FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Registrant; State of I.R.S.Employer
Commission Incorporation; Address; Identification
File No and Telephone Number Number
1-9760 ATLANTIC ENERGY, INC. 22-2871471
(a New Jersey Corporation)
6801 BLACK HORSE PIKE,
PLEASANTVILLE, NEW JERSEY 08232
609-645-4500
1-3559 ATLANTIC CITY ELECTRIC COMPANY 21-0398280
(a New Jersey Corporation)
6801 BLACK HORSE PIKE, P.O Box 1264
PLEASANTVILLE, NEW JERSEY 08232
609-645-4100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, No Par Value New York Stock Exchange
of Atlantic Energy, Inc. Philadelphia Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Rule 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10K. X
Estimated aggregate market value of the voting stock of
Atlantic Energy, Inc. held by non-affiliates at March 6, 1995,
was $976,552,108.88 based on a closing price of $18.375 per share
for the 53,145,693 outstanding shares at such date. Atlantic
Energy, Inc. owns all of the 18,320,937 outstanding shares of
Common Stock of Atlantic City Electric Company.
Documents Incorporated by Reference:
Certain sections of the Notice of Annual Meeting of
Shareholders and Proxy Statement in connection with the
Annual Meeting of Shareholders, to be held April 26, 1995, have
been incorporated by reference to provide information required by
the following parts of this report:
Part III-Item 10, Directors and Executive Officers of the
Registrant; Item 11, Executive Compensation; Item 12, Security
Ownership of Certain Beneficial Owners and Management; Item 13,
Certain Relationships and Related Transactions.
This combined Form 10-K is filed separately by Atlantic Energy,
Inc. and Atlantic City Electric Company. Information contained
herein relating to any individual registrant is filed by such
registrant on its own behalf. Atlantic City Electric Company
makes no representation as to information relating to Atlantic
Energy, Inc.
PART I
ITEM 1 BUSINESS 1
General 1
Atlantic City Electric Company 1
Competition 2
Nonutility Subsidiaries 4
Construction and Financing 6
Rates 8
Energy Requirements and Power Supply 9
Power Pool and Interconnection Agreements 10
Power Purchases and Sales 10
Capacity Planning 11
Nonutility Generation 13
Nuclear Generating Station Developments 13
Hope Creek Station 15
Salem Station 16
Peach Bottom 18
Fuel Supply 20
Oil 20
Coal 21
Gas 21
Nuclear Fuel 21
Regulation 25
Environmental Matters 27
General 27
Air 30
Water 32
Executive Officers 35
ITEM 2 PROPERTIES 37
ITEM 3 LEGAL PROCEEDINGS 37
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 37
PART II 37
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 37
ITEM 6 SELECTED FINANCIAL DATA 39
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 40
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 52
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 82
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT 82
ITEM 11 EXECUTIVE COMPENSATION 82
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 82
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 82
PART IV 82
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 82
SIGNATURES 84
PART I
ITEM 1 BUSINESS
General
Atlantic Energy, Inc. (the Company), the principal office of
which is located at 6801 Black Horse Pike, Egg Harbor Township,
New Jersey, (mailing address-6801 Black Horse Pike,
Pleasantville, NJ 08232, telephone 609-645-4500) was organized
under the laws of New Jersey in August 1986. The Company is a
public utility holding company as defined in the Public Utility
Holding Company Act of 1935 (the 1935 Act), and has claimed an
exemption from substantially all of the provisions of the 1935
Act. The Company is the parent company of Atlantic City Electric
Company (ACE) and several non-utility subsidiaries as follows:
Atlantic Generation, Inc. (AGI), ATE Investment, Inc. (ATE),
Atlantic Southern Properties, Inc. (ASP), Atlantic Energy
Technology, Inc. (AET) and Atlantic Thermal Systems, Inc. (ATS).
On January 1, 1995, the Company formed a new subsidiary, Atlantic
Energy Enterprises, Inc. (AEE), to which ownership of the
existing non-utility companies will be transferred.
Principal cash inflows of the Company include proceeds from
the issuance and sale of its Common Stock and the receipt of
dividends from ACE. During 1994, the Company's Dividend
Reinvestment and Stock Purchase Plan, before converting to an
open market type plan, raised $14 million in new equity capital
and issued 699,493 new shares of Common Stock. Proceeds from the
issuance and sale of Common Stock by the Company are deposited
into the general funds of the Company and are invested in ACE and
other subsidiaries based upon their respective capital
requirements. Principal cash outflows of the Company in 1994
included capital contributions and advances to its subsidiaries,
the payment of dividends to common shareholders and the
repurchase of outstanding common stock.
Atlantic City Electric Company
ACE, which has a wholly-owned subsidiary, Deepwater
Operating Company, is the principal subsidiary of the Company and
is engaged in the generation, transmission, distribution, and
sale of electric energy in the southern part of New Jersey.
ACE's principal office is located at 6801 Black Horse Pike, Egg
Harbor Township, New Jersey (mailing address-6801 Black Horse
Pike, P.O. Box 1264, Pleasantville, NJ 08232, telephone 609-645-
4100), and was organized under the laws of New Jersey on April
28, 1924, by merger and consolidation of several utility
companies. ACE is subject to regulation by the New Jersey Board
of Public Utilities (BPU) and the Federal Energy Regulatory
Commission (FERC). At December 31, 1994, ACE had over 465,000
customers and employed 1,794 persons, of which 741 were
affiliated with a national labor organization. With the
exception of a municipal electric system providing electric
service within the municipal boundaries of the City of Vineland,
New Jersey, ACE supplies electric service to the southern one-
third of the State of New Jersey.
ACE is a utility whose peak load has occurred during the
summer months, and approximately 30% of 1994 revenues were
recorded during the quarter ended September 30, 1994.
ACE has experienced, in varying degrees, some of the
problems common to the electric utility industry in general,
particularly an increasingly competitive energy marketplace. In
addition, certain problems experienced by other utilities could
have an indirect effect upon ACE's operations and financial
condition, as a result of common regulatory requirements and the
fact that general industry developments could affect ACE's cost
of capital.
Competition
Between 1991 and 1994, sales to industrial customers
declined as a result of cogeneration projects constructed
pursuant to the Federal Public Utility Regulatory Policies Act
(PURPA). Effective June 30, 1994, a contract with ACE's largest
industrial customer was terminated. ACE's contract provided for
the delivery of process steam, water and by-product electricity
generated by back pressure turbines by a subsidiary of ACE. In
1993, ACE received $12 million in revenues for services and
energy sales. In accordance with the termination agreement, ACE
received $4.2 million in cash proceeds, certain emission
allowances valued at $6.5 million and made provisions to retire
certain equipment. The steam and electricity needs of this
customer are now provided by a non-utility cogeneration facility.
In addition, ACE has a contract for the purchase of 188 megawatts
(MW) of capacity and energy from this facility.
Currently, ACE is under contract with four independent power
producers for the purchase of 572 MW of capacity and energy
including the facility above. The effects of any such future
displacement from cogeneration projects could be mitigated by
natural growth in the service territory and additional marketing
efforts by ACE to reduce the impact of the potential loss of
kilowatt-hour sales and revenues.
As a result of changes in Federal law designed to promote
energy efficiency, reduce reliance on imported oil, and encourage
competition in the generation of electricity, the electric
utility business is undergoing significant changes. In October
1992, the Energy Policy Act (the Act) was enacted which includes,
among other things, amendments to the Public Utility Holding
Company Act of 1935 (PUHCA) and PURPA. The Act provides for
increased competition between utility and non-utility electric
generators, and provides for the creation of exempt wholesale
generators which would be exempt from certain PUHCA regulation.
The Act also permits FERC to authorize wholesale transmission
access, or wheeling, provided that certain requirements are met.
On October 26, 1994, FERC issued a pricing policy statement which
became effective upon issue. The policy statement is designed to
provide the framework for developing transmission pricing tariffs
and contains several principles for evaluation of proposals.
Proposals include those based on a standard methodology which
seeks to recover costs based on traditional revenue requirements,
or embedded cost, and those based on non-traditional approaches
that deviate from the utility's embedded cost. Filing for an
open access transmission tariff with the FERC may not be required
until such time as a transmission service agreement needs to be
filed for a specific customer.
Another factor in determining the effects of competition on
the electric utility business will be the extent to which New
Jersey public utility regulation is modified to reflect the
competitive energy marketplace. In that regard, the Draft New
Jersey Energy Master Plan Phase I Report was issued in November
1994 and is designed to provide a framework for managing the
transition of the State's natural gas and electric power
industries from markets guided by regulation to those guided by
market-based principles and competition. For further information
see "Capacity Planning" herein.
Legislation proposed for New Jersey would, if enacted, allow
the BPU, upon petition from any electric or gas utility, to adopt
a plan of regulation other than the traditional rate base/rate of
return regulation. The legislation is designed to promote
economic development and will include investment in, or
expenditures for, innovative programs or technology for energy
conservation, energy efficiency or environmental quality. The
BPU, during the planning of the New Jersey Energy Master Plan,
has indicated that a new bill is to be drafted and introduced for
legislative approval.
Other proposed regulatory changes have been suggested
relating to matters at the state and Federal level which could
have operating and financial implications for ACE. See
"Competition", "Regulation" and "Environmental Controls" herein
for additional information.
<PAGE>
Nonutility Subsidiaries
Atlantic Generation, Inc.
At December 31,1994, AGI's activities were represented by
partnership interests in three cogeneration power projects.
Project Fuel Capacity Commercial Ownership
Location Type (MW) Operation Interest
Binghamton,
New York gas 50 1992 one-third
Pedricktown,
New Jersey gas 117 1992 one-half
Vineland,
New Jersey gas 46.5 1994 one-half
Subsidiaries of Tristar Ventures Corporation (Tristar), a
subsidiary of The Columbia Gas System, Inc. (Columbia) have
partnership interests in both the Pedricktown and the Binghamton
projects; subsidiaries of Stone & Webster Development Corporation
have a one-third partnership interest in the Binghamton project.
The Binghamton facility is hosted by a large paper manufacturer
and supplies New York State Gas and Electric under a power
purchase agreement. The Pedricktown facility is hosted by a tire
manufacturer and supplies 106 MW of capacity and energy to ACE
under a cogeneration agreement executed by ACE and approved by
the BPU. An amendment to this agreement, which returns the
project host to ACE as a retail customer has been completed,
executed and is awaiting BPU approval. The Vineland facility is
hosted by a food processor and provides 46.5 MW of capacity and
energy to the City of Vineland under a twenty-five year contract.
During 1994, AGI and its partner in Cogeneration Partners of
America, TriStar, split the day-to-day responsibilities related
to their cogeneration projects. AGI maintained management of
plant operations while TriStar maintained responsibility for the
financial, legal and fuel procurement matters. Columbia,
Tristar's parent company, and its principal subsidiary, Columbia
Gas Transmission Corporation, filed petitions seeking protection
under Chapter 11 of the Federal Bankruptcy Code in July 1991. A
reorganization plan from both companies is expected to be filed
during the first half of 1995. AGI does not anticipate any
changes in its common partnership arrangements as a result of the
reorganization plan.
At December 31, 1994, total equity in AGI amounted to $23.6
million, the funding of which has been through capital
contributions and advances from the Company.
<PAGE>
ATE Investment Inc.
ATE commenced activities in 1988. At December 31, 1994, ATE
has invested $78.2 million in leveraged leases of three
commercial aircraft and two containerships. ATE has issued $15
million principal amount of long term debt and has utilized a
revolving credit and term loan agreement with a bank to finance a
portion of its investment in leveraged leases and other
investment activities. The remainder is provided by capital
contributions from the Company. At December 31, 1994, total
equity amounted to $9.4 million.
Atlantic Southern Properties, Inc.
ASP owns and manages a 280,000 square foot commercial
property within the Company's service territory. A portion of
the office space is presently under lease to ACE. At December
31, 1994, ASP's assets consisted primarily of this real estate
site at a net book value of $10.3 million. Financing ASP's
operations have been accomplished through capital contributions
and advances from the Company, and loans from ATE. At December
31, 1994, equity totalled $3.2 million.
Atlantic Energy Technology, Inc.
AET's sole investment is a 100% ownership interest in a
company that owns a patented technology and has proprietary
knowledge relating to alternate energy technologies. Previous
funding of this investment has been through capital contribution
and loans from the parent company. AET has ceased operations and
is currently concluding the affairs of its subsidiary. As of
December 31, 1994, equity in AET totalled $1.3 million.
Atlantic Thermal Systems, Inc.
In May 1994, the Company formed a subsidiary, Atlantic
Thermal Systems, Inc., to develop, own and operate thermal
heating and cooling systems. ATS, and its wholly-owned
subsidiary also formed in May 1994, has obtained funds for its
project development through advances from the Company and through
loan agreements with ATE. At December 31, 1994, advances from
the Company amounted to $3.6 million and equity contributions by
AEI amounted to $2.6 million.
Atlantic Energy Enterprises, Inc.
On January 1, 1995, the Company formed a new subsidiary,
Atlantic Energy Enterprises, Inc., a holding company, to which
ownership of the existing non-utility businesses were
transferred. Under this organizational structure, AEE expects to
pursue non-regulated business opportunities related to the core
utility business with greater flexibility. AEE's business plan
projects an investment of approximately $215 million over the
next five years.
The amount of capital invested by the Company in its non-
utility subsidiaries will be affected, to a large degree, by the
rate of development of the respective businesses, by the business
opportunities which may exist and by the opportunities for
external financings by such subsidiaries themselves.
Construction and Financing
ACE maintains a continuous construction program, principally
for electric generation, transmission and distribution
facilities. The construction program, including the estimates of
construction expenditures, as well as the timing of construction
additions, is under continuous review. ACE's construction
expenditures will depend upon factors such as long term load
growth, general economic conditions, the ability of ACE to raise
the necessary capital, regulatory and environmental requirements,
the availability of capacity and energy from utility and
nonutility sources and the Company return on such investments.
Reference is made to "Energy Requirements and Power Supply"
herein for information with respect to ACE's estimates of future
load growth and capacity plans.
ACE's construction program and related expenditures reflect
the anticipated effects of customer-owned generation,
cogeneration and ACE's demand-side management programs. ACE's
demand-side management programs are designed to reduce the rate
of growth in electric system peak demand without restricting the
continued economic development of ACE's service area. ACE
anticipates that its demand-side management programs will
encourage the efficient use, and shift the pattern, of energy
consumption, resulting in a deferral of future construction.
Although deferrals in construction timing may result in near-term
expenditure reductions, changes in capacity plans and general
inflationary price trends could increase ultimate construction
costs.
The table below presents ACE's estimated cash construction
costs for utility plant for the years 1995 through 1997:
(Millions of Dollars) 1995 1996 1997 Total
Nuclear Generating $ 14 $ 12 $ 7 $ 33
Fossil Steam
Generating 23 7 7 37
Transmission and
Distribution 56 42 35 133
General Plant 19 17 15 51
Combustion Turbine 4 3 7 14
Total Cash $116 $ 81 $ 71 $268
Construction Costs ==== ==== ===== ====
On an interim basis, ACE finances that portion of its
construction costs and other capital requirements in excess of
its internally generated funds through the issuance of unsecured
short term debt, consisting of bank loans and commercial paper.
ACE undertakes permanent financing through the issuance of long
term debt, preferred stock and/or capital contributions from the
Company. Costs associated with ACE's share of nuclear fuel
requirements for the jointly-owned Peach Bottom, Salem and Hope
Creek generating stations have been financed by a non-affiliated
company which generally recovers its investment costs as nuclear
fuel is consumed for power generation.
At December 31, 1994, ACE had available for use various bank
lines of credit totaling $150 million, which are subject to
continuing review and to termination by the banks involved. On
December 31, 1994, ACE had short term borrowings of $8.6 million
outstanding. Based on the above level of construction
expenditures, ACE currently estimates that during the three-year
period 1995-1997, it will issue, excluding amounts issued for
refunding purposes, approximately $50 million in debt, including
First Mortgage Bonds. ACE also undertakes to reduce its overall
cost of funds through refundings of existing securities. During
1994, ACE refunded and retired over $41.56 million principal
amount of its First Mortgage Bonds, plus premiums. Funds for
such redemptions were obtained through the issuance and sale by
ACE of $54.65 million of First Mortgage Bonds. Additional funds
were used for construction purposes. Reference is made to
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Notes 6 and 7 of the Notes to
Financial Statements, incorporated by reference herein as Exhibit
28(a), for information relating to ACE's financing activities for
the 1992-1994 period and for maturities and sinking fund
provisions during the period 1995-1997.
ACE's debt securities are currently rated "A-/A3" by the
major rating agencies, its preferred stock is rated "BBB+/Baa1"
and its commercial paper is rated "A-2/P2."
No assurances can be given that the ratings of ACE's
securities will be maintained or continue at their present
levels, or be withdrawn if such credit rating agency should, in
its opinion, take such action. Downward revisions or changes in
ratings of a company's securities could have an adverse effect on
the market price of such securities and could increase a
company's cost of capital.
<PAGE>
Rates
ACE's rates for electric service at retail are subject to
the approval of the BPU. For information concerning changes in
base rates and the levelized energy clause (LEC) for the years
1992 through 1994 and certain other proceedings relating to
rates, see "Purchased Power" herein and Notes 1, 3 and 8 of ACE's
Notes to Financial Statements, incorporated by reference herein
as Exhibit 28(a).
A performance standard for ACE's five jointly-owned nuclear
units was adopted in 1987 by the BPU, with certain aspects of the
performance standards revised effective January 1, 1990. Under
these standards, the target capacity factor for such units
remained at 70%, but are measured based upon the maximum
dependable capacity of the units. The zone of reasonable
performance (deadband) is between 65% and 75%. Penalties or
rewards are based on graduated percentages of estimated costs of
replacement power. Such amount is calculated monthly, utilizing
the average PJM monthly billing rate as the cost basis for
replacement power, to the boundaries of the deadband, with
penalties calculated incrementally in steps. Any penalties
incurred are not permitted to be recovered from customers and are
required to be charged against income. Implementation of the
nuclear unit performance standard is done through ACE's LEC for
which rates are generally set annually.
The 1994 composite capacity factor for ACE's jointly-owned
nuclear units was 73.2%, which did not result in a penalty or
reward under the nuclear performance standard. (See "Nuclear
Generating Station Developments" herein.)
In February 1995, ACE filed a petition with the BPU
requesting approval of a pilot economic development power
contract program for large commercial and industrial customers.
This pilot program, if approved, would permit industrial and
commercial customers to contract for electric service on a
negotiated basis with ACE, and is designed to promote economic
stability and job retention and creation. Contracts of between
three and seven years would be available to those customers who
maintain or increase load by at least 500 kilowatts (KW) or new
customers with load of at least 2,000 KW. Contract pricing would
be, at a minimum, the marginal cost of service and, at a maximum,
the current tariff rate. The pilot would be limited to an
aggregate of 125 megawatts, or approximately 7% of ACE's utility
system peak. The timing of BPU approval on this proposal is not
known at this time.
<PAGE>
Energy Requirements and Power Supply
ACE's 1994 kilowatt-hour sales increased by approximately
1.3% over 1993 sales. Commercial sales grew by 2.6%, offset by a
2.9% decline in industrial sales. The 1994 utility system's peak
demand of 1,834 MW occurred on July 9, 1994, below the record
peak demand recorded on Saturday, July 10, 1993 at 1,962 MW.
For the five-year period of 1995 through 1999, ACE's
estimate of projected annual sales growth is 2.4% and peak load
growth (adjusted for weather) is 2.0%. These include the
estimated effects of load-reducing cogeneration and demand-side
management programs.
ACE has generally been able to provide for the growth of
energy requirements through the construction of additional
generating capacity, joint ownership in larger units and through
capacity purchases from other utilities. The net summer
installed capacity, in KW, of ACE at December 31, 1994, consisted
of the following:
Year(s) Net
Station and Primary Unit(s) Capability
Location Fuels Installed (KW)
Deepwater
Salem Co., N.J. Oil/Coal/Gas 1930/ 54,000
1954-1958 166,000
B.L. England
Cape May Co., N.J. Coal/Oil 1962-1964/ 289,000
1974 155,000
Keystone
Indiana Co., PA. Coal 1967-1968 42,000 (1)
Conemaugh
Indiana Co., PA. Coal 1970-1971 65,000 (1)
Peach Bottom
York Co., PA. Nuclear 1974 157,000 (1)
Salem
Salem Co., N.J. Nuclear 1977-1981 164,000 (1)
Hope Creek
Salem Co., N.J. Nuclear 1987 52,000 (1)
Combustion Turbine
Units Oil/Gas 1967-1991 524,000
(various locations)
Diesel Units Oil
Total Generating Capability 1961-1970 8,700
Firm Capacity Purchases and Sales-Net 651,000 (2)
Total Capability 2,327,700
==========
<PAGE>
Notes
(1) ACE's share of jointly-owned stations. See Note 5 of ACE's
Notes to Financial Statements, incorporated by reference herein
as Exhibit 28(a). (2) 125,000 KW from thirteen coal-fired units
of Pennsylvania Power & Light Company, 572,000 KW from four
nonutility suppliers, and the sale of 46,000 KW to another
electric utility.
Certain of ACE's units at the Deepwater and B. L. England
Stations and certain combustion turbine units have the capability
of using more than one primary fuel type. In such instances, the
use of a particular fuel type depends upon relative cost,
availability and applicable environmental regulations and
requirements.
Power Pool and Interconnection Agreements
ACE is a member of PJM, an integrated power pool which
coordinates the bulk power supply to eleven member utilities in
Pennsylvania, New Jersey, Delaware, Maryland, Virginia and the
District of Columbia, and is interconnected with other major
utilities in the northeastern United States. As a member of PJM,
ACE is required to plan for reserve capacity based on estimated
aggregate PJM requirements allocated to member companies. ACE
periodically files its capacity addition plans with PJM which are
intended to meet forecast capacity and reserve obligations. PJM
member companies make use of a planning year concept in reviewing
capacity and reserve requirements. Each planning year commences
on June 1 and ends on the succeeding May 31. PJM provides for
after-the-fact accounting by its members for differences between
forecast and actual load experience. ACE is also a party to the
Mid-Atlantic Area Coordination Agreement, which provides for
coordinated planning of generation and transmission facilities by
the companies included in PJM. Further coordination of short
term power supply planning is provided by inter-area agreements
with adjacent power pools.
Power Purchases and Sales
Pursuant to power purchase arrangements with Pennsylvania
Power and Light Company (PPL), ACE is purchasing a total of 125
MW of capacity and energy from PPL coal-fired sources through
September 2000. ACE also has agreements with certain other
electric utilities for the purchase of short term generating
capacity, energy and transmission capacity on an as-needed basis,
which are utilized to the extent they are economic and available.
ACE has agreed to sell 46 MW of firm capacity to Baltimore
Gas & Electric Co. for the period June 1, 1994 through May 31,
1995 and 34 MW for the period June 1, 1995 through May 31, 1996.
<PAGE>
Capacity Planning
New capacity built by a utility is subject to a Certificate
of Need (CON) process. A CON is required prior to constructing a
new generating facility in excess of 100 MW, or adding either 100
MW or 25% of capacity, whichever is smaller, to an existing site.
In addition, New Jersey utilities are required to comply with a
stipulation of settlement approved by the BPU in July 1988. The
purpose of the stipulation of settlement is to procure future
capacity and energy from qualified cogeneration and small power
production facilities through an annual competitive bidding
process, based on a long-term capacity plan. The amount to be
bid upon is subject to BPU review and will be based upon such
factors as a utility's five year projected capacity needs and its
current generating capacity, service life extension plans for
existing units, new construction, power purchases and commitments
from other utilities and non-utility sources. In general, the
procedures provide that each utility will procure non-utility
power when needed through an evaluation system which ranks
proposed projects on price and non-price factors. The price of
such power is capped at the utility's avoided cost, which avoided
cost is subject to BPU review, with a floor price of 25% of such
avoided cost. Non-price factors in the evaluation process
include project status and viability, fuel source and efficiency,
project location and environmental effects.
The stipulation of settlement was due to expire on September
15, 1993. The BPU ordered an extension of the current date
filing requirements consistent with PURPA requirements through
February 18, 1995. Similarly, the CON was set to expire on
January 30, 1994. Since no processes were in place to replace
the CON, the New Jersey Department of Environmental Protection
(NJDEP) readopted the legislation and extended it through January
28, 1999. ACE, pursuant to the terms of the July 1988
stipulation, filed data with the BPU for the fifth procurement
period in September 1993, indicating that it does not require
additional nonutility capacity for the 1994-1998 period.
Additional capacity is not required for the l999 planning year.
In 1993, an Advisory Council on Electricity Planning and
Procurement was formed under BPU Commissioner Armenti to assess
existing electric planning, resource procurement and regulatory
review processes. Two working groups were formed to address the
integrated resource planning (IRP) process and supply-side
procurement issues, respectively. As a result of recommendations
that came out of the Advisory Council discussions, two committees
were formed at the state level for the development of an
integrated resource planning process and a supply procurement
process.
<PAGE>
The primary purpose of the integrated resource planning
process will be to define the split between supply-side and
demand-side resources, and the type of resource (base,
intermediate, or peaking). Supply-side and demand-side resources
will each have their own bidding procedure to fill that resource
need. The supply procurement process will address the procedures
for bidding and construction of future resources.
In September 1994, the New Jersey Energy Master Plan
Committee began discussions on an update of the 1991 State plan.
The New Jersey Energy Master Plan will be developed in three
phases: 1) a review of key policy goals and objectives, 2)
implementation needs, and 3) an assessment of the findings. A
completion date is targeted for year end 1995. Released in
November 1994, the phase one draft report's key recommendations
impacted New Jersey electric utilities. The recommendations
include the adoption of flexible utility rates, a streamlining of
the regulatory process and the revamping of tax policies on
energy consumption. The streamlining of the regulatory process
will build upon the groundwork already achieved in the IRP and
competitive supply procurement and will include a repeal of the
CON legislation.
ACE's ability to meet its planned capacity obligations and
its projected load growth will depend upon the continued
availability of currently owned and purchased generating
capability, on the availability of capacity from cogeneration and
other power projects to be owned by others, on ACE's own planned
capacity additions and on capacity purchases from sources yet to
be determined. ACE's installed capacity, planned capacity
additions, and capacity purchase arrangements for 1995-1997 are
expected to be sufficient to supply its share of PJM reserve
requirements during that period. Increases in PJM reserve
requirements, less than anticipated benefits associated with
conservation and load management efforts, and delays in the
construction of facilities by ACE or others could further
increase ACE's need for additional generating capacity.
To the extent that such capacity provided by others is not
available, ACE would be required to pursue other sources of
capacity, and to accelerate or expand its construction program
which, in certain instances, may require additional regulatory
approvals and construction expenditures which could be
substantial. On an operational basis, ACE expects to be able to
continue to meet the demand for electricity on its system through
operation of available equipment and by power purchases.
However, if periods of unusual demand should coincide with forced
outages of equipment, ACE could find it necessary at times to
reduce or curtail load in order to safeguard the continued
operation of its system.
<PAGE>
Nonutility Generation
Additional sources of capacity for use by ACE are made
available by non-utility sources, principally cogenerators. ACE
currently has four, BPU-approved power purchase agreements for
the purchase of capacity and energy from non-utility sources
under the standard offer methodology developed and approved by
the BPU in August 1987.
Project Fuel MW Date of
Location Type Provided Commercial Operation
Chester, solid
Pennsylvania waste 75 September 1991
Pedricktown,
New Jersey gas 106 March 1992
Carney's Point,
New Jersey coal 188 March 1994
Logan Township,
New Jersey coal 203 September 1994
Total 572
The Logan Township facility was placed in commercial
operation under a renegotiated agreement approved by the BPU in
August 1993. The renegotiated agreement reduced ACE's cost for
capacity and energy. An amendment to the agreement between ACE
and the sponsors of the Pedricktown facility has been completed,
executed and is awaiting BPU approval. The amendment
restructures ACE's payment for capacity and energy reducing the
energy component of the payment. The amendment also increases
the available capacity of the facility from 106 MW to 116 MW and
returns the project's thermal host to ACE as a retail customer.
Renegotiation of a third contract is currently underway and is
expected to be completed in the third quarter of 1995.
Nuclear Generating Station Developments
ACE is a co-owner of the Hope Creek and Salem Nuclear
Generating Stations, to the extent of 5% and 7.41%, respectively.
The Hope Creek Unit and Salem Units 1 and 2 are located adjacent
to each other in Salem County, New Jersey and are operated by
Public Service Electric & Gas Company (PS). ACE is also an owner
of 7.51% of Peach Bottom Units 2 and 3, which are located in York
County, Pennsylvania and are operated by PECO. See Note 5 of the
Notes to Financial Statements of ACE filed as Exhibit 28(a) and
incorporated by reference for additional information relating to
the Company's investment in jointly-owned generating stations.
<PAGE>
In 1994, nuclear generation provided 23% of ACE's total
energy requirements. The approximate capacity factors (based on
maximum dependable capacity ratings) for ACE's jointly-owned
units for 1993 and 1994 were as follows:
Unit 1994 1993
Salem Unit 1 59.3% 60.5%
Salem Unit 2 57.8% 57.2%
Peach Bottom Unit 2 80.3% 83.4%
Peach Bottom Unit 3 97.8% 69.6%
Hope Creek 78.9% 97.7%
ACE is collecting through rates amounts to fund its share of
estimated future costs relating to the decommissioning of the
five nuclear units in which it has joint ownership interests.
Such estimated decommissioning costs are based on studies and
forecasts including generic estimates provided by the NRC.
Funding to cover the future costs of decommissioning each of the
five nuclear units, as currently authorized by the BPU and
provided for in rates, is $6.4 million annually. See Note 1 of
ACE's Notes to Financial Statements filed as Exhibit 28(a) and
incorporated by reference for additional information relating to
nuclear decommissioning.
ACE has been advised that the NRC has raised concerns that
the Thermo-Lag 330 fire barrier systems used to protect cables
and equipment at the Peach Bottom Station may not provide the
necessary level of fire protection and has requested licensees to
describe short and long term measures being taken to address this
concern. ACE has been advised that PECO has informed the NRC
that it has taken short term compensatory actions to address the
inadequacies of the Thermo-Lag barriers installed at 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 PECO's interim actions
were acceptable. By letters dated December 22, 1993 and December
20, 1994, the NRC requested additional information on the
Company's long-term measures to address Thermo-Lag 330 fire
barrier issues. PECO responded to the first two letters by
providing details on its Thermo-Lag reduction program. A
response to the third letter will be provided in March 1995.
PECO's engineering re-analysis will be completed in 1995. This
re-analysis will determine the extent of modifications that will
be performed over the next several years at Peach Bottom in order
to complete the long term measures to address the concern over
Thermo-Lag use.
ACE has been advised that in October 1990 General Electric
Company (GE) reported that crack indications were discovered near
the seam welds in the core shroud assembly in a GE boiling water
reactor (BWR) located outside the United States. As a result, GE
issued a letter requesting that the owners of GE BWR plants take
interim corrective actions, including a review of fabrication
records and visual examinations of accessible areas of the core
shroud seam welds. Both Peach Bottom Units 2 and 3 and Hope
Creek are affected by this issue and both PECO and PS are
participating in the GE BWR Owners Group to evaluate this issue
and develop long-term corrective action. PECO advised ACE that
Peach Bottom Unit 2 was inspected in October 1994 during its last
refueling outage and the inspection revealed a minimal amount of
flaws. In a letter dated Novebmer 7, 1994, PECO submitted its
findings to the NRC and provided justification for continued
operation of Unit 2. PECO also advised ACE that Peach Bottom
Unit 3 was examined in October 1993 during the last refueling
outage and crack indications were identified in two locations.
ACE was advised that on November 3, 1993, PECO presented its
findings to the NRC and provided justification for continued
operation of Unit 3 for another 2-year cycle with the crack
indications. At the Hope Creek Unit, PS advised ACE that during
the spring 1994 refueling outage, PS inspected the shroud of Hope
Creek in accordance with GE's recommendations and found no
cracks. PS reports that minimal impact to Hope Creek is expected
due to the age and materials of the Hope Creek shroud and the
historical maintenance of low conductivity water chemistry. As a
result, Hope Creek has been placed in the lowest susceptibility
category by the BWR Owners' Group. ACE cannot predict what
action will be taken with regard to the Peach Bottom Units or
what long-term corrective actions, if any, will be identified.
The periodic review and evaluation of nuclear generating
station licensees conducted by the NRC is known as the Systematic
Assessment of Licensee Performance (SALP). Under the revised
SALP process, ratings are assigned in four assessment areas,
reduced from seven assessment areas: Operations, Maintenance,
Engineering and Plant Support (the Plant Support area includes
security, emergency preparedness, radiological controls, fire
protection, chemistry and housekeeping). Ratings are assigned
from "1" to "3", with "1" being the highest and "3" being the
lowest.
Hope Creek Station
The NRC's most recent SALP report for Hope Creek for the
period December 29, 1991 through June 19, 1993 assigned ratings
of 1 in the areas of Plant Operations; Maintenance/Surveillance;
Radiological Controls; Security; and Safety/Assessment/Quality
Verification; a rating of 1-Declining, in the area of Emergency
Preparedness and a rating of 2-Improving, in the functional
category of Engineering/Technical Support.
ACE has been advised by PS that as a result of an NRC
inspection in July 1991 at Hope Creek, an enforcement conference
was held with the NRC on September 9, 1991 to discuss, among
other things, three potential violations relating to reports PS
submitted to the NRC regarding the reliability of motor operated
valves at Hope Creek. Two violations with no civil penalty were
issued to PS on October 10, 1991. The third potential violation
was investigated by the NRC's Office of Investigators (OI). By
letter dated October 20, 1993, the NRC advised PS that OI
concluded such reports were incomplete and contained inaccurate
information. An enforcement conference to review this matter was
held on December 20, 1993 at which time PS presented its position
on the issues to demonstrate that the reports were complete and
accurate and that no violation had occurred. ACE cannot predict
what actions, if any, the NRC may take in this matter.
PS has advised ACE that as a result of an internal
allegation report, PS submitted a License Event Report to the NRC
on October 14, 1994 which stated that in 1992, the Hope Creek
control room was understaffed for approximately three minutes and
a decision was made by those involved that the incident did not
warrant initiation of NRC reporting documentation. A meeting
with Region I NRC personnel was held on October 18, 1994 in which
the NRC expressed a high degree of concern over the issue. The
OI has since looked into the event, as well as an internal
investigation by PS as to the validity of the allegation. The
NRC's Senior Resident Inspector has indicated to PS that a Notice
of Violation would likely be issued. A second meeting with the
NRC was held on February 3, 1995, with resolution of this issue
pending completion of the NRC's investigation. ACE cannot
predict what other action, if any, the NRC may take in this
matter.
Salem Station
ACE was advised on January 3, 1995, the NRC issued its
SALP report for the Salem Station for the period covering June
20, 1993 through November 5, 1994. The Salem SALP report was
issued under the revised SALP process in which the number of
assessment areas has been reduced from seven to four:
Operations, Maintenance, Engineering and Plant Support (the Plant
Support area includes security, emergency preparedness,
radiological controls, fire protection, chemistry and
housekeeping). The NRC assigned ratings of "1" in the functional
area of Plant Support, "2" in the area of Engineering and "3" in
the areas of Operations and Maintenance. The NRC noted an
overall decline in performance, and evidenced particular concern
with plant and operator challenges caused by repetitive equipment
problems and personnel errors. The NRC has noted that although
PS has initiated several comprehensive actions within the past
year to improve plant performance, and some recent incremental
gains have been made, these efforts have yet to noticeably change
overall performance at Salem.
ACE was advised that as a result of the NRC investigation
following the reactor shutdown of Salem Unit 1 in April 1994, PS
was fined $500,000 for violations relating to the failure to
identify and correct significant conditions adverse to quality at
the facility related to spurious steam flow signals and
inoperable atmospheric relief valves, both of which, the NRC
concluded, lead to unnecessary safety injections during the
event; the failure to identify and correct significant conditions
adverse to quality at the facility related to providing adequate
training, guidance and procedures for the operators to cope with
the event; and the failure by supervisors to exercise appropriate
command and control of the operations staff and the reactor
during the event.
ACE has been advised by PS that PS's own assessments, as
well as those by the NRC and the Institute of Nuclear Power
Operations, indicate that additional efforts are required to
further improve operating performance and that PS is committed to
taking the necessary actions to address Salem's performance
needs. It is anticipated that the NRC will maintain a close
watch on Salem's performance and corrective actions related to
the April reactor shutdown. No assurance can be given as to
what, if any, further or additional actions may be taken or
required by the NRC to improve Salem's performance.
ACE has been informed by PS that PS is taking significant
steps to address performance shortfalls at Salem. In 1993, a
comprehensive performance assessment team identified areas of
weakness through an in-depth investigation of common causes and
events. Corrective action plans and effectiveness measures were
then initiated in 1994 and are ongoing, along with additional
measures designed to achieve a change in Salem's performance.
Personnel performance is being addressed through improved
supervisory training and increased monitoring of work activities,
improved operational command and control and the reorganization
and increased staffing at Salem. PS has established a goal of
safe, uneventful operation to be achieved through enhanced self-
assessment and corrective action processes, resolution of long-
standing equipment problems, improved independent oversight of
plant operations and improved root-cause analysis of plant
problems. In furtherance of these goals, PS has reorganized the
operational structure of its Nuclear Department and recruited a
new chief nuclear officer. In addition, PS's parent company,
Public Service Enterprise Group, Incorporated (Enterprise), has
strengthened oversight of nuclear plant operations by
establishing a standing Nuclear Committee of its Board of
Directors.
ACE was advised that on February 6, 1995, Enterprise and PS
received a request from the NRC for a meeting of its
representatives with their respective Board of Directors to
discuss the need for continued improvements in equipment
reliability and staff performance. The meeting is scheduled for
March 21, 1995. Neither ACE, nor PS, can predict what actions,
if any, the NRC may take as a result of this meeting.
ACE was advised in 1990 that the NJDEP issued a draft New
Jersey Pollutant Discharge Elimination System (NJPDES) Permit to
the Salem Station which required closed-cycle cooling. In
response to the 1990 Draft Permit, PS submitted further written
comments to the NJDEP regarding the ecological effects of station
operations demonstrating that Salem was not having and would not
have an adverse environmental impact and that closed-cycle
cooling was an inappropriate solution. PS also developed and
submitted a supplement to the permit renewal application setting
forth an alternative approach that would protect aquatic life in
the Delaware Estuary and provide other ecological benefits. PS
proposed intake screen modifications to reduce fish loss, a study
of sound deterrent systems to divert fish from the intake and a
limit on intake flow. In addition, PS 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, PS proposed a
comprehensive biological monitoring program to expand existing
knowledge of the Delaware Estuary and to monitor station impacts.
In June 1993, ACE was advised that the NJDEP issued Salem a
revised draft permit which reconsidered the requirement for
closed-cycle cooling and adopted the alternative measures
proposed by PS with certain modifications. A final five-year
permit was issued on July 20, 1994 with an effective date of
September 1, 1994. The EPA, which has the authority to review
the final permit issued by the NJDEP, completed its review and
has not raised any objections. Certain environmental groups and
other entities, including the State of Delaware, have filed
requests for hearings with the NJDEP challenging the final
permit. The NJDEP granted the hearing requests on certain of the
issues and PS has been named as a respondent along with the NJDEP
in these matters which are pending in the Office of
Administrative Law of the State of New Jersey. ACE has been
advised that PS is implementing the final permit. Additional
permits from various agencies are required to be obtained to
implement the permit. No assurances can be given as to receipt
of any such additional permits. PS has advised ACE that it
estimates that the cost of compliance with the final permit is
approximately $100 million, of which ACE's share is 7.41% and is
included in ACE's current forecast of construction expenditures.
Peach Bottom Station
On June 29, 1994, the NRC issued its SALP report for the
Peach Bottom Station for the period covering November 1, 1992
through April 30, 1994. The NRC assigned ratings of "1" in the
functional area of Operations, and "2" in the areas of
Engineering, Plant Support and Maintenance. Overall, the NRC
found continued improvement in performance during the period.
The NRC stated that enhancement in problem identification and
resolution, good control of refuelings and outages, and excellent
oversight by plant management of day-to-day activities in a
manner that ensured safer operation of the units contributed to
the improvement. Despite the overall improvement, the NRC noted
that some areas require continued management attention and that
management needs to continue to encourage plant personnel at all
levels to identify existing, and sometimes longstanding, problems
so that priorities can be established and effective corrective
actions implemented. The NRC also noted instances of personnel
inattention to detail and failure to follow procedures which
warranted additional management attention. ACE has been advised
that PECO has taken and is taking actions to address the
weaknesses discussed in the SALP Report.
ACE has been advised by PECO that in May 1992, PECO filed a
request with the NRC to amend its Facility Operating License for
Peach Bottom Units 2 and 3 to extend the expiration dates to 40
years from the date of issuance. The current operating licenses
expire 40 years from the issuance of the construction permits,
thereby allowing for an effective operating period of 34 years
six months and 33 years seven months for Peach Bottom Units 2 and
3, respectively. Operating license extensions to the years 2013
and 2014 for Units 2 and 3, respectively, would result from the
extension. ACE has been advised that by letter dated March 28,
1994, the NRC approved PECO's request to extend the license
expiration dates.
ACE has been advised by letter dated October 18, 1994 the
NRC approved PECO's request to rerate the authorized maximum
reactor core power levels of each Peach Bottom units by 5% to
1,093 megawatts thermal. The amendment to the Peach Bottom Unit
2 facility operating license was effective upon the date of the
NRC approval letter and the hardware changes required to rerate
Unit 2 were implemented during the Fall 1994 refueling outage.
After the initial start-up period, the unit has operated at the
rerated conditions since its return to service on October 22,
1994. The amendment of the Peach Bottom Unit 3 facility
operating license will be effective upon the implementation of
associated hardware changes. The hardware changes required to
rerate Peach Bottom Unit 3 are planned for the Fall 1995
refueling outage.
ACE has been advised that on November 21, 1994, the NRC
issued an $87,500 fine to PECO for violations of NRC requirements
during testing of certain motor-operated valves in the emergency
service water (ESW) system at Peach Bottom in August 1994. The
violations involved failure to adequately control testing
activities. As a result, valves in the ESW system were placed in
an inappropriate configuration, which could have rendered the
system incapable of performing its function under accident
conditions. ACE has been advised that PECO paid the fine in
December 1994.
ACE has been advised that as a result of an inspection in
October 1993, the NRC held an Enforcement Conference in December
1993 to discuss potential violations involving inappropriate
protective measures taken by workers entering radiologically
controlled areas. On January 19, 1994, the NRC issued a Level
III violation with no associated civil penalty.
PECO has advised ACE that on July 24, 1992, the NRC issued
an information notice alerting utilities owning 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 changes were
made on Peach Bottom Unit 2 and 3 in August 1993 and November
1993, respectively.
Fuel Supply
ACE's sources of electrical energy (including power
purchases) for the years indicated are shown below:
Source 1994 1993 1992
Coal 29% 34% 37%
Nuclear 23% 24% 22%
Oil/Natural Gas 7% 5% 5%
Interchange and
Purchased Power 24% 28% 28%
Cogeneration 17% 9% 8%
The prices of all types of fuels used by ACE for the
generation of electricity are subject to various factors, such as
world markets, labor unrest and actions by governmental
authorities, including allocations of fuel supplies, over which
ACE has no control.
Oil
Residual oil and distillate oil for ACE's wholly-owned
stations are furnished under two separate contracts with a major
fuel supplier. ACE has a contract for the supply of 1.0% sulfur
residual oil for both Deepwater and B. L. England Stations and
for distillate oil sufficient to supply ACE's combustion
turbines. Both contracts expire October 31, 1997. See
"Environmental Controls-Air" for information concerning the use
of particular fuels at B. L. England Station.
On December 31, 1994, the oil supply at Deepwater Station
was sufficient to operate Deepwater Unit 1 for 70 days, and the
supply at B. L. England Station was sufficient to operate Unit 3
for 39 days.
Coal
ACE has contracted with one supplier for the purchase of
2.6% sulfur coal for B. L. England Units 1 and 2 through April
30, 1999. On December 31, 1994, the coal inventory at the B. L.
England Station was sufficient to operate Units 1 and 2 for 83
days. See "Environmental Controls-Air" herein for additional
information relating to B.L. England Station.
ACE has contracted with one supplier for the purchase of
1.0% sulfur coal for Deepwater Unit 6/8 through June 30, 1998.
On December 31, 1994, the coal inventory at Deepwater Station was
sufficient to operate Unit 6/8 for 117 days.
The Keystone and Conemaugh Stations, in which ACE has joint
ownership interests of 2.47% and 3.83%, respectively, are mine-
mouth generating stations located in western Pennsylvania. The
owners of the Keystone Station have a contract through 2004,
providing for a portion of the annual bituminous coal
requirements of the Keystone Station. A combination of long and
short term contracts provide for the annual bituminous coal
requirements of the Conemaugh Station. To the extent that the
requirements of both plants are not covered by these contracts,
coal supplies are obtained from local suppliers. As of December
31, 1994, Keystone and Conemaugh had approximately a 22 day
supply and a 66 day supply of coal, respectively.
Gas
ACE is currently capable of firing natural gas in six
combustion turbine peaking units and in two conventional steam
turbine generating units. ACE has entered into a firm electric
service tariff with South Jersey Gas Company for the supply of
natural gas to its units. The tariff provides for the payment of
certain commodity and demand charges. Portions of the gas supply
are obtained from the spot market under short term renewable gas
supply and transportation contracts with various
producers/suppliers and pipelines.
Nuclear Fuel
As a joint owner of the Peach Bottom, Salem and Hope Creek
generating units, ACE relies upon the respective operating
company for arrangements for nuclear fuel supply and management.
ACE is responsible for the costs thereof to the extent of its
particular ownership interest through an arrangement with a third
party. Generally, the supply of fuel for nuclear generating
units involves the mining and milling of uranium ore to uranium
concentrate, conversion of the uranium concentrate to uranium
hexafluoride, enrichment of uranium hexafluoride and fabrication
of fuel assemblies. After spent fuel is removed from a nuclear
reactor, it is placed in temporary storage for cooling in a spent
fuel pool at the nuclear station site. Under the Nuclear Waste
Policy Act of 1982 (NWPA), the Federal government has a
contractual obligation for transportation and ultimate disposal
of the spent fuel.
ACE has been advised by PECO, the operator of Peach Bottom,
that it has contracts for uranium concentrates to fully operate
Peach Bottom Units 2 and 3 through 2002. ACE has been advised
that two of the companies that supply uranium concentrates to
PECO filed for bankruptcy under Chapter 11 of the Bankruptcy Code
on February 23, 1995. The two companies supply approximately
half of PECO's 1995 and 1996 requirements for uranium
concentrates. In addition, one of the companies is under
contract to supply approximately 25% of PECO's uranium
concentrate requirements for the period 1997 to 2002. ACE has
been advised that PECO has made alternative arrangements with
other suppliers to satisfy its short-term requirements for
uranium concentrates. For the longer-term, PECO is evaluating
its requirements and potential supply sources, including the two
suppliers which have filed petitions for bankruptcy. ACE has
been advised that neither PECO nor PS anticipate any difficulties
in obtaining its requirements for uranium concentrates. ACE has
also been advised that by PECO that its contracts for uranium
concentrates will be allocated to the Peach Bottom units, and
other PECO nuclear facilities in which ACE has no ownership
interest, on an as-needed basis. ACE has also been advised that
PECO has contracted for the following segments of the nuclear
fuel supply cycle with respect to the Peach Bottom units through
the following years:
Nuclear Unit Conversion Enrichment Fabrication
Peach Bottom Unit 2 1997 2008 1999
Peach Bottom Unit 3 1997 2008 1998
ACE has been advised by PS, the operating company for the
Salem and Hope Creek Stations, that it has arrangements which are
expected to provide sufficient uranium concentrates to meet the
current projected requirements of the Salem and Hope Creek units
through the year 2000 and approximately 60% of the requirements
through 2002. PS has advised ACE that present contracts meet the
other nuclear fuel cycle requirements for the Salem and Hope
Creek units through the years indicated below:
<PAGE>
Nuclear Unit Conversion Enrichment Fabrication
Salem Unit 1 2000 1998 2004
Salem Unit 2 2000 1998 2005
Hope Creek 2000 1998 2000
In conformity with the NWPA, PS and PECO, on behalf of the
co-owners of the Salem and Hope Creek, and Peach Bottom stations,
respectively, have entered into contracts with the Department of
Energy (DOE) for the disposal of spent nuclear fuel from those
stations. Under these contracts, the DOE is to take title to the
spent fuel at the site, then transport it and provide for its
permanent disposal at a cost to utilities based on nuclear
generation, subject to such escalation as may be required to
assure full cost recovery by the Federal government. Under NWPA,
the Federal government must commence the acceptance of these
materials for permanent offsite storage no later than 1998, but
it is possible that such storage may be delayed indefinitely.
ACE has been advised that in December 1989, the DOE announced
that it would not be able to open a permanent, high-level nuclear
waste storage facility until 2010, at the earliest. 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.
ACE has been advised that in October 1990, the NRC determined
that spent nuclear fuel generated in any reactor can be stored
safely and without significant environmental impacts in reactor
facility storage pools or in independent spent fuel storage
installations located at reactor or away-from-reactor sites for
at least 30 years beyond the licensed life for operation (which
may include the term of a revised or renewed license). The DOE
has stated that neither the NWPA nor its contracts imposes an
unconditional obligation to accept spent fuel by 1998 and
indicated that such obligation is conditional upon commencement
of a temporary storage facility. It is not possible to predict
when any type of Federal storage facility will become available.
PECO has advised ACE that spent fuel racks at Peach Bottom
Units 2 and 3 have storage capacity until 1998 for Unit 2 and
1999 for Unit 3. Options for expansion of storage capacity at
Peach Bottom beyond the pertinent dates, including rod
consolidation, are being investigated.
PS has advised ACE that on-site temporary spent fuel storage
capability will permit storage of spent fuel for Salem Units 1 an
2 through March 1998 and March 2002, respectively, when
operational full core discharge capability requirements are
considered. PS has advised ACE that it has developed an
integrated strategy to meet the longer term Salem and Hope Creek
spent fuel storage needs, and estimates that with reracking with
maximum density racks, storage capability at Salem Units 1 and 2
would be extended through 2008 and 2012, respectively. PS has
further advised ACE that the Hope Creek pool has the capacity to
hold spent fuel through September 2007 considering operational
full core discharge requirements.
The Energy Policy 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 are estimated to be $150 million per
year for 15 years, of which ACE's share is estimated to be $8.5
million. The Act provides that these costs are to be recoverable
in the same manner as other fuel costs. ACE has recorded a
liability of $8.5 million and a related regulatory asset for such
costs. ACE made its first payment related to this liability to
the respective operating companies in September 1993. In ACE's
1993 LEC filing, the BPU approved a stipulation of settlement
which included, among other things, the full LEC recovery of this
and future assessments.
ACE is collecting through rates amounts to fund its share of
the estimated future costs related to the decommissioning of the
five nuclear units in which it has joint ownership interests.
ACE's current annual funding amount, as authorized by the BPU,
totals $6.4 million. This amount is based on estimates of the
future cost of decommissioning each of the units, dates that
decommissioning activities are expected to occur and an estimate
of the return to be earned by the assets of the decommissioning
fund. The present value of ACE's nuclear decommissioning
obligation, based on 1987 site specific studies used by the BPU
for approval in 1991 and restated in 1994 dollars, is $152.2
million. ACE will seek to adjust these estimates and the level
of rates collected from customers in future BPU proceedings to
reflect changes in decommissioning cost estimates and the
expected return to be earned by the assets of the fund. As of
December 31, 1994, the present value of such funding
contributions based on current estimates for future
decommissioning costs and the dates such activities are expected
to occur is $111.4 million without regard for interest or fund
appreciation. As of December 31, 1994, the cost and market value
of the fund is $52 million, of which $36.9 million is qualified
for Federal income tax purposes. Reserves for decommissioning
obligations, presented as a component of accumulated
depreciation, amounted to $51.1 million at December 31, 1994.
In January 1993, the BPU adopted N.J.A.C. 14:5A which was
designed to provide a mechanism for periodic review of the
estimated costs of decommissioning nuclear generating stations
owned by New Jersey electric utilities. The purpose of this
regulation is to insure that adequate funds are available to
assure completion of decommissioning activities at the cessation
of commercial operation. The regulation established
decommissioning trust fund reporting requirements for electric
utilities in order to provide the BPU with timely information for
its oversight of these funds. See Note 1 and Note 8 of ACE's
Notes to Financial Statements for further information relating to
nuclear decommissioning funding.
Regulation
ACE is a public utility organized under the laws of New
Jersey and is subject to regulation as such by the BPU, among
others, which is also charged with the responsibility for energy
planning and coordination within the State of New Jersey. ACE is
also subject to regulation by the Pennsylvania Public Utility
Commission in limited respects concerning property and operations
in Pennsylvania. ACE is also subject, in certain respects, to
the jurisdiction of the FERC, and ACE maintains a system of
accounts in conformity with the Uniform System of Accounts
prescribed for public utilities and licensees subject to the
provisions of the Federal Power Act.
The construction of generating stations and the availability
of generating units for commercial operation are subject to the
receipt of necessary authorizations and permits from regulatory
agencies and governmental bodies. Standards as to environmental
suitability or operating safety are subject to change.
Litigation or legislation designed to delay or prevent
construction of generating facilities and to limit the use of
existing facilities may adversely affect the planned installation
and operation of such facilities. No assurance can be given that
necessary authorizations and permits will be received or
continued in effect, or that standards as to environmental
suitability or operating safety will not be changed in a manner
to adversely affect the Company, ACE or its operations.
Pursuant to legislation enacted in the State of New Jersey
in 1983, no public utility can commence construction of certain
electric facilities without having obtained a certificate of need
from the appropriate state regulatory authorities. For purposes
of the legislation, such electrical facilities are electric
generating units at a single site having a combined capacity of
100 MW or more and electric generating units which, when added to
an existing electric generating facility, would increase the
installed capacity of such facility by 25% or by more than 100
MW, whichever is smaller.
Operation of nuclear generating units involves continuous
close regulation by the NRC. Such regulation involves testing,
evaluation and modification of all aspects of plant operation in
light of NRC safety and environmental requirements, and
continuous demonstration to the NRC that plant operations meet
applicable requirements. The NRC has the ultimate authority to
determine whether any nuclear generating plant may operate. In
addition, the Federal Emergency Management Agency has
responsibility for the review, in conjunction with the NRC, of
certain aspects of emergency planning relating to the operation
of nuclear plants.
As a by-product of nuclear operations, nuclear generating
units, including those in which ACE owns an interest, produce
substantial amounts of low-level radioactive waste (LLRW). Such
waste is presently accumulated on-site pending permanent storage
in federally licensed disposal facilities located elsewhere.
However, under provisions of the Federal Low Level Radioactive
Policy Act, as amended (LLRWPA), as of July l, 1994, operating
disposal sites have exercised their authority to either cease
operation or deny access to LLRW generated in states which are
not members of the regional compact in which they are located.
ACE has been advised by PS and PECO that as of July l, 1994 LLRW
generated at Salem, Hope Creek and Peach Bottom is being
temporarily stored in on-site facilities pending development of
permanent disposal sites in New Jersey and Pennsylvania. The
LLRWPA further provides that each state must have a permanent
storage facility operational by January 1, 1996. ACE has been
advised that to date Pennsylvania has met such requirements by
entering into a compact with West Virginia, Maryland, Delaware
and the District of Columbia. To date, New Jersey has complied
with the LLRWPA requirements by entering into a compact with the
State of Connecticut and certifying its capability to manage,
store or dispose of low-level radioactive waste requiring
disposal after December 31, 1992. In June 1991, New Jersey
enacted legislation providing for funding of an estimated $80
million cost of establishing a facility for disposal by 1998.
Fee regulation provided for in the statute will permit the state
to recover costs of such facility from waste generators. ACE has
been advised that on-site waste storage will be provided until
permanent storage facilities are operational or until another
means of disposal is available. It is not possible to determine
the outcome of this matter at this time.
In March 1983, New Jersey enacted the Public Utility Fault
Determination Act which requires that the BPU make a
determination of fault with regard to any past or future accident
at any electric generating or transmission facility, prior to
granting a request by that utility for a rate increase to cover
accident-related costs in excess of $10 million. However, the
law allows the affected utility to file for non-accident related
rate increases during such fault determination hearings and to
recover contributions to federally mandated or voluntary cost-
sharing plans. The law further allows the BPU to authorize the
recovery of certain fault-related repair, cleanup, power
replacement or damage costs if substantiated by the evidence
presented and if authorized in writing by the BPU.
Information regarding ACE's nuclear power replacement cost
insurance and liability under the Federal Price-Anderson Act is
incorporated herein by reference to Note 8 of ACE's Notes to
Financial Statements, filed as Exhibit 28(a) to this report.
<PAGE>
Environmental Matters
General
ACE is subject to regulation with respect to air and water
quality and other environmental matters by various Federal, state
and local authorities. Emissions and discharges from ACE's
facilities are required to meet established criteria, and
numerous permits are required to construct new facilities and to
operate new and existing facilities. Additional regulations and
requirements are continually being developed by various
government agencies. The principal laws, regulations and
agencies relating to the protection of the environment which
affect ACE's operations are described below.
Construction projects and operations of ACE are affected by
the National Environmental Policy Act under which all Federal
agencies are required to give appropriate consideration to
environmental values in major Federal actions significantly
affecting the quality of the human environment.
The Federal Resource Conservation and Recovery Act of 1976
(RCRA) provides for the identification of hazardous waste and
includes standards and procedures that must be followed by all
persons that generate, transport, treat, store or dispose of
hazardous waste. ACE has filed notifications and plans with the
United States Environmental Protection Agency (EPA) relating to
the generation and treatment of hazardous waste at certain of its
facilities and generating stations.
The Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA), as amended by
the Superfund Amendments and Reauthorization Act of 1986 (SARA),
and RCRA authorize the EPA to bring an enforcement action to
compel responsible parties to take investigative and/or cleanup
actions at any site that is determined to present an imminent and
substantial danger to the public or to the environment because of
an actual or threatened release of one or more hazardous
substances. The New Jersey Spill Compensation and Control Act
(Spill Act) provides similar authority to the NJDEP. Because of
the nature of ACE's business, including the production of
electricity, various by-products and substances are produced
and/or handled which are classified as hazardous under the above
laws. ACE generally provides for the disposal and/or processing
of such substances through licensed independent contractors.
However, the statutory provisions may impose joint and several
responsibility without regard to fault on the generators of
hazardous substances for certain investigative and/or cleanup
costs at the site where these substances were disposed and/or
processed. Generally, actions directed at funding such site
investigations and/or cleanups include all known allegedly
responsible parties.
ACE has received requests for information under CERCLA with
respect to certain sites. One site, a sanitary landfill
comprising approximately 40 acres, is situated in Atlantic
County, New Jersey. ACE received a Directive, dated November 7,
1991, from the NJDEP, identifying ACE as one of a number of
parties allegedly responsible for the placement of certain
hazardous substances, namely, flyash which had been approved as
landfill material. An Administrative Consent Order (ACO) has
been executed and submitted to the NJDEP by ACE and at least four
other identified responsible parties. Site remediation will
include a soil cover of the site. ACE has joined with three
other parties and will cooperate in implementing the terms of the
ACO. Approximately eight additional responsible parties have
also been identified by the NJDEP. ACE, together with the other
signatories to the ACO, will pursue recovery against those
persons who may also pursue recovery against other responsible
parties not named in the NJDEP Directive.
ACE has been served a Summons and Complaint dated June 30,
1992 in a civil action brought pursuant to Section 107(a) of
CERCLA on behalf of the EPA. ACE has been named as one of
several defendants in connection with the recovery of costs
incurred, and to be incurred, in response to the alleged release
of hazardous substances located in Gloucester County, New Jersey.
Approximately 70 separate financially solvent entities have been
identified as having responsibility for remediation which is now
predicted to be in excess of $175 million. Sufficient discovery
has been conducted to establish that ACE's contribution to the
clean-up and remediation activity will be within the lower tiers
of financial participation. Notwithstanding the joint and
several liability imposed by law, primary responsibility will be
apportioned among others, including Federal and State agencies
and private parties. It is estimated that ACE's contribution for
the remediation and clean-up of both the Atlantic County and
Gloucester County sites is not expected to exceed $1 million.
The New Jersey Environmental Clean-up Responsibility Act was
supplemented and amended in June 1993 and became the New Jersey
Industrial Site Recovery Act. The act provides, among other
things, that any business having certain Standard Industrial
Classification Code numbers that generates, uses, transports,
manufactures, refines, treats, stores, handles or disposes of
hazardous substances or hazardous wastes is subject to the
requirements of the act upon the closing of operations or a
transfer of ownership or operations. As a precondition to such
termination or transfer of ownership or operations, the approval
of the NJDEP of a negative declaration, a remedial action work
plan or a remediation agreement and the establishment of the
remediation funding source is required.
Various state and Federal legislation have established a
comprehensive program for the disclosure of information about
hazardous substances in the workplace and the community, and
provided a procedure whereby workers and residents can gain
access to this information. Implementing the regulations
provides for extensive recordkeeping, labeling and training to be
accomplished by each employer responsible for the handling of
hazardous substances. ACE has implemented the requirements of
this legislation to achieve substantial compliance with
appropriate schedules.
ACE is also subject to the Wetlands Act of 1970, which
requires applications to and permits from the NJDEP for
conducting regulated activities (including construction and
excavation) within the "coastal wetlands," as defined therein.
Legislation enacted in 1987 by the State of New Jersey designates
certain areas as fresh water wetlands and restricts development
in those areas.
The New Jersey Coastal Area Facility Review Act (CAFRA)
requires applications to and permits from the NJDEP for
construction of certain types of facilities within the "coastal
area" as defined by CAFRA. Recent changes in regulations
effective July 1994 may have substantive impact and are in the
process of being finalized. Although the CAFRA regulations, as
initially drafted, exclude certain utilities from the most
rigorous portions of the regulations, electric utilities were not
excluded. At the present time, the NJDEP indicates that the
final rules will exclude electric lines and substation
construction and maintenance from the definition of "public
development". These activities will then be excluded from
regulation. ACE will continue an aggressive pursuit for the
exemption; omission of the exemption could have a significant
impact on service to customers in the coastal regions the extent
of which has not been determined.
Public concern continues over the health effects from
exposure to electric and magnetic fields (EMF). To date, there
are not conclusive scientific studies to support such concerns.
The New Jersey Commission on Radiation Protection is considering
promulgation of regulations which would authorize the NJDEP to
review all new power line projects of 100 kilovolts or more. The
promulgation of such regulations may affect the design and
location of ACE's existing and future electric power lines and
facilities and the cost thereof. ACE's program of Prudent Field
Management implements reasonable measures, at modest cost, to
limit magnetic field levels in the design and location of new
facilities. Such amounts as may be necessary to comply with any
new EMF rules cannot be determined at this time and are not
included in ACE's 1995-1997 estimated construction expenditures.
Air
The Federal Clean Air Act, as amended, requires that all
states achieve specified primary ambient air quality standards
(relating to public health) by December 31, 1982 unless the
deadline is extended for certain pollutants for a particular
state by appropriate action taken by the EPA, and also requires
that states achieve secondary ambient air quality standards
(relating to public welfare) under the Clean Air Act within a
reasonable time. The Clean Air Act also requires the
Administrator of the EPA to promulgate revised new source
performance standards for sulfur dioxide, particulates and
nitrogen dioxide, mandate the use of the "best technological
system of continuous emission reduction" and preclude the use of
low sulfur coal as a sole means of achieving compliance with
sulfur regulations for new power plants. The Clean Air Act
Amendments (CAAA), which provide for penalties in the event of
noncompliance, further provide that State Implementation Plans
(SIP) contain emission limitations and such other measures as may
be necessary, as determined under regulations promulgated by the
EPA, to prevent "significant deterioration" of air quality based
on regional non-degradation classifications.
The NJDEP is using the New Jersey Administrative Code, Title
7, Chapter 27 (NJAC 7:27) as its SIP to achieve compliance with
the national ambient air quality standards adopted by EPA under
the Clean Air Act. NJAC 7:27 currently provides ambient air
quality standards and emission limitations, all of which have EPA
approval, for seven pollutants, including sulfur dioxide and
particulates. ACE believes that all of its fossil fuel-fired
generating units are, in all substantial respects, currently
operating in compliance with NJAC 7:27 and the EPA approved SIP.
In November 1990, the CAAA was enacted to provide for
further restrictions and limitations on sulfur dioxide and other
emission sources as a means to reduce acid deposition. Phase I
of the legislation mandates compliance with the sulfur dioxide
reduction provisions of the legislation by January 1, 1995 by
utility power plants emitting sulfur dioxide at a rate of above
2.5 pounds per million BTU. Plants utilizing certain control
technologies to meet the Phase I sulfur dioxide reductions could
be permitted, subject to EPA approval, to either postpone
compliance until 1997 or receive an early reduction bonus
allowance for reductions achieved between 1995 and 1997. Phase
II of the legislation requires controls by January 1, 2000 on
plants emitting sulfur dioxide at a rate above 1.2 pounds per
million BTU.
ACE's wholly-owned B. L. England Units 1 and 2 and its
jointly-owned Conemaugh Units 1 and 2, in which ACE has a 3.83%
ownership interest, are affected by Phase I, and all of ACE's
other fossil-fueled steam generating units are affected by Phase
II. The Keystone Station, in which ACE has a 2.47% ownership
interest, is impacted by the sulfur dioxide provisions of Title
IV of the CAAA during Phase II. In addition, all of ACE's
fossil-fueled steam generating units will be affected by the
nitrogen oxide provisions of the CAAA. Compliance with the
legislation will cause ACE to incur additional capital and/or
operating costs. On April 26, 1991, the NJDEP renewed ACE's
expiring Certificates to Operate Control Apparatus or Equipment
(Certificates) for the three generating units at B.L. England
Station for a period of five years. The Certificates constitute
a concurrent five-year authorization to burn coal exceeding one
percent sulfur at B.L. England Units 1 and 2. Such authorization
is subject to certain conditions, including the submittal by ACE
of certain permits relating to the installation of flue gas
desulfurization systems (scrubbers) on B.L. England Units 1 and
2. Subject to receipt of necessary permits and approvals, and to
delays beyond its control, ACE would be obligated to install and
operate the scrubbers by June 30, 1995 for Unit 2 and January 31,
1997 for Unit 1. The provisions of the Certificates do not
preclude NJDEP or the BPU from allowing ACE to pursue a
compliance strategy other than scrubbing, or from disapproving
any compliance strategy, including scrubbing. The Certificates
do not preclude the NJDEP from requiring reductions in the
emissions of nitrogen oxides, and require periodic reporting by
ACE on nitrogen oxide control strategies, and by the end of 1995,
an evaluation of the applicability of nitrogen oxide control at
B.L. England Station.
ACE constructed a scrubber at a cost of approximately $81
million, at B.L. England Unit 2, which will satisfy Phase I
sulfur dioxide emission requirements for both B.L. England Units
1 and 2. Construction of the scrubber commenced in late 1992 and
commercial operation began in late 1994. The Conemaugh owners
have elected to install scrubbers on Conemaugh Units 1 and 2,
with ACE's share of the total cost estimated to be about $15
million. Scrubber construction for Conemaugh Unit 1 was also
completed in late 1994 and Unit 2 construction is expected to be
completed in 1995. The cost of certain power purchase
arrangements between ACE and other electric utilities may also be
affected by the legislation. A portion of the capital costs
necessary to continue compliance with the CAAA are included in
ACE's current estimate of construction expenditures shown under
"Construction and Financing" above. ACE expects that costs
associated with compliance would be recoverable through rates,
and may be offset, in part, by utilization of certain allowances
as permitted by the CAAA, the value of which is not presently
determinable.
The CAAA requires that reductions in nitrogen oxide (Nox)be
made from the emissions of major contributing sources and each
state must impose reasonable available control technologies on
these major sources by May 1995. NJDEP regulations adopted in
November 1993 require that a compliance plan be filed with the
NJDEP by April 15, 1994. ACE's compliance plan was filed and ACE
is awaiting comment. Preliminary capital expenditures are
estimated at $20 million with additional expenditures expected in
the year 2000 to achieve compliance with Phase II NOx reductions.
The necessary emission reductions are based on modeling results
and regulatory agency discussions and could result in additional
changes to equipment and in methods of operation and fuel, the
extent of which has not been fully determined.
Water
The Federal Water Pollution Control Act, as amended (the
Clean Water Act) provides for the imposition of effluent
limitations to regulate the discharge of pollutants, including
heat, into the waters of the United States. The Clean Water Act
also requires that cooling water intake structures be designed to
minimize adverse environmental impact. Under the Clean Water
Act, compliance with applicable effluent limitations is to be
achieved by a National Pollution Discharge Elimination System
(NPDES) permit program to be administered by the EPA or by the
state involved if such state establishes a permit program and
water quality standards satisfactory to the EPA. Having
previously adopted the New Jersey Pollution Discharge Elimination
System (NJPDES), NJDEP assumed authority to operate the NPDES
permit program. During 1981, ACE received NJPDES permits for
discharges to surface waters for all facilities with existing
EPA-issued NPDES permits. During 1986, ACE received draft
renewal permits for both B.L. England Station and Deepwater
Station for discharges to surface waters as well as groundwater.
ACE filed extensive comments with the NJDEP contesting the
numerous newly-imposed conditions in both permits. The NJDEP
subsequently issued final permits for both stations containing
certain conditions which are unacceptable to ACE. ACE filed
requests for adjudicatory hearings contesting the unacceptable
conditions contained in the permits. ACE has reached a
resolution with the NJDEP relating to groundwater permits at B.L.
England Station which required ACE to conduct additional studies,
which were completed in 1991. A draft NPDES was issued in
February 1994 to include past contested conditions and bring
current permit limitations with respect to today's environment
and technology. Most of the contested conditions were resolved
with the issuance of the NPDES permit renewal effective January
1, 1995. ACE has adjudicated two minor issues related to permit
conditions requiring that a pollutant reduction and a dilution
study be conducted.
Effective December 2, 1974, the NJDEP adopted new surface
water quality standards which, in part, provide guidelines for
heat dissipation from any source and which become standards for
subsequent Federal permits. These NJDEP guidelines were included
in the final EPA permits issued for the B. L. England, Deepwater,
Salem, and Hope Creek stations. On receipt of the permits for B.
L. England and Deepwater stations, ACE filed with the EPA a
request for alternative thermal limitations (variance) in
accordance with the provisions of Section 316(a) of the Act. The
NJDEP and EPA have subsequently determined that B. L. England
Units 1 and 2 are in compliance with applicable thermal water
quality standards. The request for a Section 316(a) variance for
Deepwater Station has not yet been acted upon. ACE is not able
at this time to predict the outcome of the request, but it
believes that it has adequately supported the request for such
variance. ACE believes that all of its wholly-owned steam
electric generating units are, in all substantial respects,
currently operating in compliance with all applicable standards
and NJPDES permit limitations, except as described herein above.
All current surface water discharge permits for B.L. England have
been renewed as of January 1, 1995 and ACE has filed for renewal
of the ground water discharge permits for B. L. England and
surface water discharge permits for Deepwater. Renewal of these
permits should be received this year.
The Delaware River Basin Commission (DRBC) has required
various electric utilities, as a condition of being permitted to
withdraw water from the Delaware River for use in connection with
the operation of certain electric generating stations, to provide
for a means of replacing water withdrawn from the river during
certain periods of low river flow. Such a requirement presently
applies to the Salem and Hope Creek Stations. As a result of
such requirement, ACE and certain other electric utilities
constructed the Merrill Creek Reservoir Project. ACE owns a 4.8%
ownership interest in the reservoir project. Although ACE
expects that sufficient replacement water would be provided by
Merrill Creek during periods of low river flow to permit the full
operation of Salem and Hope Creek, such events cannot be assured.
Environmental control technology, generally, is in the
process of further development and the implementation of such may
require, in many instances, balancing of the needs for additional
quantities of energy in future years and the need to protect the
environment. As a result, ACE cannot estimate the precise effect
of existing and potential regulations and legislation upon any of
its existing and proposed facilities and operations, or the
additional costs of such regulations. ACE's capital expenditures
related to compliance with environmental requirements in 1994
amounted to $57.5 million, and its most recent estimate for such
compliance for the years 1995-1997 is $70.7 million. Such
estimates do not include amounts which ACE may be required to
expend to comply with Phase II requirements of the CAAA at B.L.
England Unit 1 and Keystone Station or the normal costs of
compliance with radiation protection. Such additional costs
which ACE may incur in affecting compliance with potential
regulations and legislation are not included in the estimated
construction costs for the period 1995-1997 (see "Construction
and Financing"). Future regulatory and legislative developments
may require ACE to further modify, supplement or replace
equipment and facilities, and may delay or impede the
construction and operation of new facilities, at costs which
could be substantial.
<PAGE>
Executive Officers
Information concerning the Executive Officers of the Company
and ACE, as of December 31, 1994, is set forth below. Executive
Officers are elected by the respective Boards of Directors of the
Company and ACE and may be removed from office at any time by a
vote of a majority of all the Directors in office.
Name (age) Title(s) (effective date of
election to current position(s)
Jerrold L. Jacobs (55) President and Chief Executive Officer
of the Company and Chairman,
President and Chief Executive Officer
of ACE (4/28/93).
Michael J. Chesser (46) Vice President of the Company and
Executive Vice President and Chief
Operating Officer of ACE (2/1/94),
Director of ACE.
James E. Franklin II (48) Secretary and General Counsel to the
Company and ACE (1/31/95), Director
of ACE.
Meredith I. Harlacher, Jr.(52) Vice President of the Company and
Senior Vice President-Energy Supply
of ACE (4/28/93), Director of ACE.
Henry K. Levari, Jr. (46) Vice President of the Company
(8/13/86) and Senior Vice President-
Customer Operations of ACE (9/17/94),
Director of ACE.
Jerry G. Salomone (54) Vice President and Treasurer of the
Company (8/13/86) and Senior Vice
President-Finance & Administration of
ACE (4/28/93), Director of ACE.
(Retired 2/1/95)
Frank F. Frankowski (44) Vice President-Controller,
Assistant Treasurer and Assistant
Secretary of ACE (7/25/94).
Ernest L. Jolly (42) Vice President-Atlantic
Transformation of ACE (5/23/94).
J. David McCann (43) Vice President-Strategic Customer
Support of ACE (4/28/93).
Marilyn T. Powell (47) Vice President-Marketing of ACE
(9/16/94).
Henry C. Schwemm, Jr. (53) Vice President-Power Generation &
Fuels Management of ACE (4/28/93).
Scott B. Ungerer (36) Vice President of the Company
(1/17/94).
Louis M. Walters (42) Vice President-Treasurer and
Assistant Secretary of ACE (1/31/95).
<PAGE>
Prior to election to the positions above, the following
officers held other positions with ACE (unless otherwise noted)
since January 1, 1990:
M.J. Chesser Vice President-Marketing & Gas Operations,
Baltimore Gas & Electric Company
F.F. Frankowski Vice President-Controller and Assistant
Treasurer of ACE (4/28/93); General Manager
of Accounting Services (8/1/91).
J.E. Franklin II General Counsel to the Company and ACE
(10/1/94); Partner in the law firm Megargee,
Youngblood, Franklin & Corcoran, P.A.
M.I. Harlacher, Jr. Vice President of the Company and Senior Vice
President-Utility Operations of ACE (8/9/91).
J.L. Jacobs President of the Company and President and
Chief Operating Officer of ACE (1/1/90).
E.L. Jolly Vice President-External Affairs of ACE
(3/1/92); Station Manager Deepwater
Generating Station-Dupont Area for ACE.
H.K. Levari, Jr. Vice President of the Company and Senior Vice
President-Marketing and Customer Operations
of ACE (4/28/93); Vice President of the
Company and Senior Vice President-Corporate
Planning and Services of ACE (8/9/91); Vice
President-Power Delivery of ACE (4/24/90).
J.D. McCann Vice President-Power Delivery of ACE
(8/9/91).
M.T. Powell Director of marketing process, International
Business Machines Corporation.
J.G. Salomone Senior Vice President, Finance and
Accounting, Treasurer (4/22/92).
H.C. Schwemm, Jr. Vice President-Production of ACE.
S.B. Ungerer Manager, Business Planning Services (1/4/93);
Manager, Strategic Business Planning
(1/6/92); Manager, Joint Generation.
L.M. Walters Vice President-Treasurer and Secretary
(4/28/94); Vice President-Treasurer and
Assistant Secretary (4/28/93); General
Manager, Treasury and Finance (8/1/91).
<PAGE>
ITEM 2 PROPERTIES
Reference is made to the Financial Statements for
information regarding investment in such property by the Company
and ACE. Substantially all of ACE's electric plant is subject to
the lien of the Mortgage and Deed of Trust under which First
Mortgage Bonds of ACE are issued. Reference is made to Item 1 -
Business "General" and "Energy Requirements and Power Supply" for
information regarding ACE's properties. Information concerning
leases is set forth in Note 9 of ACE's Notes to Financial
Statements incorporated herein by reference. Information
regarding electric generating stations is set forth in Item 1,
Business-"Energy Requirements and Power Supply."
ITEM 3 LEGAL PROCEEDINGS
Reference is made to Item 1-Business and the Notes to
Financial Statements of the Company (Notes 3 and 10) and ACE
(Notes 3 and 8) for information regarding various pending
administrative and judicial proceedings involving rate and
operating and environmental matters, respectively.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York,
Philadelphia, and Pacific Stock Exchanges. All of ACE's Common
Stock is owned by the Company. At December 31, 1994, there were
48,850 holders of record of the Company's Common Stock. The
following table indicates the high and low sale prices for the
Company's Common Stock as reported in the Wall Street Journal-
Composite Transactions, and dividends paid for the periods
indicated:
Dividends
High Low per Share
Common Stock:
1994
First Quarter $21.750 $19.875 $ .385
Second Quarter $21.500 $16.375 $ .385
Third Quarter $19.625 $16.125 $ .385
Fourth Quarter $18.250 $16.000 $ .385
1993
First Quarter $25.000 $21.875 $ .380
Second Quarter $23.875 $21.625 $ .380
Third Quarter $25.375 $22.625 $ .385
Fourth Quarter $23.875 $20.375 $ .385
The funds required to enable the Company to pay dividends on
its Common Stock are derived primarily from the dividends paid by
ACE on its Common Stock, all of which is held by the Company.
Therefore the ability of the Company to pay dividends on its
Common Stock will be governed by the ability of ACE to pay
dividends on its Common Stock. The rate and timing of future
dividends of the Company will depend upon the earnings and
financial condition of the Company and its subsidiaries,
including ACE, and upon other factors affecting dividend policy
not presently determinable. ACE is subject to certain
limitations on the payment of dividends to the Company. Whenever
full dividends on Preferred Stock have been paid for all past
quarter-yearly periods, ACE may pay dividends on its Common Stock
from funds legally available for such purpose. Until all
cumulative dividends have been paid upon all series of Preferred
Stock and until certain required sinking fund redemptions of such
Preferred Stock have been made, no dividend or other distribution
may be paid or declared on the Common Stock of ACE and no Common
Stock of ACE shall be purchased or otherwise acquired for value
by ACE. In addition, as long as any Preferred Stock is
outstanding, ACE may not pay dividends or make other
distributions to the holder of its Common Stock if, after giving
effect to such payment or distribution, the capital of ACE
represented by its Common Stock, together with its surplus as
then stated on its books of account, shall in the aggregate, be
less than the involuntary liquidation value of the then
outstanding shares of Preferred Stock.
<PAGE>
ITEM 6 SELECTED FINANCIAL DATA
Selected financial data for the Company and ACE for each of
the last five years is listed below.
<TABLE>
<CAPTION>
Atlantic Energy, Inc.
1994 1993 1992 1991 1990
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Operating
Revenues $ 913,039 $ 865,675 $ 816,825 $ 808,374 $ 740,894
Net Income $ 76,113 $ 95,297 $ 86,210 $ 85,635 $ 68,879
Earnings per Average
Common Share $ 1.41 $ 1.80 $ 1.67 $ 1.75 $ 1.51
Total Assets
(Year-end) $2,545,555 $2,487,508 $2,219,338 $2,151,416 $2,006,010
Long Term Debt and
Redeemable Preferred
Stock (Year-end)(b) $ 940,788 $ 952,101 $ 842,236 $ 807,347 $ 747,877
Capital Lease
Obligations
(Year-end)(b) $ 42,030 $ 45,268 $ 49,303 $ 53,093 $ 57,971
Common Dividends
Declared $ 1.54 $ 1.535 $ 1.515 $ 1.495 $ 1.47
</TABLE>
<TABLE>
<CAPTION>
Atlantic City Electric Company
1994 1993 1992 1991 1990
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Operating
Revenues $ 913,226 $ 865,799 $ 816,931 $ 808,482 $ 741,005
Net Income $ 93,174 $ 109,026 $ 107,446 $ 107,428 $ 80,176
Earnings for Common
Shareholder (a) $ 76,458 $ 91,621 $ 89,634 $ 91,017 $ 69,377
Total Assets
(Year-end) $2,421,316 $2,363,584 $2,100,278 $2,042,859 $1,903,326
Long Term Debt and
Redeemable Preferred
Stock (Year-end)(b) $ 924,788 $ 937,101 $ 817,108 $ 768,247 $ 708,977
Capital Lease
Obligations
(Year-end)(b) $ 42,030 $ 45,268 $ 49,303 $ 53,093 $ 57,971
Common Dividends
Declared (a) $ 83,482 $ 81,347 $ 78,336 $ 74,073 $ 67,085
(a) Amounts shown as total, rather than on a per-share basis, since ACE is a
wholly-owned subsidiary of the Company.
(b) Includes current portion.
/TABLE
<PAGE>
ITEM 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Atlantic Energy, Inc. (the Company, AEI or parent) is the parent
of a consolidated group of wholly-owned subsidiaries consisting
of Atlantic City Electric Company (ACE) and the following
nonutility companies: Atlantic Energy Technology, Inc. (AET),
Atlantic Generation, Inc. (AGI), Atlantic Southern Properties,
Inc. (ASP), ATE Investment, Inc. (ATE) and Atlantic Thermal
Systems, Inc. (ATS). ACE, the primary subsidiary, is an electric
utility regulated by the New Jersey Board of Public Utilities
(BPU). ACE has a wholly-owned subsidiary that operates certain
generating facilities. AGI is engaged in the development and
operation of cogeneration and alternate energy projects through
various partnership arrangements. ASP owns and manages a
commercial real estate property. ATE manages a portfolio of
leveraged lease investments and provides financing and fund
management to an affiliate. ATS is engaged with development of
district heating and cooling facilities which it intends to own
and operate. AET is presently concluding the affairs of its
subsidiary which is its sole investment. On January 1, 1995, a
new subsidiary of AEI, Atlantic Energy Enterprises, Inc. (AEE),
was formed. AEI will transfer direct ownership of the existing
nonutility companies to AEE.
The Company's business plan will concentrate on the core utility
operations of ACE and the expansion of non-utility business
opportunities related to the core business. The emergence of
competition in the area of electric generation, slower growth in
energy sales, Federal deregulation of wholesale energy sales,
prospective retail wheeling initiatives coupled with a public
utility's obligation to serve and the need to mitigate future
rate increases has caused ACE to re-examine its traditional
approach to its business. ACE's current business plan recognizes
the increasingly competitive nature of the electric energy
business in general and the need to encourage economic growth and
stability in the service territory and surrounding region. ACE
is re-evaluating its revenue requirements and service pricing,
the implementation of additional cost controls and the
development of new sources of revenue. Nonutility business
strategies are expected to pursue new investment opportunities
closely related to the utility business, primarily in the areas
of nonregulated electric generation, energy technology
investments and thermal energy systems. Investments in these
areas may take place as direct ownership or in partnership with
others.
<PAGE>
Financial Results
Consolidated operating revenues for 1994, 1993 and 1992 were
$913.0 million, $865.7 million and $816.8 million, respectively.
The increase in 1994 revenue reflects an increase in Levelized
Energy Clause (LEC) revenues as a result of a $55.0 million rate
increase effective July 1994 and an increase in sales for resale.
The increased revenues for 1993 reflect the effect of a rate
increase of $10.9 million effective in that year. The revenue
increase in 1993 also reflects the contrast between the 1993
normal and the 1992 below normal summer temperatures.
Consolidated earnings per share for 1994 were $1.41 on net income
of $76.1 million, compared with $1.80 on net income of $95.3
million in 1993 and $1.67 on net income of $86.2 million in 1992.
The 1994 earnings were attributable solely to ACE and include a
reduction of $.32 for employee separation programs and $.02 for
the write-off of deferred nuclear study costs. In 1993, ACE
contributed $1.73 to consolidated earnings, primarily as a result
of increased kilowatt-hour sales due to the contrast between 1993
and 1992 summer temperatures. ACE's 1993 earnings were reduced
by $.10 as a result of charges for reorganization activities. In
1992, ACE contributed $1.74 to consolidated earnings, which
included $.15 for a litigation settlement with PECO Energy.
Nonutility operations resulted in a net loss of $345 thousand for
1994, net income of $3.7 million for 1993 and a net loss for 1992
of $3.4 million. The net loss for 1994 reflects the write-down
of carrying value of ASP's commercial site in the amount of $1.7
million after tax, or $.03 per share. This was offset, in part,
by the earnings of AGI. Non-utility net income for 1993 was
primarily the result of higher earnings of AGI derived from the
first full year's commercial operation of two of its cogeneration
projects. The loss in 1992 was primarily due to provisions made
by AET relating to restructuring of certain business activities.
That loss was offset, in part, by earnings of AGI resulting from
the start-up of two of AGI's cogeneration projects and by ATE's
lower interest expense.
The quarterly dividend paid on Common Stock was $.385 per share,
or an annual rate of $1.54 per share. Information with respect
to Common Stock for the period 1992-1994 is as follows:
1994 1993 1992
Dividends Paid Per Share $ 1.54 $ 1.53 $ 1.51
Book Value Per Share $15.56 $15.62 $15.17
Annualized Dividend
Yield 8.7% 7.0% 6.6%
Return on Average
Common Equity 9.1% 11.7% 11.1%
Total Return (Dividends
paid plus change in
share price) (11.9)% 0.6% 20.2%
Market to Book Value 113% 139% 152%
Price/Earnings Ratio 13 12 14
Closing Price-New York
Stock Exchange $17.63 $21.75 $23.13
Liquidity and Capital Resources
Overview
The Company's cash flows are dependent on the cash flows of its
subsidiaries, primarily ACE. Principal cash inflows of the
Company are dividends from ACE and funds provided by the issuance
of Common Stock. Principal cash outflows of the Company are
investments (capital contributions and advances) in its
subsidiaries for their investing activities, dividends to common
shareholders and repurchase of outstanding common stock. Cash
invested in ACE is utilized primarily for the construction of
utility generation, transmission and distribution facilities, re-
demption and maturity of long and short term debt and redemption
of preferred stock. Current investing activities of the
nonutility subsidiaries are primarily for the development of
nonutility power generation projects and thermal heating and
cooling systems.
Agreements between the Company and its subsidiaries provide for
allocation of tax liabilities and benefits generated by the
respective subsidiaries. A separate credit support agreement
exists between the Company and ATE.
In 1994, 1993 and 1992, the Company recorded $83.2 million, $81.3
million and $78.3 million, respectively, in dividends from ACE.
Other sources of funds available to the Company, which include
the issuance of common equity through optional cash purchases
under the Dividend Reinvestment and Stock Purchase Plan (DRP)
through July 1994 and ACE's employee benefit plans, are shown as
follows:
1994 1993 1992
DRP Optional Cash Purchases
Shares issued 336,193 690,466 719,324
Proceeds (000) $6,737 $15,985 $16,034
Employee Benefit Plans
Shares issued - 8,033 10,897
Proceeds (000) $ - $258 $259
Additional common equity has been provided by reinvested divi-
dends through the DRP. In June 1994, the Company discontinued
the issuance of new Common Stock through the DRP, except for
certain employee benefit plans. Common shares issued from
reinvested dividends in 1994, 1993 and 1992 were 370,654, 609,663
and 572,329, respectively.
Major cash outflows of the Company were as follows:
1994 1993 1992
(Millions)
Dividends to Shareholders $83.2 $81.3 $78.3
Advances and Capital
Contributions to Subsidiaries* $25.6 $29.8 $24.1
* Net of Repayments
On October 27, 1994, the Company's Board of Directors authorized
the Company to acquire up to three million shares of Common
Stock. The Company will cancel these shares. As of December 31,
1994, the Company has acquired and cancelled 221,700 shares at a
cost of $3.9 million.
Atlantic City Electric Company
Cash construction expenditures for the 1992-1994 period amounted
to $388.8 million and included expenditures for upgrades to
existing transmission and distribution facilities and compliance
with provisions of the Clean Air Act Amendments (CAAA) of 1990.
ACE's current estimate of cash construction expenditures for the
1995-1997 period is $268 million. These estimated expenditures
reflect necessary improvements to transmission and distribution
facilities and further compliance with provisions of the CAAA.
ACE also utilizes cash for mandatory redemptions of Preferred
Stock and maturities and redemption of long term debt. Optional
redemptions of securities are reviewed on an ongoing basis with a
view toward reducing the overall cost of funds.
Redemptions of Preferred Stock (at par or stated value)for the
period 1992-1994 are shown as follows:
1994 1993 1992
Preferred Stock
(Series)
9.96% (Shares) - 48,000 8,000
$8.53 (Shares) 240,000 - -
$8.25 (Shares) 5,000 5,000 2,500
Aggregate Amount (000) $24,500 $5,300 $1,050
First Mortgage Bonds redeemed or acquired and retired or matured
in the period 1992-1994 were as follows:
Date Series Principal Amount Price(%)
(000)
November 1994 7-5/8% due 2005 $ 6,500 100.00
June 1994 10-1/2% due 2014 23,150 102.00
Various 1994 Dates 9-1/4% due 2019 11,910 105.38*
September 1993 9-1/4% due 2019 69,233 110.95*
September 1993 8-7/8% due 2016 125,000 104.80
March 1993 8-7/8% due 2000 19,000 102.41
March 1993 8% due 2001 27,000 102.53
March 1993 8% due 1996 95,000 100.91
March 1993 4-3/8% due 1993 9,540 100.00
July 1992 4-1/2% due 1992 10,350 100.00
* Average price
Scheduled debt maturities and sinking fund requirements aggregate
$69 million for the years 1995-1997.
On or before April 1 of each year, ACE and other New Jersey
utilities are required to pay gross receipts and franchise taxes
(state excise taxes) to the State of New Jersey. In March 1994,
ACE paid $137.5 million. Included in that amount was
approximately $50 million representing the second and final
installment for the additional one-half year's amount of tax due
as required by amended state law. This additional amount of
gross receipts and franchise tax payment, plus the additional
one-half year's payment in 1993 of $45 million, has been recorded
on the Consolidated Balance Sheet as Unrecovered State Excise
Taxes and is being recovered through rates by ACE. In December
1993, ACE paid $20 million in connection with renegotiation of a
nonutility purchase power contract which ACE is recovering
through its LEC. The estimated savings of this renegotiation,
based on currently forecasted fuel costs, is $15 million to $20
million per year, net of the $20 million payment.
On an interim basis, ACE finances that portion of its con-
struction costs and other capital requirements in excess of
internally generated funds through the issuance of unsecured
short term debt consisting of commercial paper and borrowings
from banks. As of December 31, 1994, ACE has arranged for lines
of credit of $150 million of which $141.4 million was available.
Permanent financing by ACE is undertaken by the issuance of its
long term debt and Preferred Stock and from capital contributions
by the parent company. ACE's nuclear fuel requirements
associated with its jointly-owned units have been financed
through arrangements with a third party.
In 1994, ACE issued and sold $54.65 million of its long term debt
consisting of Pollution Control Bonds. The proceeds from the
financings were used for refunding higher cost Pollution Control
Bonds and for construction purposes. Additionally, $125 million
in debt securities were registered and are available for issuance
in 1995. In 1993, ACE issued and sold $469 million of long term
debt consisting of $240 million of Series B Medium Term Notes,
$225 million of First Mortgage Bonds and $4 million of Pollution
Control Bonds. The proceeds from the 1993 financings were also
used for refunding higher cost debt and construction purposes.
In 1992, ACE issued and sold $60 million of Series A Medium Term
Notes, the proceeds of which were used for ACE's construction
program. During 1995-1997, ACE expects to issue $50 million in
new long term debt to be used for funding of construction and
repayment of short term debt.
Provisions of ACE's charter, mortgage and debenture agreements
can limit, in certain cases, the amount and type of additional
financing which may be used. At December 31, 1994, ACE estimates
additional funding capacities of $218 million of First Mortgage
Bonds, or $530 million of Preferred Stock, or $432 million of
unsecured debt. These amounts are not necessarily additive.
Non-Utility Companies
Management of the nonutility companies is evaluating business
opportunities which are expected to enhance nonutility operations
over the next five years, with focused efforts on expanding and
improving its financial performance in nonutility activities.
Matters specific to each of the nonutility companies are
discussed below.
<PAGE>
Atlantic Energy Enterprises, Inc.
On January 1, 1995, AEI formed a new subsidiary, Atlantic Energy
Enterprises, Inc. (AEE), which will hold ownership of the
existing nonutility businesses of AGI, ASP, ATE, ATS, and AET.
As part of this reorganization, AEE expects to develop an
organization structured to allow greater flexibility to pursue
non-regulated business opportunities. Expansion of business is
expected to focus in the areas of non-regulated electric
generation, energy technology investments and thermal energy
systems. Investments in these areas may take place as direct
ownership or in partnership with others. AEE's business plan
reflects the potential investment of approximately $215 million
over the next five years. AEE will have its own Board of
Directors, including outside directors which will help to guide
the non-regulated enterprises.
Atlantic Generation, Inc.
AGI's activities are represented by partnership interests in
three cogeneration projects. At December 31, 1994, total
investments amounted to $24.6 million. Cash outlays for
investments (comprised of capital investment, advances and loans)
by AGI for the period 1992-1994 totaled $14.6 million. AGI
obtained the funds for its investments through capital
contributions from the parent company. During the period 1992-
1994, AGI received distributions from the partnerships totaling
$4.4 million from return of investment and repayment of
outstanding advances and loans. In June 1994, the third
cogeneration project became operational. AGI expects to continue
investment in additional domestic independent power projects in
the years 1995-1999.
Atlantic Southern Properties, Inc.
ASP's real estate investment at December 31, 1994 is a 280,000
square-foot office and warehouse facility in Atlantic County, New
Jersey. This investment has a net book value of $10.3 million
after a write-down of the carrying value in 1994 of $2.6 million
reflecting diminished value due to excess vacancy. As of
December 31, 1994, ASP's investment has been funded by capital
contributions from the parent company and borrowings under a loan
agreement with ATE. ASP's current agreement with ATE provides
for the repayment of such borrowings on or before December 31,
1995. Extensions to repay these borrowings have been routinely
granted in the past. No real estate activity beyond the existing
site is contemplated at this time by ASP.
ATE Investment, Inc.
ATE has invested $78.2 million in leveraged leases of three
commercial aircraft and two containerships. ATE has loans
outstanding to ASP which totaled $8.7 million at December 31,
1994. ATE obtained funds for its business activities and loans
to ASP through capital contributions from the parent company and
external borrowings which include $15 million principal amount of
7.44% Senior Notes due 1999 and a revolving credit and term loan
facility for borrowings of up to $35 million. At December 31,
1994, there was $1 million in borrowings outstanding under this
facility. ATE's cash flows are provided from lease rental
receipts and realization of existing tax benefits generated by
the leveraged leases sufficient to sustain operations.
Atlantic Thermal Systems, Inc.
ATS is presently engaged in the development of thermal heating
and cooling systems. ATS has obtained funds for its project
development through advances from the parent company and has
established a $10 million revolving credit agreement with ATE.
There were no loans outstanding from this agreement as of
December 31, 1994.
Atlantic Energy Technology, Inc.
AET is currently concluding the affairs of its subsidiary, which
is its sole investment. The net investment in this subsidiary is
nominal. The amount of this investment was written down in 1993
as a result of planned reorganization activities that were
provided for in 1992. At that time the subsidiary discontinued
its operations to concentrate on licensing its proprietary
knowledge. In 1993, AET received life insurance proceeds of $500
thousand through its subsidiary. There are no future plans for
investment activity at this time by AET.
RESULTS OF OPERATIONS
Operating results are dependent upon the performance of the
subsidiaries, primarily ACE. Since ACE is the principal
subsidiary within the consolidated group, the operating results
presented in the Consolidated Statement of Income are those of
ACE, after elimination of transactions among members of the
consolidated group. Results of the nonutility companies are
reported in Other Income.
Revenues
Operating Revenues - Electric increased 5.5% and 6.0% in 1994 and
1993, respectively. Components of the overall changes are shown
as follows:
(millions)
1994 1993
Base Revenues $(4.2) $12.2
Levelized Energy Clauses 30.3 (5.0)
Kilowatt-hour Sales 9.6 42.6
Unbilled Revenues (7.3) (1.2)
Sales for Resale 17.8 0.7
Other 1.2 (0.4)
Total $47.4 $48.9
Levelized Energy Clause (LEC) revenues increased in 1994 due to
rate increases of $55 million in July 1994 and $10.9 million in
October 1993. The decrease in 1993 LEC revenues was the net
result of the increase in October 1993 and an $8.5 million
decrease effective October 1992. Changes in kilowatt-hour sales
are discussed under "Billed Sales to Ultimate Utility Customers."
Overall, the combined effects of changes in rates charged to
customers and kilowatt-hour sales resulted in increases of 3.1%
and 0.8% in revenues per kilowatt-hour in 1994 and 1993,
respectively. The changes in Unbilled Revenues are a result of
the amount of kilowatt-hours consumed by ultimate customers at
the end of the respective periods, which are affected by weather
and economic conditions, and the corresponding price per
kilowatt-hour. The changes in Sales for Resale are a function of
ACE's energy mix strategy, which in turn is dependent upon ACE's
needs for energy, the energy needs of other utilities
participating in the regional power pool of which ACE is a
member, and the sources and prices of energy available. The
increase in Sales for Resale for 1994 was the result of meeting
the demands of the regional power pool due to the extreme weather
conditions during the first six months of 1994.
Effective July 1, 1994, the BPU permitted hotel-casino customers
to take service under existing commercial rate schedules which is
expected to reduce annual revenue by approximately $7 million.
Billed Sales to Ultimate Utility Customers
Changes in kilowatt-hour sales are generally due to changes in
the average number of customers and average customer use, which
is affected by economic and weather conditions. Energy sales
statistics, stated as percentage changes from the previous year,
are shown as follows:
1994 1993
Avg Avg # Avg Avg #
Customer Class Sales Use of Cust Sales Use of Cust
Residential 1.5% .4% 1.1% 6.7% 5.9% .8%
Commercial 2.6 .5 2.1 5.1 3.2 1.9
Industrial (2.9) (3.8) .9 2.6 4.6 (1.9)
Other 3.2 4.0 (.8) 1.2 1.6 (.4)
Total 1.3 - 1.2 5.4 4.4 .9
The 1994 increase in total kilowatt-hour sales was due to the
extreme weather conditions during the first quarter of 1994 and
an increased number of billing days in 1994 compared to 1993.
This increase was partially offset by the abnormal weather
conditions during the last half of the year when kilowatt-hour
usage fell below 1993 levels. In 1993, total kilowatt-hour sales
increased primarily due to the colder winter temperatures during
the first quarter, and below normal temperatures during the
summer of 1992. Improved economic conditions also contributed to
the increase in 1993 sales. Commercial sales in both years
benefitted from night lighting programs. The decline in 1994
industrial sales is due to the loss of ACE's largest customer to
an independent power producer during the year.
Costs and Expenses
Total Operating Expenses increased 7.6% and 3.9% in 1994 and
1993, respectively. Included in these expenses are the costs of
energy, purchased capacity, operations, maintenance, depreciation
and taxes.
Energy expense reflects cost incurred for energy needed to meet
load requirements, various energy supply sources used and
operation of the LECs. Changes in costs reflect the varying
availability of low-cost generation from ACE-owned and purchased
energy sources, and the corresponding unit prices of the energy
sources used, as well as changes in the needs of other utilities
participating in the Pennsylvania-New Jersey-Maryland
Interconnection. The cost of energy is recovered from customers
primarily through the operation of the LEC. Until 1994, earnings
were generally not affected by energy costs because these costs
are adjusted to match the associated LEC revenues. In any
period, the actual amount of LEC revenue recovered from customers
may be greater or less than the actual amount of energy cost
incurred in that period. Such respective overrecovery or
underrecovery of energy costs is recorded on the Consolidated
Balance Sheet as a liability or an asset as appropriate. Amounts
in the balance sheet are recognized in the Consolidated Statement
of Income within Energy expense during the period in which they
are subsequently recovered through the LEC. ACE was
underrecovered by $11 million and by $7.2 million at December 31,
1994 and 1993, respectively.
As a result of implementing the Southern New Jersey Economic
Initiative in rates, effective July 19, 1994, the Company is
forgoing recovery of future energy costs in LEC rates of $28
million through May 31, 1995. After tax income has been reduced
by $10.1 million due to the effects of this initiative in 1994.
In 1994, Energy expense increased 32.7% due to the adoption of
the Southern New Jersey Economic Initiative and the increase in
the levelized energy clause that reduced underrecovered fuel
costs. Production-related energy costs for 1994 increased by
19.9% due to increased overall generation and the high cost of
energy from additional nonutility sources. The average unit cost
for energy in 1994 increased to 2.04 cents per kilowatt-hour
compared to 1.82 cents per kilowatt-hour in 1993. Energy expense
for 1993 decreased 1.1% primarily due to an increase in
underrecovered fuel costs in 1993 compared to 1992. Production-
related energy cost for 1993 increased by 6.7% largely due to
increased generation. The average unit cost for energy in 1993
increased to 1.82 cents per kilowatt-hour compared to 1.8 cents
per kilowatt-hour in 1992. The 1993 increase in the per unit
cost is a result of increased amounts of higher cost energy from
nonutility sources and a decreased supply of lower cost energy
from coal sources.
Purchased Capacity expense reflects entitlements to generating
capacity owned by others. Purchased Capacity expense increased
18.2% and 7.4% in 1994 and 1993, respectively. The increases in
Purchased Capacity reflect additional capacity supplied by
nonutility power producers that became operational in each year.
Operations expense decreased 3.5% in 1994 and increased 8.9% in
1993. The increase in 1993 was due primarily to corporate
reorganization activities by ACE. Maintenance expense decreased
17.2% in 1994 due to cost saving measures in maintenance
activities. The 9% decrease in 1993 maintenance expense was due
to the scheduling of maintenance projects.
Depreciation and Amortization expense increased 7.9% in 1994 as a
result of an increase in the depreciable base of ACE's electric
plant in service. State Excise Taxes expense decreased 6.9% in
1994 and increased by 6.4% in 1993. The increase in 1993 is due
to a higher tax assessment.
Federal Income Taxes decreased 6.1% in 1994 and increased 21.9%
in 1993 as a result of the level of taxable income during those
periods. The change in the 1993 amount reflects the increase in
the Federal income tax rate to 35% from 34%, effective in that
year.
Employee Separation costs represents programs by ACE to reduce
its workforce by about 20%, or 350 people. Other-Net within
Other Income (Expense) decreased in 1994 due to the net after tax
impacts of the write-off of deferred nuclear study costs of $1.4
million and the write-down of the carrying value of ASP's
commercial property of $1.7 million. Litigation Settlement in
1992 represents ACE's share of the settlement of litigation
concerning the Nuclear Regulatory Commission imposed shutdown in
earlier years of the Peach Bottom Atomic Power Station. The
Litigation Settlement for 1993 represents an additional
allocation to customers of the proceeds from the 1992 settlement
as ordered by the BPU. Other-Net increased for 1993 as a result
of the first full year operation of AGI's cogeneration projects.
Interest on Long Term Debt decreased in 1994 due to refunding of
higher cost debt. Interest on Long Term Debt increased 11.4% in
1993 reflecting the net effects of issuance of $469 million of
First Mortgage Bonds during the year, and the maturity,
redemption and reacquisition of various series of First Mortgage
Bonds totaling $344.8 million principal amount. At December 31,
1994, 1993 and 1992, ACE's embedded cost of long term debt was
7.6%, 7.8% and 8.8%, respectively.
Preferred Stock Dividend Requirements decreased as a result of
continuing mandatory and optional redemptions in each year.
Embedded cost of Preferred Stock as of December 31, 1994, 1993
and 1992 was 7.6%, 7.7% and 7.7%, respectively.
Outlook
The nature of the electric utility business is capital intensive.
ACE's ability to generate cash flows from operating activities
and its continued access to the capital markets is affected by
the timing and adequacy of rate relief, competition and the
economic vitality of its service territory. ACE has lowered its
planned capital expenditures for the period 1995-1999 which will
reduce its external cash requirements. Additionally, ACE expects
to review its revenue requirements with a view toward overall
rate stability in light of expected price competition. ACE
believes one of its greatest assets is its high level of customer
service and reliability.
The financial performance of ACE will be affected in the future
by the level of sales of energy and the impacts of regulation and
competition. To better position itself for a more competitive
environment, ACE initiated cost reduction programs in 1994. One
such program was a workforce reduction program which ACE expects
will result in annual after tax cost savings in excess of $10
million. Other issues which may impact the electric utility
business include public health, safety and environmental
legislation.
Changes in operating revenues in the future will result from
changes in customer rates, energy consumption and general
economic conditions in the service area, as well as the impacts
of load management and conservation programs instituted by ACE.
ACE's revenues could also be affected by the increasing
competition in the retail and wholesale energy market. The
emergence of competition among suppliers of electricity may
require ACE to create new rate structures and to offer incentives
to its Commercial and Industrial customers.
Net income of ACE may be affected by the operational performance
of nuclear generating facilities. ACE is subject to a
BPU-mandated nuclear unit performance standard. Under the
standard, penalties or rewards are based on the aggregate
capacity factor of ACE's five jointly-owned nuclear units. Any
penalties incurred would not be permitted to be recovered from
customers and would be charged against income.
The Energy Policy Act, enacted in October 1992, provides, among
other things, for increased competition between utility and non-
utility electric generators and permits wholesale transmission
access, or wheeling, with certain requirements. Other pressures
such as increased customer demands for competitive rates,
potential loss of municipal power sales, excess generating
capacity, together with the emergence of nonutility energy
sources, are expected to increase the amount of business risk for
electric utilities in the future. In addition, the extent to
which New Jersey public utility regulation is modified to be
reflective of these new competitive realities will be a key
factor affecting the Company.
Development of electric generating facilities by nonutilities has
occurred in ACE's service territory. Effects of nonutility
generation could be offset to some extent by natural growth in
the service territory and additional efforts by ACE to reduce the
impact of the potential loss of kilowatt-hour sales and revenues.
The CAAA will require modifications at certain of ACE's
facilities. Compliance with the CAAA will cause ACE to incur
additional operating and/or capital costs. Presently, ACE's
construction budget for 1995 through 1997 includes approximately
$16 million related to the cost of compliance. In addition,
certain power purchase arrangements will be affected by the CAAA,
the effects of which are not presently determinable.
Federal and state legislation authorize various governmental
authorities to issue orders compelling responsible parties to
take cleanup action at sites determined to present danger from
releases of hazardous substances. The various statutes impose
joint and several liability without regard to fault for certain
investigative and cleanup costs for all potentially responsible
parties. ACE has received notification with respect to two sites
within New Jersey as one of a number of alleged responsible
parties for cleanup and remedial actions. ACE's responsibility
is not expected to exceed $1 million in the aggregate.
The Company believes that to continue to be successful it will
need to focus on improving the core utility operations of ACE to
meet expected competition, while identifying opportunities for
new businesses and growth in earnings through AEE. With support
from the Board of Directors, management has embarked on
implementing an aggressive business plan which it believes will
position the Company to meet the challenges of a new competitive
environment.
Inflation
Inflation affects the level of operating expenses and also the
cost of new utility plant placed in service. Traditionally, the
rate making practices that have applied to ACE have involved the
use of historical test years and the actual cost of utility
plant. However, the ability to recover increased costs through
rates, whether resulting from inflation or otherwise, depends
upon the frequency, timing and results of rate case decisions.
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
The management of Atlantic Energy, Inc. and its subsidiaries (the
Company) is responsible for the preparation of the financial
statements presented in this Annual Report. The financial
statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial
statements, management made informed judgments and estimates, as
necessary, relating to events and transactions reported.
Management is also responsible for the preparation of other
financial information included elsewhere in this Annual Report.
Management has established a system of internal accounting and
financial controls and procedures designed to provide reasonable
assurance as to the integrity and reliability of financial
reporting. In any system of financial reporting controls,
inherent limitations exist. Management continually examines the
effectiveness and efficiency of this system, and actions are
taken when opportunities for improvement are identified.
Management believes that, as of December 31, 1994, the system of
internal accounting and financial controls over financial
reporting is effective. Management also recognizes its
responsibility for fostering a strong ethical climate in which
the Company's affairs are conducted according to the highest
standards of corporate conduct. This responsibility is
characterized and reflected in the Company's code of ethics and
business conduct policy.
The financial statements have been audited by Deloitte & Touche
LLP, Certified Public Accountants. Deloitte & Touche LLP provides
objective, independent audits as to management's discharge of its
responsibilities insofar as they relate to the fairness of the
financial statements. Their audits are based on procedures
believed by them to provide reasonable assurance that the
financial statements are free of material misstatement.
The Company's internal auditing function conducts audits and
appraisals of the Company's operations. It evaluates the system
of internal accounting, financial and operational controls and
compliance with established procedures. Both the external
auditors and the internal auditors periodically make
recommendations concerning the Company's internal control
structure to management and the Audit Committee of the Board of
Directors. Management responds to such recommendations as
appropriate in the circumstances. None of the recommendations
made for the year ended December 31, 1994 represented significant
deficiencies in the design or operation of the Company's internal
control structure.
J. L. Jacobs F. F. Frankowski
President and Chief Accounting Officer
Chief Executive Officer
February 9, 1995
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is comprised solely
of independent directors. The members of the Committee are:
Jos. Michael Galvin, Jr., Gerald A. Hale, Matthew Holden, Jr.,
Kathleen MacDonnell and Harold J. Raveche. The Committee held
four meetings during 1994.
The Committee oversees the Company's financial reporting process
on behalf of the Board of Directors. In fulfilling its
responsibility, the Committee recommended to the Board of
Directors, subject to shareholder ratification, the selection of
the Company's independent auditors, Deloitte & Touche LLP . The
Committee discussed with the Company's internal auditors and
Deloitte & Touche LLP the overall scope of and specific plans for
their respective activities concerning the Company. The
Committee also discussed the Company's consolidated financial
statements with Deloitte & Touche LLP. The Committee meets
regularly with the internal and external auditors, without
management present, to discuss the results of their activities,
the adequacy of the Company's system of accounting, financial and
operational controls and the overall quality of the Company's
financial reporting. The meetings are designed to facilitate any
private communication with the Committee desired by the internal
and external auditors. No significant actions by the Committee
were required during the year ended December 31, 1994 as a result
of any private communications conducted.
Matthew Holden, Jr.
Chairman, Audit Committee
February 9, 1995<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and the Board of Directors
of Atlantic Energy, Inc.:
We have audited the accompanying consolidated balance sheets of
Atlantic Energy, Inc. and subsidiaries as of December 31, 1994
and 1993 and the related consolidated statements of income,
changes in common shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Atlantic Energy, Inc. and its subsidiaries at December 31, 1994
and 1993 and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1994
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 9, 1995
Parsippany, New Jersey<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Atlantic Energy, Inc. and Subsidiaries
(Thousands of Dollars)
For the Years Ended December 31,
1994 1993 1992
Operating Revenues-Electric $913,039 $865,675 $816,825
Operating Expenses:
Energy 210,891 159,438 161,134
Purchased Capacity 130,929 110,781 103,173
Operations 156,409 162,151 148,917
Maintenance 37,568 45,360 49,837
Depreciation and Amortization 73,344 67,950 69,371
State Excise Taxes 97,072 104,280 97,969
Federal Income Taxes 42,529 45,277 37,143
Other Taxes 10,757 10,854 12,113
Total Operating Expenses 759,499 706,091 679,657
Operating Income 153,540 159,584 137,168
Other Income and Expense:
Allowance for Equity Funds Used
During Construction 3,634 2,368 2,212
Employee Separation Costs,
net of tax of $9,265 (17,335) - -
Litigation Settlement, net of tax of:
1993-$(1,321); 1992-$4,982 - (2,564) 9,671
Other-Net 8,678 12,884 9,519
Total Other Income and Expense (5,023) 12,688 21,402
Income Before Interest Charges 148,517 172,272 158,570
Interest Charges:
Interest on Long Term Debt 57,346 59,385 53,284
Other Interest Expense 1,114 1,633 2,678
Total Interest Charges 58,460 61,018 55,962
Allowance for Borrowed Funds Used During
Construction (2,772) (1,448) (1,414)
Net Interest Charges 55,688 59,570 54,548
Less Preferred Stock Dividend Requirements
of Subsidiary 16,716 17,405 17,812
Net Income $ 76,113 $ 95,297 $ 86,210
Average Number of Shares of Common Stock
Outstanding
(in thousands) 54,149 52,888 51,592
Per Common Share:
Earnings $1.41 $1.80 $1.67
Dividends Declared $1.54 $1.535 $1.515
Dividends Paid $1.54 $1.53 $1.51
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Atlantic Energy, Inc. and Subsidiaries
(Thousands of Dollars)
For the Years Ended December 31,
1994 1993 1992
Cash Flows Of Operating Activities:
Net Income $ 76,113 $ 95,297 $ 86,210
Deferred Purchased Power Costs 14,920 (6,050) 13,410
Deferred Energy Costs (3,819) (15,269) (6,143)
Preferred Stock Dividend Requirements of
Subsidiary 16,716 17,405 17,812
Depreciation and Amortization 73,344 67,950 69,371
Deferred Income Taxes-Net 17,863 20,901 23,386
Prepaid State Excise Taxes (37,029) (35,982) 540
Employee Separation Costs 26,600 - -
Net (Increase) Decrease in Other Working
Capital (24,571) 32,364 7,685
Other-Net (2,457) 1,534 5,650
Net Cash Provided by Operating Activities 157,680 178,150 217,921
Cash Flows Of Investing Activities:
Utility Cash Construction Expenditures (119,961) (138,111) (130,700)
Leased Property (10,713) (9,946) (9,565)
Nuclear Decommissioning Trust Fund Deposits (6,424) (6,424) (6,424)
Other-Net (11,276) (9,832) (8,524)
Net Cash Used by Investing Activities (148,374) (164,313) (155,213)
Cash Flows Of Financing Activities:
Proceeds from Long Term Debt 54,572 464,633 74,655
Retirement and Maturity of Long Term Debt (42,664) (370,541) (40,599)
Increase (Decrease) in Short Term Debt 8,600 (14,600) (6,000)
Proceeds from Common Stock Issued 10,289 16,208 16,110
Repurchase of Common Stock (3,909) - -
Redemption of Preferred Stock (24,500) (5,469) (250)
Dividends Declared on Preferred Stock (16,716) (17,405) (17,812)
Dividends Declared on Common Stock (75,829) (67,259) (65,644)
Other-Net 12,330 8,584 4,412
Net Cash (Used) Provided by Financing
Activities (77,827) 14,151 (35,128)
Net (Decrease) Increase in Cash and Temporary
Investments (68,521) 27,988 27,580
Cash and Temporary Investments,
beginning of year 73,635 45,647 18,067
Cash and Temporary Investments, end of year $ 5,114 $ 73,635 $ 45,647
Supplemental Schedule of Payments:
Interest $ 62,855 $ 52,765 $ 55,275
Income taxes $ 23,374 $ 19,565 $ 24,312
Noncash Financing Activities:
Common Stock issued under stock plans $ 7,652 $ 14,088 $ 12,692
The accompanying Notes to Consolidated Financial Statements are an integral
part of these
statements.<PAGE>
CONSOLIDATED BALANCE SHEET
Atlantic Energy, Inc. and Subsidiaries
(Thousands of Dollars)
December 31,
1994 1993
Assets
Electric Utility Plant:
In Service:
Production $1,151,661 $1,054,217
Transmission 357,389 338,584
Distribution 659,619 627,649
General 180,204 173,206
Total In Service 2,348,873 2,193,656
Less Accumulated Depreciation 725,999 668,832
Net 1,622,874 1,524,824
Construction Work in Progress 110,078 156,590
Land Held for Future Use 6,941 6,901
Leased Property-Net 42,030 45,268
Electric Utility Plant-Net 1,781,923 1,733,583
Investments and Nonutility Property:
Investment in Leveraged Leases 78,216 77,268
Nuclear Decommissioning Trust Fund 52,004 43,163
Nonutility Property and Equipment-Net 18,163 14,535
Other Investments and Funds 28,940 18,102
Total Investments and Nonutility Property 177,323 153,068
Current Assets:
Cash and Temporary Investments 5,114 73,635
Accounts Receivable:
Utility Service 54,554 51,502
Miscellaneous 14,067 11,420
Allowance for Doubtful Accounts (3,300) (3,000)
Unbilled Revenues 32,070 39,309
Fuel (at average cost) 28,030 14,635
Materials and Supplies (at average cost) 27,823 28,230
Working Funds 14,475 14,315
Deferred Energy Costs 10,999 7,180
Deferred Income Taxes 12,264 3,283
Other 11,883 15,796
Total Current Assets 207,979 256,305
Deferred Debits:
Unrecovered Purchased Power Costs 115,538 130,458
Recoverable Future Federal Income Taxes 85,854 85,855
Unrecovered State Excise Taxes 73,834 33,706
Unamortized Debt Costs 38,184 39,306
Other Regulatory Assets 47,055 41,705
Other 17,865 13,522
Total Deferred Debits 378,330 344,552
Total Assets $2,545,555 $2,487,508
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.<PAGE>
Atlantic Energy, Inc. and Subsidiaries
(Thousands of Dollars)
December 31,
1994 1993
Liabilities and Capitalization
Capitalization:
Common Shareholders' Equity:
Common Stock, no par value; 75,000,000 shares
authorized; issued and outstanding:
1994 - 54,155,245; 1993 - 53,506,786 $ 593,475 $ 579,443
Retained Earnings 249,181 256,549
Total Common Shareholders' Equity 842,656 835,992
Preferred Stock of Atlantic City Electric Company:
Not Subject to Mandatory Redemption 40,000 40,000
Subject to Mandatory Redemption 149,250 173,750
Long Term Debt 778,288 766,101
Total Capitalization (excluding current portion) 1,810,194 1,815,843
Current Liabilities:
Preferred Stock Redemption Requirement 12,250 12,250
Long Term Debt 1,000 -
Short Term Debt 8,600 -
Accounts Payable 66,080 63,847
Taxes Accrued 10,409 16,020
Interest Accrued 19,168 22,149
Dividends Declared 24,681 24,910
Accrued Employee Separation Costs 26,600 -
Other 19,813 25,626
Total Current Liabilities 188,601 164,802
Deferred Credits and Other Liabilities:
Deferred Income Taxes 412,574 383,347
Deferred Investment Tax Credits 51,646 54,180
Capital Lease Obligations 41,111 44,407
Other 41,429 24,929
Total Deferred Credits and Other Liabilities 546,760 506,863
Commitments and Contingencies (Note 10)
Total Liabilities and Capitalization $2,545,555 $2,487,508
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN Atlantic Energy, Inc.
COMMON SHAREHOLDERS' EQUITY and Subsidiaries
(Thousands of Dollars)
Common Retained
Shares Stock Earnings
Balance, December 31, 1991 50,896,074 $520,345 $234,894
Common Stock issued 1,302,550 28,802
Net Income 86,210
Common stock dividends (78,336)
Balance, December 31, 1992 52,198,624 549,147 242,768
Common Stock issued 1,308,162 30,296
Net Income 95,297
Capital stock expense of subsidiary (169)
Common stock dividends (81,347)
Balance, December 31, 1993 53,506,786 579,443 256,549
Common Stock issued 870,159 17,941
Common Stock repurchased (221,700) (3,909)
Net Income 76,113
Common stock dividends (83,481)
Balance, December 31, 1994 54,155,245 $593,475 $249,181
The accompanying Notes to Consolidated Financial Statements are an integral
part of these
statements.
<PAGE>
Notes to Consolidated Financial Statements
Note 1. SIGNIFICANT ACCOUNTING POLICIES
Organization - Atlantic Energy, Inc. (the Company, AEI or parent)
is the parent of a consolidated group of wholly-owned
subsidiaries consisting of: Atlantic City Electric Company (ACE)
and the following nonutility companies: Atlantic Energy
Technology, Inc. (AET), Atlantic Generation, Inc. (AGI), Atlantic
Southern Properties, Inc. (ASP), ATE Investment, Inc. (ATE) and
Atlantic Thermal Systems, Inc. (ATS). ACE is a public utility
primarily engaged in the generation, transmission, distribution
and sale of electric energy. Rates for service are regulated by
the New Jersey Board of Public Utilities (BPU), formerly Board of
Regulatory Commissioners. ACE's service territory encompasses
approximately 2,700 square miles within the southern one-third of
New Jersey. The majority of ACE's customers are residential and
commercial. ACE, with its wholly-owned subsidiary that operates
certain generating facilities, is the principal subsidiary within
the consolidated group. AGI and its wholly-owned subsidiaries
are engaged in the development and operation of cogeneration
power projects, currently located in New Jersey and New York
through several partnership arrangements. ASP owns and manages a
commercial office and warehouse facility located in southern New
Jersey. ATE provides fund management and financing to affiliates
and manages a portfolio of investments in leveraged leases for
equipment used in the airline and shipping industries. ATS and
its wholly-owned subsidiary, both formed in May 1994, are engaged
in the development of thermal heating and cooling systems. AET
is presently concluding the affairs of its subsidiary, which is
its sole investment. On January 1, 1995, a new subsidiary of
AEI, Atlantic Energy Enterprises, Inc. (AEE), was formed. AEI
will transfer direct ownership of the existing nonutility
companies to AEE. AEE will seek to form new businesses and
ventures and invest in established businesses.
Principles of Consolidation - The consolidated financial
statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. ACE, AET,
AGI and ATS consolidate their respective subsidiaries. AGI
accounts for another investment using the equity method by
recognizing its proportionate share of the results of operations
of that investment. The results of operations of the nonutility
companies are not significant to the results of the Company and
are classified under Other Income in the Consolidated Statement
of Income.
Regulation - The accounting policies and rates of ACE are subject
to the regulations of the BPU and in certain respects to the
Federal Energy Regulatory Commission (FERC). ACE follows
generally accepted accounting principles (GAAP) and financial
reporting requirements employed by all industries as specified by
the Financial Accounting Standards Board (FASB) and the
Securities and Exchange Commission (SEC). However, accounting
for rate regulated industries may depart from GAAP applied by
other industries as permitted by Statement of Financial
Accounting Standards No. 71 (SFAS No. 71). SFAS No. 71 provides
guidance on circumstances where the economic effect of a
regulator's decision warrants different applications of GAAP as a
result of the rate making process. In setting rates, a regulator
may provide recovery of an incurred cost in a year or years other
than the year the cost is incurred. As permitted by SFAS No. 71,
costs ordered by a regulator to be deferred or capitalized for
future recovery are recorded as a regulatory asset because the
regulator's rate action provides reasonable assurance of future
economic benefits attributable to these costs. In a non-rate
regulated industry, such costs may be charged to expense in the
year incurred. SFAS No. 71 further specifies that a regulatory
liability is recorded when a regulator orders a refund to
customers of revenues previously collected, or when existing
rates provide for recovery of future costs not yet incurred.
Such treatment is not afforded to non-rate regulated companies.
When collection of regulatory assets or relief of regulatory
liabilities is no longer probable, the assets and liabilities are
applied to income in the year that the probability assessment is
made. Specific regulatory assets and liabilities that have been
recorded are discussed elsewhere in the notes to the consolidated
financial statements.
Electric Operating Revenues - Revenues are recognized when
electric energy services are rendered, and include estimates for
amounts unbilled at the end of the period for energy used
subsequent to the last billing cycle.
Nuclear Fuel - Fuel costs associated with ACE's participation in
jointly-owned nuclear generating stations, including spent
nuclear fuel disposal costs, are charged to Energy expense based
on the units of thermal energy produced.
Electric Utility Plant - Property is stated at original cost.
Generally, the plant is subject to a first mortgage lien. The
cost of property additions, including replacement of units of
property and betterments, is capitalized. Included in certain
property additions is an Allowance for Funds Used During
Construction (AFDC), which is defined in the applicable
regulatory system of accounts as the cost during the period of
construction of borrowed funds used for construction purposes and
a reasonable rate on other funds when so used. AFDC has been
calculated using a semi-annually compounded rate of 8.25%, as
approved by the BPU, since August 1, 1993. The AFDC rate was
8.95%, as approved by the BPU, prior to this date.
Depreciation - ACE provides for straight-line depreciation based
on the estimated remaining life of transmission and distribution
property, remaining life of the related nuclear plant operating
license for nuclear property and estimated average service life
for all other depreciable property. The overall composite rate
of depreciation was approximately 3.3% in 1994 and 1993 and 3.5%
in 1992. Accumulated depreciation is charged with the cost of
depreciable property retired together with removal costs less
salvage and other recoveries. Depreciation expense for the
nonutility companies is not significant.
Nuclear Decommissioning Trust - ACE has a trust to fund the
future costs of decommissioning each of the five nuclear units in
which it has an ownership interest. The current annual funding
amount, as authorized by the BPU, totals $6.4 million and is
provided for in rates charged to customers. The funding amount
is based on estimates of the future cost of decommissioning each
of the units, dates that decommissioning activities are expected
to occur and return to be earned by the assets of the fund. The
present value of ACE's nuclear decommissioning obligation, based
on 1987 site specific studies used by the BPU for approval in
1991 and restated in 1994 dollars, is $152.2 million. The BPU
has further established that decommissioning activities are
expected to begin in 2006 and continue through 2032. Actual
costs and timing of decommissioning activities may vary from the
current estimates. ACE will seek to adjust these estimates and
the level of rates collected from customers in future BPU
proceedings to reflect changes in decommissioning cost estimates
and the expected levels of inflation and interest to be earned by
the assets in the trust. As of December 31, 1994, the present
value of such contributions based on estimates for future
decommissioning costs and the dates such activities are expected
to occur is $111.4 million, without earnings on or appreciation
of the fund assets. As of December 31, 1994, the cost and market
value of the trust were $52 million. Trust contributions of the
related $36.9 million qualify for Federal income tax purposes.
The related reserve for decommissioning costs are presented as a
component of accumulated depreciation and amount to $51.1 million
at December 31, 1994 and $42.2 million at December 31, 1993.
The SEC has questioned certain accounting practices employed by
the electric utility industry concerning decommissioning costs
for nuclear generating facilities. The FASB is currently
reviewing this issue within the broad context of removal costs
relative to all industries. At this time, the Company cannot
predict what future accounting practices may be required by the
FASB and SEC concerning this issue, nor the impact on the
financial statements that any new accounting practices may have.
Deferred Energy Costs - As approved by the BPU, ACE has a
Levelized Energy Clause (LEC) through which energy and energy-
related costs (energy) are charged to customers. LEC rates are
based on projected energy costs and prior period underrecoveries
or overrecoveries of energy costs. Energy costs are recovered
through levelized rates over the period of projection, which is
generally a 12-month period. In any period, the actual amount of
LEC revenues recovered from customers may be greater or less than
the recoverable amount of actual energy costs incurred in that
period. Energy expense is adjusted to match the associated LEC
revenues. Any underrecovery (an asset representing energy costs
incurred that are to be collected from customers) or overrecovery
(a liability representing previously collected energy costs to be
returned to customers) of costs is deferred on the Consolidated
Balance Sheet as Deferred Energy Costs. These deferrals are
recognized in the Consolidated Statement of Income as Energy
expense during the period in which they are subsequently included
in the LEC.
Income Taxes - Effective January 1, 1993, deferred Federal and
state income taxes are provided on all significant temporary
differences between book bases and tax bases of assets and
liabilities, transactions that reflect taxable income in a year
different than book income, and tax carryforwards. Deferred
Federal and state income taxes for 1992 were provided on all
significant current transactions for which the timing of
recognition differs for book and tax purposes. Investment tax
credits, which are used to reduce current Federal income taxes,
are deferred on the Consolidated Balance Sheet and recognized in
book income over the life of the related property. The Company
and its subsidiaries file a consolidated Federal income tax
return. Income taxes are allocated to each of the companies
within the consolidated group based on the separate return
method.
Earnings Per Common Share - This is computed based upon the
weighted average number of common shares outstanding during the
year. Common stock equivalents attributable to the Equity
Incentive Plan do not impact this computation because they are
currently antidilutive.
Unrecovered Purchased Power Costs - ACE has an arrangement that
commenced in 1983 to purchase capacity and related energy through
September 30, 2000. Levelized base rates over the term of the
arrangement were approved by the BPU to recover costs estimated
at commencement to be incurred. During the first half of the
term, estimated costs that exceeded levelized revenues were
deferred on the Consolidated Balance Sheet as Unrecovered
Purchased Power Costs. Since then, levelized revenues have been
greater than the estimated costs, permitting the deferred costs
to be charged to Purchased Capacity expense on the Consolidated
Statement of Income. The BPU granted a return on the unrecovered
deferred balance throughout the term of the arrangement. The
unrecovered deferred balances at December 31, 1994 and 1993 were
$95.9 million and $110.5 million, respectively. Also included
within Unrecovered Purchased Power Costs are costs incurred in
renegotiating a contract with an independent power producer.
These costs are amortized to expense over the BPU-approved
recovery period of 20 years beginning in 1994. The unrecovered
balances were $19.6 million and $20 million at December 31, 1994,
respectively.
Regulatory Assets and Liabilities - Costs incurred by ACE that
have been permitted by the BPU to be deferred for recovery in
rates in more than one year, or for which future recovery is
probable, have been recorded as regulatory assets. Regulatory
assets are amortized to expense over the period of recovery.
Total regulatory assets on the Consolidated Balance Sheet at
December 31, 1994 and 1993 were $365.5 million and $332.1
million, respectively. Unamortized costs currently being
recovered in rates at December 31, 1994 and 1993, respectively,
and remaining recovery periods at December 31, 1994 are:
Unrecovered State Excise Taxes of $73.8 million and $33.7
million, with a remaining recovery period of eight years;
decommissioning and decontaminating Federally-owned nuclear units
of $7.2 million and $8.4 million, with a remaining recovery
period of 14 years; and asbestos removal of $9.6 million and $9.9
million for which the recovery period is over the remaining
depreciable life of the related generating station of 36 years.
Property Abandonment Costs at their net present value of $5
million and $6.3 million at December 31, 1994 and 1993,
respectively, are being recovered through rates with no return on
the unamortized balances of $6.5 million and $8.5 million,
respectively. Such costs were written down to their net present
values at the date of abandonment with subsequent accretions of
the unamortized balances over the recovery period. These costs
have a recovery period between two and seven years. Also
included in Other Regulatory Assets are amounts for which future
recovery is probable of $9.4 million and $9.1 million at December
31, 1994 and 1993, respectively. Costs associated with debt
reacquired by refundings, included in Unamortized Debt Costs, are
amortized over the life of the newly issued debt as permitted by
the BPU in accordance with FERC guidelines. The unamortized
balances of these costs were $32.2 million and $33.2 million at
December 31, 1994 and 1993, respectively. Recovery of regulatory
assets for Unrecovered Purchased Power Costs (Note 1), Deferred
Energy Costs (Note 1), Recoverable Future Federal Income Taxes
(Note 2) and Postretirement Benefits Other Than Pensions (Note
4) are separately discussed in the Notes to Consolidated
Financial Statements where indicated. No regulatory liabilities
existed at December 31, 1994 and 1993.
Financial Instruments - A number of items within Current Assets
and Current Liabilities on the Consolidated Balance Sheet are
considered to be financial instruments because they are cash or
are to be settled in cash. Due to their short term nature, the
carrying values of these items approximate their fair market
values. Accounts Receivable - Utility Service and Unbilled
Revenues are subject to concentration of credit risk because they
pertain to utility service conducted within a confined geographic
region. Investments in Leveraged Leases are subject to
concentration of credit risk because they are exclusive to a
small number of parties within two industries. The Company has
recourse to the affected assets under lease. These leased assets
are of general use within their respective industries.
Other - Debt premium, discount and expenses of ACE are amortized
over the life of the related debt. Temporary investments
considered as cash equivalents for Consolidated Statement of Cash
Flows purposes represent purchases of highly liquid debt
instruments maturing in three months or less. The weighted daily
average interest rates on short term debt was 4.4% for 1994 and
3.2% for 1993.
Certain prior year amounts have been reclassified to conform to
the current year reporting of these items.<PAGE>
NOTE 2. INCOME TAXES
For the Years Ended December 31,
(000) 1994 1993 1992
The components of Federal income tax expense are as follows:
Current $ 19,729 $ 25,349 $ 22,441
Deferred 17,414 20,247 23,154
Investment Tax Credits Recognized on
Leveraged Leases - (12) (233)
Total Federal Income Tax Expense 37,143 45,584 45,362
Less Amounts Included in Other Income (5,386) 307 8,219
Federal Income Taxes Included in
Operating Expenses $ 42,529 $ 45,277 $ 37,143
A reconciliation of the expected Federal income taxes compared to the reported
Federal income tax expense computed by applying the statutory rate follows:
Statutory Federal Income Tax Rate 35% 35% 34%
Income Tax Computed at the Statutory Rate $ 45,490 $ 55,400 $ 50,791
Plant Basis Differences (27) (5,171) 2,022
Amortization of Investment Tax Credits (2,534) (2,546) (2,767)
Tax Adjustments (4,097) (2,071) (3,757)
Other-Net (1,689) (28) (927)
Total Federal Income Tax Expense $ 37,143 $ 45,584 $ 45,362
Effective Federal Income Tax Rate 29% 29% 30%
State income tax expense is not significant.
Items comprising deferred tax balances are as follows at
December 31, 1994 and 1993:
(000) 1994 1993
Deferred Tax Liabilities:
Plant Basis Differences $304,476 $295,445
Leveraged Leases 61,409 53,461
Unrecovered Purchased Power Costs 33,557 38,792
State Excise Taxes 25,842 11,797
Other 24,732 21,057
Total Deferred Tax Liabilities 450,016 420,552
Deferred Tax Assets:
Deferred Investment Tax Credits 27,879 29,247
Employee Separation Costs 6,932 -
Other 15,245 11,741
Total Deferred Tax Assets 50,056 40,988
Total Deferred Taxes-Net $399,960 $379,564
At December 31, 1994 and 1993, valuation allowances exist against
deferred tax assets primarily for cumulative net operating losses
(NOLs) for state income tax purposes. The effects of the
valuation allowances and state NOLs are generally not material to
consolidated results of operation and financial position.
The Company is subject to Federal Alternative Minimum Tax (AMT),
which is attributable to nonutility operations. At December 31,
1994, there is an estimated cumulative AMT credit of $12.5
million. The AMT credit is available for an indefinite
carryforward period against future Federal income tax payable, to
the extent that the regular Federal income tax payable exceeds
future AMT payable.
Deferred tax costs associated with additional deferred tax
liabilities resulting from a change in accounting standards
regarding deferred taxes effective in 1993 are recorded on the
Consolidated Balance Sheet as Recoverable Future Federal Income
Taxes. Such recognition is given in respect of the probable
amount of revenue to be collected from ratepayers for these
additional taxes to be paid in future years.
NOTE 3: RATE MATTERS OF ACE
Energy Clause Proceedings
Changes in Levelized Energy Clause Rates
1992 - 1994
Amount Amount
Date Requested Granted Date
Filed (millions) (millions) Effective
2/92 $(6.6) $(8.5) 10/92
3/93 14.2 10.9 10/93
2/94 63.0 55.0 7/94
ACE's Levelized Energy Clause (LEC) is subject to annual review
by the BRC.
In February 1992, ACE filed a petition with the BPU for the LEC
period June 1, 1992 through May 31, 1993 requesting no change in
LEC rates. In April 1992, ACE filed a revision to their petition
requesting a $6.6 million decrease in LEC rates based on an
update for the projected overrecovery of prior LEC costs and an
amount allocated to customers from the litigation settlement with
PECO Energy (PECO) related to the Peach Bottom Atomic Power
Station. In October 1992, the BPU approved a reduction in annual
LEC revenues of $8.5 million which included the recovery of $10.4
million over a three-year period of certain deferred costs
relating to the Salem Nuclear Generating Station. The PECO
settlement allocation was subject to review by the BPU in ACE's
1993 LEC proceeding.
In March 1993, ACE filed a petition with the BPU requesting a
$14.2 million increase in LEC revenues for the June 1, 1993
through May 31, 1994 LEC period. Effective for service rendered
on and after October 1, 1993, the BPU approved an increase of
$10.9 million which included the following: 1) an additional $3.8
million of the PECO settlement together with accrued interest to
be returned to customers during the 1994-1995 LEC period; 2)
recovery of $400 thousand for the annual assessment for the
Department of Energy (DOE) decommissioning and decontamination
fund; 3) full LEC recovery of all future assessments for the DOE
decommissioning and decontamination fund and 4) recognition of
the $48 thousand penalty for 1992 nuclear operations as required
by the Nuclear Performance Standard. The additional allocation
of the PECO settlement was provided for in the 1993 financial
results and the reimbursement was made through the 1994 LEC.
On February 8, 1994, ACE filed a petition with the BPU requesting
an increase in LEC revenues of $63 million for the period June 1,
1994 through May 31, 1995. The increase was due primarily to the
additional costs incurred from two new independent power
producers (IPPs) scheduled to begin commercial operation during
the 1994/1995 LEC period. The total projected costs for fuel and
capacity for the LEC period were $147 million. ACE reduced the
requested amount by $84 million as a result of the utilization of
$56 million of current base rate revenues associated with a
utility power purchase contract expiring in May 1994 and the
Southern New Jersey Economic Initiative (SNJEI), an ACE
initiative that forgoes the recovery of $28 million of fuel
costs. Included in ACE's request was the recovery over five
years of $20 million paid by ACE in December 1993 in connection
with contract renegotiations with an IPP. Effective July 26,
1994, the BPU approved a provisional increase of $55 million
based on an adjustment to actual costs for fuel and capacity. On
November 30, 1994, the BPU rendered its decision on ACE's LEC
request approving the continuation of provisional LEC rates, the
recovery of the $20 million in renegotiation costs and the
reduction for the $28 million SNJEI.
Base Rate Case Proceedings
Effective October 1992, the BPU authorized a net increase in
annual base rate revenues of $12.9 million. In March 1994, in
response to an appeal filed by the Ratepayer Advocate in December
1992, the Superior Court of New Jersey, Appellate Division,
affirmed the BPU's decision to allow an increase in base rates
relating to changes in the state excise tax.
Other Rate Proceedings
In November 1993, ACE filed a petition with the BPU requesting
that hotel-casino customers be permitted to take service under
rate schedules offered to all other commercial and industrial
customers. On June 23, 1994, the BPU approved the request with a
provision that ACE not seek recovery of lost revenues resulting
from the hotel-casinos being permitted to shift to other rate
schedules prior to ACE's next base rate case. The BPU also
allowed for a one-time adjustment to be billed to hotel-casino
customers for the associated underrecovery in ACE's fuel clause.
Prior to BPU approval, hotel-casino customers were served under
the Hotel Casino Service rate schedule, the highest rate for
service of all ACE's service classes. Effective July 1, 1994,
all hotel-casino customers began taking service under a general
service rate schedule which could reduce annual base rate
revenues by approximately $7 million. Effective July 25, 1994,
the Hotel Casino Service rate schedules were no longer offered
for electric service.
In July 1993, the BPU initiated a generic proceeding to address
the recovery of the capacity costs associated with purchases of
power from nonutility generation projects. This issue relates to
the Ratepayer Advocate's contention that present BPU policy which
permits full recovery of these costs through the LEC provides for
a "double recovery" of cogeneration capacity costs. In August
1993, the Ratepayer Advocate identified ACE as one of the
electric utilities for which they considered the double recovery
of capacity costs to be at issue. Pursuant to its February 18,
1994 decision supporting the investigation of the double recovery
of capacity costs from nonutility generation projects, the BPU
issued its written order on September 16, 1994. The order
confirmed the establishment of a generic proceeding to review the
nonutility purchase power capacity cost recovery methodology and
ordered that the matter be reviewed in a two phase proceeding.
The scope of the issues to be resolved during the first phase of
the proceeding will include: 1) the determination of the
existence, or lack of existence, of the double recovery as a
result of the traditional LEC pass-through of nonutility
generation capacity costs; 2) the quantification of any such
double recovery found to exist for each utility for the relevant
periods; and 3) a determination of an appropriate remedy or
adjustment if such double recovery is found to occur and the
periods of time over which such an adjustment would be
applicable. Following the conclusion of the first phase of the
proceeding, the BPU, in the second phase, will render a final
decision regarding the specific findings of the Office of
Administrative Law and address the broader issues relating to the
appropriate prospective purchase power capacity cost recovery
methods. Evidentiary hearings have been scheduled through
December 1995. The BPU's final decision is not anticipated until
1996. At this time, ACE cannot predict the outcome of this
proceeding and cannot estimate the impact that the double
recovery issue may have on future rates.
NOTE 4. RETIREMENT BENEFITS
Pension
ACE has a noncontributory defined benefit pension plan covering
substantially all of its employees and those of its wholly-owned
subsidiary. Benefits are based on an employee's years of service
and average final pay. ACE's policy is to fund pension costs
within the guidelines of the minimum required by the Employee
Retirement Income Security Act and the maximum allowable as a tax
deduction. Each company is allocated its participative share of
plan costs and contributions.
Net periodic pension costs for 1994, 1993 and 1992 included the following
components:
(000) 1994 1993 1992
Service cost - benefits earned during
the period $ 6,871 $ 7,196 $ 7,310
Interest cost on projected benefit obligation 15,390 16,016 17,301
Actual return on plan assets (860) (23,200) (13,283)
Other-net (16,885) 5,496 (3,795)
Net periodic pension costs $ 4,516 $ 5,508 $ 7,533
Approximately $3 million, $5.2 million and $4.8 million of these
costs were charged to operating expense in 1994, 1993 and 1992,
respectively, and the remaining costs, which are associated with
construction labor, were charged to the cost of new utility
plant.
<PAGE>
A reconciliation of the funded status of the plan as of
December 31, 1994 and 1993 is as follows:
(000) 1994 1993
Fair value of plan assets $190,200 $213,600
Projected benefit obligation 206,742 207,246
Plan assets (less than) in excess
of projected benefit obligation (16,542) 6,354
Unrecognized net transition asset (1,722) (1,894)
Unrecognized prior service cost 306 329
Unrecognized net loss (gain) 24,106 (638)
Prepaid pension cost $ 6,148 $ 4,151
Accumulated benefit obligation:
Vested benefits $166,602 $165,872
Nonvested benefits 485 1,216
Total $167,087 $167,088
At December 31, 1994, approximately 60% of plan assets were
invested in equity securities, 18% in fixed income securities and
22% in other investments. The assumed rates used in determining
the actuarial present value of the projected benefit obligation
at year-end were as follows:
1994 1993
Weighted average discount 7.5% 7.5%
Anticipated increase in compensation 3.5% 3.5%
The assumed long term rate of return on plan assets was 8.5% for
both 1994 and 1993 and 8% for 1992.
Other Postretirement Benefits
ACE and its subsidiary provide certain health care and life
insurance benefits for retired employees and their eligible
dependents. Substantially all employees may become eligible for
these benefits if they reach retirement age while working for the
companies. Benefits are provided through insurance companies and
other plan providers whose premiums and related plan costs are
based on the benefits paid during the year. ACE has a tax
qualified trust to fund these benefits. Each company is
allocated its participative share of plan costs and
contributions.
The cost of other postretirement benefits was $15.6 million,
$13.1 million and $6 million in 1994, 1993 and 1992,
respectively. These costs were allocated as follows:
(millions) 1994 1993 1992
Operating expense $5.6 $3.3 $3.8
New utility plant-associated with
construction labor .2 1.7 2.2
Regulatory asset 9.8 8.1 -
The regulatory assets represent the amount of cost recognized
under accounting standards effective January 1, 1993 in excess of
the amount of cost currently recovered in rates. These excess
costs are deferred as authorized by an accounting order of the
BPU pending future recovery through rates.
Net periodic other postretirement benefits cost as calculated in
accordance with accounting standards in effect since January 1,
1993 include:
1994 1993
(000)
Service cost-benefits attributed to
service during the period $ 3,817 $ 3,045
Interest cost on accumulated
postretirement benefits obligation 8,450 7,133
Actual return on plan assets 100 (255)
Amortization of unrecognized transition
obligation 3,893 3,893
Other-net (700) (711)
Net periodic other postretirement cost $15,560 $13,105
A reconciliation of the funded status of the plan and the
obligation for other postretirement benefits recognized in the
Consolidated Balance Sheet as of December 31, 1994 and 1993 is as
follows:
(000) 1994 1993
Accumulated benefits obligation:
Retirees $ 43,265 $ 32,720
Fully eligible active plan participants 18,010 21,267
Other active plan participants 60,588 49,125
Total accumulated benefits obligation 121,863 103,112
Less fair value of plan assets 14,700 14,400
Accumulated benefits obligation in
excess of plan assets 107,163 88,712
Unrecognized net loss (19,223) (6,639)
Unamortized unrecognized transition
obligation (70,075) (73,968)
Accrued other postretirement benefits
cost obligation $ 17,865 $ 8,105
At December 31, 1994, approximately 81% of plan assets were
invested in fixed income securities and 19% in other investments.
The assumed health care costs trend rate for 1994 is 10% and is
assumed to evenly decline to an ultimate constant rate of 5% in
the year 2000 and thereafter. If the assumed health care costs
trend rate was increased by 1% in each future year, the aggregate
service and interest costs of the 1994 net periodic benefits cost
would increase by $1.9 million, and the accumulated
postretirement benefits obligation at December 31, 1994 would
increase by $16.7 million. The weighted average discount rate
assumed in determining the accumulated benefits obligation was
7.5% for 1994 and 1993. The assumed long term return rate on
plan assets was 7% for 1994 and 1993.
<PAGE>
NOTE 5. JOINTLY-OWNED GENERATING STATIONS
ACE owns jointly with other utilities several electric production
facilities. ACE is responsible for its pro-rata share of the
costs of construction, operation and maintenance of each
facility.
The amounts shown represent ACE's share of each facility at, or for the year
ending, December 31, including AFDC as appropriate.
Peach Hope
Keystone Conemaugh Bottom Salem Creek
Energy Source Coal Coal Nuclear Nuclear Nuclear
Company's Share
(%/MWs) 2.47/42.3 3.83/65.4 7.51/157.0 7.41/164.0 5.00/52.0
Electric Plant in Service (000):
1994 $11,293 $26,607 $125,003 $206,804 $238,980
1993 10,746 18,055 123,428 203,858 237,496
Accumulated Depreciation (000):
1994 $3,180 $6,237 $55,190 $79,898 $53,746
1993 3,231 5,971 51,871 78,383 46,933
Construction Work in Progress (000):
1994 $1,216 $2,649 $11,002 $ 8,727 $ 387
1993 758 9,956 7,983 10,799 1,022
Working Funds (000):
1994 $44 $69 $5,051 $5,199 $2,013
1993 44 69 4,772 5,249 2,061
Operation and Maintenance Expenses
(including fuel)(000):
1994 $5,085 $7,211 $29,530 $27,731 $10,471
1993 5,323 6,855 31,479 27,021 9,764
1992 4,976 7,194 29,618 25,461 9,541
Generation (MWH):
1994 257,561 419,313 1,214,776 836,725 355,390
1993 293,876 416,263 1,043,485 840,043 440,118
1992 294,222 457,771 958,740 737,356 351,672
ACE provides financing during the construction period for its
share of the jointly-owned facilities and includes its share of
direct operations and maintenance expenses in the Consolidated
Statement of Income. Additionally, ACE provides an amount of
working funds to the operators of the facilities to fund
operational needs. The increase in Electric Plant in Service and
decrease in Construction Work in Progress for Conemaugh is
primarily due to the placement in service of flue gas
disulfurization equipment (scrubber).
NOTE 6. NONUTILITY COMPANIES
The Company (AEI) is the parent holding company of the
consolidated group. Its primary activities are the management of
investments in the subsidiary companies, issuance of common
equity and performance of administrative functions on behalf of
the consolidated group. Principal assets of each of the
subsidiary companies are: AGI - capital investments of
approximately $30.3 million in cogeneration development projects
and partnerships; ASP - commercial real estate site with a net
book value of $10.3 million; ATE - leveraged lease investments of
$78.2; million and ATS - construction costs in thermal heating
and cooling projects of $6.3 million. AET is presently
concluding the affairs of its subsidiary, which is its sole
investment. The net investment in this subsidiary is nominal.
Other financial information regarding the subsidiary companies is
as follows:
Net Assets Net Income (Loss)
Company 1994 1993 1994 1993 1992
(000)
AGI $23,610 $18,746 $2,959 $4,459 $ 1,366
ASP 3,175 5,131 (1,956) (347) (263)
ATE 9,449 9,182 266 (777) 667
ATS 2,577 - (327) - -
AET 1,324 2,069 (744) 524 (4,793)
AGI's results reflect the operation of cogeneration facilities in
which AGI has an ownership interest. AGI's 1994 results were
reduced by decreased operation of a cogeneration unit and an
increase in deferred income tax expenses.
ASP's results in each year reflect the vacancy in its commercial
site due to generally poor market conditions in commercial real
estate. The 1994 results include a net after tax write-down of
the carrying value of the commercial site of $1.7 million.
ATE's 1994 results reflect a reduction in deferred income tax
expense. ATE's 1993 results were reduced by increased deferred
state income tax expense. ATE's 1992 results benefitted from
lower interest rates on amounts outstanding under its revolving
credit agreement.
ATS, formed in May 1994, is primarily a developmental stage
company that will become operational as heating and cooling
system projects are completed. The 1994 results reflect
administrative and general costs.
AET's 1994 results reflect expenses incurred researching future
investment opportunities and an increase in deferred Federal
income tax expense. AET's 1993 results are due to the receipt of
life insurance proceeds by its subsidiary company. In 1993, this
subsidiary discontinued its operating activities to concentrate
on licensing its patented proprietary knowledge. AET's 1992
results reflect the provision for the restructuring of its
subsidiary's activities.
AEI parent-only operations, excluding its equity in the results
of subsidiary companies, generally reflect administrative
expenses. Net results were losses of $543 thousand in 1994, $183
thousand in 1993 and $401 thousand in 1992.
<PAGE>
NOTE 7. CUMULATIVE PREFERRED STOCK OF ACE
ACE has authorized 799,979 shares of Cumulative Preferred Stock,
$100 Par Value, two million shares of No Par Preferred Stock and
three million shares of Preference Stock, No Par Value.
Information relating to outstanding shares at December 31 is
shown in the table below.
Current
Optional
1994 1993 Redemption
Series Par Value Shares (000) Shares (000) Price
Not Subject to Mandatory Redemption:
4% $100 77,000 $ 7,700 77,000 $ 7,700 $105.50
4.10% 100 72,000 7,200 72,000 7,200 101.00
4.35% 100 15,000 1,500 15,000 1,500 101.00
4.35% 100 36,000 3,600 36,000 3,600 101.00
4.75% 100 50,000 5,000 50,000 5,000 101.00
5% 100 50,000 5,000 50,000 5,000 100.00
7.52% 100 100,000 10,000 100,000 10,000 101.88
Total $40,000 $40,000
Subject to Mandatory Redemption:
$8.25 None 55,000 $ 5,500 60,000 $ 6,000 104.66
$8.53 None 360,000 36,000 600,000 60,000 102.00
$8.20 None 500,000 50,000 500,000 50,000 -
$7.80 None 700,000 70,000 700,000 70,00 -
Total 161,500 186,000
Less portion due within one year 12,250 12,250
Total $149,250 $173,750
Cumulative Preferred Stock Not Subject to Mandatory Redemption is
redeemable solely at the option of ACE.
On November 1 of each year, 2,500 shares of the $8.25 No Par
Preferred Stock must be redeemed through the operation of a
sinking fund at a redemption price of $100 per share. ACE may
redeem not more than an additional 2,500 shares on any sinking
fund date without premium. ACE redeemed 5,000 shares in both 1994
and 1993.
Commencing in 1994, on November 1 of each year, 120,000 shares of
the $8.53 No Par Preferred Stock must be redeemed through the
operation of a sinking fund at a redemption price of $100 per
share. At the option of ACE, not more than an additional 120,000
shares may be redeemed on any sinking fund date without premium.
ACE redeemed 240,000 shares in 1994.
Beginning August 1, 1996 and annually thereafter, 100,000 shares
of the $8.20 No Par Preferred Stock must be redeemed through the
operation of a sinking fund at a redemption price of $100 per
share. At the option of ACE, not more than an additional 100,000
shares may be redeemed on any sinking fund date without premium.
This series is not refundable prior to August 1, 2000.
Beginning May 1, 2001 and annually through 2005, 115,000 shares
of $7.80 No Par Preferred Stock must be redeemed through the
operation of a sinking fund at a redemption price of $100 per
share. On May 1, 2006, the remaining shares outstanding must be
redeemed at $100 per share. ACE has the option to redeem up to
an additional 115,000 shares without premium on each May 1
through 2005. This series is not refundable prior to May 1,
2006.
For the next five years, the annual minimum sinking fund
requirements of the Cumulative Preferred Stock Subject to
Mandatory Redemption is $12.25 million for the year 1995, and
$22.25 million in each of the years 1996 and 1997 and $10.25
million in each of the years 1998 and 1999.
Cumulative Preferred Stock of ACE is not widely held and trades
infrequently. The estimated aggregate fair market value of ACE's
outstanding Cumulative Preferred Stock at December 31, 1994 and
1993 was approximately $185 million and $231 million,
respectively. The fair market value has been determined using
market information available from actual trades of similar
instruments of companies with similar credit quality and rate.
NOTE 8. LONG TERM DEBT
Maturity December 31
Series Date 1994 1993
(Medium Term Notes (MTNs) have varying maturity dates and are shown with the
weighted average interest rate of the related issues within the year of
maturity.)
(000)
5-1/8% First Mortgage Bonds 2/1/1996 $ 9,980 $ 9,980
Medium Term Notes Series B (6.28%) 1998 56,000 56,000
Medium Term Notes Series A (7.52%) 1999 30,000 30,000
Medium Term Notes Series B (6.83%) 2000 46,000 46,000
7-1/2% First Mortgage Bonds 4/1/2002 20,000 20,000
Medium Term Notes Series B (7.18%) 2003 20,000 20,000
7-3/4% First Mortgage Bonds 6/1/2003 29,976 29,976
Medium Term Notes Series A (7.98%) 2004 30,000 30,000
Medium Term Notes Series B (7.125%) 2004 28,000 28,000
7-5/8% Pollution Control 1/1/2005 - 6,500
Medium Term Notes Series B (6.45%) 2005 40,000 40,000
6-3/8% Pollution Control 12/1/2006 2,500 2,500
Medium Term Notes Series B (6.76%) 2008 50,000 50,000
10-1/2% Pollution Control Series B 7/15/2012 850 850
6-5/8% First Mortgage Bonds 8/1/2013 75,000 75,000
7-3/8% Pollution Control Series A 4/15/2014 18,200 18,200
10-1/2% Pollution Control Series C 7/15/2014 - 23,150
8-1/4% Pollution Control Series A 7/15/2017 4,400 4,400
9-1/4% First Mortgage Bonds 10/1/2019 53,857 65,767
6.80% Pollution Control Series A 3/1/2021 38,865 38,865
7% First Mortgage Bonds 9/1/2023 75,000 75,000
5.60% Pollution Control Series A 11/1/2025 4,000 4,000
7% First Mortgage Bonds 8/1/2028 75,000 75,000
6.15% Pollution Control Series A 6/1/2029 23,150 -
7.20% Pollution Control Series A 11/1/2029 25,000 -
7% Pollution Control Series B 11/1/2029 6,500 -
Total 762,278 749,188
Debentures:
5-1/4% 2/1/1996 2,267 2,267
7-1/4% 5/1/1998 2,619 2,619
Total 4,886 4,886
Unamortized Premium and Discount-Net (3,876) (2,973)
Total Long Term Debt of ACE 763,288 751,101
Long Term Debt of ATE 16,000 15,000
Less Portion Due within One Year 1,000 -
$778,288 $766,101
In 1994, ACE redeemed its 10-1/2% Pollution Control Bonds
Series C due 7/15/2014 and its 7-5/8% Pollution Control Bonds due
1/1/2005. ACE acquired and retired $11.9 million principal
amount of First Mortgage Bonds, 9-1/4% Series due 10/1/2019. The
aggregate cost of these redemptions was $1.2 million, net of
related Federal income taxes.
Sinking fund deposits are required for retirement of the 5-1/4%
Debentures annually on February 1 through 1995 and for the 7-1/4%
Debentures annually on May 1 through 1997 in amounts in each case
sufficient to redeem $100,000 principal amount. ACE may, at its
option, redeem an additional $100,000 annually in each case.
Through December 31, 1994, ACE acquired and cancelled $333
thousand and $181 thousand principal amount of the 5-1/4% and
7-1/4% Debentures, respectively, which will be used to satisfy
its requirements for 1995. Certain series of First Mortgage
Bonds contain provisions for deposits of cash or certification of
bondable property currently amounting to $100 thousand, which ACE
may elect to satisfy through property additions. For the next
five years, the annual amount of scheduled maturities and sinking
fund requirements of ACE's long term debt are $12.266 million in
1996, $175 thousand in 1997, $58.575 million in 1998 and $30.075
million in 1999.
ACE's long term debt securities are not widely held and generally
trade infrequently. The estimated aggregate fair market value of
ACE's outstanding long term debt at December 31, 1994 and 1993
was $693 million and $768 million, respectively. The fair market
value has been determined based on quoted market prices for the
same or similar debt issues or on debt instruments of companies
with similar credit quality, coupon rates and maturities.
Long term debt of ATE primarily consists of $15 million of 7.44%
Senior Notes due 1999.The estimated fair market value of these
Notes at December 31, 1994 and 1993 was $14 million and $16
million, respectively, based on debt instruments of companies
with similar credit quality, coupon rates and maturities. Also,
ATE has a revolving credit and term loan agreement which provides
for borrowings of up to $35 million during successive revolving
credit and term loan periods through June 1995. There were $1
million in borrowings outstanding under this agreement at
December 31, 1994. Commitment fees on the unused credit line
were not significant.
NOTE 9. COMMON SHAREHOLDERS' EQUITY
In addition to public offerings, Common Stock may be issued
through the Dividend Reinvestment and Stock Purchase Plan (DRP),
ACE benefit plans (ACE plans) and the Equity Incentive Plan
(EIP). The number of shares of Common Stock issued (forfeited),
and the number of shares reserved for issuance at December 31,
1994, were as follows:
1994 1993 1992 Reserved
DRP 699,493 1,300,129 1,291,653 723,975
ACE Plans (5,046) 8,033 10,897 141,038
EIP 175,712 - - 624,288
Total 870,159 1,308,162 1,302,550
In April 1994, the shareholders of the Company approved the EIP.
Eligible participants are officers, general managers and
nonemployee directors of the Company and its subsidiaries. Under
the EIP, nonemployee director participants are entitled to
receive a grant of 1,000 shares of restricted stock.
Restrictions on these grants expire over a five-year period.
Employee participants may be awarded shares of restricted Common
Stock, stock options and other Common Stock-based awards. Actual
awards of restricted shares are based on attainment of various
levels of certain Company performance criteria within a three-
year period. Restrictions lapse upon actual award at the end of
the three-year performance period. Shares not awarded are
forfeited. Dividends earned on restricted stock issued through
the EIP are invested in additional restricted stock under the
EIP. Such stock acquired is subject to the same restrictions.
The number of restricted shares issued in 1994 to employee
participants was 167,300. Stock options granted in 1994 are
nonqualified and are exercisable three years after but within 10
years from the date of grant. Stock options are priced at an
amount at least equal to 100% of the fair market value of Common
Stock on the date of grant. As of December 31, 1994, options on
167,300 shares of common stock were granted at a price of $21.125
per share. No options were eligible to be exercised in 1994.
In October 1994, the Board of Directors authorized reacquisition
of up to three million shares of the Company's Common Stock.
Management will use its discretion, based on market conditions,
as to the timing and price of shares repurchased. There is no
schedule or specific share price target associated with the
acquisition and the authorized number of shares will not be
affected. Shares repurchased are cancelled. During 1994,the
Company reacquired 221,700 shares at prices ranging from $16.50
to $18.125 per share.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Construction Program
ACE's cash construction expenditures for 1995, which excludes
AFDC and customer contributions are estimated to be approximately
$116 million. Current commitments for the construction of major
production and transmission facilities approximate $23 million,
of which it is estimated that $19 million will be expended in
1995.
Insurance Programs
ACE is a member of certain insurance programs that provide
coverage for decontamination and property damage to members'
nuclear generating plants. Facilities at the Peach Bottom, Salem
and Hope Creek stations are insured against property damage
losses up to $2.75 billion per site under these programs.
In addition, ACE is a member of an insurance program which
provides coverage for the cost of replacement power during
prolonged outages of nuclear units caused by certain specific
conditions. The insurer for nuclear extra expense insurance
provides stated value coverage for replacement power costs
incurred in the event of an outage at a nuclear unit resulting
from physical damage to the nuclear unit. The stated value
coverage is subject to a deductible period of the first 21 weeks
of any outage. Limitations of coverage include, but are not
limited to, outages (1) not resulting from physical damage to the
unit, (2) resulting from any government mandated shutdown of the
unit, (3) resulting from any gradual deterioration, corrosion,
wear and tear, etc. of the unit, (4) resulting from any
intentional acts committed by an insured and (5) resulting from
certain war risk conditions. Under the property and replacement
power insurance programs, ACE could be assessed retrospective
premiums in the event the insurers' losses exceed their reserves.
As of December 31, 1994, the maximum amount of retrospective
premiums ACE could be assessed for losses during the current
policy year was $6.6 million under these programs.
The Price-Anderson provisions of the Atomic Energy Act of 1954,
as amended by the Price-Anderson Amendments Act of 1988, govern
liability and indemnification for nuclear incidents. All nuclear
facilities could be assessed, after exhaustion of private
insurance, up to $79.275 million each, payable at $10 million per
year, per reactor and per incident. Based on its ownership share
of nuclear facilities, ACE could be assessed up to $27.6 million
per incident. This amount would be payable at $3.48 million per
year, per incident.
Energy and Capacity Arrangements
UTILITY SOURCES
ACE has an arrangement for the purchase of 125 MWs of capacity
and related energy from Pennsylvania Power and Light through
September 30, 2000. Capacity costs, including certain deferred
charges, totaled $26.6 million, $24.4 million and $25.1 million,
and energy costs totaled $10.8 million, $11.2 million and $13.4
million in 1994, 1993 and 1992, respectively. Commitments for
capacity costs expected to be incurred are $11.7 million, $12.0
million, $12.3 million, $12.6 million, $14.2 million and $12.3
million in each of the years 1995-2000, respectively.
ACE's arrangement for the purchase of 200 MWs of capacity and
related energy from PECO expired May 31, 1994. Capacity costs
charged to Purchased Capacity expense totaled $25.6 million
through May 1994 and $55.9 million and $52.5 million for 1993 and
1992, respectively. Energy costs for the same periods amounted
to $11.4 million, $21.0 million and $19.2 million, respectively.
ACE also had another arrangement with PECO for the purchase of
energy only which terminated in October 1994. Energy costs under
this arrangement amounted to $32.5 million, $19.0 million and
$17.5 million in 1994, 1993 and 1992, respectively.
ACE is a member of the Pennsylvania-New Jersey-Maryland
Interconnection (PJM), an integrated power pool that is connected
with other utilities for the interchange of energy on an
as-needed and as-available basis. ACE is required to plan for
reserve capacity based on aggregate PJM requirements allocated to
member companies. ACE has satisfied its current reserve
requirements. ACE also has an interchange agreement with the
City of Vineland, New Jersey, which operates a municipal utility
located in ACE's service territory. The cost of energy purchased
through interchange agreements totaled $10.4 million, $9.9
million and $9.4 million in 1994, 1993 and 1992, respectively.
NONUTILITY SOURCES
ACE has contracted for a total of 569 MWs of capacity and related
energy from four nonutility sources. The last two projects under
contract for 388 MWs became operational in 1994. Non-utility
capacity costs totaled $77.0 million, $30.2 million and $24.4
million, and energy costs totaled $62.5 million, $36.0 million
and $27.6 million, in 1994, 1993 and 1992, respectively.
Capacity and energy costs from nonutility sources are recovered
through the LEC.
Environmental Matters
The provisions of Title IV of the Clean Air Act Amendments of
1990 (CAAA) will require, among other things, phased reductions
of sulfur dioxide (SO2) emissions by 10 million tons per year,
and a limit on S02 emissions nationwide by the year 2000, and
reductions in emissions of nitrogen oxides (NOx) by approximately
2 million tons per year. ACE's wholly-owned B.L. England Units 1
and 2 and its jointly-owned Conemaugh Station Units 1 and 2 are
affected during Phase I (1995) and all of ACE's other fossil-fuel
steam generating units are affected by Phase II (2000) of the
CAAA. ACE has installed a scrubber on B.L. England Unit 2 at a
cost of $81 million which went into service in December 1994. By
scrubbing B.L. England Unit 2, Phase I S02 emission requirements
are met for both B.L. England Units 1 and 2. The Conemaugh
owners installed a scrubber on Conemaugh Unit 1 which went into
service in December 1994. ACE's 3.83% share of the cost was $11
million. A scrubber on Conemaugh Unit 2 is to be completed in
1995, with ACE's share of the cost estimated to be $4 million.
The jointly-owned Keystone Station is impacted by the SO2 and NOx
provisions of Title IV of the CAAA during Phase II. Currently,
the Keystone owners plan to rely on utilizing emission
allowances, and modified fuel content to a lesser extent, to meet
compliance with the CAAA through the year 2000. In addition,
certain purchase power arrangements will be affected by the CAAA,
in amounts that are not presently determinable.
Federal and state legislation authorize various governmental
authorities to issue orders compelling responsible parties to
take cleanup action at sites determined to present danger from
releases of hazardous substances. The various statutes impose
joint and several liability without regard to fault for certain
investigative and cleanup costs for all potentially responsible
parties. ACE has received notification with respect to two sites
within New Jersey as one of a number of alleged responsible
parties for cleanup and remedial actions. ACE's maximum expense
for these claims is not expected to exceed $1 million. ACE
believes that insurance coverage is available to satisfy any
amounts in excess of the self-insured limits associated with
these particular claims should any liability result. The insurer
for pollution liability insurance provides comprehensive excess
general liability coverage, including pollution liability, for
environmental costs incurred in the event of bodily injury or
property damage resulting from the discharge or release of
pollutants into or upon the land, atmosphere or water.
Limitations of coverage include any pollution liability
1) resulting subsequent to the disposal of such pollutants, 2)
resulting from the operation of a storage facility of such
pollutants, 3) resulting in the formation of acid rain, 4) caused
to property owned by an insured and 5) resulting from any
intentional acts committed by an insured.
Other
ACE is subject to a performance standard for all of its
jointly-owned nuclear units. This standard is used by the BPU in
determining recovery of replacement energy costs resulting from
poor nuclear performance. The standard establishes a target
aggregate capacity factor within a zone of reasonable performance
to be achieved by the units. Performance outside of the zone
results in penalties or rewards. Any penalties incurred would not
be permitted to be recovered from customers and would be charged
against income. For 1994, the aggregate capacity factor of ACE's
nuclear units is within the reasonable performance zone, which
results in no penalty or reward.
A contract with an industrial company whereby ACE delivered
process steam, water and by-product electricity was terminated by
this company effective June 30, 1994. In 1993, ACE received
approximately $12 million from this company for services and
energy sales. In accordance with the termination agreement, ACE
received $4.2 million in cash proceeds, 45,165 emission
allowances valued at $6.5 million, and made provisions to retire
certain equipment. A net gain of $2.4 million net of tax
resulted. The steam and electricity needs of this company are
provided by a nonutility cogeneration facility. ACE has a
contract for the purchase of 188 MWs of capacity and energy from
this facility.
In November 1994, ACE announced a program to reduce its workforce
by up to 20% or 350 people. This program was initiated so that
ACE can better position itself for the more competitive
environment within the electric industry. Under the program,
certain employees will separate from the company and be entitled
to a severance package, including salary continuation, lump sum
payments, extended medical benefits and outplacement services.
In December 1994, ACE accrued the costs of the workforce
reduction in the amount of $17.3 million, net of tax of $9.3
million, or $.32 in earnings per share. Included is ACE's share
of an early retirement program of a jointly-owned nuclear
station. ACE's employee separations are expected to be
substantially completed by March 1, 1995.
AGI, through its subsidiaries, has partnership interests in
common with affiliates of Columbia Gas System, Inc. (Columbia) in
certain cogeneration projects. Columbia has been operating under
Chapter 11 of the Federal Bankruptcy Code since 1991. A
reorganization plan for Columbia and its principal pipeline unit
is expected to be filed with the U.S. Bankruptcy Court in the
first half of 1995. AGI does not anticipate any significant
changes in its partnership arrangements as a result of Columbia's
reorganization plan.
The Energy Policy Act of 1992 permits the Federal government to
assess investor-owned electric utilities that have ownership
interests in nuclear generating facilities an amount to fund the
decontamination and decommissioning of three Federally operated
nuclear enrichment facilities. Based on its ownership in five
nuclear generating units, ACE recorded a liability of $6.6
million and $8 million at December 31, 1994 and 1993,
respectively, for its obligation to be paid over the next 13
years. ACE has an associated regulatory asset of $7.2 million
and $8.4 million at December 31, 1994 and 1993, respectively.
Amounts are currently being recovered in rates for this liability
and the regulatory asset is concurrently being amortized to
expense based on the annual assessment billed by the Federal
government.
NOTE 11. LEASES
ACE leases various types of property and equipment for use in its
operations. Certain of these lease agreements are capital leases
consisting of the following at December 31:
(000) 1994 1993
Production plant $13,521 $13,521
Less accumulated amortization 9,707 8,846
Net 3,814 4,675
Nuclear fuel 38,216 40,593
Leased property-net $42,030 $45,268
ACE has a contractual obligation to obtain nuclear fuel for the
Salem, Hope Creek and Peach Bottom stations. The asset and
related obligation for the leased fuel are reduced as the fuel is
burned and are increased as additional fuel purchases are made.
No commitments for future payments beyond satisfaction of the
outstanding obligation exist. Operating expenses for 1994, 1993
and 1992 include leased nuclear fuel costs of $14.1 million,
$13.9 million and $13.5 million, respectively, and rentals and
lease payments for all other capital and operating leases of $5.3
million, $4.8 million and $4.8 million, respectively. Future
minimum rental payments for all noncancellable lease agreements
are not significant to ACE's operations. Rental charges of other
subsidiary companies are not significant.
<PAGE>
NOTE 12. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial data, reflecting all adjustments necessary in
the opinion of the Company for a fair presentation of such
amounts, are as follows:
Operating Operating Net Earnings Dividends Paid
Quarter Revenues Income Income Per Share Per Share
1994 (000) (000) (000)
1st $232,098 $ 39,712 $22,862 $ .43 $ .385
2nd 205,822 30,427 16,798 .31 .385
3rd 272,708 58,431 46,323 .85 .385
4th 202,410 24,969 (9,871) (.18) .385
Annual $913,039 $153,540 $76,113 $1.41 $1.54
1993
1st $203,656 $ 35,445 $19,995 $ .38 $ .38
2nd 192,538 27,381 11,093 .21 .38
3rd 268,883 68,580 52,329 .99 .385
4th 200,596 28,177 11,880 .22 .385
Annual $865,675 $159,584 $95,297 $1.80 $1.53
Individual quarters may not add to the total due to rounding, and
the effect on earnings per share of changing average number of
common shares outstanding.
The revenues of ACE are subject to seasonal fluctuations due to
increased sales and higher residential rates during the summer
months.
Net Income reflects special charges aggregating $20.4 million,
after tax of $10.9 million, or $.37 per share, recorded in Other
Income during the fourth quarter of 1994. One of the charges is
an accrual of the costs of workforce reductions for severance and
benefits packages in the amount of $17.3 million, net of tax of
$9.3 million, or $.32 per share. Another charge is an amount for
ACE's share of deferred costs for studies at a nuclear station in
the amount of $1.4 million, net of tax of $735 thousand, or $.02
per share. Also included is the write-down of the carrying value
of ASP's commercial site of $1.7 million, net of tax of $926
thousand, or $.03 per share.
<PAGE>
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information for this item concerning Directors of the
Company is set forth in the section entitled "Nominees for
Election" on page 2 of the Company's Notice of Annual Meeting of
Shareholders and definitive Proxy Statement, which is
incorporated by reference. The information required by Item 10
of Form 10-K with respect to the executive officers of the
Company and the directors of ACE is, pursuant to Instruction 3 to
Item 401(b) of Regulation S-K, set forth in Part I of this Form
10-K under the heading "Executive Officers".
ITEM 11 EXECUTIVE COMPENSATION
Information for this item with respect to the amounts paid
to the five most highly compensated executive officers of the
Company and ACE, is set forth in the section entitled " Table 1-
Summary Compensation Table" on page 14 of the Company's Notice of
Annual Meeting of Shareholders and definitive Proxy Statement,
which is incorporated herein by reference. The cash compensation
paid to twelve executive officers of ACE, as a group, in 1994 was
$2,598,662.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item as to compliance with
Section 16(a) of the Exchange Act is contained in the section
captioned "Stock Ownership of Directors and Officers" on page 5
of the Company's Notice of Annual Meeting of Shareholders and
definitive Proxy Statement, which is incorporated herein by
reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information for this item is set forth in the section
entitled "Compensation Committee Interlocks and Insider
Participation" on page 13 of the Company's Notice of Annual
Meeting of Shareholders and definitive Proxy Statement, which is
incorporated herein by reference.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
Exhibits: See Exhibit Index attached.
Financial Statements and Supplementary Schedules: The following
information for Atlantic Energy, Inc. is filed as part of this
report.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operation Page 40
Consolidated Statement of Income for the three
years ended December 31, 1994 Page 55
Consolidated Statement of Cash Flows for
the three years ended December 31, 1994 Page 56
Consolidated Balance Sheet - December 31, 1994
and December 31, 1993 Page 57
Consolidated Statement of Changes in Common
Shareholders' Equity (Note 9 to Financial Statements) Page 59
Notes to Consolidated Financial Statements Page 81
Supplementary information regarding selected
quarterly financial data (Unaudited) (Note 12 to
Financial Statements) Page 81
Independent Auditors' Report Page 54
Report of Management Page 52
The following financial information, financial statements
and notes to financial statements for ACE are filed herewith as
Exhibit 28(a) and are incorporated by reference herein:
Management's Discussion and Analysis of Financial Condition
and Results of Operation; Consolidated Statement of Income for
the three years ended December 31, 1994; Consolidated Statement
of Cash Flows for the three years ended December 31, 1994;
Consolidated Balance Sheet-December 31, 1994 and December 31,
1993; Consolidated Statement of Changes in Common Shareholder's
Equity; Notes to Consolidated Financial Statements; Independent
Auditors' Report.
All other financial schedules are included in the Financial
Statements and Notes to Financial Statements of the Company and
ACE.
Reports on Form 8-K:
None<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, who also signed in the capacity
indicated.
ATLANTIC ENERGY, INC.
ATLANTIC CITY ELECTRIC COMPANY
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
in the capacities and on the date indicated.
Date: March 21, 1995 By: /s/ J. L. Jacobs
J. L. Jacobs
Title: President and Chief Executive Officer
and Director of Atlantic Energy, Inc. and Chairman,
President, Chief Executive Officer and Director of
Atlantic City Electric Company
Date: March 21, 1995 By: /s/ L. M. Walters
L. M. Walters
Title: Acting Chief Financial Officer of Atlantic Energy, Inc.
and Vice President-Treasurer and Assistant Secretary of
Atlantic City Electric Company
DIRECTORS OF ATLANTIC ENERGY, INC.:
Jos. Michael Galvin, Jr.* Kathleen MacDonnell*
Gerald A. Hale* Richard B. McGlynn*
Matthew Holden, Jr.* Bernard J. Morgan*
Cyrus H. Holley* Harold J. Raveche*
E. Douglas Huggard*
A MAJORITY OF DIRECTORS OF ATLANTIC CITY ELECTRIC COMPANY:
Michael J. Chesser* James E. Franklin II*
Meredith I. Harlacher, Jr.* Henry K. Levari, Jr.*
Date: March 21, 1995 *By: /s/ L. M. Walters
L. M. Walters
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
3a Restated Certificate of Incorporation of Atlantic Energy,
Inc. (File No. 1-9760, Form 10-Q for quarter ended September 30,
1987-Exhibit 4(a)); Certificate of Amendment to restated
Certificate of Incorporation of Atlantic Energy, Inc. dated April
15, 1992. File No. 33-53511, Form S-8 dated May 6, 1994-Exhibit
No. 3(ii).
3b By-Laws of Atlantic Energy, Inc. as amended August 8, 1991
(File No. 1-9760, Form 10-K for year ended December 31, 1991-
Exhibit No. 3b).
3c Agreement of Merger between Atlantic City Electric Company
and South Jersey Power & Light Company filed June 30, 1949, and
Amendments through May 3, 1991 (File No. 2-71312-Exhibit No.
3(a); File No. 1-3559, Form 10-Q for quarter ended June 30, 1982-
Exhibit No. 3(b); Form 10-Q for quarter ended March 31, 1985-
Exhibit No. 3(a); Form 10-Q for quarter ended March 31, 1987-
Exhibit No. 3(a): Form 8-K dated October 12, 1988-Exhibit No.
3(a); Form 10-K for fiscal year ended December 31, 1990-Exhibit
No. 3c; and Form 10-Q for quarter ended September 30, 1991-
Exhibit No. 3c).
3d By-Laws of Atlantic City Electric Company, as amended April
24, 1989 (File No. 1-3559, Form 10-Q for the quarter ended
September 31, 1989-Exhibit No. 3).
4a Purchase Agreement, dated as of July 17, 1974, with respect
to 9.96% Cumulative Preferred Stock of Atlantic City Electric
Company (File No. 2-52000-Exhibit No. 2(hh)).
4b Purchase Agreement, dated as of December 1, 1977, with
respect to $8.25 No Par Preferred Stock of Atlantic City Electric
Company (File No. 2-60966-Exhibit No. 2(d)).
4c Mortgage and Deed of Trust, dated January 15, 1937, between
Atlantic City Electric Company and The Bank of New York (formerly
Irving Trust Company) and Supplemental Indentures through
September 1, 1993 (File No. 2-66280-Exhibit No. 2(b); File No. 1-
3559, Form 10-K for year ended December 31, 1980-Exhibit No.
4(d); Form 10-Q for quarter ended June 30, 1981-Exhibit No. 4(a);
Form 10-K for year ended December 31, 1983-Exhibit No. 4(d); Form
10-Q for quarter ended March 31, 1984-Exhibit No. 4(a); Form 10-Q
for quarter ended June 30, 1984-Exhibit 4(a); Form 10-Q for
quarter ended September 30, 1985-Exhibit 4; Form 10-Q for quarter
ended March 31, 1986-Exhibit No. 4; Form 10-K for year ended
December 31, 1987-Exhibit No. 4(d); Form 10-Q for quarter ended
September 30, 1989-Exhibit No. 4(a); Form 10-K for year ended
December 31, 1990-Exhibit No. 4(c); File No. 33-49279-Exhibit No.
4(b); File No. 1-3559, Form 10-Q for the quarter ended September
30, 1993 - Exhibits 4(a) & 4(b); Form 10-K for the year ended
December 31, 1993 - Exhibit 4c(i); File no. 1-3559, Form 10-Q for
the quarter ended June 30, 1994 - Exhibit 4(a); File No. 1-3559,
Form 10-Q for the quarter ended September 30, 1994 - Exhibit
4(a).
4c(1) Indenture Supplemental dated as of November 1, 1994 to
Mortgage and Deed of Trust dated January 15, 1937 between
Atlantic City Electric Company and The Bank of New York filed
herewith.
4e Agreement dated as of February 1, 1966, between Atlantic City
Electric Company and Fidelity Union Trust Company and Supplement
dated as of May 1, 1968. (File No. 1-3559, Form 8-K dated
March 7, 1966-Exhibit 13(b)(2); Form 8-K dated June 6, 1968-
Exhibit No. 13(b)(1)).
4f(1) Revolving Credit and Term Loan Agreement dated as of May
24, 1988 by and between ATE Investment, Inc. and The Bank of New
York (File No.1-9760, Form 10-K for year ended December 31, 1988-
Exhibit No. 4g(1)).
4f(2) Support Agreement dated as of May 24, 1988 between
Atlantic Energy, Inc. and ATE Investment, Inc. (File No. 1-9760,
Form 10-K for year ended December 31, 1988-Exhibit No. 4g(2)).
4f(3) Letter Agreement dated as of May 24, 1988 between Atlantic
Energy, Inc. and The Bank of New York (File No. 1-9760, Form 10-K
for year ended December 31, 1988-Exhibit No. 4g(3)).
4f(4) Amendment No. 1 dated as of February 22, 1989 to Revolving
Credit and Term Loan Agreement dated as of May 24, 1988 by and
between ATE Investment, Inc. and The Bank of New York (File No.
1-9760, Form 10-K for the fiscal year ended December 31, 1988).
4f(5) Amendment No. 2 dated as of June 1, 1991, to Revolving
Credit and Term Loan Agreement dated as of May 24, 1988 by and
between ATE Investment, Inc. and The Bank of New York (File No.
1-9760, Form 10-K for year ended December 31, 1991-Exhibit No.
4f(5)).
10a(1) Atlantic Energy, Inc. Directors Deferred Compensation Plan
revised as of February 4, 1988 (File No. 1-9760, Form 10-K for
year ended December 31, 1988-Exhibit No. 10a(1)).
10a(2) Description of amendment to the Deferred Compensation Plan
for Directors effective December 10, 1992 (File No. 1-9760, Form
10-K for year ended December 31, 1992-Exhibit No. 10a(1)).
10a(3) Deferred Compensation Plan for Employees of Atlantic
Energy, Inc. and Participating Subsidiaries (File No. 1-9760,
Form 10-K for year ended December 31, 1988-Exhibit No. 10a(2)).
10a(4) Description of amendment to Deferred Compensation Plan
for Employees of Atlantic Energy, Inc. and Participating
Subsidiaries effective December 10, 1992 (File No. 1-9760, Form
10-K for year ended December 31, 1992-Exhibit No. 10a(2)).
10a(5) Supplemental Executive Retirement Plan for Officers of
Atlantic City Electric Company, as amended effective March 1,
1990 (File No. 1-9760, Form 10-K for year ended December 31,
1989-Exhibit No. 10a(4)).
10a(6) Description of amendment to Supplemental Executive
Retirement Plan effective December 10, 1992 (File No. 2-9760,
Form 10-K for year ended December 31, 1992-Exhibit 10a(3)).
10a(7) Executive Medical Expense Reimbursement Plan for Officers
of Atlantic City Electric Company (File No. 1-3559, Form 10-K for
year ended December 31, 1985-Exhibit No. 10a(5)).
10a(8) Copy of Management Annual Incentive Plan of Atlantic
Energy, Inc. and its subsidiaries, effective January 1, 1992
(File No. 1-9760, Form 10-K for year ended December 31, 1991-
Exhibit No. 10a(5)).
10a(9) Copy of Atlantic Electric Excess Benefit Retirement
Income Program, as amended, effective as of August 2, 1990 (File
No. 1-3559, Form 10-K for year ended December 31, 1991-Exhibit
No. 10a(6)).
10a(10) Description of amendment to the Excess Benefit
Retirement Income Program effective December 10, 1992 (File No.
1-9760, Form 10-K for year ended December 31, 1992-Exhibit
10a(6)).
10a(11) Agreement, effective as of February 1, 1990, between
Atlantic City Electric Company and E. Douglas Huggard (File No.
1-9760, Form 10-K for year ended December 31, 1989-Exhibit No.
10a(8)).
10a(12) Agreement entered February 11, 1993 between Atlantic
City Electric Company and E. Douglas Huggard (File No. 1-9760,
Form 10-K for year ended December 31, 1992-Exhibit No. 10a(7)).
10a(13) Copy of Atlantic City Electric Company Long-Term
Performance Incentive Plan, as amended effective November 1, 1990
(File No. 1-3559, Form 10-K for year ended December 31, 1991-
Exhibit No. 10a(8)).
10a(14) Atlantic Energy, Inc. Retirement Plan for Directors, as
amended effective November 13, 1991 (File No. 1-9760, Form 10-K
for year ended December 31, 1991-Exhibit No. 10a(9)).
10a(15) Copy of Atlantic Energy, Inc. Restricted Stock Plan for
Non-employee Directors, effective January 1, 1991 (File No. 1-
9760, Form 10-K for year ended December 31, 1991-Exhibit No.
10a(10)).
10a(16) Agreement dated February 11, 1993 between Atlantic City
Electric Company and Jerrold L. Jacobs (File No. 1-3559, Form 10-
K for the year ended December 31, 1994 - Exhibit No. 10a(16)).
10a(17) Agreement dated February 10, 1994 between Atlantic City
Electric Company and Meredith I. Harlacher, Jr. (File No. 1`-
3559, Form 10-K for the year ended December 31, 1993 - Exhibit
No. 10a(17)).
10a(18) Agreement dated February 10, 1994 between Atlantic City
Electric Company and Henry K. Levari, Jr. (File No. 1-3559, Form
10-K for the year ended December 31, 1993 - Exhibit No. 10a(18)).
<PAGE>
10a(19) Agreement dated February 10, 1994 between Atlantic City
Electric Company and J. G. Salomone, Amendment to Agreement
Termination and Release Agreement dated January 31, 1995 between
Atlantic City Electric Company and J. G. Salomone (File No. 1-
3559, Form 10-K for the year ended December 31, 1993 - Exhibit
No. 10a(19)); Amendment to Agreement Termination and Release
Agreement between Atlantic City Electric Company and J. G.
Salomone, filed herewith.
10a(20) Agreement dated January 10, 1994 between Atlantic City
Electric Company and Michael Chesser (File No. 1-3559, Form 10-K
for the year ended December 31, 1993 - Exhibit No. 10a(20)).
10a(21) Employment Termination Agreement dated February 17, 1994
between John R. Lilly and Atlantic Energy, Inc. (File No. 1-3559,
Form 10-K for the year ended December 31, 1993 - Exhibit No.
10a(21)).
10a(22) Retirement and Release Agreement dated as of October 28,
1992 between Thomas E. Freeman and Atlantic City Electric Company
(File No. 1-3559, Form 10-K for the year ended December 31, 1993
- - Exhibit No. 10a(22)).
10a(23) Agreement dated October 1, 1994 between Atlantic City
Electric Company and James E. Franklin II, filed herewith.
10a(24) Termination and Release Agreement dated March 31,
1994 between Atlantic City Electric Company and S. D. McMillian,
filed herewith.
10a(25) Termination and Release Agreement dated June 22, 1994
between Atlantic City Electric Company and J. J. Lees, filed
herewith.
10a(26) Atlantic Energy, Inc. Equity Incentive Plan (File No.
33-53511, Form S-8 filed May 6, 1994-Exhibit 10.)
10b(1) Agreement as to ownership as tenants in common of the
Salem Nuclear Generating Station Units 1, 2, and 3, dated
November 24, 1971, and of Supplements, dated as of September 1,
1975, and as of January 26, 1977 (File No. 2-43137-Exhibit No.
5(p); File No. 2-60966-Exhibit No. 5(m); and File No. 2-58430-
Exhibit No. 5(o)).
10b(2) Agreement as to ownership as tenants in common of the
Peach Bottom Atomic Power Station Units 2 and 3, dated November
24, 1971 and of Supplements dated as of September 1, 1975 and as
of January 26, 1977 (File No. 2-43137-Exhibit No. 5(o); File No.
2-60966-Exhibit No. 5(j); File No. 2-58430-Exhibit No. 5(m)).
10b(3) Owners Agreement, dated April 28, 1977 between Atlantic
City Electric Company and Public Service Electric & Gas Company
for the Hope Creek Generating Station Units No. 1 and 2 (File No.
2-60966-Exhibit No. 5(v)).
<PAGE>
10b(3-1) Amendment to Owners Agreement for Hope Creek Generating
Station, dated as of December 23, 1981, between Atlantic City
Electric Company and Public Service Electric & Gas Company (File
No. 1-3559, Form 10-K for year ended December 31, 1983-Exhibit
No. 10b(3-2)).
10b(4) Pennsylvania-New Jersey-Maryland Interconnection
Agreement, dated September 26, 1956 between Public Service
Electric & Gas Company, Philadelphia Electric Company,
Pennsylvania Power & Light Company, Baltimore Gas & Electric
Company, Jersey Central Power & Light Company, Metropolitan
Edison Company, Pennsylvania Electric Company, Potomac Electric
Power Company and supplemental agreements through June 15, 1977
(File No. 1-3559, Form 10-K for year ended December 31, 1981-
Exhibit No. 10(p)).
10b(5) Pennsylvania-New Jersey-Maryland Interconnection
Supplemental Agreement, dated March 26, 1981, between Public
Service Electric & Gas Company, Philadelphia Electric Company,
Pennsylvania Power & Light Company, Baltimore Gas & Electric
Company, Jersey Central Power & Light Company, Metropolitan
Edison Company, Pennsylvania Electric Company, Potomac Electric
Power Company, Atlantic City Electric Company and Delmarva Power
& Light Company (File No. 1-3559, Form 10-Q for quarter ended
March 31, 1981-Exhibit No. 20b).
24 Independent Auditors' Consent, filed herewith.
25a Powers of Attorney for Atlantic Energy, Inc. dated as of
March 9, 1995, filed herewith.
25b Powers of Attorney for Atlantic City Electric Company dated
as of March 6, 1995, filed herewith.
27 Financial Data Schedules for Atlantic Energy, Inc. and
Atlantic City Electric Company for periods ended December 31,
1994.
28(a) Consolidated Financial Statements, Notes to Financial
Statements, Management's Discussion and Analysis of Results of
Operation and Financial Condition, and Independent Auditors'
Report for Atlantic City Electric Company for the three years
ended December 31, 1994, filed herewith.
28(b) Supplemental Financial Schedules for Atlantic Energy, Inc.
and Atlantic City Electric Company for the three years ended
December 31, 1994, filed herewith.
Exhibit 24
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration No.
33-49683 of Atlantic Energy, Inc. on Form S-3 and Registration
No. 33-53511 of Atlantic Energy, Inc. on Form S-8 and
Registration No. 33-53841 of Atlantic City Electric Company on
Form S-3 of our reports dated February 9, 1995 appearing in this
Annual Report on Form 10-K of Atlantic Energy, Inc. and Atlantic
City Electric Company for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 21, 1995
Exhibit 25(a)
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS and J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ J. L. Jacobs
J. L. Jacobs
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ M. J. Chesser
M. J. Chesser
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ J. M. Galvin, Jr.
J. M. Galvin, Jr.
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ G. A. Hale
G. A. Hale
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ M. Holden, Jr.
M. Holden, Jr.
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ C. H. Holley
C. H. Holley
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ B. J. Morgan
B. J. Morgan
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ H. J. Raveche
H. J. Raveche
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ R. B. McGlynn
R. B. McGlynn
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ E. D. Huggard
E. D. Huggard
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ L. M. Walters
L. M. Walters
<PAGE>
ATLANTIC ENERGY, INC.
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic Energy,
Inc., a New Jersey corporation, does hereby appoint J. L. JACOBS,
M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II and each of
them (with power to act without the other), including full power
of substitution and revocation, as the undersigned's true and
lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for her and in her name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in her name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as her own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 9th day of March, 1995.
/s/ K. MacDonnell
K. MacDonnell
Exhibit 25(b)
ATLANTIC CITY ELECTRIC COMPANY
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic City
Electric Company, a New Jersey corporation, does hereby appoint
J. L. JACOBS, M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II
and each of them (with power to act without the other), including
full power of substitution and revocation, as the undersigned's
true and lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 6th day of March, 1995.
/s/ M. I. Harlacher, Jr.
M. I. Harlacher, Jr.
<PAGE>
ATLANTIC CITY ELECTRIC COMPANY
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic City
Electric Company, a New Jersey corporation, does hereby appoint
J. L. JACOBS, M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II
and each of them (with power to act without the other), including
full power of substitution and revocation, as the undersigned's
true and lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 6th day of March, 1995.
/s/ M. J. Chesser
M. J. Chesser<PAGE>
ATLANTIC CITY ELECTRIC COMPANY
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic City
Electric Company, a New Jersey corporation, does hereby appoint
J. L. JACOBS, M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II
and each of them (with power to act without the other), including
full power of substitution and revocation, as the undersigned's
true and lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 6th day of March, 1995.
/s/ J. L. Jacobs
J. L. Jacobs
<PAGE>
ATLANTIC CITY ELECTRIC COMPANY
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic City
Electric Company, a New Jersey corporation, does hereby appoint
J. L. JACOBS, M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II
and each of them (with power to act without the other), including
full power of substitution and revocation, as the undersigned's
true and lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 6th day of March, 1995.
/s/ H. K. Levari, Jr.
H. K. Levari, Jr.
<PAGE>
ATLANTIC CITY ELECTRIC COMPANY
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic City
Electric Company, a New Jersey corporation, does hereby appoint
J. L. JACOBS, M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II
and each of them (with power to act without the other), including
full power of substitution and revocation, as the undersigned's
true and lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 6th day of March, 1995.
/s/ L. M. Walters
L. M. Walters
<PAGE>
ATLANTIC CITY ELECTRIC COMPANY
POWER OF ATTORNEY
The undersigned, a director or officer of Atlantic City
Electric Company, a New Jersey corporation, does hereby appoint
J. L. JACOBS, M. J. CHESSER, L. M. WALTERS AND J. E. FRANKLIN II
and each of them (with power to act without the other), including
full power of substitution and revocation, as the undersigned's
true and lawful attorneys-in-fact and agents, with full power and
authority to act in all capacities for him and in his name, place
and stead in connection with the filing with the Securities and
Exchange Commission, pursuant to the Securities Exchange Act of
1934, as amended, of an Annual Report on Form 10-K for the year
ended December 31, 1994 and any and all amendments thereto, and
execute and deliver for the undersigned and in his name, place
and stead all such other documents or instruments and to take
such further action as they, or any of them, deem appropriate.
The undersigned hereby ratifies and adopts as his own act and
deed the acts lawfully taken by said attorneys-in-fact and
agents, or any of them, or by their respective substitutes
pursuant to the powers and authorities granted herein.
IN WITNESS WHEREOF, the undersigned has executed this
document as of this 6th day of March, 1995.
/s/ J. E. Franklin, II
J. E. Franklin, II<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000806393
<NAME> ATLANTIC ENERGY, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,781,923
<OTHER-PROPERTY-AND-INVEST> 177,323
<TOTAL-CURRENT-ASSETS> 207,979
<TOTAL-DEFERRED-CHARGES> 378,330
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,545,555
<COMMON> 593,475
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 249,181
<TOTAL-COMMON-STOCKHOLDERS-EQ> 842,656
149,250
40,000
<LONG-TERM-DEBT-NET> 778,288
<SHORT-TERM-NOTES> 8,600
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,000
12,250
<CAPITAL-LEASE-OBLIGATIONS> 41,111
<LEASES-CURRENT> 940
<OTHER-ITEMS-CAPITAL-AND-LIAB> 671,460
<TOT-CAPITALIZATION-AND-LIAB> 2,545,555
<GROSS-OPERATING-REVENUE> 913,039
<INCOME-TAX-EXPENSE> 42,529
<OTHER-OPERATING-EXPENSES> 716,970
<TOTAL-OPERATING-EXPENSES> 759,499
<OPERATING-INCOME-LOSS> 153,540
<OTHER-INCOME-NET> (2,251)
<INCOME-BEFORE-INTEREST-EXPEN> 148,517
<TOTAL-INTEREST-EXPENSE> 58,460
<NET-INCOME> 76,113
0
<EARNINGS-AVAILABLE-FOR-COMM> 76,113
<COMMON-STOCK-DIVIDENDS> 83,481
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 157,680
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000008192
<NAME> ATLANTIC CITY ELECTRIC CO.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,781,923
<OTHER-PROPERTY-AND-INVEST> 55,143
<TOTAL-CURRENT-ASSETS> 207,815
<TOTAL-DEFERRED-CHARGES> 376,435
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,421,316
<COMMON> 54,963
<CAPITAL-SURPLUS-PAID-IN> 493,830
<RETAINED-EARNINGS> 249,767
<TOTAL-COMMON-STOCKHOLDERS-EQ> 796,260
149,250
40,000
<LONG-TERM-DEBT-NET> 763,288
<SHORT-TERM-NOTES> 8,600
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
12,250
<CAPITAL-LEASE-OBLIGATIONS> 41,102
<LEASES-CURRENT> 928
<OTHER-ITEMS-CAPITAL-AND-LIAB> 607,338
<TOT-CAPITALIZATION-AND-LIAB> 2,421,316
<GROSS-OPERATING-REVENUE> 913,226
<INCOME-TAX-EXPENSE> 42,529
<OTHER-OPERATING-EXPENSES> 717,702
<TOTAL-OPERATING-EXPENSES> 760,231
<OPERATING-INCOME-LOSS> 152,995
<OTHER-INCOME-NET> (1,361)
<INCOME-BEFORE-INTEREST-EXPEN> 148,862
<TOTAL-INTEREST-EXPENSE> 58,460
<NET-INCOME> 93,174
16,716
<EARNINGS-AVAILABLE-FOR-COMM> 76,458
<COMMON-STOCK-DIVIDENDS> 83,482
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 148,697
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 10a(19)
EMPLOYMENT SEPARATION and RELEASE AGREEMENT
between
Jerry G. Salomone
and
Atlantic Energy, Inc.
and its affiliated and subsidiary
companies inclusive of
Atlantic City Electric Company
This Employment Separation and Release Agreement (Agreement)
is made and entered into this 31st day of January, 1995 by and
among JERRY G. SALOMONE (Incumbent) residing at 306 Reed Road,
Absecon, County of Atlantic, State of New Jersey and Atlantic
Energy, Inc. and its affiliated and subsidiary companies
(sometimes hereinafter referred to as "Energy") including
Atlantic City Electric Company (hereinafter sometimes referred to
as "Atlantic") (hereinafter sometimes collectively referred to as
the "Company") having principal Executive Offices located at 6801
Black Horse Pike, Pleasantville, County of Atlantic, State of New
Jersey.
WHEREAS, Incumbent has been employed by the Company for some
time past in the capacity of an Officer and employee; and
WHEREAS, Incumbent has requested the Company to amend that
certain Employment Agreement dated February 10, 1994 among J. G.
Salomone, Atlantic Energy, Inc. and Atlantic City Electric
Company (the "Employment Agreement") to permit Incumbent to
terminate and withdraw from continued employment with the
Company, and to retire from the Company effective close of
business January 31, 1995 as his voluntary act and deed; and
WHEREAS, the Company has agreed to amend the Employment
Agreement to release Incumbent from his continuing obligations
thereunder in order to grant Incumbent his request to retire from
the Company effective close of business on January 31, 1995; and
WHEREAS, Incumbent and the Company have agreed that
Incumbent shall irrevocably withdraw from and terminate the
employment relationship with the Company and to retire from the
Company upon the terms and conditions more fully set forth
herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained which the parties hereto hereby agree
constitute fair, reasonable and valuable consideration, Incumbent
and the Company, intending to be legally bound, hereby represent,
covenant and agree as follows:
1. The Recital Clauses hereinabove set forth are
incorporated and made a material part of this Agreement.
2. Incumbent shall terminate and withdraw from full time
employment as an Officer and employee of the Company, and shall
resign as a Director of Atlantic effective close of business on
January 31, 1995 (the "Retirement Date"). Incumbent acknowledges
that he has selected the Retirement Date. Company acknowledges
that it has agreed to the Retirement Date selected by Incumbent.
Incumbent acknowledges that he has heretofore
voluntarily submitted Letters of Resignation resigning as a
member of the Board of Directors of all other subsidiaries of
Energy or of Atlantic for which he has served as a member of the
Board of Directors, and has also submitted his resignation as a
member of the Board of Managers of Cogenerations Partners of
America. Company acknowledges that such Letters of Resignation
have heretofore been accepted, the originals of which have been
filed in the corporate books and records of such companies.
3. Notwithstanding the Termination and Retirement Date,
Incumbent shall be entitled to receive payment for all
accumulated vacation and personal days to the extent same have
been earned, but unused during calendar years 1994 and 1995.
4. In addition to any benefit to which Incumbent is
otherwise entitled by reason of having been an employee of the
Company, the Company agrees to:
(a) Pay Incumbent an amount ($219,623.22) equivalent
to sixty-two (62) weeks of his annual Base Salary in effect as of
January 31, 1995 ($184,200.00), as established by the Board of
Directors of the Company, which shall be reduced by all
deductions required to be made by law. This payment shall be
made in monthly installments to be computed by the Company, with
the first such payment to be made March 1, 1995 and continuing to
be paid on the first business day of each month thereafter until
fully satisfied; and such amount shall not be subject to payment
of any interest thereon. Such payment will be made upon the
condition that Incumbent has executed and returned this Agreement
and the General Release, Waiver and Acknowledgment (General
Release) not later than January 31, 1995, and that the revocation
period specified in Exhibit A shall have expired without
revocation by Incumbent.
(b) Pay Incumbent an Incentive Award pursuant to:
(i) the 1994 Management Annual Incentive
Compensation Plan of Energy and its Subsidiaries in which
Incumbent is a participant (the "1994 Plan"); and
(ii) the 1995 Management Annual Incentive
Compensation Plan of Energy and its Subsidiaries in which
Incumbent is a participant (the "1995 Plan").
For purposes of the 1995 Plan, Incumbent shall be
deemed to have satisfactorily contributed toward the achievement
of the requisite goals through January 31, 1995. Therefore, any
award which may be granted by the Board of Directors in
accordance with and pursuant to the 1995 Plan shall be prorated
as to Incumbent and the prorated period shall be 1/12 of the
annual performance period.
For the 1994 Plan, Incumbent participated as an
employee for the entire plan period, being calendar year 1994.
Any award which may be granted by the Board of Directors shall be
in accordance with and pursuant to the 1994 Plan terms, and the
determination by the Board of Directors shall be final.
(c) Deliver to Incumbent those shares of stock to
which Incumbent is otherwise eligible in accordance with and
pursuant to the Company Long-Term Performance Incentive Plan
("LTPIP") currently in effect covering the period January 1, 1993
through December 31, 1995. For purposes of determining the
amount of stock to be delivered to Incumbent, Incumbent will be
credited with service through January 31, 1995 and will be deemed
to have satisfactorily contributed toward the achievement of the
longer-term financial and operating performance objectives of
such Plan for the specified period (i.e. 25/36ths of the period).
The stock will be delivered to Incumbent at the same time that
shares are otherwise distributed pursuant to the LTPIP.
(d) Deliver to Incumbent the Stock Option(s) together
with the restricted shares of stock to be determined in
accordance with and pursuant to the Equity Incentive Plan (the
"EIP") approved by the shareholders of Atlantic Energy, Inc. on
April 27, 1994. The Stock Option shall be exercised in
accordance with the provisions set forth in Section 5(h) of the
EIP and without acceleration. The restricted shares granted to
Incumbent pursuant to the EIP on April 27, 1994 will be awarded,
together with accumulated dividends, on a prorated basis at the
end of the first performance cycle and subject to performance
results, in the same manner as distributed to the other
participants in the EIP. The prorated period shall be deemed to
be 13/36ths of the total performance cycle.
(e) Provide Incumbent with continued coverage under
the Medical Expense Reimbursement Plan of the Company through
January 31, 1995; and, in addition, pay to Incumbent the
additional lump sum of Eight Thousand Dollars ($8,000.00)
intended to compensate Incumbent for certain medical procedures
currently in progress, but unbilled, and for which the Company
shall have no further obligation. This amount shall be treated
as income, and shall be added to the amount to be paid to
Incumbent pursuant to Subsection (a) of Paragraph 4 of this
Agreement, to be payable over the same period, without interest
and from which amount all deductions required by law shall be
taken.
(f) Pay to Incumbent, in a lump sum the present value
of the Supplemental Executive Retirement Plan (SERP) benefit
(using, for 1995, the Base Salary in effect as of 1/31/95) to
which Incumbent would be entitled at age 55 (grossed up for tax
purposes assuming an individual rate of 44.80%). Upon the making
of such payment to Incumbent, Company shall have no further
liability to Incumbent for any SERP benefit; except that the
Company shall be obligated to pay the Death Benefit pursuant to
the terms of the SERP upon Incumbent's death.
(g) Pay to the Incumbent, or his designated
beneficiary, all other benefits to which he is entitled by reason
of his having been an employee of the Company, which shall be
paid in the manner, amounts and at such times as are provided in
accordance with the terms and conditions thereof as in effect on
the Retirement Date, and using the Retirement Date as the date of
separation.
(h) In the event the Board of Directors of Energy
shall recommend, and the Board of Directors of Atlantic shall
adopt, a resolution which shall otherwise increase the amount of
Base Salary compensation to be paid to the Officers of Energy and
of Atlantic during calendar year 1995, in such event the Board of
Directors shall, in their sole discretion, establish a dollar
amount for Incumbent to be used for the sole purpose of
calculating an additional lump sum payment to be made to
Incumbent applying the following formula:
(i) Amount of increase, if any, as may be
determined by the Board in its discretion, to
be multiplied by 25%; the product
(ii) To be multiplied by the PBGC factor in effect
during 1995 (11.5243); to be
(iii) grossed up for tax purposes assuming an
individual tax rate of 44.80%.
It is the intent of this provision to pay to
Incumbent an amount to make Incumbent whole as if such increase
in salary had been in effect on the Retirement Date and the
increased salary amount would have been utilized to calculate the
present value of the SERP benefit to which Incumbent would
otherwise have been entitled.
It is understood and agreed, however, that
Incumbent is not to receive any additional Base Salary payment,
or any other additional compensation as a result of such action
having been taken by the Board of Directors of Energy and of
Atlantic, except as specifically set forth in this subsection (h)
of Paragraph 4. It is also understood and agreed that the Board
of Directors shall have the sole discretion to make such a
determination and as to the amount of any such award; and the
determination by the Board of Directors shall be final.
Payment of the Incentive Award and delivery of those
shares of restricted stock and the Stock Option referred to in
Subparagraphs (b), (c) and (d) of this Paragraph or shall be
consummated and delivered to Incumbent at such time as such
payment and award shall be made to all other Officers of the
Company.
Should Incumbent die prior to receiving any of the
payments or those shares of stock hereinabove referenced, payment
of such amount and/or delivery of such shares shall be made to
the Estate of the Incumbent or to such other beneficiary as
Incumbent shall designate in writing to be delivered to the
Company prior to his death to the extent permitted by the LTPIP
and the EIP.
Payment by the Company to Incumbent of the compensation
and benefits described in subsections (a) through (h) of this
Paragraph 4 shall be paid to Incumbent upon the condition that
Incumbent has executed and returned this Agreement together with
the General Release not later than January 24, 1995, and that the
revocation period specified in Exhibit A shall have expired
without revocation by Incumbent.
5. The consideration given to Incumbent pursuant to this
Agreement, with the exception of those benefits to which he and
his beneficiary or estate are otherwise entitled by reason of his
having been an employee of the Company, constitute the total
amount to which Incumbent is entitled as a result of his
employment with the Company and is paid in satisfaction of any
and all claims of any nature whatsoever, however arising, whether
known or unknown, which Incumbent has or may have against the
Company at any time as a result of, relating to or arising out of
his employment with the Company or his retirement and separation
therefrom.
6. Attached hereto and made a part hereof as Exhibit "B"
is Article VI of the By-Laws of Energy. Energy, on behalf of
itself and its subsidiaries, warrants and represents that
pursuant to these By-Laws (and the By-Laws of the applicable
subsidiary companies), Incumbent will be provided with
indemnification against liability (including attorney's fees and
related expenses) imposed upon or incurred by him in any
threatened, pending or completed investigation, claim, action,
suit, or proceeding, whether civil, administrative or
investigative in nature which may be instituted by or on behalf
of Energy, or any of its Subsidiaries, inclusive of Atlantic,
against Incumbent. Energy further represents and warrants that
in the event the By-Laws of Energy (or any subsidiary thereof)
are hereafter amended to alter or extinguish such obligation to
indemnify, notwithstanding such amendment or alteration, the
obligation to indemnify as set forth herein shall nonetheless
remain in full force and effect. In the event that Energy or its
applicable subsidiary refuses to indemnify Incumbent, or in the
event a Court of competent jurisdiction holds that Energy (or the
applicable subsidiary thereof) is not obligated to indemnify the
Incumbent (other than where a judgment or other final
adjudication establishes that the acts or omissions of the
Incumbent involved a knowing violation of law constituting
criminal conduct or are otherwise beyond the scope of indemnity
provided by the By-Laws as in effect at the time of execution and
delivery of this Agreement) then the General Release given to
Energy and its Subsidiaries, inclusive of Atlantic by Incumbent
shall become null and void for purposes of the litigation or
claim for which indemnity is being sought by Incumbent, and shall
not bar Incumbent from thereafter asserting any claim or
counterclaim he may have against Energy, or its Subsidiaries,
inclusive of Atlantic arising out of such litigation and failure
to indemnify. Furthermore, in the event Energy does not provide
such indemnification to the Incumbent, neither Energy nor its
Subsidiaries, inclusive of Atlantic, shall invoke any defense
based in whole or in part on any Statute of Limitations or on the
timeliness of such claim which may thereafter be instituted by
the Incumbent in accordance with the provisions of this paragraph
and limited to the litigation or claim for which indemnity is
being sought by Incumbent.
7. This Agreement shall apply to and be binding upon all
affiliated, related, parent, subsidiary and successor
corporations of the Company, and their assigns; and shall apply
to and be binding upon Incumbent, his personal representative,
heirs, executors, administrators, trustees, successors, assigns
and any and all persons who may succeed the legal rights and
interests of Incumbent.
8. In exchange for the undertakings of the Company
contained in Article 4, and as a condition precedent thereto,
Incumbent agrees to execute and deliver a General Release in the
form attached hereto as Exhibit A. Incumbent expressly
acknowledges that he is aware that he has rights under federal
and state laws which prohibit discrimination in employment based
on race, sex, national origin, age, religion, disability and
veteran rights, including the Age Discrimination in Employment
Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, the Equal Pay Act of 1963, as amended, the Employee
Retirement Income Security Act of 1974 (ERISA), as amended, the
New Jersey Law Against Discrimination, the New Jersey
Conscientious Employee Protection Act, the New Jersey Wage Law
and the Americans with Disabilities Act (hereinafter collectively
referred to as the "Acts"); and further acknowledges that this
Agreement and the attached General Release do legally bind
Incumbent to REMISE, RELEASE AND FOREVER DISCHARGE the Company
and its affiliated corporate entities, its and their respective
officers, directors, employees and agents, and it and their
predecessors, successors, assigns, heirs, executors and
administrators, of and from any and all manner of actions and
causes of actions, suits, debts, demands and claims whatsoever,
at law or in equity whether arising out of his employment with
the Company and his withdraw and retirement therefrom which
Incumbent ever had, now has, or hereafter may have, or which his
heirs, executors or administrators hereafter may have by reason
of any matter, cause or thing whatsoever from the beginning of
his employment with the Company to the Retirement Date and, more
particularly, but without limitation of the foregoing terms, any
and all claims concerning or relating in any way to his
employment relationship and/or his voluntary termination from
employment with the Company and his Retirement therefrom
including, but not limited to, all claims under any and all
federal, state, local and common laws dealing with employment,
separation and damages, including the Acts hereinabove referred
to in this Article, including any claims for counsel fees and
costs. It is expressly understood and agreed that this Agreement
shall operate as a clear and unequivocable waiver by Incumbent of
any claim for accrued or future wages or benefits except in
connection with any claim relating to pension or other retirement
benefits which may arise in the future. Incumbent further agrees
not to commence any legal action, in any form, against any
releasee identified in the attached General Release or any other
party connected with his employment with the Company with respect
to any right or claim, direct or indirect, encompassed by the
attached General Release and this Agreement, except to enforce
the terms of this Agreement.
9. Incumbent and the Company mutually covenant and agree
that they shall not engage in any communications which shall
disparage one another or interfere with their existing or
prospective business relationships or economic or career
prospects. The only exception to the foregoing shall be in those
circumstances in which Incumbent or the Company are obligated to
provide information in response to an investigation by a duly
authorized governmental entity or in response to legal
proceedings.
10. Incumbent agrees that, except as expressly provided
below, he will not communicate or disclose the terms of this
Agreement or of the attached General Release to or with any
person(s) with the exception of members of his immediate family,
his attorney(s), his financial advisor(s) and/or his
accountant(s). In such communication or disclosure, Incumbent
shall inform the recipient of the information that same is being
provided in a confidential manner and subject to a requirement of
confidentiality.
Company agrees that it will treat this Agreement and
the attached General Release as a personnel item to be retained
in the personnel file of Incumbent and not to be disclosed to
third parties without the express written consent of Incumbent;
except to the extent that same shall be required to be produced
in any legal proceeding, in response to an investigation by a
duly authorized governmental entity, or as required to be
disclosed by law.
11. It is expressly understood and agreed that any
violation of the confidentiality provision in the preceding
Article by Incumbent or Company, or anyone acting on his or its
behalf, shall be deemed to be a material breach of this
Agreement.
12. Incumbent agrees and recognizes that he has submitted a
voluntary request to the Company to modify and amend the terms of
a certain Employment Agreement in order to permit Incumbent to
retire without violating the terms of said Employment Agreement,
and that the Company has agreed to modify the terms of the
Employment Agreement to allow Incumbent to retire; and that this
Employment Separation and Release Agreement and the attached
General Release constitute a material portion of the amendment to
the Employment Agreement and have served as a material inducement
to Company to amend the Employment Agreement.
13.A. Incumbent agrees that he shall not, directly or
indirectly, knowingly disclose to any other person, firm or
corporation nor appropriate to his own use or to the use of any
person, firm or corporation, any Confidential Information (as
defined herein) used by or belonging to the Company, or any of
its subsidiaries or affiliates, except as may be expressly
authorized in advance by the Company in a writing signed by a
Senior Officer of the affected company.
For purposes of this Agreement, the term Senior Officer
shall mean a person holding a title within any of the companies
which constitute the Company of Senior Vice President or higher.
For purposes of this Agreement, the term Confidential
Information includes, by way of illustration and not limitation,
matters of a technical nature such as "know how", "formulae",
"processes", "procedures", "techniques", "machinery", "apparatus,
"inventions", "studies", "research projects", "technical data",
"development plans", "product specifications", as well as matters
of a business or financial nature such as, by way of illustration
and not limitation, information about the cost, sources of, and
arrangements for service or materials supplied to customers or
clients of the Company, submission and proposal procedures,
production, labor and/or material costs, profits and losses,
prices, discounts, sales, markets, customer lists, future plans,
trade secrets and proprietary information not generally available
to the public.
B. In addition, Incumbent represents and warrants that
he will never, directly or indirectly lecture upon or publish
articles concerning any Confidential Information without first
having obtained from the affected company prior approval and
written consent in the manner hereinabove contained.
C. Incumbent shall act with due diligence in order
that, on or before February 1, 1995, Incumbent shall have turned
over to the Company all documents and other things, and all
copies thereof within his possession, custody or control which
may contain or which may have been derived from, or which may
have the potential of disclosing any Confidential Information.
D. Notwithstanding the preceding subparagraphs of this
Article, it is understood and agreed that Incumbent shall not be
bound by any covenant not to compete. He shall be permitted to
engage in employment with a competitor of the Company without
limitation as to time or geographical area. However, by engaging
in such employment, Incumbent represents and warrants that he
will not violate the provision of Subparagraphs A through C of
this Article and will not, directly or indirectly, disclose any
Confidential Information of the Company or of any of its
subsidiaries or affiliates, except as expressly authorized in
advance by the Company in the manner set forth in Subparagraph A
of this Article.
14. In the event of a breach by Incumbent of any of
Articles 8, 9, 10 or 13 of this Agreement or of the attached
General Release, the Company shall be relieved and discharged of
its obligations under the terms of this Agreement to provide
Incumbent with any consideration which is in addition to the
payments and benefits to which he and his beneficiaries or his
estate are entitled by reason of his having been an employee of
the Company in accordance with the terms and conditions of such
plans and policies; and shall thereupon be entitled to institute
an action to obtain any damages that may arise from such breach.
In addition, the parties recognize that money damages are
inadequate to compensate the Company for irreparable harm that
may result from a breach of the confidentiality provisions
contained within Article 13 of this Agreement and that equitable
remedies are appropriate, inclusive of injunctive relief, which
shall be in addition to any other remedies available to the
Company at law or in Equity.
In the event of a breach by the Company of Article 9 or 10 of
this Agreement or of the attached General Release, the Incumbent
shall be entitled to institute an action for any damages which
may arise from such a breach. In addition, the parties recognize
and agree that money damages may be inadequate to compensate the
Incumbent for irreparable harm that may result from a breach of
the recommendation and confidentiality provisions contained in
Articles 9 and 10, respectively, and that equitable remedies are
appropriate, inclusive of injunctive relief, which shall be in
addition to any other remedies available to the Incumbent at law
or in Equity.
In the event either party shall be required to commence an
action, at law or in equity, to enforce its rights under or as a
result of a breach of this Agreement, the parties shall bear
their own attorneys' fees and costs.
15.Incumbent acknowledges that he has been informed of his right
to consider this Agreement and the terms thereof for a period of
at least twenty-one (21) days prior to executing and delivering
this Agreement to the Company; and that Incumbent has considered
this Agreement and the terms thereof for in excess of twenty-one
(21) days. He further acknowledges that he understands his right
to revoke this Agreement and the attached General Release, by
giving written notice to the Company in the manner set forth in
the General Release attached hereto as Exhibit A. Such notice
shall be effective upon receipt by the Company. This right is
being provided to Incumbent as required under the Age
Discrimination in Employment Act.
Incumbent further acknowledges that he has been given the
opportunity to have this Agreement and the attached General
Release reviewed by attorney(s), accountant(s) and/or financial
advisor(s) of his own choice; and that Incumbent has provided
comments which have been incorporated into this Agreement to his
satisfaction.
16. In further consideration of the undertakings by
Company, which consideration is deemed by Incumbent to be fair,
adequate and reasonable, Incumbent agrees, covenants and warrants
that Incumbent shall hereafter, and at all reasonable times,
cooperate with the Company and any affiliates and subsidiaries
thereof in the analysis, prosecution or defense of any claim
which may hereafter be asserted, as to which Incumbent has
knowledge as a result of his employment with the Company, which
shall include but not be limited to Incumbent's attendance at
depositions, trial and similar activities. The Company shall
exercise reasonable efforts to minimize Incumbent's participation
and to cooperate with Incumbent in scheduling appearances at such
proceedings. This agreement to cooperate shall extend to any
matters which are alleged to have arisen during Incumbent's
employment with the Company.
17. This Agreement and the attached General Release contain
the entire Agreement with respect to the matters contained herein
and therein and cannot be altered or amended except in a writing
duly executed by the parties or their legal representatives.
18. Nothing in this Agreement or the attached General
Release shall be construed or considered as evidence of or an
admission by the Company of a violation of the United States
Constitution, of the Age Discrimination in Employment Act, of
Title VII of the Civil Rights Act of 1964, as amended, of the New
Jersey Law against Discrimination, of the New Jersey
Conscientious Employee Protection Act, of the New Jersey Wage
Law, of the Equal Pay Act of 1963, as amended, of the Employee
Retirement Income Security Act of 1974 (ERISA), as amended, of
the New Jersey Conscientious Employee Protection Act, of the
Americans with Disabilities Act, of any other act, law, rule or
regulation referred to herein or of any other federal, state or
local law, statute, ordinance, code, regulation, rule or order;
and any such violation is specifically denied.
19. This Agreement and the attached General Release shall
be interpreted, construed and enforced in accordance with the
laws of the State of New Jersey. Should any part of this
Agreement or of the attached General Release be determined to be
unenforceable by a court of competent jurisdiction, the parties
shall immediately meet to amend the Agreement or Release to
effectuate the intent of the parties; and the surviving portions
of the Agreement and Release shall remain binding and enforceable
and in full force and effect.
20. Any notices required to be given under this Agreement
or Release shall be either hand-delivered or delivered by
certified mail, return receipt requested and shall be directed as
follows:
If to Company:
Jerrold L. Jacobs
Chairman, President & CEO
Atlantic City Electric Company
6801 Black Horse Pike
P.O. Box 1264
Pleasantville, NJ 08232
If to Incumbent:
Jerry G. Salomone
306 Reed Road
Absecon, NJ 08201
or to such other person and/or to such other address as the party
to receive notice may, from time to time, indicate in writing.
IN WITNESS WHEREOF, intending to be legally bound, the
parties hereto attach their signatures and seals effective the
date and year first above written.
DATE: INCUMBENT:
1/31/95 /s/ J. G. Salomone
J. G. Salomone
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
I hereby certify that on January 31, 1995,
Jerry G. SALOMONE, personally came before me and acknowledged
under oath, to my satisfaction, that he is the person named in
and that he did personally sign this Employment Separation and
Release Agreement.
/s/ Paula M. James
Notary Public - State of New Jersey
ATTEST: DATE: ATLANTIC CITY ELECTRIC
COMPANY:
/s/ L. M. Walters 1/31/95 /s/ Jerrold L. Jacobs
L. M. Walters, BY: Jerrold L. Jacobs
Secretary President and Chief
Executive Officer
ATTEST: DATE: ATLANTIC ENERGY, INC.:
/s/ J. E. Franklin, II 2/6/95 /s/ J. M. Galvin, Jr.
J. E. Franklin, II BY: J. M. Galvin, Jr.
Asst. Secretary Chairman of the
Personnel Committee
of Atlantic Energy, Inc. and
designated by the Board of
Directors of Atlantic Energy,
Inc. as the individual
authorized to execute and
deliver this Employment
Separation and Release
Agreement on behalf of
Atlantic Energy, Inc.
<PAGE>
GENERAL RELEASE, WAIVER and ACKNOWLEDGMENT
In consideration of the undertakings of Atlantic Energy,
Inc. and each of its Subsidiaries, inclusive of Atlantic City
Electric Company (hereinafter collectively referred to as the
"Company") set forth in Article 5 of the Employment Separation
and Release Agreement to which this Exhibit A is appended, which
provide for payment to me over and above those payments and
benefits to which I am otherwise entitled by reason of having
been an employee of the Company and subject to the terms and
conditions thereof, I hereby release, waive and discharge the
Company, and each of them, and their present and former
Directors, Officers, employees, agents, representatives and
attorneys and their respective successors, assigns, executors,
administrators, estates and heirs from and against any and all
claims of whatever nature, inclusive of claims for wrongful
discharge, property damage, personal or bodily injury which I, my
estate and heirs may have against any of them. This Release is
intended to be legally binding and to release, relinquish,
discharge, extinguish and waive any and all claims, whether known
or unknown, direct or indirect which were or could have been or
may hereafter be asserted, resulting from anything which has
occurred through the effective date of this Release, including
claims for attorneys' fees. I hereby promise not to commence or
pursue, or to authorize anyone to commence or pursue on my behalf
or in my interest any action whether legal, equitable or
administrative, or to otherwise seek to recover any damages,
remedy or relief of any kind from any releasee within the
contemplation of this Release based upon any claim covered by
this General Release, Waiver and Acknowledgment.
Without limiting the scope of the foregoing in any way, I
hereby acknowledge and confirm that my separation from employment
as an Officer and employee of the Company constitutes my
voluntary act and deed made of my own free will and without
duress, undue influence or any other pressure or condition
exerted or imposed upon me in any form by the Company or anyone
acting on its behalf; and I specifically release and waive any
and all claims relating to or arising out of any aspect of my
employment with the Company or the separation therefrom
including, but not limited to, all claims under the Age
Discrimination in Employment Act (29 USC Sec. 621, et seq..),
Title VII of the Civil Rights Act of 1964 (42 USC Sec. 2000(e),
et seq.), as amended, the New Jersey Law Against Discrimination
(N.J.S.A. 10:5-1 et seq.), the New Jersey Conscientious Employee
Protection Act (N.J.S.A. 34:19-1 et seq.), the New Jersey Wage
Law (N.J.S.A. 34:11-44.1 et seq.) and the Americans with
Disabilities Act (42 USC Sec. 12101 et seq.), the Equal Pay Act
of 1963 (29 USC Sec. 206, et seq.), the Employee Retirement
Income Security Act of 1974 (ERISA), as amended, (29 USC Sec.
301, et seq.), the Employment Contract dated February 10, 1994,
as amended, any other contract of employment, express or implied,
any provision of the Constitution of the United States of America
or of the Constitution of the State of New Jersey, and any other
law, whether common or statutory, and any rule, regulation or
order of the Unites States, the State of New Jersey, or any other
state, and all claims arising out of any legal restrictions on
the rights of the Company or its Affiliates with respect to
termination of employment and retirement except for any claims
regarding pension or other retirement benefits which may arise in
the future.
I certify that I have read the terms of this General
Release, Waiver and Acknowledgment, that I have been advised by
the Company to consult an attorney of my own choice prior to
executing this Agreement, that I have discussed it with my
attorney, and that he understands its terms and effects. I
further acknowledge that I am executing this Agreement and
Release of my own volition, with a full understanding of its
terms and effects, and with the intention of releasing all claims
recited herein in exchange for the consideration described
herein, which I acknowledge to be fair, adequate and satisfactory
to me. Neither the Company nor its agents, representatives,
employees or attorneys have made any representations to me
concerning the terms or effects of this General Release, Waiver
and Acknowledgment other than those contained herein and in the
Employment Separation and Release Agreement to which it is a
part.
I UNDERSTAND THAT FOR A PERIOD OF SEVEN (7) CALENDAR DAYS
FOLLOWING THE SIGNING OF THIS GENERAL RELEASE, WAIVER AND
ACKNOWLEDGEMENT, I MAY REVOKE IT IN A WRITING ACKNOWLEDGED BY THE
CHIEF EXECUTIVE OFFICER OF THE COMPANY, AND THAT THIS GENERAL
RELEASE, WAIVER AND ACKNOWLEDGMENT WILL NOT BE EFFECTIVE OR
ENFORCEABLE UNTIL SUCH REVOCATION PERIOD HAS EXPIRED. UPON
EXPIRATION OF SUCH REVOCATION PERIOD I UNDERSTAND AND ACKNOWLEDGE
THAT THIS GENERAL RELEASE, WAIVER AND ACKNOWLEDGEMENT AND THE
EMPLOYMENT SEPARATION AND RELEASE AGREEMENT TO WHICH IT IS
APPENDED SHALL BECOME FINAL AND ENFORCEABLE.
/s/ J. G. SALOMONE
J. G. SALOMONE
DATED: January 31, 1995
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
I hereby certify that on January 31, 1995, Jerry G.
Salomone, personally came before me and acknowledged under oath,
to my satisfaction, that he is the person named in and that he
did personally sign this General Release, Waiver and
Acknowledgement.
/s/ Paula M. James
Notary Public
State of New Jersey
ATLANTIC CITY ELECTRIC COMPANY
BY:/s/ J. L. Jacobs
J. L. Jacobs
President & Chief Executive Officer
ATTEST:
/s/ L. M. Walters
L. M. Walters, Secretary
DATED:January 31, 1995
ATLANTIC ENERGY, INC.
BY: /s/ J. M. Galvin, Jr.,
J. M. Galvin, Jr.,
Chairman of the Personnel Committee
of Atlantic Energy, Inc. and
designated by the Board of
Directors of Atlantic Energy, Inc.
as the individual authorized to
execute and deliver this General
Release, Waiver and Acknowledgment
on behalf of Atlantic Energy, Inc.
ATTEST:
/s/ J. E. Franklin, II
J. E. Franklin, II, Assistant Secretary
DATED: February 6, 1995
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
among
Jerry G. Salomone, Atlantic City Electric Company
and Atlantic Energy, Inc.
THIS Employment Agreement Amendment is entered into
effective the 31st day of January, 1995 among Atlantic City
Electric Company, a corporation of the State of New Jersey
(hereinafter the "Company"), Atlantic Energy, Inc. ("Energy") and
Jerry G. Salomone ("Executive") (collectively the "Parties").
WHEREAS, an Employment Agreement was entered into among the
Parties on the 10th day of February, 1994; and
WHEREAS, the Term of Employment pursuant to the Employment
Agreement expires at the close of business on the date of the
Annual Meeting of the shareholders of Energy in 1997, subject
only to such earlier termination as specifically provided within
Article 5 of the Employment Agreement; and
WHEREAS, the Parties hereto agree that none of the Early
Termination Provisions enumerated within Article 5 of the
Employment Agreement which would allow for Termination by the
Executive, by Company or by Energy have occurred during the term
of the Employment Agreement; and
WHEREAS, the Executive has requested Energy and the Company
to amend the terms of the Employment Agreement to grant the
Executive's request to voluntarily retire from the Company and
Energy effective on the first day of the first month following
Executive's 55th birthday; and
WHEREAS, Energy and Company have agreed to the request made
by the Executive, and have agreed to pay the Executive certain
additional consideration as more specifically set forth in the
Employment Separation and Release Agreement attached hereto as
Schedule 1; and
WHEREAS, Executive, Company and Energy have mutually agreed
to the amount of consideration, the manner and method of payment,
and the selection by the Executive of the retirement date,
In consideration for the mutual promises, covenants and
agreements expressed in this Agreement Amendment, and the
attachments hereto, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. The recital clauses hereinabove set forth are
incorporated herein and made a material part of this Agreement
Amendment.
2. The Termination Date specified in the Employment
Agreement is hereby modified. The Termination Date shall now be
close of business on January 31, 1995.
3. This Employment Agreement Amendment shall become
effective and legally binding upon the parties hereto upon
execution and delivery by the Executive of this Amendment and the
execution and delivery by Executive of the Employment Separation
and Release Agreement and the General Release, Waiver and
Acknowledgment attached thereto (both of which documents are
incorporated herein and made a part hereof and are contained
within Schedule 1 attached hereto); and upon execution of same by
the Company and Energy. Whereupon, the employment relationship
of the Executive with the Company and Energy, and their
affiliates will be permanently and irrevocably severed; and
neither Company nor Energy nor any of its affiliated or related
companies shall have any obligation, contractual or otherwise, to
hire, rehire or re-employ Executive at any time.
4. The Parties mutually represent, covenant and warrant to
the other that neither has a right to terminate this Agreement
for any of the reasons or conditions set forth in Article 5 of
the Employment Agreement; and Executive represents and warrants
that his request to amend the Employment Agreement to allow for
his Retirement from the Company is made of his own free will,
without duress, undue influence or any other pressure or
condition exerted or imposed upon him in any form by Energy, the
Company, or any of their affiliates, or by anyone acting by or on
their behalf; and is not based upon any representations made to
Executive by Energy, the Company, or any of their affiliates, or
their agents, representatives, employees or attorneys except
those specifically contained herein and in the documents attached
hereto as Schedule 1.
5. Upon satisfaction of the conditions precedent
hereinabove set forth, the employment of the Executive as an
officer of Energy, as an officer and director of Atlantic City
Electric Company and as an officer and director of Deepwater
Operating Company will terminate effective close of business on
January 31, 1995. Executive represents that he has heretofore
voluntarily submitted letters of resignation effectuating his
resignation as a Director of Atlantic Generation, Inc., ATE
Investment, Inc., Atlantic Southern Properties, Inc., Atlantic
Energy Technology, Inc., Atlantic Thermal Systems, Inc. and of
each such subsidiary thereof upon which he may have served as a
Director or an Officer; and has also submitted his resignation as
a member of the Board of Managers of Cogeneration Partners of
America. Each such resignation has heretofore been accepted and
the letter of resignation has been duly filed in the record books
of each respective company.
6. Executive hereby agrees to execute and deliver such
additional documents, inclusive of but not limited to, letters of
resignation, which may be necessary or desirable, in the opinion
of Energy, the Company or the non-regulated subsidiaries to
evidence Executive's retirement and resignation therefrom.
7. The Employment Agreement will terminate at close of
business on January 31, 1995 whereupon none of the Parties hereto
shall have any further employment obligation to the other under
the Employment Agreement; and the relationship among the Parties
shall thereupon be governed and controlled by the terms of the
Employment Separation and Release Agreement and the General
Release, Waiver and Acknowledgment.
8. This Employment Agreement Addendum incorporates
Articles 8 through 13 of the Employment Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this
Employment Agreement Addendum the date and year first above
written.
ATTEST: ATLANTIC ENERGY, INC.
/s/ L. M. Walters BY:/s/ J. M. Galvin, Jr.,
L. M. Walters, Assistant J. M. Galvin, Jr.,
Secretary Chairman of the Personnel Committee
of Atlantic Energy, Inc. and
designated by the Board of
Directors of Atlantic Energy, Inc.
as the individual authorized to
execute and deliver this Employment
Agreement on behalf of Atlantic
Energy, Inc.
ATTEST: ATLANTIC CITY ELECTRIC COMPANY
/s/ L. M. Walters BY:/s/ J. L. Jacobs,
L. M. Walters, Secretary J. L. Jacobs, President
and Chief Executive Officer
WITNESS: EXECUTIVE:
Paula M. James /s/ J. G. Salomone
J. G. Salomone
Exhibit 10a(23)
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective the
1st day of October, 1994, among ATLANTIC CITY ELECTRIC COMPANY ("Company"), a
corporation of the State of New Jersey, ATLANTIC ENERGY, INC. ("Energy"), and
James E. Franklin, II, Esq. ("Executive") .
AS consideration for the mutual promises, covenants and agreements
expressed in this Agreement, the parties hereto, intending to be legally bound
agree as follows:
1. Term of Employment.
The Executive's term of employment shall commence October 1, 1994
(the "Commencement Date"), and shall terminate at the close of
business on the date of the Annual Meeting of the Shareholders of
Energy in 1997, (the "Term of Employment") subject only to such
earlier termination as specifically provided in Article 5 hereof
(the "Termination Date"). No extension of the term of employment
shall occur without the written agreement of Executive, Company
and Energy.
2. Place of Employment.
The Executive's services during the term of this Agreement shall
be performed primarily at the principal offices of the Company.
The Executive shall be furnished with a suitable office and such
other facilities and services as he may reasonably require in
performing his obligations under this Agreement.
3. Employment Options.
A. Executive Position: The Company hereby agrees to employ the
Executive as its General Counsel for the Term of Employment. It is
understood and agreed that the position of General Counsel is a
Senior Vice Presidential level position and shall be considered as
such for all purposes.
B. Executive Responsibility: Executive hereby accepts
employment with the Company as its General Counsel and agrees that
during the Term of Employment the Executive shall exercise his
reasonable best efforts in furtherance of, and shall devote
substantially all of his working time and attention to the affairs
of the Company, Energy or any subsidiary or affiliate thereof, and
shall perform such duties and services as may reasonably be
assigned to him by, and shall report directly to the President and
Chief Executive Officer of the Company; provided, however, that
the Executive may serve as a director of other corporations or
organizations upon approval by the Board of Directors of the
Company and by the Board of Directors of Energy (the "Boards")
which, in the judgment of the Boards, will not present any
conflict of interest with the Company, Energy or any subsidiary or
affiliate thereof, and which would not affect the performance of
Executive's duties pursuant to this Agreement, which approval
shall not be unreasonably withheld; and provided further that the
Executive shall neither (a) become an officer or director of (i)
another entity which has or will have the status of a public
utility under the Federal Power Act, or any successor Act, (ii)
any bank, trust company, banking association, or firm that is
authorized by law to underwrite or participate in the marketing of
securities of a public utility, or (iii) any company supplying
electrical equipment to the Company, nor (b) accept any such
position and commence the performance of any duties or services in
such capacity (herein called an "Interlock"), unless the Executive
shall have first (x) furnished the Boards with at least thirty
(30) days prior written notice of his intention to create such
Interlock and (y) secured, if the Boards shall request that such
action be taken, any necessary authorization for such Interlock,
in form and substance satisfactory to the Boards, from the Federal
Energy Regulatory Commission, or successor regulatory agency,
pursuant to Section 305(b) of the Federal Power Act, or any
supplement or amendment thereto.
4. Compensation.
A. Base Salary and Supplements: During the Term of Employment,
the Company shall pay to the Executive a base salary of one
hundred seventy-five thousand dollars ($175,000.00) per annum
(which shall be prorated in any partial calendar year), (the "Base
Salary"). Such Base Salary shall be payable by the Company in
installments to conform with regular payroll payment dates for
officers of the Company. The Base Salary shall be reviewed
annually by the Board. There shall be no downward adjustment in
the Base Salary unless as part of a plan affecting all officers;
and there shall be no proportionately greater reduction in the
Base Salary of the Executive as compared to any other officer.
The Executive shall be paid from time to time during the Term of
Employment, in addition to his Base Salary, such incentive
compensation as the Board shall in its discretion, elect to pay to
the Executive.
B. Other Expenses and Other Benefits: During the Term of
Employment the Executive shall be entitled to such employee
benefits and perquisites as shall be available, from time to time,
to officers of the Company. Neither the Company nor Energy shall
make any voluntary changes in such employee benefit plans or
perquisites which would adversely affect Executive's rights or
benefits thereunder, unless such change is applicable to all
officers of the Company; and no such change shall result in a
proportionately greater reduction in the rights or benefits of the
Executive as compared with any other officer of the Company. The
Company and Energy further agree that no such benefit or
perquisite shall be changed in such a manner as to reduce any
benefit or award earned or accrued by Executive prior to the date
of any such modification, except as may be required by statute or
regulation or to maintain the qualified status of an employee
benefit plan.
Executive shall receive reimbursement for all reasonable travel
and other authorized expenses incurred by Executive in performing
his obligations under this Agreement, or such expenses may be paid
directly by the Company, all in accordance with the normal
policies and practices of the Company.
5. Early Termination Provisions.
A. Early Termination: The Executive's employment hereunder may
be terminated prior to the Termination Date without breach of this
Agreement only upon the following circumstances:
(a) Death: The Executive's employment hereunder shall
terminate on the date of the Executive's death. The Company
shall thereupon pay to the Executive's designated
beneficiary, in addition to any other benefits payable by or
on behalf of the Company, Energy or any subsidiary or
affiliate thereof, Executive's then current Base Salary
through the date of death.
(b) Disability: If, as a result of the Executive's
incapacity due to physical or mental illness or accident,
the Executive shall have been incapable or unable to
substantially perform the Executive's duties hereunder on a
full-time basis for a period of six (6) consecutive months,
the Company, at any time thereafter and while such absence
continues, may give written notice of early termination to
the Executive if, in the good faith opinion of a majority of
the Board of the Company the Executive is incapable or
unable to substantially perform his duties on a full-time
basis. Early termination shall be effective as of the date
set forth in said notice.
The Company shall pay to the Executive his Base Salary
through such early termination date, together with any other
earned and accrued benefits then in effect to which the
Executive would otherwise be entitled. Following such early
termination, the Executive shall be entitled to all benefits
available through the Disability Benefit Plan covering
officers of the Company.
(c) Cause by the Company: The Company may terminate the
Executive's employment hereunder for cause. For purposes of
this Agreement, the Company shall have cause to terminate
the Executive's employment hereunder only upon either
willful and continuous failure by the Executive to
substantially perform his duties hereunder (other than
failure resulting from incapacity due to physical or mental
illness), or willful engagement in misconduct which results
in economic damage to the Company. In either such event the
Board shall provide Executive with a notice of termination,
stating that in the good faith opinion of a majority of the
members of the Board of Energy who are not employees of the
Company, the Executive is being terminated and setting forth
the reasons for the Company's exercise of its right to
terminate for cause. In such notice, an early termination
date shall be stated, which shall be not less than twenty
(20) days from the date of said notice (the "Early
Termination Date").
In the event of the early termination of this Agreement for
cause, the Company shall pay to the Executive his Base
Salary through the Early Termination Date. In addition, the
Executive shall be entitled to all other earned and accrued
benefits to which the Executive would otherwise be entitled
through the Early Termination Date. Neither the Company nor
Energy shall have any further financial obligation to the
Executive; provided, however, that in the event of a
determination through arbitration that termination for Cause
was without basis, the Executive shall then be entitled, if
so determined by the arbitrator(s), to receive an award of
up to his Base Salary through the Termination Date, together
with an amount determined by the Company's actuary to be
equal to the value of the employee benefits the Executive
was deprived of by reason of the wrongful termination of
employment, and together with interest thereon calculated at
the prime rate(s) in effect for the period as established by
The Bank of New York, or its successor. Payment of such
arbitrators award by the Company shall constitute full and
final discharge of any and all financial obligations of the
Company and of Energy or any subsidiary or affiliate thereof
to the Executive.
(d) Termination by the Executive: The Executive may
exercise early termination without constituting a breach of
this Agreement upon not less than thirty (30) days advance
written notice to the Company and to Energy only in the
event of:
(i) assignment to the Executive, without the
Executive's express written approval of duties
materially inconsistent with the Executive's position,
duties, responsibilities, or status with the Company
immediately prior to any change in control of the
Company or of Energy, as hereinafter defined; or
(ii) relocation, without the prior written consent of
the Executive, of the principal offices of the Company
or relocation of the Executive's personal office to a
location more than sixty-five (65) miles from said
location prior to any change in control; or
(iii) Executive's position is eliminated or the duties
and responsibilities of the Executive are materially
and adversely changed as a result of a reorganization
or restructuring of the Company or of Energy without
the participation of and approval by Executive,
regardless of whether there has been a change in
control.
For purposes of this Agreement, a change in control of the Company
or of Energy shall be deemed to have occurred if (i) the persons
who constituted a majority of the members of the Board of Energy
at the commencement of this Agreement shall cease to constitute a
majority of the Board of Energy, unless the election or the
nomination for election by the shareholders of each such new
director was approved by two-thirds of the members of the Board of
Energy who were in office at the commencement of this Agreement,
or by those Directors of Energy who shall have been added after
the date of commencement of this Agreement and who shall have been
elected without written objection of the Executive; (ii) as a
result of a tender offer, merger, consolidation, sale of assets or
contested election, or any combination of the foregoing
transactions, the Company and/or Energy shall become a subsidiary
of another corporation or either of them shall be merged or
consolidated into another corporation, or if substantially all of
the assets of the Company and/or Energy shall be sold to another
corporation.
The exercise by the Executive of early termination as a result of
any of the events, or combination thereof, described within
subparagraphs (i) through (iii) of this subsection, shall be
communicated to the Company and to Energy by a written notice of
termination. The notice of termination shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for early termination of the Executive's employment and the
provisions of this Agreement upon which the decision shall have
been based. Such written notice shall be communicated and
delivered not less than thirty (30) days in advance of the date of
early termination.
If such a notice of termination shall have been properly given and
supported by the events giving rise to such election, the Company
shall thereupon pay to the Executive, in addition to any other
benefits payable by or on behalf of the Company, Energy or their
affiliates; (a) the Executive's Base Salary in effect at the time
of termination, through the Termination Date which, at the
discretion of the Company, may be payable either in up to three
(3) equal installments with the first such installment payable not
later than sixty (60) days following the date of early
termination, and the last such installment payable not later than
the Termination Date, or in equal installments to conform with the
regular payroll payment dates for officers of the Company (Federal
and State Income Taxes and other payroll deductions shall be
deducted from such payments); (b) all salary supplements, bonuses
and perquisites which shall have been earned through the date of
early termination, which shall be prorated; (c) all rights and
benefits under any plan in which the Executive was then
participating related to the award of securities of Energy, which
shall be accelerated and shall become exercisable immediately in
full to the extent same shall have become vested and capable of
determination. Any securities previously granted to the Executive
which remain subject to any restrictions at the time of early
termination shall have all such restrictions removed immediately
following such early termination; (d) continuation of the
Executive's medical plan benefits until the earlier of the
Termination Date or the effective date of Executive's coverage
under a subsequent employers plan or policy; and (e) an amount
determined by the Company's actuary to be equal to the value of
Executive's rights, benefits and awards for purposes of all
retirement, deferred compensation and supplemental executive
retirement plans through the Termination Date as if the Executive
had continued through such date, and Termination Date shall be
deemed to be the Executive's retirement date for purposes of said
plans. In making such calculations, and in determining the
benefits to be awarded, the Executive's age and years of service
shall be based upon the age and years of service which would have
been achieved as of the Termination Date.
Notwithstanding the obligations undertaken by the Company in
Subsection (e) above, it is understood and agreed that the
Executive shall be entitled to all retirement benefits of the
Company as of the date of early termination. However, the benefits
under all such plans shall be calculated and determined in
accordance with Subsection (e).
Other than medical plan benefits, no other benefits to be paid to
Executive pursuant to this section shall be offset or subject to
mitigation as a result of Executive's subsequent employment
following the date of early termination.
B. Termination by Company: Any termination of the Executive by
the Company or by Energy for any reason other than as specifically
provided in Article 5 shall constitute a termination by the
Company in breach of this Agreement. The Company shall thereupon
be obligated to pay to the Executive the same amounts and in the
same manner as if the Executive had terminated this Agreement in
accordance with Article 5A(d); and upon satisfaction of those
obligations, there shall be no further payments due or owing by
the Company or by Energy to the Executive.
6. Successors; Binding Agreement.
(a) The Company and Energy shall require any successor (whether
direct or indirect, by purchase, merger, consolidation,
condemnation or otherwise) to all or substantially all of the
business and/or assets of the Company or of Energy, by agreement
in form and substance satisfactory to the Executive, to expressly
assume and to agree to perform this Agreement in same manner and
to the same extent that the Company and Energy would be required
to perform if no such succession had taken place.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors,
assigns, heirs, administrators, executors and legal
representatives.
(c) This Agreement shall not be assignable except as
specifically provided herein and may not be assigned, pledged or
sold by the Executive for the benefit of the Executive or for the
benefit of the Executive's creditors.
(d) The Executive shall not have any vested right in any payment
to be made hereunder prior to the time when such payment is to be
made by the terms hereof.
Nothing contained within this Article 6 is intended to limit or
restrict the ability of Executive to exercise the early
termination provisions of Article 5.
7. Arbitration and Payment of Fees and Expenses.
Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) neutral arbitrators in
accordance with the commercial rules of the American Arbitration
Association then in effect. The arbitrators shall sit within
Atlantic County, New Jersey. Judgment may be entered upon the
arbitrators' award in any court having jurisdiction.
8. Governing Law.
The execution, validity, interpretation, performance and
enforcement of this Agreement shall be governed and determined in
accordance with the laws of the State of New Jersey
9. Entire Agreement.
This Agreement contains the entire agreement of the parties. This
Agreement may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement is sought.
10. Separability.
If any provision of this Agreement shall be rendered or declared
illegal, invalid or unenforceable by reason of any existing or
subsequently enacted legislation or by decree of a court of
competent jurisdiction, such determination shall not affect the
validity or enforceability of any other provision of this
Agreement. In the event of such determination, the parties hereto
shall promptly meet to negotiate and agree upon substitute
language to give effect to the intent of the parties and, if
replacement language cannot be agreed upon, either party may seek
recourse through arbitration in accordance with Article 7.
11. Article Headings.
Article headings are included for convenience only and are not
intended to affect the meaning or interpretation of this
Agreement.
12. Counterparts.
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
13. Waiver.
The waiver by either party of a breach of any provision of this
Agreement by the other shall not be construed as a waiver of any
subsequent breach.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date and year first above written.
ATTEST: ATLANTIC ENERGY, INC.
/s/ J. G. Salomone BY: /s/ J. M. Galvin, Jr.
J. G. Salomone J. M. Galvin, Jr., Chairman
of the Personnel Committee
of Atlantic Energy, Inc.
and designated by the Board
of Directors of Atlantic
Energy, Inc. as the
individual authorized to
execute and deliver this
Agreement on behalf of
Atlantic Energy, Inc.
ATTEST: ATLANTIC CITY ELECTRIC COMPANY
/s/ L. M. Walters BY: /s/ J. L. Jacbos
L. M. Walters J. L. Jacobs, Chairman,
President and Chief
Executive Officer
WITNESS: EXECUTIVE:
/s/ Lois F. Jennings /s/ James E. Franklin, II
James E. Franklin, II
frank794.wpd
Exhibit 10a(24)
EMPLOYMENT SEPARATION and RELEASE AGREEMENT
between
S. D. McMillian
and
Atlantic Energy, Inc.
and its affiliated and subsidiary companies
inclusive of
Atlantic City Electric Company
This Employment Separation and Release Agreement
(Agreement) is made and entered into effective the 31st day of
March, 1994 by and between S. D. McMILLIAN (Incumbent)
residing at 8157 East Beach Drive, N.W., Washington, D.C.
20012 and Atlantic Energy, Inc. and its affiliates and
subsidiaries including Atlantic City Electric Company
(hereinafter collectively referred to as the "Company") having
a principal Executive Office located at 6801 Black Horse Pike,
Pleasantville, County of Atlantic, State of New Jersey.
WHEREAS, Incumbent had been employed by the Company for
some time past in the capacity of an Officer and employee; and
WHEREAS, Incumbent had given oral notice and has
confirmed in a writing her intent to terminate and withdraw
from continued employment with the Company, as her voluntary
act and deed (hereinafter referred to as the "Notice of
Separation"); and
WHEREAS, the Company has agreed to accept the Notice of
Separation; and
WHEREAS, Incumbent and the Company have agreed that
Incumbent shall withdraw from and terminate the employment
relationship with the Company upon the terms and conditions
more fully set forth herein;
NOW, THEREFORE, in consideration of the mutual promises
and covenants herein contained which the parties hereto hereby
agree constitute fair, reasonable and valuable consideration,
Incumbent and the Company, intending to be legally bound,
hereby represent, covenant and agree as follows:
1. The Recital Clauses hereinabove set forth are
incorporated and made a material part of this Agreement.
2. Incumbent shall terminate and withdraw from full
time employment as an Officer and employee of the Company
effective close of business on March 31, 1994 (the
"Termination Date"). Incumbent acknowledges that the
Termination Date has been mutually agreed to between Company
and Incumbent.
3. Notwithstanding the preceding paragraph, in
consideration of the payment referred to in the next
succeeding paragraph, Incumbent agrees to be available to
consult with the Company through close of business on December
31, 1994. Incumbent agrees to provide such consultation,
without additional compensation, except for reimbursement of
reasonable out-of-pocket expenses upon approval by the
Company. Incumbent shall provide such consultation upon the
approval of the Chief Executive Officer of Atlantic City
Electric Company. Incumbent shall have no obligation to
provide any continuing consultation beyond the close of
business on December 31, 1994.
4. In addition to any benefit to which Incumbent is
otherwise entitled by reason of having been an employee of the
Company, the Company agrees to:
(a) Pay Incumbent in a single lump sum payment an
amount equivalent to her current regular monthly salary as
established by the Board of Directors of the Company which
would otherwise have been paid for the period April 1, 1994
through December 31, 1994, net of deductions. This payment
will be made upon the condition that Incumbent has executed
and returned this Agreement not later than April 20, 1994 and
the revocation period specified in Exhibit A shall have
expired without revocation by Incumbent. This payment will
then be made to Incumbent as soon as practicable following
expiration of the revocation period.
(b) Pay Incumbent an Incentive Award pursuant to
the 1994 Management Annual Incentive Compensation Plan of
Atlantic Energy, Inc., and its Subsidiaries (the "Plan"). For
purposes of determining the amount of such Incentive Award,
Incumbent shall be deemed to have satisfactorily contributed
to the achievement of Performance Goals during the first
quarter 1994 Plan year;
(c) Deliver to Incumbent shares of stock pursuant
to the Company Long-Term Performance Incentive Plan currently
in effect covering the period January 1, 1993 through December
31, 1995. For purposes of determining the amount of stock to
be delivered to Incumbent, the services provided by Incumbent
through March 31, 1994 in the achievement of the longer-term
financial and operating performance objective shall be deemed
to have been satisfied, and of full value;
(d) Pay to the Incumbent, or her designated
beneficiary, the benefits to which she is entitled by reason
of her having been an employee of the Company, which shall be
paid in the manner, amounts and at such times as provided in
accordance with the terms and conditions thereof, and using
the Termination Date as the date of separation; and
(e) Provide Incumbent with continued coverage
under the Medical Expense Reimbursement Plan of the Company
through June 1, 1994.
Payment of the Incentive Award and delivery of the
shares of stock referred to in Subparagraphs (b) and (c) of
this Article shall be consummated not later than January 1,
1996.
Should Incumbent die prior to receiving any of the
payments or shares of stock hereinabove listed, payment of
such amount and/or delivery of such shares shall be made to
the Estate of the Incumbent.
5. The consideration given to Incumbent pursuant to
this Agreement, with the exception of the benefits to which
she and her beneficiary or estate are entitled by reason of
her having been an employee of the Company, constitute the
total amount to which Incumbent is entitled as a result of her
employment with the Company and is paid in satisfaction of any
and all claims which Incumbent has or may have against the
Company at any time as a result of her employment with the
Company and her separation therefrom.
6. This Agreement shall apply to and be binding upon
all affiliated, related, subsidiary and successor corporations
of the Company, and their assigns; and shall apply to and be
binding upon Incumbent, her personal representative, heirs,
executors, administrators, trustees, successors, assigns and
any and all persons who may succeed the legal rights and
interests of Incumbent.
7. In exchange for the undertakings of the Company
contained in Article 4, and as a condition precedent thereto,
Incumbent agrees to execute and deliver a General Release,
Waiver and Acknowledgement (Release) in the form attached
hereto as Exhibit A. Incumbent expressly acknowledges that
she is aware of her rights under federal and state laws which
prohibit discrimination in employment based on race, sex,
national origin, age, religion, disability and veteran rights,
including the Age Discrimination in Employment Act, as
amended, Title VII of the Civil Rights Act of 1964, as
amended, the New Jersey Law Against Discrimination, the New
Jersey Conscientious Employee Protection Act, the New Jersey
Wage Law and the Americans with Disabilities Act (hereinafter
collectively referred to as the "Acts"); and further
acknowledges that this Agreement and the attached Release are
intended to include, without limitation, a release by her of
any and all rights and claims arising out of her employment
with the Company and her withdrawal and separation therefrom,
including, but not limited to, all claims under any and all
federal, state, local and common laws dealing with employment
including the Acts hereinabove referred to in this Article.
Incumbent further agrees not to commence any legal action, in
any form, against any releasee identified in the attached
Release or any other party connected with her employment with
the Company with respect to any right or claim, direct or
indirect, encompassed by the attached Release and this
Agreement, except to enforce the terms of this Agreement.
8. Incumbent agrees that she will not engage in any
communications which would injure the reputation of or
interfere with existing or prospective business relationships
of the Company.
9. Incumbent agrees that, except as expressly provided
below, she will not communicate or disclose the terms of this
Agreement or of the attached Release to or with any person(s)
with the exception of members of her immediate family, her
attorney(s), her financial advisor(s) and/or her
accountant(s). In such communication or disclosure, Incumbent
shall inform the recipient of the information that same is
being provided in a confidential manner and subject to a
requirement of confidentiality.
10. It is expressly understood and agreed that any
violation of the confidentiality provision in the preceding
Article by Incumbent, or anyone acting on her behalf, shall be
deemed to be a material breach of this Agreement.
11. Incumbent agrees and recognizes that her employment
relationship with the Company shall be permanently and
irrevocably terminated at her voluntary request as contained
in the Notice of Separation. Incumbent acknowledges that she
has no contract or other rights to employment or re-employment
with the Company; except that Incumbent shall continue to be
available to provide consultation to the extent requested,
consistent with the requirements of Article 3 of this
Agreement.
12. Incumbent agrees that she shall not, directly or
indirectly, knowingly disclose to any other person, firm or
corporation nor appropriate to her own use or to the use of
any person, firm or corporation, any Confidential Information
(as defined herein) used by or belonging to the Company,
except as same may be expressly authorized in advance by the
Company in a writing signed by a Senior Officer of the
affected company.
For purposes of this Agreement, the term Senior
Officer shall mean a person holding a title within any of the
Companies which constitute the Company of Senior Vice
President or higher.
For purposes of this Agreement, the term
Confidential Information includes, by way of illustration and
not limitation, matters of a technical nature such as "know
how", "formulae", "processes", "procedures", "techniques",
"machinery", "apparatus, "inventions", "studies", "research
projects", "technical data", "development plans", "product
specifications", as well as matters of a business or financial
nature such as, by way of illustration and not limitation,
information about the cost, sources of, and arrangements for
service or materials supplied to customers or clients of the
Company, submission and proposal procedures, production, labor
and/or material costs, profits and losses, prices, discounts,
sales, markets, customer lists, future plans, trade secrets
and proprietary information not generally available to the
public.
In addition, Incumbent represents and warrants that
she will never, directly or indirectly lecture upon or publish
articles concerning any Confidential Information without first
having obtained from the Company prior approval and written
consent in the manner hereinabove contained.
On or before March 31, 1994, Incumbent shall turn
over to the Company all documents and other things, and all
copies thereof within her possession, custody or control which
may contain or which may have been derived from, or which may
have the potential of disclosing any Confidential Information.
13. In the event of a breach of Articles 3, 7, 8, 9 or
12 of this Agreement or of the attached Release, the Company
shall be relieved and discharged of its obligations under the
terms of this Agreement to provide Incumbent with any
consideration which is in addition to the payments and
benefits to which she, her beneficiaries, or her estate are
entitled by reason of having been an employee of the Company
in accordance with the terms and conditions of such plans and
policies; and shall thereupon be entitled to institute an
action to obtain any damages that may arise from such breach.
In addition, the parties recognize that money damages are
inadequate to compensate the Company for irreparable harm that
may result from a breach of the confidentiality provisions
contained within Article 12 of this Agreement and that
equitable remedies are appropriate, inclusive of injunctive
relief.
In the event the Company shall be required to
commence an action, at law or in equity, to enforce its rights
under or as a result of a breach of Articles 3, 7, 8, 9 or 12
of this Agreement, the parties shall bear their own attorneys
fees and costs.
14. Incumbent acknowledges that she has been given the
opportunity to have this Agreement and the attached Release
reviewed by an attorney(s), accountant(s) and/or a financial
advisor(s) of her own choice; and Incumbent has exercised this
right and has had the opportunity to review and consider this
Agreement and the attached Release for a period in excess of
twenty-one (21) days, and Incumbent hereby waives any further
period of review or revocation, it being the intent of
Incumbent and the Company that this Agreement shall be
effective upon execution by all parties hereto; and the
attached Release shall be effective in accordance with its
terms.
15. This Agreement and the attached Release contain the
entire Agreement with respect to the matters contained therein
and cannot be altered or amended except in a writing duly
executed by the parties or their legal representatives.
16. Nothing in this Agreement or the attached Release
shall be construed or considered as evidence of or an
admission by the Company of a violation of the United States
Constitution, of the Age Discrimination in Employment Act, of
Title VII of the Civil Rights Act of 1964, as amended, of the
New Jersey Law against Discrimination, of the New Jersey
Conscientious Employee Protection Act, of the New Jersey Wage
Law, of the Americans with Disabilities Act, of any other act,
law, rule or regulation referred to herein or of any other
federal, state or local law, statute, ordinance, code,
regulation, rule or order; and any such violation is
specifically denied.
17. This Agreement and the attached Release shall be
interpreted, construed and enforced in accordance with the
laws of the State of New Jersey. Should any part of this
Agreement or of the attached Release be determined to be
unenforceable by a court of competent jurisdiction, the
parties shall immediately meet to amend the Agreement or
Release to effectuate the intent of the parties; and the
surviving portions of the Agreement and Release shall remain
binding and enforceable and in full force and effect.
18. Any notices required to be given under this
Agreement or Release shall be either hand-delivered or by
certified mail, return request requested and shall be directed
as follows:
If to Company:
Jerrold L. Jacobs
Chairman, President & CEO
Atlantic City Electric Company
6801 Black Horse Pike
P.O. Box 1264
Pleasantville, NJ 08232
If to Incumbent:
Sabrina D. McMillian
8157 East Beach Drive, N.W.
Washington, D.C. 20012
or to such other person and/or to such other address as the
party to receive notice may, from time to time, indicate in
writing.
IN WITNESS WHEREOF, intending to be legally bound, the
parties hereto attach their signatures and seals effective the
date and year first above written.
DATE: INCUMBENT:
March 31, 1994 /s/ SABRINA D. McMILLIAN
SABRINA D. McMILLIAN
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
I hereby certify that on March 31, 1994
SABRINA D. McMILLIAN, personally came before me and
acknowledged under oath, to my satisfaction, that she is the
person named in and that she did personally sign this
Employment Separation and Release Agreement.
/s/ K. D. Zimmerman
Notary Public - State of New Jersey
ATTEST: DATE: ATLANTIC ENERGY, INC. and
its AFFILIATES inclusive of
ATLANTIC CITY ELECTRIC
COMPANY:
L. M. Walters 3-31-94 /s/ Jerrold L .Jacobs
Secretary BY: Jerrold L. Jacobs
Exhibit A
GENERAL RELEASE, WAIVER and ACKNOWLEDGMENT
In consideration of the undertakings of Atlantic Energy,
Inc. and its affiliates inclusive of Atlantic City Electric
Company (hereinafter collectively referred to as the
"Company") set forth in Article 4 of the Employment Separation
and Release Agreement to which this Exhibit A is appended,
which provide for payment to me over and above those payments
and benefits to which I am otherwise entitled by reason of
having been an employee of the Company and subject to the
terms and conditions thereof, I hereby release, waive and
discharge the Company, and each of them, and their present and
former Directors, Officers, employees, agents, representatives
and attorneys and their respective successors, assigns,
executors, administrators, estates and heirs from and against
any and all claims which I, my estate and heirs may have
against any of them. This Release is intended to release,
relinquish, discharge, extinguish and waive any and all
claims, whether known or unknown, direct or indirect which
were or could have been or may hereafter be asserted,
resulting from anything which has occurred through the
effective date of this Release, including claims for
attorneys' fees. I hereby promise not to commence or pursue,
or to authorize anyone to commence or pursue on my behalf or
in my interest any action whether legal, equitable or
administrative, or to otherwise seek to recover any damages,
remedy or relief of any kind from any releasee within the
contemplation of this Release based upon any claim covered by
this General Release, Waiver and Acknowledgment.
Without limiting the scope of the foregoing in any way, I
hereby acknowledge and confirm that my separation from
employment as an Officer and employee of the Company
constitutes my voluntary act and deed made of my own free will
and without duress, undue influence or any other pressure or
condition exerted or imposed upon me in any form by any person
or entity; and I specifically release and waive any and all
claims relating to or arising out of any aspect of my
employment with the Company or the separation therefrom
including, but not limited to, all claims under the Age
Discrimination in Employment Act (29 USC Sec. 621, et seq..),
Title VI of the Civil Rights Act of 1964 (42 USC Sec. 2000(e),
et seq.), as amended, the New Jersey Law Against
Discrimination (N.J.S.A. 10:5-1 et seq.), the New Jersey
Conscientious Employee Protection Act (N.J.S.A. 34:19-1 et
seq.), the New Jersey Wage Law (N.J.S.A. 34:11-44.1 et seq.)
and the Americans with Disabilities Act (42 USC Sec. 12101 et
seq.), any contract of employment, express or implied, any
provision of the Constitution of the United States of America
or of the Constitution of the State of New Jersey, and any
other law, whether common or statutory, and any rule,
regulation or order of the Unites States, the State of New
Jersey, or any other state, and all claims arising out of any
legal restrictions on the rights of the Company or its
Affiliates with respect to termination of employment.
I UNDERSTAND THAT FOR A PERIOD OF SEVEN (7) CALENDAR DAYS
FOLLOWING THE SIGNING OF THIS GENERAL RELEASE, WAIVER AND
ACKNOWLEDGEMENT, I MAY REVOKE IT IN A WRITING ACKNOWLEDGED BY
THE CHIEF EXECUTIVE OFFICER OF THE COMPANY, AND THAT THIS
GENERAL RELEASE, WAIVER AND ACKNOWLEDGMENT WILL NOT BE
EFFECTIVE OR ENFORCEABLE UNTIL SUCH REVOCATION PERIOD HAS
EXPIRED. UPON EXPIRATION OF SUCH REVOCATION PERIOD I
UNDERSTAND AND ACKNOWLEDGE THAT THIS GENERAL RELEASE, WAIVER
AND ACKNOWLEDGEMENT AND THE EMPLOYMENT SEPARATION AND RELEASE
AGREEMENT TO WHICH IT IS APPENDED SHALL BECOME FINAL AND
ENFORCEABLE.
Sabrinia D. McMillian
DATED: April 26, 1994
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
I hereby certify that on April 26th, 1994
SABRINIA D. McMILLIAN, personally came before me and
acknowledged under oath, to my satisfaction, that she is the
person named in and that she did personally sign this General
Release, Waiver and Acknowledgement.
/s/ K. D. Zimmerman
Notary Public - State of New Jersey
Exhibit 10a(25)
EMPLOYMENT SEPARATION and RELEASE AGREEMENT
between
J. J. Lees
and
Atlantic City Electric Company
This Employment Separation and Release Agreement
(Agreement) is made and entered into the 26th day of April,
1994 by and between J. J. LEES (Incumbent) residing at 8201
Atlantic Avenue in the City of Margate, County of Atlantic,
State of New Jersey and Atlantic City Electric Company
(Company) having a principal Executive Office located at 6801
Black Horse Pike, Pleasantville, County of Atlantic, State of
New Jersey.
WHEREAS, Incumbent has been employed by the Company since
June 1, 1970 and, for some time past has served in the
capacity of an Officer; and
WHEREAS, Incumbent had given oral notice and has
confirmed in a writing his intent to terminate and withdraw
from continued employment with the Company, as his voluntary
act and deed (hereinafter referred to as the "Notice of
Separation"); and
WHEREAS, the Company has agreed to accept the Notice of
Separation; and
WHEREAS, Incumbent and the Company have agreed that
Incumbent shall withdraw from and terminate the employment
relationship with the Company upon the terms and conditions
more fully set forth herein;
NOW, THEREFORE, in consideration of the mutual promises
and covenants herein contained which the parties hereto hereby
agree constitute fair, reasonable and valuable consideration,
Incumbent and the Company, intending to be legally bound,
hereby represent, covenant and agree as follows:
1. The Recital Clauses hereinabove set forth are
incorporated and made a material part of this Agreement.
2. Incumbent shall terminate and withdraw from full
time employment as an Officer and employee of the Company
effective close of business on June 3, 1994 (the "Termination
Date"). Incumbent acknowledges that he has selected the
Termination Date. Company acknowledges that it has agreed to
the Termination Date. Notwithstanding the Termination Date,
Incumbent shall be entitled to utilize accumulated vacation
days and other benefits which allow him to discontinue his
day-to-day activities as an employee as of April 26, 1994.
Nonetheless, he shall continue to serve as an Officer and
employee through the Termination Date.
3. In addition to any benefit to which Incumbent is
otherwise entitled by reason of having been an employee of the
Company, the Company agrees to:
(a) Pay Incumbent in a single lump sum payment an
amount equivalent to one (1) year of his current annual Base
Salary ($112,900.00) as established by the Board of Directors
of the Company, which shall be reduced by all deductions
required by law. This payment will be made within thirty (30)
days of the execution of this Agreement and attached General
Release by Incumbent, provided that Incumbent signs and
returns this Agreement and General Release not later than July
15, 1994 and the Revocation Period specified in Exhibit A
shall have expired without revocation by Incumbent. This
payment will then be made to Incumbent as soon as practicable
following expiration of the revocation period; and
(b) Pay Incumbent an Incentive Award pursuant to
the 1994 Management Annual Incentive Compensation Plan of
Atlantic Energy, Inc., and its Subsidiaries (the "Plan"). For
purposes of determining the amount of such Incentive Award,
Incumbent shall be deemed to have satisfactorily contributed
to the achievement of Performance Goals through May 31 of the
1994 Plan year (i.e. 5/12ths); and
(c) Deliver to Incumbent shares of stock pursuant
to the Company Long-Term Performance Incentive Plan currently
in effect covering the period January 1, 1993 through December
31, 1995. For purposes of determining the amount of stock to
be delivered to Incumbent, Incumbent will be credited with
service through May 31, 1994 and will be deemed to have
satisfactorily contributed toward the achievement of the
longer-term financial and operating performance objectives of
such Plan for the specified period; and
(d) Pay to the Incumbent, or his designated
beneficiary, all those benefits to which he is entitled by
reason of his having been an employee of the Company, which
shall be paid in the manner, amounts and at such times as are
provided in accordance with the terms and conditions thereof
as in effect on the Termination Date, and using the
Termination Date as the date of separation. This is
contingent upon Incumbent's execution and delivery of and
compliance with the terms of this Agreement in the manner
specified herein. A schedule of such benefits is attached
hereto as Exhibit "B"; and
(e) Provide Incumbent with continued coverage
under the Medical Expense Reimbursement Plan of the Company
through June 3, 1994; and reimburse Incumbent for medical
expenses incurred through that date. All such expenses shall
be submitted for processing in compliance with the Plan
requirements on or before September 1, 1994.
Payment of the Incentive Award and delivery of the
shares of stock referred to in Subparagraphs (b) and (c) of
this Article shall be consummated at such time as the payment
and award shall be made to all other Officers of the Company.
Should Incumbent die prior to receiving any of the
payments or shares of stock hereinabove listed, payment of
such amount and/or delivery of such shares shall be made to
the Estate of the Incumbent or to such other beneficiary as
Incumbent shall designate in writing to be delivered to the
Company prior to his death.
4. The consideration given to Incumbent pursuant to
this Agreement, with the exception of those benefits to which
he and his beneficiary or estate are otherwise entitled by
reason of his having been an employee of the Company,
constitute the total amount to which Incumbent is entitled as
a result of his employment with the Company and is paid in
satisfaction of any and all claims of any nature whatsoever,
however arising, whether known or unknown, which Incumbent has
or may have against the Company at any time as a result of,
relating to or arising out of his employment with the Company
or his separation therefrom.
5. Attached hereto and made a part hereof as Exhibit
"C" is Article VI of the By-Laws of Atlantic Energy, Inc.
(Atlantic Energy). Atlantic Energy, on behalf of itself and
the Company, warrants and represents that pursuant to these
By-Laws, it will provide Incumbent with indemnification
against liability (including attorney's fees and related
expenses) imposed upon or incurred by him in any threatened,
pending or completed investigation, claim, action, suit, or
proceeding, whether civil, administrative or investigative in
nature which may be instituted by or on behalf of Atlantic
Energy, or any of its Subsidiaries, inclusive of the Company,
against Incumbent. Atlantic Energy further represents and
warrants that in the event the By-Laws of Atlantic Energy are
hereafter amended to alter or extinguish such obligation to
indemnify, notwithstanding such amendment or alteration, the
obligation to indemnify as set forth herein shall nonetheless
remain in full force and effect. In the event that Atlantic
Energy refuses to indemnify Incumbent, or in the event a Court
of competent jurisdiction holds that Atlantic Energy is not
obligated to indemnify the Incumbent (other than where a
judgment or other final adjudication establishes that the acts
or omissions of the Incumbent involved a knowing violation of
law constituting criminal conduct) then the General Release
given to Atlantic Energy and its Subsidiaries, inclusive of
the Company by Incumbent shall become null and void for all
purposes and shall not bar Incumbent from thereafter asserting
any claim or counterclaim he may have against Atlantic Energy,
or its Subsidiaries, inclusive of the Company. Furthermore,
in the event Atlantic Energy does not provide such
indemnification to the Incumbent, neither Atlantic Energy nor
its Subsidiaries, inclusive of the Company, shall invoke any
defense based in whole or in part on any Statute of
Limitations or on the timeliness of such claim which may
thereafter be instituted by the Incumbent in accordance with
the provisions of this paragraph.
6. This Agreement shall apply to and be binding upon
all affiliated, related, parent, subsidiary and successor
corporations of the Company, and their assigns; and shall
apply to and be binding upon Incumbent, his personal
representative, heirs, executors, administrators, trustees,
successors, assigns and any and all persons who may succeed
the legal rights and interests of Incumbent.
7. In exchange for the undertakings of the Company
contained in Article 4, and as a condition precedent thereto,
Incumbent agrees to execute and deliver a General Release,
Waiver and Acknowledgement (Release) in the form attached
hereto as Exhibit A. Incumbent expressly acknowledges that he
is aware that he has rights under federal and state laws which
prohibit discrimination in employment based on race, sex,
national origin, age, religion, disability and veteran rights,
including the Age Discrimination in Employment Act, as
amended, Title VII of the Civil Rights Act of 1964, as
amended, the New Jersey Law Against Discrimination, the New
Jersey Conscientious Employee Protection Act, the New Jersey
Wage Law and the Americans with Disabilities Act (hereinafter
collectively referred to as the "Acts"); and further
acknowledges that this Agreement and the attached General
Release are intended to include, without limitation, a release
by him of any and all rights and claims arising out of his
employment with the Company and his withdrawal and separation
therefrom, including, but not limited to, all claims under any
and all federal, state, local and common laws dealing with
employment, separation and damages, including the Acts
hereinabove referred to in this Article. Incumbent further
agrees not to commence any legal action, in any form, against
any releasee identified in the attached General Release or any
other party connected with his employment with the Company
with respect to any right or claim, direct or indirect,
encompassed by the attached General Release and this
Agreement, except to enforce the terms of this Agreement.
8. Incumbent and Company agree that neither will
engage in any communications, oral or written, which would
injure the reputation of or interfere with existing or
prospective business relationships of the other. This
covenant shall be effective as of April 26, 1994.
Incumbent and Company agree that Company will
provide Incumbent with a Letter of Recommendation in the form
attached hereto as Exhibit D, the content of which has been
reviewed and accepted by Incumbent. This Letter of
Recommendation will be submitted in response to any and all
inquiries from prospective employers. Incumbent shall direct
all such inquiries to the attention of Jerrold J. Jacobs,
President and Chief Executive Officer of the Company, or his
successor.
9. Incumbent agrees that, except as expressly provided
below, he will not communicate or disclose the terms of this
Agreement or of the attached General Release to or with any
person(s) with the exception of members of his immediate
family, his attorney(s), his financial advisor(s) and/or his
accountant(s). In such communication or disclosure, Incumbent
shall inform the recipient of the information that same is
being provided in a confidential manner and subject to a
requirement of confidentiality.
Company agrees that it will treat this Agreement
and the attached General Release as a personnel item to be
retained in the personnel file of Incumbent and not to be
disclosed to third parties without the express written consent
of Incumbent; except to the extent that same shall be required
to be produced in any legal proceeding.
10. It is expressly understood and agreed that any
violation of the confidentiality provision in the preceding
Article by Incumbent or Company, or anyone acting on his or
its behalf, shall be deemed to be a material breach of this
Agreement.
11. Incumbent agrees and recognizes that his employment
relationship with the Company shall be terminated at his
voluntary request as contained in the Notice of Separation.
Incumbent acknowledges that he has no contract or other rights
to employment or re-employment with the Company.
12.A. Incumbent agrees that he shall not, directly
or indirectly, knowingly disclose to any other person, firm or
corporation nor appropriate to his own use or to the use of
any person, firm or corporation, any Confidential Information
(as defined herein) used by or belonging to the Company or its
parent, subsidiary or affiliates, except as same may be
expressly authorized in advance by the Company in a writing
signed by a Senior Officer of the affected company.
For purposes of this Agreement, the term Senior
Officer shall mean a person holding a title within any of the
Companies which constitute the Company of Senior Vice
President or higher.
For purposes of this Agreement, the term
Confidential Information includes, by way of illustration and
not limitation, matters of a technical nature such as "know
how", "formulae", "processes", "procedures", "techniques",
"machinery", "apparatus, "inventions", "studies", "research
projects", "technical data", "development plans", "product
specifications", as well as matters of a business or financial
nature such as, by way of illustration and not limitation,
information about the cost, sources of, and arrangements for
service or materials supplied to customers or clients of the
Company, submission and proposal procedures, production, labor
and/or material costs, profits and losses, prices, discounts,
sales, markets, customer lists, future plans, trade secrets
and proprietary information not generally available to the
public.
B. In addition, Incumbent represents and warrants
that he will never, directly or indirectly lecture upon or
publish articles concerning any Confidential Information
without first having obtained from the affected company prior
approval and written consent in the manner hereinabove
contained.
C. Commencing on April 26, 1994 Incumbent shall
commence to act with due diligence in order that, on or before
June 3, 1994, Incumbent shall have turned over to the Company
all documents and other things, and all copies thereof within
his possession, custody or control which may contain or which
may have been derived from, or which may have the potential of
disclosing any Confidential Information.
D. Notwithstanding the preceding subparagraphs of
this Article, it is understood and agreed that Incumbent shall
not be bound by any covenant not to compete. He shall be
permitted to engage in employment with a competitor of the
Company without limitation as to time or geographical area.
However, by engaging in such employment, Incumbent represents
and warrants that he will not violate the provision of
Subparagraphs A through C of this Article and will not,
directly or indirectly, disclose any Confidential Information
of the Company or its parent, subsidiary or affiliates, except
as expressly authorized in advance by the Company in the
manner set forth in Subparagraph A of this Article.
13. In the event of a breach by Incumbent of Article 7,
8, 9 or 12 of this Agreement or of the attached General
Release, the Company shall be relieved and discharged of its
obligations under the terms of this Agreement to provide
Incumbent with any consideration which is in addition to the
payments and benefits to which he and his beneficiaries or his
estate are entitled by reason of his having been an employee
of the Company in accordance with the terms and conditions of
such plans and policies; and shall thereupon be entitled to
institute an action to obtain any damages that may arise from
such breach. In addition, the parties recognize that money
damages are inadequate to compensate the Company for
irreparable harm that may result from a breach of the
confidentiality provisions contained within Article 12 of this
Agreement and that equitable remedies are appropriate,
inclusive of injunctive relief, which shall be in addition to
any other remedies available to the Company at law or in
Equity.
In the event of a breach by the Company of Article 8
or 9 of this Agreement or of the attached General Release, the
Incumbent shall be entitled to institute an action for any
damages which may arise from such a breach. In addition, the
parties recognize and agree that money damages may be
inadequate to compensate the Incumbent for irreparable harm
that may result from a breach of the recommendation and
confidentiality provisions contained in Articles 8 and 9,
respectively, and that equitable remedies are appropriate,
inclusive of injunctive relief, which shall be in addition to
any other remedies available to the Incumbent at law or in
Equity.
In the event either party shall be required to
commence an action, at law or in equity, to enforce its rights
under or as a result of a breach of this Agreement, the
parties shall bear their own attorneys fees and costs.
14. Incumbent acknowledges that he has been informed of
his right to consider this Agreement and the terms thereof for
a period of at least twenty-one (21) days prior to executing
and delivering the Agreement to the Company. He further
acknowledges that he understands his right to revoke this
Agreement and the attached General Release by giving written
notice to the Company in the manner set forth in the General
Release attached hereto as Exhibit A. Such notice shall be
effective upon receipt by the Company. This right is being
provided to Incumbent as required under the Age Discrimination
in Employment Act.
Incumbent further acknowledges that he has been
given the opportunity to have this Agreement and the attached
General Release reviewed by attorney(s), accountant(s) and/or
financial advisor(s) of his own choice.
15. This Agreement and the attached General Release
contain the entire Agreement with respect to the matters
contained herein and therein and cannot be altered or amended
except in a writing duly executed by the parties or their
legal representatives.
16. Nothing in this Agreement or the attached General
Release shall be construed or considered as evidence of or an
admission by the Company of a violation of the United States
Constitution, of the Age Discrimination in Employment Act, of
Title VII of the Civil Rights Act of 1964, as amended, of the
New Jersey Law against Discrimination, of the New Jersey
Conscientious Employee Protection Act, of the New Jersey Wage
Law, of the Americans with Disabilities Act, of any other act,
law, rule or regulation referred to herein or of any other
federal, state or local law, statute, ordinance, code,
regulation, rule or order; and any such violation is
specifically denied.
17. This Agreement and the attached General Release
shall be interpreted, construed and enforced in accordance
with the laws of the State of New Jersey. Should any part of
this Agreement or of the attached General Release be
determined to be unenforceable by a court of competent
jurisdiction, the parties shall immediately meet to amend the
Agreement or Release to effectuate the intent of the parties;
and the surviving portions of the Agreement and Release shall
remain binding and enforceable and in full force and effect.
18. Any notices required to be given under this
Agreement or Release shall be either hand-delivered or
delivered by certified mail, return receipt requested and
shall be directed as follows:
If to Company:
Jerrold L. Jacobs
Chairman, President & CEO
Atlantic City Electric Company
6801 Black Horse Pike
P.O. Box 1264
Pleasantville, NJ 08232
If to Incumbent:
James J. Lees
8201 Atlantic Avenue
Margate, New Jersey 08402
or to such other person and/or to such other address as the
party to receive notice may, from time to time, indicate in
writing.
IN WITNESS WHEREOF, intending to be legally bound, the
parties hereto attach their signatures and seals effective the
date and year first above written.
DATE: INCUMBENT:
6-22-94 /s/ JAMES J. LEES
JAMES J. LEES
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
I hereby certify that on June 22, 1994
JAMES J. LEES, personally came before me and acknowledged
under oath, to my satisfaction, that he is the person named in
and that he did personally sign this Employment Separation and
Release Agreement.
/s/ Robert K. Marshall
Notary Public - State of New Jersey
ATTEST: DATE: ATLANTIC CITY ELECTRIC
COMPANY:
L. M. Walters 6-22-94 /s/ Jerrold L. Jacobs
Secretary BY: Jerrold L. Jacobs
<PAGE>
GENERAL RELEASE, WAIVER and ACKNOWLEDGMENT
In consideration of the undertakings of Atlantic Energy,
Inc. and its Subsidiaries, inclusive of Atlantic City Electric
Company (hereinafter collectively referred to as the
"Company") set forth in Article 4 of the Employment Separation
and Release Agreement to which this Exhibit A is appended,
which provide for payment to me over and above those payments
and benefits to which I am otherwise entitled by reason of
having been an employee of the Company and subject to the
terms and conditions thereof, I hereby release, waive and
discharge the Company, and each of them, and their present and
former Directors, Officers, employees, agents, representatives
and attorneys and their respective successors, assigns,
executors, administrators, estates and heirs from and against
any and all claims of whatever nature, inclusive of claims for
wrongful discharge, property damage, personal or bodily injury
which I, my estate and heirs may have against any of them.
This Release is intended to release, relinquish, discharge,
extinguish and waive any and all claims, whether known or
unknown, direct or indirect which were or could have been or
may hereafter be asserted, resulting from anything which has
occurred through the effective date of this Release, including
claims for attorneys' fees. I hereby promise not to commence
or pursue,
or to authorize anyone to commence or pursue on my behalf or
in my interest any action whether legal, equitable or
administrative, or to otherwise seek to recover any damages,
remedy or relief of any kind from any releasee within the
contemplation of this Release based upon any claim covered by
this General Release, Waiver and Acknowledgment.
Without limiting the scope of the foregoing in any way, I
hereby acknowledge and confirm that my separation from
employment as an Officer and employee of the Company
constitutes my voluntary act and deed made of my own free will
and without duress, undue influence or any other pressure or
condition exerted or imposed upon me in any form by the
Company or anyone acting on its behalf; and I specifically
release and waive any and all claims relating to or arising
out of any aspect of my employment with the Company or the
separation therefrom including, but not limited to, all claims
under the Age Discrimination in Employment Act (29 USC Sec.
621, et seq..), Title VI of the Civil Rights Act of 1964 (42
USC Sec. 2000(e), et seq.), as amended, the New Jersey Law
Against Discrimination (N.J.S.A. 10:5-1 et seq.), the New
Jersey Conscientious Employee Protection Act (N.J.S.A. 34:19-1
et seq.), the New Jersey Wage Law (N.J.S.A. 34:11-44.1 et
seq.) and the Americans with Disabilities Act (42 USC Sec.
12101 et seq.), any contract of employment, express or
implied, any provision of the Constitution of the United
States of America or of the Constitution of the State of New
Jersey, and any other law, whether common or statutory, and
any rule, regulation or order of the Unites States, the State
of New Jersey, or any other state, and all claims arising out
of any legal restrictions on the rights of the Company or its
Affiliates with respect to termination of employment.
I UNDERSTAND THAT FOR A PERIOD OF SEVEN (7) CALENDAR DAYS
FOLLOWING THE SIGNING OF THIS GENERAL RELEASE, WAIVER AND
ACKNOWLEDGEMENT, I MAY REVOKE IT IN A WRITING ACKNOWLEDGED BY
THE CHIEF EXECUTIVE OFFICER OF THE COMPANY, AND THAT THIS
GENERAL RELEASE, WAIVER AND ACKNOWLEDGMENT WILL NOT BE
EFFECTIVE OR ENFORCEABLE UNTIL SUCH REVOCATION PERIOD HAS
EXPIRED. UPON EXPIRATION OF SUCH REVOCATION PERIOD I
UNDERSTAND AND ACKNOWLEDGE THAT THIS GENERAL RELEASE, WAIVER
AND ACKNOWLEDGEMENT AND THE EMPLOYMENT SEPARATION AND RELEASE
AGREEMENT TO WHICH IT IS APPENDED SHALL BECOME FINAL AND
ENFORCEABLE.
/s/ JAMES J. LEES
JAMES J. LEES
DATED: June 22, 1994
<PAGE>
STATE OF NEW JERSEY :
: ss.
COUNTY OF ATLANTIC :
I hereby certify that on June 22, 1994
JAMES J. LEES, personally came before me and acknowledged
under oath, to my satisfaction, that he is the person named in
and that he did personally sign this General Release, Waiver
and Acknowledgement.
/s/ Robert K. Marshall
Notary Public - State of New Jersey
RELEASE
In mutual consideration of the execution and delivery of
the General Release, Waiver and Acknowledgment by James J.
Lees (Incumbent), effective upon the expiration of the
Revocation Period, as set forth therein, without exercise by
Incumbent of such revocation, thereupon Atlantic Energy, Inc.
and its Subsidiaries, inclusive of Atlantic City Electric
Company (hereinafter collectively referred to as the
"Company") hereby release, waive and discharge the Incumbent
from and against any and all claims, exclusive of claims
arising out of or based upon criminal conduct by the Incumbent
which the Company may have against Incumbent and which arose
during the term of Incumbent's employment with the Company.
Except as hereinabove set forth above, this Release is
intended to release, relinquish, discharge, extinguish and
waive any and all claims, except claims founded upon criminal
conduct by Incumbent, whether known or unknown, direct or
indirect, which were or could have been or may hereafter be
asserted, resulting from anything which occurred through the
Termination Date of Incumbent's employment with the Company.
The Company further promises not to commence or pursue, or to
authorize anyone to commence or pursue on its behalf, or in
its interest, any action, whether legal, equitable or
administrative, or to otherwise seek to recover any damages,
remedy or relief of any kind from Incumbent within the
contemplation of this Release, based upon any claim covered by
this Release. Notwithstanding the above, nothing contained
herein is intended to preclude the Company from instituting
any such action in the event of Incumbent's breach of the
Employment Separation and Release Agreement or of Incumbent's
breach of the General Release, Waiver and Acknowledgement
hereinabove contained.
ATLANTIC ENERGY, INC. AND ITS
SUBSIDIARIES, INCLUSIVE OF ATLANTIC
CITY ELECTRIC COMPANY
BY: /s/ JERROLD L. JACOBS
JERROLD L. JACOBS
ATTEST:
/s/ J. G. Salomone
J. G. Salomone
Secretary
DATED:June 22, 1994
Exhibit 4c(1)
INDENTURE SUPPLEMENTAL
TO
MORTGAGE AND DEED OF TRUST
(Dated January 15, 1937)
Executed By
ATLANTIC CITY ELECTRIC COMPANY
TO
THE BANK OF NEW YORK,
Trustee.
Dated as of November 1, 1994
This instrument was prepared by
James E. Franklin II, Esq.
/s/ James E. Franklin II, Esq.
James E. Franklin II, Esq.<PAGE>
SUPPLEMENTAL INDENTURE, dated as of November 1, 1994
for convenience of reference, and effective from the time of
execution and delivery hereof, made and entered into by and
between ATLANTIC CITY ELECTRIC COMPANY, a corporation of the
State of New Jersey (hereinafter sometimes called the "Company"),
party of the first part, and THE BANK OF NEW YORK (formerly
Irving Trust Company), a corporation of the State of New York, as
Trustee (hereinafter sometimes called the "Trustee"), party of
the second part.
WHEREAS, the Company has heretofore executed and delivered
to the Trustee its Mortgage and Deed of Trust, dated January 15,
1937 (hereinafter referred to as the "Mortgage"), for the
security of all bonds of the Company outstanding thereunder, and
by said Mortgage conveyed to the Trustee, upon certain trusts,
terms and conditions, and with and subject to certain provisos
and covenants therein contained, all and singular the property,
rights and franchises which the Company then owned or should
thereafter acquire, excepting any property expressly excepted by
the terms of the Mortgage; and
WHEREAS, the Company has heretofore executed and delivered
to the Trustee an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of June 1, 1949, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of July 1, 1950, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
November 1, 1950, an Indenture Supplemental to Mortgage and Deed
of Trust, dated as of March 1, 1952, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of January 1, 1953, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
March 1, 1954, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of March 1, 1955, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of January 1, 1957, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
April 1, 1958, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of April 1, 1959, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of March 1, 1961, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
July 1, 1962, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of March 1, 1963, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of February 1, 1966, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
April 1, 1970, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of September 1, 1970, an Indenture Supplemental
to Mortgage and Deed of Trust, dated as of May 1, 1971, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
April 1, 1972, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of June 1, 1973, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of January 1, 1975, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
May 1, 1975, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of December 1, 1976, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of January 1, 1980, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
May 1, 1981, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of November 1, 1983, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of April 15, 1984, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
July 15, 1984, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of October 1, 1985, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of May 1, 1986, an Indenture
Supplemental to Mortgage and Deed of Trust, dated as of July 15,
1987, an Indenture Supplemental to Mortgage and Deed of Trust,
dated as of October 1, 1989, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of March 1, 1991, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
May 1, 1992, an Indenture Supplemental to Mortgage and Deed of
Trust, dated as of January 1, 1993, an Indenture Supplemental to
Mortgage and Deed of Trust, dated as of August 1, 1993, an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
September 1, 1993, an Indenture Supplemental to Mortgage and Deed
of Trust, dated as of November 1, 1993, an Indenture Supplemental
to Mortgage and Deed of Trust, dated as of June 1, 1994, and an
Indenture Supplemental to Mortgage and Deed of Trust, dated as of
October 1, 1994, such instruments amending and supplementing the
Mortgage in certain respects (the Mortgage, as so amended and
supplemented, being hereinafter called the "Original Indenture")
and conveying to the Trustee, upon certain trusts, terms and
conditions, and with and subject to certain provisos and
covenants therein contained, certain property rights and property
therein described; and
WHEREAS, the Company represents that no default has occurred
under any of the provisions of the Original Indenture; and
WHEREAS, the Original Indenture provides that bonds issued
thereunder may be issued in one or more series and further
provides that, with respect to each series, the rate of interest,
the date or dates of maturity, the dates for the payment of
interest, the terms and rates of optional redemption, and other
terms and conditions shall be determined by the Board of
Directors of the Company prior to the authentication thereof; and
WHEREAS, Section 121 of the Original Indenture provides that
any power, privilege or right expressly or impliedly reserved to
or in any way conferred upon the Company by any provision of the
Original Indenture, whether such power, privilege or right is in
any way restricted or is unrestricted, may be in whole or in part
waived or surrendered or subjected to any restriction if at the
time unrestricted or to additional restriction if already
restricted, and that the Company may enter into any further
covenants, limitations or restrictions for the benefit of any one
or more series of bonds issued under the Original Indenture and
provide that a breach thereof shall be equivalent to a default
under the Original Indenture, or the Company may cure any
ambiguity or correct or supplement any defective or inconsistent
provisions contained in the Original Indenture or in any
indenture supplemental to the Original Indenture, by an
instrument in writing, properly executed, and that the Trustee is
authorized to join with the Company in the execution of any such
instrument or instruments; and
WHEREAS, the Company has heretofore from time to time,
in accordance with the provisions of the Original Indenture, as at
the time in effect, issued bonds of various series and in various
amounts and, of the bonds so issued, $737,413,000 aggregate
principal amount is outstanding at the date hereof; and
WHEREAS, the Company, by appropriate corporate action in
conformity with the terms of the Original Indenture, has duly
determined to create two new series of bonds under the Original
Indenture (herein sometimes referred to collectively as the "New
Bonds"); and
WHEREAS, each of the New Bonds is to be substantially in
the form set forth in Schedule I hereto; and
WHEREAS, each of the New Bonds (whether in temporary or
definitive form) is to bear a certificate of authentication
substantially in the form set forth in Schedule I hereto; and
WHEREAS, the Company, in the exercise of the powers and
authorities conferred upon and reserved to it under and by virtue
of the provisions of the Original Indenture, and pursuant to
resolutions of its Board of Directors, has duly resolved and
determined to make, execute and deliver to the Trustee a
supplemental indenture, in the form hereof, for the purposes
herein provided; and
WHEREAS, the Company represents that all conditions and
requirements necessary to make this supplemental indenture
(hereinafter sometimes referred to as the "Third 1994
Supplemental Indenture") a valid, binding and legal instrument in
accordance with its terms, have been done, performed and
fulfilled, and the execution and delivery hereof have been in all
respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That Atlantic City Electric Company, in consideration of
the premises and the sum of One Dollar ($1.00) and other good and
valuable consideration paid to it by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof is
hereby acknowledged, for itself and its successors and assigns,
hereby covenants and agrees to and with the Trustee, and its
successor or successors in trust, as follows:
<PAGE>
SECTION 1. The terms defined in this Section 1 shall,
for all purposes of this Third 1994 Supplemental Indenture and the
Original Indenture, have the meanings herein specified, unless
the context otherwise requires:
Plant:
The term "Plant" shall mean the B.L. England Generating
Station located in Beesley's Point, Cape May County, New Jersey.
Series A Project Facilities:
The term "Series A Project Facilities" shall have the
meaning set forth in the Cape May Facilities Agreement.
Series B Project Facilities:
The term "Series B Project Facilities" shall have the
meaning set forth in the Cape May Facilities Agreement.
Cape May Authority:
The term "Cape May Authority" shall mean the Pollution
Control Financing Authority of Cape May County (New Jersey) and
any successor thereto.
Cape May 1994 Series A Bonds:
The term "Cape May 1994 Series A Bonds" shall mean the
7.20% Pollution Control Revenue Bonds of 1994, Series A (Atlantic City
Electric Company Project) to be issued in 1994 under and pursuant
to the Cape May Indenture.
Cape May 1994 Series B Bonds:
The term "Cape May 1994 Series B Bonds" shall mean the
7% Pollution Control Revenue Refunding Bonds of 1994, Series B
(Atlantic City Electric Company Project) to be issued in 1994
under and pursuant to the Cape May Indenture.
Cape May Indenture:
The term "Cape May Indenture" shall mean the Trust
Indenture, dated as of November 1, 1994, by and between the Cape
May Authority and United Jersey Bank, as Trustee, pursuant to
which the Cape May 1994 Series A Bonds and the Cape May 1994
Series B Bonds are issued.
<PAGE>
Cape May Trustee:
The term "Cape May Trustee" shall mean, at any time in
question, the person and/or corporation acting as trustee at any
time under the Cape May Indenture.
Cape May Facilities Agreement:
The term "Cape May Facilities Agreement" shall mean the
Pollution Control Facilities Agreement, dated as of November 1,
1994, between the Cape May Authority and the Company, and any and
all modifications, supplements and amendments thereof.
SECTION 2. The Company hereby creates a forty-fifth
series of bonds to be issued under and secured by the Original Indenture
and this Third 1994 Supplemental Indenture, to be designated and
to be distinguished from the bonds of all other series by the
title "First Mortgage Bonds, 7.20% Pollution Control Series A of
1994" (herein sometimes referred to as the "bonds of the Forty-
fifth Series").
Bonds of the Forty-fifth Series shall mature on the
maturity date of the Cape May 1994 Series A Bonds and shall be issued in
temporary or definitive form, only as fully registered bonds,
without coupons, in denominations of $5,000 and any multiple or
multiples of $5,000 authorized by the Company; they shall bear
interest at the rate of seven and twenty one-hundredths per
centum per annum payable semiannually on the interest payment
dates of the Cape May 1994 Series A Bonds; and the principal of,
premium, if any, and interest on each said bond shall be payable
at the office or agency of the Company, in Hackensack, New
Jersey, and, at the option of the Company, at the office or
agency of the Company in the City of New York, in lawful money of
the United States of America; provided, however, that the Company
shall receive the credits in respect of interest on and principal
of bonds of the Forty-fifth Series as set forth in Section 5
hereof.
Every bond of the Forty-fifth Series shall be dated and
shall bear interest as provided in Section 10 of the Original
Indenture; provided, however, that bonds of the Forty-fifth
Series authenticated by the Trustee prior to the first interest
payment date shall bear interest from November 1, 1994; and
provided further, that if and to the extent that the Company
shall default in the payment of interest due on any interest
payment date, then any such bond of the Forty-fifth Series shall
bear interest from the interest payment date next preceding the
date of such bond to which interest has been paid, unless such
interest payment date is the first interest payment date, in
which case from November 1, 1994.
<PAGE>
Bonds of the Forty-fifth Series shall be subject to
redemption prior to maturity, but if in part only in integral
multiples of $5,000, under the conditions and upon the payment of
the amounts specified in the following subsections, together in
each case with interest accrued to the redemption date:
(a) at the option of the Company, on any date on or after
November 1, 2004, either as a whole or in part from time to time
on any date, at the following redemption prices, expressed in
percentages of the principal amount of the bonds to be redeemed:
REDEMPTION PERIOD REDEMPTION PRICE
November 1, 2004 through October 31, 2005 102%
November 1, 2005 through October 31, 2006 101%
November 1, 2006 and thereafter 100%
(b) at the option of the Company, as a whole at any
time at 100% of the principal amount thereof, if any of the
following events shall have occurred:
(1) any federal, state or local body exercising
governmental or judicial authority has taken any
action which results in the imposition of unreasonable
burdens or excessive liabilities with respect to the Series A
Project Facilities (or the facilities serviced
thereby) or the Plant, rendering impracticable or
uneconomical or enjoining or restraining the operation of all or
a substantial portion of the Series A Project Facilities (or the facilities
serviced thereby) or the Plant,including without limitation the condemnation
or taking by eminent domain of all or a substantial portion
of the Series A Project Facilities (or the facilities
serviced thereby) or the Plant; or
(2) changes in the cost or availability of raw
materials, operating supplies, or facilities or
technological or other changes have made the
continued operation of all or a substantial portion of the
Series A Project Facilities (or the facilities serviced
thereby) or the Plant, uneconomical; or
(3) all or a substantial portion of the Series A
Project Facilities (or the facilities serviced
thereby) or the Plant have been damaged or destroyed to such
an extent that it is not practicable or desirable to
rebuild, repair or restore the Series A Project
Facilities (or the facilities serviced thereby) or
the Plant; or
(4) as a result of any change in the Constitution of
the State of New Jersey or the Constitution of the
United States of America, or as a result of any
legislative or administrative action (whether state or
federal) or any final decree, judgment or order of any
court or administrative body (whether state or federal)
after any contest thereof by the Company in good faith,
the Cape May Indenture, the Cape May Facilities
Agreement, the bonds issued under the Original
Indenture, as supplemented, in accordance with the Cape
May Facilities Agreement, or the Bonds issued under the
Cape May Indenture, as supplemented, shall become void
or unenforceable or impossible to perform in accordance
with the intent and purposes of the parties as
expressed in the Cape May Facilities Agreement.
Any such redemption shall be on any date within one
year following the determination by the Company as evidenced
by the adoption of the resolution of the Board of Directors
of the Company described below that one of the events
listed above permitting the exercise of the option has
occurred.
(c) in whole (or in part, as hereinafter provided), at 100%
of the principal amount thereof, plus interest accrued to
the redemption date, in the event that it is finally
determined by the Internal Revenue Service or by a court of
competent jurisdiction that, as a result of the failure by
the Company to observe any covenant, agreement or
representation in the Cape May Facilities Agreement, the
interest payable on the Cape May 1994 Series A Bonds is
includable for federal income tax purposes in the gross
income of any owner for federal income tax purposes of a
Cape May 1994 Series A Bond, other than an owner who is a
"substantial user" of the Series A Project Facilities or a
"related person", as provided in Section 147(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
the applicable regulations thereunder. Any such
determination will not be considered final for this purpose
until the expiration of all periods for judicial review or
appeal, as the case may be, nor will such a determination be
deemed final unless (i) the Cape May Trustee shall have been
advised by one or more owners for federal income tax
purposes of the Cape May 1994 Series A Bonds that the
Internal Revenue Service has notified such owner or owners
in writing that it proposes to include the interest on the
Cape May 1994 Series A Bonds in gross income as a result of
such a failure by the Company and (ii) the Company has been
afforded by the tribunal the opportunity to participate in
and to direct any administrative proceeding or litigation
resulting therefrom, either directly or in the name of any
such owner of a Cape May 1994 Series A Bond. Any such
redemption of bonds of the Forty-fifth Series shall be in an
amount necessary to redeem the Cape May 1994 Series A Bonds
on any date within 180 days from the time of such final
determination that the Cape May 1994 Series A Bonds are to
be redeemed. Bonds of the Forty-fifth Series shall be
redeemed in whole after such final determination unless it
is decided in such determination that redemption of a
portion of the Cape May 1994 Series A Bonds outstanding
would have the result that interest payable on the Cape May
1994 Series A Bonds remaining outstanding after such
redemption would not be includable for federal income tax
purposes in the gross income of any owner for federal income
tax purposes of a Cape May 1994 Series A Bond (other than an
owner who is a "substantial user" of the Series A Project
Facilities or a "related person" within the meaning of
Section 147(a) of the Code and the applicable regulations
thereunder), and in such event bonds of the Forty-fifth
Series shall be redeemed (in the principal amount of$5,000
or any integral multiple thereof) in such amount so as to
accomplish that result.
The election of the Company under subsections (a) or
(b) above to redeem any of the bonds of the Forty-fifth Series
shall be evidenced by a resolution of the Board of Directors of
the Company calling for the redemption on a stated date of all or
a stated principal amount thereof. To exercise its option to
redeem the bonds of the Forty-fifth Series under subsection (a)
or (b) above, the Company shall deliver to the Trustee, the Cape
May Authority and the Cape May Trustee a certified copy of said
resolution calling all or a stated principal amount of the bonds
of the Forty-fifth Series for redemption on a date not more than
90 days from the date said resolution is delivered (in the case
of a redemption under subsection (a) above) or not more than one
year from the date of adoption of said resolution (in the case of
a redemption under subsection (b) above). The delivery to the
Cape May Trustee of a certified copy of such resolution shall
constitute notice to the Cape May Trustee of the redemption
referred to therein, on the terms specified therein. The Company
shall on or before such redemption date deposit with the Cape May
Trustee, as paying agent hereunder, the total applicable
redemption price of all the bonds so called, with interest
accrued thereon to the redemption date, less any credits to which
the Company may be entitled pursuant to Section 5 hereof, and the
Cape May Trustee, as such paying agent, shall apply such funds on
the redemption date to the redemption of the bonds so called.
The Cape May Trustee shall deliver to the Trustee
prompt written notice of the occurrence of a "final
determination" under subsection (c) above. Such notice shall be
executed on behalf of the Cape May Trustee by its President or a
Vice President or Trust Officer and shall fix a redemption date
for the appropriate amounts of bonds of the Forty-fifth Series
not more that 180 days after the occurrence of such "final
determination". On or before such redemption date, the Company
shall deposit with the Cape May Trustee, as paying agent
hereunder, the total redemption price of the bonds so called,
with interest accrued thereon to the redemption date, less any
credits to which the Company may be entitled pursuant to Section
5 hereof, and the Cape May Trustee, as such paying agent, shall
apply such funds, on the redemption date, to the redemption of
the bonds so called. The delivery to the Trustee of a certified
copy of such notice shall constitute notice to the Trustee of the
redemption referred to therein on the terms specified therein.
Whenever the Trustee shall receive a written demand for
redemption (hereinafter called "Redemption Demand") from the Cape
May Trustee, stating that the principal of all Cape May 1994
Series A Bonds then outstanding under the Cape May Indenture has
been declared to be immediately due and payable pursuant to the
provisions of Section 10.02 thereof and that such declaration of
maturity has not been rescinded, the Trustee shall within 10 days
of receiving such Redemption Demand mail a copy to the Company
stamped or otherwise marked to show the date of receipt by the
Trustee, and, in such event, the Company shall fix a redemption
date for the redemption so demanded and shall mail to the Trustee
notice of such date at least 30 days prior thereto. Such
redemption date may be any day fixed by the Company which shall
be not more than 180 days after the receipt of the Redemption
Demand by the Company from the Trustee. If the Trustee does not
receive such notice from the Company within 150 days after the
Redemption Demand shall have been received by the Trustee, then
the redemption date shall be the 180th day after such receipt of
the Redemption Demand by the Company and the bonds of the Forty-
fifth Series shall become due, together with accrued interest
thereon, on such 180th day. The Trustee shall mail notice of the
redemption date (hereinafter called the "Demand Redemption
Notice") to the Cape May Trustee as hereinafter provided,
provided however, that the Trustee shall not mail any Demand
Redemption Notice (and no such redemption shall be made) if the
Trustee shall have received a written cancellation of the
Redemption Demand from the Cape May Trustee prior to the mailing
of the Demand Redemption Notice. Anything in this paragraph
contained to the contrary notwithstanding, if, after mailing of
the Demand Redemption Notice and prior to the date fixed for
redemption, the Trustee shall have been advised in writing by the
Cape May Trustee that the Redemption Demand has been rescinded or
that the declaration of maturity of the Cape May 1994 Series A
Bonds has been rescinded, the Demand Redemption Notice shall
thereupon, without further act of the Trustee or the Company, be
rescinded and become null and void for all purposes hereunder and
no redemption of the bonds of the Forty-fifth Series and no
payments in respect thereof shall be effected or required. Any
such redemption shall be at the redemption price equal to the
principal amount of the bonds of the Forty-fifth Series to be
redeemed, together with accrued interest to the date fixed for
redemption. For the purposes of this Section 2, a demand or
notice from the Cape May Trustee shall be executed on behalf of
such trustee by its President or a Vice President or a Trust
Officer, and shall be deemed received by the Trustee when
delivered at its corporate trust office in the Borough of
Manhattan, the City of New York. The Trustee may conclusively
rely, as to the truth of the statements contained therein, upon
any such demand.
Notwithstanding the provisions of Section 52 of the
Original Indenture, any Demand Redemption Notice shall be given
by mail to the registered holder(s) of bonds of the Forty-fifth
Series, not more than 10 or less than 5 days prior to the date
fixed for redemption, and the registered holders of bonds of the
Forty-fifth Series, by the acceptance of such bonds, waive any
additional or further notice of redemption provided in the
Original Indenture.
Each bond or portion thereof of the Forty-fifth Series
called for redemption under this Section 2 shall be due and
payable at the office of the Cape May Trustee, as paying agent
hereunder, at the applicable redemption price and on the
specified redemption date, anything herein or in such bond to the
contrary notwithstanding; provided, however, that notwithstanding
the foregoing or any provisions of the Original Indenture, this
Third 1994 Supplemental Indenture, the bonds of the Forty-fifth
Series, or any notice of redemption of the bonds of the Forty-
fifth Series to the contrary, in the case of bonds of the Forty-
fifth Series to be redeemed pursuant to subsections (a) or (b)
above, the notice of redemption in respect of such bonds shall,
without further act of the Trustee or the Company, be rescinded
and become null and void for all purposes hereunder and no
redemption of such bonds and no payments in respect thereof shall
be effected or required unless an equal principal amount of Cape
May 1994 Series A Bonds are due and payable on such redemption
date. From and after the date when each bond or portion thereof
of the Forty-fifth Series shall be due and payable as aforesaid
(unless upon said date the full amount due thereon shall not be
held by the Cape May Trustee, as paying agent hereunder, and be
immediately available for payment), all further interest shall
cease to accrue on such bond or on such portion thereof, as the
case may be.
If only a portion of any bond of the Forty-fifth Series
shall be called for redemption pursuant to this Section 2, the
notice of redemption hereinbefore provided for shall specify the
portion of the principal amount thereof to be redeemed. Upon
payment of the portion so called for redemption, the Cape May
Trustee shall make an appropriate notation upon the bond of the
principal amount so redeemed.
Bonds of the Forty-fifth Series shall not be
transferable except as provided in the Cape May Indenture and
then only upon presentation and surrender thereof, for
cancellation, at the office or agency of the Company in the
Borough of Manhattan, the City of New York, by the registered
holders thereof, in person or by duly authorized attorney, in the
manner prescribed in the Original Indenture. In the manner
prescribed in the Original Indenture, bonds of the Forty-fifth
Series may be exchanged for a like aggregate principal amount of
fully registered bonds, without coupons, of the Forty-fifth
Series of other authorized denominations, upon presentation and
surrender thereof, for cancellation, at the office or agency of
the Company in the borough of Manhattan, the City of New York.
SECTION 3. The Company hereby creates a forty-sixth series
of bonds to be issued under and secured by the Original Indenture
and this Third 1994 Supplemental Indenture, to be designated and
to be distinguished from the bonds of all other series by the
title "First Mortgage Bonds, 7% Pollution Control Series B of
1994" (herein sometimes referred to as the "bonds of the Forty-
sixth Series").
Bonds of the Forty-sixth Series shall mature on the maturity
date of the Cape May 1994 Series B Bonds and shall be issued in
temporary or definitive form, only as fully registered bonds,
without coupons, in denominations of $5,000 and any multiple or
multiples of $5,000 authorized by the Company; they shall bear
interest at the rate of seven per centum per annum payable
semiannually on the interest payment dates of the Cape May 1994
Series B Bonds; and the principal of, premium, if any, and
interest on each said bond shall be payable at the office or
agency of the Company, in Hackensack, New Jersey, and, at the
option of the Company, at the office or agency of the Company in
the City of New York, in lawful money of the United States of
America; provided, however, that the Company shall receive the
credits in respect of interest on and principal of bonds of the
Forty-sixth Series as set forth in Section 6 hereof.
Every bond of the Forty-sixth Series shall be dated and
shall bear interest as provided in Section 10 of the Original
Indenture; provided, however, that bonds of the Forty-sixth
Series authenticated by the Trustee prior to the first interest
payment date shall bear interest from November 1, 1994; and
provided further, that if and to the extent that the Company
shall default in the payment of interest due on any interest
payment date, then any such bond of the Forty-sixth Series shall
bear interest from the interest payment date next preceding the
date of such bond to which interest has been paid, unless such
interest payment date is the first interest payment date, in
which case from November 1, 1994.
Bonds of the Forty-sixth Series shall be subject to
redemption prior to maturity, but if in part only in integral
multiples of $5,000, under the conditions and upon the payment of
the amounts specified in the following subsections, together in
each case with interest accrued to the redemption date:
(a) at the option of the Company, on any date on or after
November 1, 2004, either as a whole or in part from time to
time on any date, at the following redemption prices,
expressed in percentages of the principal amount of the
bonds to be redeemed:
REDEMPTION PERIOD REDEMPTION PRICE
November 1, 2004 through October 31, 2005 102%
November 1, 2005 through October 31, 2006 101%
November 1, 2006 and thereafter 100%
(b) at the option of the Company, as a whole at any time at
100% of the principal amount thereof, if any of the
following events shall have occurred:
(1) any federal, state or local body exercising
governmental or judicial authority has taken any action
which results in the imposition of unreasonable burdens
or excessive liabilities with respect to the Series B
Project Facilities (or the facilities serviced thereby)
or the Plant, rendering impracticable or uneconomical
or enjoining or restraining the operation of all or a
substantial portion of the Series B Project Facilities
(or the facilities serviced thereby) or the Plant,
including without limitation the condemnation or taking
by eminent domain of all or a substantial portion of
the Series B Project Facilities (or the facilities
serviced thereby) or the Plant; or
(2) changes in the cost or availability of raw
materials, operating supplies, or facilities or
technological or other changes have made the continued
operation of all or a substantial portion of the Series
B Project Facilities (or the facilities serviced
thereby) or the Plant, uneconomical; or
(3) all or a substantial portion of the Series B
Project Facilities (or the facilities serviced thereby)
or the Plant have been damaged or destroyed to such an
extent that it is not practicable or desirable to
rebuild, repair or restore the Series B Project
Facilities (or the facilities serviced thereby) or the
Plant; or
(4) as a result of any change in the Constitution of
the State of New Jersey or the Constitution of the
United States of America, or as a result of any
legislative or administrative action (whether state or
federal) or any final decree, judgment or order of any
court or administrative body (whether state or federal)
after any contest thereof by the Company in good faith,
the Cape May Indenture, the Cape May Facilities
Agreement, the bonds issued under the Original
Indenture, as supplemented, in accordance with the Cape
May Facilities Agreement, or the bonds issued under the
Cape May Indenture, as supplemented, shall become void
or unenforceable or impossible to perform in accordance
with the intent and purposes of the parties as
expressed in the Cape May Facilities Agreement.
Any such redemption shall be on any date within one
year following the determination by the Company as evidenced
by the adoption of the resolution of the Board of Directors
of the company described below that one of the events listed
above permitting the exercise of the option has occurred.
(c) in whole (or in part, as hereinafter provided), at 100%
of the principal amount thereof, plus interest accrued to the
redemption date, in the event that it is finally determined by
the Internal Revenue Service or by a court of competent
jurisdiction that, as a result of the failure by the Company to
observe any covenant, agreement or representation in the Cape May
Facilities Agreement, the interest payable on the Cape May 1994
Series B Bonds is includable for federal income tax purposes in
the gross income of any owner for federal income tax purposes of
a Cape May 1994 Series B Bond, other than an owner who is a
"substantial user" of the Series B Project Facilities or a
"related person", as provided in Section 147(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the applicable
regulations thereunder. Any such determination will not be
considered final for this purpose until the expiration of all
periods for judicial review or appeal, as the case may be, nor
will such a determination be deemed final unless (i) the Cape May
Trustee shall have been advised by one or more owners for federal
income tax purposes of the Cape May 1994 Series B Bonds that the
Internal Revenue Service has notified such owner or owners in
writing that it proposes to include the interest on the Cape May
1994 Series B Bonds in gross income as a result of such a failure
by the Company and (ii) the Company has been afforded by the
tribunal the opportunity to participate in and to direct any
administrative proceeding or litigation resulting therefrom,
either directly or in the name of any such owner of a Cape May
1994 Series B Bond. Any such redemption of bonds of the Forty-
sixth Series shall be in an amount necessary to redeem the Cape
May 1994 Series B Bonds on any date within 180 days from the time
of such final determination that the Cape May 1994 Series B Bonds
are to be redeemed. Bonds of the Forty-sixth Series shall be
redeemed in whole after such final determination unless it is
decided in such determination that redemption of a portion of the
Cape May 1994 Series B Bonds outstanding would have the result
that interest payable on the Cape May 1994 Series B Bonds
remaining outstanding after such redemption would not be
includable for federal income tax purposes in the gross income of
any owner for federal income tax purposes of a Cape May 1994
Series B Bond (other than an owner who is a "substantial user" of
the Series B Project Facilities or a "related person" within the
meaning of Section 147(a) of the Code and the applicable
regulations thereunder), and in such event bonds of the Forty-
sixth Series shall be redeemed (in the principal amount of $5,000
or any integral multiple thereof) in such amount so as to
accomplish that result.
The election of the Company under subsections (a) or
(b) above to redeem any of the bonds of the Forty-sixth Series
shall be evidenced by a resolution of the Board of Directors of
the Company calling for the redemption on a stated date of all or
a stated principal amount thereof. To exercise its option to
redeem the bonds of the Forty-sixth Series under subsection (a)
or (b) above, the Company shall deliver to the Trustee, the Cape
May Authority and the Cape May Trustee a certified copy of said
resolution calling all or a stated principal amount of the bonds
of the Forty-sixth Series for redemption on a date not more than
90 days from the date said resolution is delivered (in the case
of a redemption under subsection (a) above) or not more than one
year from the date of adoption of said resolution (in the case of
a redemption under subsection (b) above). The delivery to the
Cape May Trustee of a certified copy of such resolution shall
constitute notice to the Cape May Trustee of the redemption
referred to therein, on the terms specified therein. The Company
shall on or before such redemption date deposit with the Cape May
Trustee, as paying agent hereunder, the total applicable
redemption price of all the bonds so called, with interest
accrued thereon to the redemption date, less any credits to which
the Company may be entitled pursuant to Section 6 hereof, and the
Cape May Trustee, as such paying agent, shall apply such funds on
the redemption date to the redemption of the bonds so called.
The Cape May Trustee shall deliver to the Trustee
prompt written notice of the occurrence of a "final
determination" under subsection (c) above. Such notice shall be
executed on behalf of the Cape May Trustee by its President or a
Vice President or Trust Officer and shall fix a redemption date
for the appropriate amounts of bonds of the Forty-sixth Series
not more that 180 days after the occurrence of such "final
determination". On or before such redemption date, the Company
shall deposit with the Cape May Trustee, as paying agent
hereunder, the total redemption price of the bonds so called,
with interest accrued thereon to the redemption date, less any
credits to which the Company may be entitled pursuant to Section
6 hereof, and the Cape May Trustee, as such paying agent, shall
apply such funds, on the redemption date, to the redemption of
the bonds so called. The delivery to the Trustee of a certified
copy of such notice shall constitute notice to the Trustee of the
redemption referred to therein on the terms specified therein.
Whenever the Trustee shall receive a written demand for
redemption (hereinafter called "Redemption Demand") from the Cape
May Trustee, stating that the principal of all Cape May 1994
Series B Bonds then outstanding under the Cape May Indenture has
been declared to be immediately due and payable pursuant to the
provisions of Section 10.02 thereof and that such declaration of
maturity has not been rescinded, the Trustee shall within 10 days
of receiving such Redemption Demand mail a copy to the Company
stamped or otherwise marked to show the date of receipt by the
Trustee, and, in such event, the Company shall fix a redemption
date for the redemption so demanded and shall mail to the Trustee
notice of such date at least 30 days prior thereto. Such
redemption date may be any day fixed by the Company which shall
be not more than 180 days after the receipt of the Redemption
Demand by the Company from the Trustee. If the Trustee does not
receive such notice from the Company within 150 days after the
Redemption Demand shall have been received by the Trustee, then
the redemption date shall be the 180th day after such receipt of
the Redemption Demand by the Company and the bonds of the Forty-
sixth Series shall become due, together with accrued interest
thereon, on such 180th day. The Trustee shall mail notice of the
redemption date (hereinafter called the "Demand Redemption
Notice") to the Cape May Trustee as hereinafter provided,
provided however, that the Trustee shall not mail any Demand
Redemption Notice (and no such redemption shall be made) if the
Trustee shall have received a written cancellation of the
Redemption Demand from the Cape May Trustee prior to the mailing
of the Demand Redemption Notice. Anything in this paragraph
contained to the contrary notwithstanding, if, after mailing of
the Demand Redemption Notice and prior to the date fixed for
redemption, the Trustee shall have been advised in writing by the
Cape May Trustee that the Redemption Demand has been rescinded or
that the declaration of maturity of the Cape May 1994 Series B
Bonds has been rescinded, the Demand Redemption Notice shall
thereupon, without further act of the Trustee or the Company, be
rescinded and become null and void for all purposes hereunder and
no redemption of the bonds of the Forty-sixth Series and no
payments in respect thereof shall be effected or required. Any
such redemption shall be at the redemption price equal to the
principal amount of the bonds of the Forty-sixth Series to be
redeemed, together with accrued interest to the date fixed for
redemption. For the purposes of this Section 3, a demand or
notice from the Cape May Trustee shall be executed on behalf of
such trustee by its President or a Vice President or a Trust
Officer, and shall be deemed received by the Trustee when
delivered at its corporate trust office in the Borough of
Manhattan, the City of New York. The Trustee may conclusively
rely, as to the truth of the statements contained therein, upon
any such demand.
Notwithstanding the provisions of Section 52 of the
Original Indenture, any Demand Redemption Notice shall be given
by mail to the registered holder(s) of bonds of the Forty-sixth
Series, not more than 10 or less than 5 days prior to the date
fixed for redemption, and the registered holders of bonds of the
Forty-sixth Series, by the acceptance of such bonds, waive any
additional or further notice of redemption provided in the
Original Indenture.
Each bond or portion thereof of the Forty-sixth Series
called for redemption under this Section 3 shall be due and
payable at the office of the Cape May Trustee, as paying agent
hereunder, at the applicable redemption price and on the
specified redemption date, anything herein or in such bond to the
contrary notwithstanding; provided, however, that notwithstanding
the foregoing or any provisions of the Original Indenture, this
Third 1994 Supplemental Indenture, the bonds of the Forty-sixth
Series, or any notice of redemption of the bonds of the Forty-
sixth Series to the contrary, in the case of bonds of the Forty-
sixth Series to be redeemed pursuant to subsections (a) or (b)
above, the notice of redemption in respect of such bonds shall,
without further act of the Trustee or the Company, be rescinded
and become null and void for all purposes hereunder and no
redemption of such bonds and no payments in respect thereof shall
be effected or required unless an equal principal amount of Cape
May 1994 Series B Bonds are due and payable on such redemption
date. From and after the date when each bond or portion thereof
of the Forty-sixth Series shall be due and payable as aforesaid
(unless upon said date the full amount due thereon shall not be
held by the Cape May Trustee, as paying agent hereunder, and be
immediately available for payment), all further interest shall
cease to accrue on such bond or on such portion thereof, as the
case may be.
If only a portion of any bond of the Forty-sixth Series
shall be called for redemption pursuant to this Section 3, the
notice of redemption hereinbefore provided for shall specify the
portion of the principal amount thereof to be redeemed. Upon
payment of the portion so called for redemption, the Cape May
Trustee shall make an appropriate notation upon the bond of the
principal amount so redeemed.
Bonds of the Forty-sixth Series shall not be
transferable except as provided in the Cape May Indenture and
then only upon presentation and surrender thereof, for
cancellation, at the office or agency of the Company in the
Borough of Manhattan, the City of New York, by the registered
holders thereof, in person or by duly authorized attorney, in the
manner prescribed in the Original Indenture. In the manner
prescribed in the Original Indenture, bonds of the Forty-sixth
Series may be exchanged for a like aggregate principal amount of
fully registered bonds, without coupons, of the Forty-sixth
Series of other authorized denominations, upon presentation and
surrender thereof, for cancellation, at the office or agency of
the Company in the borough of Manhattan, the City of New York.
SECTION 4. In accordance with and in compliance with the
provisions of Article V of the Original Indenture, $25,000,000
principal amount of bonds of the Forty-fifth Series and
$6,500,000 principal amount of bonds of the Forty-sixth Series
may be executed on behalf of the Company and delivered to the
Trustee, and shall be authenticated by the Trustee and delivered
(without awaiting the filing or recording of this Third 1994
Supplemental Indenture) from time to time in accordance with the
order or orders of the Company, evidenced by a writing or
writings signed in the name of the Company by its President, or
one of its Vice Presidents and its Treasurer or one of its
Assistant Treasurers. The bonds of the Forty-fifth and Forty-
sixth Series shall be executed in the name of the Company by the
manual or facsimile signature of its President or one of its
Senior Vice Presidents or Vice Presidents, and its corporate
seal, or a facsimile thereof, to be impressed or imprinted
thereon and attested by the signature, or a facsimile thereof, of
its Secretary or one of its Assistant Secretaries.
SECTION 5. The Company shall be entitled to credits against
amounts otherwise payable in respect of the bonds of the Forty-
fifth Series in an amount or amounts corresponding to (i) the
principal amount of any Cape May 1994 Series A Bond surrendered
to the Cape May Trustee by the Company or the Cape May Authority,
or purchased by the Cape May Trustee, for cancellation and (ii)
the amount of moneys held by the Cape May Trustee and available
and designated for the payment of principal or redemption price
of, and/or interest on, the Cape May 1994 Series A Bonds, from
any other source of payment to the Cape May Trustee of such
moneys other than payments of principal of, premium, if any, or
interest on bonds of the Forty-fifth Series.
A certificate of the Company signed by its President or any
Vice President, and by the Secretary or any Assistant Secretary,
and consented to in writing by the Cape May Trustee, stating that
the Company is entitled to a credit under this Section 5, and
setting forth the basis therefor in reasonable detail, shall be
conclusive evidence of such entitlement and, in the case of a
credit with respect to the principal amount of the bonds of the
Forty-fifth Series, of the discharge of the Company's obligation
with respect to the payment of such principal amount, and the
Trustee shall accept and shall be entitled to rely upon such
certificate as such evidence without further investigation or
verification of the matters stated therein.
SECTION 6. The Company shall be entitled to credits
against amounts otherwise payable in respect of the bonds of the
Forty-sixth Series in an amount or amounts corresponding to (i)
the principal amount of any Cape May 1994 Series B Bond
surrendered to the Cape May Trustee by the Company or the Cape
May Authority, or purchased by the Cape May Trustee, for
cancellation and (ii) the amount of moneys held by the Cape May
Trustee and available and designated for the payment of principal
or redemption price of, and/or interest on, the Cape May 1994
Series B Bonds, from any other source of payment to the Cape May
Trustee of such moneys other than payments of principal of,
premium, if any, or interest on bonds of the Forty-sixth Series.
A certificate of the Company signed by its President or any
Vice President, and by the Secretary or any Assistant Secretary,
and consented to in writing by the Cape May Trustee, stating that
the Company is entitled to a credit under this Section 6, and
setting forth the basis therefor in reasonable detail, shall be
conclusive evidence of such entitlement and, in the case of a
credit with respect to the principal amount of the bonds of the
Forty-sixth Series, of the discharge of the Company's obligation
with respect to the payment of such principal amount, and the
Trustee shall accept and shall be entitled to rely upon such
certificate as such evidence without further investigation or
verification of the matters stated therein.
SECTION 7. The approval by the Board of Public Utilities,
State of New Jersey of the execution and delivery of this Third
1994 Supplemental Indenture shall not in anywise be construed as
approval by said Board of any other act, matter or thing which
requires the approval of said Board under the laws of the State
of New Jersey; nor shall said approval bind said Board or any
other public body or authority of the State of New Jersey having
jurisdiction in the premises in any future application for the
issue of bonds under the Original Indenture or any indenture
supplemental thereto or otherwise.
SECTION 8. As supplemented by this Third 1994 Supplemental
Indenture, the Original Indenture is in all respects ratified and
confirmed and the Original Indenture and this Third 1994
Supplemental Indenture shall be read, taken and construed as one
and the same instrument.
Nothing in this Third 1994 Supplemental Indenture contained
shall, or shall be construed to, confer upon any person other
than the holders of bonds issued under the Original Indenture and
this Third 1994 Supplemental Indenture, the Company and the
Trustee, any right to avail themselves of any benefit of any
provision of the Original Indenture or of this Third 1994
Supplemental Indenture.
The Trustee assumes no responsibility for the correctness of
the recitals of facts contained herein and makes no
representations as to the validity of this Third 1994
Supplemental Indenture.
This Third 1994 Supplemental Indenture may be simultaneously
executed in any number of counterparts, each of which so executed
shall be deemed to be an original; but such counterparts shall
together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, ATLANTIC CITY ELECTRIC COMPANY, party of
the first part, has caused this instrument to be signed in its
name and behalf by its President or a Vice President, and its
corporate seal to be hereunto affixed and attested by its
Secretary or an Assistant Secretary, and THE BANK OF NEW YORK,
party hereto of the second part, has caused this instrument to be
signed in its name and behalf by a Vice President or an Assistant
Vice President and its corporate seal to be hereunto affixed and
attested by an Assistant Vice President or an Assistant
Treasurer. Executed and delivered by Atlantic City Electric
Company in the Township of Egg Harbor, New Jersey, the 3rd day of
November, 1994.
ATLANTIC CITY ELECTRIC COMPANY
SEAL
By: /s/ L. M. Walters
(L. M. Walters)
Vice President
ATTEST:
/s/ F. F. Frankowski
(F. F. Frankowski)
Assistant Secretary
Signed, sealed and delivered by ATLANTIC CITY ELECTRIC COMPANY in
the presence of:
/s/ R. K. Marshall
(R. K. Marshall)
/s/ E. L. Kaminsky
(E. L. Kaminsky)
THE BANK OF NEW YORK
SEAL
By: /s/ Mary Jane Morrissey
(Mary Jane Morrissey)
Assistant Vice President
ATTEST:
/s/ Lucille Firrincieli
(Lucille Firrincieli)
Assistant Vice President
Signed, sealed and delivered by THE BANK OF NEW YORK in the
presence of:
/s/ A. Mazur
A. Mazur
/s/ L. Mullen
L. Mullen
STATE OF NEW JERSEY
ss:
COUNTY OF ATLANTIC
BE IT REMEMBERED that on this 3rd day of November, in the
year of our Lord one thousand nine hundred and ninety-four before
me, a Notary Public in and for the State and County aforesaid,
personally appeared F. F. Frankowski, who being by me duly sworn
on his oath says that he is Assistant Secretary of Atlantic City
Electric Company, the grantor in the foregoing Indenture
Supplemental to Mortgage and Deed of Trust, and that L. M.
Walters is a Vice President; that deponent knows the common or
corporate seal of said grantor, and the seal annexed to the said
Indenture Supplemental to Mortgage and Deed of Trust is such
common or corporate seal; that the said Indenture Supplemental to
Mortgage and Deed of Trust was signed by the said Vice President
and the seal of said grantor affixed thereto in the presence of
deponent; that said Indenture Supplemental to Mortgage and Deed
of Trust was signed, sealed and delivered as and for the
voluntary act and deed of said grantor for the uses and purposes
therein expressed, pursuant to a resolution of the Board of
Directors of said grantor; and at the execution thereof this
deponent subscribed his name thereto as witness.
Sworn and subscribed the day and year aforesaid.
/S/ STEPHANIE M. SCOLA
STEPHANIE M. SCOLA
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires October 13, 1999
[ SEAL ]
<PAGE>
STATE OF NEW YORK
ss:
COUNTY OF NEW YORK
BE IT REMEMBERED that on this 4th day of November, in the
year of our Lord one thousand nine hundred and ninety-four before
me, a Notary Public in and for the State and County aforesaid,
personally appeared Lucille Firrincieli, who being by me duly
sworn on her oath says that she is an Assistant Vice President of
THE BANK OF NEW YORK, the Trustee named in the foregoing
Indenture Supplemental to Mortgage and Deed of Trust, and that
Mary Jane Morrissey is an Assistant Vice President; that deponent
knows the common or corporate seal of said Trustee, and that the
seal annexed to the said Indenture Supplemental to Mortgage and
Deed of Trust is such common or corporate seal; that the said
Indenture Supplemental to Mortgage and Deed of Trust was signed
by the said Assistant Vice President and the seal of said Trustee
affixed thereto in the presence of deponent; that said Indenture
Supplemental to Mortgage and Deed of Trust was signed, sealed and
delivered as and for the voluntary act and deed of said Trustee
for the uses and purposes therein expressed, pursuant to
authority of the Board of Directors of said Trustee; and at the
execution thereof this deponent subscribed his name thereto as
witness.
Sworn and subscribed the day and year aforesaid.
[SEAL] /S/ WILLIAM J. CASSELS
WILLIAM J. CASSELS
NOTARY PUBLIC STATE OF NEW YORK
No. 01CA5027729
My Commission Expires May 16, 1996
<PAGE>
CERTIFICATE OF RESIDENCE
THE BANK OF NEW YORK, Mortgagee and Trustee within
named,
hereby certifies that its precise residence is 101 Barclay
Street,
in the Borough of Manhattan, in The City of New York, in the
State
of New York.
THE BANK OF NEW YORK
By:/s/ Lucille Firrincieli
Lucille Firrincieli
Assistant Vice President
<PAGE>
SCHEDULE I
This Bond is not transferable except as provided in
the
Trust Indenture dated as of November 1, 1994 of the Pollution
Control Financing Authority of Cape May County (New Jersey) to
United Jersey Bank, as Trustee.
ATLANTIC CITY ELECTRIC COMPANY
First Mortgage Bond
% Pollution Control Series of 1994
Due November 1, 2029
No. $
ATLANTIC CITY ELECTRIC COMPANY, a corporation of
the
State of New Jersey (hereinafter called the Company), for value
received, hereby promises to pay to United Jersey Bank, as
trustee under the Trust Indenture dated as of November 1, 1994,
of the Pollution Control Financing Authority of Cape May County
(New Jersey) to United Jersey Bank, as trustee, or registered
assigns, on November 1, 2029, at the office or agency of the
Company in Hackensack, New Jersey, Dollars in
lawful money of the United States of America, and to pay to the
person in whose name this bond is registered interest thereon
from November 1, 1994 or, if interest to any November 1 or May 1
has been paid, from the November 1 or May 1, as the case may be,
next preceding the date of this bond to which interest has been
paid, unless such interest payment date is May 1, 1995, in which
case from November 1, 1994, at the rate of __________________ per
centum per annum, in like money, at said office or agency on May
1 and November 1 in each year, until the Company's obligation
with respect to the payment of such principal shall have been
discharged.
This bond is one of an issue of bonds of the
Company,
issuable in series, and is one of a series known as its First
Mortgage Bonds, of the series designated in its title, all bonds
of all series issued and to be issued under and equally secured
(except insofar as any sinking fund, established in accordance
with the provisions of the Mortgage hereinafter mentioned, may
afford additional security for the bonds of any particular
series) by a Mortgage and Deed of Trust (herein, together with
any indentures supplemental thereto, called the Mortgage), dated
January 15, 1937, executed by the Company to THE BANK OF NEW
YORK, as Trustee, to which Mortgage reference is made for a
description of the property mortgaged and pledged, the nature and
I-1<PAGE>
extent of the security, the rights of the holders of the bonds in
respect thereof, the duties and immunities of the Trustee, and
the terms and conditions upon which the bonds are secured. With
the consent of the Company and to the extent permitted by
and as provided in the Mortgage, the rights and obligations of
the Company and/or of the holders of the bonds and/or coupons
and/or the terms and provisions of the Mortgage and/or of any
instruments supplemental thereto may be modified or altered by
affirmative vote of the holders of at least seventy-five per
centum (75%) in principal amount of the bonds affected by such
modification or alteration then outstanding under the Mortgage
(excluding bonds disqualified from voting by reason of the
Company's interest therein as provided in the Mortgage); provided
that no such modification or alteration shall permit the
extension of the maturity of the principal of this bond or the
reduction in the rate of interest hereon or any other
modification in the terms of payment of such principal or
interest without the consent of the holder thereof.
The principal hereof may be declared or may become
due
prior to the express date of the maturity hereof on the
conditions, in the manner and at the time set forth in the
Mortgage, upon the occurrence of a completed default as in the
Mortgage provided.
The bonds of this series are issuable in temporary
or
definitive form, only as fully registered bonds, without coupons,
in denominations of $5,000 and authorized multiples thereof. In
the manner prescribed in the Mortgage, registered bonds of this
series may be exchanged for a like aggregate principal amount of
registered bonds of other authorized denominations of the same
series, upon presentation and surrender thereof, for
cancellation, at the office or agency of the Company in the
Borough of Manhattan, The City of New York.
The Company and the Trustee may deem and treat the
person in whose name this bond is registered as the absolute
owner hereof for the purpose of receiving payment of or on
account of principal or (subject to the provisions of the
Mortgage) interest hereon and for all other purposes and the
Company and the Trustee shall not be affected by any notice to
the contrary.
The bonds of this series are redeemable as provided
in
the Indenture Supplemental to Mortgage and Deed of Trust, dated
as of November 1, 1994, creating the bonds of this series.
Reference is made to the applicable provisions of said
Supplemental Indenture, and such provisions shall for all
purposes have the same effect as though fully set forth in this
place.
I-2<PAGE>
No recourse shall be had for the payment of the
principal of or interest on this bond against any incorporator or
any past, present or future subscriber to the capital stock,
shareholder, officer or director, as such of the Company or of
any successor corporation, either directly or through the Company
or any successor corporation, under any rule of law, statute or
constitution or by the enforcement of any assessment or
otherwise, all such liability of incorporators, subscribers,
shareholders, officers and directors, as such, being released by
the holder or owner hereof by the acceptance of this bond and
being likewise waived and released by the terms of the Mortgage.
This bond shall not become valid or obligatory for
any
purpose until THE BANK OF NEW YORK, the Trustee under the
Mortgage, or its successor thereunder, shall have signed the form
of authentication certificate endorsed hereon.
IN WITNESS WHEREOF, ATLANTIC CITY ELECTRIC COMPANY
has
caused this bond to be executed in its name by the signature, or
a facsimile thereof, of its President or one of its Senior Vice
Presidents or Vice Presidents, and its corporate seal, or a
facsimile thereof, to be impressed or imprinted hereon and
attested by the signature, or a facsimile thereof, of its
Secretary or one of its Assistant Secretaries.
Dated,
ATLANTIC CITY ELECTRIC COMPANY
By
(Title)
ATTEST:
(Title)
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series herein
designated, described in the within-mentioned Mortgage.
Dated,
THE BANK OF NEW YORK,
Trustee
By
Authorized Signatory
I-3
Exhibit 28(a)
INDEPENDENT AUDITORS' REPORT
To Atlantic City Electric Company:
We have audited the accompanying consolidated balance sheets of
Atlantic City Electric Company and subsidiary as of December 31,
1994 and 1993, and the related consolidated statements of income,
changes in common shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Atlantic City Electric Company and subsidiary at December 31,
1994 and 1993 and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
February 9, 1995
Parsippany, New Jersey<PAGE>
REPORT OF MANAGEMENT
The management of Atlantic City Electric Company and subsidiary
(the Company) is responsible for the preparation of the financial
statements presented in this Annual Report on Form 10-K. The
financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the
financial statements, management made informed judgments and
estimates, as necessary, relating to events and transactions
reported. Management is also responsible for the preparation of
other financial information included elsewhere in this Annual
Report.
Management has established a system of internal accounting and
financial controls and procedures designed to provide reasonable
assurance as to the integrity and reliability of financial
reporting. In any system of financial reporting controls,
inherent limitations exist. Management continually examines the
effectiveness and efficiency of this system, and actions are
taken when opportunities for improvement are identified.
Management believes that, as of December 31, 1994, the system of
internal accounting and financial controls over financial
reporting is effective. Management also recognizes its
responsibility for fostering a strong ethical climate in which
the Company's affairs are conducted according to the highest
standards of corporate conduct. This responsibility is
characterized and reflected in the Company's code of ethics and
business conduct policy.
The financial statements have been audited by Deloitte & Touche
LLP, Certified Public Accountants. Deloitte & Touche LLP provides
an objective, independent audits as to management's discharge of
its responsibilities insofar as they relate to the fairness of
the financial statements. Their audits are based on procedures
believed by them to provide reasonable assurance that the
financial statements are free of material misstatement.
The Company's internal auditing function conducts audits and
appraisals of the Company's operations. It evaluates the system
of internal accounting, financial and operational controls and
compliance with established procedures. Both the external
auditors and the internal auditors periodically make
recommendations concerning the Company's internal control
structure, and management responds to such recommendations as
appropriate in the circumstances. None of the recommendations
made for the year ended December 31, 1994 represented significant
deficiencies in the design or operation of the Company's internal
control structure.
The Audit Committee of the Board of Directors of Atlantic Energy,
Inc., the parent of the Company, has oversight responsibility for
the ongoing examination of the Company's internal control
structure and determining that the Company's management has
fulfilled its obligation in the preparation of financial
statements. The Committee, comprised exclusively of independent
directors, discussed with the Company's internal auditors and
Deloitte & Touche LLP the overall scope and specific plans for
their respective activities concerning the Company.
The <PAGE>
Committee meets regularly with the internal auditors and Deloitte
& Touche LLP, without management present, to discuss the results
of the Company's financial reporting. The meetings are designed
to facilitate any private communication with the Committee
desired by the internal auditors or Deloitte & Touche LLP. No
significant actions by the Committee were required during the
year ended December 31, 1994 as a result of any private
communications conducted.
/s/ J. L. Jacobs /s/ F. F. Frankowski
J. L. Jacobs F. F. Frankowski
President and Controller - Vice President
Chief Executive Officer
February 9, 1995
<PAGE>
CONSOLIDATED STATEMENT OF INCOME Atlantic City Electric Company
and Subsidiary
(Thousands of Dollars)
For the Years Ended December 31,
1994 1993 1992
Operating Revenues-Electric $913,226 $865,799 $816,931
Operating Expenses:
Energy 210,891 159,438 161,134
Purchased Capacity 130,929 110,781 103,173
Operations 157,047 162,840 149,604
Maintenance 37,662 45,452 49,926
Depreciation and Amortization 73,344 67,950 69,371
State Excise Taxes 97,072 104,280 97,969
Federal Income Taxes 42,529 45,277 37,143
Other Taxes 10,757 10,854 12,113
Total Operating Expenses 760,231 706,872 680,433
Operating Income 152,995 158,927 136,498
Other Income and Expense:
Allowance for Equity Funds
Used During Construction 3,634 2,368 2,212
Employee Separation Costs,
net of tax of $9,265 (17,335) - -
Litigation Settlement, net of tax of:
1993 - $(1,321); 1992 - $(4,982) - (2,564) 9,671
Other-Net 9,568 9,865 13,613
Total Other Income and Expense (4,133) 9,669 25,496
Income Before Interest Charges 148,862 168,596 161,994
Interest Charges:
Interest on Long Term Debt 57,346 59,385 53,284
Other Interest Expense 1,114 1,633 2,678
Total Interest Charges 58,460 61,018 55,962
Allowance for Borrowed Funds Used During
Construction (2,772) (1,448) (1,414)
Net Interest Charges 55,688 59,570 54,548
Net Income $ 93,174 $109,026 $107,446
Earnings for Common Stock:
Net Income $ 93,174 $109,026 $107,446
Less Preferred Stock Dividend Requirements 16,716 17,405 17,812
Income Available for Common Stock $ 76,458 $ 91,621 $ 89,634
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS Atlantic City Electric Company
and Subsidiary
(Thousands of Dollars)
For the Years Ended December 31,
1994 1993 1992
Cash Flows Of Operating Activities:
Net Income $ 93,174 $ 109,026 $ 107,446
Deferred Purchased Power Costs 14,920 (6,050) 13,410
Deferred Energy Costs (3,819) (15,269) (6,143)
Depreciation and Amortization 73,344 67,950 69,371
Deferred Income Taxes-Net 6,116 16,213 13,531
Prepaid State Excise Taxes (37,029) (35,982) 540
Net (Increase) Decrease in Other Working
Capital (26,012) 30,762 8,661
Employee Separation Costs 26,600 - -
Other-Net 1,403 7,559 6,450
Net Cash Provided by Operating Activities 148,697 174,209 213,266
Cash Flows Of Investing Activities:
Utility Cash Construction Expenditures (119,961) (138,111) (130,700)
Leased Property (10,713) (9,946) (9,565)
Nuclear Decommissioning Trust Fund Deposits (6,424) (6,424) (6,424)
Utility Plant Removal Costs (8,000) (1,943) (4,936)
Other-Net 7,223 (3,824) (1,527)
Net Cash Used by Investing Activities (137,875) (160,248) (153,152)
Cash Flows Of Financing Activities:
Proceeds from Long Term Debt 53,572 464,633 59,655
Retirement and Maturity of Long Term Debt (42,664) (360,414) (10,350)
Increase (Decrease) in Short Term Debt 8,600 (14,600) (6,000)
Proceeds from Capital Lease Obligations 10,713 9,946 9,565
Preferred Stock Redemption (24,500) (5,469) (250)
Dividends (100,198) (98,752) (96,148)
Capital Contributions 25,270 20,991 14,605
Other-Net 1,601 (1,362) (2,822)
Net Cash (Used) Provided by
Financing Activities (67,606) 14,973 (31,745)
Net (Decrease) Increase in Cash and Temporary
Investments (56,784) 28,934 28,369
Cash and Temporary Investments,
beginning of year 60,243 31,309 2,940
Cash and Temporary Investments,
end of year $ 3,459 $ 60,243 $ 31,309
Supplemental Schedule of Payments:
Interest $ 61,035 $ 51,331 $ 53,593
Federal income taxes $ 32,254 $ 25,809 $ 36,399
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.<PAGE>
CONSOLIDATED BALANCE SHEET
Atlantic City Electric Company
and Subsidiary
(Thousands of Dollars)
December 31,
1994 1993
Assets
Electric Utility Plant:
In Service:
Production $1,151,661 $1,054,217
Transmission 357,389 338,584
Distribution 659,619 627,649
General 180,204 173,206
Total In Service 2,348,873 2,193,656
Less Accumulated Depreciation 725,999 668,832
Net 1,622,874 1,524,824
Construction Work in Progress 110,078 156,590
Land Held for Future Use 6,941 6,901
Leased Property-Net 42,030 45,268
Electric Utility Plant-Net 1,781,923 1,733,583
Investments and Nonutility Property:
Nuclear Decommissioning Trust Fund 52,004 43,163
Nonutility Property and Equipment-Net 1,286 1,286
Other Investments and Funds 1,853 11
Total Investments and Nonutility Property 55,143 44,460
Current Assets:
Cash and Temporary Investments 3,459 60,243
Accounts Receivable:
Utility Service 54,554 51,502
Miscellaneous 15,804 10,940
Allowance for Doubtful Accounts (3,300) (3,000)
Unbilled Revenues 32,070 39,309
Fuel (at average cost) 28,030 14,635
Materials and Supplies (at average cost) 27,823 28,230
Working Funds 14,475 14,313
Other Prepayments 11,760 15,582
Deferred Energy Costs 10,999 7,180
Deferred Income Taxes 12,141 2,945
Total Current Assets 207,815 241,879
Deferred Debits:
Unrecovered Purchased Power Costs 115,538 130,458
Recoverable Future Federal Income Taxes 85,854 85,855
Unrecovered State Excise Taxes 73,834 33,706
Unamortized Debt Costs 38,083 39,185
Other Regulatory Assets 47,055 41,705
Other 16,071 12,753
Total Deferred Debits 376,435 343,662
Total Assets $2,421,316 $2,363,584
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.<PAGE>
Atlantic City Electric
Company
and Subsidiary
(Thousands of Dollars)
December 31,
1994 1993
Liabilities and Capitalization
Capitalization:
Common Shareholder's Equity:
Common Stock $ 54,963 $ 54,963
Premium on Capital Stock 231,081 231,081
Contributed Capital 262,749 237,479
Capital Stock Expense (2,300) (2,470)
Retained Earnings 249,767 256,961
Total Common Shareholders' Equity 796,260 778,014
Preferred Stock:
Not Subject to Mandatory Redemption 40,000 40,000
Subject to Mandatory Redemption 149,250 173,750
Long Term Debt 763,288 751,101
Total Capitalization (excluding current portion) 1,748,798 1,742,865
Current Liabilities:
Preferred Stock Redemption Requirement 12,250 12,250
Capital Lease Obligations 928 861
Short Term Debt 8,600 -
Accounts Payable 65,632 63,819
Federal Income Taxes Payable - Affiliate 9,537 10,339
Other Taxes Accrued 3,490 6,873
Interest Accrued 19,048 22,038
Dividends Declared 24,681 24,910
Other 18,206 24,226
Accrued Employee Separation Costs 26,600 -
Total Current Liabilities 188,972 165,316
Deferred Credits and Other Liabilities:
Deferred Income Taxes 350,697 332,852
Deferred Investment Tax Credits 51,646 54,180
Capital Lease Obligations 41,102 44,407
Other 40,101 23,964
Total Deferred Credits and Other Liabilities 483,546 455,403
Commitments and Contingencies (Note 9)
Total Liabilities and Capitalization $2,421,316 $2,363,584
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN Atlantic City Electric Company
COMMON SHAREHOLDER'S EQUITY and Subsidiary
(Thousands of Dollars)
Premium on Capital
Common Capital Contributed Stock Retained
Stock Stock Capital Expense Earnings
Balance,
December 31, 1991 $54,963 $231,081 $201,883 $(2,502) $235,591
Net income 107,446
Capital stock expense 6 (6)
Capital contribution
from parent 14,605
Less dividends declared:
Preferred (17,812)
Common (78,336)
Balance,
December 31, 1992 54,963 231,081 216,488 (2,496) 246,883
Net income 109,026
Capital stock expense 26 (196)
Capital contribution
from parent 20,991
Less dividends declared:
Preferred (17,405)
Common (81,347)
Balance,
December 31, 1993 54,963 231,081 237,479 (2,470) 256,961
Net income 93,174
Capital stock expense 170 (170)
Capital contribution from
parent 25,270
Less dividends declared:
Preferred (16,716)
Common (83,482)
Balance,
December 31, 1994 $54,963 $231,081 $262,749 $(2,300) $249,767
As of December 31, 1993, the Company had 25 million authorized
shares of Common Stock at $3 par value. Shares outstanding at
December 31, 1993, 1992 and 1991 were 18,320,937.
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
<PAGE>
Notes to Consolidated Financial Statements
Note 1. SIGNIFICANT ACCOUNTING POLICIES
Organization - Atlantic City Electric Company (the Company) is a
wholly-owned subsidiary of Atlantic Energy, Inc. (AEI).
Deepwater Operating Company, which operates certain generating
facilities owned by the Company, is a wholly-owned subsidiary of
the Company. The Company is a public utility primarily engaged
in the generation, transmission, distribution and sale of
electric energy. Rates for service are regulated by the New
Jersey Board of Public Utilities (BPU), formerly the New Jersey
Board of Regulatory Commissioners. The Company's service
territory encompasses approximately 2,700 square miles within the
southern one-third of New Jersey. The majority of the Company's
customers are residential and commercial.
Principles of Consolidation - The consolidated financial
statements include the accounts of the Company and its
subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Regulation - The accounting policies and rates of the Company are
subject to the regulations of the BPU and in certain respects to
the Federal Energy Regulatory Commission (FERC). The Company
follows generally accepted accounting principles (GAAP) and
financial reporting requirements employed by all industries as
specified by the Financial Accounting Standards Board (FASB) and
the Securities and Exchange Commission (SEC). However,
accounting for rate regulated industries may depart from GAAP
applied by other industries as permitted by Statement of
Financial Accounting Standards No. 71 (SFAS No. 71). SFAS No. 71
provides guidance on circumstances where the economic effect of a
regulator's decision warrants different applications of GAAP as a
result of the rate making process. In setting rates, a regulator
may provide recovery of an incurred cost in a year or years other
than the year the cost is incurred. As permitted by SFAS No. 71,
costs ordered by a regulator to be deferred or capitalized for
future recovery are recorded as a regulatory asset because the
regulator's rate action provides reasonable assurance of future
economic benefits attributable to these costs. In a non-rate
regulated industry, such costs may be charged to expense in the
year incurred. SFAS No. 71 further specifies that a regulatory
liability is recorded when a regulator orders a refund to
customers of revenues previously collected, or when existing
rates provide for recovery of future costs not yet incurred.
Such treatment is not afforded to non-rate regulated companies.
When collection of regulatory assets or relief of regulatory
liabilities is no longer probable, the assets and liabilities are
applied to income in the year that the probability assessment is
made. Specific regulatory assets and liabilities that have been
recorded are discussed elsewhere in the notes to the consolidated
financial statements.
Electric Operating Revenues - Revenues are recognized when
electric energy services are rendered, and include estimates for
amounts unbilled at the end of the period for energy used
subsequent to the last billing cycle.
Nuclear Fuel - Fuel costs associated with the Company's
participation in jointly-owned nuclear generating stations,
including spent nuclear fuel disposal costs, are charged to
Energy expense based on the units of thermal energy produced.
Electric Utility Plant - Property is stated at original cost.
Generally, the plant is subject to a first mortgage lien. The
cost of property additions, including replacement of units of
property and betterments, is capitalized. Included in certain
property additions is an Allowance for Funds Used During
Construction (AFDC), which is defined in the applicable
regulatory system of accounts as the cost during the period of
construction of borrowed funds used for construction purposes and
a reasonable rate on other funds when so used. AFDC has been
calculated using a semi-annually compounded rate of 8.25%, as
approved by the BPU, since
August 1, 1993. The AFDC rate was 8.95%, as approved by the BPU,
prior to this date.
Depreciation - The Company provides for straight-line
depreciation based on the estimated remaining life of
transmission and distribution property, remaining life of the
related nuclear plant operating license for nuclear property and
estimated average service life for all other depreciable
property. The overall composite rate of depreciation was
approximately 3.3% in 1994 and 1993 and 3.5% in 1992.
Accumulated depreciation is charged with the cost of depreciable
property retired together with removal costs less salvage and
other recoveries.
Nuclear Decommissioning Trust - The Company has a trust to fund
the future costs of decommissioning each of the five nuclear
units in which it has an ownership interest. The current annual
funding amount, as authorized by the BPU, totals $6.4 million and
is provided for in rates charged to customers. The funding
amount is based on estimates of the future cost of
decommissioning each of the units, dates that decommissioning
activities are expected to occur and return to be earned by the
assets of the fund. The present value of the Company's nuclear
decommissioning obligation, based on 1987 site specific studies
used by the BPU for approval in 1991 and restated in 1994
dollars, is $152.2 million. The BPU has further established that
decommissioning activities are expected to begin in 2006 and
continue through 2032. Actual costs and timing of
decommissioning activities may vary from the current estimates.
The Company will seek to adjust these estimates and the level of
rates collected from customers in future BPU proceedings to
reflect changes in decommissioning cost estimates and the
expected levels of inflation and interest to be earned by the
assets in the trust. As of December 31, 1994, the present value
of such contributions based on estimates for future
decommissioning costs and the dates such activities are expected
to occur is $111.4 million, without earnings on or appreciation
of the fund assets. As of December 31, 1994, the cost and market
value of the trust were $52 million. Trust contributions of the
related $36.9 million qualify for Federal income tax purposes.
The related reserve for decommissioning costs are presented as a
component of accumulated depreciation and amount to $51.1 million
at December 31, 1994 and $42.2 million at December 31, 1993.
The SEC has questioned certain accounting practices employed by
the electric utility industry concerning decommissioning costs
for nuclear generating facilities. The FASB is currently
reviewing this issue within the broad context of removal costs
relative to all industries. At this time, the Company cannot
predict what future accounting practices may be required by the
FASB and SEC concerning this issue, nor the impact on the
financial statements that any new accounting practices may have.
Deferred Energy Costs - As approved by the BPU, the Company has a
Levelized Energy Clause (LEC) through which energy and energy-
related costs (energy) are charged to customers. LEC rates are
based on projected energy costs and prior period underrecoveries
or overrecoveries of energy costs. Energy costs are recovered
through levelized rates over the period of projection, which is
generally a 12-month period. In any period, the actual amount of
LEC revenues recovered from customers may be greater or less than
the recoverable amount of actual energy costs incurred in that
period. Energy expense is adjusted to match the associated LEC
revenues. Any underrecovery (an asset representing energy costs
incurred that are to be collected from customers) or overrecovery
(a liability representing previously collected energy costs to be
returned to customers) of costs is deferred on the Consolidated
Balance Sheet as Deferred Energy Costs. These deferrals are
recognized in the Consolidated Statement of Income as Energy
expense during the period in which they are subsequently included
in the LEC.
Income Taxes - Effective January 1, 1993, deferred Federal and
state income taxes are provided on all significant temporary
differences between book bases and tax bases of assets and
liabilities, transactions that reflect taxable income in a year
different than book income, and tax carryforwards. Deferred
Federal and state income taxes for 1992 were provided on all
significant current transactions for which the timing of
recognition differs for book and tax purposes. Investment tax
credits, which are used to reduce current Federal income taxes,
are deferred on the Consolidated Balance Sheet and recognized in
book income over the life of the related property. The Company
files a consolidated Federal income tax return with AEI. An
agreement with AEI provides for allocation to the Company of the
tax liabilities or benefits generated by the Company based on the
separate return method. Such tax liabilities and benefits are
periodically settled on a cash basis.
Unrecovered Purchased Power Costs - The Company has an
arrangement that commenced in 1983 to purchase capacity and
related energy through September 30, 2000. Levelized base rates
over the term of the arrangement were approved by the BPU to
recover costs estimated at commencement to be incurred. During
the first half of the term, estimated costs that exceeded
levelized revenues were deferred on the Consolidated Balance
Sheet as Unrecovered Purchased Power Costs. Since then,
levelized revenues have been greater than the estimated costs,
permitting the deferred costs to be charged to Purchased Capacity
expense on the Consolidated Statement of Income. The BPU granted
a return on the unrecovered deferred balance throughout the term
of the arrangement. The unrecovered deferred balance at December
31, 1994 and 1993 were $95.9 million and $110.5 million,
respectively. Also included within Unrecovered Purchased Power
Costs are costs incurred in renegotiating a contract with an
independent power producer. These costs are amortized to expense
over the BPU-approved recovery period of 20 years beginning in
1994. The unrecovered balances were $19.6 million and $20
million at December 31, 1994 and 1993, respectively.
Related Party Transactions - The Company has a contract for a
total of 106 MWS of capacity and related energy from a
cogeneration facility that is owned 50% by a wholly-owned
subsidiary of AEI. Capacity costs totaled $23.0 million in 1994
and 1993 and $18.4 million in 1992 and energy costs totaled $13.4
million, $13.2 million and $8.7 million in 1994, 1993 and 1992,
respectively. The Company also rents office space from and sells
electricity to another wholly-owned subsidiary of AEI. The rents
paid and the electric sales recorded are not significant to the
Consolidated Statement of Income. The amounts receivable and
payable to such affiliates were not significant at December 31,
1994 and 1993.
Regulatory Assets and Liabilities - Costs incurred by the Company
that have been permitted by the BPU to be deferred for recovery
in rates in more than one year, or for which future recovery is
probable, have been recorded as regulatory assets. Regulatory
assets are amortized to expense over the period of recovery.
Total regulatory assets on the Consolidated Balance Sheet at
December 31, 1994 and 1993 were $365.5 million and $332.1
million, respectively. Unamortized costs currently being
recovered in rates at December 31, 1994 and 1993, respectively,
and remaining recovery periods at December 31, 1994 are:
Unrecovered State Excise Taxes of $73.8 million and $33.7
million, with a remaining recovery period of eight years;
decommissioning and decontaminating Federally-owned nuclear units
of $7.2 million and $8.4 million, with a remaining recovery
period of 14 years; and asbestos removal of $9.6 million and $9.9
million for which the recovery period is over the remaining
depreciable life of the related generating station of 36 years.
Property Abandonment Costs at their net present value of $5
million and $6.3 million at December 31, 1994 and 1993,
respectively, are being recovered through rates with no return on
the unamortized balances of $6.5 million and $8.5 million,
respectively. Such costs were written down to their net present
values at the date of abandonment with subsequent accretions of
the unamortized balances over the recovery period. These costs
have a recovery period between two and seven years. Also
included in Other Regulatory Assets are amounts for which future
recovery is probable of $9.4 million and $9.1 million at December
31, 1994 and 1993, respectively. Costs associated with debt
reacquired by refundings, included in Unamortized Debt Costs, are
amortized over the life of the newly issued debt as permitted by
the BPU in accordance with FERC guidelines. The unamortized
balances of these costs were $32.2 million and $33.2 million at
December 31, 1994 and 1993, respectively. Recovery of regulatory
assets for Unrecovered Purchased Power Costs (Note 1), Deferred
Energy Costs (Note 1), Recoverable Future Federal Income Taxes
(Note 2) and Postretirement Benefits Other Than Pensions (Note 4)
are separately discussed in the Notes to Consolidated Financial
Statements where indicated. No regulatory liabilities existed at
December 31, 1994 and 1993.
Financial Instruments - A number of items within Current Assets
and Current Liabilities on the Consolidated Balance Sheet are
considered to be financial instruments because they are cash or
are to be settled in cash. Due to their short term nature, the
carrying values of these items approximate their fair market
values. Accounts Receivable - Utility Service and Unbilled
Revenues are subject to concentration of credit risk because they
pertain to utility service conducted within a confined geographic
region.
Other - Debt premium, discount and expenses of the Company are
amortized over the life of the related debt. Temporary
investments considered as cash equivalents for Consolidated
Statement of Cash Flows purposes represent purchases of highly
liquid debt instruments maturing in three months or less. The
weighted daily average interest rates on short term debt was 4.4%
for 1994 and 3.2% for 1993.
Certain prior year amounts have been reclassified to conform to
the current year reporting of these items.<PAGE>
NOTE 2. FEDERAL INCOME TAXES
For the Years Ended December 31,
(000) 1994 1993 1992
The components of Federal income tax expense are as follows:
Current $ 30,013 $ 29,679 $ 33,660
Deferred 6,116 16,214 13,531
Total Federal Income Tax Expense 36,129 45,893 47,191
Less Amounts Included in Other Income (6,400) 616 10,048
Federal Income Taxes Included in
Operating Expenses $ 42,529 $ 45,277 $ 37,143
A reconciliation of the expected Federal income taxes compared to the reported
Federal income tax expense computed by applying the statutory rate follows:
Statutory Federal Income Tax Rate 35% 35% 34%
Income Tax Computed at the Statutory Rate $ 45,256 $ 54,221 $ 52,577
Plant Basis Differences (27) (5,171) 2,022
Investment Tax Credits (2,534) (2,534) (2,534)
Tax Adjustments (4,874) (750) (3,757)
Other-Net (1,692) 127 (1,117)
Total Federal Income Tax Expense $ 36,129 $ 45,893 $ 47,191
Effective Federal Income Tax Rate 28% 30% 31%
Items comprising deferred tax amounts are as follows at December 31, 1994 and
1993:
1994 1993
Deferred Tax Liabilities:
Plant Basis Differences $304,476 $295,445
Unrecovered Purchased Power Costs 33,557 38,792
State Excise Taxes 25,842 11,797
Other 22,573 21,057
Total Deferred Tax Liabilities 386,448 367,091
Deferred Tax Assets:
Deferred Investment Tax Credits 27,879 29,247
Employee Separation Costs 6,932 -
Other 13,081 7,938
Total Deferred Tax Assets 47,892 37,185
Total Deferred Taxes-Net $338,556 $329,906
The deferred tax costs associated with additional deferred tax
liabilities resulting from a change in accounting standards
regarding deferred taxes effective in 1993 are recorded on the
Consolidated Balance Sheet as Recoverable Future Federal Income
Taxes. Such recognition is given in respect of the probable
amount of revenue to be collected from ratepayers for these
additional taxes to be paid in future years.
<PAGE>
NOTE 3: RATE MATTERS
Energy Clause Proceedings
Changes in Levelized Energy Clause Rates
1992 - 1994
Amount Amount
Date Requested Granted Date
Filed (millions) (millions) Effective
2/92 $(6.6) $(8.5) 10/92
3/93 14.2 10.9 10/93
2/94 63.0 55.0 7/94
The Company's Levelized Energy Clause (LEC) is subject to annual
review by the BPU.
In February 1992, the Company filed a petition with the BPU for
the LEC period June 1, 1992 through May 31, 1993 requesting no
change in LEC rates. In April 1992, the Company filed a revision
to their petition requesting a $6.6 million decrease in LEC rates
based on an update for the projected overrecovery of prior LEC
costs and an amount allocated to customers from the litigation
settlement with PECO Energy (PECO) related to the Peach Bottom
Atomic Power Station. In October 1992, the BPU approved a
reduction in annual LEC revenues of $8.5 million which included
the recovery of $10.4 million over a three-year period of certain
deferred costs relating to the Salem Nuclear Generating Station.
The PECO settlement allocation was subject to review by the BPU
in the Company's 1993 LEC proceeding.
In March 1993, the Company filed a petition with the BPU
requesting a $14.2 million increase in LEC revenues for the June
1, 1993 through May 31, 1994 LEC period. Effective for service
rendered on and after October 1, 1993, the BPU approved an
increase of $10.9 million which included the following: 1) an
additional $3.8 million of the PECO settlement together with
accrued interest to be returned to customers during the 1994-1995
LEC period; 2) recovery of $400 thousand for the annual
assessment for the Department of Energy (DOE) decommissioning and
decontamination fund; 3) full LEC recovery of all future
assessments for the DOE decommissioning and decontamination fund
and 4) recognition of the $48 thousand penalty for 1992 nuclear
operations as required by the Nuclear Performance Standard. The
additional allocation of the PECO settlement was provided for in
the 1993 financial results and the reimbursement was made through
the 1994 LEC.
On February 8, 1994, the Company filed a petition with the BPU
requesting an increase in LEC revenues of $63 million for the
period June 1, 1994 through May 31, 1995. The increase was due
primarily to the additional costs incurred from two new
independent power producers (IPPs) scheduled to begin commercial
operation during the 1994/1995 LEC period. The total projected
costs for fuel and capacity for the LEC period were $147 million.
The Company reduced the requested amount by $84 million as a
result of the utilization of $56 million of current base rate
revenues associated with a utility power purchase contract
expiring in May 1994 and the Southern New Jersey Economic
Initiative (SNJEI), a Company initiative that forgoes the
recovery of $28 million of fuel costs. Included in the Company's
request was the recovery over five years of $20 million paid by
the Company in December 1993 in connection with contract
renegotiations with an IPP. Effective July 26, 1994, the BPU
approved a provisional increase of $55 million based on an
adjustment to actual costs for fuel and capacity. On November
30, 1994, the BPU rendered its decision on the Company's LEC
request approving the continuation of provisional LEC rates, the
recovery of the $20 million in renegotiation costs and the
reduction for the $28 million SNJEI.
Base Rate Case Proceedings
Effective October 1992, the BPU authorized a net increase in
annual base rate revenues of $12.9 million. In March 1994, in
response to an appeal filed by the Ratepayer Advocate in December
1992, the Superior Court of New Jersey, Appellate Division,
affirmed the BPU's decision to allow an increase in base rates
relating to changes in the state excise tax.
Other Rate Proceedings
In November 1993, the Company filed a petition with the BPU
requesting that hotel-casino customers be permitted to take
service under rate schedules offered to all other commercial and
industrial customers. On June 23, 1994, the BPU approved the
request with a provision that the Company not seek recovery of
lost revenues resulting from the hotel-casinos being permitted to
shift to other rate schedules prior to the Company's next base
rate case. The BPU also allowed for a one-time adjustment to be
billed to hotel-casino customers for the associated underrecovery
in the Company's fuel clause. Prior to BPU approval, hotel-
casino customers were served under the Hotel Casino Service rate
schedule, the highest rate for service of all the Company's
service classes. Effective July 1, 1994, all hotel-casino
customers began taking service under a general service rate
schedule which could reduce annual base rate revenues by
approximately $7 million. Effective July 25, 1994, the Hotel
Casino Service rate schedules were no longer offered for electric
service.
In July 1993, the BPU initiated a generic proceeding to address
the recovery of the capacity costs associated with purchases of
power from nonutility generation projects. This issue relates to
the Ratepayer Advocate's contention that present BPU policy which
permits full recovery of these costs through the LEC provides for
a "double recovery" of cogeneration capacity costs. In August
1993, the Ratepayer Advocate identified the Company as one of the
electric utilities for which they considered the double recovery
of capacity costs to be at issue. Pursuant to its February 18,
1994 decision supporting the investigation of the double recovery
of capacity costs from nonutility generation projects, the BPU
issued its written order on September 16, 1994. The order
confirmed the establishment of a generic proceeding to review the
nonutility purchase power capacity cost recovery methodology and
ordered that the matter be reviewed in a two phase proceeding.
The scope of the issues to be resolved during the first phase of
the proceeding will include: 1) the determination of the
existence, or lack of existence, of the double recovery as a
result of the traditional LEC pass-through of nonutility
generation capacity costs; 2) the quantification of any such
double recovery found to exist for each utility for the relevant
periods; and 3) a determination of an appropriate remedy or
adjustment if such double recovery is found to occur and the
periods of time over which such an adjustment would be
applicable. Following the conclusion of the first phase of the
proceeding, the BPU, in the second phase, will render a final
decision regarding the specific findings of the Office of
Administrative Law and address the broader issues relating to the
appropriate prospective purchase power capacity cost recovery
methods. Evidentiary hearings have been scheduled through
December 1995. The BPU's final decision is not anticipated until
1996. At this time, the Company cannot predict the outcome of
this proceeding and cannot estimate the impact that the double
recovery issue may have on future rates.
NOTE 4. RETIREMENT BENEFITS
Pension
The Company has a noncontributory defined benefit pension plan
covering substantially all of its employees and those of its
wholly-owned subsidiary. Benefits are based on an employee's
years of service and average final pay. The Company's policy is
to fund pension costs within the guidelines of the minimum
required by the Employee Retirement Income Security Act and the
maximum allowable as a tax deduction. Each company is allocated
its participative share of plan costs and contributions.
Net periodic pension costs for 1994, 1993 and 1992 included the following
components:
(000) 1994 1993 1992
Service cost - benefits earned during the period $ 6,871 $ 7,196 $ 7,310
Interest cost on projected benefit obligation 15,390 16,016 17,301
Actual return on plan assets (860) (23,200) (13,283)
Other-net (16,885) 5,496 (3,795)
Net periodic pension costs $ 4,516 $ 5,508 $ 7,533
Approximately $3 million, $5.2 million and $4.8 million of these
costs were charged to operating expense in 1994, 1993 and 1992,
respectively, and the remaining costs, which are associated with
construction labor, were charged to the cost of new utility
plant.
<PAGE>
A reconciliation of the funded status of the plan as of December 31, 1994 and
1993 is as follows:
(000)
1994 1993
Fair value of plan assets $190,200 $213,600
Projected benefit obligation 206,742 207,246
Plan assets (less than)in excess of
projected benefit obligation (16,542) 6,354
Unrecognized net transition asset (1,722) (1,894)
Unrecognized prior service cost 306 329
Unrecognized net loss (gain) 24,106 (638)
Prepaid pension cost $ 6,148 $ 4,151
Accumulated benefit obligation:
Vested benefits $166,602 $165,872
Nonvested benefits 485 1,216
Total $167,087 $167,088
At December 31, 1994, approximately 60% of plan assets were
invested in equity securities, 18% in fixed income securities and
22% in other investments. The assumed rates used in determining
the actuarial present value of the projected benefit obligation
at year-end were as follows:
1994 1993
Weighted average discount 7.5% 7.5%
Anticipated increase in compensation 3.5% 3.5%
The assumed long term rate of return on plan assets was 8.5% for
both 1994 and 1993 and 8% for 1992.
Other Postretirement Benefits
The Company and its subsidiary provide certain health care and
life insurance benefits for retired employees and their eligible
dependents. Substantially all employees may become eligible for
these benefits if they reach retirement age while working for the
companies. Benefits are provided through insurance companies and
other plan providers whose premiums and related plan costs are
based on the benefits paid during the year. The Company has a
tax qualified trust to fund these benefits. Each company is
allocated its participative share of plan costs and
contributions.
The cost of other postretirement benefits was $15.6 million,
$13.1 million and $6 million in 1994, 1993 and 1992,
respectively. These costs were allocated as follows:
(millions) 1994 1993 1992
Operating expense $5.6 $3.3 $3.8
New utility plant-associated with
construction labor .2 1.7 2.2
Regulatory asset 9.8 8.1 -
The regulatory assets represent the amount of cost recognized
under accounting standards effective January 1, 1993 in excess of
the amount of cost currently recovered in rates. These excess
costs are deferred as authorized by an accounting order of the
BPU pending future recovery through rates.
<PAGE>
Net periodic other postretirement benefits cost as calculated in
accordance with accounting standards in effect since January 1,
1993 include:
1994 1993
(000)
Service cost-benefits attributed to service during
the period $ 3,817 $ 3,045
Interest cost on accumulated postretirement
benefits obligation 8,450 7,133
Actual return on plan assets 100 (255)
Amortization of unrecognized transition
obligation 3,893 3,893
Other-net (700) (711)
Net periodic other postretirement cost $15,560 $13,105
A reconciliation of the funded status of the plan and the obligation for other
postretirement benefits recognized in the Consolidated Balance Sheet as of
December 31, 1994 and 1993 is as follows:
(000) 1994 1993
Accumulated benefits obligation:
Retirees $ 43,265 $ 32,720
Fully eligible active plan participants 18,010 21,267
Other active plan participants 60,588 49,125
Total accumulated benefits obligation 121,863 103,112
Less fair value of plan assets 14,700 14,400
Accumulated benefits obligation in excess
of plan assets 107,163 88,712
Unrecognized net loss (19,223) (6,639)
Unamortized unrecognized transition obligation (70,075) (73,968)
Accrued other postretirement
benefits cost obligation $ 17,865 $ 8,105
At December 31, 1994, approximately 81% of plan assets were
invested in fixed income securities and 19% in other investments.
The assumed health care costs trend rate for 1994 is 10% and is
assumed to evenly decline to an ultimate constant rate of 5% in
the year 2000 and thereafter. If the assumed health care costs
trend rate was increased by 1% in each future year, the aggregate
service and interest costs of the 1994 net periodic benefits cost
would increase by $1.9 million, and the accumulated
postretirement benefits obligation at December 31, 1994 would
increase by $16.7 million. The weighted average discount rate
assumed in determining the accumulated benefits obligation was
7.5% for 1994 and 1993. The assumed long term return rate on
plan assets was 7% for 1994 and 1993.
<PAGE>
NOTE 5. JOINTLY-OWNED GENERATING STATIONS
The Company owns jointly with other utilities several electric
production facilities. The Company is responsible for its pro-
rata share of the costs of construction, operation and
maintenance of each facility.
The amounts shown represent the Company's share of each facility
at, or for the year ending, December 31, including AFDC as
appropriate.
Peach Hope
Keystone Conemaugh Bottom Salem Creek
Energy Source Coal Coal Nuclear Nuclear Nuclear
Company's Share
(%/MWs) 2.47/42.3 3.83/65.4 7.51/157.0 7.41/164.0 5.00/52.0
Electric Plant in Service (000):
1994 $11,293 $26,607 $125,003 $206,804 $238,980
1993 10,746 18,055 123,428 203,858 237,496
Accumulated Depreciation (000):
1994 $3,180 $6,237 $55,190 $79,898 $53,746
1993 3,231 5,971 51,871 78,383 46,933
Construction Work in Progress (000):
1994 $1,216 $2,649 $11,002 $ 8,727 $ 387
1993 758 9,956 7,983 10,799 1,022
Working Funds (000):
1994 $44 $69 $5,051 $5,199 $2,013
1993 44 69 4,772 5,249 2,061
Operation and Maintenance Expenses
(including fuel)(000):
1994 $5,085 $7,211 $29,530 $27,731 $10,471
1993 5,323 6,855 31,479 27,021 9,764
1992 4,976 7,194 29,618 25,461 9,541
Generation (MWH):
1994 257,561 419,313 1,214,776 836,725 355,390
1993 293,876 416,263 1,043,485 840,043 440,118
1992 294,222 457,771 958,740 737,356 351,672
The Company provides financing during the construction period for
its share of the jointly-owned facilities and includes its share
of direct operations and maintenance expenses in the Consolidated
Statement of Income. Additionally, the Company provides an
amount of working funds to the operators of the facilities to
fund operational needs. The increase in Electric Plant in
Service and decrease in Construction Work in Progress for
Conemaugh is primarily due to the placement in service of flue
gas disulfurization equipment (scrubber).
<PAGE>
NOTE 6. CUMULATIVE PREFERRED STOCK
The Company has authorized 799,979 shares of Cumulative Preferred
Stock, $100 Par Value, two million shares of No Par Preferred
Stock and three million shares of Preference Stock, No Par Value.
Information relating to outstanding shares at December 31 is
shown in the table below.
Current
Optional
1994 1993 Redemption
Series Par Value Shares (000) Shares (000) Price
Not Subject to Mandatory Redemption:
4% $100 77,000 $ 7,700 77,000 $ 7,700 $105.50
4.10% 100 72,000 7,200 72,000 7,200 101.00
4.35% 100 15,000 1,500 15,000 1,500 101.00
4.35% 100 36,000 3,600 36,000 3,600 101.00
4.75% 100 50,000 5,000 50,000 5,000 101.00
5% 100 50,000 5,000 50,000 5,000 100.00
7.52% 100 100,000 10,000 100,000 10,000 101.88
Total $ 40,000 $ 40,000
Subject to Mandatory Redemption:
$8.25 None 55,000 $ 5,500 60,000 $ 6,000 104.66
$8.53 None 360,000 36,000 600,000 60,000 102.00
$8.20 None 500,000 50,000 500,000 50,000 -
$7.80 None 700,000 70,000 700,000 70,000 -
Total 161,500 186,000
Less portion due within one year 12,250 12,250
Total $149,250 $173,750
Cumulative Preferred Stock Not Subject to Mandatory Redemption is
redeemable solely at the option of the Company.
On November 1 of each year, 2,500 shares of the $8.25 No Par
Preferred Stock must be redeemed through the operation of a
sinking fund at a redemption price of $100 per share. The
Company may redeem not more than an additional 2,500 shares on
any sinking fund date without premium. The Company redeemed 5,000
shares in both 1994 and 1993.
Commencing in 1994, on November 1 of each year, 120,000 shares of
the $8.53 No Par Preferred Stock must be redeemed through the
operation of a sinking fund at a redemption price of $100 per
share. At the option of the Company, not more than an additional
120,000 shares may be redeemed on any sinking fund date without
premium. The Company redeemed 240,000 shares in 1994.
Beginning August 1, 1996 and annually thereafter, 100,000 shares
of the $8.20 No Par Preferred Stock must be redeemed through the
operation of a sinking fund at a redemption price of $100 per
share. At the option of the Company, not more than an additional
100,000 shares may be redeemed on any sinking fund date without
premium. This series is not refundable prior to August 1, 2000.
Beginning May 1, 2001 and annually through 2005, 115,000 shares
of $7.80 No Par Preferred Stock must be redeemed through the
operation of a sinking fund at a redemption price of $100 per
share. On May 1, 2006, the remaining shares outstanding must be
redeemed at $100 per share. ACE has the option to redeem up to
an additional 115,000 shares without premium on each May 1
through 2005. This series is not refundable prior to May 1,
2006.
For the next five years, the annual minimum sinking fund
requirements of the Cumulative Preferred Stock Subject to
Mandatory Redemption is $12.25 million for the year 1995, and
$22.25 million in each of the years 1996 and 1997 and $10.25
million in each of the years 1998 and 1999.
Cumulative Preferred Stock of the Company is not widely held and
trades infrequently. The estimated aggregate fair market value
of the Company's outstanding Cumulative Preferred Stock at
December 31, 1994 and 1993 was approximately $185 million and
$231 million, respectively. The fair market value has been
determined using market information available from actual trades
of similar instruments of companies with similar credit quality
and rate.
<PAGE>
NOTE 7. LONG TERM DEBT
Maturity December 31
Series Date 1994 1993
(Medium Term Notes (MTNs) have varying maturity dates and are shown with the
weighted average interest rate of the related issues within the year of
maturity.)
(000)
5-1/8% First Mortgage Bonds 2/1/1996 $ 9,980 $ 9,980
Medium Term Notes Series B (6.28%) 1998 56,000 56,000
Medium Term Notes Series A (7.52%) 1999 30,000 30,000
Medium Term Notes Series B (6.83%) 2000 46,000 46,000
7-1/2% First Mortgage Bonds 4/1/2002 20,000 20,000
Medium Term Notes Series B (7.18%) 2003 20,000 20,000
7-3/4% First Mortgage Bonds 6/1/2003 29,976 29,976
Medium Term Notes Series A (7.98%) 2004 30,000 30,000
Medium Term Notes Series B (7.125%) 2004 28,000 28,000
7-5/8% Pollution Control 1/1/2005 - 6,500
Medium Term Notes Series B (6.45%) 2005 40,000 40,000
6-3/8% Pollution Control 12/1/2006 2,500 2,500
Medium Term Notes Series B (6.76%) 2008 50,000 50,000
10-1/2% Pollution Control Series B 7/15/2012 850 850
6-5/8% First Mortgage Bonds 8/1/2013 75,000 75,000
7-3/8% Pollution Control Series A 4/15/2014 18,200 18,200
10-1/2% Pollution Control Series C 7/15/2014 - 23,150
8-1/4% Pollution Control Series A 7/15/2017 4,400 4,400
9-1/4% First Mortgage Bonds 10/1/2019 53,857 65,767
6.80% Pollution Control Series A 3/1/2021 38,865 38,865
7% First Mortgage Bonds 9/1/2023 75,000 75,000
5.60% Pollution Control Series A 11/1/2025 4,000 4,000
7% First Mortgage Bonds 8/1/2028 75,000 75,000
6.15% Pollution Control Series A 6/1/2029 23,150 -
7.20% Pollution Control Series A 11/1/2029 25,000 -
7% Pollution Control Series B 11/1/2029 6,500 -
Total 762,278 749,188
Debentures:
5-1/4% 2/1/1996 2,267 2,267
7-1/4% 5/1/1998 2,619 2,619
Total 4,886 4,886
Unamortized Premium and Discount-Net (3,876) (2,973)
Total Long Term Debt $763,288 $751,101
In 1994, the Company redeemed its 10-1/2% Pollution Control Bonds
Series C due 7/15/2014 and its 7-5/8% Pollution Control Bonds due
1/1/2005. The Company acquired and retired $11.9 million
principal amount of First Mortgage Bonds, 9-1/4% Series due
10/1/2019. The aggregate cost of these redemptions was $1.2
million, net of related Federal income taxes.
Sinking fund deposits are required for retirement of the 5-1/4%
Debentures annually on February 1 through 1995 and for the 7-1/4%
Debentures annually on May 1 through 1997 in amounts in each case
sufficient to redeem $100,000 principal amount. The Company may,
at its option, redeem an additional $100,000 annually in each
case. Through December 31, 1994, the Company acquired and
cancelled $333 thousand and $181 thousand principal amount of the
5-1/4% and 7-1/4% Debentures, respectively, which will be used to
satisfy its requirements for 1995. Certain series of First
Mortgage Bonds contain provisions for deposits of cash or
certification of bondable property currently amounting to $100
thousand, which the Company may elect to satisfy through property
additions. For the next five years, the annual amount of
scheduled maturities and sinking fund requirements of the
Company's long term debt are $12.266 million in 1996, $175
thousand in 1997, $58.575 million in 1998 and $30.075 million in
1999.
The Company's long term debt securities are not widely held and
generally trade infrequently. The estimated aggregate fair
market value of the Company's outstanding long term debt at
December 31, 1994 and 1993 was $693 million and $768 million,
respectively. The fair market value has been determined based on
quoted market prices for the same or similar debt issues or on
debt instruments of companies with similar credit quality, coupon
rates and maturities.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Construction Program
The Company's cash construction expenditures for 1995, which
excludes AFDC and customer contributions, are estimated to be
approximately $116 million. Current commitments for the
construction of major production and transmission facilities
approximate $23 million, of which it is estimated that $19
million will be expended in 1995.
Insurance Programs
The Company is a member of certain insurance programs that
provide coverage for decontamination and property damage to
members' nuclear generating plants. Facilities at the Peach
Bottom, Salem and Hope Creek stations are insured against
property damage losses up to $2.75 billion per site under these
programs.
In addition, the Company is a member of an insurance program
which provides coverage for the cost of replacement power during
prolonged outages of nuclear units caused by certain specific
conditions. The insurer for nuclear extra expense insurance
provides stated value coverage for replacement power costs
incurred in the event of an outage at a nuclear unit resulting
from physical damage to the nuclear unit. The stated value
coverage is subject to a deductible period of the first 21 weeks
of any outage. Limitations of coverage include, but are not
limited to, outages (1) not resulting from physical damage to the
unit, (2) resulting from any government mandated shutdown of the
unit, (3) resulting from any gradual deterioration, corrosion,
wear and tear, etc. of the unit, (4) resulting from any
intentional acts committed by an insured and (5) resulting from
certain war risk conditions. Under the property and replacement
power insurance programs, the Company could be assessed
retrospective premiums in the event the insurers' losses exceed
their reserves. As of December 31, 1994, the maximum amount of
retrospective premiums the Company could be assessed for losses
during the current policy year was $6.6 million under these
programs.
The Price-Anderson provisions of the Atomic Energy Act of 1954,
as amended by the Price-Anderson Amendments Act of 1988, govern
liability and indemnification for nuclear incidents. All nuclear
facilities could be assessed, after exhaustion of private
insurance, up to $79.275 million each, payable at $10 million per
year, per reactor and per incident. Based on its ownership share
of nuclear facilities, the Company could be assessed up to $27.6
million per incident. This amount would be payable at $3.48
million per year, per incident.
Energy and Capacity Arrangements
UTILITY SOURCES
The Company has an arrangement for the purchase of 125 MWs of
capacity and related energy from Pennsylvania Power and Light
through September 30, 2000. Capacity costs, including certain
deferred charges, totaled $26.6 million, $24.4 million and $25.1
million, and energy costs totaled $10.8 million, $11.2 million
and $13.4 million in 1994, 1993 and 1992, respectively.
Commitments for capacity costs expected to be incurred are $11.7
million, $12.0 million, $12.3 million, $12.6 million, $14.2
million and $12.3 million in each of the years 1995-2000,
respectively.
The Company's arrangement for the purchase of 200 MWs of capacity
and related energy from PECO expired May 31, 1994. Capacity
costs charged to Purchased Capacity expense totaled $25.6 million
through May 1994 and $55.9 million and $52.5 million for 1993 and
1992, respectively. Energy costs for the same periods amounted
to $11.4 million, $21.0 million and $19.2 million, respectively.
ACE also had another arrangement with PECO for the purchase of
energy only which terminated in October 1994. Energy costs under
this arrangement amounted to $32.5 million, $19.0 million and
$17.5 million in 1994, 1993 and 1992, respectively.
The Company is a member of the Pennsylvania-New Jersey-Maryland
Interconnection (PJM), an integrated power pool that is connected
with other utilities for the interchange of energy on an
as-needed and as-available basis. The Company is required to
plan for reserve capacity based on aggregate PJM requirements
allocated to member companies. The Company has satisfied its
current reserve requirements. The Company also has an
interchange agreement with the City of Vineland, New Jersey,
which operates a municipal utility located in the Company's
service territory. The cost of energy purchased through
interchange agreements totaled $10.4 million, $9.9 million and
$9.4 million in 1994, 1993 and 1992, respectively.
NONUTILITY SOURCES
The Company has contracted for a total of 569 MWs of capacity and
related energy from four non utility sources. The last two
projects under contract for 388 MWs became operational in 1994.
Nonutility capacity costs totaled $77.0 million, $30.2 million
and $24.4 million, and energy costs totaled $62.5 million, $36.0
million and $27.6 million, in 1994, 1993 and 1992, respectively.
Capacity and energy costs from nonutility sources are recovered
through the LEC.
Environmental Matters
The provisions of Title IV of the Clean Air Act Amendments of
1990 (CAAA) will require, among other things, phased reductions
of sulfur dioxide (SO2) emissions by 10 million tons per year,
and a limit on S02 emissions nationwide by the year 2000, and
reductions in emissions of nitrogen oxides (NOx) by approximately
2 million tons per year. The Company's wholly-owned B.L. England
Units 1 and 2 and its jointly-owned Conemaugh Station Units 1 and
2 are affected during Phase I (1995) and all of the Company's
other fossil-fuel steam generating units are affected by Phase II
(2000) of the CAAA. The Company has installed a scrubber on B.L.
England Unit 2 at a cost of $81 million which went into service
in December 1994. By scrubbing B.L. England Unit 2, Phase I S02
emission requirements are met for both B.L. England Units 1 and
2. The Conemaugh owners installed a scrubber on Conemaugh Unit 1
which went into service in December 1994. The Company's 3.83%
share of the cost was $11 million. A scrubber on Conemaugh Unit
2 is to be completed in 1995, with the Company's share of the
cost estimated to be $4 million. The jointly-owned Keystone
Station is impacted by the SO2 and NOx provisions of Title IV of
the CAAA during Phase II. Currently, the Keystone owners plan to
rely on utilizing emission allowances, and modified fuel content
to a lesser extent, to meet compliance with the CAAA through the
year 2000. In addition, certain purchase power arrangements will
be affected by the CAAA, in amounts that are not presently
determinable.
Federal and state legislation authorize various governmental
authorities to issue orders compelling responsible parties to
take cleanup action at sites determined to present danger from
releases of hazardous substances. The various statutes impose
joint and several liability without regard to fault for certain
investigative and cleanup costs for all potentially responsible
parties. The Company has received notification with respect to
two sites within New Jersey as one of a number of alleged
responsible parties for cleanup and remedial actions. The
Company's maximum expense for these claims is not expected to
exceed $1 million. The Company believes that insurance coverage
is available to satisfy any amounts in excess of the self-insured
limits associated with these particular claims should any
liability result. The insurer for pollution liability insurance
provides comprehensive excess general liability coverage,
including pollution liability, for environmental costs incurred
in the event of bodily injury or property damage resulting from
the discharge or release of pollutants into or upon the land,
atmosphere or water. Limitations of coverage include any
pollution liability 1) resulting subsequent to the disposal of
such pollutants, 2) resulting from the operation of a storage
facility of such pollutants, 3) resulting in the formation of
acid rain, 4) caused to property owned by an insured and 5)
resulting from any intentional acts committed by an insured.
Other
The Company is subject to a performance standard for all of its
jointly-owned nuclear units. This standard is used by the BPU in
determining recovery of replacement energy costs resulting from
poor nuclear performance. The standard establishes a target
aggregate capacity factor within a zone of reasonable performance
to be achieved by the units. Performance outside of the zone
results in penalties or rewards. Any penalties incurred would not
be permitted to be recovered from customers and would be charged
against income. For 1994, the aggregate capacity factor of the
Company's nuclear units is within the reasonable performance
zone, which results in no penalty or reward.
A contract with an industrial company whereby the Company
delivered process steam, water and by-product electricity was
terminated by this company effective June 30, 1994. In 1993, the
Company received approximately $12 million from this company for
services and energy sales. In accordance with the termination
agreement, the Company received $4.2 million in cash proceeds,
45,165 emission allowances valued at $6.5 million and made
provisions to retire certain equipment. A net gain of $2.4
million net of tax resulted. The steam and electricity needs of
this company are provided by a nonutility cogeneration facility.
The Company has a contract for the purchase of 188 MWs of
capacity and energy from this facility.
In November 1994, the Company announced a program to reduce its
workforce by up to 20% or 350 people. This program was initiated
so that the Company can better position itself for the more
competitive environment within the electric industry. Under the
program, certain employees will separate from the Company and be
entitled to a severance package, including salary continuation,
lump sum payments, extended medical benefits and outplacement
services. In December 1994, the Company accrued the costs of the
workforce reduction in the amount of $17.3 million, net of tax of
$9.3 million. Included is the Company's share of an early
retirement program of a jointly-owned nuclear station. The
Company's employee separations are expected to be substantially
completed by March 1, 1995.
The Energy Policy Act of 1992 permits the Federal government to
assess investor-owned electric utilities that have ownership
interests in nuclear generating facilities an amount to fund the
decontamination and decommissioning of three Federally operated
nuclear enrichment facilities. Based on its ownership in five
nuclear generating units, the Company recorded a liability of
$6.6 million and $8 million at December 31, 1994 and 1993,
respectively, for its obligation to be paid over the next 13
years. The Company has an associated regulatory asset of $7.2
million and $8.4 million at December 31, 1994 and 1993,
respectively. Amounts are currently being recovered in rates for
this liability and the regulatory asset is concurrently being
amortized to expense based on the annual assessment billed by the
Federal government.
<PAGE>
NOTE 9. LEASES
The Company leases various types of property and equipment for
use in its operations. Certain of these lease agreements are
capital leases consisting of the following at December 31:
(000) 1994 1993
Production plant $13,521 $13,521
Less accumulated amortization 9,707 8,846
Net 3,814 4,675
Nuclear fuel 38,216 40,593
Leased property-net $42,030 $45,268
The Company has a contractual obligation to obtain nuclear fuel
for the Salem, Hope Creek and Peach Bottom stations. The asset
and related obligation for the leased fuel are reduced as the
fuel is burned and are increased as additional fuel purchases are
made. No commitments for future payments beyond satisfaction of
the outstanding obligation exist. Operating expenses for 1994,
1993 and 1992 include leased nuclear fuel costs of $14.1 million,
$13.9 million and $13.5 million, respectively, and rentals and
lease payments for all other capital and operating leases of $5.9
million, $5.5 million and $5.5 million, respectively. Future
minimum rental payments for all noncancellable lease agreements
are not significant to the Company's operations. Rental charges
of other subsidiary companies are not significant.
NOTE 10. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial data, reflecting all adjustments necessary in
the opinion of the Company for a fair presentation of such
amounts, are as follows:
Operating Operating Net Earnings for
Quarter Revenues Income Income Common Stock
1994 (000) (000) (000)
1st $232,134 $ 39,580 $27,130 $22,821
2nd 205,861 30,299 20,635 16,326
3rd 272,769 58,321 49,679 45,370
4th 202,461 24,794 (4,272) (8,059)
Annual $913,226 $152,995 $93,174 $76,458
1993
1st $203,672 $ 35,264 $ 23,770 $19,331
2nd 192,561 27,203 14,885 10,548
3rd 268,927 68,421 55,477 51,157
4th 200,637 28,039 14,894 10,585
Annual $865,799 $158,927 $109,026 $91,621
Individual quarters may not add to the total due to rounding, and
the effect on earnings per share of changing average number of
common shares outstanding.
<PAGE>
The revenues of the Company are subject to seasonal fluctuations
due to increased sales and higher residential rates during the
summer months.
Net Income reflects special charges aggregating $18.7 million,
after tax of $10 million, recorded in Other Income during the
fourth quarter of 1994. One of the charges is an accrual of the
costs of workforce reductions for severance and benefits packages
in the amount of $17.3 million, net of tax of $9.3 million.
Another charge is an amount for the Company's share of deferred
costs for studies at a nuclear station in the amount of $1.4
million, net of tax of $735 thousand.
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Atlantic City Electric Company (the Company) is a wholly-owned
and the principal subsidiary of Atlantic Energy, Inc. (AEI). The
Company is an electric utility regulated by the New Jersey Board
of Public Utilities (BPU). The Company has a wholly-owned
subsidiary that operates certain generating facilities.
The emergence of competition in the area of electric generation,
slower growth in energy sales, Federal deregulation of wholesale
energy sales, prospective retail wheeling initiatives coupled
with a public utility's obligation to serve and the need to
mitigate future rate increases has caused the Company to re-
examine its traditional approach to its business.
The Company's current business plan recognizes the increasingly
competitive nature of the electric energy business in general and
the need to encourage economic growth and stability in the
service territory and surrounding region. The Company is re-
evaluating its revenue requirements and service pricing, the
implementation of additional cost controls and the development of
new sources of revenue.
Financial Results
Operating revenues for 1994, 1993 and 1992 were $913.2 million,
$865.8 million and $816.9 million, respectively. The increase in
1994 revenue reflects an increase in Levelized Energy Clause
(LEC) revenues as a result of a $55.0 million rate increase
effective July 1994 and an increase in sales for resale. The
increased revenues for 1993 reflect the effect of a rate increase
of $10.9 million effective in that year. The revenue increase in
1993 also reflects the contrast between the 1993 normal and the
1992 below normal summer temperatures. Income available for
common stock was $76.5 million, compared with $91.6 million in
1993 and $89.6 million in 1992.
The 1994 earnings include a reduction of $17.3 million, net of
tax of $9.3 million for the expected costs of the Company's
employee separation programs and $1.4 million, net of tax of $735
thousand for the write-off of deferred nuclear study costs. In
1993, results reflect increased kilowatt-hour sales due to the
contrast between 1993 and 1992 summer temperatures. The
Company's 1993 earnings were reduced as a result of
reorganization activities. The Company's 1992 earnings were
increased due to the litigation settlement with PECO Energy.
This increase was offset in part by lower energy sales due to
cooler summer temperatures and a decrease in industrial sales.
Liquidity and Capital Resources
Overview
Cash construction expenditures for the 1992-1994 period amounted
to $388.8 million and included expenditures for upgrades to
existing transmission and distribution facilities and compliance
with provisions of the Clean Air Act Amendments (CAAA) of 1990.
The Company's current estimate of cash construction expenditures
for the 1995-1997 period is $268 million. These estimated
expenditures reflect necessary improvements to transmission and
distribution facilities and further compliance with provisions of
the CAAA.
The Company also utilizes cash for mandatory redemptions of
Preferred Stock and maturities and redemption of long term debt.
Optional redemptions of securities are reviewed on an ongoing
basis with a view toward reducing the overall cost of funds.
Redemptions of Preferred Stock (at par or stated value) and
redemptions, reacquisitions and retirements, and maturities of
First Mortgage Bonds for the period 1992-1994 are shown as
follows:
1994 1993 1992
Preferred Stock
(Series)
9.96% (Shares) - 48,000 8,000
$8.53 (Shares) 240,000 - -
$8.25 (Shares) 5,000 5,000 2,500
Aggregate Amount (000) $24,500 $5,300 $1,050
First Mortgage Bonds redeemed or acquired and retired or matured
in the period 1992-1994 were as follows:
Date Series Principal Amount Price(%)
(000)
November 1994 7-5/8% due 2005 $ 6,500 100.00
June 1994 10-1/2% due 2014 23,150 102.00
Various 1994 Dates 9-1/4% due 2019 11,910 105.38*
September 1993 9-1/4% due 2019 69,233 110.95*
September 1993 8-7/8% due 2016 125,000 104.80
March 1993 8-7/8% due 2000 19,000 102.41
March 1993 8% due 2001 27,000 102.53
March 1993 8% due 1996 95,000 100.91
March 1993 4-3/8% due 1993 9,540 100.00
July 1992 4-1/2% due 1992 10,350 100.00
* Average price
Scheduled debt maturities and sinking fund requirements aggregate
$69 million for the years 1995-1997.
On or before April 1 of each year, the Company and other New
Jersey utilities are required to pay gross receipts and franchise
taxes (state excise taxes) to the State of New Jersey. In March
1994, the Company paid $137.5 million. Included in that amount
was approximately $50 million representing the second and final
installment for the additional one-half year's amount of tax due
as required by amended state law. This additional amount of
gross receipts and franchise tax payment, plus the additional
one-half year's payment in 1993 of $45 million, has been recorded
on the Consolidated Balance Sheet as Unrecovered State Excise
Taxes and is being recovered through rates by the Company. In
December 1993, the Company paid $20 million in connection with
renegotiation of a nonutility purchase power contract which the
Company is recovering through its LEC. The estimated savings of
this renegotiation based on currently forecasted fuel costs, is
$15 million to $20 million per year, net of the $20 million
payment.
On an interim basis, the Company finances that portion of its
construction costs and other capital requirements in excess of
internally generated funds through the issuance of unsecured
short term debt consisting of commercial paper and borrowings
from banks. As of December 31, 1994, the Company has arranged
for lines of credit of $150 million of which $141.4 million was
available. Permanent financing by the Company is undertaken by
the issuance of its long term debt and Preferred Stock and from
capital contributions by the parent company. The Company's
nuclear fuel requirements associated with its jointly-owned units
have been financed through arrangements with a third party.
In 1994, the Company issued and sold $54.65 million of its long
term debt consisting of Pollution Control Bonds. The proceeds
from the financings were used for refunding higher cost Pollution
Control Bonds and for construction purposes. Additionally, $125
million in debt securities were registered and are available for
issuance in 1995. In 1993, the Company issued and sold $469
million of long term debt consisting of $240 million of Series B
Medium Term Notes, $225 million of First Mortgage Bonds and $4
million of Pollution Control Bonds. The proceeds from the 1993
financings were also used for refunding higher cost debt and
construction purposes. In 1992, the Company issued and sold $60
million of Series A Medium Term Notes, the proceeds of which were
used for the Company's construction program. During 1995-1997,
the Company expects to issue $50 million in new long term debt to
be used for funding of construction and repayment of short term
debt.
Provisions of the Company's charter, mortgage and debenture
agreements can limit, in certain cases, the amount and type of
additional financing which may be used. At December 31, 1994,
the Company estimates additional funding capacities of $218
million of First Mortgage Bonds, or $530 million of Preferred
Stock, or $432 million of unsecured debt. These amounts are not
necessarily additive.
RESULTS OF OPERATIONS
Revenues
Operating Revenues - Electric increased 5.5% and 6.0% in 1994 and
1993, respectively. Components of the overall changes are shown
as follows:
(millions)
1994 1993
Base Revenues $(4.2) $12.2
Levelized Energy Clauses 30.3 (5.0)
Kilowatt-hour Sales 9.6 42.6
Unbilled Revenues (7.3) (1.2)
Sales for Resale 17.8 0.7
Other 1.2 (0.4)
Total $47.4 $48.9
Levelized Energy Clause (LEC) revenues increased in 1994 due to
rate increases of $55 million in July 1994 and $10.9 million in
October 1993. The decrease in 1993 LEC revenues was the net
result of the increase in October 1993 and an $8.5 million
decrease effective October 1992. Changes in kilowatt-hour sales
are discussed under "Billed Sales to Ultimate Customers."
Overall, the combined effects of changes in rates charged to
customers and kilowatt-hour sales resulted in increases of 3.1%
and 0.8% in revenues per kilowatt-hour in 1994 and 1993,
respectively. The changes in Unbilled Revenues are a result of
the amount of kilowatt-hours consumed by ultimate customers at
the end of the respective periods, which are affected by weather
and economic conditions, and the corresponding price per
kilowatt-hour. The changes in Sales for Resale are a function of
the Company's energy mix strategy, which in turn is dependent
upon the Company's needs for energy, the energy needs of other
utilities participating in the regional power pool of which the
Company is a member, and the sources and prices of energy
available. The increase in Sales for Resale for 1994 was the
result of meeting the demands of the regional power pool due to
the extreme weather conditions during the first six months of
1994.
Effective July 1, 1994, the BPU permitted hotel-casino customers
to take service under existing commercial rate schedules which is
expected to reduce annual revenue by approximately $7 million.
Billed Sales to Ultimate Utility Customers
Changes in kilowatt-hour sales are generally due to changes in
the average number of customers and average customer use, which
is affected by economic and weather conditions. Energy sales
statistics, stated as percentage changes from the previous year,
are shown as follows:
1994 1993
Avg Avg # Avg Avg #
Customer Class Sales Use of Cust Sales Use of Cust
Residential 1.5% .4% 1.1% 6.7% 5.9% .8 %
Commercial 2.6 .5 2.1 5.1 3.2 1.9
Industrial (2.9) (3.8) .9 2.6 4.6 (1.9)
Other 3.2 4.0 (.8) 1.2 1.6 (.4)
Total 1.3 - 1.2 5.4 4.4 .9
The 1994 increase in total kilowatt-hour sales was due to the
extreme weather conditions during the first quarter of 1994 and
an increased number of billing days in 1994 compared to 1993.
This increase was partially offset by the abnormal weather
conditions during the last half of the year when kilowatt-hour
usage fell below 1993 levels. In 1993, total kilowatt-hour sales
increased primarily due to the colder winter temperatures during
the first quarter, and below normal temperatures during the
summer of 1992. Improved economic conditions also contributed to
the increase in 1993 sales. Commercial sales in both years
benefitted from night lighting programs. The decline in 1994
industrial sales is due to the loss of the Company's largest
customer to an independent power producer during the year.
KWH sales and electric revenues by customer class were as
follows:
Residential Commercial Industrial Other
KWH Sales (000)
1994 3,546,789 3,344,676 1,224,721 51,670
1993 3,495,722 3,259,541 1,261,069 50,080
1992 3,276,330 3,100,133 1,229,211 49,464
Revenues (000)
1994 $ 416,468 $ 336,459 $ 102,687 $ 10,973
1993 393,866 315,089 100,812 10,575
1992 364,232 299,866 97,475 10,548
Costs and Expenses
Total Operating Expenses increased 7.5% and 3.9% in 1994 and
1993, respectively. Included in these expenses are the costs of
energy, purchased capacity, operations, maintenance, depreciation
and taxes.
Energy expense reflects cost incurred for energy needed to meet
load requirements, various energy supply sources used and
operation of the LECs. Changes in costs reflect the varying
availability of low-cost generation from the Company-owned and
purchased energy sources, and the corresponding unit prices of
the energy sources used, as well as changes in the needs of other
utilities participating in the Pennsylvania-New Jersey-Maryland
Interconnection. The cost of energy is recovered from customers
primarily through the operation of the LEC. Until 1994, earnings
were generally not affected by energy costs because these costs
are adjusted to match the associated LEC revenues. In any
period, the actual amount of LEC revenue recovered from customers
may be greater or less than the actual amount of energy cost
incurred in that period. Such respective overrecovery or
underrecovery of energy costs is recorded on the Consolidated
Balance Sheet as a liability or an asset as appropriate. Amounts
in the balance sheet are recognized in the Consolidated Statement
of Income within Energy expense during the period in which they
are subsequently recovered through the LEC. The Company was
underrecovered by $11 million and by $7.2 million at December 31,
1994 and 1993, respectively.
As a result of implementing the Southern New Jersey Economic
Initiative in rates, effective July 19, 1994, the Company is
forgoing recovery of future energy costs in LEC rates of $28
million through May 31, 1995. After tax income has been reduced
by $10.1 million due to the effects of this initiative in 1994.
In 1994, Energy expense increased 32.7% due to the adoption of
the Southern New Jersey Economic Initiative and the increase in
the levelized energy clause that reduced underrecovered fuel
costs. Production-related energy costs for 1994 increased by
19.9% due to increased overall generation and the high cost of
energy from additional nonutility sources. The average unit cost
for energy in 1994 increased to 2.04 cents per kilowatt-hour
compared to 1.82 cents per kilowatt-hour in 1993. Energy expense
for 1993 decreased 1.1% primarily due to an increase in
underrecovered fuel costs in 1993 compared to 1992. Production-
related energy cost for 1993 increased by 6.7% largely due to
increased generation. The average unit cost for energy in 1993
increased to 1.82 cents per kilowatt-hour compared to 1.80 cents
per kilowatt-hour in 1992. The 1993 increase in the per unit
cost is a result of increased amounts of higher cost energy from
nonutility sources and a decreased supply of lower cost energy
from coal sources.
Purchased Capacity expense reflects entitlements to generating
capacity owned by others. Purchased Capacity expense increased
18.2% and 7.4% in 1994 and 1993, respectively. The increases in
Purchased Capacity reflect additional capacity supplied by
nonutility power producers that became operational in each year.
Operations expense decreased 3.5% in 1994 and increased 8.9% in
1993. The increase in 1993 was due primarily to corporate
reorganization activities by the Company. Maintenance expense
decreased 17.1% in 1994 due to cost saving measures in
maintenance activities. The 9% decrease in 1993 maintenance
expense was due to the scheduling of maintenance projects.
Depreciation and Amortization expense increased 7.9% in 1994 as a
result of an increase in the depreciable base of the Company's
electric plant in service. State Excise Taxes expense decreased
6.9% in 1994 and increased by 6.4% in 1993. The increase in 1993
is due to a higher tax assessment.
Federal Income Taxes decreased 6.1% in 1994 and increased 21.9%
in 1993 as a result of the level of taxable income during those
periods. The change in the 1993 amount reflects the increase in
the Federal income tax rate to 35% from 34%, effective in that
year.
Employee Separation Costs represents programs by the Company to
reduce its workforce by about 20%, or 350 people. Other-Net
within Other Income (Expense) decreased in 1994 due to the net
after tax impacts of the write-off of deferred nuclear study
costs of $1.4 million. Litigation Settlement in 1992 represents
the Company's share of the settlement of litigation concerning
the Nuclear Regulatory Commission imposed shutdown in earlier
years of the Peach Bottom Atomic Power Station. The Litigation
Settlement for 1993 represents an additional allocation to
customers of the proceeds from the 1992 settlement as ordered by
the BPU.
Interest on Long Term Debt decreased in 1994 due to refunding of
higher cost debt. Interest on Long Term Debt increased 11.4% in
1993 reflecting the net effects of issuance of $469 million of
First Mortgage Bonds during the year, and the maturity,
redemption and reacquisition of various series of First Mortgage
Bonds totaling $344.8 million principal amount. At December 31,
1994, 1993 and 1992, the Company's embedded cost of long term
debt was 7.6%, 7.8% and 8.8%, respectively.
Preferred Stock Dividend Requirements decreased as a result of
continuing mandatory and optional redemptions in each year.
Embedded cost of Preferred Stock as of December 31, 1994, 1993
and 1992 was 7.6%, 7.7% and 7.7%, respectively.
<PAGE>
Outlook
The nature of the electric utility business is capital intensive.
The Company's ability to generate cash flows from operating
activities and its continued access to the capital markets is
affected by the timing and adequacy of rate relief, competition
and the economic vitality of its service territory. The Company
has lowered its planned capital expenditures for the period 1995-
1999 which will reduce its external cash requirements.
Additionally, the Company expects to review its revenue
requirements with a view toward overall rate stability in light
of expected price competition. The Company believes one of its
greatest assets is its high level of customer service and
reliability.
The financial performance of the Company will be affected in the
future by the level of sales of energy and the impacts of
regulation and competition. To better position itself for a more
competitive environment, the Company initiated cost reduction
programs in 1994. One such program was a workforce reduction
program which the Company expects will result in annual after tax
cost savings in excess of $10 million. Other issues which may
impact the electric utility business include public health,
safety and environmental legislation.
Changes in operating revenues in the future will result from
changes in customer rates, energy consumption and general
economic conditions in the service area, as well as the impacts
of load management and conservation programs instituted by the
Company. The Company's revenues could also be affected by the
increasing competition in the retail and wholesale energy market.
The emergence of competition among suppliers of electricity may
require the Company to create new rate structures and to offer
incentives to its Commercial and Industrial customers.
Net income of the Company may be affected by the operational
performance of nuclear generating facilities. The Company is
subject to a BPU-mandated nuclear unit performance standard.
Under the standard, penalties or rewards are based on the aggre-
gate capacity factor of the Company's five jointly-owned nuclear
units. Any penalties incurred would not be permitted to be
recovered from customers and would be charged against income.
The Energy Policy Act, enacted in October 1992, provides, among
other things, for increased competition between utility and
nonutility electric generators and permits wholesale transmission
access, or wheeling, with certain requirements. Other pressures
such as increased customer demands for competitive rates,
potential loss of municipal power sales, excess generating
capacity, together with the emergence of nonutility energy
sources, are expected to increase the amount of business risk for
electric utilities in the future. In addition, the extent to
which New Jersey public utility regulation is modified to be
reflective of these new competitive realities will be a key
factor affecting the Company.
Development of electric generating facilities by nonutilities has
occurred in the Company's service territory. Effects of
nonutility generation could be offset to some extent by natural
growth in the service territory and additional efforts by the
Company to reduce the impact of the potential loss of kilowatt-
hour sales and revenues.
The CAAA will require modifications at certain of the Company's
facilities. Compliance with the CAAA will cause ACE to incur
additional operating and/or capital costs. Presently, the
Company's construction budget for 1995 through 1997 includes
approximately $16 million related to the cost of compliance. In
addition, certain power purchase arrangements will be affected by
the CAAA, the effects of which are not presently determinable.
Federal and state legislation authorize various governmental
authorities to issue orders compelling responsible parties to
take cleanup action at sites determined to present danger from
releases of hazardous substances. The various statutes impose
joint and several liability without regard to fault for certain
investigative and cleanup costs for all potentially responsible
parties. The Company has received notification with respect to
two sites within New Jersey as one of a number of alleged
responsible parties for cleanup and remedial actions. The
Company's responsibility is not expected to exceed $1 million in
the aggregate.
Inflation
Inflation affects the level of operating expenses and also the
cost of new plant placed in service. Traditionally, the rate
making practices that have applied to the Company have involved
the use of historical test years and the actual cost of plant.
However, the ability to recover increased costs through rates,
whether resulting from inflation or otherwise, depends upon the
frequency, timing and results of rate case decisions.
