<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to_____
Commission file number 33-46795
OLD DOMINION ELECTRIC COOPERATIVE
(Exact Name of Registrant as Specified in Its Charter)
VIRGINIA 23-7048405
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4201 Dominion Boulevard, Glen Allen, Virginia 23060
(Address of Principal Executive Offices) (Zip Code)
----------
(804) 747-0592
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
---- --
The Registrant is a membership corporation and has no authorized or outstanding
equity securities.
================================================================================
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000 (Unaudited)
and December 31, 1999 3
Consolidated Statements of Revenues, Expenses and
Patronage Capital (Unaudited) - Three Months Ended
March 31, 2000 and 1999 4
Consolidated Statements of Comprehensive Income (Unaudited) -
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows (Unaudited) - Three
Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
Exhibit Index 16
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------ ------------------
(in thousands)
ASSETS: (unaudited) (*)
- ----------------------------------------------------------------------
<S> <C> <C>
Electric Plant:
In service $ 898,761 $ 889,392
Less accumulated depreciation (235,555) (209,865)
------------------ ------------------
663,206 679,527
Nuclear fuel, at amortized cost 5,701 6,981
Construction work in progress 8,279 13,023
------------------ ------------------
Net Electric Plant 677,186 699,531
------------------ ------------------
Investments:
Nuclear decommissioning trust fund 56,466 54,159
Lease deposits 124,836 125,845
Other 81,708 82,020
------------------ ------------------
Total Investments 263,010 262,024
------------------ ------------------
Current Assets:
Cash and cash equivalents 53,832 25,088
Receivables 26,790 34,044
Fuel, materials and supplies, at average cost 11,119 9,312
Prepayments 2,587 2,244
------------------ ------------------
Total Current Assets 94,328 70,688
------------------ ------------------
Deferred Charges 18,403 18,269
------------------ ------------------
Total Assets $ 1,052,927 $ 1,050,512
================== ==================
CAPITALIZATION AND LIABILITIES:
- ----------------------------------------------------------------------
Capitalization:
Patronage capital $ 218,543 $ 216,369
Accumulated other comprehensive income (2,283) (2,316)
Long-term debt 497,081 509,606
------------------ ------------------
Total Capitalization 713,341 723,659
------------------ ------------------
Current Liabilities:
Long-term debt due within one year 29,700 29,700
Accounts payable 18,224 18,886
Accounts payable - Member deposits 31,004 28,752
Deferred energy 4,281 3,263
Accrued expenses 16,410 6,770
------------------ ------------------
Total Current Liabilities 99,619 87,371
------------------ ------------------
Deferred Credits and Other Liabilities:
Decommissioning reserve 56,466 54,159
Obligations under long-term leases 127,874 129,010
Other 55,627 56,313
------------------ ------------------
Total Deferred Charges and Other Liabilities 239,967 239,482
------------------ ------------------
Committments and Contingencies - -
------------------ ------------------
Total Capitalization and Liabilities $ 1,052,927 $ 1,050,512
================== ==================
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
(*) The Consolidated Balance Sheet at December 31, 1999, has been taken
from the audited financial statements at that date, but does not
include all disclosures required by generally accepted accounting
principles.
3
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF REVENUES,
EXPENSES AND PATRONAGE CAPITAL (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------
2000 1999
------------------ ------------------
(in thousands)
<S> <C> <C>
Operating Revenues $ 104,885 $ 106,318
------------------ ------------------
Operating Expenses:
Fuel 11,759 10,953
Purchased power 41,004 45,114
Operations and maintenance 8,526 8,506
Administrative and general 4,116 3,961
Depreciation, amortization, and decommissioning 25,173 20,445
Taxes other than income taxes 1,960 1,881
------------------ ------------------
Total Operating Expenses 92,538 90,860
------------------ ------------------
Operating Margin 12,347 15,458
Other (Expense)/Income, net (468) 50
Investment Income 1,093 1,278
Interest Charges, net (10,798) (13,976)
------------------ ------------------
Net Margin 2,174 2,810
Patronage Capital-Beginning of Period 216,369 206,528
------------------ ------------------
Patronage Capital-End of Period $ 218,543 $ 209,338
================== ==================
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
OLD DOMINION ELECTRIC COOPERATIVE
STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------
2000 1999
------------------ ------------------
(in thousands)
<S> <C> <C>
Net Margin $ 2,174 $ 2,610
Other Comprehensive Income:
Unrealized gain/(loss) on investments 33 (541)
------------------ ------------------
Comprehensive Income $ 2,207 $ 2,069
================== ==================
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------
2000 1999
------------------ ------------------
(in thousands)
<S> <C> <C>
Operating Activities:
Net margin $ 2,174 $ 2,810
Adjustments to reconcile net margin to net cash provided
by operating activities:
Depreciation, amortization, and decommissioning 25,173 20,445
Other non-cash charges 1,951 3,953
Amortization of lease obligations 2,264 2,172
Change in current assets 5,104 3,595
Change in current liabilities 12,248 15,260
Deferred charges (182) (32)
------------------ ------------------
Net Cash Provided by Operating Activities 48,732 48,203
------------------ ------------------
Financing Activities:
Reductions of long-term debt (13,148) -
Obligations under long-term leases (177) (175)
------------------ ------------------
Net Cash Used in Financing Activities (13,325) (175)
------------------ ------------------
Investing Activities:
Lease deposits and other investments (1,869) (2,112)
Electric plant additions (4,624) (460)
Decommissioning fund deposits (170) (170)
------------------ ------------------
Net Cash Used in Investing Activities (6,663) (2,742)
------------------ ------------------
Net Increase in Cash and Cash Equivalents 28,744 45,286
Cash and Cash Equivalents - Beginning of Period 25,088 82,382
------------------ ------------------
Cash and Cash Equivalents - End of Period $ 53,832 $ 127,668
================== ==================
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the management of Old Dominion Electric Cooperative ("Old
Dominion"), the accompanying unaudited consolidated financial statements
contain all adjustments, which include only normal recurring adjustments,
necessary for a fair statement of Old Dominion's consolidated financial
position as of March 31, 2000, and its consolidated results of operations,
comprehensive income and cash flows for the three months ended March 31, 2000
and 1999. The consolidated results of operations for the three months ended
March 31, 2000, are not necessarily indicative of the results to be expected
for the entire year. These financial statements should be read in
conjunction with the financial statements and notes thereto included in Old
Dominion's 1999 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
2. On October 14, 1997, Old Dominion's Board of Directors approved a resolution
adopting certain strategic objectives designed to mitigate the effects of the
transition to a competitive electric market (the "Strategic Plan Initiative"
or "SPI"). Subsequently, an independent assessment of the impact on Old
Dominion of transition to a competitive market was performed and the
resulting recommendations to mitigate the transition effects were approved by
the Board of Directors on July 28, 1998, and incorporated into the SPI. The
SPI, as then approved, called for the accumulation of approximately $330.0
million in cash and cash equivalents from 1998 to 2003 with the funds to be
used to reduce Old Dominion's reliance on debt. A provision of the SPI
requires that it be updated periodically based on revised projections,
projected targets, legislation, and the status of the SPI in terms of
achieving its objective. The Board of Directors will approve all revisions or
modifications.
In conjunction with the SPI, on May 10, 1999, Old Dominion's Board of
Directors unanimously approved a resolution to record accelerated
depreciation on generation assets during the period January 1, 1999, through
December 31, 2003, and to recover the additional expense through rates
pursuant to the comprehensive rate formula filed with and accepted by FERC.
A study was undertaken in late 1999 to assess the status of the SPI and the
numerous factors that impact its results. This study considered changes in
market rate forecasts, components of Old Dominion's cost of service and
deregulation timelines. Additionally, it incorporated the effects of
recording accelerated depreciation. As a result of this study, the targeted
collection amount of $330.0 million was reduced to $241.0 million. Old
Dominion will continue to evaluate the various factors that impact the
results of the SPI, monitor its progress, and, upon approval from its Board
of Directors, adjust the SPI as necessary to achieve its objective.
During the first quarter of 2000, Old Dominion recorded additional
depreciation of $17.9 million as compared to $14.2 million in the first
quarter of 1999. Rates approved by the Board of Directors for 2000 include
the recovery of additional depreciation of approximately $53.0 million. To
date Old Dominion has collected cash totaling of $94.7 million ($17.9 in the
first quarter of 2000, $45.4 million in 1999, and $31.4 million in 1998)
toward the revised SPI target of $241.0 million.
In conjunction with the SPI, Old Dominion purchased $13.2 million of its
higher cost outstanding debt in the first quarter of 2000.
3. Certain reclassifications have been made to the accompanying prior year's
consolidated financial statements to conform to the current year's
presentation.
6
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements, as defined by the Private
Securities Litigation Act of 1995, with respect to matters that could have an
impact on future operations of Old Dominion. These statements, based on
expectations and estimates of management, are not guarantees of future
performance and are subject to risks, uncertainties, and other factors that
could cause actual results to differ materially from those expressed in the
forward-looking statements. These risks, uncertainties, and other factors
include, but are not limited to: general business conditions, competition,
federal and state regulations, environmental issues, tax status, industry
restructuring, and weather. Given these uncertainties, undue reliance should
not be placed on such forward-looking statements.
Results of Operations
Operating Revenues
Old Dominion's operating revenues are derived from power sales to its Members
and to a nonmember. Revenues from sales to Members are a function of the
requirement for power by the Members' consumers and Old Dominion's cost of
service in meeting that requirement. The major factors affecting Members'
consumers' demand for power are the growth in the number of consumers and
seasonal weather fluctuations, and in the future, retail competition.
Sales to a nonmember represent sales of excess energy from the Clover Power
Station ("Clover") to Virginia Electric and Power Company ("Virginia Power")
pursuant to the requirements of the Clover Operating Agreement. In light of
deregulation initiatives in Virginia, Old Dominion and Virginia Power have
agreed that the Clover Operating Agreement will have to be restructured prior to
January 1, 2002, to permit Old Dominion to sell its excess energy from Clover to
others and to Virginia Power on changed terms.
The following table summarizes the changes (increase/(decrease)) in operating
revenues by component:
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
2000 vs 1999
--------------
(in thousands)
<S> <C>
Sales to Members:
Power sales volume $ 740
Blended rates (2,839)
Fuel adjustment revenue (64)
Margin stabilization plan adjustment 551
-------
(1,612)
Sales to a nonmember 179
-------
$(1,433)
=======
</TABLE>
The decrease in operating revenues in the first quarter of 2000 as compared to
the same period in 1999 was mainly the result of a 4% reduction in Old
7
<PAGE>
Dominion's demand rate effective August 1, 1999, offset in part by a 4.1%
increase in energy sales. Old Dominion's demand and energy sales for the three
months ended March 31, 2000, were 4,279 MW and 2,288,644 MWh, respectively. Old
Dominion's demand and energy sales for the three months ended March 31, 1999,
were 4,333 MW and 2,198,581 MWh, respectively.
Weather affects customer demand for electricity. Hot summers and cold winters
increase demand while mild weather reduces demand. The weather's effect is
measured using degree days. A degree day is the difference between the average
daily temperature and a baseline temperature of 65 degrees. Cooling degree days
result when the average daily temperature is above 65 degrees; heating degree
days result when the average daily temperature is below 65 degrees. Heating
degree days for the first quarter of 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 31,
-------------------------
2000 1999 Normal
------ ------- ------
<S> <C> <C> <C>
Heating degree days 1,883 1,944 1,868
Percentage change compared to
prior year (3.14)% (12.09)%
</TABLE>
Operating Expenses
Old Dominion has an 11.6% undivided ownership interest in the North Anna
Nuclear Power Station ("North Anna") and a 50% undivided ownership interest in
Clover. Power plants, particularly nuclear power plants such as North Anna,
generally have relatively high fixed costs; however, such facilities operate
with relatively low variable costs due to lower fuel costs and technological
efficiencies. Owners of nuclear and other power plants, including Old Dominion,
incur the embedded fixed costs of these facilities whether or not the units
operate.
When either North Anna or Clover is off-line, Old Dominion must purchase
replacement energy from either Virginia Power, which is more costly, or the
market, which may be more or less costly. As a result, Old Dominion's operating
expenses, and therefore its rates to its Members, are significantly affected by
the operation of North Anna and Clover.
Actual North Anna and Clover capacity factors for the first quarter of 2000
and 1999 as compared to the net capacity ratings were as follows:
<TABLE>
<CAPTION>
North Anna Clover
------------------- -------------------
Three Months Ended Three Months Ended
March 31, March 31,
------------------- -------------------
2000 1999 2000 1999
----- ----- ---- ----
<S> <C> <C> <C> <C>
Unit 1 71.4% 103.1% 91.2% 76.4%
Unit 2 102.5 100.6 84.0 78.6
Combined 87.0 101.9 87.6 77.5%
</TABLE>
North Anna Unit 1 ran for 522 consecutive days before it began a scheduled
refueling outage on March 12, 2000. The unit was returned to service on April
8, 2000. Unit 2 has been online for 120 consecutive days as of March 31, 2000.
North Anna Units 1 and 2 were not off-line during the first quarter of 1999.
Clover Units 1 and 2 each experienced minor outages during the first quarter
of 2000. In 1999, Clover Unit 1 operated for 166 consecutive days before it was
removed from service on March 19, 1999, to begin a 20-day scheduled maintenance
outage. Unit 2 was on-line for 53 consecutive days as of March 31, 1999.
8
<PAGE>
In addition to power generated at Clover and North Anna, Old Dominion
purchases power from Virginia Power, Public Service Electric & Gas ("PSE&G"),
Delmarva Power & Light ("Delmarva Power"), and others. Old Dominion's energy
supply for 2000 and 1999 was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
2000 1999
----------------- ------------------
(MWh) (MWh)
<S> <C> <C> <C> <C>
Clover 835,669 35.0% 729,219 32.2%
North Anna 394,461 16.5 456,827 20.2
--------- ----- --------- -----
Total Produced 1,230,130 51.5 1,186,046 52.4
--------- ----- --------- -----
Purchased Power:
Virginia Power 552,133 23.1 513,036 22.6
Delmarva Area (PSE&G, Delmarva
Power, Conectiv/PPL) 263,247 11.0 470,429 20.8
Other 345,028 14.4 96,871 4.2
--------- ----- --------- -----
Total Purchased Power 1,160,408 48.5 1,080,336 47.6
--------- ----- --------- -----
Total Available Energy 2,390,538 100.0% 2,266,382 100.0%
========= ===== ========= =====
</TABLE>
The increase in Clover production resulted in an increase in fuel expense in
the first quarter of 2000 as compared to the same period of 1999. The increase
was offset by a decrease in nuclear fuel expense caused by the refueling of
North Anna Unit 1.
Purchased power expense decreased in the first quarter of 2000 despite an
increase in purchases due to a $4.7 million energy settlement received from a
power supplier. Excluding the settlement, purchased power costs increased 1.2%.
During the first quarter of 2000, there was an increase in power purchases in
the open market.
Other operating expenses in the first quarter of 2000 did not change
significantly from the first quarter of 1999 except for depreciation expense.
Depreciation expense increased primarily because of $17.9 million of accelerated
depreciation recorded on generation assets in accordance with Old Dominion's
Strategic Plan Initiative. Old Dominion recorded $14.2 million of accelerated
depreciation in the first quarter of 1999. See Note 2 to the consolidated
financial statements.
Non-operating Income and Expenses
Interest on long-term debt decreased in the first quarter of 2000 as compared
to the same period in 1999 primarily because Old Dominion purchased $49.3
million of its higher cost outstanding debt in 1999. A $13.2 million purchase of
higher cost debt in March 2000 did not have a significant effect on interest
costs for the quarter.
Liquidity and Capital Resources
Operating activities provided $48.7 million in the first quarter of 2000 and
$48.2 million in the first quarter of 1999. The primary source of operating
funds in both 2000 and 1999 was accelerated depreciation recorded on generation
assets and the change between periods in non-cash working capital accounts.
Financing activities resulted in a cash outflow in the first quarter of 2000
because Old Dominion used its available cash to purchase outstanding debt.
Financing activities were minimal in 1999.
Investing activities in the first quarter of 2000, mainly additions to plant
and lease deposits and other investments, resulted in a cash outflow of $6.7
million. Other investments, consisting primarily of highly liquid managed bond
9
<PAGE>
and mutual funds, are classified as available-for-sale, and accordingly, are
carried at fair value. Unrealized gains and losses on other investments are
reflected as a component of capitalization.
Investing activities in the first quarter of 1999 resulted in a net cash
outflow during the first quarter of 1999 primarily because of additions to lease
deposits and other investments.
Strategic Plan Initiative
On October 14, 1997, Old Dominion's Board of Directors approved a resolution
adopting certain strategic objectives designed to mitigate the effects of the
transition to a competitive electric market (the "Strategic Plan Initiative" or
"SPI"). Subsequently, an independent assessment of the impact on Old Dominion
of transition to a competitive market was performed and the resulting
recommendations to mitigate the transition effects were approved by the Board of
Directors on July 28, 1998, and incorporated into the SPI. The SPI, as then
approved, called for the accumulation of approximately $330.0 million in cash
and cash equivalents from 1998 to 2003 with the funds to be used to reduce Old
Dominion's reliance on debt. A provision of the SPI requires that it be updated
periodically based on revised projections, projected targets, legislation, and
the status of the SPI in terms of achieving its objective. The Board of
Directors will approve all revisions or modifications.
In conjunction with the SPI, on May 10, 1999, Old Dominion's Board of
Directors unanimously approved a resolution to record accelerated depreciation
on generation assets during the period January 1, 1999, through December 31,
2003, and to recover the additional expense through rates pursuant to the
comprehensive rate formula filed with and accepted by FERC.
A study was undertaken in late 1999 to assess the status of the SPI and the
numerous factors that impact its results. This study considered changes in
market rate forecasts, components of Old Dominion's cost of service and
deregulation timelines. Additionally, it incorporated the effects of recording
accelerated depreciation. As a result of this study, the targeted collection
amount of $330.0 million was reduced to $241.0 million. Old Dominion will
continue to evaluate the various factors that impact the results of the SPI,
monitor its progress, and, upon approval from its Board of Directors, adjust the
SPI as necessary to achieve its objective.
During the first quarter of 2000, Old Dominion recorded additional
depreciation of $17.9 million as compared to $14.2 million in the first quarter
of 1999. Rates approved by the Board of Directors for 2000 include the recovery
of additional depreciation of approximately $53.0 million. To date Old Dominion
has collected cash totaling of $94.7 million ($17.9 in the first quarter of
2000, $45.4 million in 1999, and $31.4 million in 1998) toward the revised SPI
target of $241.0 million.
In conjunction with the SPI, Old Dominion purchased $13.2 million of its
higher cost outstanding debt in the first quarter of 2000.
Competition and Changing Regulations
The electric utility industry is becoming increasingly competitive as a result
of deregulation, competing energy suppliers, new technology, and other factors.
The Energy Policy Act of 1992 amended the Federal Power Act and the Public
Utilities Holding Company Act to allow for increased competition among wholesale
electricity suppliers and increased access to transmission services by such
suppliers. A number of other significant factors have affected the operations
of electric utilities, including the availability and cost of fuel for the
generation of electric energy; the use of alternative fuel sources for space and
water heating and household appliances; fluctuating rates of load growth;
compliance with environmental and other governmental regulations; licensing and
other factors affecting the construction, operation, and cost of new and
existing facilities; and the effects of conservation, energy management, and
other governmental regulations on the use of electric energy. All of these
10
<PAGE>
factors present an increasing challenge to companies in the electric utility
industry, including Old Dominion and its Members, to reduce costs, increase
efficiency and innovation, and improve management of resources.
Each of the four states in which Old Dominion's Members operate (Virginia,
Maryland, Delaware, and West Virginia) have enacted legislation that addresses
deregulation of the electric industry, and that outlines a process by which
electric utilities within their respective jurisdictions, including
cooperatives, will transition to competition. The individual deregulation plans
adopted by the Virginia, Maryland, and Delaware legislators are similar. In
these three states, previously regulated electric utilities must unbundle the
component parts of their generation, transmission, and distribution. Power
transmission and distribution will remain under government regulation; however,
power generation will be deregulated and utilities will compete for customers in
the open market. The plans of Virginia, Maryland, and Delaware each indicate
that cooperatives will remain the default provider of power in their assigned
territories, and that they will retain the metering and billing functions. Each
of these plans also provides for recovery of stranded costs over a specified
transition period; however, the timing of each state's plan implementation is
different. Additionally, each Member is legislatively required to submit a
restructuring plan to its respective commission, including its assessment of
market rates and proposed unbundled rate structure. Specific and unique aspects
of each state's legislation are detailed below.
The following table estimates the cumulative percentage of Old Dominion's load
sales, based on 1999 demand sales, that will be subject to deregulation and at
risk of loss in the competitive market each year in Virginia, Maryland,
Delaware, and West Virginia. This data is based on the dates that the Members'
individual classes of customers are free to choose an alternative power
supplier, as mandated by the individual state's legislative action:
<TABLE>
<CAPTION>
Percentage of Old Dominion's Load Sales
--------------------------------------------
<S> <C> <C> <C>
2000 2001 2002-2004
--- ---- -----------
Virginia -% - % 78.8%(1)
Maryland - -(2) 9.5 (2)
Delaware 0.6 11.5 11.5
West Virginia - 0.2 0.2
--- ---- -----
Old Dominion's Total System 0.6% 11.7% 100.0%
=== ==== =====
- ------------------
</TABLE>
(1) The opportunity for Virginia consumers to shop for the purchase of
electricity will be phased in between January 1, 2002 and January 1, 2004 in
accordance with a schedule that is to be developed by the Virginia State
Corporation Commission.
(2) Old Dominion's Maryland Member must offer customer choice by July 1, 2003.
It may voluntarily offer choice as early as 2001.
Virginia. On March 25, 1999, the governor of Virginia signed into law
comprehensive electric utility restructuring legislation. The legislation
provides for retail choice to be phased in between January 1, 2002 and January
1, 2004 in accordance with a schedule that is to be developed by the Virginia
State Corporation Commission ("VSCC"). By January 1, 2001, each utility is to
submit to the VSCC its plan for functional separation.
The deregulation plan calls for capping rates, excluding the recovery of fuel
costs, from January 1, 2002, to July 1, 2007. The rates were capped at the
levels in effect on July 1, 1999; however, a utility can petition the VSCC for
an increase in rates prior to January 1, 2001. During this transition period,
utilities may collect stranded costs through operation of the capped rates and a
wires charge that will be applied to all customers that choose an alternative
power supplier.
The 2000 session of the Virginia General Assembly passed legislation to
further enhance retail choice in Virginia. The legislation as passed
accomplishes the following: (1) more clearly defines which entities qualify as
aggregators and, therefore, must be licensed, (2) directs the VSCC to continue
its examination of whether metering and billing should be competitive, and (3)
11
<PAGE>
allows the VSCC to consider transmission charges when calculating market price.
Language in this legislation clarifies that cooperatives will be the default
supplier of all competitive services, and will continue to be permitted to sell
power directly to their customers.
Maryland. On April 8, 1999, the governor of Maryland signed into law
restructuring legislation requiring a three-year phase-in of retail competition
beginning with investor-owned utilities on July 1, 2001. Such phase-in is to be
completed by July 1, 2003, at which time all customers will be able to choose
their electric supplier. By the same law, the cooperatives must present to the
Maryland Public Service Commission ("MPSC") a plan whereby all cooperative
customers will have choice by July 1, 2003.
The legislation also calls for a 3.0% to 7.5% rate reduction for non-
cooperative residential customers upon commencement of competition; no such rate
reduction is required for cooperative customers. Rates for all customers are to
be frozen for four years from the date of the commencement of competition. Any
proposed collection of stranded costs by cooperatives is to be included in a
filing before the MPSC along with an unbundled rate study for their approval.
Old Dominion's Maryland Member, Choptank Electric Cooperative ("Choptank"), made
such a filing in July 1999. Additionally, Choptank has indicated that it may
voluntarily offer customer choice as early as July 1, 2001. Choptank and Old
Dominion are currently involved in settlement negotiations with the MPSC
regarding this filing. Old Dominion management believes that a component of
this settlement will permit Choptank to collect its stranded costs from its
customers that choose an alternative power supplier.
Delaware. On March 31, 1999, the governor of Delaware signed into law
legislation requiring a phase-in of retail competition beginning October 1,
1999, for customers of the state's investor-owned electric utility, Conectiv,
and April 1, 2000, for the customers of Delaware Electric Cooperative ("DEC"),
Old Dominion's Delaware Member. Based on current estimates, the customers of DEC
that will be permitted to shop for power during 2000 account for less than 1.0%
of Old Dominion's total load sales. All customers of DEC, representing
approximately 11.5% of Old Dominion's total load sales, will have the option of
choosing their power supplier by April 1, 2001.
Rates for Conectiv's residential customers were reduced 7.5% effective October
1, 1999, and will remain frozen at those levels through September 30, 2003.
Rates for Conectiv's non-residential customers are to remain frozen at their
October 1, 1999 levels through September 30, 2002. DEC's customers' rates are
to be frozen at current levels through March 31, 2005.
The Delaware legislation required that DEC file a restructuring and rate
unbundling plan, including any proposed collection of the Member cooperative's
stranded costs. DEC filed such a plan in September 1999. Old Dominion
intervened in this proceeding to represent the interests of all of its Members.
On February 28, 2000, the Delaware Public Service Commission ("DPSC") issued its
preliminary order in response to the filing. On April 25, 2000, the DPSC issued
its final opinion and order affirming its preliminary order. The order
indicates that it is the determination of the DPSC that DEC has no stranded
costs and therefore cannot collect such costs from those customers who choose an
alternative power supplier. Conversely, DEC has determined that it does have
stranded costs by virtue of its wholesale power contract with Old Dominion,
which includes certain above-market generation costs that its Members are
obligated to pay. DEC believes that it should be allowed to collect those costs
from all of its customers, including those that choose an alternative power
supplier. Old Dominion supports this position and is currently reviewing its
options to ensure that all of its Members equitably share in the recovery of its
above-market generation cost, and that no shifting of stranded costs among
jurisdictions occurs.
West Virginia. On March 11, 2000, the West Virginia legislature adopted a
restructuring plan into law that implements customer choice on January 1, 2001,
or a later date established by the state commission. As in the other three
states, power generation will be deregulated and utilities will compete for
customers in the open market; incumbent utilities will be the default suppliers;
and, metering and billing services will be fully competitive within four years
of the plan's implementation. The plan imposes restrictions on the residential
and large commercial/industrial rates to be charged during the first 7 and 13
years, respectively.
12
<PAGE>
With the electric utility industry moving toward a competitive environment, it
has become necessary for Old Dominion and its Members to develop innovative
approaches to serving traditional markets. In a competitive environment,
generating utilities are no longer guaranteed the recovery of prudently incurred
costs. Generating utilities with costs that exceed market prices could suffer
significant losses. Additionally, the loss of customers could also have a
significant impact on a utility's results of operations. In the case of Old
Dominion and its Members, the loss of a significant portion of load could cause
a reduction in revenues and cash flows. The resulting decrease in Member
revenues could also cause Old Dominion to lose its tax-exempt status.
Management is currently working with the Members through the Strategic Plan
Initiative to improve Old Dominion's and the Members' competitive position. See
"Strategic Plan Initiative." Old Dominion cannot predict the ultimate effect
competition will have on results of operations and future cash flows.
13
<PAGE>
OLD DOMINION ELECTRIC COOPERATIVE
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Other than certain legal proceedings arising out of the ordinary
course of business, which management believes will not have a
material adverse impact on the results of operations or financial
condition of Old Dominion, there is no other litigation pending or
threatened against Old Dominion.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the quarter ended
March 31, 2000.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
Registrant
Date: May 11, 2000 /s/Daniel M. Walker
----------------------------------------------
Daniel M. Walker
Senior Vice President of Accounting and Finance
(Chief Financial Officer)
15
<PAGE>
EXHIBIT INDEX
Page
Exhibit Description of Exhibit Number
- ------- ---------------------- ------
27. Financial Data Schedule 17
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF OLD DOMINION ELECTRIC COOPERATIVE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> $677,186
<OTHER-PROPERTY-AND-INVEST> 263,010
<TOTAL-CURRENT-ASSETS> 94,328
<TOTAL-DEFERRED-CHARGES> 7,118
<OTHER-ASSETS> 11,285
<TOTAL-ASSETS> 1,052,927
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 218,544<F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0
0
0
<LONG-TERM-DEBT-NET> 497,081
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 29,700
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 307,602
<TOT-CAPITALIZATION-AND-LIAB> 1,052,927
<GROSS-OPERATING-REVENUE> 104,885
<INCOME-TAX-EXPENSE> 0
<OTHER-OPERATING-EXPENSES> 92,538
<TOTAL-OPERATING-EXPENSES> 92,538
<OPERATING-INCOME-LOSS> 12,347
<OTHER-INCOME-NET> 625
<INCOME-BEFORE-INTEREST-EXPEN> 0
<TOTAL-INTEREST-EXPENSE> 10,797
<NET-INCOME> 2,175
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 48,732
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>OLD DOMINION IS ORGANIZED AND OPERATED AS A COOPERATIVE. PATRONAGE CAPITAL IS
THE RETAINED NET MARGINS OF OLD DOMINION WHICH HAVE BEEN ALLOCATED TO ITS
MEMBERS BASED ON THEIR REPSECTIVE POWER PURCHASES IN ACCORDANCE WITH OLD
DOMINION'S BYLAWS.
</FN>
</TABLE>
