<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, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
_____________________________
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. Employer
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, 1996 was 63,640,861
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30
1996 1995
------- -------
(Unaudited)
(Thousands except shares
and per share amounts)
OPERATING REVENUES $252,882 $248,584
------- -------
OPERATING EXPENSES:
Operation:
Purchased and interchanged power 94,996 94,063
Fuel 11,168 12,492
Other 39,009 35,109
Maintenance 10,554 11,397
Depreciation and amortization 26,998 26,785
Taxes other than federal income taxes 25,948 24,236
Federal income taxes 11,205 7,501
------- --------
Total operating expenses 219,878 211,583
------- -------
OPERATING INCOME 33,004 37,001
------- -------
OTHER INCOME:
Allowance for funds used during construction -
equity portion 117 625
Miscellaneous - net of taxes 5,923 1,633
------- -------
Total other income 6,040 2,258
------- -------
INCOME BEFORE INTEREST CHARGES 39,044 39,259
------- -------
INTEREST CHARGES:
Interest and amortization on long-term debt 18,258 20,064
Allowance for funds used during
construction - debt portion (1,164) (973)
Other 1,829 1,149
------- -------
Total interest charges 18,923 20,240
------- -------
NET INCOME 20,121 19,019
------- -------
DEDUCT:
Preferred stock dividend accrual 3,832 3,855
------- -------
INCOME FOR COMMON STOCK $ 16,289 $ 15,164
======= =======
COMMON SHARES OUTSTANDING -
WEIGHTED AVERAGE 63,640,861 63,640,861
EARNINGS PER COMMON SHARE (Note a) $0.26 $0.24
DIVIDENDS PAID PER COMMON SHARE $0.46 $0.46
The accompanying notes are an integral part of the financial statements.
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended September 30
1996 1995
------- -------
(Unaudited)
(Thousands except shares
and per share amounts)
OPERATING REVENUES $841,208 $848,521
------- -------
OPERATING EXPENSES:
Operation:
Purchased and interchanged power 300,227 293,325
Fuel 27,441 25,727
Other 117,561 123,418
Maintenance 35,030 38,433
Depreciation and amortization 81,919 80,792
Taxes other than federal income taxes 84,664 81,021
Federal income taxes 56,776 55,507
------- -------
Total operating expenses 703,618 698,223
------- -------
OPERATING INCOME 137,590 150,298
------- -------
OTHER INCOME:
Allowance for funds used during construction -
equity portion 117 719
Miscellaneous - net of taxes 7,903 5,808
------- -------
Total other income 8,020 6,527
------- -------
INCOME BEFORE INTEREST CHARGES 145,610 156,825
------- -------
INTEREST CHARGES:
Interest and amortization on long-term debt 54,949 62,257
Allowance for funds used during
construction - debt portion (3,608) (3,318)
Other 6,097 7,257
------- -------
Total interest charges 57,438 66,196
------- -------
NET INCOME 88,172 90,629
------- -------
DEDUCT:
Preferred stock dividend accrual 11,337 11,725
------- -------
INCOME FOR COMMON STOCK $ 76,835 $ 78,904
======= =======
COMMON SHARES OUTSTANDING -
WEIGHTED AVERAGE 63,640,861 63,640,861
EARNINGS PER COMMON SHARE (Note a) $1.21 $1.24
DIVIDENDS PAID PER COMMON SHARE $1.38 $1.38
The accompanying notes are an integral part of the financial statements.
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30 December 31
1996 1995
--------- ---------
(Unaudited)
(Thousands of Dollars)
UTILITY PLANT:
Electric Plant, at original cost
(including construction work in
progress of $102,080,000 and
$105,617,000, respectively) $3,465,960 $3,400,723
Less: Accumulated depreciation 1,171,428 1,118,678
--------- ---------
Net utility plant 2,294,532 2,282,045
--------- ---------
OTHER PROPERTY AND INVESTMENTS:
Investment in Bonneville Exchange Power
Contract 88,678 94,241
Investments in and advances to subsidiaries 105,776 95,459
Energy conservation loans to customers 535 783
Other investments, at cost 12,444 11,328
--------- ---------
Total other property and investments 207,433 201,811
--------- ---------
CURRENT ASSETS:
Cash 2,466 12,498
Accounts receivable 96,173 124,086
Estimated unbilled revenue 59,872 80,363
PRAM accrued revenues 61,451 59,123
Materials and supplies, at average cost 37,904 46,407
Prepayments and Other 5,356 4,352
--------- ---------
Total current assets 263,222 326,829
--------- ---------
LONG-TERM ASSETS:
Regulatory asset for deferred income taxes 236,781 249,731
PRAM accrued revenues (net of current portion) --- 55,673
Unamortized debt expense 9,352 10,264
Unamortized energy conservation charges (Note b) 40,193 37,889
Other 108,396 104,753
-------- ---------
Total long-term assets 394,722 458,310
--------- ---------
TOTAL ASSETS $3,159,909 $3,268,995
========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
September 30 December 31
1996 1995
--------- ---------
(Unaudited)
(Thousands of Dollars)
CAPITALIZATION:
Common shareholders' investment:
Common stock, $10 stated value,
80,000,000 shares authorized,
63,640,861 shares outstanding $ 636,409 $ 636,409
Additional paid-in capital 328,963 328,963
Earnings reinvested in the business 199,560 210,532
--------- ---------
Total common equity 1,164,932 1,175,904
Preferred stock not subject to
mandatory redemption 125,000 125,000
Preferred stock subject to
mandatory redemption 87,840 89,039
Long-term debt 920,549 920,439
--------- ---------
Total capitalization 2,298,321 2,310,382
--------- ---------
CURRENT LIABILITIES:
Accounts payable 49,798 50,269
Short-term debt 121,305 167,049
Current maturities of long-term debt 8,000 43,000
Accrued expenses:
Taxes 41,990 36,321
Salaries and wages 20,276 22,011
Interest 23,193 22,921
Other 17,243 27,356
--------- ---------
Total current liabilities 281,805 368,927
--------- ---------
DEFERRED INCOME TAXES:
Deferred income taxes 493,707 528,400
Investment tax credits --- 311
--------- ---------
Total deferred income taxes 493,707 528,711
--------- ---------
OTHER DEFERRED CREDITS:
Customer advances for construction 21,548 19,972
Other 64,528 41,003
--------- ---------
Total other deferred credits 86,076 60,975
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $3,159,909 $3,268,995
========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended September 30
1996 1995
------- -------
(Unaudited)
(Thousands of Dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
- --------------------
Net income $ 88,172 $ 90,629
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 81,919 80,792
Deferred income taxes and tax credits - net (22,053) 3,708
AFUDC - equity portion (117) (719)
PRAM accrued revenues - net 53,345 (12,058)
Other 27,765 42,519
Change in certain current assets
and liabilities (Note c) 49,524 2,912
- -------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 278,555 207,783
- -------------------------------------------------------------------------------
INVESTING ACTIVITIES:
- --------------------
Construction expenditures - excluding equity AFUDC (91,548) (87,289)
Additions to energy conservation program (4,410) (10,189)
Decrease in energy conservation loans 248 486
Cash received from sale of conservation assets - net --- 199,507
Other (including advances to subsidiaries) (11,764) (251)
- -------------------------------------------------------------------------------
Net Cash Provided (Used) by
Investing Activities (107,474) 102,264
- -------------------------------------------------------------------------------
FINANCING ACTIVITIES:
- --------------------
Decrease in short-term debt (45,744) (102,506)
Dividends paid (99,144) (99,642)
Redemption of bonds and notes (35,002) (100,003)
Redemption of preferred stock (1,200) (1,993)
Issue costs of bonds and stock (23) (38)
- -------------------------------------------------------------------------------
Net Cash Used by Financing Activities (181,113) (304,182)
- -------------------------------------------------------------------------------
Increase (decrease) in Cash (10,032) 5,865
Cash at Beginning of Period 12,498 5,284
- -------------------------------------------------------------------------------
Cash at End of Period $ 2,466 $ 11,149
===============================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(a) Earnings Per Common Share
Earnings per common share for the three and nine months ended
September 30, 1996 and 1995 have been computed by dividing income for
common stock by the weighted average number of common shares
outstanding.
(b) Unamortized Energy Conservation Costs
The Company's energy conservation expenditures are 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
securities were issued by the trust 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 total remaining unamortized conservation balance
at September 30, 1996 was $40.2 million.
(c) Consolidated Statements of Cash Flows
The following provides additional information concerning cash flow
activities:
Nine Months Ended September 30
1996 1995
- ---------------------------------------------------------------------------
(Thousands)
Changes in certain current assets and
current liabilities:
Accounts receivable $27,913 $11,398
Unbilled revenues 20,491 33,038
Materials and supplies 8,503 3,743
Prepayments and Other (1,004) (2,828)
Accounts payable (471) (18,111)
Accrued expenses and Other (5,908) (24,328)
- ---------------------------------------------------------------------------
Net change in current assets and current liabilities $49,524 $ 2,912
===========================================================================
Cash payments:
Interest (net of capitalized interest) $58,117 $69,168
Income taxes $68,609 $60,177
- ---------------------------------------------------------------------------
(d) Other
On September 22, 1995, the Washington Commission issued a rate order
relating to the Company's fifth and final annual rate adjustment under
the Periodic Regulatory Adjustment Mechanism ("PRAM"). In addition to
approval of the rate adjustment, the Commission also agreed, pursuant
to a negotiated settlement, to discontinue the PRAM on September 30,
1996. Under the terms of the settlement agreement, PRAM accrued
revenues outstanding at that date, totaling $61.5 million, will be
recovered in rates over a period not to exceed two years. With the
discontinuance of the PRAM, the annual regulatory adjustments for
variations in weather and hydro conditions provided for in the PRAM
were also discontinued.
On September 30, 1996, the Washington Commission issued an order
granting a joint motion by the Company and the Commission Staff to
transfer currently collected annual PRAM revenues of $165.5 million to
the Company's permanent rate schedules. As a result of the order, the
Company also wrote off $4.5 million in previously accrued revenues
related to special industrial customer service contracts.
On March 20, 1996, shareholders of the Company and Washington Energy
Company ("WECo"), voting as separate groups, gave their approval to an
Agreement and Plan of Merger between the two companies. The merger,
which would merge WECo and Washington Natural Gas Company ("WNG"), a
wholly-owned subsidiary of WECo, with and into the Company, had been
unanimously approved by the Company's Board of Directors as well as
the Boards of Directors of WECo and WNG in October 1995. The name of
the merged company, Puget Sound Energy, was also announced at the
March 20 meetings. Before the merger becomes final, however, it must
also be approved by the Washington Commission, which regulates the
utility operations of each entity.
The Agreement calls for each share of WECo common stock to be
exchanged for 0.86 share of the Company's common stock. Based on the
capitalization of the Company and WECo on September 30, 1996, holders
of the Company's and WECo's common stock would have held approximately
75% and 25% respectively, of the aggregate number of outstanding
shares of the merged company's common stock had the merger been
consummated at that date. In addition, the Agreement calls for the
preferred stock of WNG to be converted into preferred shares of the
merged company. The merger is structured as a tax-free exchange of
shares, and is expected to be accounted for as a pooling of interests.
In connection with its application for approval of the merger with
WECo, the Company filed with the Washington Commission, in February
1996, a proposed rate stability plan which, if adopted, would among
other things, increase general electric rates by 1% annually from 1997
through 2000. On September 23, 1996, Commission Staff, the Public
Counsel section of the State Attorney General's Office and other
intervenors filed testimony in the merger review proceedings. The
Commission Staff concluded the merger between the Company and WECo
would be in the public interest and would produce benefits for
customers. However, the Company and WECo find the proposed conditions
attached by staff to be unacceptable. The staff filing is a
recommendation only. The Washington Commission may accept, modify, or
entirely reject it.
The Company and WECo detailed their differences with the staff's
position and responded to the filings of other intervenors in a
rebuttal filing submitted October 11, 1996. Final briefs from all
parties are due by December 6, 1996. No specific date has been set
for the Commission to render its decision, but it is expected by the
end of December 1996.
Also in connection with the merger, the Company, on December 11, 1995,
offered a voluntary early separation plan to approximately 890
employees. The plan, which offers a severance package based on years
of service, was accepted by 204 employees on January 31, 1996. Under
the terms of the plan, the Company has the right to retain the
employees for up to 60 days after the merger is completed. If, for
any reason, the merger plans are discontinued prior to the employee's
separation date, the employee's participation in the plan will
thereupon be considered terminated and no severance benefits will be
paid. Total costs of the voluntary separation plan are currently
estimated to be $7.6 million. Through September 30, 1996, costs of
$4.1 million, for employees released under the severance package, have
been deferred pending the outcome of the regulatory approval process.
As of September 30, 1996, the Company has accumulated and deferred
costs associated with the merger of approximately $9.4 million.
On May 24, 1996, the Company filed a proposal with the Washington
Commission to create an Optional Large Power Sales Rate for its
largest customers. Under the Company's proposal, customers who elect
the Optional Large Power Sales Rate would no longer be considered
"core" customers. Instead, they would form a new class of "non-core"
customers, and the Company would no longer have an obligation to plan
for future resources to serve their needs. The non-core customers
will receive access to electric energy that is priced at current
market cost and will pay a charge for energy delivery (including a
charge for conservation programs) and a transition charge
(representing the difference between the Company's present cost and
the current market cost of electric energy and capacity). The
transition charge will be phased out before the end of the year 2000.
Non-core customers also would take on the risk that market costs could
become volatile and that electricity could be unavailable on the open
market. On October 9, 1996, the Washington Commission approved the
Company's proposal and ordered the new optional large power sales
tariff into effect November 1, 1996.
On July 12, 1996, the Company and six other Northwest electric
companies signed a memorandum of understanding to create an
independent transmission grid operator called "IndeGO" to insure non-
discriminatory, open access to electricity transmission facilities in
compliance with recent Federal Energy Regulatory Commission ("FERC")
rulings. IndeGO members include Idaho Power Company, Montana Power
Company, PacifiCorp, Portland General Electric, Sierra Pacific Power
Company, Washington Water Power Company, and the Company. However,
participation in IndeGO will be open to other transmission owners in
the Northwest. The members plan to file the IndeGO proposal with FERC
by the end of the year, and anticipate operation would commence by
July 1997.
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, 1996, was $20.1
million on operating revenues of $252.9 million, compared with net
income of $19.0 million on operating revenues of $248.6 million for
the same period in 1995. Income for common stock was $16.3 million
for the third quarter of 1996 and $15.2 million for the third quarter
of 1995. Earnings per common share were $0.26 for the third quarter
of 1996 compared to $0.24 for the third quarter of 1995 based on 63.6
million weighted average common shares outstanding for both periods.
For the first nine months of 1996, net income was $88.2 million on
operating revenues of $841.2 million, compared with net income of
$90.6 million on operating revenues of $848.5 million for the
corresponding period in 1995. Income for common stock was $76.8
million for the first nine months of 1996 and $78.9 million for the
same period in 1995. Earnings per common share were $1.21 for the
nine months ended September 30, 1996 and $1.24 for the same period in
1995 based on 63.6 million weighted average common shares outstanding
for both periods.
Total kilowatt-hour sales were 5.7 billion, including 1.2 billion in
sales to other utilities, for the third quarter of 1996, compared to
5.3 billion, including 1.0 billion in sales to other utilities, for
the third quarter of 1995. For the nine month periods ended September
30, 1996 and 1995, total kilowatt-hour sales were 17.8 billion,
including 3.0 billion in sales to other utilities, and 16.5 billion,
including 2.4 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, natural gas
wholesale prices and the energy requirements of other utilities. With
the implementation of the PRAM in October 1991, earnings have not been
significantly influenced, up or down, by sales of surplus electricity
to other utilities or by weather or hydro conditions. The PRAM,
however, ended effective September 30, 1996 under a stipulated
negotiated settlement approved by the Washington Commission. Under
terms of the settlement, PRAM accrued revenues at September 30, 1996
will be recovered in rates over a period not to exceed two years.
Preferred stock dividends decreased $0.4 million for the nine month
period ended September 30, 1996 compared to the same period in 1995.
The decrease was due primarily to lower dividend rates on the
Adjustable Rate Cumulative Preferred Stock ("ARPS"), Series B ($100
par value). Preferred stock dividends for the third quarter of 1996
were unchanged from levels experienced during the same period in 1995.
<PAGE>
Comparative Periods Ending
September 30, 1996 vs. September 30, 1995
Increase (Decrease)
Three Nine
Month Month
Period Period
-------------------
(In Millions)
Operating revenue changes
PRAM surcharge billed $ 12.1 $ 43.2
Accrual of revenue under the PRAM - Net (22.2) (65.4)
BPA Residential Purchase & Sale Agreement (2.7) (12.4)
Sales to other utilities 0.4 (1.2)
Revenue sold to Conservation Trust 2.3 (17.7)
Load and other changes 14.4 46.2
----- -----
Total operating revenue change 4.3 (7.3)
Operating expense changes
Purchased & interchanged power 0.9 6.9
Fuel (1.3) 1.7
Other operation expenses 3.9 (5.9)
Maintenance (0.8) (3.4)
Depreciation and amortization 0.2 1.1
Taxes other than federal income taxes 1.7 3.7
Federal income taxes 3.7 1.3
----- -----
Total operating expense change 8.3 5.4
Allowance for funds used during
construction (AFUDC) (0.3) (0.3)
Other income 4.3 2.1
Interest charges excluding AFUDC (1.1) (8.5)
----- -----
NET INCOME CHANGE $ 1.1 $ (2.4)
===== =====
The following is additional information pertaining to the changes
outlined in the above table.
Operating revenues
Revenues since October 1, 1995 increased as a result of rates
authorized by the Washington Commission in its fifth PRAM order
issued on September 22, 1995. (See discussion of the Periodic Rate
Adjustment Mechanism in "Other.")
Revenues in 1996 and 1995 were reduced because of the credit the
Company received through the Residential Purchase and Sale
Agreement with the Bonneville Power Administration ("BPA"). The
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.
Revenues in 1996 were reduced by $10.9 million and $31.5 million
during the three and nine month periods ended September 30, 1996,
respectively, as a result of the Company's sale of revenues, in
June 1995, associated with $202.5 million of its investment in
conservation assets to a grantor trust. The revenue decrease
represents the portion of rate revenues that were sold and
forwarded to the trust. The impact of these revenue decreases,
however, were offset by related reductions in other operation and
interest expenses. Revenue reductions related to the sale of the
conservation assets were $13.2 million and $13.8 million for the
three and nine month periods ended September 30, 1995.
Revenues from kilowatt-hour sales, excluding PRAM, were higher in
the third quarter and first nine months of 1996 as compared to the
same periods in 1995 due to colder weather and continued growth in
the number of customers.
Operating expenses
Purchased and interchanged power expenses increased $0.9 million
for the third quarter of 1996 and $6.9 million for the first nine
months of 1996 compared to the same periods in 1995. Higher levels
of purchased power, which contributed increases of $2.1 million and
$17.7 million, respectively, were due to increased power purchases
from both firm and secondary sources. These higher costs were
partially offset by increased credits of $2.6 million and $11.9
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 $1.3 million for the three month comparative
period and increased $1.7 million for the nine month comparative
period. The third quarter decrease resulted from reduced usage of
Company-owned gas turbines as the Company purchased more favorably
priced hydro power. In the second quarter of 1996, the Company
recorded a one-time charge of $1.8 million related to a loss on the
sale of oil stocks at a combustion turbine site. Additionally, an
Arbitration Panels' 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. Partially offsetting these increases for
the nine month period ended September 30, 1996, was a $4.5 million
decrease in fuel expense at the Company's Colstrip 3 & 4 plants as
the Company displaced these plants at certain times and purchased
more favorably priced hydro power.
Other operation expenses increased $3.9 million and decreased $5.9
million for the three and nine month comparative periods,
respectively. The increase for the three month period was due
primarily to increased transmission expenses of $2.1 million and a
$0.9 million increase in general and administrative expenses.
The decrease in the nine month comparative period was due to
reductions of $11.6 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. This decrease was
partially offset by increases of $3.8 million in transmission
expenses and $1.3 million in customer service expenses.
Maintenance expense decreased $0.8 million and $3.4 million for the
third quarter and first nine months of 1996 from levels experienced
during the same periods in 1995. These decreases were primarily
the result of lower maintenance expense at the Company's Colstrip
and Centralia coal-fired generation projects.
Depreciation and amortization expense increased $0.2 million and
$1.1 million for the three and nine month comparative periods,
respectively. The increases resulted from the effects of new
electric plant placed into service during the past year.
Taxes other than federal income taxes increased $1.7 million and
$3.7 million for three and nine month comparative periods, due
primarily to higher Washington state property tax and revenue-based
municipal tax payments.
Federal income taxes on operations increased $3.7 million and $1.3
million for the three and nine month comparative periods,
respectively. The increase in the third quarter of 1996 primarily
resulted from a cumulative change, made in the third quarter of
1995, in the way energy conservation expenditures are deducted for
federal tax purposes. The increase in the nine month comparative
period was partially offset by lower pre-tax operating income in
the first half of 1996.
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 increased $4.3 million and $2.1 million for the
three and nine month periods ended September 30, 1996, over the
same periods a year ago. The three and nine month comparative
period increases were due primarily to increased earnings of
subsidiaries of $4.4 million and $3.0 million, respectively.
Interest charges
Interest charges, which consist of interest and amortization on
long-term debt and other interest, decreased $1.1 million and $8.5
million for the three and nine month periods ended September 30,
1996, respectively, compared to the same periods in 1995.
Interest and amortization on long-term debt alone decreased $1.8
million for the three month comparative period and $7.3 million for
the nine month comparative period. These decreases included reduced
interest from the retirement of four issues of First Mortgage Bonds
totaling $143 million. Other interest expense increased $0.7
million for the three month comparative period due to higher
average short-term borrowing during the three months ended
September 30, 1996. Other interest expense decreased $1.2 million
for the nine month comparative period due to lower amounts of
outstanding short-term debt during the first half of 1996 and lower
interest rates compared to the same period in 1995.
Construction expenditures (excluding AFUDC and AFUCE) for the third
quarter of 1996 were $26.0 million, including $0.8 million of
conservation expenditures, compared to $33.5 million, including $2.5
million of conservation expenditures, for the third quarter of 1995.
Year-to-date construction expenditures (excluding AFUDC and AFUCE)
totaled $91.4 million, including $3.5 million of conservation
expenditures, compared to $92.3 million, including $8.4 million of
conservation expenditures, for the same period in 1995. Construction
expenditures (excluding AFUDC and AFUCE) for 1996 and 1997 are
expected to be $133.5 million and $143.8 million, respectively.
Cash provided by operations (net of dividends, AFUDC and AFUCE) as a
percentage of construction expenditures (excluding AFUDC and AFUCE)
was 207% and 69% for the third quarters of 1996 and 1995,
respectively. Cash provided by operations (net of dividends, AFUDC
and AFUCE) as a percentage of construction expenditures (excluding
AFUDC and AFUCE) was 192% and 112% for the nine month periods ended
September 30, 1996 and 1995, respectively. The Company expects cash
from operations (net of dividends, AFUDC and AFUCE) in 1996 and 1997
will, on average, be approximately 114% of average estimated
construction expenditures (excluding AFUDC and AFUCE) during the same
period. Construction expenditure estimates are subject to periodic
review and adjustment.
On September 30, 1996, the Company had available $176.5 million in
lines of credit with various banks, which provide credit support for
outstanding commercial paper of $68.4 million, effectively reducing
the unused available borrowing capacity under these lines of credit to
$108.1 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
Contingencies arising out of the normal course of the Company's business,
exist at September 30, 1996. The ultimate resolution of these issues is not
expected to have a material adverse impact on the financial condition,
results of operations or liquidity 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 (1991 through 1995 and twelve months ending
September 30, 1996).
12-b Statement setting forth computation of ratios of earnings to
combined fixed charges and preferred stock dividends (1991
through 1995 and twelve months ending September 30, 1996).
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
s/s James W. Eldredge
---------------------------------
James W. Eldredge
Corporate Secretary and Controller
Date: November 13, 1996 Chief accounting officer and
officer duly authorized to sign this
report on behalf of the registrant.
<TABLE>
Exhibit 12a
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, 1996 1995 1994 1993 1992 1991
---------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
Pre-tax income:
Net income per statement of income $133,263 $135,720 $120,059 $138,327 $135,720 $132,777
Federal income taxes 85,815 84,545 80,259 83,970 72,449 56,180
Federal income taxes charged to
other income - net 551 (488) 1,556 (382) (2,106) (2,267)
Undistributed (earnings) or losses
of less-than-fifty-percent-owned
entities -- -- -- -- (567) (16)
------- ---------------------------------------------------
Total $219,629 $219,777 $201,874 $221,915 $205,496 $186,674
Fixed charges:
Interest on long-term debt $ 73,807 $ 81,115 $ 84,144 $ 86,030 $ 89,509 $ 84,791
Other interest 8,936 10,049 6,249 3,542 10,477 6,384
Portion of rentals representative
of the interest factor 3,360 3,798 4,218 3,937 4,474 4,463
------- ---------------------------------------------------
Total $ 86,103 $ 94,962 $ 94,611 $ 93,509 $104,460 $ 95,638
Earnings available for
fixed charges $305,732 $314,739 $296,485 $315,424 $309,956 $282,312
======= ===================================================
RATIO OF EARNINGS TO FIXED CHARGES 3.55x 3.31x 3.13x 3.37x 2.97x 2.95x
</TABLE>
<PAGE>
<TABLE>
Exhibit 12b
Page 1
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, 1996 1995 1994 1993 1992 1991
---------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR COMBINED FIXED
CHARGES AND PREFERRED DIVIDEND REQUIREMENTS
Pretax Income:
Net Income per statement
of income $133,263 $135,720 $120,059 $138,327 $135,720 $132,777
Federal income taxes 85,815 84,545 80,259 83,970 72,449 56,180
Federal income taxes charged to
other income - net 551 (488) 1,556 (382) (2,106) (2,267)
------- ---------------------------------------------------
Subtotal $219,629 $219,777 $201,874 $221,915 $206,063 $186,690
Undistributed (earnings) or losses
of less-than-fifty-percent-owned
entities -- -- -- -- (567) (16)
------- ---------------------------------------------------
Total $219,629 $219,777 $201,874 $221,915 $205,496 $186,674
Fixed charges:
Interest on long-term debt $ 73,807 $ 81,115 $ 84,144 $ 86,030 $ 89,509 $ 84,791
Other interest 8,936 10,049 6,249 3,542 10,477 6,384
Portion of rentals representative
of the interest factor 3,360 3,798 4,218 3,937 4,474 4,463
------- ---------------------------------------------------
Total $ 86,103 $ 94,962 $ 94,611 $ 93,509 $104,460 $ 95,638
Earnings available for combined
fixed charges and preferred
dividend requirements $305,732 $314,739 $296,485 $315,424 $309,956 $282,312
======= ===================================================
</TABLE>
<PAGE>
<TABLE>
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)
<CAPTION>
Year Ended December 31
12 Months Ending ----------------------------------------------------
September 30, 1996 1995 1994 1993 1992 1991
---------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DVIDEND REQUIREMENT:
Fixed charges above $ 86,103 $ 94,962 $ 94,611 $ 93,509 $104,460 $ 95,638
Preferred dividend requirements 24,950 25,144 26,451 26,377 21,080 14,115
------- ---------------------------------------------------
Total $111,053 $120,106 $121,062 $119,886 $125,540 $109,753
======= ===================================================
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS 2.75x 2.62x 2.45x 2.63x 2.47x 2.57x
COMPUTATION OF PREFERRED DIVIDEND
REQUIREMENTS:
(a) Pre-tax income $219,629 $219,777 $201,874 $221,915 $206,063 $186,690
(b) Net income $133,263 $135,720 $120,059 $138,327 $135,720 $132,777
(c) Ratio of (a) to (b) 1.6481 1.6193 1.6815 1.6043 1.5183 1.4060
(d) Preferred dividends $ 15,139 $ 15,527 $ 15,731 $ 16,442 $ 13,884 $ 10,039
Preferred dividend requirements
[(d) multiplied by (c)] $ 24,950 $ 25,144 $ 26,451 $ 26,377 $ 21,080 $ 14,115
======= ===================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000081100
<NAME> PUGET SOUND POWER & LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,294,532
<OTHER-PROPERTY-AND-INVEST> 207,433
<TOTAL-CURRENT-ASSETS> 263,222
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 394,722
<TOTAL-ASSETS> 3,159,909
<COMMON> 636,409
<CAPITAL-SURPLUS-PAID-IN> 328,963
<RETAINED-EARNINGS> 199,560
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,164,932
87,840
125,000
<LONG-TERM-DEBT-NET> 920,549
<SHORT-TERM-NOTES> 52,900
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 68,405
<LONG-TERM-DEBT-CURRENT-PORT> 8,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 732,283
<TOT-CAPITALIZATION-AND-LIAB> 3,159,909
<GROSS-OPERATING-REVENUE> 841,208
<INCOME-TAX-EXPENSE> 56,776
<OTHER-OPERATING-EXPENSES> 646,842
<TOTAL-OPERATING-EXPENSES> 703,618
<OPERATING-INCOME-LOSS> 137,590
<OTHER-INCOME-NET> 8,020
<INCOME-BEFORE-INTEREST-EXPEN> 145,610
<TOTAL-INTEREST-EXPENSE> 57,438
<NET-INCOME> 88,172
11,337
<EARNINGS-AVAILABLE-FOR-COMM> 76,835
<COMMON-STOCK-DIVIDENDS> 87,824
<TOTAL-INTEREST-ON-BONDS> 52,393
<CASH-FLOW-OPERATIONS> 278,555
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
</TABLE>
