021)
Common Stock ($1.325 per share) (291,835)
Expenses of Capital Stock Activity (11,660)
Issuance of Stock
Long-Term Incentive Plan 504 12,465
Issuances 1,400 140,000
Redemptions (2,245) (224,462)
Balance, December 31, 1992 220,534 3,459,131 1,214 561,824 6,536 653,602
Net Income 590,648
Cash Dividends Declared
Preferred Stock
(at specified annual rates) (49,919)
Common Stock
($1.43 per share) (316,162)
Expenses of Capital Stock Activity (5,625)
Issuance of Stock
Long-Term Incentive Plan 982 29,346 (7,039)
Issuances 1,427 142,700
Redemptions (1,873) (187,330)
Balance, December 31, 1993 221,516 $3,488,477 $1,214 773,727 6,090 $608,972
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
General
The consolidated financial statements of PECO Energy Company (Company),
formerly known as Philadelphia Electric Company, include the accounts of its
utility subsidiary companies, all of which are wholly owned. Non-utility
subsidiaries are not material and are accounted for on the equity method.
Accounting policies are in accord-ance with those prescribed by the regulatory
authorities having jurisdiction, principally the Pennsylvania Public Utility
Commission (PUC) and the Federal Energy Regulatory Commission (FERC).
Revenues
Customers' meters are read and bills are prepared on a cycle basis. At the end
of each month, the Company accrues an estimate for the unbilled amount of
energy delivered to customers.
Pursuant to a phase-in plan approved by the PUC in its electric base-rate
order dated April 19, 1990, the Company recorded revenue equal to the full
amount of the rate increase approved, based on kilowatthours rendered to
customers. On April 5, 1991, that plan was amended by the PUC as part of the
settlement of all appeals arising from the Limerick Generating Station
(Limerick) Unit No. 2 rate proceeding to permit recovery of the remaining
unrecovered revenue by December 31, 1992 (see note 2). As of December 31, 1993
and 1992, the Company had no unrecovered phase-in plan revenue.
Fuel and Energy Cost Adjustment Clauses
The Company's classes of service are subject to fuel adjustment clauses
designed to recover or refund the differences between actual costs of fuel,
energy interchange, and purchased power and gas, and the amounts of such costs
included in base rates. Differences between the amounts billed to customers
and the actual costs recoverable are deferred and recovered or refunded in
future periods by means of prospective adjustments to rates. Generally, such
rates are adjusted every twelve months. In addition to reconciling fuel costs
and revenues, the Company's Energy Cost Adjustment (ECA), established by the
PUC, incorporates a nuclear performance standard which allows for financial
bonuses or penalties depending upon whether the Company's system nuclear
capacity factor exceeds or falls below a specified range (see note 2).
Nuclear Fuel
Nuclear fuel is capitalized and charged to fuel expense on the unit of
production method. Estimated costs of nuclear fuel disposal are charged to
fuel expense as the related fuel is consumed. The Company's share of nuclear
fuel at Peach Bottom Atomic Power Station (Peach Bottom) and Salem Generating
Station (Salem) is accounted for as a capital lease. Nuclear fuel at Limerick
is owned.
Depreciation and Decommissioning
The annual provision for depreciation is provided over the estimated service
lives of plant on the straight-line method. Annual depreciation provisions for
financial reporting purposes, expressed as a percent of average depreciable
utility plant in service, were approximately 2.75% in 1993 and 1992 and 2.74%
in 1991.
The Company's share of the estimated costs for decommissioning nuclear
generating stations currently is being charged to operations over the expected
service life of the related plant. The amounts recovered from customers are
deposited in escrow and trust accounts and invested for funding of future
costs and credited to accumulated depreciation (see note 3).
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<PAGE> 129
Income Taxes
In 1993, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," which requires an asset and
liability approach for financial accounting and reporting of income taxes. In
addition, the effects of the Alternative Minimum Tax (AMT) are normalized.
Investment Tax Credit (ITC) is deferred and amortized to income over the
estimated useful lives of the related utility plant. ITC related to plant in
service, not included in rate base, is accounted for on the flow-through
method.
Allowance for Funds Used During Construction (AFUDC)
AFUDC is the cost, during the period of construction, of debt and equity funds
used to finance construction pro-jects. AFUDC is recorded as a charge to
Construction Work in Progress, and the credits are to Interest Charges for the
pre-tax cost of borrowed funds and to Other In-come and Deductions for the
remainder as the allowance for other funds. The rates used for capitalizing
AFUDC, which averaged 9.39% in 1993, 10.61% in 1992 and 10.88% in 1991, are
computed under a method prescribed by the regulatory authorities. AFUDC is not
included in regular taxable income and the depreciation of capitalized AFUDC
is not tax deductible.
Nuclear Outage Costs
Incremental nuclear maintenance and refueling outage costs are accrued over
the unit operating cycle. For each unit, an accrual for incremental nuclear
maintenance and refueling outage expense is estimated based upon the latest
planned outage schedule and estimated costs for the outage. Differences
between the accrued and actual expense for the outage are recorded when such
differences are known.
Capitalized Software Costs
Software projects which exceed $5 million are capitalized. At December 31,
1993 and 1992, capitalized software costs totalled $56 million and $40 million
(net of $3 million and $1 million accumulated amortization), respectively.
Such capitalized amounts are amortized ratably over the expected lives of the
projects when they become operational, not to exceed 10 years.
Gains and Losses on Reacquired Debt
Gains and losses on reacquired debt are deferred and amortized to interest
expense over the period approved for ratemaking purposes.
SFAS No. 112
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," must be
adopted by the first quarter of 1994. The Company cannot currently determine
the effect of this statement upon the results of operations.
Reclassifications
Certain prior-year amounts have been reclassified for comparative purposes.
These reclassifications had no effect on net income.
2. Rate Matters
Limerick Unit No. 2 Electric Rate Order As part of the April 19, 1990 PUC
order, the PUC approved recovery of $285 million of deferred Limerick costs
representing carrying charges and depreciation associated with 50% of Limerick
common facilities. These costs are included in base rates and are being
recovered over the life of Limerick. The PUC also approved recovery of $137
million of Limerick Unit No. 1 costs which had previously been deferred
pursuant to a Declaratory Order dated September 28, 1984. These costs are
being recovered over a ten-year period without a return on investment.
<PAGE>
<PAGE> 130
On April 5, 1991, the PUC approved the settlement of all appeals arising
from the Limerick Unit No. 2 rate order. Under the terms of the settlement,
the Company is allowed to retain for shareholders any proceeds above the
average energy cost for sales of up to 399 megawatts (mW) of capacity and/or
associated energy, since the PUC had ruled that the Company had 399 mW of
near-term excess capacity in the Limerick Unit No. 2 rate order. Beginning on
April 1, 1994, the settlement provides for the Company to share in the
benefits which result from the operation of both Limerick Unit No. 1 and Unit
No. 2 through the retention of 16.5% of the energy savings. Through 1994, the
Company's potential benefit from the sale of up to 399 mW of capacity and/or
associated energy and the retained Limerick energy savings is limited to $106
million per year, with any excess accruing to customers. Beginning in 1995, in
addition to retaining the first $106 million, the Company will share in any
excess above $106 million with the Company's share of the excess being 10% in
1995, 20% in 1996 and 30% in 1997 and thereafter. During 1993, 1992 and 1991,
the Company recorded as revenue net of fuel costs $38, $34 and $25 mil- lion,
respectively, as a result of the sale of the 399 mW of capacity and/or
associated energy.
As a part of the settlement, the Company agreed not to file an electric
base-rate increase before April 1, 1994, except as allowed by the PUC or for
emergency or single-issue rate filings to recover costs associated with new
legislation or regulations.
Single-Issue Electric Base-Rate Increase Filed On September 11, 1992, the
Company filed with the PUC a request for a 1.5% electric base-rate increase
designed to recover the increased costs associated with the implementation of
SFAS No. 106, "Employers' Accounting for Post-retirement Benefits Other Than
Pensions." See notes 4 and 6.
On March 25, 1993, the PUC issued a policy statement for implementation of
SFAS No. 106 which states that the PUC "intends to move all jurisdictional
utilities to SFAS No. 106 accrual accounting for ratemaking purposes with-in
approximately five years and to allow the recovery in base rates of all
deferred amounts in approximately 20 years to the extent that costs are
prudently incurred and examined in a base-rate proceeding prior to rate
recognition."
On September 2, 1993, the PUC issued an order denying the Company current
recovery of these costs, stating that the settlement of all appeals arising
from the PUC's 1990 Limerick Unit No. 2 order precluded the Company from
seeking an increase in electric base rates for these costs before April 1,
1994. The September 2, 1993 order authorized the Company to defer the
additional SFAS No. 106 expense as a regulatory asset in accordance with the
PUC policy statement. On September 30, 1993, the Company filed with the
Commonwealth Court of Pennsylvania a petition for review of the PUC's final
order.
Recovery through rates of the Company's SFAS No. 106 transition obligation
of $505 million and amounts deferred pursuant to the PUC's September 2, 1993
Order will be permitted only if included in a general base-rate case within
approximately five years and deemed prudently incurred. The Company's future
earnings will be adversely affected to the extent that the Company is not
ultimately permitted to recover the additional non-pension postretirement
benefits costs resulting from the adoption of SFAS No. 106 through the
ratemaking process. While non-pension postretirement benefits costs
traditionally have been allowed for ratemaking on a pay-as-you-go basis,
recovery of the deferred costs through the rate making process is not assured.
<PAGE>
<PAGE> 131
Limerick Unit No. 2 Declaratory Order
Pursuant to a Declaratory Order of the PUC, the Company deferred the operating
and maintenance expenses, depreciation and accrued carrying charges on its
capital investment in Limerick Unit No. 2 and 50% of Limerick common
facilities during the period from January 8, 1990, the commercial operation
date of Limerick Unit No. 2, until April 20, 1990, the effective date of the
Limerick Unit No. 2 rate order. At December 31, 1993 and 1992, such costs
included in Deferred Limerick Costs totalled $91 million. Recovery of such
costs deferred pursuant to the Declaratory Order will be addressed by the PUC
in a subsequent electric base-rate case, although such recovery is not
assured. Any amounts not recovered would be charged against income.
Energy Cost Adjustment
The Company is subject to a PUC-established electric ECA which, in addition to
reconciling fuel costs and revenues, incorporates a nuclear performance
standard which allows for financial bonuses or penalties depending on whether
the Company's system nuclear capacity factor exceeds or falls below a
specified range. The bonuses or penalties are based upon average system
replacement energy costs. If the capacity factor is within the range of 60-
70%, there is no bonus or penalty. If the capacity factor exceeds the
specified range, progressive incremental bonuses are earned and, if the
capacity factor falls below the specified range, progressive incremental
penalties are incurred.
For the years ended December 31, 1993, 1992 and 1991, the Company's nuclear
capacity factors were 78%, 71% and 75%, respectively. This entitled the
Company to bonuses reflected in 1993, 1992 and 1991 income of $10, $1 and $5
million, respectively.
3. Commitments and Contingencies
Construction Expenditures
Construction expenditures are estimated to be $575 million for 1994 and $1.5
billion for 1995-1997. For 1994-1997, the Company expects that all of its
capital needs will be provided through internally generated funds. These
construction expenditure estimates are reviewed and revised periodically to
reflect changes in economic conditions, re-vised load forecasts and other
appropriate factors. Certain facilities under construction and to be
constructed may require permits and licenses which the Company has no
assurance will be granted.
The Company's operations have in the past and may in the future require
substantial capital expenditures in order to comply with environmental laws.
The Company expects that any capital expenditures to construct facilities for
compliance with environmental laws and the operating costs of such facilities
would be recoverable through the rate-making process, although such recovery
is not assured.
Nuclear Insurance
The Price-Anderson Act, as amended (Price-Anderson Act), sets the limit of
liability of approximately $9.4 billion for claims that could arise from an
incident involving any licensed nuclear facility in the nation. The limit is
subject to increase to reflect the effects of inflation and changes in the
number of licensed reactors. All utilities with nuclear generating units,
including the Company, have obtained coverage for these potential claims
through a combination of private insurances of $200 million and mandatory
participation in a financial protection pool. Under the Price-Anderson Act,
all nuclear reactor licensees can be assessed up to $76 million per reactor
per incident, payable at $10 million per reactor per incident per year. This
<PAGE>
<PAGE> 132
assessment is subject to inflation, state premium taxes and an additional
surcharge of 5% if the total amount of claims and legal costs exceeds the
basic assessment.
If the damages from an incident at a licensed nuclear facility exceed $9.4
billion, the President of the United States is to submit to Congress a plan
for providing additional compensation to the injured parties. Congress could
impose further revenue-raising measures on the nuclear industry to pay claims.
The Price-Anderson Act and the extensive regulation of nuclear safety by the
Nuclear Regulatory Commission (NRC) do not preempt claims under state law for
personal, property or punitive damages related to radiation hazards.
The Company maintains property insurance, including decontamination expense
coverage and premature decommissioning coverage, for loss or damage to its
nuclear facilities. Although it is not possible to determine the total amount
of the loss that may result from an occurrence at these facilities, the
Company maintains its $2.75 billion proportionate share for each station.
Under the terms of the various insurance agreements, the Company could be
assessed up to $35 million for losses incurred at any plant insured by the
insurance companies. The Company is self-insured to the extent that any losses
may exceed the amount of insurance maintained. Any such losses, if not
recovered through the ratemaking process, could have a material adverse effect
on the Company's financial condition.
The Company is a member of an industry mutual insurance company which
provides replacement power cost insurance in the event of a major outage at a
nuclear station. The premium for this coverage is subject to an assessment for
adverse loss experience. The Company's maximum share of any assessment is $17
million per year.
Nuclear Decommissioning and Spent Fuel Storage
In conjunction with the PUC's April 19, 1990 electric baserate order, the PUC
recognized a revised decommissioning cost estimate based upon total cost. The
Company's share of this revised cost is $643 million expressed in 1990
dollars, which the Company believes would be substantially unchanged at
December 31, 1993.
Under a contract with the U.S. Department of Energy (DOE), the DOE is
obligated ultimately to take possession of all spent nuclear fuel generated by
the Company's nuclear units for long-term storage by no later than 1998. The
contract currently requires that a spent fuel disposal fee of one mill ($.001)
per net kilowatthour generated be paid to the DOE. The fee may be adjusted
prospectively in order to ensure full cost recovery.
The DOE has stated that it will not be able to open a permanent, high-level
nuclear waste storage facility until 2010, at the earliest. The DOE stated
that the delay was a result of its seeking new data about the suitability of
the proposed storage facility site at Yucca Mountain, Nevada, opposition to
this location for the respository and the DOE's revision of its civilian
nuclear waste program. The DOE stated that it would seek legislation from
Congress for the construction of a temporary storage facility which would
accept spent nuclear fuel from utilities in 1998 or soon thereafter. Although
progress is being made at Yucca Mountain and several communities have
expressed interest in providing a temporary storage site, the Company cannot
predict when the temporary and permanent federal storage facilities will
become available.
Peach Bottom and Limerick have on-site storage facilities with the capacity
to store spent fuel discharged from the units through the late 1990's and, by
further modifying spent fuel storage facilities, capacity could be provided
until approximately 2010. Salem has spent fuel storage capacity through 1998
for Unit No. 1 and 2002 for Unit No. 2. Public Service Electric and Gas
(PSE&G) is planning expansion of the fuel storage capacity of Salem.
<PAGE>
<PAGE> 133
The National Energy Policy Act of 1992 (Energy Act) provides, among other
things, that utilities with nuclear reactors must pay for the decommissioning
and decontamination of the DOE nuclear fuel enrichment facilities. The total
costs are estimated to be $150 million per year for 15 years, of which the
Company's share was estimated at December 31, 1992 to be $6 million per year,
subsequently revised to $5 million in September 1993. The Energy Act provides
that these costs are to be recoverable in the same manner as other fuel costs.
The Company has recorded the liability and a related regulatory asset, which
at December 31, 1993 and 1992 was $69 and $96 million, respectively.
The Company is currently recovering in rates costs for nuclear
decommissioning and decontamination and spent fuel storage. The Company
believes that the ultimate costs of decommissioning and decontamination, spent
fuel disposal and any assessment under the Energy Act will continue to be
recoverable through rates, although such recovery is not assured.
Environmental Issues
Under federal and state environmental laws, the Company is generally liable
for the costs of remediating environmental contamination of property now or
formerly owned by the Company and of property contaminated by hazardous waste
generated by the Company. The Company owns or leases a substantial number of
real estate parcels, including parcels on which its operations or the
operations of others may have resulted in contamination by substances which
are considered hazardous under the environmental laws. The Company is
currently involved in a number of proceedings relating to sites where
hazardous waste has been deposited and may be subject to additional
proceedings in the future. An evaluation of Company sites for potential
environmental clean-up liability is on-going, including approximately 20 sites
where manufactured gas plant activities may have resulted in site
contamination. Past activities at several sites have resulted in actual site
contamination. The Company is presently engaged in performing detailed
evaluations at certain of these sites to define the nature and extent of the
contamination, to determine the necessity of remediation and to identify
possible remediation alternatives. As of December 31, 1993 and 1992, the
Company had accrued $17 and $13 million, respectively, for various
investigation and remedi-ation costs that currently can be reasonably
estimated. The Company cannot currently predict whether it will incur other
significant liabilities for additional investigation and remediation costs at
these or additional sites identified by the Company, environmental agencies or
others, or whether any such costs will be recoverable through rates or from
third parties.
Other Litigation
On April 11, 1991, 33 former employees of the Company filed an amended class
action suit against the Company in the United States District Court for the
Eastern District of Pennsylvania (Eastern District Court) on behalf of
approximately 141 persons who retired from the Company between January and
April 1990. The lawsuit, filed under the Employee Retirement Income Security
Act (ERISA), alleges that the Company fraudulently and/or negligently
misrepresented or concealed facts concerning the Company's 1990 Early
Retirement Plan and thus induced the plaintiffs to retire or not to defer
retirement immediately before the initiation of the Early Retirement Plan,
thereby depriving the plaintiffs of substantial pension and salary benefits.
On June 6, 1991, the plaintiffs filed amended complaints adding additional
plaintiffs. The lawsuit names the Company, the Company's Service Annuity Plan
(SAP) and two Company officers as defendants. The plaintiffs seek
approximately $20 million in damages representing, among other things,
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<PAGE> 134
increased pension benefits and nine months' salary pursuant to the terms of
the Early Retirement Plan, as well as punitive damages. The ultimate outcome
of this matter is not expected to have a material adverse effect on the
Company's financial condition.
On May 2, 1991, 37 former employees of the Company filed an amended class
action suit against the Company, the SAP and three former Company officers in
the Eastern District Court, on behalf of 147 former employees who retired from
the Company from January through June 1987. The lawsuit was filed under ERISA
and concerns the August 1, 1987 amendment to the SAP. The plaintiffs claim
that the Company concealed or misrepresented the fact that the amendment to
the SAP was planned to increase retirement benefits and, as a consequence,
they retired prior to the amendment to the SAP and were deprived of
significant retirement benefits. The complaint does not specify any dollar
amount of damages. The ultimate outcome of this matter is not expected to have
a material adverse effect on the Company's financial condition.
On May 25, 1993, the Company received a letter from attorneys on behalf of a
shareholder demanding that the Company's Board of Directors commence legal
action against certain Company officers and directors with respect to the
Company's credit and collections practices. The basis of the demand is the
findings and conclusions contained in the Credit and Collection section of the
May 1991 PUC Management Audit Report prepared by Ernst & Young. At its June
28, 1993 meeting, the Board of Directors appointed a special committee of
directors to consider whether such legal action is in the best interest of the
Company and its shareholders.
On July 26, 1993, attorneys on behalf of two shareholders reinstituted a
shareholder derivative action against several of the Company's present and
former officers alleging mismanagement, waste of corporate assets and breach
of fiduciary duty in connection with the Company's credit and collections
practices. This action is also based on the findings and conclusions contained
in the Credit and Collections section of the May 1991 PUC Management Audit
Report prepared by Ernst & Young. The plaintiffs seek, among other things, an
unspecified amount of damages and the awarding to the plaintiffs of the costs
and disbursements of the action, including attorneys' fees.
Any monetary damages which may be recovered, net of expenses, would be paid
to the Company because the lawsuit is brought derivatively by shareholders on
behalf of the Company.
The Company is involved in various other litigation matters, the ultimate
outcomes of which, while uncertain, are not expected to have a material
adverse effect on the Company's financial condition; however, they could have
a material effect on quarterly operating results when resolved in a future
period.
4. Changes in Accounting
Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires
the recognition of the expected costs of the benefits during the years
employees render service, but not later than the date eligible for retirement
using the prescribed accrual method. For 1992 and prior, the Company
recognized these costs on a pay-as-you-go basis. The Company is currently
recovering in base rates the pay-as-you-go costs. Adoption of SFAS No. 106
resulted in a transition obligation of $505 million, which is being amortized
on a straight-line basis over 20 years. Adoption of SFAS No. 106 had no impact
on the Company's results of operations as the Company is deferring these
increased costs (see note 6).
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Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," which requires an asset and liability approach for financial
accounting and reporting for income taxes utilizing the cumulative method of
adoption. As a result, the Company recognized a charge of $3 million or $0.02
per share during 1993. The Company has also recorded an additional accumulated
deferred income tax liability along with a corresponding recoverable deferred
income tax asset of $2.3 billion at December 31, 1993 (see note 12).
5. Retirement Benefits
The Company and its subsidiaries have non-contributory trusteed retirement
plans applicable to all regular employees. The benefits are based primarily
upon employees' years of service and average earnings prior to retirement. The
Company's funding policy is to contribute, at a minimum, amounts sufficient to
meet ERISA requirements. Approximately 71%, 78% and 79% of pension costs were
charged to operations in 1993, 1992 and 1991, respectively, and the remainder,
associated with construction labor, to the cost of new utility plant.
Pension costs for 1993, 1992 and 1991 included the following components:
(Thousands of Dollars) 1993 1992 1991
Service cost * benefits
earned during the period $33,673 $ 30,191 $ 23,692
Interest cost on projected benefit
obligations 134,658 129,000 121,826
Actual return on plan assets (226,240) (122,869) (345,677)
Amortization of transition asset (4,538) (4,539) (4,539)
Amortization and deferral 87,733 (5,741) 227,038
Net pension cost $25,286 $26,042 $ 22,340
The changes in net periodic pension costs in 1993, 1992 and 1991 were as
follows:
(Thousands of Dollars) 1993 1992 1991
Change in number, characteristics and
salary levels of participants and net
actuarial gain $(756) $ (840) $ 3,402
Change in plan provisions ---- ---- 1,978
Change in actuarial assumptions ---- 4,542 4,754
Net change (756) $ 3,702 $10,134
Plan assets consist principally of common stock, U.S. government obligations
and other fixed income instruments. In determining pension costs, the assumed
long-term rate of return on assets was 9.50% for 1993, 1992 and 1991.
The weighted-average discount rate used in determin-ing the actuarial
present value of the projected benefit obligation was 7% at December 31, 1993
and 7.75% at December 31, 1992 and 1991. The average rate of increase in
future compensation levels ranged from 4% to 6% at December 31, 1993 and
ranged from 4.5% to 6.5% at December 31, 1992 and 1991.
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Prior service cost is amortized on a straight-line basis over the average
remaining service period of employees expected to receive benefits under the
plan. The funded status of the plan at December 31, 1993 and 1992 is
summarized as follows:
(Thousands of Dollars) 1993 1992
Actuarial present value of accumulated
plan benefit obligations:
Vested benefit obligations $(1,482,868) $(1,315,292)
Accumulated benefit obligation $(1,600,768) (1,410,777)
Projected benefit obligation for
services rendered to date (1,972,332) $(1,740,013)
Plan assets at fair value 1,844,281 1,709,802
Funded status (128,051) (30,211)
Unrecognized transition asset (53,865) (58,402)
Unrecognized prior service costs 95,728 101,955
Unrecognized net gain (77,245) (183,820)
Pension liability $(163,433) $ (170,478)
6. Non-Pension Postretirement Benefits
The Company provides certain health care and life insurance benefits for
retired employees. Company employees will become eligible for these benefits
if they retire from the Company with ten years of service. These benefits and
similar benefits for active employees are provided by an insurance company
whose premiums are based upon the benefits paid during the year. In the past,
the Company has recognized the cost of providing these benefits by charging
the annual insurance premiums to expense.
The transition obligation resulting from the adoption of SFAS No. 106 was
$505 million at December 31, 1993, which represents the previously
unrecognized accumulated non-pension postretirement benefit obligation. The
transition obligation is being amortized on a straight-line basis over an
allowed 20-year period. The annual accrual for non-pension postretirement
benefits costs (including amortization of the transition obligation) is $83
million. The Company's comparable pay-as-you-go costs for these benefits,
which are currently being recovered in base rates, were $31 million in 1993.
On September 11, 1992, the Company filed with the PUC a request for a 1.5%
electric base-rate increase designed to recover the costs associated with the
implementation of SFAS No. 106 (see note 2).
The transition obligation was determined by applica-tion of the terms of
medical, dental and life insurance plans, including the effects of established
maximums on covered costs, together with relevant actuarial assumptions and
health care cost trend rates, which are projected to range from 12% in 1993 to
5% in 2002. The effect of a 1% annual increase in these assumed cost trend
rates would increase the accumulated postretirement benefit obligation by $50
million and the annual service and interest costs by $8 million.
Total costs for all plans amounted to $83, $17 and $15 million in 1993, 1992
and 1991, respectively, for 6,000 retirees during 1993, 1992 and 1991 and for
9,723 active employees during 1993. The cost was higher in 1993 than in 1992
primarily due to the adoption of SFAS No. 106.
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The net periodic benefits costs for 1993 included the following components:
(Thousands of Dollars)
Service cost - benefits earned during the period $15,615
Interest cost on projected benefit obligations 41,708
Amortization of the transition obligation 25,251
Actual return on plan assets ----
Amortization and deferral ----
Net periodic postretirement benefits costs $82,574
The funded status of the plan at December 31, 1993 is summarized as follows:
(Thousands of Dollars)
Accumulated postretirement benefit obligation:
Retirees $476,059
Fully eligible active plan participants 39,367
Other active plan participants 79,808
Total 595,234
Plan assets at fair value ----
Accumulated postretirement benefit obligation in
excess of plan assets 595,234
Unrecognized transition obligation (479,778)
Unrecognized net gain (63,675)
Accrued postretirement benefits cost
recognized on the balance sheet $51,781
Measurement of the accumulated postretirement benefits obligation was based on
a 7.25% assumed discount rate.
7. Accounts Receivable
Accounts receivable at December 31, 1993 and 1992 in-cluded unbilled operating
revenues of $115 and $111 million, respectively. Accounts receivable at
December 31, 1993 and 1992 were net of an allowance for uncollectible accounts
of $15 and $18 million, respectively.
The Company is party to an agreement with a financial institution whereby it
can sell on a daily basis and with limited recourse an undivided interest in
up to $325 million of designated accounts receivable until January 24, 1996.
At December 31, 1993 and 1992, the Company had sold a $325 million interest in
accounts receivable under this agreement. The Company retains the servicing
responsibility for these receivables.
By terms of this agreement, under certain circumstances, a portion of
deferred Limerick costs may be included in the pool of eligible receivables.
At December 31, 1993, $43 million of deferred Limerick costs were included in
the pool of eligible receivables.
8. Common Stock
At December 31, 1993 and 1992, common stock without par value consisted of
500,000,000 shares authorized and 221,516,299 and 220,534,048 shares
outstanding, respectively. At December 31, 1993, there were 4,800,000 shares
reserved for issuance under stock purchase plans.
The Company maintains a Long-Term Incentive Plan (LTIP) for certain full-
time salaried employees of the Company. The types of long-term incentive
awards which may be granted under the LTIP are non-qualified options to
purchase shares of the Company's common stock, dividend equivalents and shares
of restricted common stock. Pursuant to the LTIP, 1,961,882 shares of stock
were authorized for issuance upon exercise of options at December 31, 1993.
<PAGE>
<PAGE> 138
The following table summarizes option activity during 1993, 1992 and 1991:
1993 1992 1991
Balance at
January 1 2,445,833 1,656,244 1,126,675
Options granted 533,800 1,380,000 1,018,500
Options exercised (981,551) (504,411) (151,996)
Options cancelled (36,200) (86,000) (336,935)
Balance at
December 31 1,961,882 2,445,833 1,656,244
Exercisable at
December 31 1,447,282 1,162,833 800,744
Options were exercised at average option prices of $22.66 per share, $24.73
per share and $21.35 per share in 1993, 1992 and 1991, respectively. The
average exercise prices of shares under option were $25.12 per share, $23.18
per share and $20.34 per share at December 31, 1993, 1992 and 1991,
respectively.
9. Preferred and Preference Stock
At December 31, 1993 and 1992, Series Preference Stock consisted of
100,000,000 shares authorized, of which no shares were outstanding. At
December 31, 1993 and 1992, cumulative Preferred Stock, no par value,
consisted of 15,000,000 shares authorized.
<TABLE>
<CAPTION>
Current Shares Amount
Redemption Outstanding (Thousands of Dollars)
Price (a) 1993 1992 1993 1992
<S> <C> <C> <C> <C> <C>
Series (without mandatory redemption)
$10.75 ---- ---- 500,000 ---- 50,000
$7.85 101.00 500,000 500,000 $ 50,000 50,000
$7.80 101.00 750,000 750,000 75,000 75,000
$7.75 101.00 200,000 200,000 20,000 20,000
$4.68 104.00 150,000 150,000 15,000 15,000
$4.40 112.50 274,720 274,720 27,472 27,472
$4.30 102.00 150,000 150,000 15,000 15,000
$3.80 106.00 300,000 300,000 30,000 30,000
$7.96(b) (c) 1,400,000 1,400,000 140,000 140,000
$7.48 (d) 500,000 ---- 50,000 ----
4,224,720 4,224,720 422,472 422,472
Series (with mandatory redemption) (e)
$9.875 102.50 390,000 650,000 39,000 65,000
$9.52 ---- ---- 200,000 ---- 20,000
$9.50 1986 Series ---- ---- 675,000 ---- 67,500
$8.75 1978 Series ---- ---- 200,300 ---- 20,030
$7.325 101.46 300,000 330,000 30,000 33,000
$7.00 101.00 248,000 256,000 24,800 25,600
$6.12 (f) 927,000 ---- 92,700 ----
1,865,000 2,311,300 186,500 231,130
Total Preferred Stock 6,089,720 6,536,020 $608,972 $653,602
</TABLE>
<PAGE>
<PAGE> 139
(a) Redeemable, at the option of the Company, at the indicated dollar amounts
per share, plus accrued dividends.
(b) Ownership of this series of preferred stock is evidenced by depositary
receipts, each representing one-fourth of a share of preferred stock.
(c) None of the shares of this series are subject to redemption prior to
October 1, 1997.
(d) None of the shares of this series are subject to redemption prior to April
1, 2003.
(e) Sinking fund requirements ($100 per share) in the period 1994-1996 are
$16,800,000 annually and $3,800,000 annually in the period 1997-1998.
(f) None of the shares of this series are subject to redemption prior to
August 1, 1999.
10. Long-Term Debt
<TABLE>
<CAPTION>
(Thousands of Dollars) At December 31,
Series Due 1993 1992
<S> <C> <C> <C> <C> <C> <C>
First and Refunding Mortgage Bonds (a) 6 1/2% 1993 ---- $60,000
4 1/2% - 13.05% 1994 $170,000 170,000
9% 1995 ---- 51,200
8 1/4% 1996 ---- 80,000
6 1/8% 1997 75,000 75,000
5 3/8% - 10% 1998 225,000 250,000
5 5/8% - 11% 1999-2003 1,635,069 1,255,200
6% - 10 1/4% 2004-2008 131,875 384,437
(b) 2009-2013 154,200 ----
8 7/8% - 11% 2014-2018 129,900 479,900
6 5/8% - 10 1/2% 2019-2024 1,776,561 1,207,130
Total First and Refunding Mortgage Bonds 4,297,605 4,012,867
Notes Payable -- Banks (c) 1993-1996 167,000 372,000
Revolving Credit and Term Loan Agreements (d) 1995-1997 425,000 525,000
Pollution Control Notes (e) 1997-2025 65,565 173,700
Debentures 10.05% - 11% 1993-2011 62,000 87,000
Medium-Term Notes (f) 1994-2005 150,000 150,000
Sinking Fund Debentures --
PECO Energy Power Company, a Subsidiary 4 1/2% 1995 10,550 11,350
Unamortized Debt Discount and Premium, Net (41,114) (28,958)
Total Long-Term Debt 5,136,606 5,302,959
Due Within One Year (g) 252,263 98,998
Long-Term Debt included in Capitalization (h) $ 4,884,343 $5,203,961
</TABLE>
(a) Utility Plant is subject to the lien of the Company's mortgage.
(b) Floating rates, which were an average annual interest rate of 2.40% at
December 31, 1993.
(c) The Company has entered into interest rate swap agree-ments to fix the
effective interest rates on certain of these notes. At December 31, 1993
and 1992, the Company had two and three interest rate swap agreements
outstanding with commercial banks, for a total notional principal amount
of $167 and $242 million, respectively. These agreements are subject to
performance by the commercial banks, which are counterparties to the
interest rate swaps. However, the Company does not anticipate
nonperformance by the counterparties. The annual interest rate for these
notes, giving effect to the interest rate swaps, was 10.61% at December
31, 1993.
<PAGE>
<PAGE> 140
(d) The Company has a $525 million revolving credit and term loan agreement
with a group of banks. The revolving credit arrangement converts into a
term loan on October 3, 1994. The borrowings are due in six semi-annual
installments with the first payment due six months after the conversion
into the term loan. Interest on outstanding borrowings is based on
specific formulas selected by the Company involving yields on several
types of debt instruments. There is an annual commitment fee of 0.15% on
the unused amount. The average annual interest rate for this revolving
credit agreement was 3.64% at December 31, 1993. The Company also has a
$150 million revolving credit and term loan agree-ment with a group of
banks. The revolving credit agreement converts into a term loan in July
1995 and the commitment terminates in 1997. There is an annual commitment
fee of 0.2% on the unused amount. At December 31, 1993 and 1992, no amount
was outstanding under this agreement.
(e) Floating rates, which were an average annual interest rate of 2.24% at
December 31, 1993.
(f) Medium-term notes collateralized by mortgage bonds. The average annual
interest rate was 7.61% at December 31, 1993.
(g) Long-term debt maturities, including mandatory sink-ing fund requirements,
in the period 1995-1998 are as follows: 1995-$201,213,000; 1996-
$393,463,000; 1997-$266,463,000; 1998-$241,463,000.
(h) The annualized interest on long-term debt at December 31, 1993, was $368
million, of which $326 million was associated with mortgage bonds and $42
million was associated with other long-term debt.
11. Short-Term Debt
(Thousands of Dollars) 1993 1992 1991
Average Borrowings $113,193 $50,161 $13,493
Average Interest Rates, Computed
on Daily Basis 3.35% 3.72% 6.17%
Maximum Borrowings Outstanding $368,400 $255,500 $81,000
Average Interest Rates at December 31 3.45% 3.72% ----
At December 31, 1993, the Company had formal and informal lines of credit with
banks aggregating $351 million against which $119 million of short-term debt
was outstanding. The Company does not have formal compensating balance
arrangements with these banks. The Company has a $150 million commercial paper
program and at December 31, 1993, there was no commercial paper outstanding.
<PAGE>
<PAGE> 141
12. Income Taxes
(Thousands of Dollars) 1993 1992 1991
Included in Operating Income:
Federal
Current $117,535 $131,054 120,646
Deferred 113,054 66,281 67,914
Investment Tax Credit, Net 43,344 (3,495) 58,078
State
Current 70,740 78,546 71,516
Deferred 9,718 (7,903) (9,209)
354,391 264,483 308,945
Included in Other Income and Deductions:
Federal
Current (3,650) (45,295) (1,957)
Deferred 15,926 20,237 16,483
State
Current (1,615) (18,430) (732)
Deferred 1,147 3,328 2,648
11,808 (40,160) 16,442
Total $366,199 $224,323 $325,387
In accordance with SFAS No. 109, the Company has also recorded an additional
accumulated net deferred income tax liability and pursuant to SFAS No. 71,
"Accounting for the Effects of Certain Types of Regulation," a corresponding
recoverable deferred income tax asset of $2.3 billion at December 31, 1993,
representing primarily the cumulative amount of federal and state income taxes
associated with the elimination of the net-of-tax AFUDC accounting
methodology.
The $2.3 billion accumulated net deferred income tax liability reflects the
tax effect of anticipated revenues and reverses as the related temporary
differences reverse over the life of the related depreciable assets concurrent
with the recovery of their cost in rates.
Also included in the accumulated deferred income tax liability are other
accumulated deferred income taxes, principally associated with liberalized tax
depreciation, established in accordance with the ratemaking policies of the
PUC based on flow-through accounting.
ITC and other general business credits reduced federal income taxes
currently payable by $60, $41 and $71 million in 1993, 1992 and 1991,
respectively. Under the Tax Reform Act of 1986, ITC was repealed effective
January 1, 1986 with the exception of transition property. The Company
believes that Limerick Unit No. 2 qualifies as transition property eligible
for ITC.
Approximately $36 million of additional business credits generated from 1988
through 1992 have not been utilized due to limitations based on taxable
income. These credits, which expire between 2003 and 2007, may be used to
reduce federal income taxes in future years.
The Internal Revenue Service (IRS) has completed its examinations of the
Company's federal income tax returns through 1986. The 1987 federal income tax
return has not been audited and the 1988 through 1990 federal income tax
returns are currently under examination.
For the years 1987 through 1990, the Company's current tax liability was
determined under the AMT method resulting in a cumulative tax credit of $176
million which can be utilized in future years when regular tax liability
exceeds AMT liability.
<PAGE>
<PAGE> 142
The tax effect of temporary differences which give rise to the Company's net
deferred tax liability as of December 31, 1993 are as follows:
(Millions of Dollars) Liability
Nature of Temporary Difference: or (Asset)
Utility Plant
Accelerated Depreciation $1,270
Deferred Investment Tax Credits 346
AMT Credits (176)
Other Plant Related Temporary Differences 1,335
Taxes Recoverable Through Future Rates, Net 980
Deferred Debt Refinancing Costs 142
Other, Net (155)
Deferred Income Taxes per the Balance Sheet $3,742
The net deferred tax liability shown above is comprised of $4.182 billion of
deferred tax liabilities partly offset by $440 million of deferred tax assets.
The Omnibus Budget Reconciliation Act of 1993 changed the federal income tax
rate for corporations to 35% from 34%, effective January 1, 1993. This change
resulted in an $8 million increase in Income Taxes in the Consolidated
Statement of Income for the year ended December 31, 1993. This change also
resulted in a $107 million increase in the Deferred Income Taxes liability on
the December 31, 1993 Consolidated Balance Sheet, because the Company expects
to receive recovery of all taxes when paid.
Provisions for deferred income taxes consist of the tax effects of the
following timing differences:
(Thousands of Dollars) 1993 1992 1991
Depreciation and Amortization $ 78,324 $93,469 $89,760
Deferred Energy Costs 19,013 (18,033) (19,916)
Early Retirement Plan ---- 1,865 16,024
Incremental Nuclear Maintenance and
Refueling Outage Costs (827) (1,627) (5,629)
Uncollectible Accounts 625 (2,629) (7,750)
Reacquired Debt 28,959 39,123 18,688
Unrecovered Revenue (806) (56,050) (43,983)
Alternative Minimum Tax ---- ---- 6,331
Limerick Plant Disallowances and
Phase-In Plan 17,073 15,118 16,634
Other (2,516) 10,707 7,677
Total $139,845 $81,943 $77,836
<PAGE>
<PAGE> 143
The total income tax provisions differed from amounts computed by applying the
federal statutory tax rate to income and adjusted income before income taxes
as shown below:
(Thousands of Dollars) 1993 1992 1991
Net Income $590,648 $478,941 $534,680
Total Income Tax Provisions 366,199 224,323 325,387
Income Before Income Taxes 956,847 703,264 860,067
Deduct: Allowance for Funds Used
During Construction 23,774 20,663 23,084
Adjusted Income Before Income Taxes $933,073 $682,601 $836,983
Income Taxes on Above at Federal Statutory
Rate of 35% in 1993 and 34% in 1992 and 1991 $326,576 $232,084 $284,574
Increase (Decrease) due to:
Depreciation Timing Differences Not Normalized 9,721 10,427 15,258
Limerick Plant Disallowances and Phase-In Plan 5,094 2,159 3,490
Unbilled Revenues Not Normalized ---- (5,766) 5,620
State Income Taxes, Net of Federal
Income Tax Benefits 51,994 36,657 42,387
Amortization of Investment Tax Credits (13,470) (24,624) (17,030)
Prior Period Income Taxes (3,942) (20,655) (13,227)
Other, Net (9,774) (5,959) 4,315
Total Income Tax Provisions $366,199 $224,323 $325,387
Provisions for Income Taxes as a Percent of:
Income Before Income Taxes 38.3% 31.9% 37.8%
Adjusted Income Before Income Taxes 39.2% 32.9% 38.9%
13. Taxes, Other Than Income - Operating
(Thousands of Dollars) 1993 1992 1991
Gross Receipts $155,407 $158,314 $158,719
Capital Stock 38,990 28,013 34,924
Real Estate 71,445 63,593 43,023
Payroll 31,490 29,410 31,439
Other 800 2,538 6,456
Total $298,132 $281,868 $274,561
14. Leases
Leased property included in Utility Plant at December 31, was as follows:
(Thousands of Dollars) 1993 1992
Nuclear Fuel $448,203 $471,276
Electric Plant 2,169 2,234
Gross Leased Property 450,372 473,510
Accumulated Amortization (255,670) (263,516)
Net Leased Property $194,702 $209,994
<PAGE>
<PAGE> 144
The nuclear fuel obligation is amortized as the fuel is consumed. Amortization
of leased property totalled $58, $55 and $59 million for the years ended
December 31, 1993, 1992 and 1991, respectively. Other operating expenses
included interest on capital lease obligations of $8, $7 and $10 million in
1993, 1992 and 1991, respectively. Minimum future lease payments as of
December 31, 1993 were:
Year Ending December 31, Capital Operating
(Thousands of Dollars) Leases Leases Total
1994 $70,413 $97,982 $168,395
1995 65,988 96,821 162,809
1996 59,273 60,501 119,774
1997 18,220 59,538 77,758
1998 92 55,861 55,953
Remaining Years 1,181 616,834 618,015
Total Minimum Future Lease Payments $215,167 $987,537 $1,202,704
Imputed Interest (rates ranging from
6.5% to 17.0%) (20,465)
Present Value of Net Minimum Future
Lease Payments $194,702
Rental expense under operating leases totalled $99, $94 and $89 million in
1993, 1992 and 1991, respectively.
15. Jointly Owned Electric Utility Plant
The Company's ownership interests in jointly owned electric utility plant at
December 31, 1993 were as follows:
<TABLE>
<CAPTION>
Transmission and
Production Plants Other Plant
Peach
Bottom Salem Keystone Conemaugh
Operator PECO Public Service Pennsylvania Pennsylvania
Energy Electric and Electric Electric Various
Company Gas Company Company Company Companies
<S> <C> <C> <C> <C> <C>
Participating Interest 42.49% 42.59% 20.99% 20.72% 21% to 43%
Company's share of (Thousands of Dollars)
Utility Plant 708,532 $1,174,379 $86,742 $91,299 $87,809
Accumulated Depreciation 253,057 370,825 42,735 43,443 26,795
Construction Work in Progress 21,764 40,562 10,850 54,252 991
</TABLE>
The Company's participating interests are financed with Company funds and,
when placed in service, all operations are accounted for as if such
participating interests were wholly owned facilities.
On April 2, 1992, the United States District Court for the District of New
Jersey approved a settlement of the lawsuits filed against the Company by the
other co-owners of Peach Bottom concerning the 1987 shutdown of Peach Bottom
ordered by the NRC. As part of the settlement, the Company paid $131 million
to the other co-owners on October 1, 1992 and the Company recognized a charge
against income ($76 million, net of taxes) in the first quarter of 1992.
<PAGE>
<PAGE> 145
In 1990, the Company received net proceeds of $28 million ($16 million, net
of taxes) in settlement of a shareholders' derivative suit in connection with
the 1987 Peach Bottom shutdown. Recognition of the $28 million had been
deferred pending the resolution of the co-owners' litigation. As a result of
the settlement of the co-owners' litigation, the $28 million was recognized as
other income in the first quarter of 1992 and reported as an offset against
the amount of the above-mentioned charge relating to the settlement of the co-
owners' litigation.
16. Segment Information
(Thousands of Dollars) 1993 1992 1991
Electric Operations
Operating Revenues $3,605,425 $3,597,141 $3,662,573
Operating Expenses, excluding
Depreciation 2,228,507 2,236,907 2,253,159
Depreciation 400,851 90,846 379,607
Operating Income $976,067 $969,388 $1,029,807
Utility Plant Additions $458,125 $461,407 $422,780
Gas Operations
Operating Revenues $382,704 $365,328 $356,013
Operating Expenses, excluding
Depreciation 299,259 278,407 283,665
Depreciation 24,101 22,933 20,965
Operating Income $59,344 $63,988 $51,383
Utility Plant Additions $72,481 $74,858 $55,098
Identifiable Assets*
Electric $10,395,488 $10,393,449 $10,213,296
Gas 727,690 658,825 590,151
Nonallocable Assets 3,909,149 1,525,953 1,720,013
Total Assets $15,032,327 $12,578,227 $12,523,460
*Includes Utility Plant less accumulated depreciation, inventories and
allocated common utility property.
17. Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents. The following disclosures supplement the accompanying
Statements of Cash Flows:
(Thousands of Dollars) 1993 1992 1991
Cash Paid During the Year:
Interest (net of amount capitalized) $474,735 $515,696 $551,944
Income taxes (net of refunds) 182,751 224,352 193,340
Noncash Investing and Financing:
Capital lease obligations incurred 42,484 40,757 41,905
<PAGE>
<PAGE> 146
18. Investments
(Thousands of Dollars) December 31,
1993 1992
Trusts and Escrow Deposits for Decommissioning
Nuclear Plants $149,932 $125,703
Real Estate Developments and Other Ventures 46,741 48,273
Nonutility Property 21,262 23,141
Gas Exploration and Development Joint Ventures 625 5,026
Other Deposits 76 279
Total $218,636 $202,422
19. Financial Instruments
SFAS No. 107, "Disclosure About Fair Value of Financial Instruments,"
requires additional disclosure about the fair value of financial instruments,
including liabilities, for which it is practicable to estimate fair value.
Fair values are estimated based on quoted market prices for the same or
similar issues. The carrying amounts and fair values of the Company's
financial instruments as of December 31, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1993 1992
Carrying Fair Carrying Fair
(Thousands of Dollars) Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and Temporary Cash Investments $46,923 $46,923 $50,369 $50,369
Long-Term Debt
(including amounts due within one year) 5,136,606 5,375,427 5,302,959 5,546,896
Trusts and Escrow Accounts
for Decommissioning Nuclear Plants 149,932 160,141 125,703 131,138
</TABLE>
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of temporary cash investments and customer
accounts receivable. The Company places its temporary cash investments with
high-credit, quality financial institutions. At times, such investments may be
in excess of the Federal Depository Insurance Corporation limit.
Concentrations of credit risk with respect to customer accounts receivable are
limited due to the Company's large number of customers and their dispersion
across many industries.
20. Nuclear Fuel Agreement with Long Island Power Authority (LIPA)
On March 1, 1993, the Company entered into an agreement with LIPA and other
parties, subsequently revised on September 14, 1993, to receive $46 million as
compensation for accepting slightly irradiated nuclear fuel from Shoreham
Nuclear Power Station. The Company is to receive the $46 million in
installments as the shipments of nuclear fuel are accepted. The first of the
thirty-three shipments arrived at Limerick on September 28, 1993. As of
December 31, 1993, the Company had received 18 shipments of the nuclear fuel.
The payments from LIPA, in excess of related costs, are being recognized in
income. The Company recognized $20 million as other income in the Consolidated
Statement of Income for the year ended December 31, 1993, and deferred $6
million of payments received on the December 31, 1993 Consolidated Balance
Sheet, pursuant to this agreement. The Company estimates that the acquisition
of the fuel will result in benefits to the Company's customers of $70 million
over the next 12 to 15 years due to reduced fuel-purchase requirements.
<PAGE>
<PAGE> 147
21. Quarterly Data (Unaudited)
The data shown below include all adjustments which the Company considers
necessary for a fair presentation of such amounts:
<TABLE>
<CAPTION>
(Thousands of Dollars) Operating Revenues Operating Income Net Income
Quarter Ended 1993 1992 1993 1992 1993 1992
<S> <C> <C> <C> <C> <C> <C>
March 31 $1,071,492 $1,079,890 $281,734 $274,580 $162,356 $ 88,401
June 30 901,703 903,245 223,196 222,426 107,691 94,325
September 30 1,073,134 996,138 290,937 268,699 181,683 142,338
December 31 941,800 983,196 239,544 267,671 138,918 153,877
Earnings Applicable Average Shares Earnings
(Thousands of Dollars) to Common Stock Outstanding Per Average Share
Quarter Ended 1993 1992 1993 1992 1993 1992
March 31 $149,305 $ 72,013 220,609 220,068 $0.68 $0.33
June 30 94,540 78,207 220,856 220,170 0.43 0.35
September 30 169,727 128,754 221,318 220,327 0.77 0.59
December 31 128,018 139,236 221,493 220,411 0.58 0.63
</TABLE>
1992 first quarter results include a net charge of $103 million ($60
million, net of taxes), or $0.27 per share, as a result of the settlement of
the litigation concerning the 1987 shutdown of Peach Bottom (see note 15).
1992 fourth quarter results include a net benefit of $24 million, or $0.11
per share, as a result of the settlement of the Company's 1984-1986 federal
income tax returns.
<PAGE>
<PAGE> 148
FINANCIAL STATISTICS
Summary of Earnings and Financial Condition (Millions of Dollars)
<TABLE>
<CAPTION>
For the Year Ended 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $3,988.1 $3,962.5 $4,018.6 $3,786.7 $3,473.8 $3,246.3
Operating Income 1,035.4 1,033.4 1,081.2 767.7 809.3 742.6
Income from Continuing
Operations 590.6 478.9 534.7 105.8 590.5 566.0
Net Income 590.6 478.9 534.7 214.2 590.5 566.0
Earnings Applicable
to Common Stock 541.6 418.2 468.6 123.9 493.9 468.8
Earnings Per Average
Common Share From Continuing
Operations (Dollars) 2.45 1.90 2.15 0.07 2.36 2.33
Earnings Per Average Common
Share (Dollars) 2.45 1.90 2.15 0.58 2.36 2.33
Dividends Per Common
Share (Dollars) 1.43 1.325 1.225 1.45 2.20 2.20
Common Stock Equity (Per Share) 19.25 18.24 17.69 16.71 17.67 17.39
Average Shares of Common Stock
Outstanding (Millions) 221.1 220.2 218.2 214.4 208.9 201.5
At December 31
Net Utility Plant,
at Original Cost $10,763.0 $10,691.2 $10,598.4 $10,591.3 $10,720.8 $10,048.5
Leased Property, Net 194.7 210.0 223.8 241.3 273.5 287.5
Total Current Assets 514.8 550.0 783.2 745.0 655.0 502.5
Total Deferred Debits
and Other Assets 3,559.8 1,127.0 918.1 938.6 972.8 953.9
Total Assets $15,032.3 $12,578.2 $12,523.5 $12,516.2 $12,622.1 $11,792.4
Common Shareholders' Equity $ 4,263.4 $ 4,022.2 $ 3,892.3 $ 3,624.5 $ 3,744.8 $ 3,592.6
Preferred and Preference Stock
Without Mandatory Redemption 422.5 422.5 422.5 422.5 622.4 622.4
With Mandatory Redemption 186.5 231.1 315.6 330.9 351.1 368.1
Long-Term Debt 4,884.3 5,203.9 5,415.6 5,830.8 5,762.7 5,219.5
Total Capitalization 9,756.7 9,879.7 10,046.0 10,208.7 10,481.0 9,802.6
Total Current Liabilities 954.6 830.6 823.4 783.8 790.5 662.4
Total Deferred Credits and
Other Liabilities 4,321.0 1,867.9 1,654.1 1,523.7 1,350.6 1,327.4
Total Capitalization
and Liabilities $15,032.3 $12,578.2 $12,523.5 $12,516.2 $12,622.1 $11,792.4
</TABLE>
<PAGE>
<PAGE> 149
OPERATING STATISTICS
Electric Operations
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
Output (Millions of Kilowatthours)
Fossil 10,352 8,082 7,376 7,913 10,470 10,225
Nuclear 27,026 24,428 25,735 23,715 12,890 12,328
Hydro 1,699 1,803 1,388 2,266 1,743 1,307
Pumped Storage Output 1,478 1,597 1,653 1,437 1,354 1,515
Pumped Storage Input (2,192) (2,217) (2,355) (2,059) (1,937) (2,163)
Purchase and Interchange 6,447 8,675 8,603 5,787 11,192 11,802
Internal Combustion 56 29 79 152 348 285
Other ---- ---- ---- 180 1,063 ----
Total Electric Output 44,866 42,397 42,479 39,391 37,123 35,299
Sales (Millions of Kilowatthours)
Residential 10,657 9,894 10,311 9,815 9,974 10,058
Small Commercial and Industrial 5,773 5,367 5,284 5,066 4,921 4,666
Large Commercial and Industrial 15,935 15,770 16,177 16,554 16,749 16,516
Other 771 962 1,029 1,010 1,031 999
Service Territory 33,136 31,993 32,801 32,445 32,675 32,239
Interchange Sales 457 1,231 1,612 2,751 2,027 435
Sales to Other Utilities 8,670 6,699 5,445 1,865 ---- ----
Total Electric Output 42,263 39,923 39,858 37,061 34,702 32,674
Number of Customers, December 31
Residential 1,341,873 1,333,926 1,324,795 1,320,126 1,309,717 1,296,784
Small Commercial
and Industrial 142,363 141,253 140,901 140,305 138,244 135,274
Large Commercial and Industrial 3,742 3,972 4,162 4,344 4,449 4,520
Other 888 857 840 817 775 779
Total Electric Customers 1,488,866 1,480,008 1,470,698 1,465,592 1,453,185 1,437,357
Operating Revenues (Millions of Dollars)
Residential $ 1,354.1 $ 1,304.5 $ 1,342.3 $ 1,229.8 $ 1,157.0 $ 1,127.8
Small Commercial
and Industrial 678.9 669.8 641.0 595.2 537.1 489.4
Large Commercial
and Industrial 1,164.0 1,223.2 1,278.9 1,247.1 1,182.0 1,089.3
Other 161.2 168.0 170.4 166.9 143.9 143.8
Service Territory 3,358.2 3,365.5 3,432.6 3,239.0 3,020.0 2,850.3
Interchange Sales 14.3 32.1 42.8 81.5 68.2 17.6
Sales to Other Utilities 232.9 199.5 187.2 81.1 ---- ----
Total Electric Revenues $ 3,605.4 $ 3,597.1 $ 3,662.6 $ 3,401.6 $ 3,088.2 $ 2,867.9
Operating Expenses (Millions of Dollars)
Operating Expenses, excluding
Depreciation $ 2,228.5 $ 2,236.9 $ 2,253.2 $ 2,325.2 $ 2,077.4 $ 1,931.3
Depreciation 400.8 390.8 379.6 337.7 257.4 245.5
Total Operating Expenses $ 2,629.3 $ 2,627.7 $ 2,632.8 $ 2,662.9 $ 2,334.8 $ 2,176.8
Electric Operating Income $ 976.1 $ 969.4 $ 1,029.8 $ 738.7 $ 753.4 $ 691.1
Average Use per Residential Customer
(kilowatthours)
Without Electric Heating 6,727 6,259 6,707 6,376 6,488 6,667
With Electric Heating 17,096 16,298 16,201 16,038 17,250 17,738
Total 7,970 7,443 7,801 7,464 7,655 7,807
Electrical Peak Load, Demand
(thousands of kilowatts) 7,100 6,617 7,096 6,755 6,467 6,826
Net Electric Generating Capacity --
Year-End Summer Rating
(thousands of kilowatts) 8,877 8,836 8,766 8,766 7,759 7,762
Cost of Fuel per Million Btu $ 0.90 $ 0.82 $ 0.92 $ 1.13 $ 1.37 $ 1.19
Btu per Net
Kilowatthour Generated 10,675 10,657 10,849 10,844 10,894 10,881
</TABLE>
<PAGE>
<PAGE> 150
OPERATING STATISTICS
Gas Operations
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
Sales (Millions of Cubic Feet)
Residential 1,637 1,819 1,746 1,778 1,951 1,933
House Heating 30,687 29,750 26,423 25,303 28,301 28,112
Commercial and Industrial 22,943 21,497 20,492 23,228 30,038 39,073
Other 5,656 2,146 534 1,567 2,344 2,228
Total Gas Sales 60,923 55,212 49,195 51,876 62,634 71,346
Gas Transported for Customers 22,946 22,060 21,414 24,413 18,033 9,272
Total Gas Sales & Transported 83,869 77,272 70,609 76,289 80,667 80,618
Number of Customers, December 31
Residential 59,573 59,859 62,444 63,267 65,544 66,599
House Heating 277,500 269,577 260,473 254,564 246,273 239,022
Commercial and Industrial 31,573 30,956 30,204 29,456 28,369 27,119
Total Gas Customers 368,646 360,392 353,121 347,287 340,186 332,740
Operating Revenues (Millions of Dollars)
Residential $ 15.0 $ 16.4 $ 17.0 $ 18.1 $ 18.0 $ 17.0
House Heating 205.5 201.9 192.4 200.8 195.8 180.6
Commercial and Industrial 124.2 121.1 123.6 144.7 152.5 165.1
Other 15.2 2.8 2.2 5.6 7.3 6.6
Subtotal $ 359.9 $ 342.2 $ 335.2 $ 369.2 $ 373.6 $ 369.3
Other Revenues (including Transported
for Customers) 22.8 23.1 20.8 15.8 12.1 9.1
Total Gas Revenues $ 382.7 $ 365.3 $ 356.0 $ 385.0 $ 385.7 $ 378.4
Operating Expenses (Millions of Dollars)
Operating Expenses,
excluding Depreciation $ 299.3 $ 278.4 $ 283.7 $ 336.2 $ 310.2 $ 308.3
Depreciation 24.1 22.9 21.0 19.8 19.6 18.6
Total Operating Expenses $ 323.4 $ 301.3 $ 304.7 $ 356.0 $ 329.8 $ 326.9
Gas Operating Income
(Millions of Dollars) $ 59.3 $ 64.0 $ 51.3 $ 29.0 $ 55.9 $ 51.5
</TABLE>
Securities Statistics
Ratings on PECO Energy Company's Securities
<TABLE>
<CAPTION>
Mortgage Bonds Debentures Preferred Stock
Agency Rating Date Established Rating Date Established Rating Date Established
<S> <C> <C> <C> <C> <C> <C>
Duff and Phelps, Inc. BBB+ 4/92 BBB 4/92 BBB- 8/91
Fitch Investors Service, Inc. A- 9/92 BBB+ 9/92 BBB+ 9/92
Moody's Investors Service Baal 4/92 Baa2 4/92 baa2 4/92
Standard & Poor's Corporation BBB+ 4/92 BBB 4/92 BBB 4/92
</TABLE>
NYSE-Composite Common Stock Prices, Earnings and Dividends By Quarter (Per
Share)
<TABLE>
<CAPTION>
1993 1992
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High Price $32-7/8 $33-1/2 $31-1/8 $30-3/8 $26-3/4 $26-3/4 $26-5/8 $26
Low Price $27-3/8 $30-3/8 $27-3/4 $25-1/2 $25 $25 $23-5/8 $22-5/8
Close $30-1/4 $32-3/4 $30-5/8 $30 $26-1/8 $26-3/8 $26-3/8 $24-5/8
Earnings 58c 77c 43c 68c 63c 59c 35c 33c
Dividends 38c 35c 35c 35c 35c 32.5c 32.5c 32.5c
</TABLE>
<PAGE>
<PAGE>
<PAGE> 151
Exhibit 22
SUBSIDIARIES OF THE REGISTRANT
State
Subsidiary of Incorporation
________________ _________________
Adwin Equipment Company Pennsylvania
Adwin Realty Company Pennsylvania
Adwin Investment Company Delaware
Buttonwood Associates, Inc. Delaware
Conowingo Power Company Maryland
Heatac Energy Performance Services, Inc. Pennsylvania
PECO Energy Power Company Pennsylvania
(formerly known as Philadelphia
Electric Power Company)
Eastern Pennsylvania Development Company Pennsylvania
Eastern Pennsylvania Exploration Company Pennsylvania
The Proprietors of the Susquehanna Canal Maryland
Susquehanna Electric Company Maryland
Susquehanna Power Company Maryland
<PAGE>
<PAGE>
<PAGE> 152
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration
statements of PECO Energy Company on Form S-3 (File Nos. 33-49887, 33-59152,
33-31436, and 33-43523) and on Form S-8 (File No. 33-30317) of our reports
dated January 31, 1994, on our audits of the consolidated financial statements
and financial statement schedules of PECO Energy Company as of December 31,
1993 and 1992 and for each of the three years in the period ended December 31,
1993, which reports are incorporated by reference and included, respectively,
in this Annual Report on Form 10-K.
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 24, 1994
<PAGE>
<PAGE>
<PAGE> 153
Exhibit 24
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Susan W. Catherwood of Bryn Mawr,
PA, do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either
of them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ SUSAN W. CATHERWOOD (L.S.)
--------------------------------------
<PAGE>
<PAGE> 154
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, M. Walter D'Alessio of
Philadelphia, PA, do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL,
JR., or either of them, attorney for me and in my name and on my behalf to
sign the annual Securities and Exchange Commission report on Form 10-K for
1993 of PECO Energy Company (formerly Philadelphia Electric Company), to be
filed with the Securities and Exchange Commission, and generally to do and
perform all things necessary to be done in the premises as fully and
effectually in all respects as I could do if personally present.
DATE:February 28, 1994 /s/ M. WALTER D'ALESSIO (L.S.)
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<PAGE>
<PAGE> 155
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Richard G. Gilmore of Sarasota, FL,
do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either of
them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ R. G. GILMORE (L.S.)
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<PAGE>
<PAGE> 156
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Richard H. Glanton of Philadelphia,
PA, do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either
of them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ RICHARD H. GLANTON (L.S.)
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<PAGE>
<PAGE> 157
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, James A. Hagen of Villanova, PA, do
hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either of
them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ JAMES A. HAGEN (L.S.)
--------------------------------------
<PAGE>
<PAGE> 158
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Nelson G. Harris of Lafayette Hill,
PA, do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either
of them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ NELSON G. HARRIS (L.S.)
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<PAGE>
<PAGE> 159
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Robert D. Harrison of Bryn Mawr,
PA, do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either
of them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ ROBERT D. HARRISON (L.S.)
---------------------------------------
<PAGE>
<PAGE> 160
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Joseph C. Ladd of Rosemont, PA, do
hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either of
them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ JOSEPH C. LADD (L.S.)
---------------------------------------
<PAGE>
<PAGE> 161
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Edithe J. Levit of Philadelphia,
PA, do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either
of them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ EDITHE J. LEVIT (L.S.)
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<PAGE>
<PAGE> 162
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Kinnaird R. McKee of Oxford, MD, do
hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either of
them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ KINNAIRD R. McKEE (L.S.)
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<PAGE>
<PAGE> 163
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Joseph J. McLaughlin of Rosemont,
PA, do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either
of them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ JOSEPH J. McLAUGHLIN (L.S.)
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<PAGE>
<PAGE> 164
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Dr. John M. Palms of Columbia, SC,
do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR., or either of
them, attorney for me and in my name and on my behalf to sign the annual
Securities and Exchange Commission report on Form 10-K for 1993 of PECO Energy
Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ JOHN M. PALMS (L.S.)
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<PAGE>
<PAGE> 165
P O W E R O F A T T O R N E Y
KNOW ALL MEN BY THESE PRESENTS That I, Ronald Rubin of
Narberth, PA, do hereby appoint J. F. PAQUETTE, JR., and C. A. MC NEILL, JR.,
or either of them, attorney for me and in my name and on my behalf to sign the
annual Securities and Exchange Commission report on Form 10-K for 1993 of PECO
Energy Company (formerly Philadelphia Electric Company), to be filed with the
Securities and Exchange Commission, and generally to do and perform all things
necessary to be done in the premises as fully and effectually in all respects
as I could do if personally present.
DATE:February 28, 1994 /s/ RONALD RUBIN (L.S.)
---------------------------------------
<PAGE>
