=============================================================================
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 1-4393
-----------------------------
PUGET SOUND POWER & LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Washington 91-0374630
(State or other (I.R.S. Employee
jurisdiction of Identification No.)
incorporation or
organization)
411 - 108th Avenue N.E., Bellevue, Washington 98004-5515
(Address of principal executive offices)
(206) 454-6363
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file for such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes /X/ No / /
The number of shares of registrant's common stock outstanding at September
30, 1995 was 63,640,861.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30
1995 1994
------- -------
(Unaudited)
(Thousands except shares
and per share amounts)
OPERATING REVENUES $248,584 $264,289
------- -------
OPERATING EXPENSES:
Operation:
Purchased and interchanged power 94,063 90,888
Fuel 12,492 13,897
Other 35,109 47,936
Maintenance 11,397 14,655
Depreciation and amortization 26,785 30,240
Taxes other than federal income taxes 24,236 23,903
Federal income taxes 7,501 9,666
------- -------
Total operating expenses 211,583 231,185
------- -------
OPERATING INCOME 37,001 33,104
------- -------
OTHER INCOME:
Allowance for funds used during construction -
equity portion 625 270
Miscellaneous - net of taxes 1,633 3,009
------- -------
Total other income 2,258 3,279
------- -------
INCOME BEFORE INTEREST CHARGES 39,259 36,383
------- -------
INTEREST CHARGES:
Interest and amortization on long-term debt 20,064 21,219
Allowance for funds used during
construction - debt portion (973) (997)
Other 1,149 1,234
------- -------
Total interest charges 20,240 21,456
------- -------
NET INCOME 19,019 14,927
DEDUCT: ------- -------
Preferred stock dividend accrual 3,855 3,945
------- -------
INCOME FOR COMMON STOCK $ 15,164 $ 10,982
======= =======
COMMON SHARES OUTSTANDING -
WEIGHTED AVERAGE 63,640,861 63,629,416
EARNINGS PER COMMON SHARE (Note a) $ 0.24 $0.17
DIVIDENDS PAID PER COMMON SHARE $ 0.46 $0.46
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended September 30
1995 1994
------- -------
(Unaudited)
(Thousands except shares
and per share amounts)
OPERATING REVENUES $848,521 $857,123
------- -------
OPERATING EXPENSES:
Operation:
Purchased and interchanged power 293,325 277,111
Fuel 25,727 34,976
Other 123,418 154,040
Maintenance 38,433 39,758
Depreciation and amortization 80,792 90,345
Taxes other than federal income taxes 81,021 77,948
Federal income taxes 55,507 50,371
------- -------
Total operating expenses 698,223 724,549
------- -------
OPERATING INCOME 150,298 132,574
------- -------
OTHER INCOME:
Allowance for funds used during construction -
equity portion 719 463
Miscellaneous - net of taxes 5,808 10,039
------- -------
Total other income 6,527 10,502
------- -------
INCOME BEFORE INTEREST CHARGES 156,825 143,076
------- -------
INTEREST CHARGES:
Interest and amortization on long-term debt 62,257 62,957
Allowance for funds used during
construction - debt portion (3,318) (2,608)
Other 7,257 3,501
------- -------
Total interest charges 66,196 63,850
------- -------
NET INCOME 90,629 79,226
------- -------
DEDUCT:
Preferred stock dividend accrual 11,725 11,752
------- -------
INCOME FOR COMMON STOCK $ 78,904 $ 67,474
======= =======
COMMON SHARES OUTSTANDING -
WEIGHTED AVERAGE 63,640,861 63,629,416
EARNINGS PER COMMON SHARE (Note a) $1.24 $1.06
DIVIDENDS PAID PER COMMON SHARE $1.38 $1.38
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30 December 31
1995 1994
--------- ---------
(Unaudited)
(Thousands of Dollars)
UTILITY PLANT:
Electric Plant, at original cost (including
construction work in progress of $109,541,000
and $94,067,000, respectively) $3,372,661 $3,306,854
Less: Accumulated depreciation 1,095,547 1,039,943
--------- ---------
Net utility plant 2,277,114 2,266,911
--------- ---------
OTHER PROPERTY AND INVESTMENTS:
Investment in Bonneville Exchange Power
Contract (Note b) 96,044 101,309
Investments in and advances to subsidiaries 91,360 76,517
Energy conservation loans to customers 922 1,409
Other investments, at cost 10,785 12,203
--------- ---------
Total other property and investments 199,111 191,438
--------- ---------
CURRENT ASSETS:
Cash 11,149 5,284
Accounts receivable 96,190 107,588
Estimated unbilled revenue 53,707 86,745
PRAM accrued revenues 71,177 47,178
Materials and supplies, at average cost 45,800 49,543
Prepayments and Other 9,955 5,260
--------- ---------
Total current assets 287,978 301,598
--------- ---------
LONG TERM ASSETS:
Regulatory asset for deferred income taxes 268,824 275,296
PRAM accrued revenues (net of current portion) 51,722 63,663
Unamortized debt expense 10,530 8,076
Unamortized energy conservation charges (Note c) 33,641 239,500
Other 97,537 117,288
--------- ---------
Total long-term assets 462,254 703,823
--------- ---------
TOTAL ASSETS $3,226,457 $3,463,770
========= =========
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
September 30 December 31
1995 1994
--------- ---------
(Unaudited)
(Thousands of Dollars)
CAPITALIZATION:
Shareholders' investment:
Common stock, $10 stated value, 80,000,000
shares authorized, 63,640,861 outstanding $ 636,409 $ 636,409
Additional paid-in capital 328,963 328,753
Earnings reinvested in the business 198,553 207,567
--------- ---------
Total common equity 1,163,925 1,172,729
Preferred stock not subject to
mandatory redemption 125,000 125,000
Preferred stock subject to
mandatory redemption 89,040 91,242
Long-term debt 928,402 963,298
--------- ---------
Total capitalization 2,306,367 2,352,269
--------- ---------
CURRENT LIABILITIES:
Accounts payable 39,914 58,025
Short-term debt (Note c) 131,948 234,454
Current maturities of long-term debt 43,001 108,000
Accrued expenses:
Taxes 25,576 40,337
Salaries and wages 21,789 20,809
Interest 23,691 26,181
Other 16,961 25,018
--------- ---------
Total current liabilities 302,880 512,824
--------- ---------
DEFERRED TAXES:
Deferred income taxes 539,048 541,501
Deferred investment tax credits 415 726
--------- ---------
Total deferred taxes 539,463 542,227
--------- ---------
OTHER DEFERRED CREDITS:
Customer advances for construction 20,506 21,939
Other 57,241 34,511
--------- ---------
Total other deferred credits 77,747 56,450
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $ 3,226,457 $3,463,770
========= =========
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30
1995 1994
------- -------
(Unaudited)
(Thousands of Dollars)
OPERATING ACTIVITIES:
- --------------------
Net income $ 90,629 $ 79,226
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 80,792 90,345
Deferred income taxes and tax credits - net 3,708 10,031
AFUDC - equity portion (719) (463)
PRAM accrued revenues - net (12,058) (31,029)
Other 42,519 43,267
Change in certain current assets
and liabilities (Note d) 2,912 22,355
- ----------------------------------------------------------------------------
Net Cash Provided by Operating Activities 207,783 213,732
- ----------------------------------------------------------------------------
INVESTING ACTIVITIES:
- --------------------
Construction expenditures - excluding equity AFUDC (87,289) (100,826)
Additions to energy conservation program (10,189) (29,320)
Decrease in energy conservation loans 486 735
Cash received from subsidiary -- 30,136
Cash from sale of conservation assets 202,495 --
Other (including advances to subsidiaries) (251) (8,544)
- ----------------------------------------------------------------------------
Net Cash Provided (Used) by
Investing Activities 105,252 (107,819)
- ----------------------------------------------------------------------------
FINANCING ACTIVITIES:
- --------------------
Decrease in short-term debt (102,506) (31,377)
Dividends paid (99,642) (99,532)
Issuance of preferred stock -- 50,000
Issuance of bonds -- 85,000
Redemption of bonds and notes (100,003) (65,006)
Redemption of preferred stock (1,993) (41,849)
Issue costs of bonds and stock (3,026) (2,016)
- ----------------------------------------------------------------------------
Net Cash Used by Financing Activities (307,170) (104,780)
- ----------------------------------------------------------------------------
Increase in Cash 5,865 1,133
Cash at Beginning of Period 5,284 3,445
- ----------------------------------------------------------------------------
Cash at End of Period $ 11,149 $ 4,578
============================================================================
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(a) Earnings Per Common Share
Earnings per common share for the three and nine months ended September 30,
1995 and 1994 have been computed by dividing income for common stock by the
weighted average number of common shares outstanding.
(b) Investment in Bonneville Exchange Power Contract
The Company has a five percent interest, as a tenant in common with three
other investor-owned utilities and Washington Public Power Supply System
("WPPSS"), in the WPPSS Unit 3 project. The Unit 3 project is a partially
constructed 1,240,000 kilowatt nuclear generating plant at Satsop,
Washington, which was in a state of extended construction delay instituted
by the Bonneville Power Administration ("BPA") and WPPSS in 1983. Unit 3
was terminated by WPPSS and the other owners in 1994. Under the terms of a
settlement agreement (the "Settlement Agreement"), the Company is receiving
electric power (the "Bonneville Exchange Power Contract") from the federal
power system resources marketed by the BPA for a period of approximately
30.5 years which commenced January 1, 1987. The Settlement Agreement
settled the claims of the Company against WPPSS and BPA relating to the
construction delay of the WPPSS Unit 3 project.
Several issues in the litigation relating to WPPSS Unit 3, including claims
on behalf of WPPSS Unit 5 against the Company and the other Unit 3 owners
were not settled by the Settlement Agreement. The Company and a number of
the litigants have signed, subject to various conditions, a memorandum of
understanding intended to result in a settlement and dismissal of these
claims. Pursuant to the memorandum of understanding, on July 6, 1995,
Chemical Bank was paid a total of $55 million to settle all bondholder
claims arising in the litigation. The Company's share of the settlement
amount was $500,000, an expense which was accrued by the Company in 1994.
(c) Unamortized Energy Conservation Costs and Short-Term Debt
The Company's energy conservation expenditures have historically been
accumulated, included in rate base and amortized over a ten-year period at
the direction of the Washington Utilities and Transportation Commission (the
"Washington Commission"). In June 1995 the Company sold approximately $202.5
million of its investment in customer-owned energy conservation measures to a
grantor trust, which, in turn, issued securities backed by a Washington state
statute enacted in 1994. The statute provides that if certain conditions are
met, securities could be issued, backed by a statutory requirement that a
portion of rate revenues be segregated to repay those securities. The
proceeds of the sale were used to pay down short-term debt. The securities
were issued in June 1995 and carry a coupon rate of 6.45 percent. The
Company recognized no gain or loss on the sale. The Company's unamortized
conservation balance at September 30, 1995, was $34 million.
(d) Consolidated Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all temporary investments to be cash equivalents. These temporary
cash investments are securities held for cash management purposes, having
maturities of three months or less at time of purchase. The net change in
current assets and current liabilities for purposes of the Statement of Cash
Flows excludes short-term debt, current maturities of long-term debt, and the
current portion of the Periodic Rate Adjustment Mechanism ("PRAM") accrued
revenues.
<PAGE>
The following provides additional information concerning cash flow
activities:
Nine Months Ended September 30
1995 1994
- --------------------------------------------------------------------------
(Thousands)
Changes in current assets and current liabilities:
Accounts receivable $ 11,398 $ 7,999
Unbilled revenues 33,038 37,785
Materials and supplies 3,743 931
Prepayments and Other (2,828) (5,231)
Accounts payable (18,111) (1,716)
Accrued expenses and Other (24,328) (17,413)
- --------------------------------------------------------------------------
Net change in current assets and current liabilities $ 2,912 $ 22,355
==========================================================================
Cash payments:
Interest (net of capitalized interest): $ 69,168 $ 62,593
Income taxes $ 60,177 $ 45,706
- --------------------------------------------------------------------------
(e) Other
On October 18, 1995, the Company entered into an Agreement and Plan of Merger
with Washington Energy Company ("WECO") and Washington Natural Gas Company
("WNG"), a wholly owned subsidiary of WECO. The Merger has been unanimously
approved by the Company's Board of Directors as well as the Board of
Directors of WECO.
The Agreement calls for shares of WECO common stock to be exchanged for 0.86
shares of the Company's common stock after which, the merged company would
then be renamed. In addition, the Agreement calls for the preferred stock of
WNG to be converted into preferred shares of the merged company. The merger
would be structured as a tax-free exchange of shares, and is expected to be
accounted for as a pooling of interests. The board of directors of the new
company would consist of up to 15 individuals, drawn in a two-to-one ratio
from the current Puget Power and WECO boards.
The merger agreement is subject to the approval of the shareholders of the
respective companies and by the Washington Commission which regulates the
utility operations of each entity. Shareholder approval will be sought at
shareholder meetings to be scheduled in early 1996. The regulatory approval
process is expected to be completed in the second half of 1996.
On September 22, 1995, the Washington Commission issued a rate order relating
to the Company's annual rate adjustment under the PRAM. The Company had
requested a $62.8 million revenue increase and the Commission allowed $58.8
million. The decrease included $3.3 million related to resource cost
projections that are subject to true-up at the end of the PRAM period and a
flow-through to customers of $0.7 million related to tax benefits on the
Company's conservation expenditures. In addition to the approval of the rate
adjustment, the Commission also agreed with a proposal to discontinue the
PRAM on September 30, 1996, the end of the current PRAM period. PRAM
deferrals outstanding at that time are expected to be recovered in rates over
a period not to exceed two years.
On October 31, 1995, the Washington Commission approved a joint proposal from
the Company and the Commission Staff that allowed the Company to defer a
general rate filing that was otherwise scheduled to occur on November 1,
1995. Under the joint proposal, the Company will provide a statement of
operations for ratemaking purposes, along with supporting workpapers, to the
Commission and any interested parties by November 1, 1995. Testimony and
exhibits supporting the statement of operations will be provided by November
15, 1995. The statement of operations will be among the issues presented in,
and relevant to, the Commission's deliberations regarding the merger between
the Company and Washington Energy Company. The Company agreed to file a
general rate case within two weeks of April 15, 1996, if a merger application
is not filed by that date.
The joint proposal further recommended that a portion of current PRAM rates,
approximately $165 million, be maintained after September 30, 1996, until the
Commission's final ruling on the merger case. This $165 million consists of
$81 million of base and resource cost components under the PRAM and $84
million associated with purchase power contracts that were approved by the
Washington Commission in a 1994 prudence review case. This issue may be
resolved by an earlier motion if the parties are able to verify that the
revenue currently collected in PRAM rates are fully supported by cost data
and the Commission determines they should be transferred to the Company's
permanent rate schedules. If no such motion is filed and resolved, the
Commission will resolve the issue in its order in the merger case or general
rate case.
The Washington Commission's order approving the joint proposal provided that
any extension of these rates beyond September 30, 1996, will be treated as
temporary rates subject to refund. On November 2, 1995, the Company and
Commission Staff filed a Petition for Reconsideration that requested the
"subject to refund" language be eliminated as it was not part of the joint
proposal. On November 8, 1995, the Commission issued an order denying the
Petition for Reconsideration.
On October 1, 1989, the Company signed a contract with Montana Power under
which Montana Power provides, from its share of Colstrip Unit 4, to the
Company, 71 average MW of energy (94 MW of peak capacity) over a 21 year
period. On February 27, 1995, the Company delivered to Montana Power notice
of termination of the contract based on Montana Power's failure to arrange
for firm contractual transmission rights for such energy as required by the
contract. On February 28, 1995, Montana Power filed a lawsuit in a Montana
State Court and obtained a temporary restraining order regarding the
termination. The Company has filed a notice of removal of the Montana State
Court action to the Federal District Court in Montana. On March 7, 1995, the
Company filed a lawsuit in the United States District Court for the Western
District of Washington in response to Montana Power's failure to terminate
the contract as required and for failure to reimburse the Company for
approximately $39 million in power costs, which are due upon termination
under contract provisions. On October 6, 1995, the Company filed a motion to
stay proceedings in federal court in order to allow the Federal Energy
Regulatory Commission to decide the issue of whether the transmission rights
in place are "firm" as required under the contract. The court has not ruled
on the motion, which Montana Power has opposed.
In July 1995 the Bonneville Power Administration (BPA) announced a proposed
change in policy and rates that could significantly increase rates for the
Company's residential and small farm customers. While the proposal would not
necessitate the filing of increased rates by the Company, the proposal would
reduce the credits these customers receive on their power bill under the
Residential and Small Farm Exchange Program. The Program was established in
1980, under the Regional Power Act. The credit is designed to guarantee that
all electric users in the Pacific Northwest share in the cost benefits of
federally financed hydroelectric dams on the Columbia River. The reduction
in these credits would have no direct impact on the Company's earnings, since
the credits are passed through directly to customers on their monthly bills.
The proposal also calls for a substantial increase in the rates BPA charges
others, including the Company, to use its federally owned transmission
system. On October 25, 1995 the U.S. House-Senate Appropriations Conference
Committee directed the BPA to make $145 million available for residential and
small farm exchange credits in 1997. This action should delay for a year,
from October 1, 1996 to October 1, 1997, any impact on rates for the
Company's residential and small farm customers due to BPA's rate proposal.
The financial statements contained in this Form 10-Q are unaudited; however,
in the opinion of the Company, they include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair statement of the
results of operations for the periods shown.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income for the three months ended September 30, 1995, was $19.0 million
on operating revenues of $248.6 million, compared with net income of $14.9
million on operating revenues of $264.3 million for the same period in 1994.
Income for common stock was $15.2 million for the third quarter of 1995 and
$11.0 million for the third quarter of 1994. Earnings per common share were
$0.24 for the third quarter of 1995 compared to $0.17 for the third quarter
of 1994 based on 63.6 million weighted average common shares outstanding for
both periods.
For the nine months ending September 30, 1995, net income was $90.6 million
on operating revenues of $848.5 million, compared with net income of $79.2
million on operating revenues of $857.1 million for the corresponding period
in 1994. Income for common stock was $78.9 million for the first nine months
of 1995 and $67.5 million for the same period in 1994. Earnings per common
share were $1.24 for the nine months ended September 30, 1995 and $1.06 for
the same period in 1994 based on 63.6 million weighted average common shares
outstanding for both periods.
The increase in net income for the three and nine month periods reflects, in
part, non-recurring after-tax charges of $1.2 million and $11.9 million,
respectively, associated with the Company's two voluntary early retirement
and separation programs offered during 1994. These charges, recorded in
other operating expenses, represent decreases in earnings per common share of
$0.02 and $0.19 for the third quarter and first nine months of 1994,
respectively.
Total kilowatt-hour sales were 5.3 billion, including 1.0 billion in sales to
other utilities, for the third quarter of 1995, compared to 5.0 billion,
including 0.8 billion in sales to other utilities, for the third quarter of
1994. For the nine month periods ended September 30, 1995 and 1994, total
kilowatt-hour sales were 16.5 billion, including 2.4 billion in sales to
other utilities, and 15.8 billion, including 2.1 billion in sales to other
utilities, respectively.
The Company's operating revenues and associated expenses are not generated
evenly during the year. Variations in energy usage by consumers do occur
from season to season and from month to month within a season, primarily as a
result of weather conditions. The Company normally experiences its highest
energy sales in the first and fourth quarters of the year. Sales to other
utilities also vary by quarter and year depending principally upon water
conditions for the generation of hydroelectric power, customer usage and the
energy requirements of other utilities. With the implementation of the PRAM
in October 1991, earnings are no longer significantly influenced, up or down,
by sales of surplus electricity to other utilities or by weather or hydro
conditions. The PRAM mechanism is expected to be discontinued on September
30, 1996. (See discussion of the Periodic Rate Adjustment Mechanism in Note
(e) to the Financial Statements.)
Preferred stock dividends decreased $0.1 million and were unchanged for the
three and nine month periods ended September 30, 1995, respectively, compared
to the same periods in 1994.
<PAGE>
Comparative Periods Ending
September 30, 1995 vs. September 30, 1994
------------------------------
Increase (Decrease)
Three Nine
Month Month
Period Period
------ ------
(In Millions)
Operating revenue changes
PRAM surcharge billed $ 12.4 $ 40.8
Accrual of revenue under the PRAM - Net (10.1) (19.0)
BPA Residential Purchase & Sale Agreement (6.0) (21.7)
Sales to other utilities (4.0) (7.7)
Load and other changes (8.0) (1.0)
----- -----
Total operating revenue changes (15.7) (8.6)
Operating expense changes
Purchased & interchanged power 3.2 16.2
Fuel (1.4) (9.2)
Other operation expenses (12.8) (30.6)
Maintenance (3.3) (1.3)
Depreciation and amortization (3.4) (9.6)
Taxes other than federal income taxes 0.3 3.1
Federal income taxes (2.2) 5.1
----- -----
Total operating expense changes (19.6) (26.3)
Allowance for funds used during
construction (AFUDC) 0.3 1.0
Other income (1.4) (4.2)
Interest charges excluding AFUDC (1.3) 3.1
----- -----
NET INCOME CHANGES $ 4.1 $ 11.4
===== =====
The following is additional information pertaining to the changes outlined in
the above table.
Operating revenues
Revenues since October 1, 1994 have increased as a result of rates
authorized by the Washington Commission in its PRAM order issued on
September 27, 1994. (See discussion of the Periodic Rate Adjustment
Mechanism in Note (e) to the Financial Statements.).
Revenues in 1995 and 1994 were reduced because of the credit that the
Company received through the Residential Purchase and Sale Agreement with
the BPA. This agreement enables the Company's residential and small farm
customers to receive the benefits of lower-cost federal power. A
corresponding reduction is included in purchased and interchanged power
expenses.
Other operating revenues for the third quarter of 1995 were reduced by
$13.2 million, compared to the same period in 1994, as a result of the
Company's sale, to a grantor trust, on June 8, 1995, of $202.5 million of
its investment in conservation assets. The revenue decrease described
above represents the portion of rate revenues that are being segregated
and forwarded to the trust. The impact of this revenue decrease, however,
was offset by a reduction in amortization and interest expenses associated
with the Company's investment in conservation measures for its customers.
Revenues from kilowatt-hour sales, excluding PRAM, were higher in both the
third quarter and the first nine months of 1995 as compared to the same
periods in 1994 due to continued growth in the number of customers.
Operating expenses
Purchased and interchanged power expenses increased $3.2 million for the
third quarter of 1995 and $16.2 million for the first nine months of 1995
compared to the same periods in 1994. Higher levels of purchased power,
which contributed increases of $5.2 million and $32.7 million, were due to
increased power purchases from energy cogeneration facilities and
secondary sources. A contributing factor in the third quarter was
increased expenses of $3.6 million related to storage and interchange
power. These higher costs were partially offset by increased credits of
$5.8 million and $20.7 million, respectively, associated with the
Residential Purchase and Sale Agreement with the BPA. (See discussion of
Residential Purchase and Sale Agreement in "Operating revenues.")
Fuel expense decreased $1.4 million for the three month comparative period
and $9.2 million for the nine month comparative period as the Company
purchased additional power from cogeneration facilities and other power
producers rather than run Company-owned facilities to generate
electricity. Additionally, an Arbitration Panel's decision of a dispute
involving the coal supply agreement at the Company's fifty percent-owned
Colstrip 1 and 2 plants resulted in a $4.6 million decrease to fuel
expense in the first quarter of 1995.
Other operating expenses decreased $12.8 million and $30.6 million for the
three and nine month comparative periods, respectively. The decreases
were due primarily to non-recurring charges of $1.9 million and $18.1
million, respectively, to reflect costs associated with the Company's two
voluntary early retirement and separation programs offered in 1994.
Additional decreases of $2.0 million and $4.3 million in transmission
expenses for the three and nine month comparative periods, respectively,
also contributed to the decreases. The third quarter of 1995 also
experienced a decrease of $6.8 million in amortization expense associated
with the Company's conservation program. In June 1995 the company sold,
to a grantor trust, approximately $202.5 million of its investment in
customer-owned energy conservation measures. (See discussion of the
conservation asset transaction in "Operating revenues.")
Maintenance expense for the third quarter of 1995 decreased $3.3 million
from levels experienced during the same period in 1994 because certain
maintenance work at the Company's Colstrip plants was performed earlier in
the year and at lower cost. Maintenance expense for the nine month
comparative period decreased $1.3 million due to lower steam plant
maintenance described above which was partially offset by higher
distribution maintenance expenses in the first quarter of 1995 resulting
from increased winter storm damage to Company facilities.
Depreciation and amortization expense decreased $3.4 million and $9.6
million for the three and nine month comparative periods, respectively.
Decreases of $4.3 million and $12.9 million, respectively, were due to the
completion of the 10 year amortization period related to two terminated
generating projects. These decreases were partially offset by the effects
of new plant placed into service.
Taxes other than the federal income taxes increased $0.3 million and $3.1
million for the three and nine month comparative periods, due primarily to
higher municipal and state excise tax payments.
Federal income taxes on operations decreased $2.2 million and increased
$5.1 million for the three and nine month comparative periods,
respectively. The third quarter decrease was the result of a change in the
way energy conservation expenditures are deducted for federal tax
purposes. The nine month period increase was due primarily to higher pre-
tax operating income in 1995 compared to the same period in 1994.
AFUDC
AFUDC, which does not represent current cash income, is included partially
in other income and partially as an offset to interest expense.
Other income
Total other income decreased $1.4 million and $4.2 million for the three
and nine month periods ended September 30, 1995, over the same periods a
year ago. These declines are due in part to $0.7 million and $2.0 million
decreases, respectively, in Allowance for Funds Used to Conserve Energy
("AFUCE") and are related to a decline in energy conservation
expenditures. Also contributing to the nine month comparative decrease
was an after-tax gain of $1.9 million in the first quarter of 1994
resulting from the sale of a project by the Company's hydro development
subsidiary.
Interest charges
Interest charges, which consist of interest and amortization on long-term
debt and other interest, decreased $1.3 million and increased $3.1 million
for the three and nine month periods ended September 30, 1995,
respectively, compared to the same periods in 1994. (See discussion of
the conservation asset transaction in "Operating revenues.")
Interest and amortization on long-term debt alone decreased $1.2 million
for the three month comparative period and $0.7 million for the nine month
comparative period. Other interest expense decreased $0.1 million and
increased $3.8 million for the three and nine month comparative periods,
respectively, due to higher amounts of outstanding short-term debt and
higher interest rates in the first half of 1995 compared to the same
period in 1994.
Construction expenditures (excluding AFUDC and AFUCE) for the third quarter
of 1995 were $33.5 million, including $2.5 million of conservation
expenditures, compared to $38.5 million, including $5.8 million of
conservation expenditures, for the third quarter of 1994. Year-to-date
construction expenditures (excluding AFUDC and AFUCE) totaled $92.3 million,
including $8.4 million of conservation expenditures, compared to $123.8
million, including $25.6 million of conservation expenditures, for the same
period in 1994. Construction expenditures (excluding AFUDC and AFUCE) for
1995 and 1996 are expected to be $135 million and $144 million, respectively.
Cash provided by operations (net of dividends, AFUDC and AFUCE) as a
percentage of construction expenditures (excluding AFUDC and AFUCE) was 69%
and 40% for the third quarters of 1995 and 1994, respectively. Cash provided
by operations (net of dividends, AFUDC and AFUCE) as a percentage of
construction expenditures (excluding AFUDC and AFUCE) was 112% and 88% for
the nine month periods ended September 30, 1995 and 1994, respectively. The
Company expects to fund an average of 94% of its estimated construction
expenditures (excluding AFUDC and AFUCE) in 1995 and 1996 from cash provided
by operations (net of dividends, AFUDC and AFUCE) with the balance being
funded through the sales of securities, the nature, amount and timing of
which will be subject to market conditions and other relevant factors.
Construction expenditure estimates are subject to periodic review and
adjustment.
Preliminary estimates indicate that the proposed merger between the Company
and Washington Energy Company will result in net savings of approximately
$370 million over 10 years. (See discussion of the proposed merger in Note
(e) to the Financial Statements.)
On September 30, 1995, the Company had available $176.5 million in lines of
credit with various banks, which provide credit support for outstanding
commercial paper of $127.9 million, effectively reducing the unused available
borrowing capacity under these lines of credit to $48.6 million. In
addition, the Company has agreements with several banks to borrow on an
uncommitted, as available, basis at money-market rates quoted by the banks.
There are no costs, other than interest, for these arrangements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
For a description of legal proceedings relating to the Company's five
percent interest in WPPSS Unit No. 3, see Note (b) to the Financial
Statements.
Other contingencies, arising out of the normal course of the Company's
business, exist at September 30, 1995. The ultimate resolution of these
issues is not expected to have a material adverse impact on the financial
condition or results of operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
12-a Statement setting forth computation of ratios of
earnings to fixed charges (1990 through 1994 and
twelve months ending September 30, 1995).
12-b Statement setting forth computation of ratios of
earnings to combined fixed charges and preferred
stock dividends (1990 through 1994 and twelve months
ending September 30, 1995).
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUGET SOUND POWER & LIGHT COMPANY
Date: November 13, 1995
s/s James W. Eldredge
----------------------------
James W. Eldredge
Corporate Secretary and Controller
(Chief Accounting Officer and officer
duly authorized to sign this report
on behalf of the registrant)
<PAGE>
Exhibit 12a
<TABLE>
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT SETTING FORTH COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<CAPTION>
Year Ended December 31
12 Months Ending ----------------------------------------------------
September 30, 1995 1994 1993 1992 1991 1990
------------------ ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
Pre-tax income:
Net income per statement of income $131,461 $120,059 $138,327 $135,720 $132,777 $132,343
Federal income taxes 85,395 80,259 83,970 72,449 56,180 64,094
Federal income taxes charged to
other income - net 189 1,556 (382) (2,106) (2,267) 12
Undistributed (earnings) or losses
of less-than-fifty-percent-owned
entities -- -- -- (567) (16) (114)
------- ---------------------------------------------------
Total $217,045 $201,874 $221,915 $205,496 $186,674 $196,335
Fixed charges:
Interest on long-term debt $ 83,445 $ 84,144 $ 86,030 $ 89,509 $ 84,791 $ 81,766
Other interest 9,834 6,249 3,542 10,477 6,384 8,368
Portion of rentals representative
of the interest factor 4,126 4,218 3,937 4,474 4,463 4,388
------- ---------------------------------------------------
Total $ 97,405 $ 94,611 $ 93,509 $104,460 $ 95,638 $ 94,522
Earnings available for
fixed charges $314,450 $296,485 $315,424 $309,956 $282,312 $290,857
======= ===================================================
RATIO OF EARNINGS TO FIXED CHARGES 3.23x 3.13x 3.37x 2.97x 2.95x 3.08x
</TABLE>
<PAGE>
Exhibit 12b
Page 1
<TABLE>
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT SETTING FORTH COMPUTATIONS OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in Thousands)
<CAPTION>
Year Ended December 31
12 Months Ending ----------------------------------------------------
September 30, 1995 1994 1993 1992 1991 1990
------------------ ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR COMBINED FIXED
CHARGES AND PREFERRED DIVIDEND REQUIREMENTS
Pretax Income:
Net Income per statement
of income $131,461 $120,059 $138,327 $135,720 $132,777 $132,343
Federal income taxes 85,395 80,259 83,970 72,449 56,180 64,094
Federal income taxes charged to
other income - net 189 1,556 (382) (2,106) (2,267) 12
------- ---------------------------------------------------
Subtotal $217,045 201,874 221,915 206,063 186,690 196,449
Undistributed (earnings) or losses
of less-than-fifty-percent-owned
entities -- -- -- (567) (16) (114)
------- ---------------------------------------------------
Total $217,045 $201,874 $221,915 $205,496 $186,674 $196,335
Fixed charges:
Interest on long-term debt $ 83,445 $ 84,144 $ 86,030 $ 89,509 $ 84,791 $ 81,766
Other interest 9,834 6,249 3,542 10,477 6,384 8,368
Portion of rentals representative
of the interest factor 4,126 4,218 3,937 4,474 4,463 4,388
------- ---------------------------------------------------
Total $ 97,405 $ 94,611 $ 93,509 $104,460 $ 95,638 $ 94,522
Earnings available for combined
fixed charges and preferred
dividend requirements $314,450 $296,485 $315,424 $309,956 $282,312 $290,857
======= ===================================================
<PAGE>
Exhibit 12b
Page 2
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT SETTING FORTH COMPUTATIONS OF RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in Thousands)
Year Ended December 31
12 Months Ending ----------------------------------------------------
September 30, 1995 1994 1993 1992 1991 1990
------------------ ----------------------------------------------------
DIVIDEND REQUIREMENT:
Fixed charges above $ 97,405 $ 94,611 $ 93,509 $104,460 $ 95,638 $ 94,522
Preferred dividend requirements 25,928 26,451 26,377 21,080 14,115 18,399
------- ---------------------------------------------------
Total $123,333 $121,062 $119,886 $125,540 $109,753 $112,921
======= ===================================================
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS 2.55x 2.45x 2.63x 2.47x 2.57x 2.58x
COMPUTATION OF PREFERRED DIVIDEND
REQUIREMENTS:
(a) Pre-tax income $217,045 $201,874 $221,915 $206,063 $186,690 $196,449
(b) Net income $131,461 $120,059 $138,327 $135,720 $132,777 $132,343
(c) Ratio of (a) to (b) 1.6510 1.6815 1.6043 1.5183 1.4060 1.4844
(d) Preferred dividends $ 15,704 $ 15,731 $ 16,442 $ 13,884 $ 10,039 $ 12,395
Preferred dividend requirements
[(d) multiplied by (c)] $ 25,928 $ 26,451 $ 26,377 $ 21,080 $ 14,115 $ 18,399
======= ===================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<RESTATED>
<CIK> 0000081100
<NAME> PUGET SOUND POWER & LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,277,114
<OTHER-PROPERTY-AND-INVEST> 199,111
<TOTAL-CURRENT-ASSETS> 287,978
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 462,254
<TOTAL-ASSETS> 3,226,457
<COMMON> 636,409
<CAPITAL-SURPLUS-PAID-IN> 328,963
<RETAINED-EARNINGS> 198,553
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,163,925
89,040
125,000
<LONG-TERM-DEBT-NET> 928,402
<SHORT-TERM-NOTES> 4,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 127,948
<LONG-TERM-DEBT-CURRENT-PORT> 43,001
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 745,141
<TOT-CAPITALIZATION-AND-LIAB> 3,226,457
<GROSS-OPERATING-REVENUE> 848,521
<INCOME-TAX-EXPENSE> 55,507
<OTHER-OPERATING-EXPENSES> 642,716
<TOTAL-OPERATING-EXPENSES> 698,223
<OPERATING-INCOME-LOSS> 150,298
<OTHER-INCOME-NET> 6,527
<INCOME-BEFORE-INTEREST-EXPEN> 156,825
<TOTAL-INTEREST-EXPENSE> 66,196
<NET-INCOME> 90,629
11,725
<EARNINGS-AVAILABLE-FOR-COMM> 78,904
<COMMON-STOCK-DIVIDENDS> 87,824
<TOTAL-INTEREST-ON-BONDS> 59,249
<CASH-FLOW-OPERATIONS> 207,783
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
