<PAGE> 1
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM 10-K
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3591
______________________________
Texas Utilities Company
(Exact name of registrant as specified in its charter)
A Texas I.R.S. Employer
Corporation No. 75-0705930
2001 Bryan Tower, Dallas, Texas 75201
Telephone Number (214) 812-4600
______________________________
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, without par value New York Stock Exchange, Inc.
Chicago Stock Exchange, Incorporated
The Pacific Stock Exchange Incorporated
Securities Registered Pursuant to Section 12(g) of the Act: None
______________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
_____ _____
______________________________
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. { X }
______________________________
Aggregate market value of Common Stock held by non-affiliates, based on
the last reported sale price on the composite tape on February 28, 1994:
$8,723,110,054
Common Stock outstanding at February 28, 1994: 225,841,037 shares,
without par value
______________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement pursuant to Regulation 14A,
which will be mailed to the Commission for filing on or about April 1, 1994,
are incorporated by reference into Part III of this report.
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Description Page
- ---- ----------- ----
<S> <C> <C>
PART I
1 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company and Its Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Peak Load and Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Fuel Supply and Purchased Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Regulation and Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Construction Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The TU Electric and SESCO Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . 19
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART II
5 Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . 20
6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Consolidated Financial Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Consolidated Operating Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7 Management's Discussion and Analysis of Financial Condition and
Results of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
PART III
10 Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . 57
11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12 Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . 57
13 Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . 57
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . 58
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS.
THE COMPANY AND ITS SUBSIDIARIES
Texas Utilities Company (Company) was incorporated under the laws of
the State of Texas in 1945 and has perpetual existence under the provisions of
the Texas Business Corporation Act. The Company is a holding company which
owns all of the outstanding common stock of Texas Utilities Electric Company
(TU Electric), which is the principal subsidiary of the Company, Southwestern
Electric Service Company (SESCO) and five other wholly-owned subsidiaries which
perform specialized functions within the Texas Utilities Company system. The
Company and its subsidiaries are referred to herein as "System Companies."
The Company holds no franchises other than its corporate franchise. TU
Electric and SESCO possess all of the necessary franchises and certificates
required to enable them to conduct their respective businesses (see Regulation
and Rates).
TU Electric is engaged in the generation, purchase, transmission,
distribution and sale of electric energy in the north central, eastern and
western parts of Texas, with a population estimated at 5,650,000 -- about
one-third of the population of Texas. Electric service is provided in 88
counties and 372 incorporated municipalities, including Dallas, Fort Worth,
Arlington, Irving, Plano, Waco, Mesquite, Grand Prairie, Wichita Falls, Odessa,
Midland, Carrollton, Tyler, Richardson and Killeen. The area is a diversified
commercial and industrial center with substantial banking, insurance,
communications, electronics, aerospace, petrochemical and specialized steel
manufacturing, and automotive and aircraft assembly. The territory served
includes major portions of the oil and gas fields in the Permian Basin and East
Texas, as well as substantial farming and ranching sections of the State. It
also includes the Dallas-Fort Worth International Airport and the Alliance
Airport.
SESCO is engaged in the purchase, transmission, distribution and sale
of electric energy in ten counties in the eastern and central parts of Texas
with a population estimated at 125,000. SESCO generates no electric energy.
For consolidated energy sales and operating revenues contributed by TU
Electric and SESCO for each customer classification, see Item 6. Selected
Financial Data -- Consolidated Operating Statistics.
Texas Utilities Fuel Company (Fuel Company) owns a natural gas pipeline
system, acquires, stores and delivers fuel gas and provides other fuel services
at cost for the generation of electric energy by TU Electric.
Texas Utilities Mining Company (Mining Company) owns, leases and
operates fuel production facilities for the surface mining and recovery of
lignite at cost for the generation of electric energy by TU Electric.
Texas Utilities Services Inc. (TU Services) provides financial,
accounting, computer, telecommunications, personnel, procurement and other
administrative services at cost to the System Companies. TU Services also acts
as transfer agent, registrar and dividend paying agent with respect to the
common stock of the Company and the preferred stock of TU Electric and as agent
for participants under the Company's Automatic Dividend Reinvestment and Common
Stock Purchase Plan.
1
<PAGE> 4
ITEM 1. BUSINESS (CONTINUED).
THE COMPANY AND ITS SUBSIDIARIES -- (CONCLUDED)
Basic Resources Inc. was organized for the purpose of developing
natural resources, primarily energy sources, and related technology and
services.
Chaco Energy Company (Chaco) was organized to own and operate
facilities for the acquisition, production, sale and delivery of coal and other
fuels and currently leases extensive coal reserves.
At December 31, 1993, the System Companies had 10,859 full-time
employees.
PEAK LOAD AND CAPABILITY
TU Electric's and SESCO's net capability, peak load and reserve, in
megawatts (MW), at the time of peak were as follows during the years indicated:
<TABLE>
<CAPTION>
PEAK LOAD (a)
----------------------
INCREASE
(DECREASE) FIRM
NET OVER PEAK
YEAR CAPABILITY AMOUNT PRIOR YEAR LOAD RESERVE(b)
----- --------- -------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C>
1993 . . . . . . . . . . . 21,697(c) 18,324 4.6% 17,852 3,845
1992 . . . . . . . . . . . 21,697 17,525 3.4 17,102 4,595
1991 . . . . . . . . . . . 21,849 16,952 (5.9) 16,831 5,018
<FN>
_____________________
(a) At the time of the 1993 peak load which occurred on July 29, SESCO was purchasing 100% of its load from
TU Electric. TU Electric peak load includes interruptible load at the time of peak of 499 MW in 1993,
463 MW in 1992 and 341 MW in 1991.
(b) Amount of net capability in excess of firm peak load at the time of peak.
(c) Included in net capability was 1,771 MW of firm purchased capacity, including 1,691 MW of cogeneration
and small power production. Excluded from net capability were purchased power contracts (150 MW) entered
into by SESCO with the Lower Colorado River Authority and Central Power and Light which were entered into
after the time of peak load. Also, excluded is Comanche Peak Unit 2 (1,150 MW), which was placed into
commercial operation after the peak load occurred.
</TABLE>
The peak load changes resulted primarily from customer growth in the
service area and weather factors. TU Electric expects to continue to purchase
capacity in the future from various sources. (See Fuel Supply and Purchased
Power and Note 11 to Consolidated Financial Statements.)
On November 14, 1993, the emissions chimney serving Unit 3 (750 MW) of
the Monticello lignite-fueled generating station (Monticello) collapsed,
rendering the unit inoperable. The unit will be rebuilt and operated as a
lignite/coal-fueled facility. TU Electric expects the unit to be returned to
service during 1995. (See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation - Liquidity and Capital Resources.)
Firm peak load increases over the next ten years are expected to average
approximately 2.2% annually, after giving effect to load management programs
(including interruptible contracts). The ten year system resource plan for TU
Electric (Resource Plan) provides for meeting the increases in required net
capability through the completion of gas/oil-fueled combustion turbine and
lignite-fueled capacity additions, purchased power capacity (including
cogeneration and small power production) and load management programs. Load
management programs are designed to improve the efficient use
2
<PAGE> 5
ITEM 1. BUSINESS (CONTINUED).
PEAK LOAD AND CAPABILITY -- (CONCLUDED)
of TU Electric's generating units and help delay the need to add new
capacity. The Resource Plan is subject to annual review as part of a
regular planning process. When compared to the previous resource plan, the
current plan reflects a one year deferral for the in-service dates of 1,500 MW
of Twin Oak lignite units (Twin Oak), 1,230 MW of combined cycle combustion
turbines and 272 MW of simple-cycle combustion turbines. The components of the
Resource Plan (see Item 2. Properties -- Construction Program) are as follows:
<TABLE>
<CAPTION>
RESOURCE PLAN 1994-2003
-----------------------
CAPABILITY
RESOURCE ADDITIONS (MW) PERCENT
----------------- ---------- -------
<S> <C> <C>
Combustion Turbines . . . . . . . . 1,502 28%
Lignite/Coal . . . . . . . . . . . . 1,500 28
Load Management . . . . . . . . . . 1,228 22
Purchased Power . . . . . . . . . . 1,189 22
----- ---
Total . . . . . . . . . . . . . 5,419 100%
----- ---
----- ---
</TABLE>
TU Electric is currently conducting an experimental pilot project, in
conjunction with regulatory and customer groups, to develop a 1995 Integrated
Resource Plan (IRP). In addition to increasing public participation in the
planning process, TU Electric is soliciting proposals for additional
demand-side management resources and certain renewable energy resources to meet
a portion of the customers' future energy requirements. The IRP is expected to
be completed and filed with the Public Utility Commission of Texas (PUC) late
in the summer of 1994. TU Electric hopes to obtain approval of the IRP in
early 1995. It is unknown what effect, if any, this new planning process will
have on future resource plans.
FUEL SUPPLY AND PURCHASED POWER
Net system input for 1993 was 91,891 million kilowatt-hours (kWh) of
which 79,105 million kWh were generated by TU Electric. During this period,
844,128,889 million British thermal units (Btu) of fuel (including 40,391,702
million Btu furnished by Aluminum Company of America (Alcoa) at no cost) were
consumed for electric generation (see Lignite/Coal).
Average fuel and purchased power cost (excluding capacity charges) per
kWh of net input was 1.92 cents for 1993, 1.85 cents for 1992 and 1.82 cents
for 1991. A comparison of the resource mix for net kWh input and the unit cost
per million Btu of fuel during the last three years is as follows:
3
<PAGE> 6
ITEM 1. BUSINESS (CONTINUED).
FUEL SUPPLY AND PURCHASED POWER -- (CONTINUED)
<TABLE>
<CAPTION>
MIX FOR NET UNIT COST
KWH INPUT PER MILLION BTU
---------------------- ---------------------
1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fuel for Electric Generation:
Gas/Oil (a) . . . . . . . . . . 33.6% 34.4% 37.4% $2.81 $2.69 $2.47
Lignite/Coal (b) . . . . . . . . 40.2 44.2 43.9 1.10 1.05 1.05
Nuclear . . . . . . . . . . . . 12.4 8.1 6.1 0.71(c) 0.41 0.33
----- ----- -----
Total/Weighted Average
Fuel Cost . . . . . . . . . . 86.2 86.7 87.4 $1.73 $1.65 $1.62
Purchased Power . . . . . . . . . 13.8 13.3 12.6
----- ----- -----
Total . . . . . . . . . . . . 100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
- ---------------
<FN>
(a) Fuel oil amounted to 0.003% in 1993, 0.02% in 1992 and 0.1% in 1991 of total fuel and purchased power requirements.
(b) Lignite cost per ton to TU Electric was $13.98 in 1993, $13.19 in 1992 and $13.48 in 1991.
(c) Unit cost per million Btu in 1993 includes avoided cost of fuel during trial operations. The 1993 cost, excluding
Comanche Peak Unit 2 while in trial operation, was $0.62 in 1993.
</TABLE>
GAS/OIL
Fuel gas for units at nineteen of the principal generating stations of
TU Electric, having an aggregate net gas/oil capability of 12,931 MW, was
provided during 1993 by Fuel Company. Fuel Company supplied approximately 48%
of such fuel gas requirements under contracts with producers at the wellhead and
under other contracts with dedicated reserves and 52% under contracts with
commercial suppliers. Additional gas/oil-fueled combustion turbines, with an
aggregate net capability of 1,502 MW, are planned for the future (see Peak Load
and Capability and Item 2. Properties -- Construction Program).
Fuel Company has acquired under contracts expiring at intervals through
2008, with producers at the wellhead, supplies of gas which are generally
expected to be produced over a ten to fifteen year period. As gas production
under contract declines and contracts expire, new contracts are expected to be
negotiated to replenish or augment such supplies. Fuel Company has negotiated
gas purchase contracts, with terms ranging from one to twenty years, with a
number of commercial suppliers. Additionally, Fuel Company has entered into a
number of short-term gas purchase contracts with other commercial suppliers at
spot market prices; however, these contracts typically do not provide for a firm
supply obligation from the seller or a firm purchase obligation from Fuel
Company. In the past, curtailments of gas deliveries have been experienced
during periods of winter peak gas demand; however, such curtailments have been
of relatively short duration, have had a minimal impact on operations and have
generally required utilization of fuel oil and gas storage inventories to
replace the gas curtailed. During 1993, no curtailments were experienced.
Fuel Company owns and operates an intrastate natural gas pipeline system
which extends from the gas-producing area of the Permian Basin in West Texas to
the East Texas gas fields and southward to the Gulf Coast area. This system
includes a one-half interest in a 36-inch pipeline which extends 395 miles from
the Permian Basin area of West Texas to a point of termination south of the
Dallas-Fort Worth area and has a total estimated capacity of 800 million cubic
feet per day with existing compression facilities. Additionally, Fuel Company
owns a 39% undivided interest in another 36-inch pipeline connecting to this
pipeline and extending 58 miles eastward to one of Fuel Company's underground
gas storage facilities. Fuel Company also owns and operates approximately 1,650
miles
4
<PAGE> 7
ITEM 1. BUSINESS (CONTINUED).
FUEL SUPPLY AND PURCHASED POWER -- (CONTINUED)
of various smaller capacity lines which are used to gather and transport
natural gas from other gas-producing areas. The pipeline facilities of
Fuel Company form an integrated network through which fuel gas is gathered
and transported to certain TU Electric generating stations for use in the
generation of electric energy.
Fuel Company also owns and operates three underground gas storage
facilities with a usable capacity of 27.2 billion cubic feet with
approximately 20.2 billion cubic feet of gas in inventory at December 31, 1993.
Gas stored in these facilities currently can be withdrawn for use during
periods of peak demand, to meet seasonal and other fluctuations or curtailment
of deliveries by gas suppliers. Under normal operating conditions, up to 500
million cubic feet can be withdrawn each day for a two-week period, with
withdrawals at lower rates thereafter.
Fuel oil is stored at all nineteen of the principally gas-fueled
generating stations. At December 31, 1993, the System Companies had fuel oil
storage capacity sufficient to accommodate approximately 6.6 million barrels of
oil, with approximately 2.4 million barrels of oil in inventory. Fuel Company
has access to an oil pipeline and owns a terminal facility to provide for more
dependable and efficient movement of oil. Generally, oil required to replenish
that oil removed from storage will be obtained through purchases in the open
market.
LIGNITE/COAL
Lignite is used as the primary fuel in two units at the Big Brown
generating station (Big Brown), three units at Monticello, three units at the
Martin Lake generating station (Martin Lake) and one unit at the Sandow
generating station (Sandow), having an aggregate net capability of 5,845 MW.
Two other lignite-fueled units, with an aggregate net capability of 1,500 MW,
are included in the current Resource Plan (see Peak Load and Capability and
Item 2. Properties -- Construction Program). TU Electric's lignite units have
been constructed adjacent to surface mined lignite reserves. At the present
time, TU Electric owns in fee or has under lease an estimated 863 million tons
of proven reserves dedicated to existing power plants or planned future power
plants. Mining Company owns, leases and operates equipment to remove the
overburden and to recover lignite. One of TU Electric's lignite units, Sandow
4, is fueled from lignite deposits owned by Alcoa, which furnishes fuel at no
cost to TU Electric for that portion of energy generated from such unit which
is equal to the amount of energy delivered to Alcoa (see Item 6. Selected
Financial Data -- Consolidated Operating Statistics).
Lignite production operations at Big Brown, Monticello and Martin Lake
are accompanied by an extensive reclamation program which returns the land to
productive uses such as wildlife habitats, commercial timberland and pasture
land. Similar programs are planned for future lignite-fueled production
operations. For information concerning federal and state laws with respect to
surface mining, see Environmental Matters.
TU Electric supplemented TU Electric-owned lignite fuel at its Monticello
plant with western coal from the Powder River Basin (PRB) in Wyoming during
five months of 1993. The coal was purchased and transported on an "as-
available, as-required" basis. Because current mine capacity in the PRB is
greater than the demand at this time, ample amounts of western coal are
available on the spot market at favorable prices. Fuel requirements at
Monticello were reduced as a result of the November 1993 collapse of the
emissions chimney at Unit 3. Consequently, deliveries of western coal were
discontinued and lignite mining operations at the Monticello mines were
reduced. When Unit 3 returns to service, lignite mining operations and western
coal deliveries at Monticello will resume in order to supply the required
fuels. Further, TU Electric is also actively
5
<PAGE> 8
ITEM 1. BUSINESS (CONTINUED).
FUEL SUPPLY AND PURCHASED POWER -- (CONTINUED)
considering the use of western coal as a supplemental fuel at its other
existing lignite-fueled plants and as a long-term alternative fuel for
existing and future units. For information concerning applicable air
quality standards, see Environmental Matters.
Chaco has rights to sub-bituminous coal reserves totaling more than 120
million recoverable tons located in the Star Lake region of San Juan and
McKinley counties in northwest New Mexico. In 1990, Chaco entered into a
revised lease agreement with a major mineral interest owner, Hospah Coal
Company (Hospah), a subsidiary of Santa Fe Industries, Inc. (Santa Fe),
estimated to cover more than 300 million additional tons of recoverable coal in
the same area of New Mexico. Chaco and Santa Fe also entered into a separate
agreement providing for the transportation of coal mined from both of these
deposits. In 1993, Santa Fe transferred the coal-related assets of Hospah to
Hanson Natural Resources Company. This transfer of assets includes the lease
agreement between Chaco and Hospah. This agreement will continue in accordance
with its terms. For information pertaining to these agreements, see Note 11 to
Consolidated Financial Statements.
NUCLEAR
TU Electric owns and operates two nuclear-fueled generating units at
the Comanche Peak nuclear generating station (Comanche Peak), each of which is
designed for a net capability of 1,150 MW. (See Peak Load and Capability.)
The nuclear fuel cycle requires the mining and milling of uranium ore
to provide uranium oxide concentrate (U3O8), the conversion of U3O8 to uranium
hexafluoride (UF6), the enrichment of the UF6 and the fabrication of the
enriched uranium into fuel assemblies. TU Electric has on hand or has
contracted for the raw materials and services it expects to need for its
nuclear units through the years shown below:
<TABLE>
<CAPTION>
Uranium Conversion Enrichment Fabrication
------- ---------- ---------- -----------
<S> <C> <C> <C>
2001 2003 2014 2002
</TABLE>
TU Electric expects to meet its U3O8 requirements through the years
shown above from inventory on hand and amounts under contract. Although TU
Electric cannot predict the future availability of uranium and nuclear fuel
services, TU Electric does not currently expect to have difficulty obtaining
U3O8 and the services necessary for its conversion, enrichment and fabrication
into nuclear fuel for years later than those shown above.
The National Energy Policy Act of 1992 (Energy Act) has provisions for
the recovery of a portion of the costs associated with the decommissioning and
decontamination of the gaseous diffusion plants used to enrich uranium for
fuel. These costs are being recovered in fees paid to the Department of Energy
as determined by the Secretary of Energy. The total annual assessment for all
domestic utilities is capped at $150 million per federal fiscal year assessable
for fifteen years. TU Electric's share, as established by the Department of
Energy, is estimated to be $1.3 million per year.
6
<PAGE> 9
ITEM 1. BUSINESS (CONTINUED).
FUEL SUPPLY AND PURCHASED POWER -- (CONCLUDED)
The Nuclear Waste Policy Act of 1982, as amended (NWPA), provides for
the development by the federal government of interim storage and permanent
disposal facilities for spent nuclear fuel and/or high level radioactive waste
materials. TU Electric is unable to predict when the federal government will
be able to provide such storage and disposal facilities. Under provisions of
the NWPA, funding for the program is provided by a one-mill per kWh fee
currently levied on electricity generated and sold from nuclear reactors,
including the Comanche Peak units. Onsite storage capacity for spent fuel is
sufficient to accommodate the operation of Comanche Peak for approximately 10
years and this storage capacity can be increased, subject to approval by the
Nuclear Regulatory Commission (NRC).
PURCHASED POWER
In 1993, TU Electric and SESCO purchased an aggregate of 12,786 million
kWh or approximately 14% of their energy requirements and had available 1,771
MW of firm purchased capacity, or approximately 8%, of net capability under
contract at the time of peak load. TU Electric and SESCO may acquire purchased
power capacity in the future to accommodate a portion of system load and
continue to investigate potential available sources. For information
concerning the Resource Plan, see Peak Load and Capability and Note 11 to
Consolidated Financial Statements.
GENERAL
Neither TU Electric nor SESCO is able to predict: (i) whether or not
problems may be encountered in the future in obtaining the fuel and purchased
power it will require, (ii) the effect upon its operations of any difficulty it
may experience in protecting its rights to fuel and purchased power now under
contract, or (iii) the cost of fuel and purchased power. All reasonable costs
of fuel and purchased power are generally recoverable subject to the rules of
the PUC. (See Regulation and Rates for information pertaining to the method of
recovery of purchased power and fuel costs.)
REGULATION AND RATES
REGULATION
The Company is a holding company as defined in the Public Utility
Holding Company Act of 1935. However, the Company and its subsidiary companies
are exempt from the provisions of such Act, except Section 9(a)(2) which
relates to the acquisition of securities of public utility companies.
TU Electric and SESCO do not transmit electric energy in interstate
commerce or sell electric energy at wholesale in interstate commerce, or own or
operate facilities therefor, and their facilities are not connected directly or
indirectly to other systems which are involved in such interstate activities,
except during the continuance of emergencies permitting temporary or permanent
connections or under order of the Federal Energy Regulatory Commission (FERC)
exempting TU Electric and SESCO from jurisdiction under the Federal Power Act.
In view thereof, TU Electric and SESCO believe that they are not public
utilities as defined in the Federal Power Act and have been advised by their
counsel that they are not subject to general regulation under such Act.
The PUC has original jurisdiction over electric rates and service in
unincorporated areas and those municipalities that have ceded original
jurisdiction to the PUC and has exclusive appellate jurisdiction to review the
rate and service orders and ordinances of municipalities. Generally, the Texas
Public
7
<PAGE> 10
ITEM 1. BUSINESS (CONTINUED).
REGULATION AND RATES -- (CONTINUED)
Utility Regulatory Act prohibits the collection of any rates or charges
(including charges for fuel) by a public utility that does not have the
prior approval of the PUC. The provisions for inclusion of construction
work in progress (CWIP) in rate base provide that such inclusion is an
exceptional form of rate relief to be granted only when necessary to the
financial integrity of the utility and that it shall not be included for
major projects to the extent they have been imprudently planned or managed.
The construction of new production facilities of TU Electric and SESCO
is subject to PUC certification. In January 1992, the PUC approved Notice of
Intent (NOI) applications which were filed by TU Electric in June 1991 for
1,512 MW of combustion turbines and 650 MW of coal-fired generation. An NOI is
the first step of a process for PUC approval for construction of utility plant.
Certain intervenors in the NOI proceeding appealed the PUC's approval. On
November 23, 1993, the 126th Judicial District Court of Travis County, Texas
announced its decision to reverse and remand the PUC's approval; however, the
court has not yet issued a judgment. TU Electric will decide about an appeal
after the judgment is issued. (See Peak Load and Capability and Item 2.
Properties -- Construction Program.)
TU Electric is subject to the jurisdiction of the NRC with respect to
nuclear power plants. NRC regulations govern the granting of licenses for the
construction and operation of nuclear power plants and subject such plants to
continuing review and regulation.
In August 1992, following action by the NRC staff which extended the
construction permit for Comanche Peak Unit 2, an Atomic Safety and Licensing
Board (ASLB) was established to determine whether proposed intervenors have
standing to intervene and, if so, whether valid issues exist to necessitate a
hearing to determine if there was a good cause to extend such construction
permit. In December 1992, the ASLB issued an order denying a hearing on these
petitions, and the proposed intervenors have taken actions to appeal this
decision. In April 1993, the NRC denied such appeals, and two of the proposed
intervenors petitioned the U.S. Court of Appeals for the District of Columbia
Circuit to grant a summary reversal of the NRC order and stay the operating
license. On February 24, 1994, the appeal was voluntarily dismissed.
The System Companies are also subject to various other federal, state
and local regulations. (See Environmental Matters.)
FUEL COST RECOVERY RULE
Pursuant to a PUC rule governing the recovery of fuel costs, the
recovery of TU Electric and SESCO's eligible fuel costs is provided through
fixed fuel factors. The rule allows a utility's fuel factor to be revised
upward or downward every six months, according to a specified schedule. Each
six months, a utility is required to petition to make either surcharges or
refunds to ratepayers, together with interest based on a twelve month average
of prime commercial rates, for any material cumulative under- or over-recovery
of fuel costs. If the cumulative difference between the under- or
over-recovery, plus interest, is in excess of 4% of the annual estimated fuel
costs most recently approved by the PUC, it will be deemed to be material.
Accordingly, in August 1993, TU Electric petitioned the PUC for a recovery of
approximately $144.5 million, including interest, in under-collected fuel costs
through June 30, 1993, which were due primarily to increased natural gas costs.
The PUC approved the recovery of such costs in the final order in Docket 11735.
The recovery will be offset by the refund of the
8
<PAGE> 11
ITEM 1. BUSINESS (CONTINUED).
REGULATION AND RATES -- (CONTINUED)
difference between bonded rates and rates approved in the final order.
(See Docket 11735 below, Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation and Note 10 to Consolidated
Financial Statements.)
The fuel cost recovery rule also contains a procedure for an expedited
change in the fixed fuel factor in the event of an emergency. Final
reconciliation of fuel costs must be made either in a reconciliation
proceeding, which may cover no more than three years and no less than one year,
or in a general rate case. In a final reconciliation, a utility has the burden
of proving that fuel costs under review were reasonable and necessary to
provide reliable electric service, that it has properly accounted for its
fuel-related revenues, and that fuel prices charged to the utility by an
affiliate were reasonable and necessary and not higher than prices charged for
similar items by such affiliate to other affiliates or nonaffiliates. In
addition, the rule provides for recovery of purchased power capacity costs with
respect to purchases from qualifying facilities, to the extent such costs are
not otherwise included in base rates. Recovery is made on a monthly basis
through a Power Cost Recovery Factor (PCRF). The energy-related costs of such
purchases are included in the fixed fuel factor. Penalties of up to 10% will
be imposed in the event an emergency increase has been granted when there was
no emergency or when collections under the PCRF exceed PCRF costs by 10% in any
month or 5% in the most recent twelve months.
DOCKET 11735
In January 1993, TU Electric made applications to the PUC (Docket
11735) and to its municipal regulatory authorities for upward adjustments in
rates for electric service throughout its service area, which would have
increased annual operating revenues by approximately $760 million, or 15.3%,
based upon the test year ended June 30, 1992. Such request reflected, among
other things, costs associated with Comanche Peak Unit 2, costs associated with
Comanche Peak Unit 1 after the end of the Docket 9300 (see below) test year,
additional ad valorem taxes and certain postretirement benefit costs. In August
1993, pursuant to rules of the PUC, TU Electric placed its requested rate
increase into effect, under bond and subject to refund with interest,
applicable to energy sales on and after such date. Revenues were recorded net
of an estimated reserve for possible refunds.
In October 1993, the PUC issued an order (Order) approving the terms of
an agreement (Settlement Agreement) among TU Electric, the General Counsel's
office of the PUC and applicable intervenors which, among other things, settled
all remaining issues relating to the design, construction and cost of Comanche
Peak through commencement of commercial operation of Unit 2. The Settlement
Agreement provided for the disallowance in Docket 11735 of $250 million of
costs relating to the completion of Comanche Peak. Pursuant to the Order, TU
Electric refunded $5 million in fuel charges previously incurred in order to
resolve the fuel phase of Docket 11735 under which TU Electric was seeking
reconciliation of approximately $4.6 billion of fuel costs incurred during the
three year period ended June 30, 1992, under the fuel rule in effect prior to
May 1993. Further, in order to resolve the primary issue in another proceeding
which resulted from a complaint filed against TU Electric in October 1992 by
the General Counsel's office of the PUC, as a result of the Order, TU Electric
agreed to write off $83 million of allowance for funds used during construction
(AFUDC), which consisted of the amount subject to dispute in such proceeding
and similar charges subsequently accrued. Also, under the Settlement Agreement
and confirmed in the Docket 11735 final order (see below), TU Electric will
recover, ratably over an eight year period, $197 million of operation and
9
<PAGE> 12
ITEM 1. BUSINESS (CONTINUED).
REGULATION AND RATES -- (CONTINUED)
maintenance expenditures incurred by TU Electric in connection with its
recent cost reduction program. However, an additional $25 million of such
expenditures will not be subject to recovery and was written off by TU
Electric. As a result of the Settlement Agreement, TU Electric recorded a
charge against earnings in September 1993 of approximately $363 million ($265
million after tax).
On January 28, 1994, the PUC issued a final order in Docket 11735 which
provided for a total annual revenue increase of approximately $435 million, or
8.7%. TU Electric strongly disagrees with the final order and has filed a
motion for rehearing with the PUC, and will appeal the outcome, if necessary.
As a result of this final order, unless the order is changed on rehearing, TU
Electric will refund the difference between the bonded rates and the rates
approved in the final order, including interest, all of which is being fully
reserved by TU Electric. The total amount to be refunded will be determined
once approved rates have been implemented, which is expected to be during the
second quarter of 1994. The amount to be refunded at December 31, 1993 was
approximately $141.2 million. Such refund will be mitigated by a fuel cost
surcharge approved by the PUC of approximately $144.5 million, including
interest, in under-collected fuel costs through June 30, 1993. (See Fuel Cost
Recovery Rule.)
In November 1993, an intermediate appellate court in Texas, considering
an appeal of another utility's rate case, ruled that utilizing tax benefits
generated by costs not allowed in rates to reduce rates charged to customers
was required by prior court rulings for all disallowed costs, including capital
costs. TU Electric believes that such rulings are erroneous and not consistent
with the Texas Public Utility Regulatory Act. According to a Private Letter
Ruling issued to TU Electric by the Internal Revenue Service (IRS) with respect
to investment tax credits, such ratemaking treatment, to the extent related to
property classified for tax purposes as public utility property, would result
in a violation of the normalization rules contained in the Internal Revenue
Code of 1986, as amended (Code). Violation of the normalization rules would
result in a significant adverse effect on TU Electric's results of operation
and liquidity. The tax benefits associated with the Comanche Peak costs
disallowed in Docket 9300 (see below) could be affected as a result of the
court's method. In addition, in its final order in Docket 11735, the PUC
reduced rates for the tax benefits generated by certain costs which were not
allowed in rates. However, the PUC recognized the potential for a
normalization violation if investment tax credits and tax depreciation
generated by disallowed plant costs are used to reduce rates. Therefore, the
PUC ordered TU Electric to obtain a Private Letter Ruling from the IRS with
respect to tax depreciation on disallowed plant. Thus, TU Electric's rates
would not reflect the tax depreciation benefit of disallowed plant unless the
IRS rules such benefits can be utilized to reduce rates without violating the
normalization rules contained in the Code. Such a finding by the IRS would
require TU Electric to refund the tax depreciation benefits to its customers.
TU Electric does not believe it is likely that such refund will occur if the
IRS maintains a position similar to that stated in its previous Private Letter
Ruling to TU Electric.
DOCKET 9300
In September 1991, the PUC issued a final order in TU Electric's prior
rate case (Docket 9300), which provided for a total revenue increase of
approximately $442 million and included $695 million of CWIP in rate base to
support the revenue increase. It also included a prudence disallowance of $472
million with respect to certain Comanche Peak costs relating to 87.8% of TU
Electric's ownership interest in both units of Comanche Peak. With respect to
TU Electric's reacquisition of the remaining 12.2% minority owner interests in
Comanche Peak, the order included an additional disallowance of $909 million.
10
<PAGE> 13
ITEM 1. BUSINESS (CONTINUED).
REGULATION AND RATES -- (CONCLUDED)
In November 1991, TU Electric filed a petition in the 250th Judicial
District Court of Travis County, Texas, requesting a reversal and remand of the
Docket 9300 final order. Other parties to the PUC proceeding also filed
appeals with respect to various portions of the order. In September 1992,
after a hearing, the Court entered a judgment in the appeals which affirmed the
prudence disallowance of $472 million but reversed and remanded to the PUC for
reconsideration those portions of the PUC's final order providing for
additional disallowances aggregating $884 million with respect to TU Electric's
reacquisition of minority owner interests in Comanche Peak. The Court
recognized that on remand the PUC may adjust the amount of CWIP included in TU
Electric's rate base to be consistent with the PUC's redeterminations regarding
the minority owner reacquisitions and the amount of cash working capital.
Therefore, TU Electric does not expect this judgment to affect the rates
approved in the Docket 9300 final order. Other parties to this suit have
appealed this judgment. TU Electric disagrees with certain portions of this
judgment and also has appealed. It is unable to predict the outcome of such
appeals and any reconsiderations by the PUC.
COMPETITION
The electric utility industry in general has become, and is expected to
be, increasingly competitive due to a variety of regulatory and economic
developments. The level of competition is affected by, among other things,
price, reliability of service, the cost of energy alternatives, new
technologies and governmental regulations. TU Electric and SESCO's electric
businesses are exposed to certain competitive forces in varying degrees.
TU Electric and SESCO, like the electric industry generally, face
increasing competition in the supply of bulk power at wholesale. Electric
utilities have historically sought to sell surplus capacity and energy outside
their traditional service territories. The Energy Act was designed, among
other things, to foster competition in the wholesale market by (a)
facilitating, through amendments to the Public Holding Company Act of 1935, the
ownership and operation of generating facilities by "exempt wholesale
generators" (which may include independent power producers as well as
affiliates of electric utilities) and (b) authorizing, through amendments to
the Federal Power Act, the FERC under certain conditions to order utilities
which own transmission facilities to provide wholesale transmission services to
or for other utilities and other entities selling electric energy. While TU
Electric and SESCO have experienced competitive pressures in the wholesale
market, resulting in a minor loss of load, wholesale sales constitute a
relatively low percentage of total sales. See Item 6. Selected Financial Data
- - Consolidated Operating Statistics.
The legislatures and/or the regulatory commissions in several states
have considered or are considering "retail wheeling" which, in general terms,
means the transmission by an electric utility of energy produced by another
entity over its transmission and distribution system to a retail customer in
such utility's service territory. A requirement to transmit directly to retail
customers would have the result of permitting retail customers to purchase
electric capacity and energy from, at the election of such customers, the
electric utility in whose service area they are located or from any other
electric utilities or independent power producers. This issue has not been
actively pursued in the Texas legislature or by the PUC.
11
<PAGE> 14
ITEM 1. BUSINESS (CONTINUED).
COMPETITION -- (CONCLUDED)
TU Electric and SESCO generally have the right, through PUC
certification, to provide electric service to the public within their service
areas. However, some energy consumers in their service areas have the ability
to produce their own electricity or use alternative forms of energy.
Additionally, TU Electric and SESCO operate in some dually certified areas with
other utilities.
Neither TU Electric nor SESCO are able to predict the extent of future
competitive developments or what impact, if any, such developments may have on
their operations.
ENVIRONMENTAL MATTERS
The System Companies are subject to various federal, state and local
regulations dealing with air and water quality and related environmental
matters (see Item 2. Properties -- Construction Program for environmental
expenditures).
AIR
Under the Texas Clean Air Act, the Texas Natural Resource Conservation
Commission (TNRCC), formerly the Texas Air Control Board and the Texas Water
Commission, has jurisdiction over the permissible level of air contaminant
emissions from generating facilities located within the State of Texas. In
addition, the new source performance standards of the Environmental Protection
Agency (EPA) promulgated under the federal Clean Air Act, as amended (Clean Air
Act), which have also been adopted by the TNRCC, are applicable to such
generating units, the construction of which commenced after September 18, 1978.
TU Electric's generating units have been constructed to operate in compliance
with current regulations and emission standards promulgated pursuant to these
Acts; however, due to variations in the quality of the lignite fuel,
operation of certain of the lignite-fueled generating units at reduced loads is
required from time to time in order to maintain compliance with these
standards. Planned future generating facilities have received state and
federal permits and are designed to comply with applicable statutes and
regulations.
The Clean Air Act includes provisions which, among other things, place
limits on the sulfur dioxide emissions produced by generating units. The Clean
Air Act requires that fossil-fueled plants meet new sulfur dioxide emission
standards by 1995 (Phase I) and additional sulfur dioxide emission standards by
2000 (Phase II). TU Electric's generating units are not affected by the Phase
I requirements. The applicable Phase II requirements currently are met by 52
out of 56 of TU Electric's generating units. Because the sulfur dioxide
emissions from the other four units are relatively low and alternatives are
available to enable these units to reduce sulfur dioxide emissions or utilize
compensatory reduction allowances achieved in other units, compliance with the
applicable Phase II sulfur dioxide requirements is not expected to have a
significant impact on TU Electric. In January 1993, the EPA issued its "core"
regulations to implement the sulfur dioxide reduction program. TU Electric is
preparing compliance plans in accordance with the regulations.
To meet these sulfur dioxide requirements, the Clean Air Act provides
for the annual allocation of sulfur dioxide emission allowances to utilities.
Under the Clean Air Act, utilities are permitted to transfer allowances within
their own systems and to buy or sell allowances. The EPA grants a maximum
number of allowances annually to TU Electric based on the amount of emissions
from units in operation during the period 1985-1987. The Clean Air Act also
provides that TU Electric will be
12
<PAGE> 15
ITEM 1. BUSINESS (CONTINUED).
ENVIRONMENTAL MATTERS -- (CONTINUED)
granted additional annual allowances for certain TU Electric units under
construction based on part of their anticipated emissions. TU Electric
intends to utilize internal allocation of emission allowances within its
system and, if it is cost effective, may purchase emission allowances to
enable both existing and future electric generating units to meet the
requirements of the Clean Air Act. TU Electric is unable to predict the
extent to which it may generate excess allowances or will be able to
acquire allowances from others if needed.
Other provisions of the Clean Air Act may require TU Electric to take
other actions. TU Electric's lignite-fired generating units meet the nitrogen
oxide limits currently required by the Clean Air Act. The requirements of the
Clean Air Act for ozone nonattainment areas may require nitrogen oxide emission
reductions at TU Electric's natural gas-fired units in the Dallas-Fort Worth
area. The Clean Air Act also requires studies over a four year period by the
EPA to assess the potential for toxic emissions from utility boilers. TU
Electric is unable to predict either the results of such studies or the effects
of any subsequent regulations. Continuous emission monitoring systems are
required by the Clean Air Act to be installed by 1995 on most of TU Electric's
fossil-fueled units. Installation began in 1992 and is expected to be completed
as required.
Only certain parts of the regulations implementing the Clean Air Act
have been published as final rules. Until more of these regulations have been
promulgated and specific state requirements developed, TU Electric will not be
able to fully determine the cost or method for compliance for these
requirements. TU Electric believes that it can meet the requirements necessary
to be in compliance with these provisions as they are developed. Estimates for
the capital requirements related to the Clean Air Act are included in TU
Electric's estimated construction expenditures. Any additional capital costs,
as well as any increased operating costs associated with new requirements or
compliance measures, are expected to be recoverable through rates, as similar
costs have been recovered in the past.
WATER
The TNRCC and the EPA have jurisdiction over all water discharges
(including storm water) from all System Companies' facilities. TU Electric's
facilities presently in operation have been constructed to operate in
compliance with applicable state and federal requirements relating to discharge
of pollutants into the water. TU Electric, Fuel Company, and Mining Company
have obtained all required waste water discharge permits from the TNRCC and the
EPA for facilities in operation and have applied for or obtained all such
permits for facilities under construction. TU Electric, Fuel Company, and
Mining Company believe they can satisfy the requirements necessary to obtain
any required permits or renewals.
Diversion, impoundment and withdrawal of water for cooling and other
purposes are subject to the jurisdiction of the TNRCC. TU Electric possesses
all necessary permits for these activities from the TNRCC for its present
operations and plants under construction.
OTHER
Federal legislation regulating surface mining was enacted in August
1977 and regulations implementing the law have been issued. Mining Company's
lignite mining operations are currently
13
<PAGE> 16
ITEM 1. BUSINESS (CONCLUDED).
ENVIRONMENTAL MATTERS -- (CONCLUDED)
regulated at the state level by the Railroad Commission of Texas, with
oversight by the United States Department of the Interior's Office of
Surface Mining, Reclamation and Enforcement. Surface mining permits have
been issued for current Mining Company operations that provide fuel for Big
Brown, Monticello and Martin Lake.
Treatment, storage and disposal of solid and hazardous waste are
regulated at the state level under the Texas Solid Waste Disposal Act and at
the federal level under the Resource Conservation and Recovery Act of 1976, as
amended (RCRA). The EPA has issued regulations under the RCRA and the TNRCC
has issued regulations under the Texas act applicable to TU Electric
facilities. TU Electric has registered its solid waste disposal sites and has
obtained or applied for such permits as are required by such regulations.
Under the federal Low-Level Radioactive Waste Policy Act of 1980, as
amended, the State of Texas is required to provide by 1996, either on its own
or jointly with other states in a compact, for the disposal of all low-level
radioactive waste generated within the state. The State of Texas is taking
steps to site, construct and operate a low-level radioactive waste disposal
site by 1996 and submitted a license application in March 1992 for a low-level
waste disposal facility. The State of Texas has entered into an agreement with
other states in its region to take and dispose of all low-level radioactive
waste from Texas for the period January 1, 1993 through June 30, 1994. It is
expected that such material will be stored on-site until other facilities are
available.
14
<PAGE> 17
ITEM 2. PROPERTIES.
The Company owns no utility plant or real property. At December 31,
1993, TU Electric owned or leased and operated the following units:
<TABLE>
<CAPTION>
ELECTRIC NET
GENERATING CAPABILITY
UNITS FUEL SOURCE (MW) %
---------- ----------- ---------- -----
<S> <C> <C> <C>
47 Natural Gas (a). . . . . . . . 11,936 56.7
9 Lignite/Coal (b) . . . . . . . 5,845 27.7
2 Nuclear . . . . . . . . . . . 2,300 10.9
10 Diesel . . . . . . . . . . . . 20 0.1
15 Combustion Turbines (c). . . . 975 4.6
------ -----
Total . . . . . . . . . . . . 21,076 100.0
------ -----
------ -----
<FN>
____________________
(a) Thirty-eight natural gas units are designed to operate on fuel oil for short periods when
gas supplies are interrupted or curtailed. Five natural gas units are designed to operate
on fuel oil for extended periods.
(b) Includes the Monticello Unit 3 (750 MW).
(c) Natural gas units leased and operated by TU Electric. Such units are designed to operate on
fuel oil for extended periods.
</TABLE>
The principal generating facilities and load centers of TU Electric are
connected by 3,861 circuit miles of 345,000 volt transmission lines and 9,098
circuit miles of 138,000 and 69,000 volt transmission lines.
TU Electric is connected by six 345,000 volt lines to Houston Lighting
& Power Company; by three 345,000 volt, eight 138,000 volt and nine 69,000 volt
lines to West Texas Utilities Company; by two 345,000 volt, seven 138,000 volt
and one 69,000 volt lines to the Lower Colorado River Authority; by four
345,000 volt and eight 138,000 volt lines to the Texas Municipal Power Agency;
and at several points with smaller systems operating wholly within Texas.
SESCO is connected to TU Electric by three 138,000 volt lines, eight 69,000
volt lines and two lines at distribution voltage. TU Electric and SESCO
are members of the Electric Reliability Council of Texas (ERCOT), an intrastate
network of investor-owned entities, cooperatives and public entities. ERCOT is
the regional reliability coordinating organization for member electric power
systems in Texas.
The generating stations and other important units of property of TU
Electric and SESCO are located on lands owned primarily in fee simple. The
greater portion of the transmission and distribution lines of TU Electric and
SESCO, and of the gas gathering and transmission lines of Fuel Company, has
been constructed over lands of others pursuant to easements or along public
highways and streets as permitted by law. The rights of the System Companies
in the realty on which their properties are located are considered by them to
be adequate for their use in the conduct of their business. Minor defects and
irregularities customarily found in titles to properties of like size and
character may exist, but any such defects and irregularities do not materially
impair the use of the properties affected thereby. TU Electric, SESCO and Fuel
Company have the right of eminent domain whereby they may, if necessary,
perfect or secure titles to privately held land used or to be used in their
operations. Utility plant of TU Electric and SESCO is generally subject to the
liens of their respective mortgages.
15
<PAGE> 18
ITEM 2. PROPERTIES (CONTINUED).
CONSTRUCTION PROGRAM
The Company has taken steps to substantially reduce construction
expenditures from amounts previously estimated. Such expenditures, excluding
AFUDC (see Note 1 to Consolidated Financial Statements), are presently
estimated at $400 million for each of the years 1994, 1995 and 1996. The
System Companies are subject to federal, state and local regulations dealing
with environmental protection (see Item 1. Business--Environmental Matters).
Expenditures for construction to meet the requirements of such regulations at
existing generating units are estimated to be $55 million for 1994 and were
approximately $34 million in 1993, $25.4 million for 1992 and $10.4 million for
1991.
TU Electric's Resource Plan includes two lignite-fueled 750 MW units at
Twin Oak currently scheduled for service for the peak seasons of 2000 and 2001,
respectively. However, estimated construction expenditures, excluding AFUDC,
for the 1994-1996 period do not include any significant amounts for the
resumption of construction of these units. Active construction and the accrual
of AFUDC on Twin Oak, suspended in 1987 due to forecast changes in load growth,
would need to resume in 1996 in order to meet the current schedule. Assuming
the units are financed by TU Electric using traditional methods, approximately
$210 million would be added to construction expenditures in 1996.
TU Electric's Resource Plan also includes 1,502 MW of gas/oil-fueled
combustion turbine units (including 272 MW of simple cycle combustion turbines
planned for completion during the peak season of 1999), none of which requires
significant construction expenditures in the 1994-1996 period reflected above.
The reevaluation of growth expectations, the effects of inflation,
additional regulatory requirements and the availability of fuel, labor,
materials and capital may result in changes in estimated construction costs and
dates of completion. Commitments in connection with the construction program
are generally revocable subject to reimbursement to manufacturers for
expenditures incurred or other cancellation penalties. (See Item 1. Business
- -- Peak Load and Capability.)
For information regarding financing of the construction program, see
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
16
<PAGE> 19
THE TU ELECTRIC AND SESCO SYSTEMS
DECEMBER 31, 1993
17
<PAGE> 20
ITEM 3. LEGAL PROCEEDINGS.
In May 1990, Nancy F. King and Rodney B. Shields, allegedly as
shareholders of the Company, filed suit in the United States District Court
for the Northern District of Texas derivatively on behalf of the Company
against the Company as a nominal defendant and James K. Dobey, Jack W.
Evans, J. S. Farrington, William M. Griffin, Margaret N. Maxey, Erle Nye,
Charles R. Perry and William H. Seay, directors of the Company, and Burl B.
Hulsey, Jr. and Charles N. Prothro, former directors of the Company. The
plaintiffs allege mismanagement involving gross negligence, willful
misconduct, breaches of fiduciary duty and waste of corporate assets on the
part of the defendants in connection with activities relating to Comanche
Peak. In September 1991, the Court entered an order which stayed this suit
until thirty days after entry of a final judgment by the District Court in
TU Electric's appeal of the final order of the PUC in Docket 9300. In
September 1992, a final judgment in this appeal was entered by the District
Court. (See Item 1. Business -- Regulation and Rates.) The plaintiff
refused to extend the stay pending the appeals of this judgment, filed an
amended complaint which claimed damages in excess of $1.247 billion, added
as defendants two former directors of the Company, Perry G. Brittain and
James H. Zumberge, and one current director of the Company, James A.
Middleton, and removed Rodney B. Shields as a plaintiff. In response, the
Company moved to extend the stay through resolution of the appeals or
alternatively to dismiss the suit. In December 1992, this suit was
consolidated with a similar suit described below. In January 1993, the
Court entered an order which stays the consolidated suit until thirty days
after the disposition of all appeals from the final order of the PUC in
Docket 9300. (See Item 1. Business -- Regulation and Rates.)
In November 1991, Sheree Anne Meyer, as custodian for Adam Joseph
Davenport, allegedly as a shareholder of the Company, filed suit in the
United States District Court for the Northern District of Texas
derivatively on behalf of the Company and TU Electric against the Company
and TU Electric as nominal defendants and J. S. Farrington, Erle Nye, James
K. Dobey, Jack W. Evans, William M. Griffin, Margaret N. Maxey, James A.
Middleton, Charles R. Perry and William H. Seay, directors of the Company,
and James H. Zumberge, a former director of the Company, S. S. Swiger, a
former officer of the Company, and T. L. Baker, an officer of TU Electric.
The plaintiff alleges breaches of fiduciary duty and negligence primarily
relating to Comanche Peak, which the plaintiff claims have resulted in
damages in an amount not less than $1.381 billion. In December 1991, the
Court entered an order which stayed this suit until thirty days after entry
of a final judgment by the District Court in TU Electric's appeal of the
final order of the PUC in Docket 9300. In September 1992, a final judgment
in this appeal was entered by the District Court. (See Item 1. Business --
Regulation and Rates.) The plaintiff refused to extend the stay pending
the appeals of this judgment and the Company moved to extend the stay
through resolution of the appeals or alternatively to dismiss the suit. In
December 1992, this suit was consolidated into the suit described above.
In January 1993, the Court entered an order which stays the consolidated
suit until thirty days after the disposition of all appeals from the final
order of the PUC in Docket 9300. (See Item 1. Business - Regulation and
Rates.)
18
<PAGE> 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
- ------------------
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES PRESENTLY DATE FIRST
HELD (CURRENT TERM ELECTED TO BUSINESS EXPERIENCE
NAME OF OFFICER AGE EXPIRES MAY 20, 1994) PRESENT OFFICE(S) (PRECEDING FIVE YEARS)
--------------- ---- ------------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
J. S. Farrington 59 Chairman, Chief February 20, 1987 Same.
Executive and
Director
Erle Nye 56 President and February 20, 1987 Same and Chief Executive
Director of TU Electric.
H. Jarrell Gibbs 56 Vice President and November 15, 1991 Executive Vice President
Principal Financial of TU Electric; prior
Officer thereto, Executive Vice
President of the Texas
Electric Service Division
of TU Electric; prior
thereto, Vice President
of TU Electric.
There is no family relationship between any of the above named executive officers.
</TABLE>
19
<PAGE> 22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is listed on the New York, Chicago and
Pacific stock exchanges (symbol: TXU).
The price range of the common stock of the Company on the composite
tape, as reported by The Wall Street Journal, and the dividends paid, for
each of the calendar quarters of 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
Quarter Ended Price Range Dividends Paid
------------- ---------------------------------------- --------------------
1993 1992 1993 1992
----------------- ---------------- --------- --------
High Low High Low
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
March 31 . . . . . . . . . . . . . . . $47 3/8 $41 5/8 $42 $37 1/2 $0.76 $0.75
June 30 . . . . . . . . . . . . . . . 47 7/8 44 1/4 39 7/8 37 0.77 0.76
September 30 . . . . . . . . . . . . . 49 3/4 45 1/2 43 3/4 38 5/8 0.77 0.76
December 31 . . . . . . . . . . . . . 47 42 1/4 43 5/8 40 5/8 0.77 0.76
----- -----
$3.07 $3.03
----- -----
----- -----
</TABLE>
The Company has declared common stock dividends payable in cash in each
year since its incorporation in 1945. The Board of Directors of the Company,
at its February 1994 meeting, declared a regular quarterly dividend of $0.77 a
share. Future dividends, however, may vary depending upon the Company's profit
levels and capital requirements as well as financial and other conditions
existing at the time. Reference is made to Note 4 to Consolidated Financial
Statements regarding limitations upon payment of dividends on common stock of
TU Electric and SESCO.
The approximate number of record holders of the common stock of the
Company as of February 28, 1994, was 113,078.
20
<PAGE> 23
Item 6. SELECTED FINANCIAL DATA.
CONSOLIDATED FINANCIAL STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1993* 1992 1991* 1990 1989
--------- --------- -------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Total assets -- end of year . . . . . . . . . . . . . . . . . $21,518,128 $19,428,568 $18,792,782 $18,650,979 $17,219,155
- --------------------------------------------------------------------------------------------------------------------------------
Utility plant -- gross -- end of year . . . . . . . . . . . . $23,836,729 $23,043,778 $21,927,788 $20,726,629 $19,136,977
Accumulated depreciation and amortization -- end of year. . 4,710,398 4,251,002 3,851,330 3,446,785 3,148,407
Reserve for regulatory disallowances -- end of year . . . . 1,308,460 1,308,460 1,308,460 -- --
Construction expenditures (including allowance for
funds used during construction) . . . . . . . . . . . . . 871,450 1,136,971 1,232,239 1,453,594 1,812,471
- --------------------------------------------------------------------------------------------------------------------------------
Capitalization -- end of year
Long-term debt . . . . . . . . . . . . . . . . . . . . . . $ 8,379,826 $ 7,931,981 $ 7,951,086 $ 7,380,575 $ 6,416,923
Preferred stock:
Not subject to mandatory redemption . . . . . . . . . . . 1,083,008 909,564 1,007,728 1,007,728 1,007,732
Subject to mandatory redemption . . . . . . . . . . . . . 396,917 418,748 425,758 426,737 329,009
Common stock equity . . . . . . . . . . . . . . . . . . . . 6,570,993 6,590,537 6,283,675 6,827,808 6,330,263
----------- ----------- ----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . $16,430,744 $15,850,830 $15,668,247 $15,642,848 $14,083,927
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Capitalization ratios -- end of year
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 51.0% 50.0% 50.8% 47.2% 45.6%
Preferred stock . . . . . . . . . . . . . . . . . . . . . . 9.0 8.4 9.1 9.2 9.5
Common stock equity . . . . . . . . . . . . . . . . . . . . 40.0 41.6 40.1 43.6 44.9
----------- ----------- ----------- ----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
- --------------------------------------------------------------------------------------------------------------------------------
Embedded interest cost on long-term debt -- end of year . . . 8.7% 9.2% 9.7% 9.8% 9.8%
Embedded dividend cost on preferred stock -- end of year. . . 7.6% 8.4% 8.5% 8.6% 8.3%
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change
in accounting principle . . . . . . . . . . . . . . . . . . $368,660 $619,204 $(409,964) $850,802 $779,084
Cumulative effect of a change in accounting for unbilled
revenue (Net of taxes of $41,679,000)(Note 12) . . . . . . -- 80,907 -- -- --
----------- ----------- ----------- ----------- -----------
Consolidated net income (loss) . . . . . . . . . . . . . . . $368,660 $700,111 $(409,964) $850,802 $779,084
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Dividends declared on common stock . . . . . . . . . . . . . $682,438 $653,146 $ 624,261 $575,424 $512,084
- --------------------------------------------------------------------------------------------------------------------------------
Common stock data
Shares outstanding -- average . . . . . . . . . . . . . . . 221,555,218 214,850,225 207,357,881 193,460,523 175,567,061
Shares outstanding -- end of year . . . . . . . . . . . . . 224,345,422 217,316,054 210,700,373 196,970,326 183,189,361
Earnings per share (on average shares outstanding):
Before cumulative effect of a change in accounting . . . . $1.66 $2.88 $(1.98) $4.40 $4.44
Cumulative effect of a change in accounting
for unbilled revenue . . . . . . . . . . . . . . . . . -- 0.38 -- -- --
----------- ----------- ----------- ----------- -----------
Total earnings per average share . . . . . . . . . $1.66 $3.26 $(1.98) $4.40 $4.44
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Dividends declared per share . . . . . . . . . . . . . . . $3.08 $3.04 $3.00 $2.96 $2.92
Book value per share -- end of year . . . . . . . . . . . . $29.29 $30.33 $29.82 $34.66 $34.56
Return on average common stock equity . . . . . . . . . . . 5.6% 10.9% (6.3)% 12.9% 13.0%
- --------------------------------------------------------------------------------------------------------------------------------
Allowance for funds used during construction as
percent of consolidated net income . . . . . . . . . . . . 71.4% 43.5% -- % 72.6% 65.0%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Certain financial statistics for the years 1993 and 1991 were affected by
TU Electric recording regulatory disallowances in the rate orders issued by the
Public Utility Commission of Texas in Dockets 11735 and 9300, respectively.
(See Note 10 to Consolidated Financial Statements.)
21
<PAGE> 24
Item 6. SELECTED FINANCIAL DATA (Concluded).
CONSOLIDATED OPERATING STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
ELECTRIC ENERGY GENERATED AND
PURCHASED (MWh)
Generated -- net station output . . . . . . . . . . . . . . 79,105,495 74,652,339 76,326,601 76,044,403 74,925,395
Purchased and net interchange . . . . . . . . . . . . . . . 12,785,246 11,417,251 11,027,061 12,179,724 12,588,899
---------- ---------- ---------- ---------- ----------
Total generated and purchased . . . . . . . . . . . . . . 91,890,741 86,069,590 87,353,662 88,224,127 87,514,294
Company use, losses and unaccounted for . . . . . . . . . . 6,397,110 5,747,156 4,996,123 4,496,294 5,571,768
---------- ---------- ---------- ---------- ----------
Total electric energy sales . . . . . . . . . . . . . . . 85,493,631 80,322,434 82,357,539 83,727,833 81,942,526
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
ELECTRIC ENERGY SALES (MWh)
Residential . . . . . . . . . . . . . . . . . . . . . . . . 30,221,666 27,266,411 28,505,885 28,157,802 27,294,613
Commercial . . . . . . . . . . . . . . . . . . . . . . . . 24,044,045 22,959,464 23,012,114 23,429,101 22,539,351
Industrial . . . . . . . . . . . . . . . . . . . . . . . . 21,415,721 21,108,894 21,482,750 21,839,196 21,377,542
Government and municipal . . . . . . . . . . . . . . . . . 5,377,027 5,032,780 5,056,868 4,914,503 4,683,259
---------- ---------- ---------- ---------- ----------
Total general business . . . . . . . . . . . . . . . . . 81,058,459 76,367,549 78,057,617 78,340,602 75,894,765
Other electric utilities . . . . . . . . . . . . . . . . . 4,435,172 3,954,885 4,299,922 5,387,231 6,047,761
---------- ---------- ---------- ---------- ----------
Total electric energy sales . . . . . . . . . . . . . . . 85,493,631 80,322,434 82,357,539 83,727,833 81,942,526
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
OPERATING REVENUES (thousands)
Residential . . . . . . . . . . . . . . . . . . . . . . . . $2,254,832 $1,995,767 $2,043,421 $1,859,239 $1,752,679
Commercial . . . . . . . . . . . . . . . . . . . . . . . . 1,499,266 1,405,546 1,391,995 1,266,030 1,228,672
Industrial . . . . . . . . . . . . . . . . . . . . . . . . 864,452 849,365 852,952 801,821 817,802
Government and municipal . . . . . . . . . . . . . . . . . 342,639 304,286 303,597 273,596 251,941
---------- ---------- ---------- ---------- ----------
Total general business . . . . . . . . . . . . . . . . . 4,961,189 4,554,964 4,591,965 4,200,686 4,051,094
Other electric utilities . . . . . . . . . . . . . . . . . 215,625 209,170 228,075 232,755 245,821
---------- ---------- ---------- ---------- ----------
Total from electric energy sales . . . . . . . . . . . . 5,176,814 4,764,134 4,820,040 4,433,441 4,296,915
Other operating revenues (including unbilled revenue
and over/under-recovered fuel revenue)* . . . . . . . . . 257,698 143,742 73,133 109,182 23,613
---------- ---------- ---------- ---------- ----------
Total operating revenues . . . . . . . . . . . . . $5,434,512 $4,907,876 $4,893,173 $4,542,623 $4,320,528
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
ELECTRIC CUSTOMERS (end of year)
Residential . . . . . . . . . . . . . . . . . . . . . . . . 2,020,667 1,952,916 1,921,119 1,900,005 1,875,524
Commercial . . . . . . . . . . . . . . . . . . . . . . . . 221,422 210,185 205,555 205,359 210,824
Industrial . . . . . . . . . . . . . . . . . . . . . . . . 21,954 21,969 22,156 22,214 22,024
Government and municipal . . . . . . . . . . . . . . . . . 29,034 28,204 27,719 24,538 23,434
---------- ---------- ---------- ---------- ----------
Total general business . . . . . . . . . . . . . . . . . 2,293,077 2,213,274 2,176,549 2,152,116 2,131,806
Other electric utilities . . . . . . . . . . . . . . . . . 220 243 247 63 64
---------- ---------- ---------- ---------- ----------
Total electric customers . . . . . . . . . . . . . . . . 2,293,297 2,213,517 2,176,796 2,152,179 2,131,870
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
RESIDENTIAL STATISTICS (excludes master-metered
customers, kWh sales and revenues)
Average kWh per customer . . . . . . . . . . . . . . . . 15,210 13,329 14,099 14,050 13,754
Average revenue per kWh . . . . . . . . . . . . . . . . . 7.78cents 7.41cents 7.26cents 6.69cents 6.50cents
______________________________
Industrial classification includes service to Alcoa-Sandow:
Electric energy sales (MWh) . . . . . . . . . . . . . . . 3,166,797 3,157,852 3,359,824 3,517,431 3,276,303
Operating revenues (thousands) . . . . . . . . . . . . . $53,352 $56,043 $55,987 $55,274 $56,985
</TABLE>
* In 1992, other operating revenues do not include $122,586,000 of unbilled
base rate revenues which were reclassified as a cumulative effect of a
change in accounting principle effective January 1, 1992.
22
<PAGE> 25
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
LIQUIDITY AND CAPITAL RESOURCES
The primary capital requirements of Texas Utilities Company (Company) in
1993 and as estimated for 1994 through 1996 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996
------ ------ ------ ------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Cash construction expenditures (excluding
allowance for funds used during construction) . . . $ 628,000 $400,000 $400,000 $400,000
Nuclear fuel (excluding allowance for funds used
during construction) and non-utility property . . . 93,000 66,000 62,000 72,000
Maturities and redemptions of long-term debt,
sinking fund requirements and redemptions
of preferred stock . . . . . . . . . . . . . . . . . 2,944,000 151,000 135,000 246,000
---------- -------- -------- --------
Total $3,665,000 $617,000 $597,000 $718,000
---------- -------- -------- --------
---------- -------- -------- --------
</TABLE>
For information concerning construction work contemplated by the Texas
Utilities Company System (System Companies) and the commitments with respect
thereto, see Item 2. Properties -- Construction Program and Note 11 to
Consolidated Financial Statements.
The System Companies have generated cash from operations sufficient to meet
operating needs, pay dividends on capital stock and finance a portion of
capital requirements. Factors affecting the ability of Texas Utilities
Electric Company (TU Electric) to continue to fund a portion of its capital
requirements from operations include adequate rate relief in the future
reflecting regulatory practices allowing recovery of capital investment through
adequate depreciation rates, normalization of federal income taxes, recovery of
the cost of fuel and purchased power and the opportunity to earn competitive
rates of return required in the capital markets.
In order to remain competitive and in response to the recent disappointing
rate order in Docket 11735, the Company has taken steps to reduce operating
costs and capital expenditures and is reviewing various alternatives and
strategies to improve future earnings potential and its basic financial
position. This review may result in further initiatives which may include, but
not necessarily be limited to, alternative uses or disposition of existing
assets, somewhat greater utilization of short-term and variable rate
securities, new marketing and rate initiatives and application for additional
rate increases from regulatory authorities. It is not possible at this time to
predict the effect any of these possible initiatives will have on the Company's
financial position or its results of operation. For 1993, approximately 68% of
the cash needed for construction expenditures was generated from operations by
the System Companies. The Company believes internal cash generation will
increase as a result of the Docket 11735 rate order and through the
implementation of the initiatives discussed above.
In August 1993, TU Electric placed Comanche Peak Unit 2 in commercial
operation and implemented, under bond, its 15.3% rate increase requested in
Docket 11735. In September 1993, TU Electric recorded a charge against
earnings of approximately $363 million ($265 million after tax) related to an
agreement (Settlement Agreement) among the parties involved in TU Electric's
Docket 11735. The Settlement Agreement resolved all issues in the prudence and
fuel phases of Docket 11735 and also permits TU Electric to recover, ratably
over an eight year period, $197 million of expenditures incurred in connection
with the Company's recent cost reduction program. The Settlement Agreement
also resolved the difference between TU Electric and the Public Utility
Commission of Texas (PUC) staff that was the primary issue in another
proceeding related to the accrual of an allowance for funds used during
23
<PAGE> 26
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (CONTINUED).
LIQUIDITY AND CAPITAL RESOURCES -- (CONTINUED)
construction (AFUDC), during the bonded rate period of Docket 9300, on
construction work in progress (CWIP) that was subsequently included in rate
base pursuant to the final order in Docket 9300.
On January 28, 1994, the PUC issued a final order in Docket 11735 which
provided for a total annual revenue increase of approximately $435 million, or
8.7%. TU Electric strongly disagrees with the final order and has filed a
motion for rehearing with the PUC, and will appeal the outcome, if necessary.
As a result of this final order, unless the order is changed on rehearing, TU
Electric will refund the difference between the bonded rates and the rates
approved in the final order, including interest, all of which is being fully
reserved by TU Electric. The total amount to be refunded will be determined
once approved rates have been implemented, which is expected to be during the
second quarter of 1994. The amount to be refunded at December 31, 1993 was
approximately $141.2 million. Such refund will be mitigated by a fuel cost
surcharge approved by the PUC of approximately $144.5 million, including
interest, in under-collected fuel costs through June 30, 1993. For additional
information regarding the rate decision, see Item 1. Business -- Regulation and
Rates and Note 10 to Consolidated Financial Statements.
As a result of the final order and its effects on earnings, TU Electric
could be restricted from issuing additional shares of preferred stock. TU
Electric does not believe this restriction would materially affect its ability
to fund its continuing operations or capital requirements. Although TU
Electric cannot predict the outcome of its appeal of the Docket 9300 rate
decision or its expected appeal of the Docket 11735 rate decision, future
regulatory actions or any changes in economic and securities market conditions,
no changes are expected in trends or commitments, other than those discussed
above, which might significantly alter its basic financial position.
On November 14, 1993, the emissions chimney for Unit 3 of the Monticello
Steam Electric Station collapsed. The cause of the collapse has not been
determined but such unit and the associated lignite mining operation will be
inoperative until completion of repairs. TU Electric is formulating the
engineering, procurement and construction plans that will return the unit to
service in 1995. The cost of repairs is covered by TU Electric's insurance
which includes a $2,000,000 deductible. Therefore, the Company does not expect
the accident to materially effect its results of operation or financial
position.
On July 1, 1993, Southwestern Electric Service Company (SESCO) became a
wholly-owned subsidiary of the Company pursuant to approval by shareholders of
SESCO and the Securities and Exchange Commission. The acquisition was
accounted for as a purchase business combination with the resulting goodwill
being amortized evenly over forty years. The operations of SESCO after the
date of acquisition have been reflected in the consolidated financial
statements. The acquisition of SESCO did not have a material effect on the
Company's results of operation or financial position.
External funds of a permanent or long-term nature are obtained through the
sales of common stock, preferred stock and long-term debt by the System
Companies. The capitalization ratios of the Company and its subsidiaries at
December 31, 1993 consisted of approximately 51% long-term debt, 9% preferred
stock and 40% common stock equity.
24
<PAGE> 27
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (CONTINUED).
LIQUIDITY AND CAPITAL RESOURCES -- (CONTINUED)
The System Companies had financings totaling $3,805,754,370 in 1993.
Proceeds from such financings were used primarily for the early redemption of
higher coupon debt and higher dividend preferred stock. The System Companies
redeemed or made principal payments of $2,944,339,000 on long-term debt and
preferred stock. Financings in 1993 by the System Companies included the
following:
LONG-TERM DEBT:
<TABLE>
<CAPTION>
PRINCIPAL
DESCRIPTION AMOUNT INTEREST RATE MATURITY
----------- --------- ------------- --------
<S> <C> <C> <C>
First mortgage and collateral trust bonds (TU Electric). . . $2,050,000,000 5-1/2% to 7-7/8% 1998 to 2025
Taxable pollution control series (TU Electric)* . . . . . . 100,000,000 4.25% 2023
Pollution control series (TU Electric) . . . . . . . . . . . 298,465,000 5-1/2% to 6.10% 2022 to 2028
Senior notes (Mining Company) . . . . . . . . . . . . . . . 325,000,000 6-1/2% to 7% 2000 to 2005
--------------
Total $2,773,465,000
--------------
--------------
</TABLE>
______________________________
* The taxable pollution control series bonds are in a flexible mode and
while in such mode will be remarketed for periods of less than 270 days and are
secured by an irrevocable letter of credit. TU Electric has sufficient unused
existing lines of credit that would allow refinancing of the bonds on a
long-term basis should remarketing prove unsuccessful.
COMMON STOCK (COMPANY):
<TABLE>
<CAPTION>
NET
DESCRIPTION SHARES PROCEEDS
----------- ------ --------
<S> <C> <C>
Automatic Dividend Reinvestment and Common Stock Purchase Plan. . . 5,163,587 $220,848,000
Employees' Thrift Plan and Employee Stock Ownership Plan . . . . . 445,465 20,123,000
Acquisition of SESCO . . . . . . . . . . . . . . . . . . . . . . . 1,420,316 59,976,000
--------- ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 7,029,368 $300,947,000
--------- ------------
--------- ------------
</TABLE>
<TABLE>
<CAPTION>
NET
SHARES PROCEEDS DIVIDENDS
------ -------- ---------------
<S> <C> <C> <C>
PREFERRED STOCK (TU ELECTRIC) . . . . 7,500,000* $731,342,370 $6.375 to $8.20
</TABLE>
______________________________
* Four depositary shares have been issued with respect to each of 5,000,000
of such underlying shares of preferred stock.
The replacement of higher coupon debt and higher dividend preferred stock
during 1993 reduced interest and dividend requirements by approximately
$45,000,000 on an annualized basis. TU Electric redeemed $15,000,000 of 10.45%
First Mortgage and Collateral Trust Bonds, Secured Medium-Term Notes on March
16, 1994 and intends to redeem $335,000,000 of First Mortgage Bonds with
interest rates ranging from 7-3/8% to 9-1/2% on April 1, 1994 with each
redemption subject to the deposit of the necessary redemption monies by TU
Electric. Additional early redemptions of long-term debt and preferred stock
may occur from time to time in amounts presently undetermined. (See Notes 5
and 6 to Consolidated Financial Statements.)
On February 2, 1994, the Company amended its Automatic Dividend
Reinvestment and Common Stock Purchase Plan. The amendments include the option
for the purchase of common stock on the open market through an independent
broker to meet share requirements under the plan.
The System Companies expect to sell additional debt and equity securities
as needed (subject to the possible restriction on the issuance of additional
shares of preferred stock as discussed above) including the possible future
sale by TU Electric of up to $450,000,000 of First Mortgage and Collateral
Trust Bonds currently registered with the Securities and Exchange Commission
for offering pursuant to Rule 415 under the Securities Act of 1933. TU
Electric also has 250,000 shares of Cumulative Preferred Stock ($100
liquidation value) similarly registered. It is the intent of the Company and
TU Electric to negotiate a new credit facility prior to the scheduled
reduction in June 1994 in the joint lines of credit of the
25
<PAGE> 28
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (CONTINUED).
LIQUIDITY AND CAPITAL RESOURCES -- (CONCLUDED)
Company and TU Electric. The new facility would be used for working capital,
as back-up for commercial paper and for other corporate purposes. For
information regarding short-term financings of the Company, see Note 2 to
Consolidated Financial Statements.
The Company's capital requirements have not been significantly affected by
the requirements of the federal Clean Air Act, as amended (Clean Air Act).
Although TU Electric is unable to fully determine the cost of compliance with
the Clean Air Act, it is not expected to have a significant impact on the
Company. Any additional capital costs, as well as any increased operating
costs associated with these new requirements, are expected to be recoverable
through rates, as similar costs have been recovered in the past.
The National Energy Policy Act of 1992 addresses a wide range of energy
issues and is intended to increase competition in electric generation and
broaden access to electric transmission systems. TU Electric and SESCO are
unable to predict the impact of regulations implementing this legislation on
their operations until such regulations are promulgated and approved. However,
TU Electric and SESCO believe that such legislation reflects the trend toward
increased competition in the energy industry.
While TU Electric and SESCO have experienced competitive pressures in the
wholesale market resulting in a minor loss of load, wholesale sales constitute
a relatively low percentage of total sales. TU Electric and SESCO are unable
to predict the extent of future competitive developments or what impact, if
any, such developments may have on operations. (See Item 1. Business --
Competition.)
See Item 6. Selected Financial Data -- Consolidated Financial Statistics
for additional information.
RESULTS OF OPERATION
Operating revenues increased 10.7% and 0.3% for the years ended December
31, 1993 and 1992, respectively. The following table details the factors
contributing to these changes:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
--------------------
FACTORS 1993 1992
------------ -------- --------
THOUSANDS OF DOLLARS
<S> <C> <C>
Base rate revenue . . . . . . . . . . . . . . $357,076 $(57,824)
Fuel revenue . . . . . . . . . . . . . . . . 150,707 42,161
Power cost recovery factor revenue . . . . . (1,313) (89)
Unbilled revenue and other . . . . . . . . . 20,166 30,455
-------- --------
Total . . . . . . . . . . . . . . . . . . $526,636 $ 14,703
-------- --------
-------- --------
</TABLE>
Base rate revenue increased in 1993 due to higher energy sales and higher rate
levels implemented in August 1993 as compared to a decrease in base rate
revenues in 1992 as a result of lower energy sales. Energy sales increased
6.4% for 1993 and decreased 2.5% for 1992. The increase in energy sales in 1993
was due primarily to increased customer usage resulting from more normal
weather conditions and an increase in customers, while the decrease in 1992
resulted from milder than normal weather and unfavorable economic conditions,
partially offset by an increase in customers. The rate increase placed in
effect in August 1993 increased base rate revenues, net of amounts to be
refunded, by approximately $177 million in 1993. The increase in fuel revenue
for 1993 resulted from increased energy sales and increased fuel costs. The
increase in fuel revenue in 1992 was primarily due to fuel refunds in 1991,
partially offset by decreased energy sales in 1992. The increase in unbilled
revenue and other resulted from a larger accrual of unbilled revenue in both
periods. (See Note 12 to Consolidated Financial Statements.)
26
<PAGE> 29
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (CONTINUED).
RESULTS OF OPERATION -- (CONTINUED)
Fuel and purchased power expense increased 10.7% and 0.9% for 1993 and
1992, respectively. Fuel and purchased power expense increased for 1993
primarily due to increased energy sales and the increase in the price of gas
partially offset by an increased utilization of nuclear fuel. The 1992
increase in fuel and purchased power was primarily the result of an increased
price of gas which more than offset the decrease in generation. (See Item 1.
Business -- Fuel Supply and Purchased Power and Item 6. Selected Financial Data
- -- Consolidated Operating Statistics.)
Total operating expenses, excluding fuel and purchased power, increased
15.7% for 1993 and decreased 1.3% for 1992. Operation, maintenance and
depreciation expenses increased in 1993 as a result of the commencement of
commercial operation of Unit 2 of Comanche Peak in August 1993. Operation
expense in 1993 also increased due to higher pension costs and other
postretirement benefits costs associated with Financial Accounting Standards
Board (FASB) Statement 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions", partially offset by lower employee labor costs.
Maintenance expense was also affected by inventory adjustments during the third
and fourth quarters of 1993. Operation and maintenance expenses decreased in
1992 primarily due to decreased employee related costs and management's efforts
to further reduce other costs through a cost reduction program. Depreciation
expense decreased in 1992 as a result of recording the disallowances associated
with Comanche Peak Unit 1 in TU Electric's Docket 9300 rate order. Taxes other
than income increased in 1993 due primarily to increased local gross receipts
taxes resulting from higher tax rates on increased revenues and an increase in
ad valorem taxes. The increase in 1993 was partially offset by a refund of
prior years franchise taxes of approximately $23,875,000.
AFUDC decreased 13.5% and 16.4% in 1993 and 1992, respectively. The
decrease in 1993 was primarily due to the discontinuation of the accrual of
AFUDC on Unit 2 of Comanche Peak when such unit achieved commercial operation
in August 1993. This decrease was partially offset by the change to a gross
rate in 1993 related to the adoption of FASB Statement 109, "Accounting for
Income Taxes", for projects commenced before March 1986 (see Notes 1 and 7 to
Consolidated Financial Statements). The decrease in 1992 was caused by the
implementation of the Docket 9300 rate order placing $695 million of CWIP in
rate base and the exclusion of $485 million of CWIP disallowed on Unit 2 of
Comanche Peak. (See Note 10 to Consolidated Financial Statements.)
The regulatory disallowances reflect charges resulting from the Settlement
Agreement among the parties in Docket 11735. (See Note 10 to Consolidated
Financial Statements.)
Other income and deductions -- net decreased for both periods due to
reduced interest income on temporary cash investments partially offset by an
increase in interest income on under-recovered fuel revenue in 1993.
Federal income taxes -- other income decreased in 1993 due to the effect of
recording the taxes associated with the regulatory disallowances and increased
in 1992 because 1991 was affected by the recording of taxes associated with the
provision for regulatory disallowances. (See Notes 7 and 10 to Consolidated
Financial Statements.)
Total interest charges, excluding AFUDC, decreased 0.2% and 7.4% for 1993
and 1992, respectively. Interest on mortgage bonds increased in 1993 as a
result of new issues sold and the annualization of interest on bond issues
sold in the prior period, partially offset by reduced interest requirements
as a
27
<PAGE> 30
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (CONCLUDED).
RESULTS OF OPERATION -- (CONCLUDED)
result of the Company's refinancing efforts. The decrease in 1992 resulted
from retirements and redemptions of certain higher rate issues. Interest on
other long-term debt decreased in both periods due to the continuing retirement
of debt incurred on the purchases of the minority ownership interests in
Comanche Peak and refunding of higher interest rate debt. Other interest
expense decreased in all periods due primarily to decreased interest on
short-term borrowings and decreased interest on over-recovered fuel revenues
partially offset by increased amortization of debt issuance expenses and
redemption premiums.
Preferred stock dividends decreased 2.7% and 2.6% for 1993 and 1992,
respectively, primarily due to the redemption of series with higher dividend
rates partially offset by dividends on new issues.
The cumulative effect of recording unbilled revenue reflects the accounting
change made on January 1, 1992, by TU Electric to begin recording base rate
revenue for energy sales sold but not billed.
The major factors affecting earnings in 1993 were the implementation of the
rate increase, the recording of the regulatory disallowances, the
discontinuation of AFUDC on Unit 2 of Comanche Peak and the commencement of
depreciation on approximately $668 million of investment in Comanche Peak Unit
2 incurred after the end of the Docket 11735 test year which was not included
in rates. The factors mentioned above resulted in a decrease in consolidated
net income of 47.3% for 1993. The change in accounting for unbilled revenue in
1992 and the recording of the provision for regulatory disallowances in 1991
(see Note 10 to Consolidated Financial Statements) resulted in an increase to
consolidated net income in 1992 over 1991. The change in accounting for
unbilled revenue increased consolidated net income $0.48 per share, of which
$0.38 per share represents the cumulative effect of the change in accounting
principle at January 1, 1992. The consolidated net loss in 1991 was due to the
recognition of the provision for regulatory disallowances and the provision for
refunds and related interest. Another major factor affecting earnings in 1992
and 1991 was the discontinuation of the accrual of AFUDC on approximately $1.3
billion of investment in Comanche Peak Unit 1, incurred after the end of the
test year, which was not reflected in rates until Docket 11735 bonded rates
were implemented.
ACCOUNTING CHANGES
In November 1993, Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (Statement 112) was issued.
Statement 112 is effective for fiscal years beginning after December 15, 1993.
Statement 112 applies to certain types of postemployment benefits provided to
former or inactive employees after employment but before retirement. The
Company does not expect Statement 112 to have a material effect on the
Company's financial position or results of operation.
28
<PAGE> 31
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1992 1991
-------- -------- --------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . $5,434,512 $4,907,876 $4,893,173
---------- --------- ----------
OPERATING EXPENSES
Fuel and purchased power . . . . . . . . . . . . . . . . 1,858,054 1,678,514 1,663,274
Operation . . . . . . . . . . . . . . . . . . . . . . . 812,555 731,344 778,939
Maintenance . . . . . . . . . . . . . . . . . . . . . . 350,004 301,251 309,424
Depreciation and amortization . . . . . . . . . . . . . 439,548 421,300 436,877
Federal income taxes . . . . . . . . . . . . . . . . . . 322,118 171,088 120,078
Taxes other than income . . . . . . . . . . . . . . . . 465,307 441,060 448,875
---------- --------- ----------
Total operating expenses . . . . . . . . . . . . . . 4,247,586 3,744,557 3,757,467
---------- --------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . 1,186,926 1,163,319 1,135,706
---------- --------- ----------
OTHER INCOME (LOSS)
Allowance for equity funds used during construction . . 150,125 194,462 251,744
Regulatory disallowances (Note 10) . . . . . . . . . . . (359,556) -- (1,381,145)
Other income and deductions -- net . . . . . . . . . . . 33,518 35,837 50,882
Federal income taxes (Notes 7 and 10) . . . . . . . . . 112,574 (11,417) 357,180
---------- --------- ----------
Total other income (loss) . . . . . . . . . . . . . . (63,339) 218,882 (721,339)
---------- --------- ----------
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . . . 1,123,587 1,382,201 414,367
---------- --------- ----------
INTEREST CHARGES
Interest on mortgage bonds . . . . . . . . . . . . . . . 611,090 598,235 608,729
Interest on other long-term debt . . . . . . . . . . . . 109,459 122,494 130,475
Other interest . . . . . . . . . . . . . . . . . . . . . 32,254 33,586 75,825
Allowance for borrowed funds used during construction . (113,108) (109,736) (112,301)
---------- --------- ----------
Total interest charges . . . . . . . . . . . . . . . 639,695 644,579 702,728
PREFERRED STOCK DIVIDENDS OF SUBSIDIARY . . . . . . . . . . 115,232 118,418 121,603
---------- --------- ----------
Income (loss) before cumulative effect of a change
in accounting principle . . . . . . . . . . . . . . . . 368,660 619,204 (409,964)
Cumulative effect of a change in accounting for unbilled
revenue (Net of taxes of $41,679,000)(Note 12) . . . . . -- 80,907 --
---------- --------- ----------
CONSOLIDATED NET INCOME (LOSS) . . . . . . . . . . . . . . $ 368,660 $ 700,111 $ (409,964)
---------- --------- ----------
---------- --------- ----------
Average shares of common stock outstanding (thousands) . . 221,555 214,850 207,358
Earnings per share (on average shares outstanding):
Before cumulative effect of a change in accounting . . . $1.66 $2.88 $(1.98)
Cumulative effect of a change in accounting
for unbilled revenue . . . . . . . . . . . . . . . . . -- 0.38 --
---------- --------- ----------
Total earnings per share . . . . . . . . . . . . . . $1.66 $3.26 $(1.98)
---------- --------- ----------
---------- --------- ----------
Dividends declared per share of common stock . . . . . . $3.08 $3.04 $3.00
</TABLE>
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1992 1991
-------- -------- --------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR . . . . . . . . . . . . . . . $2,171,018 $2,125,889 $3,160,114
ADD -- Consolidated net income (loss) . . . . . . . . . . . 368,660 700,111 (409,964)
LESOP dividend deduction tax benefit (Note 7) . . . 6,975 -- --
---------- --------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . 2,546,653 2,826,000 2,750,150
DEDUCT -- Dividends declared on common stock (for amounts per
share, see Statements of Consolidated Income) 682,438 653,146 624,261
Preferred stock redemption costs . . . . . . . . 21,802 1,836 --
---------- --------- ----------
BALANCE AT END OF YEAR . . . . . . . . . . . . . . . . . . $1,842,413 $2,171,018 $2,125,889
---------- --------- ----------
---------- --------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
29
<PAGE> 32
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1993 1992 1991
-------- -------- --------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income (loss) . . . . . . . . . . . . . $ 368,660 $ 700,111 $ (409,964)
Adjustments to reconcile consolidated net income (loss)
to cash provided by operating activities:
Depreciation and amortization (including amounts
charged to fuel) . . . . . . . . . . . . . . . . . . 543,441 477,201 482,378
Deferred federal income taxes -- net . . . . . . . . . 82,290 171,487 (247,633)
Federal investment tax credits -- net . . . . . . . . . (22,383) (22,957) (56,208)
Allowance for equity funds used during construction . . (150,125) (194,462) (251,744)
Regulatory disallowances (Note 10) . . . . . . . . . . 359,556 -- 1,381,145
Provision for refunds and related interest -- net . . . (27,235) (18,475) 44,893
Cumulative effect of a change in accounting for
unbilled revenue -- net (Note 12) . . . . . . . . . . -- (80,907) --
Changes in assets and liabilities:
Receivables -- net . . . . . . . . . . . . . . . . . (90,561) 103,394 (30,863)
Inventories . . . . . . . . . . . . . . . . . . . . . 11,112 (23,545) (14,462)
Accounts payable -- net . . . . . . . . . . . . . . . 2,797 20,599 (8,320)
Interest and taxes accrued . . . . . . . . . . . . . 14,449 2,267 115,345
Other working capital . . . . . . . . . . . . . . . . 154,154 29,232 24,921
Under-recovered fuel revenue -- net of deferred
taxes . . . . . . . . . . . . . . . . . . . . . . . (83,501) (27,854) (28,729)
Voluntary retirement/severance program . . . . . . . -- (119,668) --
Other -- net . . . . . . . . . . . . . . . . . . . . 29,751 10,179 37,910
------------ ------------ -----------
Cash provided by operating activities . . . . . . . 1,192,405 1,026,602 1,038,669
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of securities:
First mortgage bonds . . . . . . . . . . . . . . . . . 2,448,465 1,808,595 737,298
Other long-term debt . . . . . . . . . . . . . . . . . 325,000 -- 175,000
Preferred stock . . . . . . . . . . . . . . . . . . . . 731,342 -- --
Common stock . . . . . . . . . . . . . . . . . . . . . 240,971 253,660 482,116
Retirement of long-term debt and preferred stock . . . . (2,944,339) (1,851,325) (344,658)
Change in notes payable . . . . . . . . . . . . . . . . . (253,100) -- 215,000
Common stock dividends paid . . . . . . . . . . . . . . . (674,869) (646,002) (612,002)
Debt premium, discount, financing and reacquisition
expenses . . . . . . . . . . . . . . . . . . . . . . . . (141,545) (126,916) (15,406)
------------ ------------ -----------
Cash provided by (used in) financing activities . . (268,075) (561,988) 637,348
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures . . . . . . . . . . . . . . . . (871,450) (1,136,971) (1,232,239)
Allowance for equity funds used during construction
(excluding amount for nuclear fuel) . . . . . . . . . 138,950 179,519 232,068
Change in construction receivables/payables -- net . . . (32,847) (2,907) (6,074)
------------ ------------ -----------
Cash construction expenditures . . . . . . . . . . . (765,347) (960,359) (1,006,245)
Non-utility property -- net . . . . . . . . . . . . . . . (10,171) (12,024) (13,618)
Nuclear fuel (excluding allowance for equity funds used
during construction) . . . . . . . . . . . . . . . . . (16,889) (33,656) (16,694)
Acquisition of SESCO . . . . . . . . . . . . . . . . . . (1,237) -- --
Other investments . . . . . . . . . . . . . . . . . . . . (15,976) (9,399) (12,931)
------------ ------------ -----------
Cash used in investing activities . . . . . . . . . (809,620) (1,015,438) (1,049,488)
------------ ------------ -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . 114,710 (550,824) 626,529
CASH AND CASH EQUIVALENTS -- BEGINNING BALANCE . . . . . . 97,874 648,698 22,169
------------ ------------ -----------
CASH AND CASH EQUIVALENTS -- ENDING BALANCE . . . . . . . . $ 212,584 $ 97,874 $ 648,698
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
30
<PAGE> 33
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1992
-------- --------
THOUSANDS OF DOLLARS
<S> <C> <C>
UTILITY PLANT
In service:
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,476,725 $11,461,906
Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,542,399 1,493,602
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,822,202 3,567,646
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477,515 466,214
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,318,841 16,989,368
Less accumulated depreciation . . . . . . . . . . . . . . . . . . 4,595,533 4,201,396
----------- -----------
Utility plant in service less accumulated depreciation . . . . . 17,723,308 12,787,972
Construction work in progress . . . . . . . . . . . . . . . . . . . 1,040,483 5,614,430
Nuclear fuel (net of accumulated amortization: 1993 -- $114,865,000;
1992 -- $49,606,000) . . . . . . . . . . . . . . . . . . . . . . . 320,891 358,087
Held for future use . . . . . . . . . . . . . . . . . . . . . . . . 41,649 32,287
----------- -----------
Utility plant less accumulated depreciation and amortization . . 19,126,331 18,792,776
Less reserve for regulatory disallowances (Note 10) . . . . . . . . 1,308,460 1,308,460
----------- -----------
Net utility plant . . . . . . . . . . . . . . . . . . . . . . . 17,817,871 17,484,316
----------- -----------
INVESTMENTS
Non-utility property . . . . . . . . . . . . . . . . . . . . . . . . 554,370 544,167
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . 99,748 52,042
----------- -----------
Total investments . . . . . . . . . . . . . . . . . . . . . . . 654,118 596,209
----------- -----------
CURRENT ASSETS
Cash in banks . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,841 6,574
Temporary cash investments -- at cost . . . . . . . . . . . . . . . 204,743 91,300
Special deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 21,975 8,518
Accounts receivable:
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,670 113,576
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,439 40,069
Allowance for uncollectible accounts . . . . . . . . . . . . . . . (6,394) (1,613)
Inventories -- at average cost:
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . 194,226 203,400
Fuel stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,380 149,776
Prepaid taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,776 9,778
Other prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 44,250 52,340
Deferred federal income taxes . . . . . . . . . . . . . . . . . . . 43,543 --
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 10,716 6,919
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 939,165 680,637
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets:
Debt reacquisition costs . . . . . . . . . . . . . . . . . . . . . 287,430 214,245
Cancelled lignite unit costs . . . . . . . . . . . . . . . . . . . 20,678 23,189
Rate case costs . . . . . . . . . . . . . . . . . . . . . . . . . 66,508 52,006
Litigation and settlement costs . . . . . . . . . . . . . . . . . 72,685 72,685
Voluntary retirement/severance program . . . . . . . . . . . . . . 212,367 255,265
Recoverable deferred federal income taxes -- net (Note 7) . . . . 1,230,418 --
Other regulatory assets . . . . . . . . . . . . . . . . . . . . . 21,242 --
Under-recovered fuel revenue . . . . . . . . . . . . . . . . . . . . 204,772 75,152
Other deferred debits . . . . . . . . . . . . . . . . . . . . . . . 63,559 47,549
----------- -----------
Total deferred debits . . . . . . . . . . . . . . . . . . . . . 2,179,659 740,091
Less reserve for regulatory disallowances (Note 10) . . . . . . . . 72,685 72,685
----------- -----------
Net deferred debits . . . . . . . . . . . . . . . . . . . . . . 2,106,974 667,406
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,518,128 $19,428,568
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
31
<PAGE> 34
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1992
-------- --------
THOUSANDS OF DOLLARS
<S> <C> <C>
CAPITALIZATION
Common stock without par value -- net:
Authorized shares -- 500,000,000
Outstanding shares: 1993 -- 224,345,422; 1992 -- 217,316,054 . . $ 4,728,580 $ 4,419,519
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 1,842,413 2,171,018
----------- -----------
Total common stock equity . . . . . . . . . . . . . . . . . . 6,570,993 6,590,537
Preferred stock:
Not subject to mandatory redemption . . . . . . . . . . . . . . . 1,083,008 909,564
Subject to mandatory redemption . . . . . . . . . . . . . . . . . 396,917 418,748
Long-term debt, less amounts due currently . . . . . . . . . . . . . 8,379,826 7,931,981
----------- -----------
Total capitalization . . . . . . . . . . . . . . . . . . . . . 16,430,744 15,850,830
----------- -----------
CURRENT LIABILITIES
Notes payable -- banks . . . . . . . . . . . . . . . . . . . . . . . -- 250,000
Long-term debt due currently . . . . . . . . . . . . . . . . . . . . 151,105 196,533
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 260,634 291,678
Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . 200,410 192,955
Customers' deposits . . . . . . . . . . . . . . . . . . . . . . . . 50,798 52,640
Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . 310,091 284,179
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . 195,002 205,204
Refunds due to customers . . . . . . . . . . . . . . . . . . . . . . 141,153 --
Other current liabilities . . . . . . . . . . . . . . . . . . . . . 106,192 100,748
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . 1,415,385 1,573,937
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred federal income taxes (Note 7) . . . . . . . . . 2,686,409 1,036,466
Unamortized federal investment tax credits . . . . . . . . . . . . . 705,531 725,828
Other deferred credits and noncurrent liabilities . . . . . . . . . 280,059 241,507
----------- -----------
Total deferred credits and other noncurrent liabilities . . . 3,671,999 2,003,801
COMMITMENTS AND CONTINGENCIES (Note 11)
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,518,128 $19,428,568
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
32
<PAGE> 35
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
System of Accounts -- The accounting records of Texas Utilities Electric
Company (TU Electric), the principal subsidiary of Texas Utilities Company
(Company), and Southwestern Electric Service Company (SESCO) are maintained in
accordance with the Federal Energy Regulatory Commission's Uniform System of
Accounts as adopted by the Public Utility Commission of Texas (PUC).
Consolidation -- The consolidated financial statements include the Company
and its subsidiaries (System Companies). All significant intercompany items
and transactions have been eliminated in consolidation. Certain financial
statement items for 1992 and 1991 have been reclassified to conform to the 1993
presentation.
On July 1, 1993, SESCO became a wholly-owned subsidiary of the Company
pursuant to approval by shareholders of SESCO and the Securities and Exchange
Commission. The acquisition was accounted for as a purchase business
combination with the resulting goodwill being amortized evenly over forty
years. The acquisition of SESCO did not have a material effect on the
Company's results of operation or financial condition.
Utility Plant -- Utility plant is stated at original cost. The cost of
property additions to utility plant includes labor and materials, applicable
overhead and payroll-related costs and an allowance for funds used during
construction.
Allowance For Funds Used During Construction -- Allowance for funds used
during construction (AFUDC) is a cost accounting procedure whereby amounts
based upon interest charges on borrowed funds and a return on equity capital
used to finance construction are added to utility plant. The accrual of AFUDC
is in accordance with generally accepted accounting principles for the
industry, but does not represent current cash income.
TU Electric is capitalizing AFUDC, compounded semi-annually, on
expenditures for ongoing construction work in progress (CWIP) and nuclear fuel
in process not otherwise allowed in rate base by regulatory authorities.
Effective January 1, 1993, TU Electric began using a gross rate of 10.4% for
AFUDC for all construction to comply with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (Statement 109). In 1992 and
1991, TU Electric used a net-of-tax rate of 8.8% and 10.4%, respectively, on
projects commenced before March 1, 1986, and a gross rate of 10.4% and 12.0%,
respectively, on projects commenced thereafter. Rates were determined on the
basis of, but are less than, the cost of capital used to finance the
construction program.
Depreciation of Utility Plant -- Depreciation is generally based upon an
amortization of the original cost of depreciable properties (net of regulatory
disallowances) on a straight-line basis over the estimated service lives of the
properties. Depreciation as a percent of average depreciable property
approximated 2.5%, 2.8% and 2.9% for 1993, 1992 and 1991, respectively.
Depreciation also includes an amount for Comanche Peak nuclear generating
station (Comanche Peak) decommissioning costs which is being accrued over the
lives of the units and deposited to external trust funds. (See Note 11.)
Amortization of Nuclear Fuel and Refueling Outage Costs -- The
amortization of nuclear fuel in the reactors (net of regulatory disallowances)
is calculated on the units of production method and, subsequent to commercial
operation, is included in nuclear fuel expense. TU Electric accrues a
provision for costs anticipated to be incurred during the next scheduled
Comanche Peak refueling outage.
33
<PAGE> 36
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Other Investments -- The difference of $46,153,000 between the amount at
which the investments in subsidiaries is carried by the Company and the
underlying book equity of such subsidiaries at the respective dates of
acquisition is included in other investments.
Revenues -- Revenues include billings under approved rates (including a
fixed fuel factor) applied to meter readings each month on a cycle basis and,
beginning January 1, 1992, an accrual of base rate revenue for energy provided
after cycle billing but not billed through the end of each month (see Note 12).
Revenues also include an amount for under- or over-recovery of fuel revenue
representing the difference between actual fuel cost and billings on the
approved fixed fuel factor and a provision that generally allows recovery
through a Power Cost Recovery Factor, on a monthly basis, of the capacity
portion of purchased power cost from qualifying facilities not included in base
rates. The fuel portion of purchased power cost is included in the fixed fuel
factor. A utility's fuel factor can be revised upward or downward every six
months, according to a specified schedule. Each six months, a utility is
required to petition to make either surcharges or refunds to ratepayers,
together with interest based on a twelve month average of prime commercial
rates, for any material cumulative under- or over-recovery of fuel costs. If
the cumulative difference between the under- or over-recovery, plus interest,
is in excess of 4% of the annual estimated fuel costs most recently approved by
the PUC, it will be deemed to be material. A procedure exists for an expedited
change in fuel factors in the event of an emergency. Final reconciliation of
fuel costs must be made either in a reconciliation proceeding, which may cover
no more than three years and no less than one year, or in a general rate case.
Federal Income Taxes -- The System Companies file a consolidated federal
income tax return and federal income taxes are allocated to all System
Companies based upon their taxable income or loss. Deferred federal income
taxes are currently provided for temporary differences between book and the tax
basis of assets and liabilities (including the provision for regulatory
disallowances). Generally, such differences result primarily from the use of
liberalized depreciation and cost recovery deductions allowable under the
Internal Revenue Code, the under- or over-recovery of fuel revenue and unbilled
revenues accrued for tax purposes. Temporary differences in earlier years for
which deferred federal income taxes were not provided approximated $184,000,000
at December 31, 1993. Investment tax credits are normally amortized to income
over the estimated service lives of the properties. For 1992 and 1991, the
System Companies' taxes were provided for under the provisions of Accounting
Principles Board Opinion No. 11, "Accounting for Income Taxes". (See Note 7
for change in accounting for income taxes.)
Consolidated Cash Flows -- For purposes of reporting cash flows, temporary
cash investments purchased with a remaining maturity of three months or less
are considered to be cash equivalents.
34
<PAGE> 37
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONCLUDED)
The supplemental schedule below details cash payments and noncash
investing and financing activities:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
CASH PAYMENTS:
Interest (net of amounts capitalized) . . . . . . . . . $637,186 $600,273 $680,275
Income taxes . . . . . . . . . . . . . . . . . . . . . . 74,756 28,033 25,627
NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of SESCO:
Book value of assets acquired . . . . . . . . . . . . $ 69,521 $ -- $ --
Goodwill acquired . . . . . . . . . . . . . . . . . . 32,059 -- --
Less: Liabilities assumed . . . . . . . . . . . . . (39,991) -- --
Less: Stock issued . . . . . . . . . . . . . . . . . (59,976) -- --
-------- -------- --------
Cash paid . . . . . . . . . . . . . . . . . . . . 1,613 -- --
Less: Cash acquired . . . . . . . . . . . . . . . . . 376 -- --
-------- -------- --------
Net cash . . . . . . . . . . . . . . . . . . . . . $ 1,237 $ -- $ --
-------- -------- --------
-------- -------- --------
</TABLE>
2. SHORT-TERM FINANCING
At December 31, 1993, the Company and TU Electric had joint lines of
credit aggregating $700,000,000 under a credit facility agreement with a group
of commercial banks. The facility, for which the Company pays a fee, is
scheduled by such agreement to be reduced by $350,000,000 in June 1994 and June
1995. It is the intent of the Company and TU Electric to negotiate a new
credit facility prior to the scheduled reduction in June 1994. The new
facility would be used for working capital, as backup for commercial
paper and for other corporate purposes. At December 31, 1993, the total of
short-term borrowings authorized by the Board of Directors of the Company from
banks or other lenders was $1,075,000,000.
At December 31, 1993, SESCO had lines of credit aggregating $5,500,000
under agreements with commercial banks. These agreements will expire in 1994.
3. COMMON STOCK
The Company issued shares of its authorized but unissued common stock as
follows:
<TABLE>
<CAPTION>
AUTOMATIC DIVIDEND EMPLOYEES' THRIFT PLAN
REINVESTMENT AND COMMON AND EMPLOYEE
PUBLIC OFFERING STOCK PURCHASE PLAN STOCK OWNERSHIP PLAN TOTAL
-------------------- -------------------------- ----------------------- ----------------------
YEAR SHARES* AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---- ------- ------ -------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993 1,420,316 $ 59,976,000 5,163,587 $220,848,000 445,465 $20,123,000 7,029,368 $300,947,000
1992 -- -- 6,004,151 229,278,000 611,530 24,382,000 6,615,681 253,660,000
1991 6,900,000 243,644,000 6,233,283 216,667,000 596,764 21,805,000 13,730,047 482,116,000
</TABLE>
______________________________
* Shares issued for public offering in 1993 were used in connection with the
acquisition of SESCO.
At December 31, 1993, 3,492,620 shares of the authorized but unissued
common stock of the Company were reserved for issuance and sale pursuant to the
above plans.
35
<PAGE> 38
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. COMMON STOCK -- (CONCLUDED)
On February 2, 1994, the Company amended its Automatic Dividend
Reinvestment and Common Stock Purchase Plan. The amendments include the option
for purchase of common stock on the open market through an independent broker
to meet share requirements under the plan.
The trustee of the Employees' Thrift Plan of the Texas Utilities Company
System (Thrift Plan) borrowed $250,000,000 in the form of a note payable from
an outside lender and purchased 7,142,857 shares of common stock from the
Company in connection with the leveraged employee stock ownership provision of
the Thrift Plan. Such shares are held by the trustee until allocated to Thrift
Plan participants when required to meet the System Companies' obligations under
terms of the Thrift Plan. The Company has purchased the note from the outside
lender, which has been recorded as a reduction to common stock equity. The
Thrift Plan uses dividends on the shares purchased and contributions from the
System Companies, if required, to repay the note. Common stock equity
increases as shares are allocated to participants. Such allocations in 1993,
1992 and 1991 increased common stock equity by $8,115,000, $8,072,000 and
$7,976,000, respectively.
The Company has 50,000,000 authorized shares of serial preference stock
having a par value of $25 a share, none of which has been issued.
4. RETAINED EARNINGS
TU Electric's and SESCO's articles of incorporation, mortgages, as
supplemented, and debenture agreements contain provisions which, under certain
conditions, restrict distributions on or acquisitions of their common stock.
At December 31, 1993, $181,228,000 of retained earnings were thus restricted as
a result of the provisions of such articles of incorporation. Retained
earnings at such date also includes $431,243,000 representing the Company's
equity in undistributed earnings since acquisition included in transfers by TU
Electric from its retained earnings to stated value of common stock. The total
of such restricted retained earnings at December 31, 1993 is $612,471,000.
36
<PAGE> 39
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PREFERRED STOCK OF TU ELECTRIC (CUMULATIVE, WITHOUT PAR VALUE, ENTITLED
UPON LIQUIDATION TO $100 A SHARE; AUTHORIZED 17,000,000 SHARES)
<TABLE>
<CAPTION>
REDEMPTION PRICE PER SHARE
(BEFORE ADDING ACCUMULATED DIVIDENDS)
SHARES OUTSTANDING AMOUNT -------------------------------------
DIVIDENDS DECEMBER 31, DECEMBER 31, CURRENT EVENTUAL MINIMUM
--------------- --------------------- --------------------- ----------------- -----------------
FROM TO 1993 1992 1993 1992 FROM TO FROM TO
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOT SUBJECT TO MANDATORY REDEMPTION
- -----------------------------------
$4.00 $ 5.08 . . . . . . 1,222,942 1,222,942 $ 122,592 $122,592 $101.79 $112.00 $101.79 $112.00
6.84 7.98 . . . . . . 5,799,675 1,549,675 568,175 155,266 102.40 103.42 100.00 103.42
8.16 8.92 . . . . . . 2,149,475 1,999,475 210,528 198,642 102.04 103.29 100.00 103.29
9.32 11.32 . . . . . . -- 1,550,000 -- 153,205 -- -- -- --
Adjustable rate (a) . . . . 1,850,000 1,850,000 181,713 181,713 103.00 103.00 100.00 100.00
Flexible adjustable rate . -- 1,000,000 -- 98,146 -- -- -- --
---------- --------- ---------- --------
Total . . . . . . . . . . 11,022,092 9,172,092 $1,083,008 $909,564
---------- --------- ---------- --------
---------- --------- ---------- --------
SUBJECT TO MANDATORY REDEMPTION (b)(c)
- --------------------------------------
$6.375 $ 6.98 . . . . . . 2,000,000 -- $ 197,755 $ -- $ -- $ -- $100.00 $100.00
8.92 9.48 . . . . . . -- 1,433,300 -- 142,802 -- -- -- --
9.64 10.375 . . . . . . 2,000,000 2,774,000 199,162 275,946 100.00 100.00 100.00 100.00
---------- --------- ---------- --------
Total . . . . . . . . . . 4,000,000 4,207,300 $ 396,917 $418,748
---------- --------- ---------- --------
---------- --------- ---------- --------
</TABLE>
______________________________
(a) Adjustable rate series A bears a dividend rate for the period ended
January 31, 1994, of 6.50% per annum and adjustable rate series B
bears a dividend rate for the period ended December 31, 1993, of 7.00%
per annum, both of which are based on a fixed liquidation price of
$100 per share.
(b) TU Electric is required to redeem at a price of $100 per share plus
accumulated dividends a specified minimum number of shares annually or
semi-annually on the initial/next dates shown below. These redeemable
shares may be called, purchased or otherwise acquired. Certain issues
may not be redeemed at the option of TU Electric prior to 1995. TU
Electric may annually call for redemption, at its option, an aggregate
of up to twice the number of shares shown below for each series at a
price of $100 per share plus accumulated dividends, except for the
$9.64 series which may be redeemed in a minimum amount of 10,000
shares at any time at a price of $100 per share plus accumulated
dividends plus a component at a variable price per share which is
designed to maintain the expected yield at issuance:
<TABLE>
<CAPTION>
MINIMUM REDEEMABLE INITIAL/NEXT DATE OF
SERIES SHARES MANDATORY REDEMPTION
------ ------------------ --------------------
<S> <C> <C>
$ 9.64 125,000 semi-annually 5/1/95
10.375 150,000 annually 4/1/96
9.875 50,000 annually 10/1/96
6.98 50,000 annually 7/1/03
6.375 50,000 annually 10/1/03
</TABLE>
Preferred stock mandatory redemption requirements for the next five years
are $25 million in 1995 and $45 million annually in 1996, 1997 and 1998.
The carrying value of preferred stock subject to mandatory redemption is
being increased periodically to equal the redemption amounts at the
mandatory redemption dates with a corresponding increase in preferred stock
dividends.
(c) Under certain circumstances relating to a change in federal tax law
governing the dividends received deduction applicable to eligible
corporations, the dividend rate of the $9.64 series may increase to a
maximum of $10.74.
37
<PAGE> 40
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PREFERRED STOCK OF TU ELECTRIC (CUMULATIVE, WITHOUT PAR VALUE, ENTITLED
UPON LIQUIDATION TO $100 A SHARE; AUTHORIZED 17,000,000 SHARES) --
(CONCLUDED)
The table below details changes in preferred stock of TU Electric:
<TABLE>
<CAPTION>
DIVIDENDS SHARES AMOUNT
-------------- ------------------------------- ---------------------------
FROM TO 1993 1992 1991 1993 1992 1991
------ ---- ---- ---- ---- ---- ---- ----
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C> <C>
NOT SUBJECT TO MANDATORY REDEMPTION:
- ------------------------------------
ISSUED:
$7.22 $7.98 . . . . . . . . . . . 4,250,000 -- -- $ 412,909 $ -- $ --
-- 8.20 . . . . . . . . . . . 1,250,000 -- -- 120,759 -- --
REDEEMED:
$8.32 $ 8.92 . . . . . . . . . . . (1,100,000) -- -- (108,872) -- --
9.32 11.32 . . . . . . . . . . . (1,550,000) -- -- (153,205) -- --
Flexible Adjustable Rate . . . . . . (1,000,000) -- -- (98,146) -- --
Stated Rate Auction . . . . . . . . -- (1,000,000) -- -- (98,164) --
---------- ---------- ------- --------- -------- -------
Total . . . . . . . . . . . . . . 1,850,000 (1,000,000) -- $ 173,445 $(98,164) $ --
---------- ---------- ------- --------- -------- -------
---------- ---------- ------- --------- -------- -------
SUBJECT TO MANDATORY REDEMPTION:
- --------------------------------
ISSUED:
$6.375 $6.98 . . . . . . . . . . . 2,000,000 -- -- $ 197,675 $ -- $ --
REDEEMED:
$ 8.92 $ 9.48 . . . . . . . . . . . (1,433,300) (40,950) -- (142,802) (4,095) --
10.00 10.08 . . . . . . . . . . . (774,000) (34,000) (14,000) (77,004) (3,400) (1,400)
---------- ---------- ------- --------- -------- -------
Total . . . . . . . . . . . . . . (207,300) (74,950) (14,000) $ (22,131) $ (7,495) $(1,400)
---------- ---------- ------- --------- -------- -------
---------- ---------- ------- --------- -------- -------
</TABLE>
38
<PAGE> 41
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT, LESS AMOUNTS DUE CURRENTLY
<TABLE>
<CAPTION>
MATURITY INTEREST RATE DECEMBER 31,
---------------- ----------------- ---------------------------
FROM TO FROM TO 1993 1992
-------- ------ --------- ------ ----------- -----------
THOUSANDS OF DOLLARS
<S> <C> <C>
First mortgage bonds:
1995 1997 4-1/2% 7-1/8% . . . . . . . . . . . . . . . . . . . . . . . $ 474,710 $ 474,000
1998 2002 5-1/2 10-3/8 . . . . . . . . . . . . . . . . . . . . . . . . 1,284,046 1,207,000
2003 2007 6-1/4 9-1/2 . . . . . . . . . . . . . . . . . . . . . . . . 875,000 800,000
2008 2012 9-3/8 10.44 . . . . . . . . . . . . . . . . . . . . . . . . 150,000 325,000
2015 2017 9-1/4 9-3/8 . . . . . . . . . . . . . . . . . . . . . . . . -- 450,000
2018 2022 8-7/8 11-3/8 . . . . . . . . . . . . . . . . . . . . . . . . 1,075,000 1,225,000
2023 2025 7-3/8 8-3/4 . . . . . . . . . . . . . . . . . . . . . . . . 1,450,000 375,000
Pollution control series:
2007 2028 5-1/2 9-7/8 . . . . . . . . . . . . . . . . . . . . . . . . 1,435,060 1,136,595
Taxable pollution control series: (a)
2021 2023 Various . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278,340 228,340
Sinking fund debentures:
-- 1994 -- 7-3/4 . . . . . . . . . . . . . . . . . . . . . . . . -- 11,950
Secured medium-term notes, series A through C:
1994 2003 8.72 10.50 . . . . . . . . . . . . . . . . . . . . . . . . 320,000 600,000
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,342,156 6,832,885
General obligation bonds:
-- 2007 -- 8.40 . . . . . . . . . . . . . . . . . . . . . . . . 10,000 --
Pollution control revenue bonds:
2004 2009 5.70 7-5/8 . . . . . . . . . . . . . . . . . . . . . . . . -- 157,150
Promissory note and debt assumed for purchase of electric plant: (b)
1993 2021 8.25 9.73 . . . . . . . . . . . . . . . . . . . . . . . . 344,161 348,899
Senior notes:
1995 2010 6-1/2 10.85 . . . . . . . . . . . . . . . . . . . . . . . . 686,800 576,680
Notes payable to banks: (c)
-- 1996 3.8125 6.125 . . . . . . . . . . . . . . . . . . . . . . . . 75,000 75,000
Unamortized premium and discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78,291) (58,633)
---------- ----------
Total long-term debt, less amounts due currently . . . . . . . . . . . . . . . . . . $8,379,826 $7,931,981
---------- ----------
---------- ----------
</TABLE>
____________________
(a) Taxable pollution control series consist of four series: $18,000,000 at
3.35% and $10,340,000 at 3.40% of flexible rate Series 1991A at December
31, 1993; $50,000,000 of Series 1991C at 8.49% through June 1, 1994;
$100,000,000 of Series 1991D at 8.85% through June 1, 1995; and
$100,000,000 at 3.425% of flexible rate Series 1993 at December 31, 1993.
Series 1991A and Series 1993 bonds are in a flexible mode and while in such
mode will be remarketed for periods of less than 270 days, and are secured
by an irrevocable letter of credit with maturities in excess of one year.
The interest rates on Series 1991C and Series 1991D bonds will be repriced
on the mandatory tender dates of June 1, 1994 and 1995, respectively. TU
Electric has existing lines of credit that would allow refinancing of bonds
not supported by the letter of credit on a long-term basis should
remarketing prove unsuccessful.
(b) In 1988, TU Electric purchased the ownership interest in Comanche Peak of
Brazos Electric Power Cooperative and issued a promissory note payable over
33 years. The note is secured by a mortgage on the acquired interest. In
1990, TU Electric purchased the ownership interest in Comanche Peak of
Tex-La Electric Cooperative of Texas, Inc. (Tex-La) and assumed debt of
Tex-La payable over approximately 32 years. The assumption is secured by a
mortgage on the acquired interest. The Company has guaranteed these
various payments.
(c) The interest rate is reset at the beginning of each period, with the
duration of each period being selected by Texas Utilities Fuel Company.
39
<PAGE> 42
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT, LESS AMOUNTS DUE CURRENTLY -- (CONCLUDED)
Sinking fund and maturity requirements for the years 1994 through 1998
under long-term debt instruments in effect at December 31, 1993, were as
follows:
<TABLE>
<CAPTION>
SINKING MINIMUM CASH
YEAR FUND MATURITY(a) REQUIREMENT(b)
--------- ------- ----------- --------------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . . $21,750 $140,450 $151,105
1995 . . . . . . . . . . . . . . . . . . . . . . . . 39,626 80,710 109,651
1996 . . . . . . . . . . . . . . . . . . . . . . . . 33,558 176,920 200,480
1997 . . . . . . . . . . . . . . . . . . . . . . . . 33,158 399,800 423,796
1998 . . . . . . . . . . . . . . . . . . . . . . . . 32,914 451,065 476,316
</TABLE>
____________________
(a) The maturity requirements do not include the mandatory tenders of TU
Electric's taxable pollution control series, equal to $50,000,000 in
1994 and $100,000,000 in 1995, which are expected to be remarketed.
(b) The minimum cash requirement does not include the sinking fund
requirements that may be satisfied by certification of property
additions at the rate of 167% of such requirements, except for twelve
issues at 100%.
From time to time, various principal amounts of first mortgage bonds have
been redeemed by TU Electric prior to maturity. In 1993, the System Companies
refunded $1,810,000,000 of higher coupon debt. The debt reacquisition costs
have been deferred and are being amortized over the remaining lives of the
bonds retired pursuant to current regulatory treatment.
Electric plant of TU Electric and SESCO is generally subject to the liens
of their respective mortgages.
7. FEDERAL INCOME TAXES
In January 1993, the Company adopted Statement 109, which among other
things, requires the liability method of recognition for all temporary
differences, requires that deferred tax liabilities and assets be adjusted for
an enacted change in tax laws or rates and prohibits net-of-tax accounting and
reporting. Certain provisions of Statement 109 provide that regulated
enterprises are permitted to recognize such adjustments as regulatory assets or
liabilities if it is probable that such amounts will be recovered from or
returned to customers in future rates. Accordingly, at December 31, 1993, the
Company's consolidated balance sheet reflects a regulatory asset of
approximately $1.2 billion net of an approximate $0.6 billion regulatory
liability. The cumulative effect on consolidated net income of adopting
Statement 109 is not considered material to the annual results of operation.
In August 1993, Congress passed the Revenue Reconciliation Act of 1993
which increased the top corporate income tax rate from 34% to 35% retroactive
to January 1, 1993.
40
<PAGE> 43
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FEDERAL INCOME TAXES -- (CONTINUED)
The details of federal income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Charged (credited) to operating expenses:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,950 $ 32,934 $ 71,887
--------- --------- ----------
Deferred -- net:
Differences between depreciation methods and lives . . . . . . . . 205,545 182,039 220,210
Certain capitalized construction costs . . . . . . . . . . . . . . 33,251 5,189 2,706
Under-recovered fuel revenue . . . . . . . . . . . . . . . . . . . 43,436 13,371 14,800
Early redemptions of long-term debt . . . . . . . . . . . . . . . 22,944 35,543 3,364
Benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . 1,251 (6,765) (5,355)
Unbilled revenues . . . . . . . . . . . . . . . . . . . . . . . . (11,990) (4,568) 277
Alternative minimum tax . . . . . . . . . . . . . . . . . . . . . (97,248) (43,494) (68,671)
Investment tax credit carryforward . . . . . . . . . . . . . . . . 25,403 9,451 16,243
Amortization of tax rate differences . . . . . . . . . . . . . . . 16,411 (2,661) (27,619)
Provision for refunds and related interest -- net . . . . . . . . (39,871) 6,282 (15,541)
Prior year adjustments . . . . . . . . . . . . . . . . . . . . . . (2,643) 1,251 (19,351)
Net operating loss carryforward . . . . . . . . . . . . . . . . . 23,430 (73,179) (46,719)
Voluntary retirement/severance costs . . . . . . . . . . . . . . . (3,566) 40,288 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,198 (1,636) (10,125)
--------- --------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,551 161,111 64,219
--------- --------- ----------
Investment tax credits -- net . . . . . . . . . . . . . . . . . . . (22,383) (22,957) (16,028)
--------- --------- ----------
Total to operating expenses . . . . . . . . . . . . . . . . . . 322,118 171,088 120,078
--------- --------- ----------
Charged (credited) to other income:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,484) (13,308) (19,948)
--------- --------- ----------
Deferred -- net:
Alternative minimum tax . . . . . . . . . . . . . . . . . . . . . (4,256) 5,856 9,705
Advance royalties . . . . . . . . . . . . . . . . . . . . . . . . 5,452 5,452 5,452
Amortization of tax rate differences . . . . . . . . . . . . . . . (18,699) -- 1,670
Regulatory disallowances . . . . . . . . . . . . . . . . . . . . . (102,034) -- (327,178)
Amortization of regulatory disallowances . . . . . . . . . . . . . 29,477 22,883 8,787
Prior year adjustments . . . . . . . . . . . . . . . . . . . . . . 105 (128) 18,754
Net operating loss carryforward . . . . . . . . . . . . . . . . . -- (10,005) (17,510)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865 667 3,268
--------- --------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (89,090) 24,725 (297,052)
--------- --------- ----------
Investment tax credits -- regulatory disallowances . . . . . . . . -- -- (40,180)
--------- --------- ----------
Total to other income . . . . . . . . . . . . . . . . . . . . . (112,574) 11,417 (357,180)
--------- --------- ----------
Charged to cumulative effect of a change in
accounting for unbilled revenue -- deferred . . . . . . . . . . . . -- 41,679 --
Charged to retained earnings:
LESOP dividend deduction . . . . . . . . . . . . . . . . . . . . . (6,975) -- --
--------- --------- ----------
Total federal income taxes . . . . . . . . . . . . . . . . . $ 202,569 $224,184 $(237,102)
--------- --------- ----------
--------- --------- ----------
</TABLE>
41
<PAGE> 44
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FEDERAL INCOME TAXES -- (CONTINUED)
The significant components of the Company's deferred tax assets and
liabilities reflected net in the consolidated balance sheet at December 31,
1993 are:
<TABLE>
<CAPTION>
THOUSANDS OF DOLLARS
--------------------
<S> <C>
DEFERRED TAX ASSETS
Current:
Unbilled revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,684
Bad debt reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,941
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82)
-----------
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,543
-----------
-----------
Non-Current:
Unamortized ITC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 373,589
Regulatory disallowances . . . . . . . . . . . . . . . . . . . . . . . . . 318,025
Alternative minimum tax . . . . . . . . . . . . . . . . . . . . . . . . . 418,257
Tax rate differences . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,581
NOL carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,593
ITC carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,171
Combustion turbine leases . . . . . . . . . . . . . . . . . . . . . . . . 10,338
Refunds and interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,403
Benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,077
Mining equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,177
Property insurance reserve . . . . . . . . . . . . . . . . . . . . . . . . (1,090)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,951
-----------
Total non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,436,072
-----------
DEFERRED TAX LIABILITIES
Non-Current:
Capitalized construction costs . . . . . . . . . . . . . . . . . . . . . . 2,108,906
Differences between depreciation methods and lives . . . . . . . . . . . . 1,455,812
Advance royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,349
Previous flow-through differences . . . . . . . . . . . . . . . . . . . . 97,378
Unamortized debt reacquisition costs . . . . . . . . . . . . . . . . . . . 99,683
Under-recovered fuel revenue . . . . . . . . . . . . . . . . . . . . . . . 71,666
Voluntary retirement/severance costs . . . . . . . . . . . . . . . . . . . 31,444
Lignite depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,261
Rate case costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,089
Nuclear fuel basis differences . . . . . . . . . . . . . . . . . . . . . . 12,294
Intangible plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,113
Cancelled lignite unit costs . . . . . . . . . . . . . . . . . . . . . . . 8,815
Deferred mining and development costs . . . . . . . . . . . . . . . . . . 1,640
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,031
-----------
Total deferred tax liability . . . . . . . . . . . . . . . . . . . . . . 4,122,481
-----------
NET TOTAL NON-CURRENT DEFERRED TAX LIABILITY . . . . . . . . . . . . . . . . . $ 2,686,409
-----------
-----------
</TABLE>
42
<PAGE> 45
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FEDERAL INCOME TAXES -- (CONCLUDED)
Federal income taxes were less than the amount computed by applying the
federal statutory rate to pre-tax book income (loss) as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
-------- -------- ---------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Federal income taxes at statutory rate: 1993 -- 35%; 1992 and 1991 -- 34% . . . . $242,703 $354,522 $(178,658)
-------- -------- ---------
Reductions in federal income taxes resulting from:
Allowance for funds used during construction . . . . . . . . . . . . . . . . . . 52,540 98,221 118,603
Depletion allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,696 22,014 21,104
Amortization of investment tax credits . . . . . . . . . . . . . . . . . . . . . 22,336 22,957 23,111
LESOP dividend deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,675 7,359 7,230
Amortization of tax rate differences . . . . . . . . . . . . . . . . . . . . . . 2,420 2,661 29,289
Reversal of prior book/tax differences:
Regulatory disallowances . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,553) -- (142,412)
Investment tax credit -- regulatory disallowances . . . . . . . . . . . . . . . -- -- 40,180
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,811) (24,774) (23,626)
Prior year adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722 1,222 (11,694)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,891) 678 (3,341)
-------- -------- ---------
Total reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,134 130,338 58,444
-------- -------- ---------
Total federal income taxes . . . . . . . . . . . . . . . . . . . . . . $202,569 $224,184 $(237,102)
-------- -------- ---------
-------- -------- ---------
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.2% 21.5% 45.1%
</TABLE>
The System Companies have net operating loss carryforwards of
approximately $379 million that are available to offset future ordinary taxable
income. Approximately $122 million of these loss carryforwards expire in 2006
and the remaining $257 million expire in 2007. In addition, the System
Companies have approximately $12 million of general business credit
carryforwards which expire in 2006 and $418 million of minimum tax credit
carryforwards which are available to offset future taxes.
As a part of its ongoing large case audit program, the Internal Revenue
Service (IRS) is currently auditing the consolidated Federal income tax returns
of the System Companies for the years 1987 through 1990. During the course of
the audit, the IRS has proposed a number of adjustments to the returns as filed,
the most significant of which relates to a proposed reclassification of certain
costs incurred in connection with the construction of Comanche Peak Unit 1 as
costs incurred to procure a nuclear operating license. The Company is unable to
predict the ultimate resolution of the issues raised in the audit and therefore
is unable to predict at this time the amount of any additional tax payment which
may be required. While the making of additional tax payments would have an
impact on the Company's cash position, the Company does not expect the outcome
of the audit to have a material effect on its results of operation.
8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS
The System Companies have uniform retirement plans covering substantially
all employees. An employee's benefits are based on years of accredited service
and average annual earnings received during the three years of highest
earnings. The costs of the plans were determined by independent actuaries.
Contributions to the plans were determined using the frozen attained age method
which is one of the several actuarial methods allowed by the Employee
Retirement Income Security Act of 1974. For financial reporting purposes,
pension cost has been determined using the projected unit credit actuarial
method. The cumulative difference between pension cost as determined for
financial reporting purposes and contributions to the plans is recorded either
as prepaid pension cost or as accrued pension liability.
43
<PAGE> 46
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS -- (CONTINUED)
The table below details the plans' funded status and amount recognized in
the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1992
-------- ---------
THOUSANDS OF DOLLARS
<S> <C> <C>
Actuarial present value of accumulated benefits:
Accumulated benefit obligation (including vested benefits of
$635,071,000 for 1993 and $579,376,000 for 1992) . . . . . . . . . . . . . $(686,124) $(619,927)
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date . . . . . . . . . $(860,461) $(749,334)
Plan assets at fair value -- primarily equity investments,
government bonds and corporate bonds . . . . . . . . . . . . . . . . . . . 869,487 755,848
--------- ---------
Plan assets in excess of projected benefit obligation . . . . . . . . . . . . 9,026 6,514
Unrecognized net gain from past experience different from
that assumed and effects of changes in assumptions . . . . . . . . . . . . (147,876) (183,474)
Prior service cost not yet recognized in net periodic pension expense . . . . 19,423 21,472
Unrecognized plan assets in excess of projected benefit obligation at
initial application . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,947) (8,762)
--------- ---------
Accrued pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(127,374) $(164,250)
--------- ---------
--------- ---------
</TABLE>
Assumptions used in determination of the projected benefit obligation include
the following:
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Discount rate . . . . . . . . . . . . . . . . 7.875% 8.50%
Increase in compensation levels . . . . . . . 4.700% 4.70%
</TABLE>
Total pension costs, including amounts charged to fuel cost, deferred and
capitalized, were comprised of the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
-------- -------- --------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Service cost -- benefits earned during the period . . . . . . $ 23,872 $ 31,178 $ 30,888
Interest cost on projected benefit obligation . . . . . . . . 62,017 71,788 67,266
Actual return on plan assets . . . . . . . . . . . . . . . . (93,850) (81,987) (239,393)
Net amortization and deferral . . . . . . . . . . . . . . . . 37,722 (2,468) 156,881
--------- --------- ---------
Net periodic pension cost . . . . . . . . . . . . . . . . . 29,761 18,511 15,642
Deferred termination cost . . . . . . . . . . . . . . . . . . -- 137,733 --
--------- --------- ---------
Total pension cost . . . . . . . . . . . . . . . . . . . $ 29,761 $156,244 $ 15,642
--------- --------- ---------
--------- --------- ---------
</TABLE>
The assumed long-term rate of return on plan assets was 8.75% for 1993, 1992
and 1991.
In addition to the retirement plans, the System Companies offer certain
health care and life insurance benefits to substantially all its employees and
their eligible dependents at retirement which normally is age 65 but may be as
early as age 55 with 15 years of service. Retirees currently pay a portion of
the cost of providing such benefits and are expected to continue to do so in
the future. In January 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (Statement 106), which requires a change in the
accounting for a company's obligation to provide health care and certain other
benefits to its retirees from the "pay-as-you-go" method to an accrual method
and requires the cost of the obligation to be recognized in the period from
employment date until full eligibility for benefits.
44
<PAGE> 47
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS -- (CONCLUDED)
The System Companies' net periodic postretirement benefits cost other than
pensions for the year ended December 31, 1993, including amounts charged to
fuel cost and capitalized, were comprised of the following components:
<TABLE>
<CAPTION>
THOUSANDS OF DOLLARS
--------------------
<S> <C>
Service cost -- benefits earned during the period . . . . . . . . . . . . . . $ 8,423
Interest cost on the accumulated postretirement benefit obligation . . . . . . 32,063
Amortization of the transition obligation . . . . . . . . . . . . . . . . . . 18,657
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . --
Net amortization and deferral . . . . . . . . . . . . . . . . . . . . . . . . --
---------
Net postretirement benefits cost . . . . . . . . . . . . . . . . . . . . . $ 59,143
---------
---------
</TABLE>
The table below details the funded status for other postretirement benefits
and amount recognized by the System Companies at December 31, 1993:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(260,520)
Fully eligible active employees . . . . . . . . . . . . . . . . . . . . . . . (6,401)
Other active employees . . . . . . . . . . . . . . . . . . . . . . . . . . . (177,228)
---------
Total APBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (444,149)
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . --
---------
APBO in excess of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . (444,149)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,486
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . . --
Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . . . . 354,489
---------
Accrued postretirement benefits cost . . . . . . . . . . . . . . . . . . . . . $ (36,174)
---------
---------
</TABLE>
The expected increase in costs of future benefits covered by the plan is
projected using a health care cost trend rate of 7.5% in 1994, 6.5% in 1995,
5.5% in 1996 and 5.0% in 1997 and thereafter. A one percentage point increase
in the assumed health care cost trend rate in each future year would increase
the APBO at December 31, 1993 by approximately $68.6 million and other
postretirement benefits cost for 1993 by approximately $8.8 million.
The assumed discount rate used to measure the APBO is 7.875%.
The Company's cost of providing other postretirement benefits in 1992 and
1991, which was recognized on a "pay-as-you-go" basis, was approximately
$13,766,000 and $14,499,000, respectively. The Company was granted recovery of
its Statement 106 cost in Docket 11735 (see Note 10). Funding of the other
postretirement benefits obligation will begin by the third quarter of 1994.
45
<PAGE> 48
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SALES OF ACCOUNTS RECEIVABLE
In November 1993, TU Electric terminated its then existing receivables
facility to sell receivables to certain financial institutions and entered into
a new facility with other financial institutions. Under such new facility, TU
Electric is entitled to sell and such financial institutions may purchase, on
an ongoing basis, undivided interests in customer accounts receivable
representing up to an aggregate of $350,000,000. Additional receivables are
continually sold to replace those collected. At December 31, 1993 and 1992,
accounts receivable was reduced by $300,000,000 to reflect the sales of such
receivables to financial institutions under such agreements.
10. RATE PROCEEDINGS
DOCKET 11735
In January 1993, TU Electric made applications to the PUC in Docket 11735
and to its municipal regulatory authorities for upward adjustments in rates for
electric service throughout its service area, which would have increased annual
operating revenues by approximately $760 million, or 15.3%, based upon the test
year ended June 30, 1992. Such request reflects, among other things, costs
associated with Comanche Peak Unit 2, costs associated with Comanche Peak Unit
1 after the end of the Docket 9300 (see below) test year, additional ad valorem
taxes and certain postretirement benefit costs. In August 1993, pursuant to
rules of the PUC, TU Electric placed its requested rate increase into effect,
under bond and subject to refund with interest, applicable to energy sales on
and after such date. Revenues were recorded net of an estimated reserve for
possible refunds.
In October 1993, the PUC issued an order (Order) approving the terms of an
agreement (Settlement Agreement) among TU Electric, the General Counsel's
office of the PUC and applicable intervenors which, among other things, settled
all remaining issues relating to the design, construction and cost of Comanche
Peak through commencement of commercial operation of Unit 2. The Settlement
Agreement provides for the disallowance in Docket 11735 of $250 million of
costs relating to the completion of Comanche Peak. Pursuant to the Order, TU
Electric refunded $5 million in fuel charges previously incurred in order to
resolve the fuel phase of Docket 11735 under which TU Electric was seeking
reconciliation of approximately $4.6 billion of fuel costs incurred during the
three year period ended June 30, 1992, under the fuel rule in effect prior to
May 1993. Further, in order to resolve the primary issue in another proceeding
which resulted from a complaint filed against TU Electric in October 1992 by
the General Counsel's office of the PUC, as a result of the Order, TU Electric
agreed to write off $83 million of AFUDC, which consists of the amount subject
to dispute in such proceeding and similar charges subsequently accrued. Also,
under the Settlement Agreement and confirmed in the Docket 11735 final order
(see below), TU Electric will recover, ratably over an eight year period, $197
million of operation and maintenance expenditures incurred by TU Electric in
connection with its recent cost reduction program. However, an additional $25
million of such expenditures will not be subject to recovery and was written
off by TU Electric. As a result of the Settlement Agreement, TU Electric
recorded a charge against earnings in September 1993 of approximately $363
million ($265 million after tax).
46
<PAGE> 49
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RATE PROCEEDINGS -- (CONTINUED)
On January 28, 1994, the PUC issued a final order in Docket 11735 which
provided for a total annual revenue increase of approximately $435 million, or
8.7%. TU Electric strongly disagrees with the final order and has filed a
motion for rehearing with the PUC, and will appeal the outcome, if necessary.
As a result of this final order, unless the order is changed on rehearing, TU
Electric will refund the difference between the bonded rates and the rates
approved in the final order, including interest, all of which is being fully
reserved by TU Electric. The total amount to be refunded will be determined
once approved rates have been implemented, which is expected to be during the
second quarter of 1994. The amount to be refunded at December 31, 1993 was
approximately $141.2 million. Such refund will be mitigated by a fuel cost
surcharge approved by the PUC of approximately $144.5 million, including
interest, in under-collected fuel costs through June 30, 1993.
The following details the effect on 1993 consolidated net income of the
Settlement Agreement and the Docket 11735 final order charges:
<TABLE>
<CAPTION>
THOUSANDS OF DOLLARS
--------------------
<S> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,000)
----------
OPERATING EXPENSES
Federal income taxes -- current . . . . . . . . . . . . . . . . . 1,000
Federal income taxes -- deferred . . . . . . . . . . . . . . . . . 750
----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . (3,250)
----------
OTHER INCOME (LOSS)
Regulatory disallowances . . . . . . . . . . . . . . . . . . . . . (359,556)
Federal income taxes -- current . . . . . . . . . . . . . . . . . 2,258
Federal income taxes -- deferred . . . . . . . . . . . . . . . . . 94,406
----------
Total other income (loss) . . . . . . . . . . . . . . . . . . . . (262,892)
----------
EFFECT ON CONSOLIDATED NET INCOME . . . . . . . . . . . . . . . . . $ (266,142)
----------
----------
</TABLE>
In November 1993, an intermediate appellate court in Texas, considering an
appeal of another utility's rate case, ruled that utilizing tax benefits
generated by costs not allowed in rates to reduce rates charged to customers
was required by prior court rulings for all disallowed costs, including capital
costs. TU Electric believes that such rulings are erroneous and not consistent
with the Texas Public Utility Regulatory Act. According to a Private Letter
Ruling issued to TU Electric by the IRS with respect to investment tax credits,
such ratemaking treatment, to the extent related to property classified for tax
purposes as public utility property, would result in a violation of the
normalization rules contained in the Internal Revenue Code of 1986, as amended
(Code). Violation of the normalization rules would result in a significant
adverse effect on TU Electric's results of operation and liquidity. The tax
benefits associated with the Comanche Peak costs disallowed in Docket 9300 (see
below) could be affected as a result of the court's method. In addition, in its
final order in Docket 11735, the PUC reduced rates for the tax benefits
generated by certain costs which were not allowed in rates. However, the PUC
recognized the potential for a normalization violation if investment tax
credits and tax depreciation generated by disallowed plant costs are used to
reduce rates. Therefore, the PUC ordered TU Electric to obtain a Private
Letter Ruling from the IRS with respect to tax depreciation on disallowed
plant. Thus, TU Electric's rates would not reflect the tax depreciation
benefit of disallowed plant unless
47
<PAGE> 50
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RATE PROCEEDINGS -- (CONCLUDED)
the IRS rules such benefits can be utilized to reduce rates without violating
the normalization rules contained in the Code. Such a finding by the IRS would
require TU Electric to refund the tax depreciation benefits to its customers.
TU Electric does not believe it is likely that such refund will occur if the
IRS maintains a position similar to that stated in its previous Private Letter
Ruling to TU Electric.
DOCKET 9300
In September 1991, the PUC issued a final order in Docket 9300 which
provided for a total revenue increase of approximately $442 million and
included $695 million of CWIP in rate base to support the revenue increase. It
also included a prudence disallowance of $472 million with respect to certain
Comanche Peak costs relating to 87.8% of TU Electric's ownership interest in
both units of Comanche Peak. With respect to TU Electric's reacquisition of
the remaining 12.2% minority owner interests in Comanche Peak, the order
included an additional disallowance of $909 million. In September 1991, TU
Electric recorded a charge against earnings, as a provision for regulatory
disallowances, of $1.381 billion ($1.011 billion after tax) as a result of the
Docket 9300 final order.
In November 1991, TU Electric filed a petition in the 250th Judicial
District Court of Travis County, Texas, requesting a reversal and remand of the
Docket 9300 final order. Other parties to the PUC proceeding also filed
appeals with respect to various portions of the order. In September 1992,
after a hearing, the Court entered a judgment in the appeals which affirmed the
prudence disallowance of $472 million but reversed and remanded to the PUC for
reconsideration those portions of the PUC's final order providing for
additional disallowances aggregating $884 million with respect to TU Electric's
reacquisition of minority owner interests in Comanche Peak. The Court
recognized that on remand the PUC may adjust the amount of CWIP included in TU
Electric's rate base to be consistent with the PUC's redeterminations regarding
the minority owner reacquisitions and the amount of cash working capital.
Therefore, TU Electric does not expect this judgment to affect the rates
approved in the Docket 9300 final order. Other parties to this suit have
appealed this judgment. TU Electric disagrees with certain portions of the
judgment and also has appealed. TU Electric is unable to predict the outcome
of such appeals and any reconsideration by the PUC.
11. COMMITMENTS AND CONTINGENCIES
CONSTRUCTION PROGRAM
The Company has taken steps to substantially reduce construction
expenditures from amounts previously estimated. Construction expenditures,
excluding AFUDC, are presently estimated at $400 million for each of the years
1994, 1995 and 1996. Estimated construction expenditures for 1994 through 1996
do not include $210 million in 1996 to resume active construction of two
lignite-fueled units at Twin Oak which would be necessary to meet the current
scheduled in service dates of the units. The reevaluation of growth
expectations, the effects of inflation, additional regulatory requirements, and
the availability of fuel, labor, materials and capital may result in changes in
estimated construction costs and dates of completion. Commitments in
connection with the construction program are generally revocable subject to
reimbursement to manufacturers for expenditures incurred or other cancellation
penalties.
48
<PAGE> 51
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
CLEAN AIR ACT
The federal Clean Air Act, as amended (Clean Air Act) includes provisions
which, among other things, place limits on the sulfur dioxide emissions
produced by generating units. To meet these sulfur dioxide requirements, the
Clean Air Act provides for the annual allocation of sulfur dioxide emission
allowances to utilities. Under the Clean Air Act, utilities are permitted to
transfer allowances within their own systems and to buy or sell allowances. The
EPA grants a maximum number of allowances annually to TU Electric based on the
amount of emissions from units in operation during the period 1985 through 1987.
The Clean Air Act also provides that TU Electric be granted additional annual
allowances for certain TU Electric units under construction based on part of
their anticipated emissions. The Company's capital requirements have not been
significantly affected by the requirements of the Clean Air Act. Although TU
Electric is unable to fully determine the cost of compliance with the Clean Air
Act, it is not expected to have a significant impact on the Company. Any
additional capital costs, as well as any increased operating costs associated
with these new requirements, are expected to be recoverable through rates, as
similar costs have been recovered in the past.
PURCHASED POWER CONTRACTS
TU Electric and SESCO have entered into purchased power contracts to
purchase portions of the generating output of certain qualifying cogenerators
and qualifying small power producers through the year 2005. These contracts
provide for capacity payments subject to a facility meeting certain operating
standards and energy payments based on the actual power taken under the
contracts. The cost of these and other purchased power contracts is recovered
currently through base rates, power cost and fuel recovery factors applied to
customer billings. Capacity payments under these contracts for the years ended
December 31, 1993, 1992 and 1991 were $251,610,000, $240,341,000 and
$229,953,000, respectively.
Assuming operating standards are achieved, future capacity payments under
the agreements are estimated as follows:
<TABLE>
<CAPTION>
YEARS THOUSANDS OF DOLLARS
----- --------------------
<S> <C>
1994 . . . . . . . . . . . . . $ 236,991
1995 . . . . . . . . . . . . . 229,340
1996 . . . . . . . . . . . . . 232,987
1997 . . . . . . . . . . . . . 240,884
1998 . . . . . . . . . . . . . 246,535
Thereafter . . . . . . . . . . 654,641
----------
Total . . . . . . . . . . . $1,841,378
----------
----------
</TABLE>
LEASES
The System Companies have entered into operating leases covering various
facilities and properties including combustion turbines, transportation, mining
and data processing equipment, and office space. Lease costs charged to
operation expense for the years ended December 31, 1993, 1992 and 1991 were
$138,184,000, $127,446,000 and $126,690,000, respectively.
49
<PAGE> 52
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
The Company's future minimum lease commitments under such operating leases
that have initial or remaining noncancellable lease terms in excess of one year
as of December 31, 1993, were as follows:
<TABLE>
<CAPTION>
YEARS THOUSANDS OF DOLLARS
----- --------------------
<S> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . $ 78,073
1995 . . . . . . . . . . . . . . . . . . . . . . . 63,356
1996 . . . . . . . . . . . . . . . . . . . . . . . 56,204
1997 . . . . . . . . . . . . . . . . . . . . . . . 35,682
1998 . . . . . . . . . . . . . . . . . . . . . . . 33,356
Thereafter . . . . . . . . . . . . . . . . . . . . 654,260
--------
Total minimum lease commitments* . . . . . . . $920,931
--------
--------
</TABLE>
______________________________
* Minimum lease commitments have not been reduced by
$3,833,000 due to the Company under noncancellable
subleases.
COOLING WATER CONTRACTS
TU Electric has entered into contracts with public agencies to purchase
cooling water for use in the generation of electric energy. In connection with
certain contracts, TU Electric has agreed, in effect, to guarantee the
principal, $38,590,000 at December 31, 1993, and interest on bonds issued to
finance the reservoirs from which the water is supplied. The bonds mature at
various dates through 2011 and have interest rates ranging from 5-1/2 to 7%. TU
Electric is required to make periodic payments equal to such principal and
interest for the years 1994 through 1998 which includes amounts assumed by a
third party as follows: $4,423,000 for 1994; $4,431,000 for 1995; $4,430,000
for 1996; $4,435,000 for 1997 and $4,435,000 for 1998. Payments made by TU
Electric, net of amounts assumed by a third party under such contracts, for
1993, 1992 and 1991 were $2,954,000, $2,849,000 and $2,596,000, respectively.
In addition, TU Electric is obligated to pay certain variable costs of
operating and maintaining the reservoirs. TU Electric has assigned to a
municipality all contract rights and obligations of TU Electric in connection
with $86,450,000 remaining principal amount of bonds at December 31, 1993,
issued for similar purposes which had previously been guaranteed by TU
Electric. TU Electric is, however, contingently liable in the unlikely event
of default by the municipality.
CHACO COAL PROPERTIES
Chaco Energy Company (Chaco) has a coal lease agreement for the rights to
certain surface mineable coal reserves located in New Mexico. The agreement
provides for minimum advance royalty payments of approximately $16 million per
year through 2017, covering approximately 228 million tons of coal. The
Company has entered into a surety agreement to assure the performance by Chaco
with respect to this agreement. At December 31, 1993 and 1992, $483,855,000
and $467,819,000, respectively, of minimum advance royalties paid by Chaco are
included in non-utility property.
50
<PAGE> 53
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
NUCLEAR INSURANCE
With regard to liability coverage, the Price-Anderson Act (Act) provides
financial protection for the public in the event of a significant nuclear power
plant incident. The Act sets the statutory limit of public liability for a
single nuclear incident currently at $9.4 billion and requires nuclear power
plant operators to provide financial protection for this amount. As required,
TU Electric provides this financial protection for a nuclear incident at
Comanche Peak resulting in public bodily injury and property damage through a
combination of private insurance and industry-wide retrospective payment plans.
As the first layer of financial protection, TU Electric has purchased $200
million of liability insurance from American Nuclear Insurers (ANI), which
provides such insurance on behalf of two major stock and mutual insurance
pools, Nuclear Energy Liability Insurance Association and Mutual Atomic Energy
Liability Underwriters. The second layer of financial protection is provided
under an industry retrospective payment program called Secondary Financial
Protection (SFP). Under the SFP, each operating licensed reactor in the United
States is subject to an assessment of up to $79.275 million, subject to
increases for inflation every five years, in the event of a nuclear incident at
any nuclear plant in the United States. Assessments are limited to $10 million
per operating licensed reactor per year per incident. All assessments under
the SFP are subject to a 3% insurance premium tax which is not included in the
amounts above.
With respect to nuclear decontamination and property damage insurance, NRC
regulations require that nuclear plant license-holders maintain not less than
$1.06 billion of such insurance and require the proceeds thereof to be used to
place a plant in a safe and stable condition, to decontaminate it pursuant to a
plan submitted to and approved by the NRC before the proceeds can be used for
plant repair or restoration or to provide for premature decommissioning. TU
Electric maintains nuclear decontamination and property damage insurance for
Comanche Peak in the amount of $2.75 billion, above which TU Electric is
self-insured. The primary layer of coverage of $500 million is provided by
ANI. The remaining coverage includes premature decommissioning coverage and is
provided by ANI in the amount of $850 million and Nuclear Electric Insurance
Limited (NEIL), a nuclear electric utility industry mutual insurance company,
in the amount of $1.4 billion. TU Electric is subject to a maximum annual
assessment from NEIL of $17 million in the event NEIL's losses under this type
of insurance for major incidents at nuclear plants participating in this
program exceed its accumulated funds and reinsurance.
TU Electric maintains Extra Expense Insurance through NEIL to cover the
additional costs of obtaining replacement power from another source if one or
both of the units at Comanche Peak are out of service for more than twenty-one
weeks as a result of covered direct physical damage. The coverage provides for
weekly payments of up to $3.5 million for the first and $2.345 million for the
second and third fifty-two week periods of each outage, respectively, after the
initial twenty-one week period. The total maximum coverage is $426 million per
unit. The coverage amounts applicable to each unit will be reduced to 80% if
both units are out of service at the same time as a result of the same
accident. Under this coverage, TU Electric is subject to a maximum assessment
of $10 million per year.
51
<PAGE> 54
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES -- (CONCLUDED)
NUCLEAR DECOMMISSIONING AND DISPOSAL OF SPENT FUEL
TU Electric has established a reserve (included in accumulated
depreciation) for the decommissioning of Comanche Peak, whereby decommissioning
costs are being recovered from customers over the life of the plant and
deposited in external trust funds (included in other investments). At December
31, 1993, such reserve totaled $35,978,000 which includes an accrual of
$12,612,000 for the year ended December 31, 1993. At December 31, 1993,
$35,720,000 has been deposited in the external trust funds for decommissioning
of Unit 1 and Unit 2. Realized earnings on funds deposited in the external
trust are recognized in the reserve. Based on a site-specific study during
1992 using the prompt dismantlement method and then-current dollars,
decommissioning costs for Comanche Peak Unit 1, and Unit 2 and common
facilities were estimated to be $255,000,000 and $344,000,000, respectively.
Decommissioning activities are projected to begin in 2030 and 2032 for Comanche
Peak Unit 1, and Unit 2 and common facilities, respectively. TU Electric is
recovering such costs based upon the 1992 study through the rates placed in
effect under Docket 11735 (see Note 10).
TU Electric has a contract with the United States Department of Energy for
the future disposal of spent nuclear fuel at a cost of one mill per
kilowatt-hour of Comanche Peak net generation. The disposal fee is included in
nuclear fuel expense.
GENERAL
In addition to the above, the Company and its subsidiaries are involved in
various legal and administrative proceedings which, in the opinion of the
Company, should not have a material effect upon its financial position or
results of operation.
12. CHANGE IN ACCOUNTING FOR UNBILLED REVENUE
Effective January 1, 1992, TU Electric began recording base rate revenue
for energy sold but not billed through the end of each month to achieve a
better matching of revenues and expenses. Prior to the change in accounting
method, revenues were recognized based on customer billings on a cycle basis.
The change in accounting increased consolidated net income in 1992 by
$102,044,000 ($0.48 per share), of which $80,907,000 ($0.38 per share)
represents the cumulative effect of the change in accounting principle at
January 1, 1992. Pro forma effects, assuming retroactive application of
recording unbilled revenues, are presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
--------- --------- ----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
As previously reported:
Consolidated net income (loss) . . . . . . . . . . . . . . . . $368,660 $700,111 $(409,964)
Earnings per share . . . . . . . . . . . . . . . . . . . . . . $1.66 $3.26 $(1.98)
Pro forma:
Consolidated net income (loss) . . . . . . . . . . . . . . . . -- $619,204 $(407,248)
Earnings per share . . . . . . . . . . . . . . . . . . . . . . -- $2.88 $(1.96)
</TABLE>
52
<PAGE> 55
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
In December 1991, the FASB issued Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
(Statement 107) to provide readers of the financial statements another method
of valuing financial instruments on a current basis. The following information
represents the Company's estimate of the amount at which the instruments could
be exchanged in a current transaction between willing parties, other than in a
forced sale.
The amounts reflected in the consolidated balance sheet for cash,
temporary cash investments and special deposits approximate fair value due to
the short maturity of such instruments. The fair values of financial
instruments for which estimated fair values have not been specifically
presented is not materially different than their related book value.
Other investments includes amounts principally for nuclear decommissioning
fund assets and funds invested pursuant to certain incentive and compensation
agreements. The fair values of the nuclear decommissioning assets and
incentive and compensation assets are estimated based on quoted market prices
at year-end for the instruments in which such funds are invested.
Common stock -- net has been reduced by the note receivable from the
trustee of the leveraged employee stock ownership provision of the Thrift Plan.
The fair values of such note, long-term debt and preferred stock subject to
mandatory redemption are estimated at the lesser of the Company's call price or
the present value of future cash flows discounted at rates consistent with
comparable maturities adjusted for credit risk.
The carrying amount of other financial liabilities classified as current
on the consolidated balance sheet, such as notes payable and long- term debt
due currently, approximates fair value due to the short maturity of such
instruments. Customer deposits have no defined maturities and, therefore, are
reflected at the amount payable on demand at the balance sheet date.
TU Electric has agreed, in effect, to guarantee the principal and interest
on bonds used to finance the reservoirs from which TU Electric uses cooling
water for certain generating units. TU Electric is also the guarantor for the
principal amount of certain bonds issued for similar purposes which were
assigned to a municipality. The outstanding principal at December 31, 1993 and
1992 of the bonds for which TU Electric is contingently liable is $125,000,000
and $131,000,000, respectively. The fair value of the bonds, approximately
$136,000,000 and $131,000,000 for December 31, 1993 and 1992, respectively, is
based on the present value of the instruments' approximate cash flows
discounted at the year-end risk free rate for issues of comparable maturities
adjusted for credit risk.
The estimated fair value of the System Companies' significant financial
instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
-------------------------- --------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ---------- ------------ ----------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C>
Long-term debt . . . . . . . . . . . . . . . . . . . . $8,379,826 $9,334,454 $7,931,981 $8,703,670
Preferred stock subject to mandatory redemption . . . . 396,917 408,347 418,748 455,009
LESOP note receivable . . . . . . . . . . . . . . . . . 250,000 277,521 250,000 251,452
Other investments . . . . . . . . . . . . . . . . . . . 53,549 54,839 37,603 38,770
</TABLE>
53
<PAGE> 56
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
14. SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
In the opinion of the Company, the information below includes all
adjustments (constituting only normal recurring accruals and the change in
accounting, see Note 12) necessary to a fair statement of such amounts.
Quarterly results are not necessarily indicative of expectations for a full
year's operations because of seasonal and other factors, including rate
changes, variations in maintenance and other operating expense patterns, the
impact of the change in AFUDC accruals (see Note 1) and the charges for
regulatory disallowances. For additional information regarding the charges for
regulatory disallowances, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation and Note 10.
<TABLE>
<CAPTION>
EARNINGS PER
CONSOLIDATED SHARE OF
OPERATING REVENUES OPERATING INCOME NET INCOME COMMON STOCK*
--------------------- ------------------- ------------------ ------------------
QUARTER ENDED 1993 1992 1993 1992 1993 1992 1993 1992
- ------------- ---------- ---------- -------- -------- -------- -------- -------- -------
THOUSANDS OF DOLLARS (EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31 . . . . . . $1,142,493 $1,057,160 $ 243,804 $ 229,693 $153,116 $166,347 $0.70 $0.78
June 30 . . . . . . . 1,255,952 1,196,065 273,292 292,842 162,666 156,690 0.74 0.73
September 30 . . . . 1,786,283 1,478,473 464,691 421,134 51,671 294,960 0.23 1.37
December 31 . . . . . 1,249,784 1,176,178 205,139 219,650 1,207 82,114 0.01 0.38
---------- ---------- ---------- ---------- -------- --------
$5,434,512 $4,907,876 $1,186,926 $1,163,319 $368,660 $700,111
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
</TABLE>
- ---------------
* Quarterly earnings per share of common stock are based on the weighted
average number of shares outstanding during the quarter and, as a result,
the sum of the quarters may not equal annual earnings per share.
54
<PAGE> 57
INDEPENDENT AUDITORS' REPORT
Texas Utilities Company:
We have audited the accompanying consolidated balance sheets of Texas Utilities
Company and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, retained earnings and cash flows for each of
the three years in the period ended December 31, 1993. Our audits also included
the financial statement schedules listed in Item 14.(a)2. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Texas Utilities Company and
subsidiaries at December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Notes 7 and 8 to the consolidated financial statements, in
1993, the Company changed its methods of accounting for income taxes and
postretirement benefits other than pensions to conform with Statements of
Financial Accounting Standards No. 109 and No. 106, respectively. Also
discussed in Note 12 to the consolidated financial statements, in 1992, the
Company changed its method of accounting for base rate revenue sold but not
billed.
/s/ DELOITTE & TOUCHE
Dallas, Texas
March 11, 1994
55
<PAGE> 58
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
STATEMENT OF RESPONSIBILITY
The management of Texas Utilities Company is responsible for the
preparation, integrity and objectivity of the consolidated financial statements
of the Company and its subsidiaries and other information included in this
report. The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. As appropriate, the statements
include amounts based on informed estimates and judgments of management.
The management of the Company has established and maintains a system of
internal control designed to provide reasonable assurance, on a cost-effective
basis, that assets are safeguarded, transactions are executed in accordance
with management's authorization and financial records are reliable for
preparing consolidated financial statements. Management believes that the
system of control provides reasonable assurance that errors or irregularities
that could be material to the consolidated financial statements are prevented
or would be detected within a timely period. Key elements in this system
include the effective communication of established written policies and
procedures, selection and training of qualified personnel and organizational
arrangements that provide an appropriate division of responsibility. This
system of control is augmented by an ongoing internal audit program designed to
evaluate its adequacy and effectiveness. Management considers the
recommendations of the internal auditors and independent certified public
accountants concerning the Company's system of internal control and takes
appropriate actions which are cost-effective in the circumstances. Management
believes that, as of December 31, 1993, the Company's system of internal
control was adequate to accomplish the objectives discussed herein.
The Board of Directors of the Company addresses its oversight
responsibility for the consolidated financial statements through its Audit
Committee, which is composed of directors who are not employees of the Company.
The Audit Committee meets regularly with the Company's management, internal
auditors and independent certified public accountants to review matters
relating to financial reporting, auditing and internal control. To ensure
auditor independence, both the internal auditors and independent certified
public accountants have full and free access to the Audit Committee.
The independent certified public accounting firm of Deloitte & Touche is
engaged to audit, in accordance with generally accepted auditing standards, the
consolidated financial statements of the Company and its subsidiaries and to
issue their report thereon.
/s/ J. S. FARRINGTON
J. S. Farrington, Chairman of the Board
and Chief Executive
/s/ ERLE NYE
Erle Nye, President
/s/ H. JARRELL GIBBS
H. Jarrell Gibbs, Vice President
and Principal Financial Officer
/s/ H. DAN FARELL
H. Dan Farell, Controller
and Principal Accounting Officer
56
<PAGE> 59
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to these items is found under the headings Election
of Directors, Executive Compensation, and Beneficial Ownership of Common
Stock of the Company in the definitive proxy statement to be mailed by the
registrant to the Commission for filing on or about April 1, 1994. Additional
information with respect to Executive Officers of the Registrant is found at
the end of Part I.
57
<PAGE> 60
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(a) Documents filed as part of this Report:
1. Financial Statements (included in Item 8, Financial Statements
and Supplementary Data):
Statements of Consolidated Income for each of the three years in the
period ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . 29
Statements of Consolidated Retained Earnings for each of the three
years in the period ended December 31, 1993 . . . . . . . . . . . . . . . 29
Statements of Consolidated Cash Flows for each of the three years in
the period ended December 31, 1993 . . . . . . . . . . . . . . . . . . . 30
Consolidated Balance Sheets, December 31, 1993 and 1992 . . . . . . . . . . 31
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 33
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . 55
Statement of Responsibility . . . . . . . . . . . . . . . . . . . . . . . . 56
2. Financial Statement Schedules--
For each of the three years in the period ended December 31, 1993:
Schedule V--Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . 66
Schedule VI--Accumulated Depreciation . . . . . . . . . . . . . . . . . . . 67
Schedule VIII--Valuation and Qualifying Accounts . . . . . . . . . . . . . . 68
Schedule IX--Short-term Borrowings . . . . . . . . . . . . . . . . . . . . . 69
Schedule X--Supplementary Information . . . . . . . . . . . . . . . . . . . 70
</TABLE>
The following financial statement schedules are omitted because of the
absence of the conditions under which they are required or because the
required information is included in the Financial Statements or notes
thereto: I, II, III, IV, VII, XI, XII and XIII.
(b) Reports on Form 8-K:
Reports on Form 8-K filed since September 30, 1993, are as follows:
DATE OF REPORT ITEMS REPORTED
-------------- --------------
October 26, 1993 Item 5. OTHER EVENTS
November 24, 1993 Item 5. OTHER EVENTS
January 14, 1994 Item 5. OTHER EVENTS
January 31, 1994 Item 5. OTHER EVENTS
58
<PAGE> 61
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED).
(C) EXHIBITS:
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
---------------------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
<S> <C> <C> <C> <C>
3(a) 33-48880 4(a) -- Restated Articles of Incorporation of Texas Utilities Company.
3(b) 33-48880 4(b) -- Bylaws, as amended, of Texas Utilities Company.
4(a) 2-90185 4(a) -- Mortgage and Deed of Trust, dated as of December 1, 1983, between Texas Utilities
Electric Company and Irving Trust Company (now The Bank of New York), Trustee.
4(a)-1 -- Supplemental Indentures to Mortgage and Deed of Trust:
2-90185 4(b) First April 1, 1984
2-92738 4(a)-1 Second September 1, 1984
2-97185 4(a)-1 Third April 1, 1985
2-99940 4(a)-1 Fourth August 1, 1985
2-99940 4(a)-2 Fifth September 1, 1985
33-01774 4(a)-2 Sixth December 1, 1985
33-9583 4(a)-1 Seventh March 1, 1986
33-9583 4(a)-2 Eighth May 1, 1986
33-11376 4(a)-1 Ninth October 1, 1986
33-11376 4(a)-2 Tenth December 1, 1986
33-11376 4(a)-3 Eleventh December 1, 1986
33-14584 4(a)-1 Twelfth February 1, 1987
33-14584 4(a)-2 Thirteenth March 1, 1987
33-14584 4(a)-3 Fourteenth April 1, 1987
33-24089 4(a)-1 Fifteenth July 1, 1987
33-24089 4(a)-2 Sixteenth September 1, 1987
33-24089 4(a)-3 Seventeenth October 1, 1987
33-24089 4(a)-4 Eighteenth March 1, 1988
33-24089 4(a)-5 Nineteenth May 1, 1988
33-30141 4(a)-1 Twentieth September 1, 1988
33-30141 4(a)-2 Twenty-first November 1, 1988
33-30141 4(a)-3 Twenty-second January 1, 1989
33-35614 4(a)-1 Twenty-third August 1, 1989
33-35614 4(a)-2 Twenty-fourth November 1, 1989
33-35614 4(a)-3 Twenty-fifth December 1, 1989
33-35614 4(a)-4 Twenty-six February 1, 1990
33-39493 4(a)-1 Twenty-seventh September 1, 1990
33-39493 4(a)-2 Twenty-eighth October 1, 1990
33-39493 4(a)-3 Twenty-ninth October 1, 1990
33-39493 4(a)-4 Thirtieth March 1, 1991
33-45104 4(a)-1 Thirty-first May 1, 1991
33-45104 4(a)-2 Thirty-second July 1, 1991
33-46293 4(a)-1 Thirty-third February 1, 1992
33-49710 4(a)-1 Thrity-fourth April 1, 1992
33-49710 4(a)-2 Thirty-fifth April 1, 1992
33-49710 4(a)-3 Thirty-sixth June 1, 1992
</TABLE>
59
<PAGE> 62
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED).
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
---------------------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
<S> <C> <C> <C> <C>
33-49710 4(a)-4 Thirty-seventh June 1, 1992
33-57576 4(a)-1 Thirty-eighth August 1, 1992
33-57576 4(a)-2 Thirty-ninth October 1, 1992
33-57576 4(a)-3 Fortieth November 1, 1992
33-57576 4(a)-4 Forty-first December 1, 1992
33-60528 4(a)-1 Forty-second March 1, 1993
33-64692 4(a)-1 Forty-third April 1, 1993
33-64692 4(a)-2 Forty-fourth April 1, 1993
33-64692 4(a)-3 Forty-fifth May 1, 1993
33-68100 4(a)-1 Forty-sixth July 1, 1993
0-11442 99(b) Forty-seventh October 1, 1993
Form 10-Q
(Quarter ended
September 30, 1993)
0-11442 4(a)-2 Forty-eighth November 1, 1993
Form 10-K
(1993)
4(b) 2-2801 B-2 -- Mortgage and Deed of Trust, dated as of February 1, 1937, between Dallas Power &
Light Company and Old Colony Trust Company, Trustee (The First National Bank of
Boston, successor Trustee).
4(b)-1 -- Supplemental Indentures to Mortgage and Deed of Trust:
2-7855 7(a) First April 1, 1949
2-8466 7(a)-2 Second June 1, 1950
2-10071 4(b)-3 Third March 1, 1953
2-12200 2(b)-1 Fourth February 1, 1956
2-77857 4(b)-5 Fifth December 1, 1956
2-77857 4(b)-6 Sixth December 1, 1959
2-20997 2(b)-7 Seventh February 1, 1963
2-77857 4(b)-8 Eighth January 1, 1966
2-25805 2(b)-9 Ninth February 1, 1967
2-37161 2(c) Tenth June 1, 1970
2-42043 2(c) Eleventh November 1, 1971
2-45403 2(c) Twelfth September 1, 1972
2-52708 2(c) Thirteenth March 1, 1975
2-77857 4(b)-14 Fourteenth May 1, 1977
2-71621 4(c) Fifteenth June 1, 1981
2-77857 4(b)-16 Sixteenth November 1, 1981
2-77857 4(c) Seventeenth July 1, 1982
2-81476 4(b)-18 Eighteenth November 1, 1982
2-81476 4(c) Nineteenth February 1, 1983
2-90185 4(c)-1 Twentieth June 1, 1983
2-90185 4(c)-2 Twenty-first January 1, 1984
2-90185 4(c)-3 Twenty-second April 1, 1984
2-92738 4(b)-1 Twenty-third September 1, 1984
</TABLE>
60
<PAGE> 63
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED).
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
---------------------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
<S> <C> <C> <C> <C>
2-99940 4(b)-1 Twenty-fourth September 1, 1985
33-11376 4(b)-1 Twenty-fifth October 1, 1986
33-14584 4(b)-1 Twenty-sixth March 1, 1987
33-24089 4(b)-1 Twenty-seventh July 1, 1987
33-30141 4(b)-1 Twenty-eighth January 1, 1989
33-35614 4(b)-1 Twenty-ninth November 1, 1989
33-46293 4(b)-2 Thirtieth February 1, 1992
33-49710 4(b)-1 Thirty-first June 1, 1992
4(c) 2-5609 7(b) -- Mortgage and Deed of Trust, dated as of March 1, 1945, between Texas Electric
Service Company and The Fort Worth National Bank, Trustee (Bank One, Texas, N.A.,
successor Trustee).
4(c)-1 -- Supplemental Indentures to Mortgage and Deed of Trust:
2-7186 7(b) First October 1, 1947
2-7423 7(c) Second April 1, 1948
2-7894 7(d) Third April 1, 1949
2-8982 7(e) Fourth June 1, 1951
2-9547 4(c) Fifth May 1, 1952
2-10118 4(c) Sixth April 1, 1953
2-12227 2(c) Seventh March 1, 1955
2-60449 2(b)-1 Eighth March 1, 1956
2-60449 2(b)-1 Ninth July 1, 1957
2-60449 2(b)-1 Tenth November 1, 1958
2-21105 2(b) Eleventh April 1, 1963
2-23056 2(b) Twelfth February 1, 1965
2-24384 2(c) Thirteenth February 1, 1966
2-26297 2(c) Fourteenth May 1, 1967
2-31474 2(c) Fifteenth March 1, 1969
2-38358 2(c) Sixteenth October 1, 1970
2-39627 2(c) Seventeenth April 1, 1971
2-42552 2(c) Eighteenth January 1, 1972
2-60449 2(b)-1 Nineteenth April 1, 1974
2-60449 2(b)-1 Twentieth December 1, 1974
2-60449 2(b)-1 Twenty-first June 1, 1975
2-60449 2(b)-1 Twenty-second March 1, 1976
2-63425 2(c) Twenty-third February 1, 1979
2-66633 2(c) Twenty-fourth March 1, 1980
2-74809 4(c)-1 Twenty-fifth November 1, 1981
2-74809 4(d)-1 Twenty-sixth December 1, 1981
2-76675 4(c) Twenty-seventh April 1, 1982
2-80329 4(c) Twenty-eighth November 1, 1982
2-80329 4(d) Twenty-ninth December 1, 1982
2-90185 4(d)-1 Thirtieth June 1, 1983
2-90185 4(d)-2 Thirty-first January 1, 1984
</TABLE>
61
<PAGE> 64
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED).
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
---------------------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
<S> <C> <C> <C> <C>
2-90185 4(d)-3 Thirty-second April 1, 1984
2-92738 4(c)-1 Thirty-third September 1, 1984
2-99940 4(c)-1 Thirty-fourth August 1, 1985
33-9583 4(c)-1 Thirty-fifth March 1, 1986
33-11376 4(c)-1 Thirty-sixth December 1, 1986
33-14584 4(c)-1 Thirty-seventh February 1, 1987
33-24089 4(c)-1 Thirty-eighth September 1, 1987
33-24089 4(c)-2 Thirty-ninth October 1, 1987
33-24089 4(c)-3 Fortieth March 1, 1988
33-30141 4(c)-1 Forty-first September 1, 1988
33-39493 4(c)-1 Forty-second September 1, 1990
33-39493 4(c)-2 Forty-third March 1, 1991
33-46293 4(c)-2 Forty-fourth February 1, 1992
33-57576 4(c)-1 Forty-fifth October 1, 1992
33-57576 4(c)-2 Forty-sixth November 1, 1992
33-60528 4(c)-1 Forty-seventh March 1, 1993
33-68100 4(c)-1 Forty-eighth July 1, 1993
0-11442 99(a) Forty-ninth October 1, 1993
Form 10-Q
(Quarter ended
September 30, 1993)
4(d) 2-5718 7(c) -- Mortgage and Deed of Trust, dated as of May 1, 1945, between Texas Power & Light
Company and Republic National Bank of Dallas, Trustee (NationsBank of Texas, N.A.,
successor Trustee).
4(d)-1 -- Supplemental Indentures to Mortgage and Deed of Trust:
2-7204 7(a) First October 1, 1947
2-7446 7(a) Second April 1, 1948
2-9474 4(c) Third April 1, 1952
2-10204 4(c) Fourth May 1, 1953
2-11162 2(b) Fifth October 1, 1954
2-12856 4(c) Sixth November 1, 1956
2-14553 2(b) Seventh December 1, 1958
2-19452 2(b)-1 Eighth January 1, 1961
2-21028 2(b) Ninth February 1, 1963
2-24326 2(c) Tenth January 1, 1965
2-24326 2(d) Eleventh February 1, 1966
2-25885 2(c) Twelfth February 1, 1967
2-27853 2(c) Thirteenth January 1, 1968
2-35941 2(c) Fourteenth February 1, 1970
2-38171 2(c) Fifteenth September 1, 1970
2-39083 2(c) Sixteenth February 1, 1971
2-42763 2(c) Seventeenth February 1, 1972
2-46740 2(c) Eighteenth February 1, 1973
</TABLE>
62
<PAGE> 65
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED).
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
---------------------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
<S> <C> <C> <C> <C>
2-73790 4(b)-19 Nineteenth February 1, 1974
2-73790 4(b)-20 Twentieth October 1, 1974
2-52865 2(c) Twenty-first April 1, 1975
2-55210 2(c) Twenty-second January 1, 1976
2-57963 2(c) Twenty-third February 1, 1977
2-63369 2(c) Twenty-fourth February 1, 1979
2-67594 (b)(2)-2 Twenty-fifth May 1, 1980
2-73790 4(c) Twenty-sixth September 1, 1981
2-77733 4(b) Twenty-seventh November 1, 1981
2-77733 4(c) Twenty-eighth June 1, 1982
2-90185 4(e)-1 Twenty-ninth November 1, 1982
2-90185 4(e)-2 Thirtieth June 1, 1983
2-90185 4(e)-3 Thirty-first October 1, 1983
2-90185 4(e)-4 Thirty-second January 1, 1984
2-90185 4(e)-5 Thirty-third April 1, 1984
2-92738 4(d)-1 Thirty-fourth September 1, 1984
2-97185 4(d)-1 Thirty-fifth April 1, 1985
33-01774 4(d)-1 Thirty-sixth December 1, 1985
33-9583 4(d)-1 Thirty-seventh May 1, 1986
33-11376 4(d)-1 Thirty-eighth December 1, 1986
33-14584 4(d)-1 Thirty-ninth April 1, 1987
33-24089 4(d)-1 Fortieth May 1, 1988
33-30141 4(d)-1 Forty-first August 1, 1988
33-35614 4(d)-1 Forty-second August 1, 1989
33-35614 4(d)-2 Forty-third December 1, 1989
33-35614 4(d)-3 Forty-fourth February 1, 1990
33-39493 4(d)-1 Forty-fifth October 1, 1990
33-45104 4(d)-1 Forty-sixth May 1, 1991
33-45104 4(d)-2 Forty-seventh July 1, 1991
33-46293 4(d)-2 Forty-eighth February 1, 1992
33-49710 4(d)-1 Forty-nineth April 1, 1992
33-57576 4(d)-1 Fiftieth August 1, 1992
33-57576 4(d)-2 Fifty-first December 1, 1992
33-64692 4(d)-1 Fifty-second April 1, 1993
33-64692 4(d)-2 Fifty-third May 1, 1993
0-11442 4(d)-2 Fifty-fourth November 1, 1993
Form 10-K
(1993)
</TABLE>
63
<PAGE> 66
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED).
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
---------------------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
<S> <C> <C> <C>
4(e) -- Agreement to furnish certain debt instruments.
4(f) 33-68104 4(b)-16 -- Deposit Agreement between TU Electric and Chemical
Bank, dated as of January 11, 1993.
4(g) 33-68104 4(b)-17 -- Deposit Agreement between TU Electric and Chemical
Bank, dated as of August 4, 1993.
4(h) 0-11442 4(h) -- Deposit Agreement between TU Electric and Chemical
Form 10-K Bank, dated as of October 14, 1993.
(1993)
10(a)** 1-3591 10(a) -- Deferred and Incentive Compensation Plan of the Texas
Form 10-K Utilities Company System, as amended June 30, 1992.
(1992)
10(b)** 1-3591 10(b) -- Salary Deferral Program of the Texas Utilities Company System
Form 10-K as amended May 31, 1992.
(1992)
10(c)** 1-3591 10(c) -- Restated Supplemental Retirement Plan for the employees of the
Form 10-K Texas Utilities Company System, dated as of January 1, 1991.
(1992)
21 -- Subsidiaries of Texas Utilities Company.
23(a) -- Consent of Counsel.
23(b) -- Independent Auditors' Consent.
99(a) 0-11442 99(a) -- Agreement, dated as of February 12, 1988, between TU
Form 10-K Electric and Texas Municipal Power Agency.
(1993)
99(b) 33-55408 99(a) -- Agreement, dated as of July 5, 1988, between TU Electric
and the Brazos Electric Power Cooperative, Inc.
99(c) 33-55408 99(b) -- Agreement, dated as of January 30, 1990, between TU
Electric and Tex-La Electric Cooperative of Texas, Inc.
99(d) 33-55408 99(c) -- Amended and Restated Credit Agreement, dated as of April 1,
1990, among TU Electric, Texas Utilities, certain banks and
Morgan Guaranty Trust Company of New York, Agent.
99(e) 33-59988 2 -- Agreement and plan of merger, dated as of January 25, 1993, by
and among Texas Utilities Company, TUA, Inc., and Southwestern
Electric Service Company.
</TABLE>
64
<PAGE> 67
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONCLUDED)
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
---------------------------
WITH
FILE AS
EXHIBITS NUMBER EXHIBIT NUMBER DATED
- -------- ------ ------- ------ -----
<S> <C> <C> <C>
99(f) 33-23532 4(c)(i) -- Trust Indenture, Security Agreement and Mortgage, dated as of
December 1, 1987, as supplemented by Supplement No. 1 thereto
dated as of May 1, 1988 among the Lessor, TU Electric and the
Trustee.
99(g) 33-24089 4(e) -- Supplement No. 2 to Trust Indenture, Security Agreement and
Mortgage, dated as of August 1, 1988.
99(h) 33-24089 4(e)-1 -- Supplement No. 3 to Trust Indenture, Security Agreement and
Mortgage, dated as of August 1, 1988.
99(i) 0-11442 99(c) -- Supplement No. 4 to Trust Indenture, Security Agreement and
Form 10-Q Mortgage, including form of Secured Facility Bond, 1993 Series,
(Quarter ended dated as of July 1, 1993.
June 30, 1993)
99(j) 33-23532 4(d) -- Lease Agreement, dated as of December 1, 1987, between the
Lessor and TU Electric as supplemented by Supplement No. 1
thereto dated as of May 20, 1988 between the Lessor and TU
Electric.
99(k) 33-24089 4(f) -- Lease Agreement Supplement No. 2, dated as of August 18, 1988.
99(l) 33-24089 4(f)-1 -- Lease Agreement Supplement No. 3, dated as of August 25, 1988.
99(m) 33-63434 4(d)(iv) -- Lease Agreement Supplement No. 4, dated as of December 1, 1988.
99(n) 33-63434 4(d)(v) -- Lease Agreement Supplement No. 5, dated as of June 1, 1989.
99(o) 0-11442 99(d) -- Lease Agreement Supplement No. 6, dated as of July 1, 1993.
Form 10-Q
(Quarter ended
June 30, 1993)
99(p) 33-23532 4(e) -- Participation Agreement dated as of December 1, 1987, as
amended by a Consent to Amendment of the Participation
Agreement, dated as of May 20, 1988, each among the Lessor,
the Trustee, the Owner Participant, certain banking institutions,
Capcorp, Inc. and TU Electric.
99(q) 33-24089 4(g) -- Consent to Amendement of the Participation Agreement, dated as
of August, 18, 1988.
99(r) 33-24089 4(g)-1 -- Supplement No. 1 to the Participation Agreement, dated as of
August 18, 1988.
99(s) 33-24089 4(g)-2 -- Supplement No. 2 to the Participation Agreement, dated as of
August 18, 1988.
99(t) 33-63434 4(e)(v) -- Supplement No. 3 to the Participation Agreement, dated as of
December 1, 1988.
99(u) 0-11442 99(e) -- Supplement No. 4 to the Participation Agreement, dated as of
Form 10-Q June 17, 1993.
(Quarter ended
June 30, 1993)
____________________________________________
<FN>
*Incorporated herein by reference.
**Management contract or compensation plan or arrangement required to be filed as an exhibit to this report
pursuant to Item 14(c) of Form 10-K.
</TABLE>
65
<PAGE> 68
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
SCHEDULE V -- UTILITY PLANT
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ---------------------------------------------------------------------------------------------------------------
BALANCE AT OTHER BALANCE
BEGINNING ADDITIONS CHANGES -- AT END
CLASSIFICATION OF YEAR AT COST RETIREMENTS ADD OF YEAR
- ---------------------------------------------------------------------------------------------------------------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Utility plant
In service:
Production . . . . . . . $11,461,906 $5,024,351 $ 9,532 $ -- $16,476,725
Transmission . . . . . . 1,493,601 46,824 2,924 4,898 (a) 1,542,399
Distribution . . . . . . 3,567,646 236,987 28,684 46,253 (a) 3,822,202
General . . . . . . . . . 466,215 20,012 11,432 2,720 (a) 477,515
----------- ---------- -------- ----------- -----------
Total . . . . . . . . 16,989,368 5,328,174 52,572 53,871 22,318,841
Construction work in progress 5,614,429 (4,574,698) -- 752 (a) 1,040,483
Nuclear fuel -- net . . . . 358,087 28,063 -- (65,259)(b) 320,891
Held for future use . . . . 32,286 9,363 -- -- 41,649
----------- ---------- -------- ----------- -----------
Utility plant before reserve 22,994,170 790,902 52,572 (10,636) 23,721,864
Less reserve for regulatory
disallowances . . . . . (1,308,460) -- -- -- (1,308,460)
----------- ---------- -------- ----------- -----------
Total utility plant . $21,685,710 $ 790,902 $ 52,572 $ (10,636) $22,413,404
----------- ---------- -------- ----------- -----------
----------- ---------- -------- ----------- -----------
Year Ended December 31, 1992
Utility plant
In service:
Production . . . . . . . $11,371,056 $ 109,388 $ 18,538 $ -- $11,461,906
Transmission . . . . . . 1,443,565 55,073 5,037 -- 1,493,601
Distribution . . . . . . 3,377,396 218,007 27,757 -- 3,567,646
General . . . . . . . . . 450,778 24,662 9,225 -- 466,215
----------- ---------- -------- ----------- -----------
Total . . . . . . . . 16,642,795 407,130 60,557 -- 16,989,368
Construction work in progress 4,895,288 719,141 -- -- 5,614,429
Nuclear fuel -- net . . . . 333,701 48,600 -- (24,214)(b) 358,087
Held for future use . . . . 30,611 1,675 -- -- 32,286
----------- ---------- -------- ----------- -----------
Utility plant before reserve 21,902,395 1,176,546 60,557 (24,214) 22,994,170
Less reserve for regulatory
disallowances . . . . . (1,308,460) -- -- -- (1,308,460)
----------- ---------- -------- ----------- -----------
Total utility plant . $20,593,935 $1,176,546 $ 60,557 $ (24,214) $21,685,710
----------- ---------- -------- ----------- -----------
----------- ---------- -------- ----------- -----------
Year Ended December 31, 1991
Utility plant
In service:
Production . . . . . . . $11,274,364 $ 116,454 $ 19,762 $ -- $11,371,056
Transmission . . . . . . 1,388,959 57,829 3,223 -- 1,443,565
Distribution . . . . . . 3,190,258 220,796 33,658 -- 3,377,396
General . . . . . . . . . 427,104 33,035 9,361 -- 450,778
----------- ---------- -------- ----------- -----------
Total . . . . . . . . 16,280,685 428,114 66,004 -- 16,642,795
Construction work in progress 4,093,059 802,229 -- -- 4,895,288
Nuclear fuel -- net . . . . 311,416 47,678 -- (25,393)(b) 333,701
Held for future use . . . . 30,162 449 -- -- 30,611
----------- ---------- -------- ----------- -----------
Utility plant before reserve 20,715,322 1,278,470 66,004 (25,393) 21,902,395
Less reserve for regulatory
disallowances . . . . . -- -- -- (1,308,460)(c) (1,308,460)
----------- ---------- -------- ----------- -----------
Total utility plant . $20,715,322 $1,278,470 $ 66,004 $(1,333,853) $20,593,935
----------- ---------- -------- ----------- -----------
----------- ---------- -------- ----------- -----------
</TABLE>
_______________
(a) Other changes to utility plant and CWIP represents acquisition of SESCO.
(See Note 1 to Consolidated Financial Statements.)
(b) Other changes to nuclear fuel includes $65,259,000, $24,214,000 and
$25,393,000 deducted for amortization in 1993, 1992 and 1991,
respectively.
(c) Disallowed Comanche Peak related costs. (See Note 10 to Consolidated
Financial Statements.)
66
<PAGE> 69
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COSTS AND NET CHANGES -- AT END
CLASSIFICATION OF YEAR EXPENSES (a) RETIREMENTS ADD (b) OF YEAR
- -------------------------------------------------------------------------------------------------------------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Accumulated depreciation . . . $4,201,396 $458,564 $69,782 $5,355 $4,595,533
Year Ended December 31, 1992
Accumulated depreciation . . . $3,825,937 $439,048 $69,505 $5,916 $4,201,396
Year Ended December 31, 1991
Accumulated depreciation . . . $3,435,478 $450,752 $67,449 $7,156 $3,825,937
</TABLE>
__________________
(a) Includes depreciation on lignite fuel production facilities charged to
fuel and decommissioning expense for Comanche Peak.
(b) Depreciation and depletion charged to various accounts, including
depreciation of transportation and work equipment, based on estimated
lives thereof, are charged to clearing accounts and allocated on the basis
of the use of such equipment.
67
<PAGE> 70
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER BALANCE AT
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS (a) END OF YEAR
- -------------------------------------------------------------------------------------------------------------------------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C>
VALUATION ACCOUNT, DEDUCTED FROM RELATED
ASSET ON THE BALANCE SHEET --
Year Ended December 31, 1993
Reserve for regulatory disallowances . . . . $1,381,145 $ -- $ -- $ -- $1,381,145
Allowance for uncollectible accounts . . . . 1,613 21,607 -- 16,826 6,394
Year Ended December 31, 1992
Reserve for regulatory disallowances . . . . $1,381,145 $ -- $ -- $ -- $1,381,145
Allowance for uncollectible accounts . . . . 2,931 4,102 -- 5,420 1,613
Year Ended December 31, 1991
Reserve for regulatory disallowances . . . . $ -- $1,381,145 $ -- $ -- $1,381,145
Allowance for uncollectible accounts . . . . 2,290 14,226 -- 13,585 2,931
</TABLE>
____________________
(a) Deductions represents uncollectible accounts written off net of recoveries
of amounts previously written off.
68
<PAGE> 71
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------------------
WEIGHTED
WEIGHTED AVERAGE
BALANCE WEIGHTED MAXIMUM AVERAGE INTEREST
AT AVERAGE AMOUNT AMOUNT RATE
CATEGORY OF AGGREGATE END OF INTEREST OUTSTANDING OUTSTANDING DURING
SHORT-TERM BORROWINGS YEAR RATE DURING YEAR DURING YEAR (a) YEAR (a)
- -----------------------------------------------------------------------------------------------------------------------------
THOUSANDS OF DOLLARS
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Amounts payable to banks for borrowings . . $ -- -- $300,000 $ 84,934 3.84%
Holders of commercial paper . . . . . . . . -- -- 299,700 54,401 3.72
Year Ended December 31, 1992
Amounts payable to banks for borrowings . . $250,000 3.86% $350,000 $277,306 4.28%
Holders of commercial paper . . . . . . . . -- -- 139,857 8,069 3.79
Year Ended December 31, 1991
Amounts payable to banks for borrowings . . $250,000 5.77% $300,000 $229,681 6.51%
Holders of commercial paper . . . . . . . . -- -- 133,800 35,756 6.84
</TABLE>
______________________
(a) Weighted averages are based upon daily amounts outstanding and equivalent
annual interest thereon.
69
<PAGE> 72
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INFORMATION
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B
- -----------------------------------------------------------------------------------------------------------
CHARGED TO EXPENSES
AND OTHER ACCOUNTS
--------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------
ITEM 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------
THOUSANDS OF DOLLARS
<S> <C> <C> <C>
Taxes other than income:
Ad valorem . . . . . . . . . . . . . . . . . . . . . . . . . . $219,219 $197,398 $184,171
Local gross receipts . . . . . . . . . . . . . . . . . . . . . 155,492 126,849 122,683
State gross receipts . . . . . . . . . . . . . . . . . . . . . 78,092 72,572 71,752
State franchise . . . . . . . . . . . . . . . . . . . . . . . . 3,728 31,611 54,414
Social security and unemployment . . . . . . . . . . . . . . . 40,420 54,546 50,388
Public Utility Commission assessment . . . . . . . . . . . . . 8,499 7,613 7,664
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 25,339 22,360 19,191
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $530,789 $512,949 $510,263
-------- -------- --------
-------- -------- --------
Charged to:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . $465,307 $441,060 $448,875
Utility plant and sundry accounts . . . . . . . . . . . . . . . 65,482 71,889 61,388
</TABLE>
______________________________
Maintenance and repairs, depletion, amortization, royalties, research and
development, and advertising, other than amounts set out separately in the
financial statements, are not material.
70
<PAGE> 73
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
TEXAS UTILITIES COMPANY
Date: By: /s/ J. S. FARRINGTON
__________________________________
(J. S. FARRINGTON, CHAIRMAN OF THE
BOARD AND CHIEF EXECUTIVE)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. S. FARRINGTON
________________________________________________ Principal Executive
(J. S. Farrington, Chairman of the Board Officer and Director
and Chief Executive)
/s/ ERLE NYE
________________________________________________ President and Director
(Erle Nye, President)
/s/ H. JARRELL GIBBS
________________________________________________ Principal Financial
(H. Jarrell Gibbs, Vice President) Officer
/s/ H. DAN FARELL
________________________________________________ Principal Accounting
(H. Dan Farell, Controller) Officer
/s/ JACK W. EVANS Director
________________________________________________
(Jack W. Evans)
/s/ BAYARD H. FRIEDMAN Director
________________________________________________
(Bayard H. Friedman)
/s/ WILLIAM M. GRIFFIN Director
________________________________________________
(William M. Griffin)
/s/ KERNEY LADAY Director
________________________________________________
(Kerney Laday)
/s/ MARGARET N. MAXEY Director
________________________________________________
(Margaret N. Maxey)
/s/ JAMES A. MIDDLETON Director
________________________________________________
(James A. Middleton)
/s/ CHARLES R. PERRY Director
________________________________________________
(Charles R. Perry)
/s/ HERBERT H. RICHARDSON Director
________________________________________________
(Herbert H. Richardson)
</TABLE>
71
<PAGE> 74
APPENDIX TO ELECTRONIC FORMAT DOCUMENT
A map outlining the service systems is displayed on page 17 of this report on
Form 10-K. This map appears in the paper format version of the document and
not in this electronic filing.
<PAGE> 1
EXHIBIT 4(e)
March 24, 1994
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Texas Utilities Company
1993 Annual Report on Form 10-K
Gentlemen:
Pursuant to the exemption afforded by item 601(b)(4)(iii)(A) of
Regulation S-K, Texas Utilities Company (Company) is not filing as exhibits to
its Annual Report on Form 10-K for 1993 instruments with respect to certain
long-term debt of the Company and/or its subsidiaries. These instruments
include (i) agreements with respect to pollution control revenue bonds and (ii)
agreements with respect to senior notes. Reference is made to Note 6 to
Financial Statements (Item 8 of the Company's Annual Report on Form 10-K for
1993).
Each item of long-term debt referenced above does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis.
The company agrees to furnish a copy of the above instruments to the
Securities and Exchange Commision upon request.
Sincerely,
/s/ H. JARRELL GIBBS
H. Jarrell Gibbs
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
Subsidiaries of Texas Utilities Company State of Incorporation
<S> <C>
Texas Utilities Electric Company Texas
Texas Utilities Services Inc. Texas
Texas Utilities Mining Company Texas
Texas Utilities Fuel Company Texas
Chaco Energy Company New Mexico
Basic Resources Inc. Texas
Southwestern Electric Service Company Texas
</TABLE>
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF COUNSEL
We hereby consent to the incorporation by reference of the statements
made as to matters of law and legal conclusions contained in this Annual Report
on Form 10-K of Texas Utilities Company for the fiscal year ended December 31,
1993, under Part I, Item 1--Business--Regulation and Rates and Environmental
Matters, in Texas Utilities Company's Registration Statement on Form S-3 (No.
33-55408).
WORSHAM, FORSYTHE, P.E.
SAMPELS & WOOLDRIDGE, L.L.P.
By: /s/ NEIL ANDERSON
-----------------
A Partner
March 24, 1994
Dallas, Texas
<PAGE> 1
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Texas Utilities Company's
Registration Statement No. 33-55408 on Form S-3 and Registration Statements No.
33-46674 and 33-48880 on Form S-8 of our report dated March 11, 1994, which
report includes an explanatory paragraph concerning the Company's changes in
its methods of accounting for income taxes and postretirement benefits other
than pensions to conform with Statements of Financial Accounting Standards No.
109 and No. 106, respectively, and for the change in its method of accounting
for base rate revenue sold but not billed, appearing in this Annual Report on
Form 10-K of Texas Utilities Company for the year ended December 31, 1993.
/s/ DELOITTE & TOUCHE
Dallas, Texas
March 24, 1994
