<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 September 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 X No
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,
159,060,605 shares outstanding at
October 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
October 31, 1995
<PAGE>
PP&L RESOURCES, INC.
AND
PENNSYLVANIA POWER & LIGHT COMPANY
FORM 10-Q
FOR THE QUARTER ENDED September 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 6. Exhibits and Reports on Form 8-K
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 September 30, 1995 and December 31, 1994, and the
Consolidated Statement of Income and Consolidated Statement of Cash Flows for
the periods ended September 30, 1995 and 1994. Resources is the parent holding company of
Pennsylvania 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 Statement of Income.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Thousands of Dollars, except per share data)
<CAPTION>
Three Months
Ended September 30,
1995 1994
<S> <C> <C>
Operating Revenues ............................... $682,249 $661,142
Operating Expenses
Operation
Fuel......................................... 125,974 117,798
Power purchases.............................. 66,142 66,067
Other........................................ 110,362 118,500
Maintenance..................................... 38,488 43,207
Depreciation.................................... 77,437 72,129
Amortized depreciation.......................... 9,939 6,564
Income taxes.................................... 92,229 57,952
Taxes, other than income........................ 48,217 46,992
Voluntary early retirement program.............. (65,661)
503,127 529,209
Operating Income .................................. 179,122 131,933
Other Income and (Deductions)
Allowance for equity funds used during
construction................................. 68
Income tax credits (expense).................... (8,229) 1,916
Other - net..................................... (20,238) 212
(28,399) 2,128
Income Before Interest Charges & Dividends on Preferred
Stock ........................................... 150,723 134,061
Interest Charges
Long-term debt.................................. 52,851 52,445
Short-term debt and other....................... 6,020 6,605
Allowance for borrowed funds used during
construction and interest capitalized........ (2,270) (1,943)
56,601 57,107
Preferred Stock Dividend Requirements.............. 6,942 6,942
Net Income......................................... $87,180 $70,012
Earnings Per Share of Common Stock (a) ............ $0.55 $0.46
Average Number of Shares Outstanding
(thousands)....................................... 158,131 153,789
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>
Nine Months
Ended September 30,
1995 1994
<S> <C> <C>
Operating Revenues ...............................$2,018,947 $2,070,813
Operating Expenses
Operation
Fuel......................................... 326,563 365,154
Power purchases.............................. 214,040 221,916
Other........................................ 353,712 365,114
Maintenance..................................... 123,615 133,630
Depreciation.................................... 232,324 216,346
Amortized depreciation.......................... 29,816 19,693
Income taxes.................................... 210,171 186,059
Taxes, other than income........................ 149,547 153,284
Voluntary early retirement program.............. (65,661)
1,574,127 1,661,196
Operating Income .................................. 444,820 409,617
Other Income and (Deductions)
Allowance for equity funds used during
construction................................. 4,072 2,552
Income tax credits (expense).................... (7,998) 4,461
Other - net..................................... (17,376) (2,258)
(21,302) 4,755
Income Before Interest Charges & Dividends on Preferred
Stock ........................................... 423,518 414,372
Interest Charges
Long-term debt.................................. 161,064 159,823
Short-term debt and other....................... 15,404 15,773
Allowance for borrowed funds used during
construction and interest capitalized........ (6,995) (5,843)
169,473 169,753
Preferred Stock Dividend Requirements.............. 20,826 21,463
Net Income......................................... $233,219 $223,156
Earnings Per Share of Common Stock (a) ............ $1.48 $1.46
Average Number of Shares Outstanding
(thousands)....................................... 157,187 152,951
Dividends Declared Per Share of Common
Stock............................................. $1.2525 $1.2525
<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>
Sept. 30, December 31,
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
Electric utility plant in service.................. $9,551,516 $9,306,519
Accumulated depreciation......................... (3,051,562) (2,871,129)
Deferred depreciation............................ 226,401 256,021
6,726,355 6,691,411
Construction work in progress...................... 186,929 211,288
Nuclear fuel owned and leased - net
of amortization.................................. 144,856 143,591
Other leased property - net of amortization ....... 84,064 80,385
Electric utility plant - net..................... 7,142,204 7,126,675
Other property - net of depreciation,
amortization and depletion....................... 64,060 67,850
7,206,264 7,194,525
Investments
Associated company - at equity..................... 17,185 17,088
Nuclear plant decommissioning trust fund .......... 102,918 87,490
Financial investments.............................. 136,733 119,632
Other - at cost or less............................ 23,781 8,654
280,617 232,864
Current Assets
Cash and cash equivalents.......................... 9,159 10,079
Marketable securities.............................. 94,363 100,537
Accounts receivable, less reserve
Customers........................................ 181,581 189,771
Interconnection.................................. 1,888 1,610
Other............................................ 11,368 12,861
Unbilled revenues.................................. 59,912 88,668
Fuel (coal and oil) - at average cost.............. 90,661 125,545
Materials and supplies - at average cost........... 124,073 123,630
Prepayments........................................ 33,799 11,015
Deferred income taxes.............................. 38,780 27,572
Other.............................................. 21,401 26,916
666,985 718,204
Deferred Debits
Utility plant carrying charges - net
of amortization.................................. 22,353 23,142
Reacquired debt costs.............................. 117,899 113,466
Assessment for decommissioning uranium
enrichment facilities............................ 31,522 33,492
Retired miners' health care benefits............... 13,783 14,536
Taxes recoverable through future rates............. 989,289 986,292
Postretirement benefits other than pensions........ 31,925
Voluntary early retirement program................. 65,661
Other.............................................. 43,873 55,160
1,316,305 1,226,088
$9,470,171 $9,371,681
<FN>
See accompanying Financial Notes.
</TABLE>
<TABLE>
PP&L RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<CAPTION>
Sept. 30, December 31,
1995 1994
(Unaudited) (Audited)
LIABILITIES
<S> <C> <C>
Capitalization
Common equity
Common stock...................................... $1,584 $1,555
Capital in excess of par value ................... 1,495,941 1,432,946
Earnings reinvested .............................. 1,060,137 1,024,127
Capital stock expense and other .................. (7,249) (4,160)
2,550,413 2,454,468
Preferred stock
With sinking fund requirements.................... 295,000 295,000
Without sinking fund requirements................. 171,375 171,375
Long-term debt...................................... 2,827,356 2,940,750
5,844,144 5,861,593
Current Liabilities
Commercial paper.................................... 120,000 64,000
Bank loans.......................................... 14,887 10,168
Long-term debt due within one year.................. 30,000 39
Capital lease obligations due within one year....... 79,396 73,682
Accounts payable.................................... 107,729 146,073
Taxes accrued....................................... 30,427 46,741
Interest accrued.................................... 66,543 63,958
Dividends payable................................... 73,077 71,710
Other............................................... 112,904 101,924
634,963 578,295
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits..................... 221,954 230,064
Deferred income taxes............................... 2,089,263 2,046,861
Capital lease obligations........................... 150,734 151,083
Unamortized cost of power plant spare parts......... 7,719 26,406
Accrued nuclear plant decommissioning costs......... 105,267 89,713
Accrued mine closing costs.......................... 55,928 56,427
Contract settlement proceeds to be credited
to customers..................................... 24,521 32,931
Accrued pension costs............................... 180,763 163,487
Accrued assessment for decommissioning
uranium enrichment facilities.................... 28,895 28,895
Accrued retired miners' health care benefits........ 30,975 29,568
Accrued postretirement benefits other than
pensions and postemployment benefits.............. 34,275 21,784
Other............................................... 60,770 54,574
2,991,064 2,931,793
Commitments and Contingent Liabilities
(See Note 11)..............................................
$9,470,171 $9,371,681
<FN>
See accompanying Financial Notes.
</TABLE>
<TABLE>
PP&L RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months
Ended Sept. 30,
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities
Net income......................................................... $233,219 $223,156
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation.................................................... 263,774 237,732
Amortization of property under capital leases................... 61,022 61,419
Preferred stock dividend requirements .......................... 20,826 21,463
Amortization of contract settlement proceeds and
deferred cost of power plant spare parts....................... (28,721) (28,527)
Deferred income taxes and investment tax credits................ 18,187 (22,831)
Equity component of AFUDC....................................... (4,072) (2,552)
Voluntary early retirement program.............................. (65,661)
Change in current assets and current liabilities
Accounts receivable....................................... 9,405 2,522
Unbilled and refundable electric revenues................. 39,432 34,237
Fuel inventories.......................................... 34,884 (10,274)
Materials and supplies.................................... (443) 3,243
Prepayments .............................................. (22,784) (19,477)
Accounts payable.......................................... (38,344) (47,755)
Accrued interest and taxes................................ (13,729) (28,379)
Other..................................................... 5,623 17,780
Other operating activities - net................................ 26,279 49,610
Net cash provided by operating activities.................... 538,897 491,367
Cash Flows From Investing Activities
Property, plant and equipment expenditures......................... (318,326) (363,983)
Proceeds from sales of nuclear fuel to trust....................... 43,756 13,551
Purchases of available-for-sale securities......................... (247,614) (124,164)
Sales and maturities of available-for-sale securities.............. 242,900 66,842
Net purchases and sales of other financial investments ............ (8,704) 6,531
Other investing activities - net................................... 3,685 19,641
Net cash used in investing activities........................ (284,303) (381,582)
Cash Flows From Financing Activities
Issuance of long-term debt......................................... 55,000 718,750
Issuance of common stock........................................... 56,997 43,073
Issuance of preferred stock.................................................... 80,000
Reduction of long-term debt........................................ (140,250) (637,350)
Retirement of preferred stock.................................................. (120,000)
Payments on capital lease obligations.............................. (61,022) (61,419)
Dividends paid..................................................... (216,667) (212,354)
Net increase in short-term debt.................................... 60,719 101,102
Costs associated with issuance and retirement of securities........ (10,252) (23,551)
Other financing activities - net................................... (39) (39)
Net cash used in financing activities........................ (255,514) (111,788)
Net Decrease In Cash and Cash Equivalents .......................... (920) (2,003)
Cash and Cash Equivalents at Beginning of Period ................... 10,079 8,271
Cash and Cash Equivalents at End of Period ......................... $9,159 $6,268
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for
Interest (net of amount capitalized).............................. $162,039 $151,887
Income taxes...................................................... $195,509 $212,145
<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 September 30, 1995 and December 31, 1994,
and the Consolidated Statement of Income and Consolidated Statement of Cash Flows
for the periods ended September 30, 1995 and 1994. All nonutility operating transactions
are included in "Other Income and (Deductions)--Other-net" in PP&L's Consolidated
Statement of Income.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Thousands of Dollars, except per share data)
<CAPTION>
Three Months
Ended September 30,
1995 1994(a)
<S> <C> <C>
Operating Revenues ............................... $682,249 $661,142
Operating Expenses
Operation
Fuel......................................... 125,974 117,798
Power purchases.............................. 66,142 66,067
Other........................................ 110,362 118,500
Maintenance..................................... 38,488 43,207
Depreciation.................................... 77,437 72,129
Amortized depreciation.......................... 9,939 6,564
Income taxes.................................... 92,229 57,952
Taxes, other than income........................ 48,217 46,992
Voluntary early retirement program.............. (65,661)
503,127 529,209
Operating Income .................................. 179,122 131,933
Other Income and (Deductions)
Allowance for equity funds used during
construction................................. 68
Income tax credits (expense) ................... (8,620) 1,887
Other - net..................................... (19,207) (115)
(27,759) 1,772
Income Before Interest Charges..................... 151,363 133,705
Interest Charges
Long-term debt.................................. 52,851 52,445
Short-term debt and other....................... 6,020 6,605
Allowance for borrowed funds used during
construction and interest capitalized........ (2,270) (1,943)
56,601 57,107
Net Income......................................... 94,762 76,598
Dividends on Preferred Stock....................... 6,942 6,942
Earnings Available to PP&L Resources, Inc. ....... $87,820 $69,656
<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, except per share data)
<CAPTION>
Nine Months
Ended September 30,
1995 1994(a)
<S> <C> <C>
Operating Revenues ...............................$2,018,947 $2,070,813
Operating Expenses
Operation
Fuel......................................... 326,563 365,154
Power purchases.............................. 214,040 221,916
Other........................................ 353,712 365,114
Maintenance..................................... 123,615 133,630
Depreciation.................................... 232,324 216,346
Amortized depreciation.......................... 29,816 19,693
Income taxes.................................... 210,171 186,059
Taxes, other than income........................ 149,547 153,284
Voluntary early retirement program.............. (65,661)
1,574,127 1,661,196
Operating Income .................................. 444,820 409,617
Other Income and (Deductions)
Allowance for equity funds used during
construction................................. 4,072 2,552
Income tax credits (expense).................... (9,029) 4,418
Other - net..................................... (15,534) (2,959)
(20,491) 4,011
Income Before Interest Charges..................... 424,329 413,628
Interest Charges
Long-term debt.................................. 161,064 159,823
Short-term debt and other....................... 15,404 15,773
Allowance for borrowed funds used during
construction and interest capitalized........ (6,995) (5,843)
169,473 169,753
Net Income......................................... 254,856 243,875
Dividends on Preferred Stock....................... 20,826 21,463
Earnings Available to PP&L Resources, Inc. ........ $234,030 $222,412
<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>
Sept. 30, December 31,
1995 1994(a)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
Electric utility plant in service.................. $9,551,516 $9,306,519
Accumulated depreciation......................... (3,051,562) (2,871,129)
Deferred depreciation............................ 226,401 256,021
6,726,355 6,691,411
Construction work in progress...................... 186,929 211,288
Nuclear fuel owned and leased - net
of amortization.................................. 144,856 143,591
Other leased property - net of amortization ....... 84,064 80,385
Electric utility plant - net..................... 7,142,204 7,126,675
Other property - net of depreciation,
amortization and depletion....................... 64,060 67,850
7,206,264 7,194,525
Investments
Associated company - at equity..................... 17,185 17,088
Nuclear plant decommissioning trust fund .......... 102,918 87,490
Financial investments.............................. 127,699 118,115
Other - at cost or less............................ 13,670 8,654
261,472 231,347
Current Assets
Cash and cash equivalents.......................... 3,978 9,109
Marketable securities.............................. 50,607 52,544
Accounts receivable, less reserve
Customers........................................ 181,581 189,771
Interconnection.................................. 1,888 1,610
Other............................................ 11,165 12,390
Unbilled revenues.................................. 59,912 88,668
Fuel (coal and oil) - at average cost.............. 90,661 125,545
Materials and supplies - at average cost........... 124,073 123,630
Prepayments........................................ 33,666 11,015
Deferred income taxes.............................. 38,773 27,524
Other.............................................. 21,518 26,916
617,822 668,722
Deferred Debits
Utility plant carrying charges - net
of amortization.................................. 22,353 23,142
Reacquired debt costs.............................. 117,899 113,466
Assessment for decommissioning uranium
enrichment facilities............................ 31,522 33,492
Retired miners' health care benefits............... 13,783 14,536
Taxes recoverable through future rates............. 989,289 986,292
Postretirement benefits other than pensions ....... 31,925
Voluntary early retirement program ................ 65,661
Other.............................................. 43,873 55,160
1,316,305 1,226,088
$9,401,863 $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>
Sept. 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............................... 1,010,051 973,230
Capital stock expense and other .................. (7,238) (10,112)
2,482,037 2,403,645
Preferred stock
With sinking fund requirements.................... 295,000 295,000
Without sinking fund requirements................. 171,375 171,375
Long-term debt...................................... 2,827,356 2,940,750
5,775,768 5,810,770
Current Liabilities
Commercial paper.................................... 120,000 64,000
Bank loans.......................................... 14,887 10,168
Long-term debt due within one year.................. 30,000 39
Capital lease obligations due within one year....... 79,396 73,682
Accounts payable.................................... 107,597 145,723
Taxes accrued....................................... 30,676 46,907
Interest accrued.................................... 66,543 63,958
Dividends payable................................... 73,077 71,710
Other............................................... 112,855 101,924
635,031 578,111
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits..................... 221,954 230,064
Deferred income taxes............................... 2,089,263 2,046,869
Capital lease obligations........................... 150,734 151,083
Unamortized cost of power plant spare parts......... 7,719 26,406
Accrued nuclear plant decommissioning costs......... 105,267 89,713
Accrued mine closing costs.......................... 55,928 56,427
Contract settlement proceeds to be credited
to customers..................................... 24,521 32,931
Accrued pension costs............................... 180,763 163,487
Accrued assessment for decommissioning
uranium enrichment facilities.................... 28,895 28,895
Accrued retired miners' health care benefits........ 30,975 29,568
Accrued postretirement benefits other than
pensions and postemployment benefits.............. 34,275 21,784
Other............................................... 60,770 54,574
2,991,064 2,931,801
Commitments and Contingent Liabilities
(See Note 11)..............................................
$9,401,863 $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>
Nine Months
Ended Sept. 30,
1995 1994(a)
<S> <C> <C>
Cash Flows From Operating Activities
Net income......................................................... $254,856 $243,875
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation.................................................... 263,774 237,732
Amortization of property under capital leases................... 61,022 61,419
Amortization of contract settlement proceeds and
deferred cost of power plant spare parts....................... (28,721) (28,527)
Deferred income taxes and investment tax credits................ 18,187 (22,831)
Equity component of AFUDC....................................... (4,072) (2,552)
Voluntary early retirement program.............................. (65,661)
Change in current assets and current liabilities
Accounts receivable....................................... 9,137 2,794
Unbilled and refundable electric revenues................. 39,432 34,237
Fuel inventories.......................................... 34,884 (10,274)
Materials and supplies.................................... (443) 3,243
Prepayments .............................................. (22,651) (19,477)
Accounts payable.......................................... (38,126) (47,755)
Accrued interest and taxes................................ (13,646) (28,371)
Other..................................................... 5,457 17,780
Other operating activities - net................................ 26,093 49,452
Net cash provided by operating activities.................... 539,522 490,745
Cash Flows From Investing Activities
Property, plant and equipment expenditures......................... (318,326) (363,983)
Proceeds from sales of nuclear fuel to trust....................... 43,756 13,551
Purchases of available-for-sale securities......................... (66,337) (38,323)
Sales and maturities of available-for-sale securities.............. 64,976 31,172
Net purchases and sales of other financial investments ............ 1,407 6,531
Other investing activities - net................................... 3,685 19,641
Net cash used in investing activities........................ (270,839) (331,411)
Cash Flows From Financing Activities
Issuance of long-term debt......................................... 55,000 718,750
Issuance of common stock and capital contribution from parent ..... 38,697 43,073
Issuance of preferred stock.................................................... 80,000
Reduction of long-term debt........................................ (140,250) (637,350)
Retirement of preferred stock.................................................. (120,000)
Payments on capital lease obligations.............................. (61,022) (61,419)
Dividends paid..................................................... (216,667) (212,354)
Dividends for capitalization of PMDC .......................................... (50,000)
Net increase in short-term debt.................................... 60,719 101,102
Costs associated with issuance and retirement of securities........ (10,252) (23,551)
Other financing activities - net................................... (39) (39)
Net cash used in financing activities........................ (273,814) (161,788)
Net Decrease In Cash and Cash Equivalents .......................... (5,131) (2,454)
Cash and Cash Equivalents at Beginning of Period ................... 9,109 8,271
Cash and Cash Equivalents at End of Period ......................... $3,978 $5,817
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for
Interest (net of amount capitalized).............................. $162,039 $151,887
Income taxes...................................................... $196,501 $212,145
<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 September 30, 1994 financial statements have
been reclassified to conform to the presentation in the September 30, 1995
financial 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. 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'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
On September 27, 1995, the Pennsylvania Public Utility Commission
(PUC) issued a final order with respect to the base rate case filed by PP&L
on December 30, 1994 (PUC decision).
PP&L's request to increase base rates, which was its first in ten
years, sought to increase annual PUC-jurisdictional revenues by $261.6
million, or about 11.7%. The PUC's decision granted PP&L a $107 million
increase based on test year conditions. An allocation of a $22 million
credit to base rates from the Energy Cost Rate (ECR) resulted in an $85
million, or about 3.8%, net increase in PUC-jurisdictional revenues
effective September 28, 1995.
The following table provides a comparison of PP&L's filing and the PUC
decision:
Original
Filing Allowed
Rate Base ($ - Millions) $5,017.7 $5,017.7
Return ($ - Millions) $508.9 $478.7
Rate of Return 10.14% 9.54%
Return on Common Equity 13.00% 11.50%
The PUC decision allows PP&L to levelize the annual amount of
depreciation on pre-1989 property for its Susquehanna station at $173
million for the period October 1, 1995 through December 31, 1998. This
levelization eliminates the previously scheduled annual increase in
depreciation expense resulting from the modified sinking fund method of
depreciation. As part of its proposal to levelize depreciation, PP&L
agreed to automatically reduce annual Susquehanna station depreciation on
January 1, 1999 to reflect the return to straight line depreciation. This
change in depreciation will result in a $90 million annual reduction in
base rates effective January 1, 1999.
The PUC determined that all of PP&L's generating capacity is necessary
to meet customer needs, rejecting the arguments of some intervenors that an
excess capacity adjustment should be imposed on PP&L. As a result of the
PUC's action in this regard, PP&L's base rates include a full return on all
of its generating facilities used to serve retail customers, as well as all
operating expenses associated with those facilities. In its previous base
rate case in 1985, the PUC had found that PP&L had excess generating
capacity and disallowed a return on the common equity PP&L invested in
Susquehanna Unit No. 2.
Also, the PUC decision permits recovery of the PUC-jurisdictional
amount of retiree health care costs applicable to operations, the amount
incurred under the prior "pay-as-you-go" method, about $7 million annually,
and the amount resulting from the adoption of Statement of Financial
Accounting Standards (SFAS) 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", about $11 million annually. In addition,
the PUC decision permits PP&L to recover, over a period of about 17 years,
the amount of SFAS 106 costs that would have been deferred from January 1,
1993 through September 30, 1995 pursuant to a PUC order but for a
Pennsylvania Commonwealth Court (Commonwealth Court) decision (now awaiting
possible Pennsylvania Supreme Court review) that PP&L could not recover
these deferred costs. As a result of the PUC decision, which provides for
recovery of $27 million of previously expensed SFAS 106 costs, PP&L
recorded a $15.7 million after-tax credit to income, or 10 cents per share
of Resources' common stock, in September 1995.
In addition, the PUC decision permits PP&L to recover through customer
rates the PUC-jurisdictional amount, $65.7 million, of the cost of its 1994
voluntary early retirement program over a period of five years. As a
result, PP&L recorded a $37.8 million after-tax credit to income, or 24
cents per share of Resources' common stock, in September 1995 to reverse
the charge for this program that was recorded in the fourth quarter of
1994. The estimated annual savings of $35 million from the program also
are reflected in the allowed rates.
The PUC decision also permits recovery over a 10-year period of
certain deferred operating and capital costs, net of energy savings,
incurred from the time Susquehanna Unit No. 2 was placed in commercial
operation until the effective date of base rate recognition for that Unit,
but denies recovery of those costs for Susquehanna Unit No. 1. As a result
of the PUC decision with respect to Susquehanna Unit No. 1, PP&L recorded a
one-time charge in September 1995 which, after taxes, reduced PP&L's net
income by $20.4 million, or 13 cents per share of Resources' common stock.
The PUC decision makes several adjustments to the amount requested by
PP&L for the currently estimated cost of decommissioning the Susquehanna
station. These adjustments include the elimination of the $106.6 million
contingency amount included in the decommissioning cost estimate, an
increase in the earnings assumption on the decommissioning fund from 5.5%
to 7.5% and a reflection of post-shutdown earnings on the fund in
calculating the total amount necessary to decommission the Susquehanna
station. After giving effect to these adjustments, the total amount of the
Susquehanna station decommissioning costs included in PUC-jurisdictional
rates is $9.5 million annually.
The PUC decision reduces the return on common equity from the 13.0%
requested by PP&L to 11.5%. In addition to the reduction in the return on
common equity, the PUC makes several other adjustments and disallowances in
its final decision. Except for the reduction in the return on common
equity and the one-time charge relating to the denial of the claim for
deferred operating and capital costs for Susquehanna Unit No. 1, the
adjustments and disallowances included in the PUC decision do not have a
significant adverse impact on PP&L's and Resources' earnings.
In its decision, the PUC ruled that PP&L cannot include in its ECR the
cost of capacity currently being billed to other utilities pursuant to
contractual arrangements as it returns to PP&L. At the same time, however,
the PUC also ruled that PP&L was not required to flow back to PUC-
jurisdictional customers through the ECR the revenues received for off-
system sales of capacity and energy attributable to such returning
capacity. Accordingly, the PUC decision permits the benefits that can be
achieved from sales of the returning capacity to accrue to shareowners.
The Pennsylvania Office of Consumer Advocate has appealed the PUC
decision to the Commonwealth Court. PP&L cannot predict the final outcome
of this matter.
Energy Cost Rate Issues
As a result of the PUC decision, PP&L filed a new ECR rate with the
PUC for the period September 28, 1995 through March 31, 1996. The new rate
reflects the roll-in of all energy costs into base rates. In addition,
PP&L is no longer required to include as a credit to the ECR one-third of
the revenues from its capacity credit sales to other electric utilities.
On October 26, 1995, the PUC approved the revised ECR rate.
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 PP&L's 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 PUC's
Office of Trial Staff 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 PP&L's 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, reflected the recovery
of the $9.7 million of previously disallowed replacement power costs.
Special Base Rate Credit Adjustment
The Special Base Rate Credit Adjustment (SBRCA) has been in effect
since April 1, 1991 and reduced PUC-jurisdictional customers' bills for the
effects of three nonrecurring items. As a result of the PUC decision,
PP&L's SBRCA was changed to exclude that portion of the credit associated
with a capacity and energy contract with Atlantic City Electric Company
(Atlantic), since the costs recovered from Atlantic were excluded from PUC-
jurisdictional base rates. See Note 4 for more details on this contract.
Refund of State Tax Decrease
In June 1994, legislation was enacted that decreased the Pennsylvania
corporate net income tax rate (Pa. CNI) 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 Pa. CNI from 10.99% to 9.99% retroactive to January 1, 1995.
In July 1995, PP&L filed with the PUC a recomputation of its STAS to
reflect the decrease in the Pa. CNI from 10.99% to 9.99%. This was
expected to reduce customer rates by about $16.6 million rather than the
$9.2 previously filed.
As a result of the PUC decision, the Pa. CNI reflected in base rates
was changed from 12.25% to 10.99%. PP&L filed a recomputation of its STAS
to reflect the new Pa. CNI reflected in base rates as well as revised
revenues and taxable income resulting from the base rate filing. The
revised STAS, which was approved on October 26, 1995, is expected to reduce
customer rates by about $12.9 million. This change will have no effect on
PP&L's net income.
FERC-Jurisdictional Rates
On October 26, 1995, the Federal Energy Regulatory Commission (FERC)
approved PP&L's request to recover postretirement benefits other than
pensions through its contractual agreements with other major electric
utilities, subject to refund after FERC review. Beginning November 1,
1995, PP&L will bill these utilities on an accrual basis for their share of
ongoing postretirement costs other than pensions. In addition, each
utility will be billed a levelized amount of previously deferred
postretirement benefit costs. PP&L expects to recover the previously
deferred costs during the contract periods. See Note 4 for more details on
these contracts.
In the October 26, 1995 order, FERC also ordered hearings to evaluate
the justness and reasonableness of PP&L's rates in its contractual
agreements with Jersey Central Power & Light Company (JCP&L), Atlantic,
Baltimore Gas & Electric Company and UGI Corporation. PP&L cannot predict
the outcome of these hearings.
See "Part II. Other Information - Legal Proceedings" for a discussion
of litigation by JCP&L against PP&L.
4. Sales to Other Major Electric Utilities - PP&L
PP&L provides 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 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 (189,000 kilowatts per year) until the end of the
agreement on December 31, 1999. PP&L estimates that annual revenues
associated with 189,000 kilowatts of returning capacity from JCP&L are
about $40 million and that economy energy sales for 189,000 kilowatts of
capacity on the Pennsylvania-New Jersey-Maryland Interconnection
Association (PJM) would produce about $25 million of annual revenues. 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 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 fuel-related costs. This agreement with
JCP&L must be approved by the FERC and the New Jersey Board of Public
Utilities.
PP&L provides Baltimore Gas & Electric (BG&E) with 129,000 kilowatts
or 6.6 percent of its share of capacity and related energy from the
Susquehanna station. Sales to BG&E will continue through May 2001.
PP&L will continue to seek additional opportunities to market its
capacity and energy in the bulk power markets which would produce revenues
in excess of the amount that would be realized through economy energy sales
on the PJM.
5. Financing Activity - Resources/PP&L
As a result of a corporate restructuring, as of April 27, 1995, PP&L's
157,300,382 shares of outstanding common stock became Resources' common
stock. During the third quarter of 1995, 937,165 shares of Resources'
common stock ($18.3 million) were issued through the Dividend Reinvestment
Plan (DRIP). At September 30, 1995, Resources had 390,000,000 shares of
authorized common stock, $.01 par value, of which 158,407,582 shares were
outstanding. In October 1995, Resources issued an additional 653,023
shares of common stock ($15.2 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 these 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 principal amount of First Mortgage
Bonds, 6.15% Pollution Control Bonds Series K due 2029, that provided for
the refunding of $55 million principal amount of First Mortgage Bonds,
9.375% Pollution Control Bonds Series G, 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 5.9% at September 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 September 30, 1995 under these credit arrangements.
PP&L leases its nuclear fuel from a trust. The maximum financing
capacity of the trust under existing credit arrangements is $200 million.
7. New Regulatory Assets - PP&L
PP&L established new regulatory assets as a result of the recent PUC
and FERC decisions. These regulatory assets as of September 30, 1995 are
as follows (millions of dollars):
Voluntary early retirement program $65.7
Postretirement benefits other than pensions 31.9
Rate case expenses 1.5
$99.1
The PUC-jurisdictional portion of PP&L's 1994 voluntary early
retirement program costs will be recovered through rates over a five-year
period beginning September 28, 1995.
Postretirement benefits other than pensions includes $27.0 million
applicable to PUC-jurisdictional customers, which will be recovered through
rates over approximately 17 years beginning September 28, 1995. The
balance represents postretirement benefits other than pensions applicable
to PP&L's contractual agreements with other major electric utilities. PP&L
will recover these costs during the contract periods.
Rate case expenses represent non-payroll costs incurred for the
preparation of the recent base rate case applicable to PUC-jurisdictional
customers. These costs will be recovered through rates over a four-year
period beginning September 28, 1995.
See Note 3 for more details on "Rate Matters".
8. Workforce Reductions - PP&L
As part of its continuing efforts 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. Additionally, re-engineering efforts
led to the displacement and termination of 100 management employees. The
cost of severance benefits provided to these management and bargaining unit
employees reduced net income for the three and nine months ended September
30, 1995 by $8.3 million, or 5 cents per share of Resources' common stock,
and $10.4 million, or 7 cents per share of Resources' common stock,
respectively. Annual savings in operating expenses associated with this
reduction in employees are estimated to be approximately $12 million.
PP&L continues its ongoing re-engineering and cost reduction efforts,
which are expected to impact the size of PP&L's workforce. As a result of
these efforts, PP&L on November 13, 1995, announced that about 300
bargaining unit positions will be eliminated throughout its service
territory. Although no specific targets have been set, PP&L currently
expects that the present level of 6,730 full time employees will decline to
6,000 or fewer employees over the next few years. As the workforce
declines, additional costs may be incurred due to the reductions, in
amounts that are not currently determinable.
9. New Accounting Standard - Resources
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.
Resources does not expect the adoption of SFAS 121 to have a material
effect on its net income.
10. Fourth Quarter 1995 Events - PP&L
In October 1995, a PP&L subsidiary entered into an agreement to sell
one of its subsidiaries that owns coal mining assets. PP&L has determined
these assets will not be required for future operations. PP&L estimates
that after-tax income of approximately $24 million will be recorded in the
fourth quarter upon closing this transaction.
PP&L is reviewing the level of spare parts at its power plants and the
capitalized costs of a new information system. The potential write-off
from the above items is not yet determinable, but may eliminate a
substantial portion of the gain associated with the sale of the coal
assets.
11. 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
discussions below regarding the denial of plaintiff's motion for class
certification in the Fuel Oil Dealers' Litigation and environmental
matters.
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 September 30, 1995 was about $41.7 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 (Clean Air Act) 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 the Phase II limits, PP&L plans to purchase lower
sulfur coal, consume banked emission allowances and purchase additional
emission allowances instead of relying on flue gas desulfurization
equipment (FGD). PP&L's decision to not install FGD, with an estimated
capital cost of $413 million, on the two 750,000 kilowatt coal-fired
generating units at the Montour station represents a significant reduction
in capital expenditures.
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 expected 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. Expenditures to meet the 1999 requirements are
disclosed in the table of projected construction expenditures and discussed
in Management's Discussion and Analysis of Financial Condition and Results
of Operations under the caption "Financial Condition - Capital Expenditure
Requirements".
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.
PP&L currently estimates that additional capital expenditures and
operating costs for environmental compliance will be incurred beyond 2000
in amounts which are not now determinable but could be material.
The Pennsylvania Air Pollution Control Act implements the Clean Air
Act. The state legislation essentially requires that new state air
emission standards be no more stringent than federal standards. This
legislation is not expected to significantly affect PP&L's plans for
compliance with the Clean Air Act.
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 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
pursuing opportunities to beneficially use coal ash from the Brunner Island
station 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
requirements of the DEP regulations address these groundwater degradation
issues. PP&L has reviewed its remedial action plans with the DEP.
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. The
current Montour station NPDES permit contains very stringent limits for
certain toxic metals and increased monitoring requirements. Toxic
reduction studies are being conducted at the Montour station before the
permit limits become effective. Depending on the results of the studies,
additional water treatment facilities may be needed at the Montour station.
Improvements and upgrades are being planned for the Sunbury, Brunner Island
and Holtwood stations' 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 2000, 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 discussed
in the table of construction expenditures in the Management's Discussion
and Analysis of Financial Condition and Results of Operations under the
caption "Financial Condition - Capital Expenditure Requirements". PP&L
currently estimates that about $30 million of additional capital
expenditures could be required beyond 2000. 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 have been 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 September 30, 1995, PP&L had accrued $11.7 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 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 (PMDC), 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 nine
months ended September 30, 1995 to the comparable periods ended September
30, 1994.
The Consolidated Statements of Income reflect the results of past
operations and are 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
Comparison of Earnings
September 30,
3 Months Ended 9 Months Ended
1995 1994 1995 1994
Earnings per share - actual $0.55 $0.46 $1.48 $1.46
Weather variance (0.05) (0.02) 0.01 (0.10)
Earnings per share,
weather-normalized 0.50 0.44 1.49 1.36
Employee reduction programs:
Voluntary early retirement program-PUC (0.24) (0.24)
Other employee reductions 0.07 0.07
One-time adjustments:
Recovery of postretirement benefits
other than pensions-PUC (0.10) (0.10)
Disallowance of Susquehanna Unit No. 1
deferred operating and capital costs 0.13 0.13
Recovery of purchased power costs (0.04)
Recognition of deferred tax liabilities
relating to undeveloped coal
reserves 0.03 0.03
Expensing deferred PUC-jurisdictional
postretirement benefits - applicable
to 1993 0.04
Unrecovered purchased power costs _____ _____ _____ 0.06
Earnings Per Share-Normalized $0.39 $0.44 $1.34 $1.46
The reductions in earnings excluding weather, employee reduction
programs and one-time adjustments for the three and nine months ended
September 30, 1995 and 1994 were primarily due to the annual increase in
depreciation for the Susquehanna station and the depreciation of PP&L's
other new property placed in service.
Several key initiatives have been put in place to improve financial
performance. These initiatives include:
o A $671 million reduction in capital expenditures over the five-year
period 1996-2000, including reductions of $93 million and $220
million for 1996 and 1997, respectively; these reductions reflect,
among other things, a decision to not install flue gas
desulfurization equipment (FGD) at PP&L's Montour station;
o Except for common equity capital to be provided through sales of
common stock under the Dividend Reinvestment Plan (DRIP) by
Resources, PP&L expects to meet all of its construction
expenditures and debt maturities through internally generated funds
during the five-year period 1996-2000;
o A planned 8% ($56 million) reduction in operation and maintenance
costs by the year 2000; and
o Marketing and economic development activities to achieve an average
compound growth rate of about 2% annually in sales to service area
customers through the year 2000.
Resources and PP&L believe that the PUC's September 27, 1995 rate
decision (PUC decision) and these initiatives should result in financial
performance that will permit Resources to increase shareowner value,
including growth in earnings per share and in the dividend on common stock
over the long term. Actual sales growth and improvement in earnings and
financial performance will depend upon economic conditions, the levels of
consumption, the impact of increasing competition in the electric utility
industry, the effects of regulation and other factors. Additionally, PP&L
remains committed to a corporate objective of keeping its prices as stable
as possible and maintaining customer rates that compare favorably with
those of neighboring utilities.
See Financial Note 3 for detailed information about PP&L's recent
Pennsylvania Public Utility Commission (PUC) decision.
Electric Energy Sales - PP&L
System Sales
System, or service area, sales for the three months ended September
30, 1995 were approximately 8.1 billion kwh, an increase of 368 million
kwh, or 4.7%, over the three months ended September 30, 1994. Sales for
the third quarter of 1995 to residential, commercial, and industrial
customers increased 6.9%, 5.3%, and 2.7%, respectively, over the comparable
period in 1994.
System sales were approximately 24.7 billion kwh for the nine months
ended September 30, 1995, essentially unchanged from the nine months ended
September 30, 1994. Sales in the residential customer category were lower
for the nine months ended September 30, 1995 than for the comparable period
in 1994, primarily due to the extreme cold weather in the first quarter of
1994 compared to milder weather in the first quarter of 1995. However,
sales in the commercial and industrial customer categories were higher in
the first nine months of 1995 than in the comparable period in 1994.
Industrial sales, which are not affected by weather conditions, increased
in each of the first three quarters of 1995 and each quarter of 1994.
Industrial sales are an important indicator of the economic health of
PP&L's service area.
Weather-normalized system sales totaled 24.7 billion kwh for the nine
months ended September 30, 1995. This represents an increase of 559
million kwh, or 2.3%, over the same period in 1994. Weather-normalized
sales to residential, commercial, and industrial customers were higher in
the first nine months of 1995 than in the first nine months of 1994.
Sales to Other Major Electric Utilities
For the three months ended September 30, 1995, contractual sales to
other major utilities were 2.3 billion kwh, 31.1% higher than the
comparable period in 1994, while sales to Pennsylvania-New Jersey-Maryland
Interconnection Association (PJM) were 915 million kwh, or 40.4% lower than
the comparable period in 1994. These fluctuations were primarily due to an
increase in direct two-party sales to other utilities versus sales to the
PJM.
Contractual sales to other major utilities for the nine months ended
September 30, 1995 were 5.8 billion kwh, 23.7% higher than the comparable
period in 1994, while sales to the PJM for the nine months ended September
30, 1995, were 1.9 billion kwh, 23.3% lower than the comparable period in
1994. These changes were primarily due to an increase in direct two-party
sales to other utilities versus sales to PJM. See Financial Note 4 for a
discussion on PP&L's long-term contracts with other major utilities.
Rate Matters - PP&L
On September 27, 1995, the PUC issued a final order with respect to
the base rate case filed by PP&L on December 30, 1994.
PP&L's request to increase base rates, which was its first in ten
years, sought to increase PUC-jurisdictional revenues by $261.6 million, or
about 11.7%. The PUC decision in the rate case grants PP&L a $107 million
increase based on test year conditions. An allocation of a $22 million
credit to base rates from the Energy Cost Rate (ECR) will produce an $85
million, or about 3.8%, increase in PUC-jurisdictional revenues effective
September 28, 1995.
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
Changes in total operating revenues were attributable to the
following:
September 30, 1995 vs. September 30, 1994
(Millions of Dollars)
Three Months Nine Months
Ended Ended
Sales volume & sales mix effect $16.3 $ 28.7
Weather effect 8.8 (37.1)
Energy revenues 3.7 (43.0)
Replacement power costs - 25.4
Reduction in PA corporate income tax (2.9) (10.9)
Sales to other major utilities 14.3 12.6
PJM energy sales (13.0) (21.0)
Capacity-related and transmission
entitlement transactions (7.1) (9.0)
Other 1.0 2.4
$21.1 $(51.9)
Lower energy revenues of $43.0 million for the nine months ended
September 30, 1995, were partially offset by a $25.4 million increase in
revenues due to replacement power costs, which was the result of a $15.7
million decrease in revenues in the first quarter of 1994 for the
unrecovered replacement power costs and a $9.7 million increase in revenues
in the first quarter of 1995 for the partial recovery of these replacement
power costs. The net effect on energy costs is a $17.6 million decrease in
1995 from the comparable period in 1994.
Revenues from capacity-related sales and transmission entitlements for
the three and nine months ended September 30, 1995, were lower than the
comparable periods in 1994 due to the end of one of PP&L's long-term
contracts for capacity credit sales.
Fuel Expense - PP&L
Fuel expense for the three months ended September 30, 1995 increased
$8.2 million, 6.9% from the comparable period in 1994 due to:
Components of Steam Stations Combustion
Fuel Cost - Coal- Oil- Nuclear- Turbines &
Thousands of Dollars Fired Fired Fired Diesels Total
Higher (Lower) Output $ 8,917 $ 7,004 $(1,611) $1,052 $15,362
Higher (Lower) Price
of Fuel (2,457) (1,551) (3,183) 5 (7,186)
$ 6,460 $ 5,453 $(4,794) $1,057 $ 8,176
Fuel expense for the nine months ended September 30, 1995 decreased
$38.6 million, 10.6% from the comparable period in 1994 due to:
Components of Steam Stations Combustion
Fuel Cost - Coal- Oil- Nuclear- Turbines &
Thousands of Dollars Fired Fired Fired Diesels Total
Higher (Lower) Output $ 9,903 $(40,533) $ 7,033 $(1,004) $(24,601)
Higher (Lower) Price
of Fuel (7,021) 2,928 (9,920) 23 (13,990)
$ 2,882 $(37,605) $(2,887) $ (981) $(38,591)
Total generation for the three and nine months ended September 30,
1995 increased 4.5% and 3.5% from the comparable periods in 1994,
respectively. The increased generation was due to higher system sales for
the three months ended September 30, 1995 and lower power purchases for the
nine months ended September 30, 1995.
Other Operation, Maintenance and Depreciation Expenses - PP&L
Other operating expenses decreased $8.1 million and $11.4 million,
respectively, for the three and nine months ended September 30, 1995 over
the comparable periods in 1994. These decreases were primarily due to the
regulatory effects of accounting for Statement of Financial Accounting
Standards (SFAS) 106, "Employees' Accounting for Postretirement Benefits
Other Than Pensions", as discussed in 'Post Retirement Benefits Other Than
Pensions'. Excluding these effects, other operating expense increased
$19.2 million and $32.3 million, respectively, for the three and nine
months ended September 30, 1995.
For the three months ended September 30, 1995, $14.3 million of the
increase was applicable to the costs associated with PP&L's workforce
reductions while another $6.5 million was due to its increased re-
engineering efforts and computer network support costs.
The increase for the nine months ended September 30, 1995 was due to
$17.7 million applicable to the costs associated with PP&L's workforce
reductions with an additional $17.0 million applicable to increased costs
for computer network support which should increase future productivity.
Maintenance expense decreased $4.7 and $10.0 million, respectively,
for the three and nine months ended September 30, 1995. This decrease is
primarily due to PP&L's continuing efforts to reduce maintenance costs and
achieve longer operating cycles at selected fossil-fueled plants.
Depreciation expense increased $8.7 million and $26.1 million,
respectively, for the three and nine months ended September 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. The PUC decision allows PP&L to levelize the annual amount of
depreciation on pre-1989 property for its Susquehanna station at $173
million for the period October 1, 1995 through December 31, 1998. This
levelization eliminates the previously scheduled annual increase in
depreciation expense resulting from the modified sinking fund method of
depreciation. As part of its proposal to levelize depreciation, PP&L
agreed to automatically reduce annual Susquehanna station depreciation on
January 1, 1999 with a related reduction in base rates to reflect the
return to straight line depreciation.
PP&L continues its ongoing re-engineering and cost reduction efforts,
which are expected to impact the size of PP&L's workforce. As a result of
these efforts, PP&L on November 13, 1995, announced that about 300
bargaining unit positions will be eliminated throughout its service
territory. Although no specific targets have been set, PP&L currently
expects that the present level of 6,730 full time employees will decline to
6,000 or fewer employees over the next few years. As the workforce
declines, additional costs may be incurred due to the reductions, in
amounts that are not currently determinable. See Financial Note 8 for
detailed information on workforce reductions.
Postretirement Benefits Other Than Pensions - PP&L
As a result of the PUC decision, PP&L recorded in September 1995 a
$27.0 million credit to income that represents the amount resulting from
the adoption of SFAS 106 that would have been deferred from January 1, 1993
through September 30, 1995 but for a 1994 Pennsylvania Commonwealth Court
(Commonwealth Court) decision [now awaiting possible Pennsylvania Supreme
Court review] which reversed a PUC order and ruled that PP&L could not
recover these deferred costs. At that time, PP&L began to expense the
increased costs applicable to operations that would otherwise have been
deferred and wrote off such costs deferred from January 1, 1993.
For the three and nine months ended September 30, 1995, retiree
benefit costs charged to operating expense decreased $27.3 million and
$43.7 million, respectively, from the comparable periods in 1994. The
change for the third quarter is primarily due to the PUC decision in
September 1995 while the decrease for the nine month periods is due to the
PUC decision and the charge of $17.0 million ($10.8 million of which is
applicable to 1993) in the second quarter of 1994 as a result of the
Commonwealth Court decision.
See Financial Notes 3 and 7 for more details on the PUC decision and
"New Regulatory Assets - PP&L".
Income Taxes - Resources/PP&L
For the three months ended September 30, 1995 income tax expense
increased $44.4 million, or 79.3%, over the comparable period in 1994. This
is primarily due to an increase in Resources' pre-tax income of $61.6
million, expensing deferred tax assets of $11.4 million as a result of the
PUC decision, and recognizing deferred tax liabilities of $4.1 million
relative to undeveloped coal reserves. Partially offsetting these
increases was a $1.2 million decrease resulting from the reduction of the
Pennsylvania corporate net income tax rate from 11.99% to 9.99%.
For the nine months ended September 30, 1995 income tax expense
increased $36.6 million, or 20.1%, over the comparable period in 1994.
This resulted primarily from an increase in Resources' pre-tax income of
$46.0 million and the one-time adjustments related to the PUC decision and
undeveloped coal reserves described above. Partially offsetting these
increases was a $5.9 million decrease resulting from the reduction of the
Pennsylvania corporate net income tax rate.
See Financial Note 3 for more details on "Rate Matters".
Voluntary Early Retirement Program - PP&L
In the PUC decision, PP&L was permitted to recover the PUC-
jurisdictional portion of the cost, or $65.7 million, of its 1994 voluntary
early retirement program in customer rates over a period of five years.
The estimated annual savings of $35 million were also reflected in the
allowed base rates.
See Financial Notes 3 and 7 for more details on the PUC decision and
"New Regulatory Assets - PP&L".
Other Income and (Deductions) - Other-Net - Resources
'Other-net' decreased for the three and nine months ended September
30, 1995, $20.5 and $15.1 million, respectively, compared to the same
periods in 1994. These decreases are primarily due to a $10.5 million
charge to expense associated with evaluating and responding to PECO Energy
Company's unsolicited proposal to acquire Resources and the $8.9 million
write-off of the Susquehanna Unit No. 1 deferred operating and capital
costs which were disallowed in the PUC decision. Partially offsetting
these decreases was an increase of $2.9 million in the equity earnings in
PP&L's subsidiaries for the nine months ended September 30, 1995 over the
comparable period in 1994.
Fourth Quarter 1995 Events - PP&L
In October 1995, a PP&L subsidiary entered into an agreement to sell
one of its subsidiaries that owns coal mining assets. PP&L has determined
these assets will not be required for future operations. PP&L estimates
that after-tax income of approximately $24 million will be recorded in the
fourth quarter upon closing this transaction.
PP&L is reviewing the level of spare parts at its power plants and the
capitalized costs of a new information system. The potential write-off
from the above items is not yet determinable, but may eliminate a
substantial portion of the gain associated with the sale of the coal
assets.
Financial Condition
Reduction in Capital Expenditure Requirements - PP&L
The schedule below shows PP&L's current capital expenditure
projections for the years 1995-2000. This schedule reflects the $671
million reduction in capital expenditures over the period 1996 through
2000, as previously discussed.
Capital Expenditure Requirements (a)
------------Projected---------------
1995 1996 1997 1998 1999 2000
(Millions of Dollars)
Construction expenditures
Generating facilities $102 $ 80 $ 63 $ 68 $ 56 $ 61
Transmission and distribution
facilities 167 146 140 142 145 150
Environmental 42 33 25 33 25 3
Other 60 49 30 22 18 17
371 308 258 265 244 231
Nuclear fuel owned and leased 54 91 64 64 65 66
Other leased property 39 7 7 7 8 8
Total $464 $406 $329 $336 $317 $305
(a) Construction expenditures include Allowance for Funds Used During
Construction which is expected to be less than $20 million in each of
the years 1995-2000.
A significant portion of the reduction in construction expenditures
during this period reflects PP&L's decision to not install flue gas
desulfurization equipment (FGD) on the two 750,000 kilowatt coal-fired
generating units at the Montour station with an estimated capital cost of
$413 million. Instead of relying on the FGD to achieve compliance with the
Phase II requirements of the Federal Clean Air Act Amendments of 1990
(Clean Air Act), PP&L plans to purchase low sulfur coal, consume banked
emission allowances and purchase additional emission allowances.
PP&L also has reduced its projected construction expenditures for
transmission and distribution facilities during this period by about $120
million and reduced its expenditures for construction improvements at
fossil-fueled and hydro generating stations by $78 million from the amounts
included in the 1995 Construction Budget. Reductions in construction
expenditures previously expected to be spent for the development of a new
customer information system and other projects over the 1996-2000 period
account for another $60 million of reductions in capital spending.
Financing Programs - Resources/PP&L
Resources will continue to obtain common equity capital through the
operation of the DRIP and PP&L's Employee Stock Ownership Plan (ESOP).
From January through October 1995, Resources obtained $72.2 million of
common equity through the DRIP. It is expected that the DRIP will be
continued during the years 1996 and 1997, resulting in proceeds of about
$70 million annually, and that the ESOP will be continued during the years
1996 through 2000, with expected proceeds of about $8 million annually.
In August 1995, PP&L issued $55 million of First Mortgage Bonds, 6.15%
Pollution Control Bonds Series K due 2029, that provided for the refunding
of $55 million First Mortgage Bonds, 9.375% Pollution Control Bonds Series
G, on September 1, 1995. In addition, PP&L plans to issue up to $250
million of first mortgage bonds in 1995 to retire higher cost bonds
purchased in the open market earlier in 1995 and to reduce its short-term
debt.
PP&L also anticipates the issuance of $116 million of unsecured notes
in early 1996 in order to redeem higher-cost bonds through the maintenance
and replacement fund provisions of PP&L's Mortgage.
Except for funds derived from sales of common stock by Resources, as
described above, Resources expects that internally generated funds (after
provision for dividends) will be adequate to meet its capital requirements
and $415 million of debt maturities for the years 1996-2000. PP&L has no
preferred stock sinking fund requirements during 1996-2000.
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 September 30, 1995 under these
arrangements.
Financial Indicators - Resources
The ratio of pre-tax income to interest charges was 3.5 and 3.3,
respectively, for the nine months ended September 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
145% at September 30, 1995 compared with 123% at September 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
discussions in Financial Note 11, "Commitments and Contingent Liabilities",
regarding the denial of plaintiff's motion for class certification in the
Fuel Oil Dealers' Litigation and environmental matters.
Increasing Competition
See "Earnings-Resources" for a discussion of PP&L's strategic
initiatives to improve financial performance and enhance its competitive
position.
Regulatory Developments - PP&L
In May 1994, the PUC ordered a generic investigation to examine the
role of competition in Pennsylvania's electric utility industry. The
purpose of the investigation is to solicit input regarding the potential
impact of competition on the state's electric utilities and their
customers. The first phase of the investigation was a paper proceeding to
gather and analyze data at both the wholesale and retail levels of the
electric utility industry. Interested parties filed 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 submitted comments in response to the PUC
order.
The second phase of the investigation will involve hearings to accept
testimony from interested parties. These hearings, commencing in December
1995, will be presided over by the PUC Commissioners and an Administrative
Law Judge.
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, prudent and verifiable stranded costs" incurred as a result of
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 were due by August 7, 1995. PP&L filed comments on
the NOPR.
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 subsidiary of Resources. PMDC will engage in
unregulated business activities through investments in world-wide power
markets. On July 13, 1995, PMDC invested $10.1 million as part of a
consortium that is part owner of an electric generating company in Bolivia
and , on October 11, 1995, committed to invest up to $10 million as a
partner in a fund which will invest in Latin American generation,
transmission and distribution business.
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.
Proposed Acquisition by
PECO Energy Company
On August 14, 1995, PECO publicly announced a proposal to acquire
Resources. The PECO proposal was made to the Board of Directors of
Resources. Under this proposal, each share of Resources common stock would
have been converted into 0.865 of a share of PECO common stock.
On September 5, 1995, the Resources' Board of Directors, after due
consideration and review of the PECO proposal, unanimously voted to reject
the PECO proposal. The Resources' Board of Directors concluded that the
PECO proposal was not in the best interests of Resources, its shareowners,
customers, employees or the communities it serves.
On October 23, 1995, PECO made a revised acquisition proposal for
consideration by the Resources' Board of Directors. Under the revised
proposal, Resources' shareowners would have received 0.921 shares of PECO
common stock for each share of outstanding Resources' common stock which
they owned. PECO stated that the revised proposal was its "final offer."
On November 1, 1995, Resources' Board of Directors, after a comprehensive
analysis, unanimously voted to reject PECO's revised proposal. The Board
concluded that PECO's revised proposal was not in the best interests of
Resources and its shareowners, customers, employees or the communities it
serves. Later that same day, PECO withdrew its proposal to acquire
Resources and stated that it would take no further action to pursue such a
transaction.
Certain Litigation
On October 2, 1995, a shareowner of Resources sent a letter to the
Board (Demand Letter) which, among other things, requested that Resources
"commence legal proceedings" against each of the directors "for failing to
prudently exercise [their] fiduciary duties to Resources and its
shareholders" in regard to the PECO proposal. Resources' Board considered
the Demand Letter at meetings held on October 25 and November 1, 1995, and
determined unanimously in the exercise of its business judgment that
commencement by Resources of legal proceedings against the directors as
requested in the Demand Letter would not be in the best interests of
Resources. On November 1, 1995, Resources filed an action for declaratory
judgment in the Court of Common Pleas for Lehigh County, Pennsylvania
against this shareowner. The action seeks, among other things, a judgment
that the Resources Board's determination to refuse the shareowner's demand
was a valid exercise of its business judgment.
<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 11 to Financial Statements for information
concerning two complaints filed against PP&L by fuel oil dealers alleging
that PP&L's promotion of electric heat pumps and off-peak storage systems
had violated and continues to violate the federal antitrust laws.
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Proposed Acquisition by PECO Energy
Company - Certain Litigation" for information concerning a Demand Letter
sent to the Resources Board by a shareowner and a declaratory judgment
action by Resources.
In August 1995, Jersey Central Power & Light Company (JCP&L) filed a
complaint against the Company with the Federal Energy Regulatory Commission
(FERC). JCP&L purchases 945 MW of capacity and energy from PP&L pursuant
to an agreement that was accepted by FERC in 1984. (Under the terms of
that agreement, beginning on January 1, 1996, the amount of capacity and
energy purchased by JCP&L decreases yearly by 189 MW until the contract
terminates on December 31, 1999). In its complaint, JCP&L alleges that
PP&L inappropriately allocated certain costs to JCP&L related to
Susquehanna depreciation, auxiliary facilities and services, PP&L's
voluntary early retirement program, environmental liability reserves, and
other items. JCP&L also alleges that it should receive Clean Air Act
emission allowances from PP&L. JCP&L is seeking refunds (with interest) in
an unspecified amount, an amendment to the agreement, and corrections by
PP&L of its billing practices. On September 18, 1995, PP&L filed an answer
denying JCP&L's allegations and requesting that FERC dismiss the complaint.
PP&L cannot predict the final outcome of this proceeding.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 - Copy of the Sixty-fourth Supplemental Indenture, dated as of
August 1, 1995, to PP&L's Mortgage and Deed of Trust, dated as of
October 1, 1945, pursuant to which PP&L's First Mortgage Bonds,
Pollution Control Series K, were issued.
27 - Financial Data Schedule
(b) Reports on Form 8-K
Report Dated October 6, 1995
Item 5. Other Events
Information regarding the Pennsylvania Public Utility Commission's
final order with respect to the base rate case filed by PP&L.
<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: November 14, 1995
R. E. Hill
Senior Vice President-Financial and
Treasurer (PP&L Resources, Inc.)
Senior Vice President-Financial
(Pennsylvania Power & Light Company)
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 September 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,142,204
<OTHER-PROPERTY-AND-INVEST> 344,677
<TOTAL-CURRENT-ASSETS> 666,985
<TOTAL-DEFERRED-CHARGES> 1,316,305
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,470,171
<COMMON> 1,584
<CAPITAL-SURPLUS-PAID-IN> 1,488,692
<RETAINED-EARNINGS> 1,060,137
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,550,413
295,000
171,375
<LONG-TERM-DEBT-NET> 2,827,356
<SHORT-TERM-NOTES> 14,887
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 120,000
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 150,734
<LEASES-CURRENT> 79,396
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,231,010
<TOT-CAPITALIZATION-AND-LIAB> 9,470,171
<GROSS-OPERATING-REVENUE> 2,018,947
<INCOME-TAX-EXPENSE> 210,171
<OTHER-OPERATING-EXPENSES> 1,363,956
<TOTAL-OPERATING-EXPENSES> 1,574,127
<OPERATING-INCOME-LOSS> 444,820
<OTHER-INCOME-NET> (21,302)
<INCOME-BEFORE-INTEREST-EXPEN> 423,518
<TOTAL-INTEREST-EXPENSE> 169,473
<NET-INCOME> 254,045
20,826
<EARNINGS-AVAILABLE-FOR-COMM> 233,219
<COMMON-STOCK-DIVIDENDS> 197,209
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 538,897
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.48
</TABLE>
<PAGE>
PENNSYLVANIA POWER & LIGHT COMPANY
TO
BANKERS TRUST COMPANY
(successor to Morgan Guaranty Trust Company of New York,
formerly Guaranty Trust Company of New York)
As Trustee under Pennsylvania Power & Light
Company's Mortgage and Deed of Trust,
Dated as of October 1, 1945
_____________________________
Sixty-Fourth Supplemental Indenture
Providing among other things for
First Mortgage Bonds, Pollution Control Series K
_____________________________
Dated as of August 1, 1995
<PAGE>
SIXTY-FOURTH SUPPLEMENTAL INDENTURE
SIXTY-FOURTH SUPPLEMENTAL INDENTURE, dated as of the 1st day
of August, 1995 made and entered into by and between PENNSYLVANIA
POWER & LIGHT COMPANY, a corporation of the Commonwealth of
Pennsylvania, whose address is Two North Ninth Street, Allentown,
Pennsylvania 18101 (hereinafter sometimes called the Company),
and BANKERS TRUST COMPANY (successor to MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, formerly GUARANTY TRUST COMPANY OF NEW
YORK), a corporation of the State of New York, whose address is 4
Albany Street, New York, New York 10006 (hereinafter sometimes
called the Trustee), as Trustee under the Mortgage and Deed of
Trust, dated as of October 1, 1945 (hereinafter called the
Mortgage and, together with any indentures supplemental thereto,
hereinafter called the Indenture), which Mortgage was executed
and delivered by Pennsylvania Power & Light Company to secure the
payment of bonds issued or to be issued under and in accordance
with the provisions of the Mortgage, reference to which said
Mortgage is hereby made, this instrument (hereinafter called the
Sixty-fourth Supplemental Indenture) being supplemental thereto;
WHEREAS, said Mortgage was or is to be recorded in various
Counties in the Commonwealth of Pennsylvania, which Counties
include or will include all Counties in which this Sixty-fourth
Supplemental Indenture is to be recorded; and
WHEREAS, an instrument, dated August 5, 1994, was executed
by the Company appointing Bankers Trust Company as Trustee in
succession to said Morgan Guaranty Trust Company of New York
(resigned) under the Indenture, and by Bankers Trust Company
accepting said appointment, which instrument was or is to be
recorded in various Counties in the Commonwealth of Pennsylvania;
and
WHEREAS, by the Mortgage the Company covenanted that it
would execute and deliver such supplemental indenture or
indentures and such further instruments and do such further acts
as might be necessary or proper to carry out more effectually the
purposes of the Indenture and to make subject to the lien of the
Indenture any property thereafter acquired and intended to be
subject to the lien thereof; and
WHEREAS, the Company executed and delivered, as supplements
to the Mortgage, the following supplemental indentures:
Designation Dated as of
First Supplemental Indenture July 1, 1947
Second Supplemental Indenture December 1, 1948
Third Supplemental Indenture February 1, 1950
Fourth Supplemental Indenture March 1, 1953
Fifth Supplemental Indenture August 1, 1955
Sixth Supplemental Indenture December 1, 1961
Seventh Supplemental Indenture March 1, 1964
Eighth Supplemental Indenture June 1, 1966
Ninth Supplemental Indenture November 1, 1967
Tenth Supplemental Indenture December 1, 1967
Eleventh Supplemental Indenture January 1, 1969
Twelfth Supplemental Indenture June 1, 1969
Thirteenth Supplemental Indenture March 1, 1970
Fourteenth Supplemental Indenture February 1, 1971
Fifteenth Supplemental Indenture February 1, 1972
Sixteenth Supplemental Indenture January 1, 1973
Seventeenth Supplemental Indenture May 1, 1973
Eighteenth Supplemental Indenture April 1, 1974
Nineteenth Supplemental Indenture October 1, 1974
Twentieth Supplemental Indenture May 1, 1975
Twenty-first Supplemental Indenture November 1, 1975
Twenty-second Supplemental Indenture December 1, 1976
Twenty-third Supplemental Indenture December 1, 1977
Twenty-fourth Supplemental Indenture April 1, 1979
Twenty-fifth Supplemental Indenture April 1, 1980
Twenty-sixth Supplemental Indenture June 1, 1980
Twenty-seventh Supplemental Indenture June 1, 1980
Twenty-eighth Supplemental Indenture December 1, 1980
Twenty-ninth Supplemental Indenture February 1, 1981
Thirtieth Supplemental Indenture February 1, 1981
Thirty-first Supplemental Indenture September 1, 1981
Thirty-second Supplemental Indenture April 1, 1982
Thirty-third Supplemental Indenture August 1, 1982
Thirty-fourth Supplemental Indenture October 1, 1982
Thirty-fifth Supplemental Indenture November 1, 1982
Thirty-sixth Supplemental Indenture February 1, 1983
Thirty-seventh Supplemental Indenture November 1, 1983
Thirty-eighth Supplemental Indenture March 1, 1984
Thirty-ninth Supplemental Indenture April 1, 1984
Fortieth Supplemental Indenture August 15, 1984
Forty-first Supplemental Indenture December 1, 1984
Forty-second Supplemental Indenture June 15, 1985
Forty-third Supplemental Indenture October 1, 1985
Forty-fourth Supplemental Indenture January 1, 1986
Forty-fifth Supplemental Indenture February 1, 1986
Forty-sixth Supplemental Indenture April 1, 1986
Forty-seventh Supplemental Indenture October 1, 1986
Forty-eighth Supplemental Indenture March 1, 1988
Forty-ninth Supplemental Indenture June 1, 1988
Fiftieth Supplemental Indenture January 1, 1989
Fifty-first Supplemental Indenture October 1, 1989
Fifty-second Supplemental Indenture July 1, 1991
Fifty-third Supplemental Indenture May 1, 1992
Fifty-fourth Supplemental Indenture November 1, 1992
Fifty-fifth Supplemental Indenture February 1, 1993
Fifty-sixth Supplemental Indenture April 1, 1993
Fifty-seventh Supplemental Indenture June 1, 1993
Fifty-eighth Supplemental Indenture October 1, 1993
Fifty-ninth Supplemental Indenture February 15, 1994
Sixtieth Supplemental Indenture March 1, 1994
Sixty-first Supplemental Indenture March 15, 1994
Sixty-second Supplemental Indenture September 1, 1994
Sixty-third Supplemental Indenture October 1, 1994
which supplemental indentures were or are to be recorded in
various Counties in the Commonwealth of Pennsylvania; and
WHEREAS, the Company executed and delivered its Supplemental
Indenture, dated July 1, 1954, creating a security interest in
certain personal property of the Company, pursuant to the
provisions of the Pennsylvania Uniform Commercial Code, as a
supplement to the Mortgage, which Supplemental Indenture was
filed in the Office of the Secretary of the Commonwealth of
Pennsylvania on July 1, 1954, and all subsequent supplemental
indentures were so filed; and
WHEREAS, in addition to the property described in the
Mortgage, as heretofore supplemented, the Company has acquired
certain other property, rights and interests in property; and
WHEREAS, the Company has heretofore issued, in accordance
with the provisions of the Mortgage, as supplemented, the
following series of First Mortgage Bonds:
Principal Principal
Amount Amount
Series Issued Outstanding
3% Series due 1975 $93,000,000 None
2-3/4% Series due 1977 20,000,000 None
3-1/4% Series due 1978 10,000,000 None
2-3/4% Series due 1980 37,000,000 None
3-1/2% Series due 1983 25,000,000 None
3-3/8% Series due 1985 25,000,000 None
4-5/8% Series due 1991 30,000,000 None
4-5/8% Series due 1994 30,000,000 None
5-5/8% Series due 1996 30,000,000 $30,000,000
6-3/4% Series due 1997 30,000,000 30,000,000
6-1/2% Series due 1972 15,000,000 None
7% Series due 1999 40,000,000 40,000,000
8-1/8% Series due June 1, 1999 40,000,000 40,000,000
9% Series due 2000 50,000,000 None
7-1/4% Series due 2001 60,000,000 60,000,000
7-5/8% Series due 2002 75,000,000 75,000,000
7-1/2% Series due 2003 80,000,000 80,000,000
Pollution Control Series A 28,000,000 None
9-1/4% Series due 2004 80,000,000 None
10-1/8% Series due 1982 100,000,000 None
9-3/4% Series due 2005 125,000,000 None
9-3/4% Series due
November 1, 2005 100,000,000 None
8-1/4% Series due 2006 150,000,000 None
8-1/2% Series due 2007 100,000,000 None
9-7/8% Series due 1983-1985 100,000,000 None
15-5/8% Series due 2010 100,000,000 None
11-3/4% Series due 1984 30,000,000 None
Pollution Control Series B 70,000,000 None
Pollution Control Series C 20,000,000 None
14% Series due
December 1, 1990 125,000,000 None
15% Series due 1984-1986 50,000,000 None
14-3/4% Series A due 1986 30,000,000 None
14-3/4% Series B due 1986 20,000,000 None
16-1/2% Series due 1987-1991 52,000,000 None
16-1/8% Series due 1992 100,000,000 None
16-1/2% Series due 1986-1990 92,500,000 None
13-1/4% Series due 2012 $100,000,000 None
Pollution Control Series D 70,000,000 None
12-1/8% Series due 1989-1993 50,000,000 None
13-1/8% Series due 2013 125,000,000 None
Pollution Control Series E 37,750,000 None
13-1/2% Series due 1994 125,000,000 None
Pollution Control Series F 115,500,000 None
12-3/4% Series due 2014 125,000,000 None
Pollution Control Series G 55,000,000 $55,000,000
12% Series due 2015 125,000,000 None
10-7/8% Series due 2016 125,000,000 None
9-5/8% Series due 1996 125,000,000 None
9% Series due 2016 125,000,000 None
9-1/2% Series due 2016 125,000,000 None
9-1/4% Series due 1998 125,000,000 None
9-5/8% Series due 1998 125,000,000 None
10% Series due 2019 125,000,000 None
9-1/4% Series due 2019 250,000,000 250,000,000
9-3/8% Series due 2021 150,000,000 150,000,000
7-3/4% Series due 2002 150,000,000 150,000,000
8-1/2% Series due 2022 150,000,000 150,000,000
Pollution Control Series H 90,000,000 90,000,000
6-7/8% Series due 2003 100,000,000 100,000,000
7-7/8% Series due 2023 200,000,000 200,000,000
5-1/2% Series due 1998 150,000,000 150,000,000
6-1/2% Series due 2005 125,000,000 125,000,000
6% Series due 2000 125,000,000 125,000,000
6-3/4% Series due 2023 150,000,000 150,000,000
Pollution Control Series I 53,250,000 53,250,000
6.55% Series due 2006 150,000,000 150,000,000
7.30% Series due 2024 150,000,000 150,000,000
6-7/8% Series due 2004 150,000,000 150,000,000
7-3/8% Series due 2014 100,000,000 100,000,000
Pollution Control Series J 115,500,000 115,500,000
7.70% Series due 2009 200,000,000 200,000,000
which bonds are also sometimes called bonds of the First through
Seventy-first Series, respectively; and
WHEREAS, Section 8 of the Mortgage provides that the form of
each series of bonds (other than the First Series) issued
thereunder shall be established by Resolution of the Board of
Directors of the Company and that the form of such series, as
established by said Board of Directors, shall specify the
descriptive title of the bonds and various other terms thereof,
and may also contain such provisions not inconsistent with the
provisions of the Indenture as the Board of Directors may, in its
discretion, cause to be inserted therein expressing or referring
to the terms and conditions upon which such bonds are to be
issued and/or secured under the Indenture; and
WHEREAS, Section 120 of the Mortgage provides, among other
things, that any power, privilege or right expressly or impliedly
reserved to or in any way conferred upon the Company by any
provision of the Indenture, whether such power, privilege or
right is in any way restricted or is unrestricted, may be in
whole or in part waived or surrendered or subjected to any
restriction if at the time unrestricted or to additional
restriction if already restricted, and the Company may enter into
any future covenants, limitations or restrictions for the benefit
of any one or more series of bonds issued thereunder, or the
Company may cure any ambiguity contained therein or in any
supplemental indenture or may establish the terms and provisions
of any series of bonds other than said First Series, by an
instrument in writing executed and acknowledged by the Company in
such manner as would be necessary to entitle a conveyance of real
estate to record in all of the States in which any property at
the time subject to the lien of the Indenture shall be situated;
and
WHEREAS, the Company now desires to create a new series of
bonds and to add to its covenants and agreements contained in the
Mortgage, as heretofore supplemented, certain other covenants and
agreements to be observed by it and to alter and amend in certain
respects the covenants and provisions contained in the Mortgage;
and
WHEREAS, the execution and delivery by the Company of this
Sixty-fourth Supplemental Indenture, and the terms of the bonds
of the Seventy-second Series, hereinafter referred to, have been
duly authorized by the Board of Directors of the Company by
appropriate Resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That Pennsyl-
vania Power & Light Company, in consideration of the premises and
of One Dollar to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof is
hereby acknowledged, and in further evidence of assurance of the
estate, title and rights of the Trustee and in order further to
secure the payment both of the principal of and interest and
premium, if any, on the bonds from time to time issued under the
Indenture, according to their tenor and effect and the
performance of all the provisions of the Indenture (including any
modification made as in the Mortgage provided) and of said bonds,
hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms (subject,
however, to Excepted Encumbrances as defined in Section 6 of the
Mortgage) unto Bankers Trust Company, as Trustee under the
Indenture, and to its successor or successors in said trust, and
to said Trustee and its successors and assigns forever, all
property, real, personal and mixed, of the kind or nature
specifically mentioned in the Mortgage, as heretofore
supplemented, or of any other kind or nature, acquired by the
Company after the date of the execution and delivery of the
Sixty-third Supplemental Indenture (except any herein or in the
Mortgage, as heretofore supplemented, expressly excepted and
except any which may not lawfully be mortgaged or pledged under
the Indenture), now owned or, subject to the provisions of
Section 87 of the Mortgage, hereafter acquired by the Company (by
purchase, consolidation, merger, donation, construction, erection
or in any other way) and wheresoever situated, including (without
in anywise limiting or impairing by the enumeration of the same
the scope and intent of the foregoing) all lands, power sites,
flowage rights, water rights, water locations, water
appropriations, ditches, flumes, reservoirs, reservoir sites,
canals, raceways, dams, dam sites, aqueducts, and all other
rights or means for appropriating, conveying, storing and
supplying water; all rights of way and roads; all plants for the
generation of electricity by steam, water and/or other power; all
power houses, gas plants, street lighting systems, standards and
other equipment incidental thereto, telephone, radio and
television systems, air-conditioning systems and equipment
incidental thereto, water works, water systems, steam heat and
hot water plants, substations, lines, service and supply systems,
bridges, culverts, tracks, ice or refrigeration plants and
equipment, offices, buildings and other structures and the
equipment thereof; all machinery, engines, boilers, dynamos,
electric, gas and other machines, regulators, meters,
transformers, generators, motors, electrical, gas and mechanical
appliances, conduits, cables, water, steam heat, gas or other
pipes, gas mains and pipes, service pipes, fittings, valves and
connections, pole and transmission lines, wires, cables, tools,
implements, apparatus, furniture and chattels; all municipal and
other franchises, consents or permits; all lines for the
transmission and distribution of electric current, gas, steam
heat or water for any purpose including towers, poles, wires,
cables, pipes, conduits, ducts and all apparatus for use in
connection therewith; all real estate, lands, easements,
servitudes, licenses, permits, franchises, privileges, rights of
way and other rights in or relating to real estate or the
occupancy of the same and (except as herein or in the Mortgage,
as heretofore supplemented, expressly excepted) all the right,
title and interest of the Company in and to all other property of
any kind or nature appertaining to and/or used and/or occupied
and/or enjoyed in connection with any property hereinbefore or in
the Mortgage, as heretofore supplemented, described.
TOGETHER with all and singular the tenements, hereditaments,
prescriptions, servitudes, and appurtenances belonging or in
anywise appertaining to the aforesaid property or any part
thereof, with the reversion and reversions, remainder and
remainders and (subject to the provisions of Section 57 of the
Mortgage) the tolls, rents, revenues, issues, earnings, income,
product and profits thereof, and all the estate, right, title and
interest and claim whatsoever, at law as well as in equity, which
the Company now has or may hereafter acquire in and to the
aforesaid property and franchises and every part and parcel
thereof.
IT IS HEREBY AGREED by the Company that, subject to the
provisions of Section 87 of the Mortgage and to the extent
permitted by law, all the property, rights, and franchises
acquired by the Company (by purchase, consolidation, merger,
donation, construction, erection or in any other way) after the
date hereof, except any herein or in the Mortgage, as heretofore
supplemented, expressly excepted, shall be and are as fully
granted and conveyed hereby and as fully embraced within the lien
hereof and the lien of the Indenture, as if such property, rights
and franchises were now owned by the Company and were
specifically described herein and conveyed hereby.
IT IS HEREBY DECLARED by the Company that all the property,
rights and franchises now owned or hereafter acquired by the
Company have been, or are, or will be owned or acquired with the
intention to use the same in carrying on the business or branches
of business of the Company, and it is hereby declared that it is
the intention of the Company that all thereof, except any herein
or in the Mortgage, as heretofore supplemented, expressly
excepted, shall (subject to the provisions of Section 87 of the
Mortgage and to the extent permitted by law) be embraced within
the lien of this Sixty-fourth Supplemental Indenture and the lien
of the Indenture.
PROVIDED that the following are not and are not intended to
be now or hereafter granted, bargained, sold, released, conveyed,
assigned, transferred, mortgaged, pledged, set over or confirmed
hereunder and are hereby expressly excepted from the lien and
operation of this Sixty-fourth Supplemental Indenture and from
the lien and operation of the Indenture, viz: (1) cash, shares
of stock, bonds, notes and other obligations and other securities
not hereafter specifically pledged, paid, deposited, delivered or
held under the Indenture or covenanted so to be; (2) goods,
wares, merchandise, equipment, apparatus, materials, or supplies
held for the purpose of sale or other disposition in the usual
course of business; fuel, oil and similar materials and supplies
consumable in the operation of any of the properties of the
Company; construction equipment acquired for temporary use; all
aircraft, rolling stock, trolley coaches, buses, motor coaches,
automobiles and other vehicles and materials and supplies held
for the purposes of repairing or replacing (in whole or part) any
of the same; all timber, minerals, mineral rights and royalties;
(3) bills, notes and accounts receivable, judgments, demands and
choses in action, and all contracts, leases and operating
agreements not specifically pledged under the Indenture or
covenanted so to be; the Company's contractual rights or other
interest in or with respect to tires not owned by the Company;
(4) the last day of the term of any lease or leasehold which may
be or become subject to the lien of the Indenture; and (5)
electric energy, gas, steam, ice, and other materials or products
generated, manufactured, produced or purchased by the Company for
sale, distribution or use in the ordinary course of its business;
provided, however, that the property and rights expressly
excepted from the lien and operation of the Indenture in the
above subdivisions (2) and (3) shall (to the extent permitted by
law) cease to be so excepted in the event and as of the date that
the Trustee or a receiver or trustee shall enter upon and take
possession of the Mortgaged and Pledged Property in the manner
provided in Article XIII of the Mortgage by reason of the
occurrence of a Default as defined in Section 65 thereof, as
supplemented by the provisions of this Sixty-fourth Supplemental
Indenture.
TO HAVE AND TO HOLD all such properties, real, personal and
mixed, granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed by the
Company as aforesaid, or intended so to be, unto Bankers Trust
Company, as Trustee, and its successors and assigns forever.
IN TRUST NEVERTHELESS for the same purposes and upon the
same terms, trusts and conditions and subject to and with the
same provisos and covenants as are set forth in the Mortgage, as
heretofore supplemented, this Sixty-fourth Supplemental Indenture
being supplemental to the Mortgage.
AND IT IS HEREBY COVENANTED by the Company that all the
terms, conditions, provisos, covenants and provisions contained
in the Mortgage, as heretofore supplemented, shall affect and
apply to the property hereinbefore described and conveyed and to
the estate, rights, obligations and duties of the Company and the
Trustee and the beneficiaries of the trust with respect to said
property, and to the Trustee and its successors as Trustee of
said property in the same manner and with the same effect as if
the said property had been owned by the Company at the time of
the execution of the Mortgage, and had been specifically and at
length described in and conveyed to the Trustee by the Mortgage
as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the
Trustee and its successors in said trust under the Indenture, as
follows:
ARTICLE I
Seventy-second Series of Bonds
SECTION 1. There shall be a series of bonds designated
"Pollution Control Series K" (herein sometimes referred to as the
"Seventy-second Series"), each of which shall also bear the
descriptive title First Mortgage Bonds, and the form thereof,
which shall be established by Resolution of the Board of
Directors of the Company, shall contain suitable provisions with
respect to the matters hereinafter in this Section specified.
Bonds of the Seventy-second Series shall be limited to
$55,000,000 in aggregate principal amount except as provided in
Section 16 of the Mortgage and shall mature on August 1, 2029,
and shall be issued as fully registered bonds in denominations of
Five Thousand Dollars and in any multiple or multiples of Five
Thousand Dollars; they shall bear interest at the rate of 6.15%
per annum, payable semi-annually on February 1 and August 1 of
each year; the principal of and interest on each said bond to be
payable at the office or agency of the Company in the City of
Philadelphia, Pennsylvania, in such coin or currency of the
United States of America as at the time of payment is legal
tender for public and private debts. Bonds of the Seventy-second
Series shall be dated as in Section 10 of the Mortgage provided.
(I) On and after August 1, 2005, bonds of the Seventy-
second Series shall be redeemable, prior to maturity, at the
option of the Company in whole at any time, or in part in such
principal amount as may be directed by the Company from time to
time, upon notice, as provided in Section 52 of the Mortgage,
mailed at least forty-five (45) days prior to the date fixed for
redemption unless the registered owner shall agree to accept a
shorter notice, at the following redemption prices, expressed in
percentages of the principal amount of the bonds to be redeemed:
Optional
Redemption
Price
Redemption Period
August 1, 2005 through July 31, 2006 102%
August 1, 2006 through July 31, 2007 101
August 1, 2007 and thereafter 100
in each case, together with accrued interest to the date fixed
for redemption.
(II) Bonds of the Seventy-second Series shall also be
redeemable in whole at any time, or in part in such principal
amount as an Officers' Certificate received by the Trustee shall
state is identical to the principal amount of 1995 Series A Bonds
(as hereinafter defined) being redeemed pursuant to Extraordinary
Optional Redemption (a) referred to in such 1995 Series A Bonds
from time to time, prior to maturity, upon like notice, by the
application (either at the option of the Company or pursuant to
the requirements of the Indenture) of cash delivered to or
deposited with the Trustee pursuant to the provisions of Section
64 of the Mortgage at the redemption price of 100% of the
principal amount of the bonds to be redeemed in each case,
together with accrued interest to the date fixed for redemption.
(III) Bonds of the Seventy-second Series shall also be
redeemable at the option of the Company in whole at any time
prior to maturity upon like notice whenever the Company shall
elect to deliver and the Trustee shall receive an Officers'
Certificate certifying that the Company has, within the preceding
90 days, merged or consolidated with another corporation having
capital stock and surplus (including retained earnings) of at
least $50,000,000 as of any date (hereinafter called the
"Financial Date") within 180 days prior to the effective date of
such merger or consolidation, such Officers' Certificate to be
accompanied by a certified copy of the document effecting the
merger or consolidation, and a balance sheet of such other
corporation certified by such other corporation's chief financial
officer or an independent certified public accountant as of the
Financial Date. Any such redemption shall be at the redemption
price of 100% of the principal amount of the bonds to be
redeemed, together with accrued interest to the date fixed for
redemption.
(IV) In the event that any Pollution Control Revenue
Refunding Bonds, 1995 Series A (Pennsylvania Power & Light
Company Project), issued under the Trust Indenture dated as of
May 1, 1973, as supplemented (hereinafter called the "Trust
Indenture") by the Lehigh County Industrial Development Authority
(hereinafter called the "Authority")(such Bonds herein called
"1995 Series A Bonds") are to be redeemed in accordance with
Section 5.06 of the Ninth Supplemental Indenture to the Trust
Indenture, bonds of the Seventy-second Series in a principal
amount equal to the principal amount of the 1995 Series A Bonds
so to be redeemed, shall be redeemed by the Company, on the date
fixed for redemption of such bonds of the Seventy-second Series,
at the redemption price of 100% of the principal amount of the
bonds to be redeemed, together with accrued interest to the date
fixed for redemption.
The Trustee may conclusively presume that no redemption of
bonds of the Seventy-second Series is required pursuant to the
first paragraph of this subsection (IV) unless and until it shall
have received a written notice from the trustee under the Trust
Indenture, stating that the 1995 Series A Bonds are to be
redeemed in accordance with such Section 5.06 of the Ninth
Supplemental Indenture to the Trust Indenture and specifying the
principal amount of the 1995 Series A Bonds so to be redeemed and
specifying a date for the redemption of an equal principal amount
of the bonds of the Seventy-second Series, which shall be a date
within 90 days from the date of such written notice but not
earlier than 80 days from the receipt of such written notice by
the Trustee.
(V) Bonds of the Seventy-second Series shall be redeemed in
whole whenever the Trustee shall receive a written demand
(hereinafter called "Default Redemption Demand") from the trustee
under the Trust Indenture for redemption stating that the
principal of all bonds then outstanding under the Trust Indenture
has been declared to be immediately due and payable pursuant to
the provisions of Section 9.02 thereof. The Trustee shall within
10 days of receiving the Default Redemption Demand mail a copy to
the Company stamped or otherwise marked to show the date of
receipt by the Trustee. The Company shall fix a redemption date
and shall mail the Trustee notice of such selection at least 30
days prior to the date so selected. Such redemption date may be
any day not more than 180 days after the receipt of the Default
Redemption Demand by the Trustee. If the Trustee does not
receive notice of such selection by the Company within 150 days
after the Default Redemption Demand was received by the Trustee,
then the redemption date shall be the 180th day after such
receipt. The Trustee shall mail notice of the redemption date
(hereinafter called the "Default Redemption Notice") to the
trustee under the Trust Indenture not more than 10 nor less than
5 days prior to the date fixed for redemption. The Trustee shall
not mail any Default Redemption Notice (and no such redemption
shall be made) if the Trustee receives a written cancellation of
the Default Redemption Demand from the trustee under the Trust
Indenture prior to the mailing of the Default Redemption Notice.
Notwithstanding the provisions of Section 52 of the Mortgage,
the holders of bonds of the Seventy-second Series by the
acceptance of such bonds waive 30 days notice of any redemption
pursuant to this subsection (V). Any such redemption shall be at
the redemption price of 100% of the principal amount of the bonds
to be redeemed, together with accrued interest to the date fixed
for redemption.
(VI) The Company hereby waives its right to have any notice
of redemption pursuant to subsection (IV) or (V) of this Section
1 state that such notice is subject to the receipt of the
redemption moneys by the Trustee before the date fixed for
redemption. Notwithstanding the provisions of Section 52 of the
Mortgage, any such notice under such subsections shall not be
conditional.
The Company covenants that any cash delivered to the Trustee
under the provisions of subsection (I) of Section 39 of the
Mortgage, as supplemented, will not be applied to the redemption
of any bonds of the Seventy-second Series so long as any bonds of
the Ninth through Tenth, Twelfth through Thirteenth, Fifteenth
through Seventeenth, Forty-fifth or Fifty-fourth through Seventy-
first Series remain Outstanding.
(VII) At the option of the registered owner, any bonds of
the Seventy-second Series, upon surrender thereof, for
cancellation, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, shall be exchangeable
for a like aggregate principal amount of bonds of the same
series, interest rate and maturity of other authorized
denominations.
Bonds of the Seventy-second Series shall be transferable,
upon the surrender thereof for cancellation, together with a
written instrument of transfer in form approved by the registrar
duly executed by the registered owner or by his duly authorized
attorney, at the office or agency of the Company in the Borough
of Manhattan, The City of New York.
The Company hereby waives any right to make a charge for any
exchange or transfer of bonds of the Seventy-second Series.
For the purposes of subsections (IV) and (V) of this Section
1, a demand from the trustee under the Trust Indenture shall be
executed on behalf of such trustee by its President or a Vice
President or a Trust Officer and shall be deemed received by the
Trustee when delivered at its corporate trust office in the
Borough of Manhattan, The City of New York. The Trustee may
conclusively rely as to the truth of the statements contained
therein, upon any such demand.
ARTICLE II
Maintenance and Replacement Fund
Covenant -- Dividend Covenant --
Other Related Provisions of the Mortgage
SECTION 2. Subject to the provisions of Section 3 hereof,
the Company covenants and agrees that the provisions of Section
39 of the Mortgage, which were to remain in effect so long as any
bonds of the First Series remained Outstanding, shall remain in
full force and effect so long as any bonds of the Seventy-second
Series are Outstanding.
Clause (d) of subsection (II) of Section 4 of the Mortgage,
as heretofore amended, is hereby further amended by inserting the
words "and Seventy-second Series" after the words "and Seventy-
first Series" each time such words appear therein.
Clause (6) and clause (e) of Section 5 of the Mortgage and
Section 29 of the Mortgage, as heretofore amended, are hereby
further amended by inserting therein "Seventy-second," before
"Seventy-first," each time such words occur therein.
ARTICLE III
Miscellaneous Provisions
SECTION 3. The Company reserves the right to make such
amendments to the Mortgage, as supplemented, as shall be
necessary in order to delete subsection (I) of Section 39 of the
Mortgage, and each holder of bonds of the Seventy-second Series
hereby consents to such deletion without any other or further
action by any holder of bonds of the Seventy-second Series.
SECTION 4. The terms defined in the Mortgage, as heretofore
supplemented, shall, for all purposes of this Sixty-fourth
Supplemental Indenture, have the meanings specified in the
Mortgage, as heretofore supplemented.
SECTION 5. Whenever in this Sixty-fourth Supplemental
Indenture either of the parties hereto is named or referred to,
this shall, subject to the provisions of Articles XVI and XVII of
the Mortgage, be deemed to include the successors and assigns of
such party, and all the covenants and agreements in this Sixty-
fourth Supplemental Indenture contained by or on behalf of the
Company, or by or on behalf of the Trustee shall, subject as
aforesaid, bind and inure to the respective benefits of the
respective successors and assigns of such parties, whether so
expressed or not.
SECTION 6. A breach of a specified covenant or agreement of
the Company contained in this Sixty-fourth Supplemental Indenture
shall become a Default under the Indenture upon the happening of
the events provided in Section 65(g) of the Mortgage with respect
to such a covenant or agreement.
SECTION 7. The Trustee hereby accepts the trusts herein
declared, provided, created or supplemented and agrees to perform
the same upon the terms and conditions herein and in the
Mortgage, as heretofore supplemented, set forth and upon the
following terms and conditions:
The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of
this Sixty-fourth Supplemental Indenture or for or in respect of
the recitals contained herein, all of which recitals are made by
the Company solely. Each and every term and condition contained
in Article XVII of the Mortgage, as heretofore amended by said
First through Sixty-third Supplemental Indentures, shall apply to
and form part of this Sixty-fourth Supplemental Indenture with
the same force and effect as if the same were herein set forth in
full with such omissions, variations and insertions, if any, as
may be appropriate to make the same conform to the provisions of
this Sixty-fourth Supplemental Indenture.
SECTION 8. Nothing in this Sixty-fourth Supplemental Inden-
ture, expressed or implied, is intended, or shall be construed,
to confer upon, or to give to, any person, firm or corporation,
other than the parties hereto and the holders of the bonds and
coupons Outstanding under the Indenture, any right, remedy or
claim under or by reason of this Sixty-fourth Supplemental
Indenture or by any covenant, condition, stipulation, promise or
agreement hereof, and all the covenants, conditions,
stipulations, promises and agreements in this Sixty-fourth
Supplemental Indenture contained by or on behalf of the Company
shall be for the sole and exclusive benefit of the parties
hereto, and of the holders of the bonds and coupons Outstanding
under the Indenture.
SECTION 9. This Sixty-fourth Supplemental Indenture shall
be executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.
PENNSYLVANIA POWER & LIGHT COMPANY does hereby constitute
and appoint JOHN R. BIGGAR, Vice President - Finance and
Treasurer of PENNSYLVANIA POWER & LIGHT COMPANY, to be its
attorney for it, and in its name and as and for its corporate act
and deed to acknowledge this Sixty-fourth Supplemental Indenture
before any person having authority by the laws of the
Commonwealth of Pennsylvania to take such acknowledgment, to the
intent that the same may be duly recorded, and BANKERS TRUST
COMPANY does hereby constitute and appoint JAMES MCDONOUGH, Trust
Officer of BANKERS TRUST COMPANY, to be its attorney for it, and
in its name and as and for its corporate act and deed to
acknowledge this Sixty-fourth Supplemental Indenture before any
person having authority by the laws of the Commonwealth of
Pennsylvania to take such acknowledgment, to the intent that the
same may be duly recorded.
<PAGE>
IN WITNESS WHEREOF, PENNSYLVANIA POWER & LIGHT COMPANY has
caused its corporate name to be hereunto affixed, and this
instrument to be signed and sealed by its President or one of its
Vice Presidents, and its corporate seal to be attested by its
Secretary or one of its Assistant Secretaries for and in its
behalf, in the City of Allentown, Pennsylvania, and BANKERS TRUST
COMPANY has caused its corporate name to be hereunto affixed, and
this instrument to be signed and sealed by one of its Vice
Presidents or one of its Trust Officers, and its corporate seal
to be attested by one of its Assistant Treasurers, in The City of
New York, as of the day and year first above written.
PENNSYLVANIA POWER & LIGHT COMPANY
By______________________________
Vice President
Attest:
_______________________________________
Assistant Secretary
<PAGE>
BANKERS TRUST COMPANY, as Trustee
By___________________________________
Trust Officer
Attest:
________________________________________
Assistant Treasurer
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF LEHIGH )
I HEREBY CERTIFY that on this 4th day of August, A.D. 1995,
before me, the subscriber, a Notary Public of the Commonwealth
aforesaid, commissioned for the City of Allentown, in the County
of Lehigh, personally appeared JOHN R. BIGGAR, Vice President -
Finance and Treasurer of PENNSYLVANIA POWER & LIGHT COMPANY,
known to me to be the attorney named in the foregoing Indenture,
and by virtue and in pursuance of the authority therein conferred
upon such attorney, acknowledged said Indenture to be the act and
deed of said PENNSYLVANIA POWER & LIGHT COMPANY.
WITNESS my hand and notarial seal the day and year
aforesaid.
________________________________________________
CATHERINE J. BROBST
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I HEREBY CERTIFY that on this 4th day of August, A.D. 1995,
before me, the subscriber, a Notary Public of the State
aforesaid, commissioned for the County of New York, personally
appeared JAMES MCDONOUGH, Trust Officer of BANKERS TRUST COMPANY,
known to me to be the attorney named in the foregoing Indenture,
and by virtue and in pursuance of the authority therein conferred
upon such attorney, acknowledged said Indenture to be the act and
deed of the said BANKERS TRUST COMPANY.
I FURTHER CERTIFY that I am not a director or officer of
said BANKERS TRUST COMPANY.
WITNESS my hand and notarial seal the day and year
aforesaid.
______________________________
SHARON V. ALSTON
Notary Public, State of New York
No. 31-4966275
Qualified in New York County
Commission Expires May 7, 1996
Bankers Trust Company hereby certifies that its precise name
and address as Trustee hereunder are:
Bankers Trust Company
4 Albany Street
New York, New York 10006
BANKERS TRUST COMPANY
By_______________________________
Trust Officer
