<PAGE>
United States
Securities and Exchange Commission
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Registrant; State of Incorporation; IRS Employer
Number Address; and Telephone No. Identification No.
1-11459 PP&L Resources, Inc. 23-2758192
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
1-905 Pennsylvania Power & Light Company 23-0959590
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
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.
PP&L Resources, Inc. Yes No
(This quarterly report on Form 10-Q is the first report required to
be filed by PP&L Resources, Inc. since it became subject to the
filing requirements of the Securities Exchange Act of 1934.)
PP&L Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
PP&L Resources, Inc. Common stock, $.01 par value,
158,282,909 shares outstanding at
July 31, 1995
Pennsylvania Power & Light Co. Common stock, no par value,
157,300,382, shares outstanding and
all held by PP&L Resources, Inc. at
July 31, 1995
<PAGE>
PP&L RESOURCES, INC.
AND
PENNSYLVANIA POWER & LIGHT COMPANY
FORM 10-Q
FOR THE QUARTER ENDED June 30, 1995
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PP&L Resources, Inc.
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Pennsylvania Power & Light Company
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Financial Statements
PP&L Resources, Inc. and Pennsylvania Power & Light Company
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PP&L Resources, Inc. and Pennsylvania Power & Light Company
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 4. Submission of Matters to a Vote of Security Holders
SIGNATURES
<TABLE>
PP&L RESOURCES, INC.
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
In the opinion of PP&L Resources, Inc. (Resources), the unaudited financial
statements, included herein, reflect all adjustments necessary to present fairly the
Consolidated Balance Sheets as of June 30, 1995 and December 31, 1994, and the
Consolidated Statements of Income and Consolidated Statements of Cash Flows for
the periods ended June 30, 1995 and 1994. Resources is the parent holding company of
Pennsyslvania Power & Light Company (PP&L), Power Markets Development Company (PMDC),
and the newly formed Spectrum Energy Services Corporation (Spectrum). PP&L comprises
99 percent of Resources' assets, revenues and earnings. All nonutility operating
transactions are included in "Other Income and (Deductions)--Other-net" in Resources'
Consolidated Statements of Income.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Thousands of Dollars, except per share data)
<CAPTION>
Three Months
Ended June 30,
1995 1994
<S> <C> <C>
Operating Revenues ............................... $609,213 $640,218
Operating Expenses
Operation
Fuel......................................... 86,611 102,531
Power purchases.............................. 74,290 75,444
Other........................................ 123,035 135,037
Maintenance..................................... 50,336 51,764
Depreciation.................................... 77,434 72,130
Amortized depreciation.......................... 9,939 6,564
Income taxes.................................... 35,630 39,314
Taxes, other than income........................ 47,666 49,056
504,941 531,840
Operating Income .................................. 104,272 108,378
Other Income and (Deductions)
Allowance for equity funds used during
construction................................. 1,732 1,636
Income tax credits (expense).................... (114) 1,194
Other - net..................................... 2,274 (1,146)
3,892 1,684
Income Before Interest Charges & Dividends on Preferred
Stock ........................................... 108,164 110,062
Interest Charges
Long-term debt.................................. 53,433 52,803
Short-term debt and other....................... 5,586 5,746
Allowance for borrowed funds used during
construction and interest capitalized........ (2,516) (2,486)
56,503 56,063
Preferred Stock Dividend Requirements.............. 6,942 6,942
Net Income......................................... $44,719 $47,057
Earnings Per Share of Common Stock (a) ............ $0.28 $0.31
Average Number of Shares Outstanding
(thousands)....................................... 157,161 152,757
Dividends Declared Per Share of Common
Stock............................................. $0.4175 $0.4175
<FN>
(a) Based on average number of shares outstanding.
See accompanying Financial Notes.
</TABLE>
<TABLE>
PP&L RESOURCES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Thousands of Dollars, except per share data)
<CAPTION>
Six Months
Ended June 30,
1995 1994
<S> <C> <C>
Operating Revenues ...............................$1,336,698 $1,409,672
Operating Expenses
Operation
Fuel......................................... 200,587 247,348
Power purchases.............................. 147,898 155,849
Other........................................ 243,309 246,614
Maintenance..................................... 85,167 90,430
Depreciation.................................... 154,887 144,221
Amortized depreciation.......................... 19,877 13,129
Income taxes.................................... 117,943 128,108
Taxes, other than income........................ 101,331 106,289
1,070,999 1,131,988
Operating Income .................................. 265,699 277,684
Other Income and (Deductions)
Allowance for equity funds used during
construction................................. 4,004 2,552
Income tax credits ............................. 232 2,547
Other - net..................................... 2,862 (2,469)
7,098 2,630
Income Before Interest Charges & Dividends on Preferred
Stock ........................................... 272,797 280,314
Interest Charges
Long-term debt.................................. 108,213 107,379
Short-term debt and other....................... 9,385 9,170
Allowance for borrowed funds used during
construction and interest capitalized........ (4,724) (3,900)
112,874 112,649
Preferred Stock Dividend Requirements.............. 13,884 14,520
Net Income......................................... $146,039 $153,145
Earnings Per Share of Common Stock (a) ............ $0.93 $1.00
Average Number of Shares Outstanding
(thousands)....................................... 156,688 152,489
Dividends Declared Per Share of Common
Stock............................................. $0.835 $0.835
<FN>
(a) Based on average number of shares outstanding.
See accompanying Financial Notes.
</TABLE>
<TABLE>
PP&L RESOURCES,INC.
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
Electric utility plant in service.................. $9,486,796 $9,306,519
Accumulated depreciation......................... (2,987,074) (2,871,129)
Deferred depreciation............................ 236,274 256,021
6,735,996 6,691,411
Construction work in progress...................... 181,098 211,288
Nuclear fuel owned and leased - net
of amortization.................................. 149,603 143,591
Other leased property - net of amortization ....... 83,505 80,385
Electric utility plant - net..................... 7,150,202 7,126,675
Other property - net of depreciation,
amortization and depletion....................... 64,851 67,850
7,215,053 7,194,525
Investments
Associated company - at equity..................... 17,121 17,088
Nuclear plant decommissioning trust fund .......... 99,482 87,490
Financial investments.............................. 131,119 119,632
Other - at cost or less............................ 13,335 8,654
261,057 232,864
Current Assets
Cash and cash equivalents.......................... 7,562 10,079
Marketable securities.............................. 89,869 100,537
Accounts receivable, less reserve
Customers........................................ 186,288 189,771
Interconnection.................................. 5,554 1,610
Other............................................ 13,511 12,861
Unbilled revenues.................................. 61,006 88,668
Fuel (coal and oil) - at average cost.............. 116,590 125,545
Materials and supplies - at average cost........... 124,430 123,630
Prepayments........................................ 69,781 11,015
Deferred income taxes.............................. 33,752 27,572
Other.............................................. 20,653 26,916
728,996 718,204
Deferred Debits
Utility plant carrying charges - net
of amortization.................................. 22,616 23,142
Reacquired debt costs.............................. 117,273 113,466
Assessment for decommissioning uranium
enrichment facilities............................ 32,178 33,492
Retired miners' health care benefits............... 13,926 14,536
Taxes recoverable through future rates............. 1,000,524 986,292
Other.............................................. 59,452 55,160
1,245,969 1,226,088
$9,451,075 $9,371,681
<FN>
See accompanying Financial Notes.
</TABLE>
<TABLE>
PP&L RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited) (Audited)
LIABILITIES
<S> <C> <C>
Capitalization
Common equity
Common stock...................................... $1,575 $1,555
Capital in excess of par value ................... 1,477,650 1,432,946
Earnings reinvested .............................. 1,039,093 1,024,127
Capital stock expense and other .................. (8,001) (4,160)
2,510,317 2,454,468
Preferred stock
With sinking fund requirements.................... 295,000 295,000
Without sinking fund requirements................. 171,375 171,375
Long-term debt...................................... 2,826,521 2,940,750
5,803,213 5,861,593
Current Liabilities
Commercial paper.................................... 215,000 64,000
Bank loans.......................................... 12,888 10,168
Long-term debt due within one year.................. 30,000 39
Capital lease obligations due within one year....... 80,197 73,682
Accounts payable.................................... 106,077 146,073
Taxes accrued....................................... 35,696 46,741
Interest accrued.................................... 64,353 63,958
Dividends payable................................... 72,685 71,710
Other............................................... 86,201 101,924
703,097 578,295
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits..................... 224,657 230,064
Deferred income taxes............................... 2,055,528 2,046,861
Capital lease obligations........................... 152,562 151,083
Unamortized cost of power plant spare parts......... 13,957 26,406
Accrued nuclear plant decommissioning costs......... 101,789 89,713
Accrued mine closing costs.......................... 57,269 56,427
Contract settlement proceeds to be credited
to customers..................................... 27,337 32,931
Accrued pension costs............................... 168,496 163,487
Accrued assessment for decommissioning
uranium enrichment facilities.................... 28,895 28,895
Accrued retired miners' health care benefits........ 30,506 29,568
Accrued postretirement benefits other than
pensions and postemployment benefits.............. 30,333 21,784
Other............................................... 53,436 54,574
2,944,765 2,931,793
Commitments and Contingent Liabilities
(See Note 9)...............................................
$9,451,075 $9,371,681
<FN>
See accompanying Financial Notes.
</TABLE>
<TABLE>
PP&L RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months
Ended June 30,
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities
Net income......................................................... $146,039 $153,145
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation.................................................... 175,848 158,486
Amortization of property under capital leases................... 40,055 36,381
Preferred stock dividend requirements .......................... 13,884 14,520
Amortization of contract settlement proceeds and
deferred cost of power plant spare parts....................... (19,122) (19,389)
Deferred income taxes and investment tax credits................ (18,371) (8,246)
Equity component of AFUDC....................................... (4,004) (2,552)
Change in current assets and current liabilities
Accounts receivable....................................... (1,111) (24,210)
Unbilled and refundable electric revenues................. 28,193 14,141
Fuel inventories.......................................... 8,955 (19,096)
Materials and supplies.................................... (800) 1,867
Prepayments .............................................. (58,766) (54,920)
Accounts payable.......................................... (39,996) (37,568)
Accrued interest and taxes................................ (10,650) (33,900)
Other..................................................... (8,817) 11,573
Other operating activities - net................................ 15,728 26,559
Net cash provided by operating activities.................... 267,065 216,791
Cash Flows From Investing Activities
Property, plant and equipment expenditures......................... (222,380) (235,119)
Proceeds from sales of nuclear fuel to trust....................... 32,382 12,892
Purchases of available-for-sale securities......................... (147,748) (76,877)
Sales and maturities of available-for-sale securities.............. 150,093 30,515
Other financial investments........................................ 37 273
Other investing activities - net................................... 2,473 16,184
Net cash used in investing activities........................ (185,143) (252,132)
Cash Flows From Financing Activities
Issuance of long-term debt................................................. 603,250
Issuance of common stock........................................... 38,697 21,776
Issuance of preferred stock.................................................... 80,000
Reduction of long-term debt........................................ (85,250) (521,850)
Retirement of preferred stock.................................................. (120,000)
Payments on capital lease obligations.............................. (40,055) (36,381)
Dividends paid..................................................... (143,981) (141,396)
Net increase in short-term debt.................................... 153,720 182,949
Costs associated with issuance and retirement of securities........ (7,531) (19,668)
Other financing activities - net................................... (39) (39)
Net cash provided by (used in) financing activities.......... (84,439) 48,641
Net Increase(Decrease) In Cash and Cash Equivalents ................ (2,517) 13,300
Cash and Cash Equivalents at Beginning of Period ................... 10,079 8,271
Cash and Cash Equivalents at End of Period ......................... $7,562 $21,571
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for
Interest (net of amount capitalized).............................. $108,897 $95,660
Income taxes...................................................... $127,762 $149,066
<FN>
See accompanying Financial Notes.
</TABLE>
<TABLE>
PENNSYLVANIA POWER & LIGHT COMPANY
In the opinion of Pennsylvania Power & Light Company (PP&L), the unaudited
financial statements, included herein, reflect all adjustments necessary to present
fairly the Consolidated Balance Sheets as of June 30, 1995 and December 31, 1994,
and the Consolidated Statements of Income and Consolidated Statements of Cash Flows
for the periods ended June 30, 1995 and 1994. All nonutility operating transactions
are included in "Other Income and (Deductions)--Other-net" in PP&L's Consolidated
Statements of Income.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Thousands of Dollars)
<CAPTION>
Three Months
Ended June 30,
1995 1994(a)
<S> <C> <C>
Operating Revenues ............................... $609,213 $640,218
Operating Expenses
Operation
Fuel......................................... 86,611 102,531
Power purchases.............................. 74,290 75,444
Other........................................ 123,035 135,037
Maintenance..................................... 50,336 51,764
Depreciation.................................... 77,434 72,130
Amortized depreciation.......................... 9,939 6,564
Income taxes.................................... 35,630 39,314
Taxes, other than income........................ 47,666 49,056
504,941 531,840
Operating Income .................................. 104,272 108,378
Other Income and (Deductions)
Allowance for equity funds used during
construction................................. 1,732 1,636
Income tax credits (expense) ................... (509) 1,183
Other - net..................................... 2,895 (1,491)
4,118 1,328
Income Before Interest Charges..................... 108,390 109,706
Interest Charges
Long-term debt.................................. 53,433 52,803
Short-term debt and other....................... 5,586 5,746
Allowance for borrowed funds used during
construction and interest capitalized........ (2,516) (2,486)
56,503 56,063
Net Income......................................... 51,887 53,643
Dividends on Preferred Stock....................... 6,942 6,942
Earnings Available to PP&L Resources, Inc. ....... $44,945 $46,701
<FN>
(a) Restated to reflect the retroactive dividend of Power Markets Development
Company (PMDC) to Resources, as described in Financial Note 2 to the financial
statements.
See accompanying Financial Notes.
</TABLE>
<TABLE>
PENNSYLVANIA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Thousands of Dollars)
<CAPTION>
Six Months
Ended June 30,
1995 1994(a)
<S> <C> <C>
Operating Revenues ...............................$1,336,698 $1,409,672
Operating Expenses
Operation
Fuel......................................... 200,587 247,348
Power purchases.............................. 147,898 155,849
Other........................................ 243,309 246,614
Maintenance..................................... 85,167 90,430
Depreciation.................................... 154,887 144,221
Amortized depreciation.......................... 19,877 13,129
Income taxes.................................... 117,943 128,108
Taxes, other than income........................ 101,331 106,289
1,070,999 1,131,988
Operating Income .................................. 265,699 277,684
Other Income and (Deductions)
Allowance for equity funds used during
construction................................. 4,004 2,552
Income tax credits (expense).................... (409) 2,533
Other - net..................................... 3,674 (2,843)
7,269 2,242
Income Before Interest Charges..................... 272,968 279,926
Interest Charges
Long-term debt.................................. 108,213 107,379
Short-term debt and other....................... 9,385 9,170
Allowance for borrowed funds used during
construction and interest capitalized........ (4,724) (3,900)
112,874 112,649
Net Income......................................... 160,094 167,277
Dividends on Preferred Stock....................... 13,884 14,520
Earnings Available to PP&L Resources, Inc. ........ $146,210 $152,757
<FN>
(a) Restated to reflect the retroactive dividend of Power Markets Development
Company (PMDC) to Resources, as described in Financial Note 2 to the financial
statements.
See accompanying Financial Notes.
</TABLE>
<TABLE>
PENNSYLVANIA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<CAPTION>
June 30, December 31,
1995 1994(a)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
Electric utility plant in service.................. $9,486,796 $9,306,519
Accumulated depreciation......................... (2,987,074) (2,871,129)
Deferred depreciation............................ 236,274 256,021
6,735,996 6,691,411
Construction work in progress...................... 181,098 211,288
Nuclear fuel owned and leased - net
of amortization.................................. 149,603 143,591
Other leased property - net of amortization ....... 83,505 80,385
Electric utility plant - net..................... 7,150,202 7,126,675
Other property - net of depreciation,
amortization and depletion....................... 64,851 67,850
7,215,053 7,194,525
Investments
Associated company - at equity..................... 17,121 17,088
Nuclear plant decommissioning trust fund .......... 99,482 87,490
Financial investments.............................. 121,651 118,115
Other - at cost or less............................ 11,965 8,654
250,219 231,347
Current Assets
Cash and cash equivalents.......................... 7,220 9,109
Marketable securities.............................. 50,733 52,544
Accounts receivable, less reserve
Customers........................................ 186,288 189,771
Interconnection.................................. 5,554 1,610
Other............................................ 12,959 12,390
Unbilled revenues.................................. 61,006 88,668
Fuel (coal and oil) - at average cost.............. 116,590 125,545
Materials and supplies - at average cost........... 124,430 123,630
Prepayments........................................ 69,781 11,015
Deferred income taxes.............................. 33,761 27,524
Other.............................................. 20,697 26,916
689,019 668,722
Deferred Debits
Utility plant carrying charges - net
of amortization.................................. 22,616 23,142
Reacquired debt costs.............................. 117,273 113,466
Assessment for decommissioning uranium
enrichment facilities............................ 32,178 33,492
Retired miners' health care benefits............... 13,926 14,536
Taxes recoverable through future rates............. 1,000,524 986,292
Other.............................................. 59,452 55,160
1,245,969 1,226,088
$9,400,260 $9,320,682
<FN>
(a) Restated to reflect the retroactive dividend of Power Markets Development
Company (PMDC) to Resources, as described in Financial Note 2 to the financial
statements.
See accompanying Financial Notes.
</TABLE>
<TABLE>
PENNSYLVANIA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<CAPTION>
June 30, December 31,
1995 1994(a)
LIABILITIES
<S> <C> <C>
Capitalization
Common equity
Common stock...................................... $1,476,048 $1,440,527
Additional paid-in capital ....................... 3,176
Earnings reinvested............................... 988,367 973,230
Capital stock expense and other .................. (8,018) (10,112)
2,459,573 2,403,645
Preferred stock
With sinking fund requirements.................... 295,000 295,000
Without sinking fund requirements................. 171,375 171,375
Long-term debt...................................... 2,826,521 2,940,750
5,752,469 5,810,770
Current Liabilities
Commercial paper.................................... 215,000 64,000
Bank loans.......................................... 12,888 10,168
Long-term debt due within one year.................. 30,000 39
Capital lease obligations due within one year....... 80,197 73,682
Accounts payable.................................... 106,012 145,723
Taxes accrued....................................... 35,742 46,907
Interest accrued.................................... 64,353 63,958
Dividends payable................................... 72,685 71,710
Other............................................... 86,149 101,924
703,026 578,111
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits..................... 224,657 230,064
Deferred income taxes............................... 2,055,528 2,046,869
Capital lease obligations........................... 152,562 151,083
Unamortized cost of power plant spare parts......... 13,957 26,406
Accrued nuclear plant decommissioning costs......... 101,789 89,713
Accrued mine closing costs.......................... 57,269 56,427
Contract settlement proceeds to be credited
to customers..................................... 27,337 32,931
Accrued pension costs............................... 168,496 163,487
Accrued assessment for decommissioning
uranium enrichment facilities.................... 28,895 28,895
Accrued retired miners' health care benefits........ 30,506 29,568
Accrued postretirement benefits other than
pensions and postemployment benefits.............. 30,333 21,784
Other............................................... 53,436 54,574
2,944,765 2,931,801
Commitments and Contingent Liabilities
(See Note 9)...............................................
$9,400,260 $9,320,682
<FN>
(a) Restated to reflect the retroactive dividend of Power Markets Development
Company (PMDC) to Resources, as described in Financial Note 2 to the financial
statements.
See accompanying Financial Notes.
</TABLE>
<TABLE>
PENNSYLVANIA POWER & LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months
Ended June 30,
1995 1994(a)
<S> <C> <C>
Cash Flows From Operating Activities
Net income......................................................... $160,094 $167,277
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation.................................................... 175,848 158,486
Amortization of property under capital leases................... 40,055 36,381
Amortization of contract settlement proceeds and
deferred cost of power plant spare parts....................... (19,122) (19,389)
Deferred income taxes and investment tax credits................ (18,371) (8,246)
Equity component of AFUDC....................................... (4,004) (2,552)
Change in current assets and current liabilities
Accounts receivable....................................... (1,030) (23,790)
Unbilled and refundable electric revenues................. 28,193 14,141
Fuel inventories.......................................... 8,955 (19,096)
Materials and supplies.................................... (800) 1,867
Prepayments .............................................. (58,766) (54,920)
Accounts payable.......................................... (39,711) (37,568)
Accrued interest and taxes................................ (10,770) (33,891)
Other..................................................... (8,912) 11,573
Other operating activities - net................................ 15,541 26,482
Net cash provided by operating activities.................... 267,200 216,755
Cash Flows From Investing Activities
Property, plant and equipment expenditures......................... (222,380) (235,119)
Proceeds from sales of nuclear fuel to trust....................... 32,382 12,892
Purchases of available-for-sale securities......................... (53,656) (12,765)
Sales and maturities of available-for-sale securities.............. 55,124 13,265
Other financial investments........................................ 1,407 273
Other investing activities - net................................... 2,473 16,184
Net cash used in investing activities........................ (184,650) (205,270)
Cash Flows From Financing Activities
Issuance of long-term debt................................................. 603,250
Issuance of common stock and capital contribution from parent ..... 38,697 21,776
Issuance of preferred stock.................................................... 80,000
Reduction of long-term debt........................................ (85,250) (521,850)
Retirement of preferred stock.................................................. (120,000)
Payments on capital lease obligations.............................. (40,055) (36,381)
Dividends paid..................................................... (143,981) (141,396)
Dividends for capitalization of PMDC .......................................... (50,000)
Net increase in short-term debt.................................... 153,720 182,949
Costs associated with issuance and retirement of securities........ (7,531) (19,668)
Other financing activities - net................................... (39) (39)
Net cash used in financing activities........................ (84,439) (1,359)
Net Increase(Decrease) In Cash and Cash Equivalents ................ (1,889) 10,126
Cash and Cash Equivalents at Beginning of Period ................... 9,109 8,271
Cash and Cash Equivalents at End of Period ......................... $7,220 $18,397
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for
Interest (net of amount capitalized).............................. $108,897 $95,660
Income taxes...................................................... $128,498 $149,066
<FN>
(a) Restated to reflect the retroactive dividend of Power Markets Development
Company (PMDC) to Resources, as described in Financial Note 2 to the financial
statements.
See accompanying Financial Notes.
</TABLE>
<PAGE>
PP&L Resources, Inc. and Pennsylvania Power & Light Company
Notes to Financial Statements
1. Interim Financial Statements
Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted in this Form 10-Q
pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). These financial statements should be read in conjunction
with the financial statements and notes thereto included in Pennsylvania
Power & Light Company's Annual Report to the SEC on Form 10-K for the year
ended December 31, 1994.
Certain amounts in the June 30, 1994 financial statements have been
reclassified to conform to the presentation in the June 30, 1995
statements.
2. Holding Company Formed
Effective April 27, 1995, PP&L Resources, Inc. (Resources), which had
been a wholly owned subsidiary of Pennsylvania Power & Light Company
(PP&L), became the parent holding company of PP&L. As of the effective
date, the holders of PP&L common stock became holders of Resources common
stock and the stock certificates representing PP&L common stock now
represent Resources common stock. Also effective April 27, 1995, Power
Markets Development Company (PMDC), a subsidiary of PP&L, was transferred
as a dividend in the amount of $50.9 million from PP&L to become a direct
subsidiary of Resources. In the accompanying financial statements, for
comparability purposes, the dividend of PMDC was reported retroactive to
March 1994 when PMDC was formed as a subsidiary.
PP&L's financial condition and results of operation are currently the
principal factors affecting Resources' financial condition and results of
operations. All nonutility operating transactions are included in "Other
Income and (Deductions)--Other-net" in Resources' and PP&L's Consolidated
Statements of Income.
3. Rate Matters - PP&L
Base Rate Filing with the PUC
In December 1994, PP&L filed a request with the Pennsylvania Public
Utility Commission (PUC) for a $261 million increase in electric base
rates, an 11.7% increase in PUC-jurisdictional rates. This is the first
such request by PP&L in ten years.
Several items included in the rate filing relate to the Susquehanna
station. PP&L currently uses a modified sinking fund method of
depreciation for property placed in service at Susquehanna prior to January
1989, which results in substantial increases in annual depreciation expense
each year until 1999. At that time, annual depreciation expense is
scheduled to decline by about $90 million to the amount that would have
been recorded if a straight-line method of depreciation had been in effect
since the in-service dates of the units. PP&L is seeking to levelize this
depreciation expense at an annual amount of about $173 million over the
period October 1995 through December 1998, which would eliminate the
currently scheduled increases in depreciation during that time period.
PP&L also is seeking recovery, over a ten-year period, of certain
deferred operating and capital costs, net of energy savings, incurred from
the time the Susquehanna units were placed in service until the effective
dates of the rate increases for those units. These costs, which were
deferred in accordance with PUC orders, total about $39 million including
related deferred income taxes.
When the PUC decided PP&L's last rate case in 1985, it determined that
PP&L had excess generating capacity and disallowed a return on the common
equity investment in Susquehanna Unit 2. PP&L's generating reserves have
declined over the past ten years and are projected to be below the level
considered excess by the PUC in 1985. Accordingly, the rate increase
request also reflects a return on PP&L's common equity investment in
Susquehanna Unit 2.
Additionally, PP&L is requesting an $18 million annual increase in the
amount it collects from customers for the estimated cost to decommission
the Susquehanna station. This increase reflects a site-specific
decommissioning study completed in late 1993 which indicates that PP&L's
90% share of the cost to decommission Susquehanna will be about $724
million, an amount substantially greater than the amount currently
reflected in rates.
PP&L also is requesting to collect about $45 million annually for the
estimated cost of dismantling its fossil-fuel plants at the end of their
expected useful lives.
The rate request also seeks recovery of the full amount of retiree
health care costs being recorded in accordance with Statement of Financial
Accounting Standards (SFAS) 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," including the amount PP&L began to defer as
of January 1993 pursuant to a PUC order but subsequently charged to expense
due to a decision by the Commonwealth Court of Pennsylvania that reversed
the PUC order. The charge to expense in 1994 amounted to $22.9 million,
which included $10.8 million applicable to 1993.
The filing also requests shortening the depreciation lives of certain
coal-fired generating stations by up to twelve years and lengthening the
depreciation lives of certain transmission, distribution and other
property.
PP&L is seeking recovery of the costs related to its voluntary early
retirement program over a five-year period. The rate filing reflects an
estimate of the savings from the early retirement program. To the extent
that the PUC permits recovery of the cost of the program in rates, PP&L
will record a credit to income to reverse the recoverable portion of the
charge recorded in the fourth quarter of 1994 which, after income taxes,
reduced net income by $43.4 million or 28 cents per share of common stock.
PP&L also has proposed a method of recovering costs currently being
billed to other utilities under Federal Energy Regulatory Commission
tariffs pursuant to contractual arrangements for the sale of capacity and
related energy to those utilities. These contracts begin to phase-out in
1996, and PP&L has proposed to recover the costs associated with the
returning capacity through the Energy Cost Rate (ECR) included in PUC
jurisdictional rates. Under the proposal, the ECR would be adjusted
automatically each year as capacity is returned pursuant to the contracts.
In this way, customer rates, through ECR billings, will reflect both the
capital-related and operating costs associated with the returning capacity.
PP&L's proposal provides for all the revenues associated with sales of any
returning capacity or related energy to be flowed through the ECR for the
benefit of customers.
Various parties filed complaints against the rate increase, including
the Office of Consumer Advocate (OCA), the PUC's Office of Trial Staff
(OTS) and a group of industrial customers. In January 1995, the PUC
suspended the request pending an investigation and hearings.
On July 31, 1995, the Administrative Law Judge (ALJ) assigned to the
rate case issued his recommended decision. The ALJ recommended an overall
increase of $61.7 million. The recommended decision includes the following
proposed reductions in PP&L's request: (1) $88.7 million from a reduction
in the requested return on common equity from 13% to 10.9%; (2) $33.6
million from a finding that PP&L has excess generating capacity resulting
in a disallowance of a return on investment in 564 megawatts of system
generating capacity; (3) $5.2 million from a reduction in PP&L's requested
increase in Susquehanna decommissioning costs; (4) $2.1 million from a
denial of PP&L's request to recover certain deferred operating and capital
costs for Susquehanna Unit 1; (5) $45 million from a denial of PP&L's
request to begin collecting now for the estimated cost of dismantling its
fossil-fuel plants; and (6) $18.1 million from a denial of PP&L's request
to shorten the depreciation lives of certain fossil plants. The
recommended decision includes various other adjustments to the requested
increase.
The ALJ recommended approval of PP&L's requests to levelize
depreciation expense for the Susquehanna station, recover the full amount
of retiree health care costs being recorded in accordance with SFAS 106 and
recover the costs of its voluntary early retirement program. The ALJ also
recommended denial of PP&L's request to recover through the ECR costs
associated with capacity returning upon the phase-out of contract sales
with other major electric utilities, but recommended approval of PP&L's
alternative proposal to allow PP&L to retain the revenue from any sales
made possible by such returning capacity.
PP&L will file exceptions to the ALJ's recommendation with the PUC. A
final PUC order is not expected until late September 1995. PP&L is unable
to predict the outcome of this base rate proceeding.
Energy Cost Rate Issues
In April 1994, the PUC reduced PP&L's 1994-95 ECR claim by
approximately $15.7 million to reflect costs associated with replacement
power during a portion of the period that Susquehanna Unit 1 was out of
service for refueling and repairs. As a result of the PUC's action, PP&L
recorded a charge against income in the first quarter of 1994 for the $15.7
million of unrecovered replacement power costs which reduced earnings by 6
cents per share of common stock.
PP&L filed a complaint with the PUC objecting to the decision to
exclude these replacement power costs from the 1994-95 ECR, and
subsequently reached a settlement with the complainants and the OTS on this
matter.
The PUC approved the settlement agreement on February 24, 1995. As a
result of this PUC action, PP&L in the first quarter of 1995 recorded a
credit to income of $9.7 million which increased earnings by 4 cents per
share of common stock.
In March 1995, the PUC approved PP&L's 1995-96 ECR. That ECR, which
is about $2.8 million lower than the previous ECR, reflects the recovery of
the $9.7 million of previously disallowed replacement power costs.
Refund of State Tax Decrease
In June 1994, legislation was enacted that decreased the Pennsylvania
corporate net income tax rate from 12.25% to 11.99% retroactive to January
1, 1994, with further reductions to 10.99%, 10.75% and 9.99% in 1995, 1996
and 1997, respectively. In accordance with the terms of its tariffs, PP&L
filed with the PUC a recomputation of its State Tax Adjustment Surcharge
(STAS) to reflect the decreases in state income taxes for 1994 and the
first quarter of 1995. The STAS began in July 1994 and reduced customer
bills through March 1995 by about $2.7 million. A revised STAS for the
April 1995 through March 1996 period went into effect in April 1995 and was
expected to reduce customer bills through March 1996 by about $9.2 million.
However, in June 1995, legislation was enacted that decreased the
Pennsylvania corporate net income tax rate from 10.99% to 9.99% retroactive
to January 1, 1995. On July 7, 1995, PP&L filed with the PUC a
recomputation of its STAS to reflect this new decrease in the state income
taxes. The effect of the reduction in state income taxes is expected to
reduce customer bills through March 1996 by about $16.6 million rather than
the $9.2 million previously filed. The change in the Pennsylvania
corporate net income tax rate will have no effect on PP&L's net income.
4. Sales to Other Major Electric Utilities - PP&L
PP&L provides Atlantic City Electric Company (Atlantic) with 125,000
kilowatts of capacity (summer rating) and related energy from its wholly
owned coal-fired stations. The agreement with Atlantic originally provided
for sales to continue through September 2000.
On March 20, 1995, Atlantic notified PP&L that it will terminate the
agreement on March 20, 1998, pursuant to termination provisions in the
agreement. PP&L expects to be able to resell the capacity and energy at
prices approximately equal to that received from Atlantic. The agreement's
termination is not expected to have a material impact on PP&L's revenues or
net income. In 1994, PP&L received about $23.1 million in revenues from
this agreement.
PP&L provides Jersey Central Power and Light Company (JCP&L) with
945,000 kilowatts of capacity and related energy from all of its generating
units. Sales to JCP&L will continue at the 945,000 kilowatt level through
1995, with the amount then declining uniformly each year until the end of
the agreement on December 31, 1999. On April 6, 1995, PP&L entered into a
new agreement with JCP&L whereby PP&L will provide JCP&L increasing amounts
of installed capacity credits and energy from all of its generating units.
Sales to JCP&L under this agreement will begin in June 1997 and will
continue through May 2004. Under this agreement, PP&L will provide JCP&L
150,000 kilowatts of capacity credits and energy from June 1997 through May
1998, 200,000 kilowatts from June 1998 through May 1999 and 300,000
kilowatts from June 1999 through May 2004. Sales to JCP&L under the
initial contract are at a price equal to PP&L's cost of providing service,
including a return on PP&L's investment in generating capacity. Sales
under the new agreement will be priced based on a predetermined demand
factor that escalates over time plus an energy component based on PP&L's
actual energy-related costs. This agreement with JCP&L must be approved by
the Federal Energy Regulatory Commission and the New Jersey Board of Public
Utilities.
5. Financing Activity - Resources/PP&L
As a result of corporate restructuring, as of April 27, 1995, PP&L's
157,300,382 shares of outstanding common stock became Resources' common
stock. During the second quarter of 1995, 993,666 shares ($19.2 million)
were issued through the Dividend Reinvestment Plan (DRIP). At June 30,
1995, Resources had 390,000,000 shares of authorized common stock, $.01 par
value, of which 157,470,417 shares were outstanding. In July 1995,
Resources issued an additional 812,492 shares of common stock ($15.8
million) through the DRIP.
In the second quarter of 1995, PP&L acquired in the open market $35.0
million of its First Mortgage Bonds, 9-1/4% Series due 2019, and $50.25
million of its First Mortgage Bonds, 9-3/8% Series due 2021. PP&L intends
to retire the bonds within the coming year. The acquisition of these bonds
reduced long-term debt outstanding on the Consolidated Balance Sheets of
Resources and PP&L.
In August, PP&L issued $55 million of First Mortgage Bonds, 6.15%
Pollution Control Bonds Series K due 2029, to provide for the refunding of
the Series G Bonds on September 1, 1995.
6. Credit Arrangements - PP&L
PP&L issues commercial paper and, from time to time, borrows from
banks to provide short-term funds required for general corporate purposes.
In addition, certain subsidiaries also borrow from banks to obtain short-
term funds. Bank borrowings generally bear interest at rates negotiated at
the time of the borrowing. PP&L's weighted average interest rate on short-
term borrowings was 6.1% at June 30, 1995.
PP&L has credit arrangements with banks that produce a total of $295
million of lines of credit to provide back-up for PP&L's commercial paper
and short-term borrowings of certain subsidiaries. No borrowings were
outstanding at June 30, 1995 under these credit arrangements.
PP&L leases its nuclear fuel from a trust funded by sales of
commercial paper. The maximum financing capacity of the trust under
existing credit arrangements is $200 million.
7. Workforce Reductions - PP&L
As part of its continuing effort to reduce costs, PP&L offered a
voluntary severance program to employees who are members of the bargaining
unit. Under the program, bargaining unit employees had until July 7, 1995
to request voluntary severance. Seventy-five employees requested and were
granted severance under this program, at a total cost of $6.1 million, or 2
cents per share of common stock. No amounts under this plan were accruable
at June 30, 1995. PP&L will record the cost of this program as a charge
against income in the third quarter of 1995. Employees requesting
severance under this program were given a lump sum payment based upon the
employee's years of service. Additionally, employees requesting severance
who were age 55 or older by July 31, 1995 also received supplemental
monthly payments and no reduction in retirement benefits for age. Annual
savings in operating expenses associated with this program are estimated to
be approximately $4 million.
PP&L continues its ongoing re-engineering and cost reduction efforts,
which are expected to impact the size of PP&L's workforce. Although no
specific targets have been set, PP&L currently expects that the present
level of 6,883 full time employees may decline to 6,000 or fewer employees
over the next three years. PP&L expects additional costs and savings, in
amounts that are not currently determinable, as a result of future
workforce reductions.
8. New Accounting Standard - PP&L
In March 1995, the Financial Accounting Standards Board adopted SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement requires a company to review
certain assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If
an asset is determined to be impaired, an impairment loss is recognized.
SFAS 121 is effective for financial statements for fiscal years beginning
after December 15, 1995.
PP&L is currently reviewing the provisions of SFAS 121, but does not
expect the adoption of SFAS 121 to have a material effect on its net
income.
9. Commitments and Contingent Liabilities - PP&L
There have been no material changes related to PP&L's commitments and
contingent liabilities since PP&L filed its 1994 Form 10-K, except for the
discussion below regarding the denial of plaintiff's motion for class
certification in the Fuel Oil Dealers' Litigation.
For discussion pertaining to PP&L's financing matters, see
Management's Discussion and Analysis of Financial Condition and Results of
Operations under the caption "Financial Condition - Financing Programs."
Nuclear Operations
PP&L is a member of certain insurance programs which provide coverage
for property damage to members' nuclear generating stations. Facilities at
the Susquehanna station are insured against property damage losses up to
$3.6 billion under these programs. PP&L is also a member of an insurance
program which provides insurance coverage for the cost of replacement power
during prolonged outages of nuclear units caused by certain specified
conditions. Under the property and replacement power insurance programs,
PP&L could be assessed retrospective premiums in the event of the insurers'
adverse loss experience. The maximum amount PP&L could be assessed under
these programs at June 30, 1995 was about $41.9 million.
Nuclear Regulatory Commission regulations require that in the event of
an accident, where the estimated cost of stabilization and decontamination
exceeds $100 million, proceeds of property damage insurance be segregated
and used, first, to place and maintain the reactor in a safe and stable
condition and, second, to complete required decontamination operations
before any insurance proceeds would be made available to PP&L or the
trustee under the Mortgage. PP&L's on-site property damage insurance
policies for the Susquehanna station conform to these regulations.
PP&L's public liability for claims resulting from a nuclear incident
at the Susquehanna station is limited to about $8.9 billion under
provisions of The Price Anderson Amendments Act of 1988 (the Act). PP&L is
protected against this liability by a combination of commercial insurance
and an industry assessment program. A utility's liability under the
assessment program will be indexed not less than once during each five-year
period for inflation and will be subject to an additional surcharge of 5%
in the event the total amount of public claims and costs exceeds the basic
assessment. In the event of a nuclear incident at any of the reactors
covered by the Act, PP&L could be assessed up to $151 million per incident,
payable at a rate of $20 million per year, plus the additional 5%
surcharge, if applicable.
Fuel Oil Dealers' Litigation
In August 1991, a group of fuel oil dealers in PP&L's service area
filed a complaint against PP&L in United States District Court for the
Eastern District of Pennsylvania (District Court) alleging that certain of
PP&L's marketing activities had violated and continue to violate the
federal antitrust laws. The complaint requested judgment against PP&L for
a sum in excess of $10 million for the alleged antitrust violations, treble
the damages alleged to have been sustained by the plaintiffs. In addition,
the complaint requested a permanent injunction against all activities found
to be illegal.
In April 1992, another fuel oil dealer in PP&L's service area filed a
class action complaint against PP&L in the District Court alleging, as did
the August 1991 complaint, that certain of PP&L's marketing activities had
violated and continue to violate the federal antitrust laws. The complaint
also alleged that PP&L engaged in a civil conspiracy and unfair competition
in violation of Pennsylvania law.
The plaintiff sought to represent as a class all fuel oil dealers in
PP&L's service area. The complaint requested a permanent injunction
against all activities found to be illegal and treble the damages alleged
to have been sustained by the class. No specific damage amount was set
forth in the complaint. This second antitrust complaint was consolidated
with the August 1991 complaint for pre-trial purposes. In April 1995, the
District Court denied plaintiff's motion for class certification.
PP&L has been granted summary judgment on many of these claims. Still
pending before the District Court are the plaintiffs' claims regarding
PP&L's alleged agreements with developers that their developments consist
of only electrically heated units (all-electric agreements) and the state
law claims related to such agreements.
In addition, in June 1994 plaintiffs filed an amended complaint in
District Court alleging that PP&L's former residential conversion program
- -- under which cash grants were offered to contractors and homeowners to
convert from fossil fuel heating systems to electric systems -- also
violated the federal antitrust laws.
PP&L cannot predict the outcome of this litigation.
Environmental Matters
The Federal Clean Air Act Amendments of 1990 deal, in part, with acid
rain under Title IV, attainment of federal ambient ozone standards under
Title I, and toxic air emissions under Title III. PP&L has complied with
the Phase I acid rain provisions under Title IV. More stringent Phase II
limits for sulfur dioxide reductions are required by January 2000. To meet
these limits, PP&L may install flue gas desulfurization equipment (FGD) on
up to 60% of its coal-fired generating capacity, purchase lower sulfur
coal, and bank or trade emission allowances among its generating units or
with other utilities to the extent permitted by the legislation. The exact
mix of lower sulfur fuel, emission allowance purchases, sales or trades,
and the amount and timing of FGD will be based on FGD installation costs,
fuel cost and availability, and emission allowance prices.
PP&L has met the requirements under Title I to install reasonably
available control technology to reduce nitrogen oxide emissions. A further
two-phase nitrogen oxides reduction from pre-Clean Air Act levels has been
proposed for the area where PP&L's plants are located -- a 55% reduction by
May 1999 and a 75% reduction by 2003 -- unless scientific studies to be
completed by 1997 indicate a different reduction is appropriate. The
reductions would be required during a five-month ozone season from May
through September.
In addition to acid rain and ambient ozone attainment provisions, the
legislation requires the Environmental Protection Agency (EPA) to conduct a
study of hazardous air emissions from power plants. EPA is also studying
the health effects of fine particulates which are emitted from power plants
and other sources. Adverse findings from either study could cause the EPA
to mandate additional ultra high efficiency particulate removal baghouses
or specialized flue gas scrubbing to remove certain vaporous trace metals
and certain gaseous emissions.
In addition to the "Capital Expenditure Requirements" shown on page 35
of PP&L's 1994 Form 10-K, PP&L currently estimates that additional capital
expenditures and operating costs for environmental compliance will be
incurred beyond 1997. Capital expenditures that may be required and the
additional revenue required to recover these costs, based on 1994 revenues,
are as follows:
Capital Cost Revenue
($ millions) Requirement
Phase II acid rain
1998-2005 $300-500 3.0%
Nitrogen oxides and
ambient ozone by:
1999 80 0.5%
2003 150 1.3%
Hazardous air emissions by 2000 310 1.8%
Collectively, these costs represent a potential capital exposure of up
to $1.0 billion beyond 1997, as well as additional operating costs in
amounts which are not now determinable but could be material.
The Pennsylvania Air Pollution Control Act implements the Federal
Clean Air Act Amendments of 1990. The state legislation essentially
requires that new state air emission standards be no more stringent than
federal standards. This legislation has no effect on PP&L's plans for
compliance with the Federal Clean Air Act Amendments of 1990.
The PUC's policy regarding the trading and usage of, and the
ratemaking treatment for, emission allowances by Pennsylvania electric
utilities provides, among other things, that the PUC will not require
approval of specific transactions and the cost of allowances will be
recognized as energy-related power production expenses and recoverable
through the ECR.
The Pennsylvania Department of Environmental Protection (DEP)
(formerly the Department of Environmental Resources) regulations governing
the handling and disposal of industrial (or residual) solid waste require
PP&L to submit detailed information on waste generation, minimization and
disposal practices. They also require PP&L to upgrade and repermit
existing ash basins at all of its coal-fired generating stations by
applying updated standards for waste disposal. Ash basins that cannot be
repermitted are required to close by July 1997. Any groundwater
contamination caused by the basins must also be addressed. Any new ash
disposal facility must meet the rigid site and design standards set forth
in the regulations. In addition, the siting of future facilities at PP&L
facilities could be affected.
To address the DEP regulations, PP&L is moving forward with its plan
to install dry fly ash handling systems at the Brunner Island, Sunbury and
Holtwood stations. PP&L, with siting assistance from a public advisory
group, has chosen mine sites at which to use the dry fly ash from the
Sunbury and Holtwood stations for reclamation. In addition, PP&L is
exploring opportunities to beneficially use coal ash from Brunner Island in
various roadway construction projects in the vicinity of the plant that may
delay or preclude the need for a new disposal facility.
Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage
piles has been identified at several PP&L generating stations. Many DEP
requirements address these groundwater degradation issues. Remedial work
is substantially completed at two generating stations. There is nothing
to indicate remedial work will be required at other PP&L generating
stations.
The DEP regulations to implement the toxic control provisions of the
Federal Water Quality Act of 1987 and to advance Pennsylvania's toxic
control program authorize the DEP to use both biomonitoring and a water
quality based chemical-specific approach in the National Pollutant
Discharge Elimination System (NPDES) permits to control toxics. In 1993,
PP&L received new NPDES permits for the Montour and Holtwood stations. The
Montour permit contains very stringent limits for certain toxic metals and
increased monitoring requirements. Toxic reduction studies are being
conducted at Montour before the permit limits become effective. Additional
water treatment facilities may be needed at Montour, depending on the
results of the studies.
At Holtwood, toxics are required to be monitored at the fly ash basin
until its closure in 1997. PP&L has agreed to an implementation schedule
for closure of this basin and for construction of a new dry fly ash
handling system at Holtwood in lieu of NPDES permit limits at the fly ash
basin. The closure of the Holtwood fly ash basin will require changes to
the facility's existing waste water treatment system. Improvements and
upgrades also are being planned for the Sunbury and Brunner Island waste
water treatment systems to meet the anticipated NPDES permit requirements.
In June 1995, the DEP ordered a PP&L subsidiary to abate seepage
allegedly discharged from a mine formerly operated by that subsidiary. The
subsidiary currently does not believe that it is responsible for this
seepage and is contesting the DEP order. A consultant was hired to perform
additional testing to determine the source of the seepage. If no direct
connection exists between the mine water and the seepage, no abatement is
required.
Capital expenditures through 1997, to comply with the residual waste
regulations, correct groundwater degradation at fossil-fueled generating
stations and address waste water control at PP&L facilities, are included
in the "Capital Expenditure Requirements" on page 35 of PP&L's 1994 Form
10-K. PP&L currently estimates that about $77 million of additional
capital expenditures could be required beyond 1997. Actions taken to
correct groundwater degradation, to comply with the DEP's regulations and
to address waste water control are also expected to result in increased
operating costs in amounts which are not now determinable but could be
material.
PP&L has signed a Consent Order with the DEP to address a number of
sites where PP&L may be liable for remediation of contamination. This may
include potential polychlorinated biphenyl contamination at certain of
PP&L's substations and pole sites; potential contamination at a number of
coal gas manufacturing facilities formerly owned and operated by PP&L; and
oil or other contamination which may exist at some of PP&L's former
generating facilities. As a current or past owner or operator of these
sites, PP&L may be liable under the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (Superfund),
or other laws for the costs associated with addressing any hazardous
substances at these sites.
These sites will be prioritized based upon a number of factors,
including any potential human health or environmental risk posed by the
site, the public's interest in the site, and PP&L's plans for the site.
Under the Consent Order, PP&L will not be required by DEP to spend more
than $5 million per year on investigation and remediation at those sites
covered by the Consent Order.
At June 30, 1995, PP&L had accrued $10.5 million, representing the
amount PP&L can reasonably estimate it will have to spend to remediate
sites involving the removal of hazardous or toxic substances including
those covered by the Consent Order mentioned above. PP&L is involved in
several other sites where it may be required, along with other parties, to
contribute to such remediation. Some of these sites have been listed by
the Environmental Protection Agency (EPA) under Superfund, and others may
be candidates for listing at a future date. Future cleanup or remediation
work at sites currently under review, or at sites currently unknown, may
result in material additional operating costs which PP&L cannot estimate at
this time. In addition, certain federal and state statutes, including
Superfund and the Pennsylvania Hazardous Sites Cleanup Act, empower certain
governmental agencies, such as the EPA and the DEP, to seek compensation
from the responsible parties for the lost value of damaged natural
resources. The EPA and the DEP may file such compensation claims against
the parties, including PP&L, held responsible for cleanup of such sites.
Such natural resource damage claims against PP&L could result in material
additional liabilities.
Concerns have been expressed by some members of the scientific
community and others regarding the potential health effects of electric and
magnetic fields (EMF). These fields are emitted by all devices carrying
electricity, including electric transmission and distribution lines and
substation equipment. Federal, state and local officials are focusing
increased attention on this issue. PP&L is actively participating in the
current research effort to determine whether or not EMF causes any human
health problems and is taking steps to reduce EMF, where practical, in the
design of new transmission and distribution facilities. PP&L is unable to
predict what effect the EMF issue might have on PP&L operations and
facilities and the associated cost.
In complying with statutes, regulations and actions by regulatory
bodies involving environmental matters, including the areas of water and
air quality, hazardous and solid waste handling and disposal and toxic
substances, PP&L may be required to modify, replace or cease operating
certain of its facilities. PP&L may also incur material capital
expenditures and operating expenses in amounts which are not now
determinable.
<PAGE>
PP&L Resources, Inc. and Pennsylvania Power & Light Company
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Effective April 27, 1995, PP&L Resources, Inc. (Resources), which had
been a wholly owned subsidiary of Pennsylvania Power & Light Company
(PP&L), became the parent holding company of PP&L. As of the effective
date, the holders of PP&L common stock became holders of Resources common
stock and the stock certificates representing PP&L common stock now
represent Resources common stock. Also effective April 27, 1995, Power
Markets Development Company (PMD), a subsidiary of PP&L, became a direct
subsidiary of Resources. In July 1995, Resources incorporated a new
subsidiary, Spectrum Energy Services Corporation (Spectrum), to pursue
unregulated business opportunities that are allied to the energy business.
PP&L is the principal subsidiary of Resources and, as such, this
discussion explains material changes in results of operations as reflected
in both Resources' and PP&L's Consolidated Statements of Income and also
focuses on recent trends and events affecting Resources' and PP&L's
financial conditions. This discussion should be read in conjunction with
the section entitled "Review of the Company's Financial Condition and
Results of Operations" in PP&L's Annual Report to the Securities and
Exchange Commission on Form 10-K for the year ended December 31, 1994.
Results of Operations
The following explains material changes in principal items on the
Consolidated Statements of Income comparing the three months and six months
ended June 30, 1995 to the comparable periods ended June 30, 1994.
The Consolidated Statements of Income reflect the results of past
operations and is not intended as any representation of the results of
future operations. Future results of operations will necessarily be
affected by various and diverse factors and developments. Because results
for interim periods can be disproportionately influenced by various factors
and developments and by seasonal variations, the results of operations for
interim periods are not necessarily indicative of results or trends for the
year.
Earnings - Resources
For the six months ended June 30, 1995 and 1994, earnings per share of
common stock were $0.93 and $1.00, respectively. Under normal weather
conditions, earnings per share for the six month period ended June 30,
1995, would have been 6 cents higher and earnings per share for the
comparable period in 1994 would have been 8 cents lower. Excluding weather
and one-time adjustments, earnings per share were $0.95 and $1.02 for the
six months ended June 30, 1995 and 1994, respectively. Of this reduction
in earnings between the two periods, 6 cents per share is due to an
increase in depreciation which reflects the annual increase associated with
the method of depreciating the PP&L Susquehanna station and the
depreciation of new property placed in service by PP&L.
Earnings for the six months ended June 30, 1995 were affected by a
one-time adjustment to income related to a settlement agreement for the
recovery of previously disallowed replacement power costs in PP&L's 1994-95
Energy Cost Rate (ECR). This adjustment increased after-tax net income by
$5.6 million, or 4 cents per share.
For the six months ended June 30, 1994, PP&L recorded charges against
income that, in the aggregate, adversely affected after-tax net income by
about $15.1 million, or 10 cents per share, related to the write-off of
certain deferred retiree benefit costs and the disallowance by the
Pennsylvania Public Utility Commission (PUC) of the recovery of replacement
power costs through the ECR.
Earnings per share of common stock for the three months ended June 30,
1995 and 1994, were 28 and 31 cents, respectively. Under normal weather
conditions, earnings per share for both periods would have been 1 cent
higher. Excluding weather and one-time adjustments, earnings were 29 and 36
cents per share for the quarters ended June 30, 1995 and 1994,
respectively. This decrease is partially due to the annual increase in
depreciation expense associated with the method of depreciating the PP&L
Susquehanna station and the depreciation of new property placed in service
by PP&L.
Earnings for the three months ended June 30, 1994 were adversely
affected by an after-tax charge to net income of $6.2 million, or 4 cents
per share, due to the write-off of certain deferred retiree benefit costs.
Electric Energy Sales - PP&L
System, or service area, sales were approximately 16.5 billion kwh for
the six months ended June 30, 1995, a decrease of 397 million kwh, or 2.3%,
from the comparable period in 1994. Mild weather in the first quarter of
1995, compared to extreme cold weather in the first quarter of 1994, was
the primary reason for the decrease in system sales. Sales in all major
customer categories, with the exception of industrial customers, were lower
in the first six months of 1995 than in the first six months of 1994.
Industrial sales, which are not affected by weather conditions, increased
in each of the first two quarters of 1995 and each quarter of 1994.
Industrial sales are an important indicator of the economic health of
PP&L's service area.
System sales for the three months ended June 30, 1995 were
approximately 7.6 billion kwh, an increase of 191 million, or 2.6%, over
the three months ended June 30, 1994. Sales for the second quarter of 1995
to residential, commercial, and industrial customers increased 0.9%, 3.0%,
and 5.1%, respectively, over the comparable period in 1994.
PP&L currently anticipates weather-normalized system sales of
approximately 32.5 billion kwh for 1995. This represents an increase of
419 million kwh, or 1.3%, over 1994 weather-normalized sales. Weather-
normalized system sales totaled 16.8 billion kwh for the six months ended
June 30, 1995. This represents an increase of 336 million kwh, or 2.0%,
over the same period in 1994.
Contractual sales to other major utilities were 3.5 billion kwh for
the first six months of 1995, or 19.3% higher than the first six months of
1994. This was primarily due to an increase in direct two-party sales to
other utilities versus sales to the Pennsylvania-New Jersey-Maryland
Interconnection Association (PJM). See Financial Note 4 for a discussion
on future changes to PP&L's long-term contracts with other major utilities.
Sales to the PJM for the six months ending June 30, 1995, were 985
million kwh, or 4.7% over the comparable period in 1994. However, sales to
PJM for the three months ended June 30, 1995, were 147 million kwh, or
29.4%, lower than that recorded in the comparable period in 1994. This
decrease was mainly the result of an increase in direct two-party sales to
PJM companies rather than sales to the PJM.
Rate Matters - PP&L
In December 1994, PP&L filed a request with the PUC for a $261 million
increase in electric base rates, an 11.7% increase in PUC-jurisdictional
rates. In January 1995, the PUC suspended the request pending
investigation and hearings. On July 31, 1995, the Administrative Law Judge
(ALJ) recommended an increase in rates of $61.7 million. PP&L will file
exceptions to the ALJ's recommendation with the PUC. A final PUC order is
not expected until late September 1995. PP&L is unable to predict the
outcome of this base rate proceeding.
Since PP&L's last base case decision in 1985, the average price of
electricity for all customers has gone up less than one-half of one percent
due primarily to changes in energy costs (associated principally with fuel
costs and the purchase of output from non-utility generators). Even if
PP&L is granted the full amount of the proposed increase, the price its
customers pay for electricity will have increased at a rate considerably
below the rate of inflation since 1985.
See Financial Note 3 for detailed information about PP&L's base rate
filing with the PUC as well as information about other rate matters.
Operating Revenues - PP&L
Total operating revenues for the six months ended June 30, 1995,
decreased $73.0 million, or 5.2%, from the comparable period in 1994. This
decrease was primarily due to an $87 million decrease in revenues from
system sales as a result of milder weather in the first quarter of 1995
compared to the extreme cold weather in the first quarter of 1994, lower
energy revenues and a reduction in the Pennsylvania corporate net income
tax rate from 11.99% in 1994 to 9.99% in 1995. This decrease was partially
offset by a $25.4 million increase in accrued revenues to be billed to
customers through the ECR due to replacement power costs, which was the
result of a $15.7 million decrease in revenues in March 1994 for
unrecovered replacement power costs and a $9.7 million increase in revenues
in February 1995 as a result of the partial recovery of these replacement
power costs. See Financial Note 3 for more details on "Rate Matters".
Operating revenues for the three months ended June 30, 1995, decreased
$31.0 million, or 4.8%, from the comparable period in 1994. System sales
accounted for $17.5 million of the decrease. This was a combination of
lower energy revenues for the three months ended June 30, 1995, and a
decrease in revenues of $7.0 million between the two periods, primarily the
result of a decrease in the Pennsylvania corporate net income tax rate from
11.99% in 1994 to 9.99% in 1995. See Financial Note 3, "Rate Matters", for
more details. Revenues from sales to the PJM decreased by $7.9 million.
This decrease was primarily a result of PP&L increasing direct two-party
sales to PJM companies rather than sales to the PJM.
Fuel Expense - PP&L
Fuel expense for the six months ended June 30, 1995 decreased by $46.8
million from the comparable period in 1994. Total generation for the two
periods was essentially unchanged, primarily due to milder weather offset
by higher system sales in the first quarter of 1995. However, fuel costs
decreased due to higher nuclear generation and lower oil-fired generation
as well as lower unit fuel costs for nuclear generation.
Fuel expense for the three months ended June 30, 1995 decreased by
$15.9 million from the comparable period in 1994. While total generation
for the two periods was essentially unchanged, fuel costs decreased due to
higher nuclear generation -- resulting from a shorter refueling outage and
better performing units in 1995 -- lower unit fuel costs for nuclear
generation, and lower oil-fired generation.
Other Operation, Maintenance and Depreciation Expenses - PP&L
For the three months ended June 30, 1995, other operating expense
decreased $12.0 million, or 8.9%, from the comparable period in 1994. This
decrease was primarily due to a Commonwealth Court of Pennsylvania decision
that reversed a PUC order and ruled that PP&L could not defer the increase
in retiree benefits costs arising from the adoption of Statement of
Financial Accounting Standards 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". As a result, in May 1994
PP&L charged to expense $16.0 million of deferred retiree benefits costs
(of which $10.8 million were previously deferred in 1993).
Maintenance expense decreased $5.3 million, or 5.8%, for the six
months ended June 30, 1995 from the comparable period in 1994. This is
primarily due to PP&L's initiatives to reduce maintenance costs and to
achieve longer operating cycles at selected fossil plants.
Depreciation expense increased $8.7 million and $17.4 million,
respectively, for the three and six months ended June 30, 1995, compared to
the same period in 1994. Higher depreciation expense reflects the annual
increase associated with the method of depreciating the Susquehanna station
and the depreciation of new property placed in service by PP&L.
Income Taxes
Income tax expense decreased by $7.9 million, or 6.3%, for the six
months ended June 30, 1995, from the comparable period in 1994. This was
primarily due to the decrease in the Pennsylvania corporate net income tax
rate from 11.99% to 9.99%.
For a discussion on the State Tax Adjustment Surcharge see Financial
Note 3.
Financial Condition
Financing Programs - Resources/PP&L
The 1995 financing plans for Resources and PP&L provided for a public
offering of $100 million common stock and the issuance of $80 million
common stock under the Dividend Reinvestment Plan (DRIP). These plans also
provided for the refunding of $55 million of First Mortgage Bonds, 9-3/8%
Pollution Control Bonds Series G due 2015.
From January through July 1995, Resources obtained $54.5 million of
common equity through DRIP. In August, PP&L issued $55 million of First
Mortgage Bonds, 6.15% Pollution Control Bonds Series K due 2029, to provide
for the refunding of the Series G Bonds on September 1, 1995.
In addition, PP&L plans to issue up to $250 million of First Mortgage
Bonds in 1995 with the exact amount of such sale to be determined after
Resources completes its evaluation of whether to proceed with the public
offering of common stock discussed above. The proceeds from the sale of
the First Mortgage Bonds and the offering of common stock, if completed,
will be used to reduce short-term debt, a portion of which was used to
acquire $85.25 million principal amount of First Mortgage Bonds on the open
market.
PP&L also anticipates the issuance of $116 million of unsecured notes
later in 1995 or early 1996 and the redemption in 1996 of $115 million of
higher-cost Bonds through the maintenance and replacement fund provisions
of the mortgage.
PP&L's ability to issue securities during the 1995-1997 period is not
expected to be limited by earnings or other issuance tests. To enhance
financing flexibility, a $250 million revolving credit arrangement is
maintained with a group of banks and is used principally as a back-up for
PP&L's commercial paper, and $45 million in credit arrangements are
maintained with a group of banks to provide back-up for PP&L's commercial
paper and short-term borrowings of certain subsidiaries. No borrowings
were outstanding at June 30, 1995 under these arrangements.
Dividends - Resources
The amount of Resources' earnings and dividends will be affected by
the manner in which PP&L is regulated by the PUC, including the results of
the recently pending rate case. As a practical matter, the ability of
Resources to pay dividends will be governed by the ability of Resources'
operating subsidiaries, in particular PP&L, to pay dividends to Resources.
In the future, dividends from subsidiaries other than PP&L may also be a
source of funds for dividend payments by Resources. While the Resources'
Board of Directors has no current intention to change the existing dividend
policy on Resources' common stock, the rate and timing of future dividends
will depend upon the future earnings and financial condition of Resources
and PP&L, and upon other relevant factors affecting Resources' dividend
policy which are not presently determinable. In addition to internally
generated funds, Resources and its subsidiaries may be required to raise
capital from both the debt and equity markets. Should Resources be limited
in its ability to market issues of common stock, this could affect
Resources' ability to make equity contributions to PP&L, which in turn
could affect the availability and cost of debt and senior equity financing
by PP&L for capital expenditures and construction.
Financial Indicators - Resources
The ratio of pre-tax income to interest charges was 3.2 and 3.4,
respectively, for the six months ended June 30, 1995 and 1994. The annual
per share dividend rate on common stock remained unchanged at $1.67 per
share. The ratio of the market price to book value of common stock was
122% at June 30, 1995 compared with 121% at June 30, 1994.
Commitments and Contingent Liabilities - PP&L
There have been no material changes related to PP&L's commitments and
contingent liabilities since PP&L filed its 1994 Form 10-K, except for the
discussion in Financial Note 9, "Commitments and Contingent Liabilities",
regarding the denial of plaintiff's motion for class certification in the
Fuel Oil Dealers' Litigation.
Increasing Competition
Regulatory Developments - PP&L
In May 1994, the PUC ordered an investigation to examine the role of
competition in Pennsylvania's electric utility industry. The investigation
will allow the PUC to solicit input regarding the potential impact of
competition on the state's electric utilities and their customers. The
investigation, which will gather and analyze data at both the wholesale and
retail levels of the electric utility industry, will be a paper proceeding.
Interested parties have the opportunity to file written comments addressing
the following specific topics: wheeling - issues and impact, consumer
issues, safety and reliability, the impact of market structure changes and
legal issues. PP&L has submitted comments in response to the PUC order.
In March 1995, the Federal Energy Regulatory Commission (FERC) issued
a major Notice of Proposed Rulemaking (NOPR) primarily dealing with open
access to transmission lines and recovery of stranded costs. The NOPR
would require all utilities to file open access tariffs available to all
wholesale sellers and buyers of electricity. The tariffs must offer point-
to-point and network services, as well as ancillary services. A utility
would have to offer these services to all eligible customers on a basis
comparable to the services the utility provides to itself. A utility must
take service under its transmission access tariff for its own wholesale
sales and purchases. The NOPR would not affect existing transmission
agreements.
The NOPR also provides that utilities are entitled to recover all
"legitimate and verifiable stranded costs" incurred in rendering
transmission services pursuant to their tariffs. The FERC proposes to
provide recovery mechanisms for wholesale stranded costs, including
stranded costs resulting from municipalization. The NOPR contains filing
requirements for utilities to seek recovery of wholesale stranded costs.
Wholesale contracts signed after July 11, 1994 must contain explicit
provisions authorizing recovery of stranded costs. For contracts signed
before this date, a utility may seek recovery if it can show that it had a
reasonable expectation of continuing to serve the customer after the
contract term and that it has made reasonable efforts to mitigate any
stranded costs. PP&L's contracts with its 18 FERC wholesale customers were
signed before July 11, 1994.
The states have responsibility for adopting policies concerning
recovery of stranded costs resulting from retail wheeling transactions.
Under the NOPR, the FERC will assert jurisdiction over such costs only if
the states lack authority to deal with stranded costs.
Initial comments on the open access and stranded cost recovery
portions of the NOPR are due by August 7, 1995. PP&L has filed its
comments on the NOPR.
Restructuring - PP&L
PP&L continues its ongoing re-engineering and cost reduction efforts,
which are expected to impact the size of PP&L's workforce. Although no
specific targets have been set, PP&L currently expects that the present
level of 6,883 full time employees may decline to 6,000 or fewer employees
over the next three years. PP&L expects additional costs and savings, in
amounts that are not currently determinable, as a result of future
workforce reductions.
As a result of a PP&L offer, 75 bargaining unit employees elected
voluntary severance. The voluntary severance program was part of PP&L's
overall strategy to reduce costs and to match staffing with workload. See
Financial Note 7 for a further discussion of this program.
New Markets - Resources
One of Resources' strategic initiatives is to invest in power-related
businesses outside of PP&L's service territory, both domestically and in
foreign countries. To take advantage of these new business opportunities,
PP&L formed a holding company structure, effective April 27, 1995, after
receiving all necessary regulatory approvals and shareowner approval at
PP&L's 1995 annual meeting. As a result of this restructuring, PP&L became
a direct subsidiary of Resources.
In March 1994, PP&L incorporated a new subsidiary, PMDC, and made an
initial investment of $50 million in this new subsidiary. Effective April
27, 1995, PMDC became a direct subsidiary of Resources. PMDC exists to
engage in unregulated business activities through investments in world-wide
power markets. In July 1995, PMDC invested $10.1 million as part of a
consortium that is part owner of an electric generating company in Bolivia.
In July 1995, Resources formed another unregulated subsidiary,
Spectrum, to pursue opportunities to offer energy-related products and
services to PP&L's existing customers and to others beyond PP&L's service
territory. Other subsidiaries may be formed to take advantage of new
business opportunities.
<PAGE>
PP&L RESOURCES, INC. AND
PENNSYLVANIA POWER & LIGHT COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 3 to Financial Statements for information
concerning rate matters.
Reference is made to Note 9 to Financial Statements for information
concerning two complaints filed against PP&L by fuel oil dealers alleging
that its promotion of electric heat pumps and off-peak storage systems had
violated and continues to violate the federal antitrust laws.
On August 7, 1995, one of the nonutility generating companies from
which PP&L purchases power under the Public Utility Regulatory Policies Act
of 1978 (PURPA) brought suit against PP&L in the United States District
Court for the Eastern District of Pennsylvania (District Court), alleging
that between July 1994 and July 1995 PP&L improperly curtailed power
purchases from the nonutility generator. The nonutility generator claims
that such activity breached the power purchase agreement between the two
parties and violated the federal antitrust laws, among other counts. The
nonutility generator alleges that PP&L's actions resulted in loss of power
sales revenue of $1.6 million and unquantified increased costs of
operation. The nonutility generator is requesting compensatory and
punitive damages, as well as treble damages for the alleged antitrust
violations. PP&L cannot predict the outcome of this litigation.
In March 1993, the U.S. Environmental Protection Agency (EPA) filed a
complaint under Section 107 of Superfund in District Court against PP&L and
10 unrelated parties to recover all past and future EPA costs of
investigating and remediating the Heleva landfill site in Lehigh County,
Pennsylvania. The EPA alleges it has spent approximately $10 million to
date at this site. PP&L has filed an answer to the complaint denying
liability based on the absence of evidence that PP&L sent any hazardous
substances to the site. PP&L has settled this matter for a sum which is
not material.
In June 1995, the Pennsylvania Department of Environmental Protection
(DEP) ordered a PP&L subsidiary to abate seepage allegedly discharged from
a mine formerly operated by that subsidiary. The subsidiary currently does
not believe that it is responsible for this seepage and is contesting the
DEP order. A consultant was hired to perform additional testing to
determine the source of the seepage. If no direct connection exists
between the mine water and the seepage, no abatement is required.
In July 1995, PP&L and 19 other unrelated parties received an EPA
order under Section 106 of Superfund requiring that certain remedial
actions be taken at the Novak Landfill Superfund site in Lehigh County,
Pennsylvania. The EPA had previously issued a Consent Decree to PP&L and
several other parties, but no agreement on the Consent Decree was reached.
PP&L, along with several other parties, intends to comply with the EPA
order. The estimated cost of the EPA's selected remedy is $20 million.
PP&L's share of these costs is not expected to be material. PP&L and
several other parties are engaged in ongoing litigation against other
parties that generated or transported substances disposed of at the site.
Item 2. Changes in Securities
Effective April 27, 1995, all outstanding common stock of PP&L was
exchanged for and converted into the common stock of Resources.
Item 4. Submission of Matters to a Vote of Security Holders
At PP&L's Annual Meeting of Shareowners held on April 26, 1995, the
shareowners:
(1) Approved a corporate restructuring pursuant to an Agreement and
Plan of Exchange whereby Resources became the parent holding company
of PP&L. The vote was 104,502,081 in favor, and 4,229,750 against,
with 2,222,546 abstaining;
(2) Elected all five nominees for the office of director. The vote
for all nominees was 123,163,507. The votes for individual nominees
were as follows:
Number of Votes
For Withhold Authority
Derek C. Hathaway 122,902,152 2,639,548
Stuart Heydt 124,057,111 2,275,656
Clifford I. Jones 122,845,400 2,659,347
Robert Y. Kaufman 122,761,664 2,719,255
Ruth Leventhal 123,072,306 2,564,835
The vote to withhold authority for all nominees was 2,133,649;
(3) Approved the Amended and Restated Directors Deferred Compensation
Plan. The vote was 110,977,022 in favor, and 10,253,831 against, with
4,769,998 abstaining;
(4) Approved the Amended and Restated Incentive Compensation Plan for
officers and other key employees. The vote was 108,768,760 in favor,
and 12,414,025 against, with 4,818,066 abstaining; and
(5) Ratified the appointment of Price Waterhouse LLP as independent
auditors of PP&L for the year ended December 31, 1995. The vote was
122,700,257 in favor, and 1,291,620 against, with 2,008,974
abstaining.
Item 6. Exhibits
(a) Exhibits
27 - Financial Data Schedule
<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. The signature for each
undersigned company shall be deemed to relate only to matters having
reference to such company or its subsidiary.
PP&L Resources, Inc.
(Registrant)
Pennsylvania Power & Light Company
(Registrant)
Date: August 11, 1995 /s/ R. E. Hill
R. E. Hill
Senior Vice President-Financial and
Treasurer (PP&L Resources, Inc.)
Senior Vice President-Financial
(Pennsylvania Power & Light Company)
/s/ J. J. McCabe
J. J. McCabe
Vice President & Controller (PP&L
Resources, Inc. and Pennsylvania
Power & Light Company)
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE SHEET, CONSOLIDATED
STATEMENT OF CASH FLOWS FOR THE FORM 10-Q DATED JUNE 30, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000922224
<NAME> PP&L RESOURCES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,150,202
<OTHER-PROPERTY-AND-INVEST> 325,908
<TOTAL-CURRENT-ASSETS> 728,996
<TOTAL-DEFERRED-CHARGES> 1,245,969
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,451,075
<COMMON> 1,575
<CAPITAL-SURPLUS-PAID-IN> 1,469,649
<RETAINED-EARNINGS> 1,039,093
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,510,317
295,000
171,375
<LONG-TERM-DEBT-NET> 2,826,521
<SHORT-TERM-NOTES> 12,888
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<COMMERCIAL-PAPER-OBLIGATIONS> 215,000
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<CAPITAL-LEASE-OBLIGATIONS> 152,562
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<GROSS-OPERATING-REVENUE> 609,213
<INCOME-TAX-EXPENSE> 35,630
<OTHER-OPERATING-EXPENSES> 469,311
<TOTAL-OPERATING-EXPENSES> 504,941
<OPERATING-INCOME-LOSS> 104,272
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<INCOME-BEFORE-INTEREST-EXPEN> 108,164
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6,942
<EARNINGS-AVAILABLE-FOR-COMM> 44,719
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