SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For Quarter ended September 30, 1995
( ) Transition Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Commission Registrant; State of Incorporation; IRS Employer
File No. Address; and Telephone No. Identification No.
1-9760 Atlantic Energy, Inc. 22-2871471
(New Jersey)
6801 Black Horse Pike
Egg Harbor Township, NJ 08234
(609) 645-4500
1-3559 Atlantic City Electric Company 21-0398280
(New Jersey)
6801 Black Horse Pike
Egg Harbor Township, NJ 08234
(609) 645-4100
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 the number of shares outstanding of each of the issuers'
classes of common stock, as of the latest practicable date:
Atlantic Energy, Inc. 52,539,465 (as of November 10, 1995)
All of the outstanding shares of Common Stock of Atlantic City
Electric Company are owned by Atlantic Energy, Inc.
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Thousands of Dollars
Quarter Ended September 30,
1995 1994
(unaudited)
Operating Revenues-Electric $302,685 $272,708
Operating Expenses:
Energy 62,513 67,714
Purchased Capacity 49,955 30,171
Operations 37,645 40,197
Maintenance 7,473 9,136
Depreciation and Amortization 19,620 18,351
State Excise Taxes 31,100 24,695
Federal Income Taxes 25,891 21,400
Other Taxes 2,006 2,613
Total Operating Expenses 236,203 214,277
Operating Income 66,482 58,431
Other Income:
Allowance for Equity Funds Used During
Construction 169 975
Other-Net 1,710 5,334
Total Other Income 1,879 6,309
Interest Charges:
Interest on Long Term Debt 15,658 14,243
Other Interest Expense 605 645
Total Interest Charges 16,263 14,888
Allowance for Borrowed Funds Used
During Construction (434) (780)
Net Interest Charges 15,829 14,108
Less Preferred Stock Dividend
Requirements of Subsidiary 3,787 4,309
Net Income $ 48,745 $ 46,323
Average Number of Shares of Common 52,543 54,353
Stock Outstanding (in thousands)
Per Common Share:
Earnings $ .93 $ .85
Dividends Declared $ .385 $ .385
Dividends Paid $ .385 $ .385
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<PAGE>
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Thousands of Dollars
Year-to-Date September 30,
1995 1994
(unaudited)
Operating Revenues-Electric $727,519 $710,629
Operating Expenses:
Energy 146,905 158,581
Purchased Capacity 142,939 97,840
Operations 111,169 115,419
Maintenance 22,204 27,184
Depreciation and Amortization 58,539 55,117
State Excise Taxes 78,460 75,786
Federal Income Taxes 38,230 43,394
Other Taxes 7,181 8,737
Total Operating Expenses 605,627 582,058
Operating Income 121,892 128,571
Other Income:
Allowance for Equity Funds Used During
Construction 829 2,697
Other-Net 5,582 9,512
Total Other Income 6,411 12,209
Interest Charges:
Interest on Long Term Debt 44,804 42,862
Other Interest Expense 2,513 1,024
Total Interest Charges 47,317 43,886
Allowance for Borrowed Funds Used
During Construction (1,158) (2,018)
Net Interest Charges 46,159 41,868
Less Preferred Stock Dividend
Requirements of Subsidiary 11,362 12,928
Net Income 70,782 85,984
Retained Earnings at Beginning of Period 249,181 256,549
319,963 342,533
Dividends Declared on Common Stock (61,000) (62,581)
Retained Earnings at End of Period $258,963 $279,952
Average Number of Shares of Common
Stock Outstanding (in thousands) 52,908 54,082
Per Common Share:
Earnings $1.34 $1.59
Dividends Declared $1.155 $1.155
Dividends Paid $1.155 $1.155
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
Thousands of Dollars
Year-to-Date September 30,
1995 1994
(unaudited)
Cash Flows Of Operating Activities:
Net Income $ 70,782 $ 85,984
Deferred Purchased Power Costs 11,785 11,170
Deferred Energy Costs (15,901) (11,919)
Depreciation and Amortization 58,539 55,117
Deferred Income Taxes-Net 11,201 18,099
Prepaid State Excise Taxes (20,257) (61,724)
Employee Separation Costs (15,619) -
Net Increase in Other Working Capital (11,296) (19,457)
Preferred Stock Dividend Requirements
of Subsidiary 11,362 12,928
Other-Net 4,676 (5,407)
Net Cash Provided by Operating
Activities 105,272 84,791
Cash Flows Of Investing Activities:
Utility Cash Construction Expenditures (68,574) (79,592)
Leased Property (6,262) (3,925)
Nuclear Decommissioning Trust Fund
Deposits (4,818) (4,818)
Utility Plant Removal Costs (3,924) (3,585)
Other-Net 806 (253)
Net Cash Used by Investing Activities (82,772) (92,173)
Cash Flows Of Financing Activities:
Proceeds from Long Term Debt 126,704 22,693
Retirement and Maturity of Long Term Debt - (36,023)
Increase in Short Term Debt 11,400 40,400
Proceeds from Common Stock Issued - 9,917
Purchases of Common Stock (29,626) -
Dividends Declared on Preferred Stock (11,362) (12,928)
Dividends Declared on Common Stock (61,000) (55,000)
Other-Net 5,473 3,052
Net Cash Provided (Used) by Financing
Activities 41,589 (27,889)
Net Increase (Decrease) in Cash and
Temporary Investments 64,089 (35,271)
Cash and Temporary Investments,
beginning of period 5,114 73,635
Cash and Temporary Investments,
end of period $ 69,203 $ 38,364
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<PAGE>
CONSOLIDATED BALANCE SHEET
Thousands of Dollars
September 30, December 31,
1995 1994
(unaudited)
ASSETS
Electric Utility Plant:
In Service $2,405,372 $2,348,873
Less Accumulated Depreciation 779,558 725,999
Net 1,625,814 1,622,874
Construction Work in Progress 117,281 110,078
Land Held for Future Use 6,941 6,941
Leased Property-Net 38,678 42,030
Electric Utility Plant-Net 1,788,714 1,781,923
Nonutility Property and Investments:
Investment in Leveraged Leases 78,777 78,216
Nuclear Decommissioning Trust Fund 59,097 52,004
Nonutility Property and Equipment-Net 21,377 18,163
Other Investments and Funds 33,897 28,940
Total Nonutility Property and
Investments 193,148 177,323
Current Assets:
Cash and Temporary Investments 69,203 5,114
Accounts Receivable:
Utility Service 74,946 54,554
Miscellaneous 16,392 14,067
Allowance for Doubtful Accounts (3,300) (3,300)
Unbilled Revenues 37,651 32,070
Fuel (at average cost) 21,110 28,030
Materials and Supplies (at average cost) 26,281 27,823
Working Funds 14,348 14,475
Prepaid State Excise Taxes 32,714 5,287
Other Prepayments 7,579 6,596
Deferred Energy Costs 26,901 10,999
Deferred Income Taxes - 12,264
Total Current Assets 323,825 207,979
Deferred Debits:
Unrecovered Purchased Power Costs 103,753 115,538
Recoverable Future Federal Income Taxes 85,854 85,854
Unrecovered State Excise Taxes 66,664 73,834
Unamortized Debt Costs 36,345 38,184
Other Regulatory Assets 54,714 47,055
Other 12,879 17,865
Total Deferred Debits 360,209 378,330
Total Assets $2,665,896 $2,545,555
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<PAGE>
CONSOLIDATED BALANCE SHEET
Thousands of Dollars
September 30, December 31,
1995 1994
(unaudited)
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Shareholders' Equity:
Common Stock $ 563,892 $ 593,475
Retained Earnings 258,963 249,181
Total Common Shareholders' Equity 822,855 842,656
Preferred Stock of Atlantic Electric:
Not Subject to Mandatory Redemption 40,000 40,000
Subject to Mandatory Redemption 149,250 149,250
Long Term Debt 871,129 778,288
Total Capitalization
(excluding current portion) 1,883,234 1,810,194
Current Liabilities:
Cumulative Preferred Stock Redemption
Requirement 12,250 12,250
Long Term Debt 35,547 1,000
Short Term Debt 20,000 8,600
Accounts Payable 52,420 66,080
Taxes Accrued 37,702 10,409
Interest Accrued 16,807 19,168
Dividends Declared 24,015 24,681
Accrued Employee Separation Costs 10,981 26,600
Other 19,202 19,813
Total Current Liabilities 228,924 188,601
Deferred Credits and Other Liabilities:
Deferred Income Taxes 412,845 412,574
Deferred Investment Tax Credits 49,745 51,646
Capital Lease Obligations 38,040 41,111
Other 53,108 41,429
Total Deferred Credits and
Other Liabilities 553,738 546,760
Commitments and Contingencies (Notes 3, 4 and 6)
Total Liabilities and Capitalization $2,665,896 $2,545,555
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Atlantic Energy, Inc. (the Company or AEI) is a public
utility holding company. Its principal subsidiary is
Atlantic City Electric Company (ACE), an electric utility.
On January 1, 1995, AEI transferred direct ownership of its
nonutility companies to a new subsidiary, Atlantic Energy
Enterprises, Inc. (AEE). AEE serves as the holding company
for the following nonutility companies: Atlantic
Generation, Inc. (AGI), ATE Investment, Inc. (ATE), Atlantic
Southern Properties, Inc. (ASP), Atlantic Energy Technology,
Inc. (AET), and Atlantic Thermal Systems, Inc. (ATS). The
consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly-
owned. All significant intercompany accounts and
transactions have been eliminated in consolidation. The
results of operations of the nonutility companies are not
significant and are classified under Other Income in the
Consolidated Statement of Income. These consolidated
financial statements reflect all normal, recurring
adjustments and accruals which, in the opinion of
management, are necessary for a fair presentation of the
consolidated financial statements presented. The notes to
the consolidated financial statements accompanying the
Company's 1994 Annual Report to Shareholders and Form 10-K
filed with the Securities and Exchange Commission should be
read in conjunction with this report. Note 1 of these
annual reports specifically identifies the significant
accounting policies of the Company. The consolidated
balance sheet contained in the financial statements
presented herein that is labeled December 31, 1994 was
derived from the audited consolidated balance sheet
presented in the 1994 Annual Report to Shareholders and Form
10-K. Certain prior year amounts have been reclassified to
conform to the current year reporting.
<PAGE>
2. The components of Federal Income Tax expense are as follows
(in thousands of dollars):
Quarter Ended September 30,
1995 1994
(unaudited)
Current $21,281 $29,685
Deferred 7,029 (6,095)
Total Federal Income Tax Expense 28,310 23,590
Less Amounts Included in Other Income 2,419 2,190
Federal Income Taxes Included
in Operating Expenses $25,891 $21,400
A reconciliation of the expected Federal income taxes
compared to the reported Federal Income Tax expense computed
by applying the statutory rate follows:
Tax Computed at the Statutory Rate
of 35% $28,295 $25,978
Utility Plant Basis Differences (310) 123
Investment Tax Credits (642) (634)
Other-Net 967 (1,877)
Total Federal Income Tax Expense $28,310 $23,590
Effective Federal Income Tax Rate 35% 32%
Year-to-Date September 30,
1995 1994
(unaudited)
Current $29,560 $28,479
Deferred 11,021 18,104
Total Federal Income Tax Expense 40,581 46,583
Less Amounts Included in Other Income 2,351 3,189
Federal Income Taxes Included
in Operating Expenses $38,230 $43,394
Tax Computed at the Statutory Rate
of 35% $42,954 $50,923
Utility Plant Basis Differences 483 1,631
Investment Tax Credits (1,917) (1,901)
Deferred Tax Adjustments - (375)
Other-Net (939) (3,695)
Total Federal Income Tax Expense $40,581 $46,583
Effective Federal Income Tax Rate 33% 32%
Certain prior year reconciliation amounts have been
reclassified to conform to current year reporting.
The Company is awaiting settlement by the IRS concerning
taxes in 1984 through 1986. The impending settlement is not
expected to have a material impact to the Company.
3. On April 17, 1995, ACE filed a petition with the New Jersey
Board of Public Utilities (BPU) requesting a $37.0 million
increase in annual levelized energy clause (LEC) revenues.
The petition also requested that the proposed rates be
implemented on a provisional basis, for service rendered on
and after June 1, 1995. This request for provisional rates
was to avoid any further increase in the proposed rates that
would result from compression as the implementation of the
proposed rates are delayed beyond the June 1, 1995 date.
Compression results from a shorter recovery period requiring
the increase in costs to be collected over a reduced level
of sales. The requested LEC increase is due primarily to
increased costs associated with the purchase of energy and
capacity from Independent Power Producers (IPP's). ACE has
BPU approved contracts with four IPP's. This LEC request
represents the first filing that includes a full year of
contract costs for all four IPP's. Though ACE's petition
supports a $67.6 million increase in LEC revenues, ACE has
voluntarily reduced its request by $30.6 million in order to
keep its rates competitive. This reduction was accomplished
by offering to forego the recovery of $10 million in LEC
revenues under the Southern New Jersey Economic Initiative
tariff rider and to defer recovery of $20.6 million of LEC
costs. ACE will seek full recovery of the $20.6 million
deferred LEC costs, without carrying costs, in its next
annual LEC filing. On July 7, 1995, the BPU approved the
provisional $37.0 million increase in annual LEC revenues
effective for service rendered to customers on and after
July 7, 1995. Evidentiary hearings for the determination of
final LEC rates were held in August 1995. The matter is now
before the Administrative Law Judge whose decision is
expected by the end of November 1995. A final BPU decision
is expected by the end of 1995. ACE cannot predict the
outcome of the final decision at this time.
On November 1, 1994, ACE filed a Motion with the BPU for
reconsideration of its order in the matter of the Generic
Proceeding on the double recovery of capacity costs. This
matter concerns the Ratepayer Advocate's allegation that ACE
and other New Jersey electric utility companies are
recovering capacity costs associated with IPP contracts
concurrently in base rates and LEC rates. By its order the
BPU found that the Ratepayer Advocate had reserved its right
to argue for an adjustment to the LEC rates approved in the
1992, 1993 and 1994 LEC proceedings. ACE's Motion argues
that the Stipulation settling the 1992 LEC and the BPU's
order approving that Stipulation did not include language
granting such rights to the Ratepayer Advocate. On March
22, 1995, ACE's Motion was denied by the BPU on the grounds
that this issue was previously addressed in its initial
order. Evidentiary hearings in the Generic Proceeding are
scheduled throughout 1995 and into 1996 with a final
decision expected during the third quarter of 1996. In
September 1995, the Ratepayer Advocate filed testimony which
calculates ACE's over-recovery of capacity costs for the
four year period, June 1991 through May 1995, at $46
million. ACE will file rebuttal testimony in mid-December
1995. ACE cannot predict the outcome of the decision at
this time.
4. In August 1995, ACE issued and sold $80 million of First
Mortgage Bonds in the form of Medium Term Notes in the
following increments: $30 million of 6.81% Series due 2001;
$25 million of 7.01% Series due 2002; $1 million of 7.25%
Series due 2010; $7 million of 7.63% Series due 2014; $15
million of 7.68% Series due 2015; $2 million of 7.68%
Series due 2016. Net proceeds in the amount of $79.5
million from these issuances were used primarily for the
October 1, 1995 redemption of $53.9 million principal amount
of the 9 1/4% Series First Mortgage Bonds due 10/1/2019 at a
price of 105.15%. In addition, proceeds were used for ACE's
ongoing construction program and repayment of short term
debt.
ACE's Cumulative Preferred Stock and long term debt
securities are not widely held and generally trade
infrequently. Their estimated aggregate fair market values
at September 30, 1995 are approximately $195 million and
$876 million, respectively. Their estimated aggregate fair
market values at December 31, 1994 were approximately $185
million and $693 million, respectively. At September 30,
1995, ACE had no outstanding short term debt.
At September 30, 1995, AEI had $20 million outstanding under
an unsecured short term debt facility. Proceeds from this
borrowing were used to repay funds temporarily provided by
subsidiary companies and for the acquisition of the
Company's common stock. As of September 30, 1995, AEI had
$6.8 million outstanding in temporary funding from
subsidiaries. Amounts outstanding under both temporary
facilities were repaid from the revolving credit and term
loan facility referred to below in October 1995.
In September 1995, AEI established a $75 million revolving
credit and term loan facility. The revolver is comprised of
a 364 day senior revolving credit facility in the amount of
$35 million and a three year senior revolving credit
facility in the amount of $40 million. Interest rates on
borrowings will be based on senior debt ratings and on the
borrowing option selected by the Company. There were no
borrowings outstanding on either facility as of September
30, 1995. In addition to repayment of amounts outstanding
under the temporary loan facilities referred to above, this
facility will be used to fund further acquisitions of
Company common stock and for other general corporate
purposes.
At September 30, 1995, ATE had outstanding $23.3 million
under its revolving credit and term loan facility. The
estimated aggregate fair market value of ATE's senior notes
at September 30, 1995 and December 31, 1994 was
approximately $15 million and $14 million, respectively.
5. As of September 30, 1995 and December 31, 1994, 52,539,465
and 54,155,245 shares of common stock were outstanding,
respectively. During the third quarter of 1995, the Company
reacquired and cancelled 65,000 shares of its common stock
at a cost of $1.2 million. Year-to-date ended September 30,
1995, the Company reacquired and cancelled 1,625,000 shares
of its common stock at a total cost of $29.6 million. The
prices paid for these shares ranged from $17.625 to $18.875
per share. Funding for stock acquisitions had been provided
in part by temporary funding from subsidiary companies and
the short term borrowing facility referred to above.
6. ACE, a 7.41% owner in the Salem Nuclear Generating Station
(Salem), was advised by Public Service Electric & Gas
Company (PS), operator of Salem, that Salem Unit 1 and Unit
2 were taken out of service on May 16, 1995 and June 7,
1995, respectively. ACE has been advised that PS
subsequently informed the Nuclear Regulatory Commission
(NRC) that the units would remain shutdown until there is a
thorough review and resolution of certain equipment and
management issues that have affected Salem's operation and
PS estimates that Unit 1 and Unit 2 will both return to
service during the second quarter of 1996, although no
assurances have been given by PS. ACE's share of additional
operation and maintenance expenses associated with restart
activities are currently estimated to be slightly less than
$4 million for 1995. An estimate of additional restart
expenses for 1996 has not yet been released by PS pending
the completion of the assessment of Unit 2 and development
of the final scope of work required.
ACE is subject to a BPU imposed nuclear performance standard
for all of its jointly-owned nuclear units. ACE anticipates
that the 1995 aggregate capacity factor of the five nuclear
units in which ACE owns a minority interest will be below
the 65% minimum annual standard established by the BPU, due
to the shutdown of the above mentioned units. As a result,
ACE has provided for a 1995 performance penalty of $1.2
million after tax.
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Thousands of Dollars
Quarter Ended September 30,
1995 1994
(unaudited)
Operating Revenues-Electric $303,031 $272,769
Operating Expenses:
Energy 62,513 67,714
Purchased Capacity 49,955 30,171
Operations 37,437 40,346
Maintenance 7,483 9,158
Depreciation and Amortization 19,620 18,351
State Excise Taxes 31,100 24,695
Federal Income Taxes 25,891 21,400
Other Taxes 2,006 2,613
Total Operating Expenses 236,005 214,448
Operating Income 67,026 58,321
Other Income:
Allowance for Equity Funds Used During
Construction 169 975
Miscellaneous Income-Net 1,300 4,491
Total Other Income 1,469 5,466
Interest Charges:
Interest on Long Term Debt 15,658 14,243
Other Interest Expense 605 645
Total Interest Charges 16,263 14,888
Allowance for Borrowed Funds Used
During Construction (434) (780)
Net Interest Charges 15,829 14,108
Net Income 52,666 49,679
Less Preferred Dividend Requirements 3,787 4,309
Balance Available for Common Shareholder $ 48,879 $ 45,370
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Thousands of Dollars
Year-to-Date September 30,
1995 1994
(unaudited)
Operating Revenues-Electric $727,943 $710,765
Operating Expenses:
Energy 146,905 158,581
Purchased Capacity 142,939 97,840
Operations 111,113 115,860
Maintenance 22,230 27,249
Depreciation and Amortization 58,539 55,117
State Excise Taxes 78,460 75,786
Federal Income Taxes 38,230 43,394
Other Taxes 7,181 8,737
Total Operating Expenses 605,597 582,564
Operating Income 122,346 128,201
Other Income:
Allowance for Equity Funds Used During
Construction 829 2,697
Miscellaneous Income-Net 6,540 8,416
Total Other Income 7,369 11,113
Interest Charges:
Interest on Long Term Debt 44,804 42,862
Other Interest Expense 2,513 1,024
Total Interest Charges 47,317 43,886
Allowance for Borrowed Funds Used
During Construction (1,158) (2,018)
Net Interest Charges 46,159 41,868
Net Income 83,556 97,446
Retained Earnings at Beginning of Period 249,767 256,961
333,323 354,407
Dividends Declared:
Cumulative Preferred Stock 11,362 12,928
Common Stock 61,014 62,581
Total Dividends Declared 72,376 75,509
Retained Earnings at End of Period $260,947 $278,898
Earnings for Common Stock:
Net Income $ 83,556 $ 97,446
Less Preferred Dividend Requirements 11,362 12,928
Balance Available for Common Shareholder $ 72,194 $ 84,518
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Thousands of Dollars
Year-to-Date September 30,
1995 1994
(unaudited)
Cash Flows Of Operating Activities:
Net Income $ 83,556 $ 97,446
Deferred Purchased Power Costs 11,785 11,170
Deferred Energy Costs (15,901) (11,919)
Depreciation and Amortization 58,539 55,117
Deferred Federal Income Taxes-Net 8,685 16,201
Prepaid State Excise Taxes (20,257) (61,724)
Employee Separation Costs (15,619) -
Net Increase in Other Working Capital (8,597) (20,202)
Other-Net 9,020 (2,168)
Net Cash Provided by Operating
Activities 111,211 83,921
Cash Flows Of Investing Activities:
Cash Construction Expenditures (68,574) (79,592)
Leased Property (6,262) (3,925)
Nuclear Decommissioning Trust Fund
Deposits (4,818) (4,818)
Plant Removal Costs (3,924) (3,585)
Other-Net 6,305 3,782
Net Cash Used by Investing Activities (77,273) (88,138)
Cash Flows Of Financing Activities:
Proceeds from Long Term Debt 104,404 22,693
Retirement and Maturity of Long Term Debt - (36,023)
(Decrease) Increase in Short Term Debt (8,600) 40,400
Proceeds from Capital Lease Obligations 6,262 3,925
Capital Contributions 313 25,270
Dividends Declared on Preferred Stock (11,362) (12,928)
Dividends Declared on Common Stock (61,014) (62,581)
Other-Net (833) (869)
Net Cash Provided (Used)by Financing
Activities 29,170 (20,113)
Net Increase (Decrease) in Cash and
Temporary Investments 63,108 (24,330)
Cash and Temporary Investments,
beginning of period 3,459 60,243
Cash and Temporary Investments,
end of period $ 66,567 $ 35,913
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
CONSOLIDATED BALANCE SHEET
Thousands of Dollars
September 30, December 31,
1995 1994
(unaudited)
ASSETS
Electric Utility Plant:
In Service $2,405,372 $2,348,873
Less Accumulated Depreciation 779,558 725,999
Net 1,625,814 1,662,874
Construction Work in Progress 117,281 110,078
Land Held for Future Use 6,941 6,941
Leased Property-Net 38,678 42,030
Electric Utility Plant-Net 1,788,714 1,781,923
Nonutility Property and Investments:
Nuclear Decommissioning Trust Fund 59,097 52,004
Other Property, Investments and Funds 2,041 3,139
Total Nonutility Property and
Investments 61,138 55,143
Current Assets:
Cash and Temporary Investments 66,567 3,459
Accounts Receivable:
Utility Service 74,946 54,554
Miscellaneous 18,201 15,804
Allowance for Doubtful Accounts (3,300) (3,300)
Unbilled Revenues 37,651 32,070
Fuel (at average cost) 21,110 28,030
Materials and Supplies (at average cost) 26,281 27,823
Working Funds 14,347 14,475
Prepaid State Excise Taxes 32,714 5,287
Deferred Energy Costs 26,901 10,999
Deferred Income Taxes - 12,141
Prepayments 5,716 6,473
Total Current Assets 321,134 207,815
Deferred Debits:
Unrecovered Purchased Power Costs 103,753 115,538
Recoverable Future Federal Income Taxes 85,854 85,854
Unrecovered State Excise Taxes 66,664 73,834
Unamortized Debt Costs 36,260 38,083
Other Regulatory Assets 54,714 47,055
Other 11,519 16,071
Total Deferred Debits 358,764 376,435
Total Assets $2,529,750 $2,421,316
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
CONSOLIDATED BALANCE SHEET
Thousands of Dollars
September 30, December 31,
1995 1994
(unaudited)
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Shareholder's Equity:
Common Stock $ 54,963 $ 54,963
Premium on Capital Stock 231,081 231,081
Contributed Capital 263,062 262,749
Capital Stock Expense (2,300) (2,300)
Retained Earnings 260,947 249,767
Total Common Shareholder's Equity 807,753 796,260
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption 40,000 40,000
Subject to Mandatory Redemption 149,250 149,250
Long Term Debt 856,129 763,288
Total Capitalization
(excluding current portion) 1,853,132 1,748,798
Current Liabilities:
Cumulative Preferred Stock Redemption
Requirement 12,250 12,250
Long Term Debt 12,247 -
Short Term Debt - 8,600
Accounts Payable 52,260 65,632
Federal Income Taxes Payable-Affiliate 38,194 9,537
Other Taxes Accrued 3,654 3,490
Interest Accrued 16,329 19,048
Dividends Declared 24,015 24,681
Accrued Employee Separation Costs 10,981 26,600
Other 18,189 19,134
Total Current Liabilities 188,119 188,972
Deferred Credits and Other Liabilities:
Deferred Income Taxes 348,817 350,697
Deferred Investment Tax Credits 49,745 51,646
Capital Lease Obligations 38,040 41,102
Other 51,897 40,101
Total Deferred Credits and
Other Liabilities 488,499 483,546
Commitments and Contingencies (Notes 3, 4 and 5)
Total Liabilities and Capitalization $2,529,750 $2,421,316
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Atlantic City Electric Company (the Company and ACE) is a
wholly-owned subsidiary of Atlantic Energy, Inc. The
consolidated financial statements include the accounts of
the Company and its subsidiary, which is wholly-owned. All
significant intercompany accounts and transactions have been
eliminated in consolidation. These consolidated financial
statements reflect all normal, recurring adjustments and
accruals which, in the opinion of management, are necessary
for a fair presentation of the consolidated financial
statements presented. The notes to the consolidated
financial statements accompanying the Company's 1994 Annual
Report on Form 10-K filed with the Securities and Exchange
Commission should be read in conjunction with this report.
Note 1 of these annual reports specifically identifies the
significant accounting policies of the Company. The
consolidated balance sheet contained in the financial
statements presented herein that is labeled December 31,
1994 was derived from the audited consolidated balance sheet
presented in the 1994 Form 10-K. Certain prior year amounts
have been reclassified to conform to the current year
reporting.
<PAGE>
2. The components of Federal Income Tax expense are as follows
(in thousands of dollars):
Quarter Ended September 30,
1995 1994
(unaudited)
Current $22,311 $30,184
Deferred 6,074 (6,977)
Total Federal Income Tax Expense 28,385 23,207
Less Amounts Included in Other Income 2,494 1,807
Federal Income Taxes Included
in Operating Expenses $25,891 $21,400
A reconciliation of the expected Federal income taxes
compared to the reported Federal Income Tax expense computed
by applying the statutory rate follows:
Tax Computed at the Statutory Rate
of 35% $28,369 $25,510
Utility Plant Basis Differences (310) 123
Investment Tax Credits (634) (634)
Other-Net 960 (1,792)
Total Federal Income Tax Expense $28,385 $23,207
Effective Federal Income Tax Rate 35% 32%
Year-to-Date September 30,
1995 1994
(unaudited)
Current $32,609 $29,997
Deferred 8,685 16,201
Total Federal Income Tax Expense 41,294 46,198
Less Amounts Included in Other Income 3,064 2,804
Federal Income Taxes Included
in Operating Expenses $38,230 $43,394
Tax Computed at the Statutory Rate
of 35% $43,698 $50,275
Utility Plant Basis Differences 483 1,631
Investment Tax Credits (1,901) (1,901)
Deferred Tax Adjustments - (375)
Other-Net (986) (3,432)
Total Federal Income Tax Expense $41,294 $46,198
Effective Federal Income Tax Rate 33% 32%
Certain prior year reconciliation amounts have been
reclassified to conform to the current year reporting.
The Company is awaiting settlement by the IRS concerning
taxes in 1984 through 1986. The impending settlement is not
expected to have a material impact to the Company.
<PAGE>
3. On April 17, 1995, the Company filed a petition with the New
Jersey Board of Public Utilities (BPU) requesting a $37.0
million increase in annual levelized energy clause (LEC)
revenues. The petition also requested that the proposed
rates be implemented on a provisional basis, for service
rendered on and after June 1, 1995. This request for
provisional rates was to avoid any further increase in the
proposed rates that would result from compression as the
implementation of the proposed rates are delayed beyond the
June 1, 1995 date. Compression results from a shorter
recovery period requiring the increase in costs to be
collected over a reduced level of sales. The requested LEC
increase is due primarily to increased costs associated with
the purchase of energy and capacity from Independent Power
Producers (IPP's). The Company has BPU approved contracts
with four IPP's. This LEC request represents the first
filing that includes a full year of contract costs for all
four IPP's. Though the Company's petition supports a $67.6
million increase in LEC revenues, the Company has
voluntarily reduced its request by $30.6 million in order to
keep its rates competitive. This reduction was accomplished
by offering to forego the recovery of $10 million in LEC
revenues under the Southern New Jersey Economic Initiative
tariff rider and to defer recovery of $20.6 million of LEC
costs. The Company will seek full recovery of the $20.6
million deferred LEC costs, without carrying costs, in its
next annual LEC filing. On July 7, 1995, the BPU approved
the provisional $37.0 million increase in annual LEC
revenues effective for service rendered to customers on and
after July 7, 1995. Evidentiary hearings for the
determination of final LEC rates were held in August 1995.
The matter is now before the Administrative Law Judge whose
decision is expected by the end of November 1995. A final
BPU decision is expected by the end of 1995. The Company
cannot predict the outcome of the final decision at this
time.
On November 1, 1994, the Company filed a Motion with the BPU
for reconsideration of its order in the matter of the
Generic Proceeding on the double recovery of capacity costs.
This matter concerns the Ratepayer Advocate's allegation
that the Company and other New Jersey electric utility
companies are recovering capacity costs associated with IPP
contracts concurrently in base rates and LEC rates. By its
order the BPU found that the Ratepayer Advocate had reserved
its right to argue for an adjustment to the LEC rates
approved in the 1992, 1993 and 1994 LEC proceedings. The
Company's Motion argues that the Stipulation settling the
1992 LEC and the BPU's order approving that Stipulation did
not include language granting such rights to the Ratepayer
Advocate. On March 22, 1995, the Company's Motion was
denied by the BPU on the grounds that this issue was
previously addressed in its initial order. Evidentiary
hearings in the Generic Proceeding are scheduled throughout
1995 and into 1996 with a final decision expected during the
third quarter of 1996. In September 1995, the Ratepayer
Advocate filed testimony which calculates the Company's
over-recovery of capacity costs for the four year period,
June 1991 through May 1995, at $46 million. ACE will file
rebuttal testimony in mid-December 1995. The Company cannot
predict the outcome of the decision at this time.
4. In August 1995, the Company issued and sold $80 million of
First Mortgage Bonds in the form of Medium Term Notes in the
following increments: $30 million of 6.81% Series due 2001;
$25 million of 7.01% Series due 2002; $1 million of 7.25%
Series due 2010; $7 million of 7.63% Series due 2014; $15
million of 7.68% Series due 2015; $2 million of 7.68%
Series due 2016. Net proceeds in the amount of $79.5
million from these issuances were used primarily for the
October 1, 1995 redemption of $53.9 million principal amount
of the 9 1/4% Series First Mortgage Bonds due 10/1/2019 at a
premuim of 105.15%. Additionally, proceeds were used for
ACE's ongoing construction program and repayment of short
term debt. At September 30, 1995, the Company had no
outstanding short term debt. The Company's Cumulative
Preferred Stock and long term debt securities are not widely
held and generally trade infrequently. Their estimated
aggregate fair market values at September 30, 1995 are
approximately $195 million and $876 million, respectively.
Their estimated aggregate fair market values at December 31,
1994 were approximately $185 million and $693 million,
respectively.
5. The Company, a 7.41% owner in the Salem Nuclear Generating
Station (Salem), was advised by Public Service Electric &
Gas Company (PS), operator of Salem, that Salem Unit 1 and
Unit 2 were taken out of service on May 16, 1995 and June 7,
1995, respectively. ACE has been advised that PS
subsequently informed the Nuclear Regulatory Commission
(NRC) that the units would remain shutdown until there is a
thorough review and resolution of certain equipment and
management issues that have affected Salem's operation and
PS estimates that Unit 1 and Unit 2 will both return to
service during the second quarter of 1996, although no
assurances have been given by PS. The Company's share of
additional operation and maintenance expenses associated
with restart activities are currently estimated by PS to be
slightly less than $4 million for 1995. An estimate of
additional restart expenses for 1996 has not yet been
released by PS pending the completion of the assessment of
Unit 2 and development of the final scope of work required.
The Company is subject to a BPU imposed nuclear performance
standard for all of its jointly-owned nuclear units. The
Company anticipates that the 1995 aggregate capacity factor
of the five nuclear units in which it owns a minority
interest will be below the 65% minimum annual standard
established by the BPU, due to the shutdown of the above
mentioned units. As a result, the Company has provided for
a 1995 performance penalty of $1.2 million after tax.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited)
The following is management's discussion and analysis of
significant factors which affected the Company's interim
financial condition and results of operations. To properly
assess and evaluate the Company's performance one should read, in
conjunction with this report, the Management's Discussion and
Analysis of Financial Condition and Results of Operations
included in the Company's 1994 Annual Report to Shareholders
(pages 25-33). ACE is the principal subsidiary of the Company
and the following discussion focuses primarily on ACE.
LIQUIDITY AND CAPITAL RESOURCES
The operating needs of the Company, representing those of the
consolidated group, are dependent upon the results of its
subsidiaries, principally those of ACE.
In August 1995, ACE issued and sold $80 million of First Mortgage
Bonds in the form of Medium Term Notes in the following
increments: $30 million of 6.81% Series due 2001; $25 million
of 7.01% Series due 2002; $1 million of 7.25% Series due 2010;
$7 million of 7.63% Series due 2014; $15 million of 7.68% Series
due 2015; $2 million of 7.68% Series due 2016. Net proceeds in
the amount of $79.5 million from these issuances were used
primarily for the October 1, 1995 redemption of $53,9 million
principal amount of the 9 1/4% Series First Mortgage Bonds due
10/1/2019 at a premium of 105.15%. Additionally, proceeds were
sued for ACE's ongoing construction program and repayment of
short term debt. At September 30, 1995, ACE had no outstanding
short term debt.
At September 30, 1995, AEI had $20 million outstanding under an
unsecured short term debt facility. Proceeds from this borrowing
were used to repay funds temporarily provided by subsidiary
companies and for the acquisition of the Company's common stock.
As of September 30, 1995, notes payable by AEI to subsidiaries
amounted to $6.8 million. Amounts outstanding under both
temporary arrangements were repaid from the revolving credit and
term facility referred to below in October 1995.
In September 1995, AEI established a $75 million revolving credit
and term loan facility. The revolver is comprised of a 364 day
senior revolving credit facility in the amount of $35 million and
a three year senior revolving credit facility in the amount of
$40 million. Interest rates on borrowings will be based on
senior debt ratings and on the borrowing option selected by the
Company. There were no borrowings on either facility as of
September 30, 1995. In addition to repayment of amounts
outstanding under the temporary loan arrangements referred to
above, this facility will be used to fund further acquisitions of
Company common stock and for other general corporate purposes.
During the third quarter 1995, ATE increased the debt outstanding
under its revolving credit and term loan facility by $3.8 million
to $23.3 million. Proceeds were used to support the activities
of affiliated companies.
The Company reacquired and cancelled 65,000 shares of its common
stock during the third quarter of 1995 at a total cost of $1.2
million. Year-to-date ended September 30, 1995, the Company
reacquired and cancelled 1,625,000 shares of its common stock at
a total cost of $29.6 million. Funding for the stock
acquisitions had been provided in part by temporary funding from
subsidiary companies and the short term borrowing facility
referred to above.
Current year Dividends Declared on Common Stock as presented on
the Consolidated Statement of Cash Flows includes the effects of
market purchases of common stock with reinvested dividends as
instituted since July 1994. Prior to this, dividends reinvested
were applied towards the issuance of original shares.
RESULTS OF OPERATIONS
Changes in net income and earnings per share for the periods
ended September 30, 1995 versus the corresponding periods of the
previous year are as follows:
Periods Ended September 30, 1995
Quarter Year-to-Date
Net Income 5.2% (17.7)%
Earnings Per Share 9.4% (15.7)%
The change in net income for the current quarter reflects an
increase in electric revenues, offset in part by an increase in
purchased capacity costs. The decrease in net income for the
year-to-date period is due to an increase in purchased capacity
costs. Total operating expenses, excluding purchased capacity
costs, decreased in both current periods when compared to the
respective prior year periods.
Significant factors contributing to these changes are explained
below. Unless otherwise specified, changes are in terms of the
current year period compared to the corresponding prior year
period.
<PAGE>
Utility Revenues
Changes in Operating Revenues-Electric are disclosed in the
following table:
Periods Ended September 30, 1995
(Thousands of Dollars)
Quarter Year-to-Date
Base Revenues $ (20) $ (2,190)
Levelized Energy Clause 15,643 40,822
Kilowatt-hour Sales 6,616 (14,422)
Unbilled Revenues 4,413 8,749
Sales for Resale 4,736 (14,492)
Other Revenues (1,411) (1,577)
Total $29,977 $ 16,890
Levelized Energy Clause (LEC) Revenues for the period increased
due to a provisional rate increase in July 1995 of $37.0 million
on an annual basis. Changes in Kilowatt-hour Sales are explained
in the following section 'Billed Sales to Ultimate Utility
Customers'. The changes in Unbilled Revenues are a result of the
amount of kilowatt-hours consumed by, but not yet billed to,
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 to wholesale customers 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 the
quarter was the result of meeting new contract demands for bulk
power sales to wholesale customers outside the regional power
pool. The decline in Sales for Resale for the year-to-date period
primarily reflects a decrease in available supplemental energy
sources to ACE due to the expiration of a 200 megawatt capacity
arrangement in May 1994. The year-to-date decline also
recognizes a decrease in the demands of the regional power pool
in the beginning of the current year due to the mild weather
conditions when compared to the extreme weather conditions during
the same period in 1994.
Billed Sales to Ultimate Utility Customers
Changes in billed 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
corresponding periods of the prior year, are shown below.
Periods Ended September 30, 1995
Quarter Year-to-Date
Average Average
Customer Class Sales Use Cust Sales Use Cust
Residential 3.9 % 2.7 % 1.2% (3.9)% (5.1)% 1.3%
Commercial 3.4 2.1 1.2 .8 ( .8) 1.6
Industrial (5.7) (7.3) 1.7 (7.2) (8.5) 1.4
Total 2.4 1.2 1.2 (2.5) (3.7) 1.3
The increase in Residential sales and average use for the quarter
is due to warmer summer temperatures in 1995 compared to the
summer temperatures in 1994. The year-to-date decrease is due to
the above normal temperatures during the heating season in
contrast to the significantly below normal temperatures
experienced during the 1994 heating season. Sales to the
Commercial sector increased in the current quarter due to ongoing
economic growth, favorable weather and a strong shore tourism
season. The year-to-date growth in this sector is weaker than
the current quarter's growth because of the contrast in heating
season conditions mentioned above. Approximately one-half of the
increase in the number of Commercial customers is due to the
continuing popularity of ACE's night lighting programs. The
sales declines in the Industrial sector for the current periods
are primarily related to the impact of two former customers
taking energy service from independent power producers commencing
June 1994 and January 1995.
Expenses
Total Operating Expenses for quarter and year-to-date periods
ended September 30, 1995 increased by 10.2% and 4.0%,
respectively. Excluding depreciation and taxes, Total Operating
Expenses increased by 7.0% and 6.1%, respectively, due to an
increase in purchased capacity costs.
Energy expense reflects the amount of energy needed to meet load
requirements, as well as the various fuel and purchased energy
sources used and the operation of the LEC. Changes in costs
reflect the availability of low-cost generation from ACE-owned
and purchased energy sources, the unit prices of the energy
sources used and changes in the needs of other utilities
participating in the regional power pool. The cost of energy is
recovered from customers primarily through the operation of the
LEC. Generally, earnings are not affected by energy costs
because these costs are adjusted to match the associated LEC
revenues. However since July 1994, ACE has voluntarily foregone
recovery of certain amounts of otherwise recoverable fuel costs
through its Southern New Jersey Economic Initiative (SNJEI),
thereby reducing earnings. Such reduced recoveries are
discretionary by ACE, and are influenced by competitive and
economic factors. Otherwise, in any period the actual amount of
LEC revenue recovered from customers will be greater or less than
the actual amount of energy cost incurred and eligible for
recovery in that period. Such respective overrecovery or
underrecovery of energy costs is recorded on the Consolidated
Balance Sheet as a liability or asset as appropriate. Amounts on
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 $26.9 million at September 30, 1995, as compared to $11
million at December 31, 1994.
Energy expense for the quarter and year-to-date periods decreased
by 7.7% and 7.4%, respectively. Excluding deferred energy costs,
Energy expense for the quarter and year-to-date periods increased
by 25.5% and decreased by 4.8%, respectively. The increase for
the quarter was attributable to ACE utilizing alternative energy
sources to replace energy and capacity lost due to the continued
shutdown of the Salem units since May and June of 1995. The
year-to-date decrease is due to lower generation needs as a
result of reduced energy sales and a more favorable mix of energy
supply sources that reduced per unit energy costs. This decrease
was offset in part by the effects of ACE's SNJEI which foregoes
recovery of otherwise eligible energy costs. The SNJEI reduced
after tax income for the quarter and year-to-date periods by $1.6
million and $10.6 million, respectively.
Purchased Capacity expense for the quarter and year-to-date
periods increased 65.6% and 46.1%, respectively. This increase
reflects the combination of capacity supplied by a nonutility
cogeneration facility as a replacement for utility contracted
capacity that expired in May 1994, and additional capacity
supplied by another cogeneration facility that became available
in late 1994.
Sources of Energy by Fuel Source for the periods ended September
30, 1995 are as follows:
Quarter Year-To-Date
Coal 39% 37%
Nuclear 12 20
Interchanged and Purchased 16 17
Nonutility Purchased 26 23
Oil and Natural Gas 7 3
Total 100% 100%
Operations expense for the quarter and year-to-date periods
decreased 6.3% and 3.7%, respectively, and Maintenance expense
for the quarter and year-to-date periods decreased 18.2% and
18.3%, respectively, due to cost reduction initiatives employed
by ACE in 1995.
Depreciation expense for the quarter and year-to-date periods
increased 6.9% and 6.2%, respectively, due to ACE's increased
electric plant in service.
State Excise Tax expense for the quarter increased 25.9%
reflecting increased energy sales for the quarter.
Federal Income Tax expense for the quarter and year-to-date
periods increased 20.9% and decreased 11.9%, respectively, due to
higher third quarter and lower year-to-date taxable income
compared to the same periods last year.
Total Interest charges for the quarter and year-to-date periods
increased by 9.2% and 7.8%, respectively, reflecting the increase
in long term debt outstanding during the periods.
Other income for the quarter and year-to-date decreased 70.2% and
47.5%, respectively, due to a gain recognized in the third
quarter of 1994 upon termination of a contract by a large
industrial concern.
Preferred Stock Dividend Requirements decreased 12.1% for both
the quarter and year-to-date periods as a result of mandatory and
optional sinking fund redemptions in November of 1994.
In December 1994, ACE recorded the expected costs of a voluntary
employee separation program. A total of 276 employees throughout
the Company took the separation package. A majority of the
employee separations occurred as of March 1, 1995, with the
remaining separations to take place by December 31, 1995. The
balance of the accrued separation costs on the Consolidated
Balance Sheet at September 30, 1995 is $10.9 million compared to
$26.6 million at December 31, 1994. ACE expects settlement of
this obligation to be substantially completed by the end of 1996.
ACE, a 7.41% owner in the Salem Nuclear Generating Station
(Salem), was advised by Public Service Electric & Gas Company
(PS), operator of Salem, that Salem Unit 1 and Unit 2 were taken
out of service on May 16, 1995 and June 7, 1995, respectively. PS
subsequently informed the Nuclear Regulatory Commission (NRC)
that the units would remain shutdown until there is a thorough
review and resolution of certain equipment and management issues
that have affected Salem's operation. PS estimates that Unit 1
and Unit 2 will both return to service during the second quarter
of 1996, although no assurances have been given by PS. ACE's
share of additional operation and maintenance expenses associated
with restart activities are currently estimated by PS to be
slightly less than $4 million for 1995. An estimate of additional
restart expenses for 1996 has not yet been released by PS pending
the completion of the assessment of Unit 2 and development of the
final scope of work required.
ACE is subject to a BPU imposed nuclear performance standard for
all of its jointly-owned nuclear units. ACE anticipates that the
1995 aggregate capacity factor of the five nuclear units in which
ACE owns a minority interest will be below the 65% minimum annual
standard established by the BPU primarily due to the shutdown of
the above mentioned units. As a result, ACE has provided for a
1995 performance penalty of $1.2 million after tax.
NONUTILITY ACTIVITIES
Nonutility operations, which include AEI parent, for the quarter
and year-to-date September 30, 1995 resulted in a net loss of
$133 thousand and $1.4 million, respectively, compared to the
same periods of the prior year which resulted in net income of
$952 thousand and $1.5 million, respectively. Of these amounts,
operations of AEE and subsidiaries for the quarter and year-to-
date ended September 30, 1995 resulted in net income of $304
thousand and a net loss of $190 thousand, respectively, when
compared to the same periods of the prior year which resulted in
net income of $1.2 million and $1.9 million, respectively. The
1995 loss is largely due to administrative and general costs
incurred in the development of various new businesses, offset in
part by increased earnings from a partnership interest in
cogeneration facilities that experienced increased revenues.
AEI parent for the quarter and year-to-date periods ended
September 30, 1995 resulted in a net loss of $437 thousand and
$1.2 million, respectively. The same periods of the prior year
resulted in a net loss of $201 thousand and $387 thousand,
respectively. The 1995 loss is largely due to interest expense
associated with short term borrowings.
In July 1995, Atlantic Jersey Thermal System Inc., a special
purpose wholly-owned subsidiary of ATS, organized a limited
partnership, Thermal Energy Limited Partnership I, to develop,
construct, own and operate a district heating and cooling system
to serve certain customers in Atlantic City's business and casino
district. In July 1995, ATS commenced operation and maintenance
of an existing heating and cooling facility at a casino in
Atlantic City.<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited)
The following is management's discussion and analysis of
significant factors which affected the Company's interim
financial condition and results of operations. To properly
assess and evaluate the Company's performance one should read, in
conjunction with this report, the Management's Discussion and
Analysis of Financial Condition and Results of Operations
included in the Company's 1994 Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
LIQUIDITY AND CAPITAL RESOURCES
In August 1995, the Company issued and sold $80 million of First
Mortgage Bonds in the form of Medium Term Notes in the following
increments: $30 million of 6.81% Series due 2001; $25 million
of 7.01% Series due 2002; $1 million of 7.25% Series due 2010;
$7 million of 7.63% Series due 2014; $15 million of 7.68% Series
due 2015; $2 million of 7.68% Series due 2016. Net proceeds in
the amount of $79.5 million from these issuances were used
primarily for the October 1, 1995 redemption $53.9 million
principal amount of the 9 1/4% Series First Mortgage Bonds due
10/01/2019 at a premium of 105.15%. Additionally, the proceeds
were used for the ongoing construction program and repayment of
short term debt. At September 30, 1995, the Company had no
outstanding short term debt.
RESULTS OF OPERATIONS
Net income increased for the quarter by 6.0% from the
corresponding period of 1994. The increase in net income for the
current quarter reflects an increase in electric revenues which
was offset in part by an increase in purchased capacity costs.
Net income for the year-to-date period decreased 14.3% due to an
increase in purchased capacity costs. Total operating expenses,
excluding purchased capacity costs, decreased in both current
periods when compared to the respective prior year periods.
Significant factors contributing to these changes are explained
below. Unless otherwise specified, changes are in terms of the
current year period compared to the corresponding prior year
period.<PAGE>
Revenues
Changes in Operating Revenues-Electric are disclosed in the
following table:
Periods Ended September 30, 1995
(Thousands of Dollars)
Quarter Year-to-Date
Base Revenues $ 265 $ (1,902)
Levelized Energy Clause 15,643 40,822
Kilowatt-hour Sales 6,616 (14,422)
Unbilled Revenues 4,413 8,749
Sales for Resale 4,736 (14,492)
Other Revenues (1,411) (1,577)
Total $30,262 $ 17,178
Levelized Energy Clause (LEC) Revenues for the period increased
due to a provisional rate increase in July 1995 of $37.0 million
on an annual basis. Changes in Kilowatt-hour Sales are explained
in the following section 'Billed Sales to Ultimate Customers'.
The changes in Unbilled Revenues are a result of the amount of
kilowatt-hours consumed by, but not yet billed to, 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 to
wholesale customers are a function of the Company's energy mix
strategy, which in turn is dependent upon its 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
the quarter was the result of meeting new contract demands for
bulk power sales to wholesale customers outside the regional
power pool. The decline in Sales for Resale for the year-to-date
period primarily reflects a decrease in available supplemental
energy sources to the Company due to the expiration of a 200
megawatt capacity arrangement in May 1994. The year-to-date
decline also recognizes a decrease in the demands of the regional
power pool in the beginning of the current year due to the mild
weather conditions when compared to the extreme weather
conditions during the same period in 1994.
Billed Sales to Ultimate Customers
Changes in billed 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
corresponding period of the prior year, are shown below.
Periods Ended September 30, 1995
Quarter Year-to-Date
Average Average
Customer Class Sales Use Cust Sales Use Cust
Residential 3.9 % 2.7 % 1.2% (3.9)% (5.1)% 1.3%
Commercial 3.4 2.1 1.2 .8 ( .8) 1.6
Industrial (5.7) (7.3) 1.7 (7.2) (8.5) 1.4
Total 2.4 1.2 1.2 (2.5) (3.7) 1.3
The increase in Residential sales and average use for the quarter
is due to warmer summer temperatures in 1995 compared to the
summer temperatures in 1994. The year-to-date decrease is due to
the above normal temperatures during the heating season in
contrast to significantly below normal temperatures experienced
during the 1994 heating season. Sales to the Commercial sector
increased in the current quarter due to ongoing economic growth,
favorable weather and a strong shore tourism season. The year-
to-date growth in this sector is weaker than the current
quarter's growth because of the contrast in heating season
conditions mentioned above. Approximately one-half of the
increase in the number of Commercial customers is due to the
continuing popularity of the Company's night lighting programs.
The sales declines in the Industrial sector for the current
periods are primarily related to the impact of two former
customers taking energy service from independent power producers
commencing in June 1994 and January 1995.
Expenses
Total Operating Expenses for quarter and year-to-date periods
ended September 30, 1995 increased by 10.1% and 4.0%,
respectively. Excluding depreciation and taxes, Total Operating
Expenses increased by 6.8% and 5.9%, respectively, due to an
increase in purchased capacity costs.
Energy expense reflects the amount of energy needed to meet load
requirements, as well as the various fuel and purchased energy
sources used and the operation of the LEC. Changes in costs
reflect the availability of low-cost generation from Company-
owned and purchased energy sources, the unit prices of the energy
sources used and changes in the needs of other utilities
participating in the regional power pool. The cost of energy is
recovered from customers primarily through the operation of the
LEC. Generally earnings are not affected by energy costs because
these costs are adjusted to match the associated LEC revenues.
However since July 1994, the Company has voluntarily foregone
recovery of certain amounts of otherwise recoverable fuel costs
through its Southern New Jersey Economic Initiative (SNJEI),
thereby reducing earnings. Such reduced recoveries are
discretionary by the Company, and are influenced by competitive
and economic factors. Otherwise, in any period the actual amount
of LEC revenue recovered from customers will be greater or less
than the actual amount of energy cost incurred and eligible for
recovery in that period. Such respective overrecovery or
underrecovery of energy costs is recorded on the Consolidated
Balance Sheet as a liability or asset as appropriate. Amounts on
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 $26.9 million at September 30, 1995, as
compared to $11 million at December 31, 1994.
<PAGE>
Energy expense for the quarter and year-to-date periods decreased
by 7.7% and 7.4%, respectively. Excluding deferred energy costs,
Energy expense for the quarter and year-to-date periods increased
by 25.5% and decreased by 4.8%, respectively. The increase for
the quarter was attributable to the Company utilizing alternative
energy sources to replace energy and capacity lost due to the
continued shutdown of the Salem units since May and June of 1995.
The year-to-date decrease is due to lower generation needs as a
result of reduced energy sales and a more favorable mix of energy
supply sources that reduced per unit energy costs. This decrease
was offset in part by the effects of the Company's SNJEI which
foregoes recovery of otherwise eligible energy costs. The SNJEI
reduced after tax income for the quarter and year-to-date periods
by $1.6 million and $10.6 million, respectively.
Purchased Capacity expense for the quarter and year-to-date
periods increased 65.6% and 46.1%, respectively. This increase
reflects the combination of capacity supplied by a nonutility
cogeneration facility as a replacement for utility contracted
capacity that expired in May 1994, and additional capacity
supplied by another cogeneration facility that became available
in late 1994.
Sources of Energy by Fuel Source for the periods ended September
30, 1995 are as follows:
Quarter Year-to-Date
Coal 39% 37%
Nuclear 12 20
Interchanged and Purchased 16 17
Nonutility Purchased 26 23
Oil and Natural Gas 7 3
Total 100% 100%
Operations expense for the quarter and year-to-date periods
decreased by 7.2% and 4.1%, respectively, and Maintenance expense
for the quarter and year-to-date periods decreased 18.3% and
18.4%, respectively, due to cost reduction initiatives employed
in 1995.
Depreciation expense for the quarter and year-to-date periods
increased 6.9% and 6.2%, respectively, due to increased electric
plant in service.
State Excise Tax expense for the quarter increased by 25.9%
reflecting increased energy sales for the quarter.
Federal Income Tax expense for the quarter and year-to-date
periods increased 20.9% and decreased 11.9%, respectively, due to
higher third quarter and lower year-to-date taxable income
compared to the same periods last year.
Total Interest charges for the quarter and year-to-date periods
increased by 9.2% and 7.8%, respectively, reflecting the increase
in long term debt outstanding during the periods.
Other Income for the quarter and year-to-date decreased 73.1% and
33.6%, respectively, due to a gain recognized in the third
quarter of 1994 upon termination of a contract by a large
industrial concern.
Preferred Stock Dividend Requirements decreased 12.1% for both
the quarter and year-to-date periods as a result of mandatory and
optional sinking fund redemptions in November 1994.
In December 1994, the Company recorded the expected costs of a
voluntary employee separation program. A total of 276 employees
throughout the Company took the separation package. A majority
of the employee separations occurred as of March 1, 1995, with
the remaining separations to take place by December 31, 1995.
The balance of the accrued separation costs on the Consolidated
Balance Sheet at September 30, 1995 is $10.9 million compared to
$26.6 million at December 31, 1994. The Company expects
settlement of this obligation to be substantially completed by
the end of 1996.
The Company, a 7.41% owner in the Salem Nuclear Generating
Station (Salem), was advised by Public Service Electric & Gas
Company (PS), operator of Salem, that Salem Unit 1 and Unit 2
were taken out of service on May 16, 1995 and June 7, 1995,
respectively. PS subsequently informed the Nuclear Regulatory
Commission (NRC) that the units would remain shutdown until there
is a thorough review and resolution of certain equipment and
management issues that have affected Salem's operation. PS
estimates that Unit 1 and Unit 2 will both return to service
during the second quarter of 1996, although no assurances have
been given by PS. The Company's share of additional operation
and maintenance expenses associated with restart activities are
currently estimated by PS to be slightly less than $4 million for
1995. An estimate of additional restart expenses for 1996 has not
yet been released by PS pending the completion of the assessment
of Unit 2 and development of the final scope of work required.
The Company is subject to a BPU imposed nuclear performance
standard for all of its jointly-owned nuclear units. The Company
anticipates that the 1995 aggregate capacity factor of the five
nuclear units in which it owns a minority interest will be below
the 65% minimum annual standard established by the BPU primarily
due to the shutdown of the above mentioned units. As a result,
the Company has provided for a 1995 performance penalty of $1.2
million after tax.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
Certain developments have occurred in connection with matters
previously reported under Part I, Item 1-Business in the Annual
Report on Form 10-K for the fiscal year ended December 31, 1994
for Atlantic Energy, Inc. (AEI) and Atlantic City Electric
Company (ACE); Part II, Other Information in the Quarterly Report
on Form 10-Q for the quarters ended March 31, 1995 and June 30,
1995; and Part II, Item 5 in the Current Reports on Form 8-K
dated October 19, 1995. In addition, certain new information is
contained herein.
Rate Matters
ACE's rates for electric service at retail are subject to the
approval of the New Jersey Board of Public Utilities (BPU).
Reference is made to Note 3 of the Notes to Financial Statements
for AEI and ACE filed herewith for information pertaining to the
petition filed with the BPU for changes in the Levelized Energy
Clause (LEC) revenues and the issue of the double recovery of
capacity costs.
As previously reported in the Company's report on Form 10-Q
for the quarters ended March 31, 1995 and June 30, 1995, the New
Jersey legislature enacted a regulatory reform bill in June 1995
that authorizes the BPU to approve alternative forms of rate
regulation and to allow utilities to provide discounted rates in
order to retain large customers. Alternative rate regulation is
defined as regulation other than the traditional rate base, rate
of return methodology. The bill was signed into law by New Jersey
Governor Christine Whitman in July 1995 and provides for the
recovery of up to 50 percent of the value of discounts in a
subsequent base rate case if it can be adequately demonstrated
that the discount benefits all ratepayers. The new law, P.L.
1995, c.180, provided a 90 day timeframe for the BPU to adopt
specific standards by which utilities can establish off-tariff
rates. In developing these standards, the BPU solicited input
from all interested parties through the circulation of a draft
proposal, a public hearing and two round table discussions. On
October 27, 1995, the BPU issued its summary decision and order
in the generic proceeding to consider and implement standards for
off-tariff rate agreements pursuant to P.L. 1995, c. 180. The
standards incorporate the following provisions: the utility must
compare the revenue to be generated from the off-tariff rate
agreement to the revenue which would have been generated
otherwise; the utility must detail the need for the reduction in
rates to each off-tariff rate customer; the method of determining
the minimum electricity price an off-tariff agreement can
contain; the term of an off-tariff agreement shall not exceed 7
years subject to several exceptions; certain annual filing
requirements with the BPU on aggregated data pertaining to the
implementation of off-tariff rate agreements; confidentiality of
certain data and documents filed with the BPU pursuant to an off-
tariff agreement. Specific off-tariff pricing arrangements with
ACE'S customers will be limited by the resources available in the
Company's business plan.
Item 5. Other Information
On September 20, 1995, Atlantic Energy announced the selection
of Michael J. Barron to serve as chief financial officer. He
will also serve as senior vice president and chief financial
officer for Atlantic Electric. Barron succeeds J.G.Salomone who
retired from the company earlier this year. In his new post,
Barron will be responsible for developing and overseeing the
financial strategy of Atlantic Energy and its affiliated
companies. His responsibilities will include financial planning
and administration, risk management, investor relations and
property management.
As previously reported in the Company's report on Form 10-Q
for the quarter ended March 31, 1995, on March 29, 1995 the
Federal Energy Regulatory Commission (FERC) issued a Notice of
Proposed Rulemaking (NOPR) regarding several key electric utility
industry issues such as transmission access, transmission pricing
and recovery guidelines for stranded costs stemming from
wholesale transactions. According to the NOPR, within 60 days of
passage of a final rule, nondiscriminatory open-access
transmission tariffs must be filed for ACE and all other affected
electric utilities. These tariffs may be utilized by any
participant in the wholesale market, such as utilities,
nonutility generators, power marketers, municipalities and/or
cooperatives. The NOPR further includes the requirement that
utilities take service under the tariffs for their own wholesale
sales and purchases of electric energy. The issue of retail
wheeling has been left to the individual states to decide upon.
On August 4, 1995, ACE filed its initial comments to the FERC's
NOPR addressing such issues as full recovery of stranded costs by
utilities, establishing a special category of stranded costs for
nonutility generating contracts to help mitigate these costs,
enforcing exit fees from departing customers and allowing
existing power pools the opportunity to improve on the
efficiency, reliability and economy currently provided. On
October 4, 1995, ACE filed reply comments to FERC regarding
initial comments filed by other respondents and reiterated its
initial comments. FERC has scheduled technical conferences during
the next few months to discuss issues regarding ancillary
services, pro-forma tariffs and power pools. A final ruling is
anticipated in March 1996. At this time the final outcome of this
FERC NOPR can not be determined.
The BPU is currently developing an Energy Master Plan (EMP) to
define how the energy market will function within the state in
the future. The EMP is being developed in three phases. The phase
I report, issued in March 1995, outlined the broad policy
objectives to be followed in developing more specific
recommendations in phases II and III. Phase II will detail the
activities needed to implement the objectives delineated in the
phase I report. Phase III will include an assessment of energy
prices, energy supply and energy use. Both phase II and III are
scheduled for completion by the end of 1995. On September 15,
1995, ACE filed initial comments to the BPU's phase II notice of
inquiry which requested opinions on a diverse set of issues.
Highlights of ACE's comments include: the need for full recovery
of stranded costs by utilities, system reliability must be
maintained, retail wheeling should not be implemented, support
the evolution of a more competitive bulk power market and
development of a program to reduce utility energy supply costs
and nonutility generation contract costs. On October 20, 1995,
ACE submitted its reply comments to the BPU. Following a review
period, the BPU is expected to issue a report in March 1996
containing specific findings and recommendations.
Nuclear
As previously reported under Part 1, Item I-Business,
"Regulation" and Note 1 of the Notes to Financial Statements in
the Company's 1994 Annual Report on Form 10-K, New Jersey
Administrative Code 14:5A-2.1 requires all New Jersey electric
utilities to file with the BPU a nuclear decommissioning cost
update by January 1, 1996 and every four years thereafter. Public
Service Electric & Gas Company (PS), on behalf of the co-owners,
has engaged an independent engineer to develop this estimate for
Salem, Hope Creek and Peach Bottom, in which ACE is a 7.41%,
5.00% and 7.51% owner, respectively. ACE expects that its share
of nuclear decommissioning cost will increase, however, the
magnitude of the increase can not be determined at this time.
Salem
ACE is a 7.41% owner of Salem Nuclear Generating Station
(Salem) operated by PS. As previously reported in the Company's
reports on Form 10-Q for the quarter ended June 30, 1995 and Form
8-K's dated June 15, 1995, July 21, 1995 and October 19, 1995,
ACE was advised by PS that Salem Units 1 and 2 were taken out of
service on May 16, 1995 and June 7, 1995, respectively. The
return of the units to service is predicated upon the completion
of a thorough assessment of the equipment and management issues
that have affected the operation of the station and the necessary
corrections to assure safe and reliable operation over the long
term.
ACE has been advised by PS that they have completed the
examination of Unit 1 to identify the scope of work necessary to
achieve safe, sustained and reliable operation. A similar
examination of Unit 2 is expected to be completed in November
1995. Following the completion of the Unit 2 work scope, PS will
provide a final work scope for both units to the Nuclear
Regulatory Commission (NRC) at a meeting to be held in mid-
December. ACE has been informed by PS that significant progress
has been made in identifying and resolving the equipment, process
and personnel issues that have affected Salem station's past
performance. PS has further advised that to date, more than 25%
of the necessary work activities have been completed and many
others have been initiated. PS has extended the time period to
complete the scope of work on Unit 1 by 60 days. This has
delayed the return of Unit 1 to commercial operation until the
second quarter of 1996. PS has informed ACE that the current
estimate for the return of Unit 2 to commercial operation remains
the second quarter of 1996, although no assurances can be given.
For further information, see Notes 5 and 6 of the Notes to
Financial Statements for ACE and AEI, respectively.
<PAGE>
ACE has been advised by PS that senior management changes have
been made at the following positions since July 1995- Senior Vice
President-Nuclear Operations, Senior Vice President-Nuclear
Engineering, General Manager-Salem Operations, Director-Nuclear
Training, Director-Plant Engineering & Projects, Director-System
Engineering, Director-Design Engineering, Director-Quality
Assurance & Nuclear Safety Review, Manager-Salem Projects,
Manager-Salem Maintenance and Manager-Salem Operations. PS has
advised ACE that PS is committed to achieving high standards of
safety and operational performance for its nuclear program. PS
advised ACE that PS's objective is to restart and run the Salem
plants in accordance with these standards so as to assure long
term reliability and reduce overall production costs.
ACE has been advised that on October 5, 1995, PS declared an
alert at Salem Unit 1. The event involved a problem with the
overhead annunciator panel in the Unit 1 control room. PS has
chartered a significant event response team (SERT) to investigate
the event, determine the root causes and suggest corrective
actions. Simultaneously, the NRC formed a special inspection
team to investigate the event during the period October 6 through
October 18. What actions the NRC might take, if any, can not be
determined at this time. At the time of the event there was no
fuel in the reactor, no release of radiation and no danger to the
public or on-site personnel.
As previously reported, a Salem NRC enforcement conference was
held on July 28, 1995 related to certain violations of NRC
requirements. The violations included valves that were
incorrectly positioned following a plant modification in May
1993, non-conservatisms in the setpoints for a pressurizer
overpressure protection system and several examples of inadequate
root cause determination of events, leading to insufficient
corrective actions at Salem. On October 16, 1995, the NRC
proposed cumulative civil penalties of $600,000 related to these
violations. PS has advised the NRC that the proposed penalties
would not be contested.
ACE continues to evaluate the legal, regulatory and
administrative implications of these events. At this time, it is
impossible to predict what action may be taken, if any, by
participation in any regulatory, administrative or civil
proceedings which, if commenced, may affect the outcome of these
matters and the ultimate responsibility for such costs and
penalties.
As a nonoperating minority owner, ACE believes that the safe
and expeditious restart of the Salem units is of utmost
importance to the customers and shareholders of ACE, and
continues to actively encourage PS to take whatever steps are
necessary and reasonable for PS to effectively and properly
respond to concerns expressed by the NRC and to restart the units
in a timely manner. ACE has conveyed these concerns directly to
the management of PS.
<PAGE>
Hope Creek
ACE is a 5% owner of Hope Creek Nuclear Generating Station
(Hope Creek) which is operated by PS. As previously reported in
the June 30, 1995 report on Form 10-Q, ACE was notified that on
July 8, 1995, during a manual shutdown of Hope Creek, in order to
repair control room ventilation equipment, operators partially
opened a valve for a period of time and inadvertently reduced the
effectiveness of the shutdown cooling system. The positioning of
the valve and the resulting temperature change violated plant
procedures and technical specifications, although the impact of
the event to plant safety was minimal. On July 31, 1995, NRC
staff met with plant management concerning this issue and
subsequently decided to assign a special inspection team to
independently evaluate this event as well as PS's response to it,
including PS's procedures and training for operator handling of
abnormal conditions. ACE was advised that on September 25, 1995,
the NRC's special inspection team issued its report and
identified several areas where operator and senior plant
management performance during this event was inadequate. PS has
advised that an NRC enforcement conference was held on November
6, 1995. Whether a penalty will be assessed or how significant
it may be can not be determined at this time.
ACE has been advised by PS that on September 19, 1995, the NRC
issued a notice of violation for insufficient control room
manning at Hope Creek during a three minute period in June, 1992.
Two level IV violations with no civil penalty were received for
this incident; one for the three minute period in which there was
no senior reactor operator present and the other for not meeting
the reporting requirements for this event.
Peach Bottom
ACE is a 7.51% owner of Peach Bottom Atomic Power Station
(Peach Bottom) operated by PECO Energy Company (PECO). As
previously reported in the June 30, 1995 report on Form 10-Q, ACE
has been advised by PECO that on August 2, 1995, the NRC held an
predecisional enforcement conference regarding three alleged
violations in control and design activities and technical
specification requirements regarding operability of the emergency
diesel generators. ACE has been advised that on August 17, 1995,
the NRC issued its notice of violation report and, in the report,
recognized that PECO identified the problem issues, conducted a
detailed root cause evaluation and took appropriate corrective
actions. The NRC elected not to propose a civil penalty in this
case based on the identification and corrective action taken by
PECO.
ACE has been advised by PECO that, by letter dated October 18,
1994, the NRC has approved PECO's request to rerate the
authorized maximum reactor core power levels of Peach Bottom
Units No. 2 and 3 by 5% to 3,458 megawatts from the current
limits of 3,293 megawatts. The amendment of the Peach Bottom
Unit No. 2 facility operating license was effective upon the date
of the NRC approval letter. The amendment of the Unit No. 3
facility operating license became effective with the completion
of hardware changes which were done during Unit No. 3's fall 1995
refueling outage.
Item 6. Exhibits and Reports on 8-K
Exhibits: See Exhibit Index Attached
Reports on Form 8-K:
A Current Report on Form 8-K was filed dated October 19, 1995
relating to the shutdown of Salem Unit 1 on May 16, 1995 and
Salem Unit 2 on June 7,1995. <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Atlantic Energy, Inc.
Atlantic City Electric Company
(Registrant)
Date: November 14, 1995 By: /s/ L. M. Walters
L. M. Walters
Treasurer of Atlantic Energy, Inc.
and Vice President, Treasurer and
Assistant Secretary of Atlantic
City Electric Company
<PAGE>
EXHIBIT INDEX
27 Financial Data Schedules for Atlantic Energy, Inc. and
Atlantic City Electric Company for periods ended
September 30, 1995.
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