SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31,June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____to_____
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-1443 Central and South West Corporation 51-0007707
(A Delaware Corporation)
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234
(214) 777-1000
0-346 Central Power and Light Company 74-0550600
(A Texas Corporation)
539 North Carancahua Street
Corpus Christi, Texas 78401-2802
(512) 881-5300
0-343 Public Service Company of Oklahoma 73-0410895
(An Oklahoma Corporation)
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(918) 599-2000
1-3146 Southwestern Electric Power Company 72-0323455
(A Delaware Corporation)
428 Travis Street
Shreveport, Louisiana 71156-0001
(318) 222-2141
0-340 West Texas Utilities Company 75-0646790
(A Texas Corporation)
301 Cypress Street
Abilene, Texas 79601-5820
(915) 674-7000
Indicate by check mark whether the registrants (1) have
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 registrants were
required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
Common Stock Outstanding at April 30,July 28, 1995
Shares
Central and South West Corporation 191,225,584191,789,895
Central Power and Light Company 6,755,535
Public Service Company of Oklahoma 9,013,000
Southwestern Electric Power Company 7,536,640
West Texas Utilities Company 5,488,560
This combined Form 10-Q is separately filed by Central
and South West Corporation, Central Power and Light Company,
Public Service Company of Oklahoma, Southwestern Electric
Power Company and West Texas Utilities Company. Information
contained herein relating to any individual registrant is
filed by such registrant on its own behalf. Each other
registrant makes no representation as to information relating
to the other registrants.
2
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY
COMPANIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31,JUNE 30, 1995
Page
Number
GLOSSARY OF TERMS 3
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements. (Unaudited) 4
Central and South West Corporation and Subsidiary Companies 5
Consolidated Statements of Income 6
Consolidated Balance Sheets 7
Consolidated Statements of Cash Flows 9
Results of Operations 10
Central Power and Light Company 1214
Statements of Income 1315
Balance Sheets 1416
Statements of Cash Flows 1618
Results of Operations 1719
Public Service Company of Oklahoma 1922
Consolidated Statements of Income 2023
Consolidated Balance Sheets 2124
Consolidated Statements of Cash Flows 2326
Results of Operations 2427
Southwestern Electric Power Company 2529
Statements of Income 2630
Balance Sheets 2731
Statements of Cash Flows 2933
Results of Operations 3034
West Texas Utilities Company 3136
Statements of Income 3237
Balance Sheets 3338
Statements of Cash Flows 3540
Results of Operations 3641
Notes to Financial Statements 3743
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 4554
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 4756
Item 2. Changes in Securities. Inapplicable
Item 3. Defaults Upon Senior Securities. Inapplicable
Item 4. Submission of Matters to a Vote of Security-Holders. 50Security Holders. 58
Item 5. Other Information. 5359
Item 6. Exhibits and Reports on Form 8-K. 5860
Signatures. 59
362
GLOSSARY OF TERMS
The following abbreviations or acronyms used in this text are
defined below:
Abbreviation or Acronym Definition
1987 Order................... Order granted in September 1987 to WTU by the
Texas Commission in connection with Docket
No. 7289, Application of WTU for Deferred
Accounting Treatment of Certain Oklaunion-
Related Costs
Agreement in Principle....... Agreement in Principle to settle certain CPL
regulatory matters
ALJ.......................... Administrative Law Judge
ANI.......................... American Nuclear Insurance
APS.......................... Arizona Public Service Company
Bankruptcy Court............. United States Bankruptcy Court for the Western
District of Texas, Austin Division, before
which the El Paso bankruptcy reorganization
proceeding, Case No. 92-10148-FM, is pending
Burlington Northern.......... Burlington Northern Railroad Company
Cimmaron..................... Cimmaron Chemical Company
Cities....................... Several cities in CPL's service territory
Court of Appeals............. Court of Appeals, Third District of Texas,
Austin, Texas
CPL.......................... Central Power and Light Company, Corpus Christi,
Texas
CPL Settlement Agreement..... Settlement Agreement filed by CPL with the Texas
Commission to settle certain CPL regulatory
matters
CSW.......................... Central and South West Corporation, Dallas,
Texas
CSW Common................... Central and South West Corporation common stock,
$3.50 par value per shareSuit..................... Suit filed by CSW against El Paso in the United
States Bankruptcy Court in Austin, Texas
CSWE......................... CSW Energy, Inc., Dallas, Texas
CSW System................... Central and South West Corporation and
subsidiaries
CWIP......................... Construction work in progress
Effective Date............... The effective date of the Modified PlanDEV-I........................ CSW Development-I, Inc.
Electric Operating Companies. CPL, PSO, SWEPCO and WTU
El Paso...................... El Paso Electric Company
FPA.......................... Federal Power Act
FERC......................... Federal Energy Regulatory Commission
Holding Company Act.......... Public Utility Holding Company Act of 1935, as
amended
HSR Act...................... Hart-Scott-Rodino Antitrust Improvements Act of
1976El Paso Suit................. Suit filed by El Paso against CSW in state
district court in El Paso, Texas
EPA.......................... Environmental Protection Agency
FMB.......................... First Mortgage Bonds
Kwh.......................... Kilowatt-hour
Las Cruces................... City of Las Cruces, New Mexico
MCPC......................... Mid-Continent Power Company
MDEQ......................... Mississippi Department of Environmental Quality
Merger....................... The proposed merger whereby El Paso would become
a wholly owned subsidiary of CSW
Merger Agreement............. Agreement and Plan of Merger between El Paso and
CSW, dated as of May 8, 1993, as amended
MGP.......................... Manufactured gas plant or coal gasification plant
Mississippi Power............ Mississippi Power Company
Mmbtu........................ Million Btu Modified Plan................ Modified Third Amended Plan of Reorganization(British thermal unit)
Mw........................... Megawatt
Mwh.......................... Megawatt- hourMegawatt-hour
NEIL......................... Nuclear Electric Insurance Limited
New Mexico Commission........ New Mexico Public Utility Commission
NRC.......................... Nuclear Regulatory Commission
Oklahoma Commission.......... Corporation Commission of the State of Oklahoma
Oklaunion.................... Oklaunion Power Station Unit No. 1
Palo Verde................... Palo Verde Nuclear Generating StationPCB.......................... Polychlorinated Biphenyl
PCRB......................... Pollution Control Revenue Bonds
PFD.......................... Proposal for Decision
PRP.......................... Potentially Responsible Party
PSO.......................... Public Service Company of Oklahoma, Tulsa,
Oklahoma
RCRA......................... Federal Resource Conservation and Conservation Recovery Act of 1976
RFP.......................... Rate Filing Package
SEC.......................... Securities and Exchange Commission
SPS.......................... Southwestern Public Service Company
STP.......................... South Texas Project nuclear electric generating
station
SWEPCO....................... Southwestern Electric Power Company, Shreveport,
Louisiana
Termination Date............. Merger Agreement termination June 8, 1995
Texas Commission............. Public Utility Commission of Texas
TNRCC........................ Texas Natural Resource Conservation Commission
Transok...................... Transok, Inc. and subsidiaries, Tulsa, Oklahoma
TSCA......................... Toxic Substance Control Act of 1976
Westinghouse................. Westinghouse Electric Corporation
WTU.......................... West Texas Utilities Company, Abilene, Texas
4
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
(unaudited)
5CSW
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES 6
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Millions, except per share amounts)
REVENUES
Electric operating revenues $ 514774 $ 673785 $ 1,288 $ 1,458
Gas 136 172134 116 270 288
Other diversified 9 5
659 85012 7 21 12
920 908 1,579 1,758
OPERATING EXPENSES AND TAXES
Fuel and purchased power 235 290257 292 492 581
Gas purchased for resale 72 11076 60 148 170
Gas extraction and marketing 28 2224 23 52 45
Other operating 109 143149 145 258 289
Charges for terminated Merger 42 -- 42 --
Maintenance 37 41 45 78 86
Depreciation and amortization 94 8792 89 186 176
Taxes, other than federal income 37 49 51 86 100
Federal income taxes (43) 15
569 75720 46 (23) 61
750 751 1,319 1,508
OPERATING INCOME 90 93170 157 260 250
OTHER INCOME AND DEDUCTIONS
Mirror CWIP liability
amortization 10 17 21 34
Other 25 6
35 2311 4 34 10
21 21 55 44
INCOME BEFORE INTEREST CHARGES 125 116191 178 315 294
INTEREST CHARGES
Interest on long-term debt 56 5355 112 108
Interest on short-term debt and
other 25 15
81 6827 16 52 31
83 71 164 139
NET INCOME 44 48108 107 151 155
Preferred stock dividends 5 54 10 9
NET INCOME FOR COMMON STOCK $ 39103 $ 43103 $ 141 $ 146
AVERAGE COMMON SHARES
OUTSTANDING 190.8 188.5191.4 189.0 191.1 188.8
EARNINGS PER SHARE OF COMMON
STOCK $ 0.200.54 $ 0.230.55 $ 0.74 $ 0.78
DIVIDENDS PAID PER SHARE OF
COMMON STOCK $ 0.4300.43 $ 0.425 $ 0.86 $ 0.85
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
7
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Millions)
ASSETS
PLANT
Electric utility
Production $ 5,8095,833 $ 5,802
Transmission 1,3931,409 1,377
Distribution 2,5732,607 2,539
General 773776 764
Construction work in progress 422442 412
Nuclear fuel 161163 161
Total electric 11,13111,230 11,055
Gas 809821 798
Other diversified 3137 15
11,97112,088 11,868
Less - Accumulated depreciation 3,9614,053 3,870
8,0108,035 7,998
CURRENT ASSETS
Cash and temporary cash investments 34 27
Accounts receivable 661904 837
Materials and supplies, at average cost 163164 162
Electric fuel inventory, substantially at
average cost 132140 118
Gas inventory/products for resale 1723 23
Under-recovered fuel costs -- 54
Accumulated deferred income taxes 3420 2
Prepayments and other 3544 42
1,0761,329 1,265
DEFERRED CHARGES AND OTHER ASSETS
Deferred plant costs 515 516
Mirror CWIP asset 319317 322
Other non-utility investments 314335 394
Income tax related regulatory assets, net 276265 216
Other 306318 274
1,7301,750 1,722
$ 10,81611,114 $ 10,985
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
8
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Millions)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock: $3.50 par value
Authorized: 350,000,000 shares
Issued and outstanding: 191.2Authorized shares: 350.0 million
shares
inOutstanding shares: June 30, 1995,
and191.7 million
December 31, 1994,
190.6 million shares in 1994 $ 669671 $ 667
Paid-in capital 573586 561
Retained earnings 1,7811,801 1,824
Total Common Stock Equity 3,0233,058 3,052
Preferred stock
Not subject to mandatory redemption 292 292
Subject to mandatory redemption 35 35
Long-term debt 2,9562,954 2,940
TOTAL CAPITALIZATION 6,3066,339 6,319
CURRENT LIABILITIES
Long-term debt and preferred stock due within
twelve months 3331 7
Short-term debt 897846 910
Short-term debt - CSW Credit, Inc. 527748 573
Accounts payable 216258 286
Accrued taxes 6297 111
Accrued interest 4247 61
Refund due customers 52 --
Over-recovered fuel costs 5761 21
Other 115129 138
2,0012,269 2,107
DEFERRED CREDITS
Income taxes 2,1022,072 2,048
Investment tax credits 317313 320
Mirror CWIP liability and other 90121 191
2,5092,506 2,559
$ 10,81611,114 $ 10,985
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements.
9
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
ThreeSix Months Ended
March 31,June 30,
1995 1994
(Millions)
OPERATING ACTIVITIES
Net Income $ 44151 $ 48155
Non-cash Items Included in Net Income
Depreciation and amortization 105 94208 195
Deferred income taxes and investment tax
credits (43) 20(50) 38
Mirror CWIP liability amortization (10) (17)
Restructuring(21) (34)
Charges for terminated Merger 42 --
Regulatory assets established for restructuring
charges (23)(21) --
Changes in Assets and Liabilities
Accounts receivable 23 29(74) (44)
Over and under- recoveries of fuel 90 (9)94 (16)
Accounts payable (62) (39)(19) (57)
Accrued taxes (49) (35)(14) (5)
Refund due customers pursuant to CPL Agreement
in Principle 52 --
Other (34) 16
93 107(54) (18)
294 214
INVESTING ACTIVITIES
Capital expenditures and acquisitions (100) (121)(212) (268)
Non-affiliated accounts receivable collections 52 49(90) (114)
CSWE projects 61 6832 37
Other (15) (7)
(9)
6 (13)(285) (352)
FINANCING ACTIVITIES
Common stock sold 15 929 25
Proceeds from issuance of long-term debt 40 40138
Retirement of long-term debt (1) (1)(6) (2)
Reacquisition of long-term debt --(1) (14)
Redemption of preferred stock -- (4)
Change in short-term debt (59) (30)111 125
Payment of dividends (87) (85)
(92) (85)(175) (170)
(2) 98
NET CHANGE IN CASH AND CASH EQUIVALENTS 7 9(40)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 27 62
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 34 $ 7122
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 89166 $ 72131
Income taxes paid $ 217 $ 614
The accompanying notes to consolidated financial statements as they relate
to CSW are an integral part of these statements. 10
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Set forth below is information concerning the consolidated
results of operations for CSW for the three month periodand six month
periods ending March
31,June 30, 1995. For information concerning the results
of operations for each of the Electric Operating Companies, see the
discussions below under the heading RESULTS OF OPERATIONS following
the financial statements of each of the Electric Operating Companies.
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED MARCH 31,JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock was
unchanged at $103 million during the second quarter of 1995 compared
to the second quarter of 1994. Earnings per share decreased to $0.54
from $0.55 due to an increase in the number of shares of CSW common
stock outstanding. Included in the second quarter 1995 results was
the establishment of a reserve of $42 million for deferred merger and
acquisition costs as a result of CSW's termination of the Merger on
June 9, 1995. Also impacting earnings were increased interest costs
and lower earnings from Mirror CWIP liability amortization.
Offsetting these factors were increased gas revenues, non-fuel
electric revenues and prior year tax adjustments.
Operating Revenues. Operating revenues increased 1% to $920
million in the second quarter of 1995 from $908 million in the second
quarter of 1994. This increase reflects increased gas revenues offset
partially by decreased electric revenues. Gas revenues increased due
to higher gas sales and transportation which were offset partially by
lower gas prices. Electric revenues decreased primarily due to lower
fuel revenues in the second quarter of 1995 compared to the second
quarter of 1994. Total retail Kwh sales increased 2.2% in the second
quarter of 1995 as compared to the second quarter of 1994.
Residential, commercial and industrial sales were up 2.5%, 1.9% and
2.1%, respectively. Increased usage, primarily by industrial
customers, and new residential and commercial customers, contributed
to the Kwh sales growth.
Fuel and Purchased Power. Fuel and purchased power expense
decreased 12% to $257 million in the second quarter of 1995 from $292
million in the second quarter of 1994. The total composite unit cost
of fuel decreased 8% to $1.65 per Mmbtu in the second quarter of 1995
from $1.79 per Mmbtu in the second quarter of 1994, reflecting lower
gas, lignite and nuclear fuel prices and increased use of less costly
nuclear fuel. These lower costs reduced total fuel expense $34
million. Purchased power decreased $1 million or 8% in the second
quarter of 1995.
Gas Purchased for Resale. Gas purchased for resale increased 27%
to $76 million in the second quarter of 1995 from $60 million in the
second quarter of 1994 due to an increase in gas sales volumes which
was partially offset by a decrease in the average cost of gas.
Charges for Terminated Merger. CSW recorded a $42 million charge
for the establishment of a reserve for deferred merger and acquisition
costs as a result of CSW's termination of the Merger on June 9, 1995.
See Part II - Other Information - Item 1. for additional information
related to the termination of the Merger and litigation arising in
connection therewith.
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994 (continued)
Maintenance. Maintenance decreased 9% to $41 million in the
second quarter of 1995 from $45 million in the second quarter of 1994.
This decrease was due primarily to lower levels of maintenance
associated with STP.
Depreciation and Amortization. Depreciation and amortization
increased 3% from $89 million to $92 million due primarily to
increases in all classes of depreciable plant.
Federal Income Taxes. Federal income taxes decreased $26 million
during the second quarter of 1995 from $46 million during the second
quarter of 1994. This decrease resulted primarily from prior year tax
adjustments at the Electric Operating Companies as well as lower pre-
tax income. See NOTE 6. Federal Income Taxes for additional
information related to the tax adjustments.
Other Income and Deductions. Mirror CWIP liability amortization
decreased 35% to $11 million in the second quarter of 1995 from $17
million in the second quarter of 1994. The decrease reflects the
original liability amortization schedule agreed upon in the settlement
of CPL rate cases in 1990 and 1991. Other income increased $6 million
during the second quarter of 1995 as compared to the second quarter of
1994. The increase was primarily attributable to the reclassification
of CSWE's operating activities. Prior to 1994, CSWE was in the
developmental stage of its business and, accordingly, its operating
activities were classified in Other Income and Deductions. However,
in conjunction with the completion of three projects in 1994, CSWE's
revenues and expenses were classified as operating activities in Other
Diversified Revenues and Other Operating Expenses at the end of 1994.
Both of these components had negative earnings impacts classified in
Other Income and Deductions during the second quarter of 1994.
Interest on Short-Term Debt and Other. Interest on short-term
debt and other increased $11 million during the second quarter of 1995
as compared to the second quarter of 1994 due to higher levels of
short-term borrowings and higher short-term interest rates.
COMPARISON OF THE SIX MONTH ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
decreased 9%3% to $39$141 million during the first quartersix months of 1995 from
$43$146 million during the first quartersix months of 1994. Earnings per share
decreased to $0.20$0.74 from $0.23. The decrease reflects$0.78, reflecting the impact of the Agreement
in Principle to settle CPL regulatory matters, increased
depreciationas well as the establishment of a $42 million reserve for
deferred merger and amortization,acquisition costs associated with CSW's
termination of the Merger on June 9, 1995. Also adversely impacting
earnings were increased interest costs and lower earnings from mirrorMirror
CWIP liability amortization. Partially offsetting these factors were
reduced operations and maintenance costsincreased non-fuel electric revenues and lower ad
valorem taxes. See NOTE 2. Litigation and Regulatory Proceedings
for information related to the Agreement in Principle.
Operating Revenues. Operating revenues decreased 23%10% to $659$1,579
million during the six months ended June 30, 1995 from $850 million.$1,758 million
during the six months ended June 30, 1994. This decrease reflects a
$62 million write-off of fuel under-recovery and $50 million of
reserves for refunds and a $62.3 million write-off of fuel under-
recovery recorded in the first quarter of 1995 as a result
of the Agreement in Principle. In addition, fuel revenues were lower
in the first quartersix months of 1995 as compared to the first quartersix months of
1994 due to lower fuel costs as described below. TotalThe decrease in
operating revenues was offset in part by a 2.4% increase in total retail
Kwh sales increased 2.6% in the first quartersix months of 1995 as compared to the first quartersix
months of 1994. Commercial
sales were up 2.2%Residential, commercial and industrial sales were up 5%increased
1.2%, while2.0% and 3.5%, respectively, during the six
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
months ended June 30, 1995. Increased usage, particularly among
industrial customers, and new residential sales decreased by less than 1%.and commercial customers
caused the increase. Gas revenues decreased 21%6% to $136$270 million orduring
first six months of 1995 from $288 million during the first quarter of 1995 from $172 million in the
fourth quartersix months
of 1994. This decrease was due to lower gas prices partially offset
by increased gas sales and lower gastransportation volumes.
Fuel and Purchased Power. Total fuelFuel and purchased power expense
decreased 19%15% to $235$492 million during the six months ended June 30,
1995 from $290 million. Total fuel expense
decreased $50$581 million due to lower fuel cost.during the six months ended June 30, 1994. The total
composite unit cost of fuel decreased 24%16% to $1.60$1.63 per Mmbtu in the
first six months of 1995 from $2.11$1.93 per Mmbtu in the first six months
of 1994, reflecting lower gas, coallignite and lignitenuclear fuel prices and
increased use of less costly nuclear fuel. These lower costs reduced
total fuel expense by $83 million. Purchased power decreased $5$6
million or 33%21% in the first quartersix months of 1995 as compared to the
first quartersix months of 1994 due primarily to increased generation from
STP which replaced power that had been purchased during the first quartersix
months of 1994 when STP was out of service.
Gas Purchased for Resale. Gas purchased for resale decreased 35%13%
to $72$148 million during the six months ended June 30, 1995 from $110 million. This$170
million during the six months ended June 30, 1994 due to a decrease in
the average cost of gas which was partially offset by higher sales
volumes.
Gas Extraction and Marketing. Gas extraction and marketing
expenses increased $7 million to $52 million during the six months
ended June 30, 1995 as compared to the comparable period in 1994. The
increase was due to a lower
average cost of gas.higher natural gas liquids sales volumes.
Other Operating. Other operating expense decreased 24%11% to $109$258
million during the six months ended June 30, 1995 from $143 million.$289 million
during the six months ended June 30, 1994. This decrease was
primarily due to the recognition of a $23.3$21 million regulatory asset for
previously recorded restructuring charges. Also contributing to the
decrease iswas the reversal of $4.3$7 million in rate case costs pursuant to
the Agreement in Principle and a reductionreductions in employee related costs.
Charges for Terminated Merger. CSW recorded a $42 million charge
for the establishment of a reserve for deferred merger and acquisition
costs as a result of CSW's termination of the Merger on June 9, 1995.
See Part II - Other Information - Item 1. for information related to
the termination of the Merger and litigation arising in connection
therewith.
Maintenance. Maintenance decreased 10%9% to $37$78 million during the
six months ended June 30, 1995 from $41
million.$86 million during the six months
ended June 30, 1994. This decrease was due to lower levels of
maintenance activity at all the Electric Operating Companies, including lower
levelswith the exception of
SWEPCO where maintenance increased slightly, and costs associated with
STP. Maintenance expenditures
at STP were lower in 1995 than the comparable period in 1994, but are
11
expected to remain at higher levels than before the 1993-1994 STP
outage.
Depreciation and Amortization. Depreciation and amortization
increased 7%6% from $87$176 million to $94$186 million due primarily to
increases in all classes of depreciable plant.
Taxes, Other than Federal Income. Taxes other than Federal
income decreased 24%14% to $37$86 million during the six months ended June
30, 1995 from $49 million.$100 million during the six months ended June 30, 1994.
This decrease was due primarily to lower ad valorem tax expense as a
result of a true uptrue-up to prior yearsyear estimates.
CSW RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
Federal Income Taxes. Federal income taxes decreased $58$84 million
during the first quartersix months of 1995 when compared to the first quartersix months
of 1994. This decrease includeswas due to a $34 million reduction of deferred
federalFederal income taxes of $34 million, resulting from the Agreement in Principle, as
well asa $23
million reduction due to prior year tax adjustments at the Electric
Operating Companies and lower pre-tax income. Mirror CWIP Liability Amortization.See NOTE 6. Federal
Income Taxes for additional information related to the tax
adjustments.
Other Income and Deductions. Mirror CWIP liability amortization
decreased 41%38% to $10$21 million during the six months ended June 30, 1995
from $17 million.$34 million during the six months ended June 30, 1994. The
decrease reflects the original liability amortization schedule agreed
upon in the settlement of CPL rate cases in 1990 and 1991. Other. Other
income increased $18 million.$24 million to $34 million during the six months
ended June 30, 1995 from $10 million during the six months ended June
30, 1994. This increase was due primarily to increased interest
income of $12 million and recognition of $8.1$8 million of previously
deferred factoring income pursuant to the Agreement in Principle.
Other income also increased $3.2$3 million as a result of the $2.7 million net gain
on the sale by PSO
of a non-utility fiber-optic telecommunication property.property during the first
quarter of 1995.
Interest on Short-Term Debt and Other. Interest on short-term
debt and other increased $12$21 million to $52 million in the first six
months of 1995 from $31 million during the first quarter of 1995
as compared to the first quartersix months of 1994.
This increase reflects higher levels of short-term borrowing and
higher short-term interest rates.
12CPL
CENTRAL POWER AND LIGHT COMPANY 13
CENTRAL POWER AND LIGHT COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Thousands) (Thousands)
ELECTRIC OPERATING REVENUES $127,282 $263,229$324,525 $333,169 $451,807 $596,398
OPERATING EXPENSES AND TAXES
Fuel 60,064 78,02476,000 88,052 136,064 166,076
Purchased power 3,071 15,7993,956 14,049 7,027 29,848
Other operating 23,534 54,77457,455 54,907 80,989 109,681
Maintenance 17,205 18,55914,697 19,169 31,902 37,728
Depreciation and amortization 37,000 34,30137,372 34,939 74,372 69,240
Taxes, other than Federal income 9,475 19,91920,522 21,398 29,997 41,317
Federal income taxes (53,623) 4,910
96,726 226,28618,005 25,585 (35,618) 30,495
228,007 258,099 324,733 484,385
OPERATING INCOME 30,556 36,94396,518 75,070 127,074 112,013
OTHER INCOME AND DEDUCTIONS
Mirror CWIP liability amortization 10,250 17,000 20,500 34,000
Allowance for equity funds
used during construction (114) (62) (115) (24)
Other 8,096 1,038
18,346 18,0382,477 390 10,574 1,390
12,613 17,328 30,959 35,366
INCOME BEFORE INTEREST CHARGES 48,902 54,981109,131 92,398 158,033 147,379
INTEREST CHARGES
Interest on long-term debt 28,560 26,67928,534 27,953 57,094 54,632
Interest on short-term debt
and other 5,299 3,9696,050 2,418 11,349 6,387
Allowance for borrowed funds
used during construction (1,319) (653)
32,540 29,995(1,097) (443) (2,416) (1,096)
33,487 29,928 66,027 59,923
NET INCOME 16,362 24,98675,644 62,470 92,006 87,456
Preferred stock dividends 3,896 3,4583,468 3,641 7,364 7,099
NET INCOME FOR COMMON STOCK $ 12,46672,176 $ 21,52858,829 $ 84,642 $ 80,357
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
14
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $3,076,059$3,076,016 $3,070,005
Transmission 456,941457,729 451,050
Distribution 842,008854,724 828,350
General 219,567219,689 216,888
Construction work in progress 144,154158,537 142,724
Nuclear fuel 161,114163,283 161,152
4,899,8434,929,978 4,870,169
Less - Accumulated depreciation
and amortization 1,437,8311,470,966 1,400,343
3,462,0123,459,012 3,469,826
CURRENT ASSETS
Cash 1,3252,023 642
Special deposits 668 668
Accounts receivable 44,68448,602 29,865
Materials and supplies, at average cost 65,92266,157 66,209
Fuel inventory, at average cost 24,54123,589 22,916
Accumulated deferred income taxes 12,6502,558 --
Under-recovered fuel costs -- 54,126
Prepayments and other 1,7545,231 2,316
151,544148,828 176,742
DEFERRED CHARGES AND OTHER ASSETS
Deferred STP costs 488,775488,544 488,987
Mirror CWIP asset 319,320316,814 321,825
Income tax related regulatory assets, net 346,298349,931 288,444
Other 104,148106,189 76,875
1,258,5411,261,478 1,176,131
$4,872,097$4,869,318 $4,822,699
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
14
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $25 par value, authorized
12,000,000 shares; issued and
outstanding 6,755,535 shares $ 168,888 $ 168,888
Paid-in capital 405,000 405,000
Retained earnings 834,933882,108 857,466
Total Common Stock Equity 1,408,8211,455,996 1,431,354
Preferred stock 250,351 250,351
Long-term debt 1,468,0011,469,060 1,466,393
TOTAL CAPITALIZATION 3,127,1733,175,407 3,148,098
CURRENT LIABILITIES
Long-term debt due within twelve months 723526 723
Advances from affiliates 214,663145,129 161,320
Accounts payable 43,41052,257 75,051
Accrued taxes 20,64750,365 59,386
Accumulated deferred income taxes -- 13,812
Accrued interest 26,27122,633 24,681
Over-recovered fuel costs 22,27733,445 --
Refund due customers 52,25052,237 --
Other 25,16923,264 31,476
405,410379,856 366,449
DEFERRED CREDITS
Accumulated deferred income taxes 1,126,4181,119,516 1,087,317
Investment tax credits 157,085155,638 158,533
Mirror CWIP liability and other 56,01138,901 62,302
1,339,5141,314,055 1,308,152
$4,872,097$4,869,318 $4,822,699
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
16
CENTRAL POWER AND LIGHT COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
ThreeSix Months Ended
March 31,June 30,
1995 1994
(Thousands)
OPERATING ACTIVITIES
Net Income $16,362 $24,986$92,006 $87,456
Non-cash Items Included in Net Income
Depreciation and amortization 43,984 37,41486,648 80,107
Deferred income taxes and
investment tax credits (46,663) 10,671(48,553) 23,922
Mirror CWIP liability amortization (10,250) (17,000)
Restructuring(20,500) (34,000)
Regulatory assets established for restructuring
charges (23,330)(20,652) --
Allowance for equity funds
used during construction 115 24
Changes in Assets and Liabilities
Accounts receivable (14,819) 5,889(18,737) 3,685
Fuel inventory (1,625) (4,108)(673) (7,923)
Accounts payable (31,641) (1,231)(22,794) (12,524)
Accrued taxes (38,739) (31,157)(9,021) (7,121)
Over- and under-recovered fuel costs 76,403 (10,556)87,571 (24,904)
Refund due customers 52,250pursuant to Agreement
in Principle 52,237 --
Accrued restructuring charges (828) (6,823)
Other (3,994) (4,444)
17,938 10,464(23,852) (11,478)
152,967 90,421
INVESTING ACTIVITIES
Construction expenditures (31,437) (36,472)(65,087) (77,366)
Allowance for borrowed funds
used during construction (1,319) (653)
(32,756) (37,125)(2,416) (1,096)
(67,503) (78,462)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt -- 99,190
Reacquisition of long-term debt (745) (459)
Retirement of preferred stock -- (3,581)
Change in advances from affiliates 53,342 53,733(16,191) (71,973)
Payment of dividends (37,841) (23,326)
15,501 26,826(67,147) (36,988)
(84,083) (13,811)
NET CHANGE IN CASH AND CASH EQUIVALENTS 683 1651,381 (1,852)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 642 2,435
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,3252,023 $ 2,600583
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $29,056 $31,168$64,250 $57,599
Income taxes paid/(refunded)paid $ --1,502 $ --26
The accompanying notes to financial statements as they relate
to CPL are an integral part of these statements.
17
CENTRAL POWER AND LIGHT COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED MARCH 31,JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock decreased 42%increased 23%
to $12.5$72.2 million during the firstsecond quarter of 1995 from $21.5$58.8 million in the
firstsecond quarter of 1994. The increase was due primarily to increased non-fuel
revenues, decreased plant maintenance and prior year tax adjustments, offset
partially by decreased Mirror CWIP liability amortization and higher
depreciation and interest expenses.
Electric Operating Revenues. Total revenues decreased 3% to $324.5
million during the second quarter of 1995 from $333.2 million during the
second quarter of 1994 due primarily to a $22.4 million decrease in fuel
revenue resulting from lower average unit fuel costs and purchased power as
discussed below. Partially offsetting the decrease in fuel revenue was a
$14.0 million increase in non-fuel revenue resulting from a 6% increase in
retail Kwh sales and a 60% increase in lower margin sales for resale. The
increase in retail sales was attributable to increased usage per customer in
1995. The increase in sales for resale was due primarily to a new contract
with an existing customer.
Fuel. Fuel expense decreased approximately 14% to $76.0 million during
the second quarter of 1995 from $88.1 million during the second quarter of
1994. The decrease in fuel expense was due primarily to a 27% decrease in the
average unit cost of fuel from $1.88 per Mmbtu in the second quarter of 1994
to $1.38 per Mmbtu in the second quarter of 1995 resulting from the
expiration of higher priced gas contracts, the renegotiation of a coal
contract and increased usage of lower unit cost nuclear fuel. The decrease in
the cost of fuel was partially offset by an 18% increase in generation
attributable to the restart of STP Unit 2 in May 1994.
Purchased Power. Purchased power decreased $10.1 million during the
second quarter of 1995 as compared to the second quarter of 1994 due to the
increased generation at STP Unit 2, which replaced power that had been
purchased during the second quarter of 1994 when STP Unit 2 was out of
service.
Other Operating. Other operating expense increased $2.5 million, or 5%,
during the second quarter of 1995 as compared to the second quarter of 1994.
This increase was due primarily to higher administrative and general expenses,
partially offset by lower nuclear plant operating expenses than those incurred
during 1994 while STP was out of service.
Maintenance. Maintenance expense decreased $4.5 million, or 23%, during
the second quarter of 1995 as compared to the second quarter of 1994, due
primarily to decreased nuclear maintenance expense than that incurred during
1994 while STP was out of service and the postponement of previously scheduled
plant maintenance.
Depreciation and Amortization. Depreciation and amortization increased
$2.4 million, or 7%, during the second quarter of 1995 as compared to the
second quarter of 1994 as a result of an increase in depreciable property and
the amortization of restructuring charges associated with the Agreement in
Principle associated with several
pending regulatory proceedings.Principle. See NOTE 2. Litigation and Regulatory Proceedings for additional
information related to the Agreement in Principle.
Federal Income Taxes. Federal income taxes decreased $7.6 million in
the second quarter of 1995 as compared to the second quarter of 1994 due
primarily to prior year tax adjustments. See NOTE 6. Federal Income Taxes
for additional information related to the tax adjustments.
CPL RESULTS OF OPERATIONS (continued)
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1995 AND 1994 (continued)
Other Income and Deductions. Mirror CWIP liability amortization
decreased $6.8 million compared to the second quarter of 1994. In accordance
with the original liability amortization schedule agreed upon in the
settlement of its rate cases in 1990 and 1991, CPL is amortizing its Mirror
CWIP liability in declining amounts over the years 1991 through 1995. Other
income was higher in the second quarter of 1995 when compared to the second
quarter of 1994 due primarily to the recognition of factoring income pursuant
to the Agreement in Principle and an increase in consolidated tax savings.
Interest Charges. Interest on short-term debt and other increased $3.6
million in the second quarter of 1995 when compared to the second quarter of
1994 as a result of higher levels of short-term debt outstanding at higher
interest rates and the recognition of interest expense associated with over-
recovered fuel.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock increased 5% to
$84.6 million during the first six months of 1995 from $80.4 million in the
first six months of 1994. Increased non-fuel revenue, decreased plant
maintenance and prior year tax adjustments, offset by decreased Mirror CWIP
liability amortization and higher depreciation expense, contributed to this
increase. Partially offsetting this increase were lower earnings resulting
from the effects of the Agreement in Principle. See NOTE 2. Litigation and
Regulatory Proceedings for additional information related to the Agreement in
Principle.
Electric Operating Revenues. Total revenues decreased $135.9$144.6 million, or
52%24%, induring the first quartersix months of 1995 as compared to the first quartersix months of
1994 due primarily to a $50.0 million reserve for refund and a $62.3 million
write-off of under-recovered fuel costs as a
result ofresulting from the Agreement in
Principle. Under the Agreement in Principle, CPL will provide customers a one-timeone-
time base rate refund of $50.0 million. In addition, CPL will not charge
customers for $62.3 million in replacement power costs associated with the
1993-1994 STP outage.
Also contributing to the decrease in revenue was a $31.0$53.4 million decrease
in fuel revenue resulting from lower average unit fuel costs and purchased
power as discussed below. Partially offsetting the decrease in fuel revenue
was a $4.5$21.1 million increase in basenon-fuel revenue which reflectedresulting from a 5% increase
in retail Kwh sales and a 39%50% increase in lower margin sales for resale. The
increase in retail sales is due
primarilywas attributable to warmer weather as well asincreased usage per customer growth.in
1995. The increase in sales for resale is attributablewas due primarily to the increased availability of
lower cost generating capacity and warmer weather.a new contract
with an existing customer.
Fuel. Fuel expense decreased $18.0$30.0 million, or 23%18%, during the first quartersix
months of 1995 as compared to the first quartersix months of 1994. The decrease in
fuel expense was due primarily to a 32% decrease in the average unit cost of
fuel from $2.23$2.03 per Mmbtu infor the first quartersix months of 1994 to $1.37$1.38 per Mmbtu
infor the first quartersix months of 1995 resulting from the expiration of higher
priced gas contracts, the renegotiation of a decrease in the cost of gascoal contract and increased usage
of lower unit cost nuclear fuel. The decrease in the cost of fuel was
partially offset by a 26%21% increase in generation attributable to the restart of
STP UnitUnits 1 and Unit 2 in February and May 1994, respectively.
CPL RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
Purchased Power. Purchased power decreased $12.7$22.8 million during the first
quartersix months of 1995 as compared to the first quartersix months of 1994 due to increased
generation at STP, which replaced power that had been purchased during the
first quarterhalf of 1994 when STP was out of service.
Other Operating. Other operating expense decreased $31.2$28.7 million, or 57%26%,
during the first quartersix months of 1995 as compared to the first quartersix months of
1994. ThisThe decrease was primarily due to the recognition of a $23.3$20.7 million
regulatory asset for previously recorded restructuring charges. Also
contributing to the decrease iswas the reversal of $4.3$6.5 million in rate case
costs pursuant to the Agreement in Principle and a reduction in employee related costs.Principle.
Maintenance. Maintenance expense decreased $1.4$5.8 million, or 15%, during
the first six months of 1995 as compared to the first six months of 1994, due
primarily to decreased nuclear maintenance expense than that incurred during
1994 while STP was out of service and the postponement of previously scheduled
plant maintenance.
Depreciation and Amortization. Depreciation and amortization increased
$5.1 million, or 7%, during the first quartersix months of 1995 aswhen compared to
the first quarter of
1994, due primarily to decreases in transmission, distribution and
nuclear maintenance expenses partially offset by higher steam
maintenance expenses.
Depreciation and Amortization. Depreciation and amortization
increased $2.7 million, or 8%, during the first quarter of 1995 as
compared to the first quartersix months of 1994 as a result of higherincreased depreciable plant assetsproperty and the
amortization of restructuring charges associated with the Agreement in
Principle.
18
Taxes, Other than Federal Income. The $10.4Taxes other than Federal income
decreased $11.3 million decrease in
other taxes during the first quartersix months of 1995 as compared to the
first quartersix months of 1994 was due primarily to lower ad valorem tax expensesexpense
resulting from true up ofa true-up to prior year estimates.
Federal Income Taxes. Federal income taxes decreased $58.5$66.1 million in
the first quartersix months of 1995 as compared to the first quartersix months of 1994 due
primarily to the accelerated flowback of $34.3 million of unprotected excess
deferred income taxes in accordance with the Agreement in Principle, as well asprior
year tax adjustments and lower pre-tax income. See NOTE 6. Federal Income
Taxes for additional information related to the tax adjustments.
Other Income and Deductions. The Mirror CWIP liability amortization decreased
$6.8$13.5 million whenduring the first six months of 1995 as compared to the first quartersix
months of 1994. In accordance with the original liability amortization
schedule agreed upon in the settlement of its rate cases in 1990 and 1991, CPL
is amortizing its mirrorMirror CWIP liability in declining amounts over the years
1991 through 1995. The increase in otherOther income was alsohigher in the first six months of 1995
when compared to 1994 due primarily to the recognition during the first quarter of
$8.1 million of factoring income
pursuant to the Agreement in Principle.Principle and an increase in consolidated tax
savings.
Interest Charges. Long-termInterest on long-term debt interest expense increased $1.9$2.5 million
during the first quartersix months of 1995 as compared to the first six months of
1994 as a result of increased long-term debt outstanding. Interest on short-
term debt and other increased $5.0 million in the second quarter of 1995 when
compared to the second quarter of 1994 as a result of increasedhigher levels of short-
term debt outstanding.
19outstanding at higher interest rates and the recognition of interest
expense associated with over-recovered fuel.
PSO
PUBLIC SERVICE COMPANY OF OKLAHOMA 20
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Thousands) (Thousands)
ELECTRIC OPERATING REVENUES $148,416 $157,509$161,644 $174,631 $310,060 $332,140
OPERATING EXPENSES AND TAXES
Fuel 70,473 70,08662,989 71,462 133,462 141,548
Purchased power 4,743 13,1155,651 9,722 10,394 22,836
Other operating 29,868 30,62628,092 29,189 57,960 59,815
Maintenance 6,313 8,0468,749 9,398 15,062 17,444
Depreciation and amortization 16,485 15,40316,580 15,605 33,065 31,008
Taxes, other than Federal income 6,732 6,6247,041 7,963 13,773 14,587
Federal income taxes 954 1,182
135,568 145,0824,172 7,484 5,126 8,666
133,274 150,823 268,842 295,904
OPERATING INCOME 12,848 12,42728,370 23,808 41,218 36,236
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction 480 9659 143 539 239
Other 2,688 (102)
3,168 (6)528 211 3,216 109
587 354 3,755 348
INCOME BEFORE INTEREST CHARGES 16,016 12,42128,957 24,162 44,973 36,584
INTEREST CHARGES
Interest on long-term debt 7,399 7,398 7,398 14,797 14,797
Interest on short-term debt
and other 1,766 9891,770 1,223 3,537 2,213
Allowance for borrowed funds used
during construction (598) (273)
8,567 8,114(723) (386) (1,322) (660)
8,445 8,235 17,012 16,350
NET INCOME 7,449 4,30720,512 15,927 27,961 20,234
Preferred stock dividends 204 204 408 408
NET INCOME FOR COMMON STOCK $ 7,24520,308 $ 4,10315,723 $ 27,553 $ 19,826
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
21
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $ 902,929925,664 $ 902,602
Transmission 346,433352,446 346,433
Distribution 668,346681,102 668,346
General 149,564152,430 150,898
Construction work in progress 113,26893,060 96,133
2,180,5402,204,702 2,164,412
Less - Accumulated depreciation 875,973892,475 859,894
1,304,5671,312,227 1,304,518
CURRENT ASSETS
Cash 10,5671,930 5,453
Accounts receivable 22,65922,680 21,531
Materials and supplies, at average cost 40,55940,518 39,888
Fuel inventory, at LIFO cost 17,47724,505 17,820
Accumulated deferred income taxes 10,6959,284 6,670
Prepayments 2,2652,970 7,889
104,222101,887 99,251
DEFERRED CHARGES AND OTHER ASSETS 56,40257,651 61,345
$1,465,191$1,471,765 $1,465,114
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
22
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $15 par value, authorized
11,000,000 shares; issued 10,482,000
shares and outstanding 9,013,000
shares $ 157,230 $ 157,230
Paid-in capital 180,000 180,000
Retained earnings 131,514141,822 124,269
Total Common Stock Equity 468,744479,052 461,499
Preferred stock 19,826 19,826
Long-term debt 378,127378,501 402,752
TOTAL CAPITALIZATION 866,697877,379 884,077
CURRENT LIABILITIES
Long-term debt due within twelve months 25,000 --
Advances from affiliates 61,67052,435 55,160
Payables to affiliates 19,71126,378 27,876
Accounts payable 49,43236,903 59,899
Payables to customers 33,34529,920 22,655
Accrued taxes 13,63218,460 17,356
Accrued interest 5,6815,465 8,867
Other 15,19021,546 15,157
223,661216,107 206,970
DEFERRED CREDITS
Accumulated deferred income taxes 283,032280,314 281,139
Investment tax credits 48,31347,616 49,011
Income tax related regulatory
liabilities, net 17,90417,473 18,611
Other 25,58432,876 25,306
374,833378,279 374,067
$1,465,191$1,471,765 $1,465,114
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
23
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
ThreeSix Months Ended
March 31,June 30,
1995 1994
(Thousands)
OPERATING ACTIVITIES
Net Income $ 7,449 $ 4,307$27,961 $20,234
Non-cash Items Included in Net Income
Depreciation and amortization 17,637 16,49635,903 33,632
Deferred income taxes and
investment tax credits (3,537) (378)(5,972) 3,303
Allowance for equity funds used
during construction (480) (96)(539) (239)
Changes in Assets and Liabilities
Accounts receivable (1,128) 2,744(1,149) 7,348
Materials and supplies (328) 3,457(7,315) 6,567
Prepayments 5,624 (510)4,919 (5,573)
Accounts payable (557) (15,611)(8,320) (4,758)
Accrued taxes (3,724) (4,037)1,104 5,424
Accrued restructuring charges (417) (4,052)
Other 3,091 (2,147)
24,047 4,225current liabilities 6,389 (1,549)
Other deferred credits 7,570 (4,609)
Other 2,750 (962)
62,884 54,766
INVESTING ACTIVITIES
Construction expenditures (23,770) (30,501)(48,672) (59,184)
Allowance for borrowed funds used during
construction (598) (273)(1,322) (660)
Other (871) (862)
(25,239) (31,636)(3,281) (1,391)
(53,275) (61,235)
FINANCING ACTIVITIES
ChangesChange in advances from affiliates 6,510 30,792(2,725) 17,613
Payment of dividends (204) (5,204)
6,306 25,588(10,407) (12,408)
(13,132) 5,205
NET CHANGE IN CASH AND CASH EQUIVALENTS 5,114 (1,823)(3,523) (1,264)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,453 2,429
CASH AND CASH EQUIVALENTS AT END OF PERIOD $10,567 $ 6061,930 $ 1,165
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $11,361 $ 7,694$19,509 $15,685
Income taxes paid $ 2,3725,908 $ --10
The accompanying notes to consolidated financial statements as they relate
to PSO are an integral part of these statements.
24
PUBLIC SERVICE COMPANY OF OKLAHOMA
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED MARCH 31,JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 77%29% to $7.2$20.3 million during the firstsecond quarter of 1995
from $4.1$15.7 million induring the firstsecond quarter of 1994. The
increase resulted primarily from the sale of a non-utility fiber optic telecommunication
property.prior year tax adjustments.
Electric Operating Revenues. Revenues decreased approximately 6%7% to
$148.4$161.6 million during the firstsecond quarter of 1995 from $157.5$174.6
million during the firstsecond quarter of 19941994. The decreased
revenues were due primarily to a $14.6 million reduction in fuel
revenues and a 3.8% decrease in retail Kwh sales which was
primarily the result of decreased fuel
recovery.weather-related demand. PSO
recovers its monthly fuel and purchased power expenses currently
in its revenues, andrevenues; therefore the net decrease in these costs resulted
in lower revenues.
Also affecting revenues was an
increase in sales for resale to other electric utilities due to
increased market place demand.
Fuel. Fuel expense increased less than 1%decreased 12% to $63.0 million during
the firstsecond quarter of 1995 as compared to $71.5 million during
the firstsecond quarter of 1994 as1994. This decrease was due primarily to a
result
of a 20% increasereduction in Kwh generation and anthe over-recovery of fuel costs, as well as a
reduction in average unit fuel costs from customers which was previously recorded as deferred fuel expense.
Kwh generation was affected by the$2.05 per Mmbtu in 1994
to $1.86 per Mmbtu in 1995. The decrease in power purchases as
discussed below. These increasesaverage unit fuel
costs was attributable to the settlement of coal transportation
litigation and a reduction in the spot market price of natural
gas. Such decreases were partially offset by a reductionan increase in
unit fuel costs. The averagehigher unit fuel cost natural gas-fired generation and the
reversal of prior year accruals for the first quarter
of 1995 was $1.72 per Mmbtu, a decrease of approximately 18% from the
same period last year. The decrease in per unit fuel costs reflects
lower costs for natural gas and coal.potential liabilities related
to coal transportation. See Part II - OTHER INFORMATION
- - Item
1. Legal Proceedings for additional information related to
pending coal transportation.transportation litigation.
Purchased Power. Purchased power decreased 64% to $4.7$4.1 million, or
42%, during the firstsecond quarter of 1995 from $13.1 million duringas compared to the firstsecond
quarter of 1994 due primarily to decreased purchases of economy
energy.
Maintenance. Maintenance expenseFederal Income Taxes. Federal income taxes decreased $1.7$3.3
million, or 22%44%, during the firstsecond quarter of 1995 as compared to
the second quarter of 1994 primarily as a result of prior year
tax adjustments, offset in part by higher pre-tax income. See
NOTE 6. Federal Income Taxes for additional information related
to the tax adjustments.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 39% to $27.6 million for the six months ended June 30,
1995 from $19.8 million for the six months ended June 30, 1994.
The increase resulted primarily from the sale during the first
quarter of 1995 of non-utility fiber optic telecommunication
property, decreased operating and maintenance expenses and prior
year tax adjustments.
Electric Operating Revenues. Revenues decreased 7% to
$310.1 million during the first six months of 1995 from $332.1
million during the first six months of 1994 due primarily to a
$22.8 million reduction in fuel revenues and a 2.0% decrease in
retail Kwh sales (which was primarily the result of decreased
weather-related demand). PSO recovers its monthly fuel and
purchased power expenses currently in its revenues; therefore,
the decrease in these costs resulted in lower revenues.
PSO RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
Fuel. Fuel expense decreased approximately 6% to $133.5
million during the first six months of 1995 as compared to $141.5
million in the same period of 1994. This decrease was due
primarily to a reduction in the over-recovery of fuel costs, as
well as a reduction in average fuel costs from $2.07 per Mmbtu in
1994 to $1.79 per Mmbtu in 1995. The decrease in average fuel
costs was attributable to the settlement of certain coal
transportation litigation and a reduction in the price of natural
gas. Such decreases were partially offset by a 7% increase in
Kwh generation and the reversal of prior year accruals for
potential liabilities related to coal transportation. See Part
II - OTHER INFORMATION - Item 1. Legal Proceedings for additional
information related to pending coal transportation litigation.
Purchased Power. Purchased power decreased $12.4 million,
or 55%, during the first six months of 1995 as compared to the
same period of 1994 due primarily to decreased purchases of
economy energy.
Maintenance Expenses. Maintenance expenses decreased 14% to
$15.1 million for the six months ended June 30, 1995 from $17.4
million for the same period of 1994 primarily as a result of
decreased overhead linesline maintenance activities,
primarily tree trimming.activities.
Depreciation and Amortization. The increase in depreciationDepreciation and
amortization expense of $1.1increased $2.1 million, or 7%, during the
first quartersix months of 1995 as compared to the first quartersix months of
1994 was due primarily to an increaseincreases in depreciable property.plant.
Federal Income Taxes. Federal income taxes decreased 41% to
$5.1 million during the first six months of 1995 from $8.7
million during the same period of 1994 primarily as a result of
prior year tax adjustments, offset in part by higher pre-tax
income. See NOTE 6. Federal Income Taxes for additional
information related to the tax adjustments.
Other Income and Deductions. Other income and deductions
increased $3.2$3.4 million primarily as a result of thea $2.7 million net
gain on the sale of a non-utility fiber optic telecommunication
property.property during the first quarter of 1995.
Interest on Short-term Debt and Other. Short-term debt and
other increased $0.8$1.3 million due primarily to higher levels of
short-term debt outstanding at higher short-term interest rates.
25SWEPCO
SOUTHWESTERN ELECTRIC POWER COMPANY 26
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Thousands) (Thousands)
ELECTRIC OPERATING REVENUES $169,240 $190,066$212,960 $211,989 $382,200 $402,055
OPERATING EXPENSES AND TAXES
Fuel 63,191 87,19078,652 87,312 141,844 174,502
Purchased power 5,463 4,5594,269 4,050 9,732 8,609
Other operating 28,592 28,00229,357 29,975 57,949 57,977
Maintenance 9,345 8,97611,471 10,955 20,816 19,931
Depreciation and amortization 20,284 19,76220,359 19,878 40,643 39,640
Taxes, other than Federal income 10,865 12,90012,207 12,751 23,072 25,651
Federal income taxes 4,913 3,857
142,653 165,2467,767 10,369 12,679 14,226
164,082 175,290 306,735 340,536
OPERATING INCOME 26,587 24,82048,878 36,699 75,465 61,519
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction 1,449 667656 736 2,105 1,403
Other 410 1,050
1,859 1,7171,042 438 1,452 1,488
1,698 1,174 3,557 2,891
INCOME BEFORE INTEREST CHARGES 28,446 26,53750,576 37,873 79,022 64,410
INTEREST CHARGES
Interest on long-term debt 11,321 10,81311,117 10,900 22,437 21,713
Interest on short-term debt
and other 2,848 1,5802,835 1,553 5,684 3,133
Allowance for borrowed funds
used during construction (1,248) (393)
12,921 12,000(1,446) (431) (2,694) (824)
12,506 12,022 25,427 24,022
NET INCOME 15,525 14,53738,070 25,851 53,595 40,388
Preferred stock dividends 778 840 841 1,618 1,681
NET INCOME FOR COMMON STOCK $ 14,74737,230 $ 13,69725,010 $ 51,977 $ 38,707
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
27
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $1,402,342$1,403,839 $1,401,418
Transmission 395,605404,088 385,113
Distribution 755,367763,781 733,707
General 221,838222,626 213,563
Construction work in progress 130,707146,240 149,508
2,905,8592,940,574 2,883,309
Less - Accumulated depreciation 1,048,2691,069,905 1,026,751
1,857,5901,870,669 1,856,558
CURRENT ASSETS
Cash 5572,379 1,296
Accounts receivable 48,94747,455 54,344
Materials and supplies, at average cost 27,88328,987 28,109
Fuel inventory, at average cost 74,16873,189 61,701
Accumulated deferred income taxes 7,3314,762 6,592
Prepayments and other 13,68214,202 13,071
172,568170,974 165,113
DEFERRED CHARGES AND OTHER ASSETS 54,74958,811 57,536
$2,084,907$2,100,454 $2,079,207
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
28
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $18 par value, authorized
7,600,000 shares; issued and
outstanding 7,536,640 shares $ 135,660 $ 135,660
Paid-in capital 245,000 245,000
Retained earnings 312,209327,440 297,462
Total Common Stock Equity 692,869708,100 678,122
Preferred stock
Not subject to mandatory redemption 16,032 16,032
Subject to mandatory redemption 34,82834,778 34,828
Long-term debt 594,489595,580 595,833
TOTAL CAPITALIZATION 1,338,2181,354,490 1,324,815
CURRENT LIABILITIES
Long-term debt and preferred stock
due within twelve months 6,4455,140 5,270
Advances from affiliates 90,36665,414 81,868
Accounts payable 37,62148,598 50,138
Fuel refund due customers 14,293Over-recovered fuel cost 9,751 12,200
Customer deposits 12,41411,907 13,075
Accrued taxes 17,04532,885 12,495
Accrued interest 7,4619,970 17,175
Other 18,55119,464 30,615
204,196203,129 222,836
DEFERRED CREDITS
Accumulated deferred income taxes 369,430364,220 365,441
Investment tax credits 80,00578,986 81,023
Income tax related regulatory liabilities,
net 43,01041,910 44,836
Other 50,04857,719 40,256
542,493542,835 531,556
$2,084,907$2,100,454 $2,079,207
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
29
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
ThreeSix Months Ended
March 31,June 30,
1995 1994
(Thousands)
OPERATING ACTIVITIES
Net Income $15,525 $14,537$53,595 $40,388
Non-cash Items Included in Net Income
Depreciation and amortization 22,851 22,11645,676 44,316
Deferred income taxes and
investment tax credits 407 440(4,354) 1,226
Allowance for equity funds used during
construction (1,449) (667)(2,105) (1,403)
Changes in Assets and Liabilities
Accounts receivable 5,397 (4,974)6,889 (9,798)
Fuel inventory (12,467) 12,730(11,488) 15,796
Accounts payable (12,517) (7,593)(1,540) 5,482
Accrued taxes 4,550 4,37020,390 17,204
Accrued interest (9,714) (5,008)(7,205) --
Over- and under-recovered fuel costs 2,093 1,170(2,449) 1,697
Restructuring charges (288) (3,663)
Other 1,115 7,704
15,791 44,8255,099 5,702
102,220 116,947
INVESTING ACTIVITIES
Construction expenditures (19,853) (28,597)(52,465) (66,728)
Allowance for borrowed funds used during
construction (1,248) (393)(2,694) (824)
Other (1,609) (1,286)
(22,710) (30,276)(3,370) (2,007)
(58,529) (69,559)
FINANCING ACTIVITIES
Change in advances from affiliates 8,498 (3,771)(16,454) (27,864)
Redemption of preferred stock (50) --
Retirement of long-term debt (1,499) (1,365)(1,692) (1,559)
Reacquisition of long-term debt -- (1,714)(1,713)
Payment of dividends (819) (6,841)
6,180 (13,691)(24,412) (18,682)
(42,608) (49,818)
NET CHANGE IN CASH AND CASH EQUIVALENTS (739) 8581,083 (2,430)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,296 6,723
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5572,379 $ 7,5814,293
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $20,581 $16,434$30,964 $23,374
Income taxes paid $ --2,581 $ 3731,932
The accompanying notes to financial statements as they relate
to SWEPCO are an integral part of these statements.
30
SOUTHWESTERN ELECTRIC POWER COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED MARCH 31,JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 8%49% to $14.7$37.2 million during the firstsecond quarter of 1995
from $13.7$25.0 million during the firstsecond quarter of 1994. The
increase was due primarily to an increase in non-fuel revenue and
prior year tax adjustments.
Electric Operating Revenues. Electric operating revenues
decreased 11%increased $1.0 million to $169.2$213.0 million during the firstsecond
quarter of 1995 from $190.1$212.0 million during the firstsecond quarter of
1994. This decrease in
revenues was1994 due primarily to a $16.3$5.6 million increase in non-fuel revenue
offset in part by a $4.6 million decrease in fuel revenue resulting fromdue to
lower average unit fuel cost and a decrease in
generation. Partially offsetting the decrease in fuel revenue was an
$8.5 millioncosts. The increase in base revenue, which reflectednon-fuel revenues was
primarily the result of a 3%3.6% increase in retail Kwh sales.
Fuel. Fuel expense decreased 28%10% to $63.2$78.7 million during the
firstsecond quarter of 1995 when compared to the second quarter of
1994 due primarily to a 7% decrease in generation and a decrease
in the average unit fuel cost from $1.74 per Mmbtu in 1994 to
$1.71 per Mmbtu in 1995. The decrease was due primarily to the
settlement of litigation with fuel suppliers and lower natural
gas prices. Because SWEPCO recovers its fuel expenses currently
in revenues, the decrease in these expenses resulted in lower
electric operating revenues during the second quarter of 1995.
Maintenance. Maintenance increased $0.5 million, or 5%,
during the second quarter of 1995 when compared to the first
quarter of 1994 due primarily to a 12% decreasean increase in generation and a decreasescheduled power
plant maintenance partially offset by decreased overhead line
maintenance. Overhead line maintenance expense was higher in the
average unit fuel cost per Mmbtu from $1.90 in 1994 to $1.57 per Mmbtu
in 1995. The decrease in unit fuel costs was due primarily to lower
spot market natural gas prices.
Purchased Power. Purchased power expense increased approximately
$0.9 million or 20% in the firstsecond quarter of 1995 from $4.6 million1994 as a result of an ice storm that impacted
SWEPCO's distribution system during the corresponding quarter in 1994 due primarily to increased
purchases of economy energy.that period.
Taxes, Other than Federal Income. Taxes, other than Federal
income decreased 16% to $10.9$0.5 million, or 4%, during the firstsecond quarter
of 1995 from $12.9 million duringwhen compared to the firstsecond quarter of 1994 due primarily
to a decrease in ad valorem taxes partially offset by an increase
in state franchise taxes.
Federal Income Taxes. Federal income taxes increased 27%decreased 25% to
$4.9$7.8 million during the firstsecond quarter of 1995 from $3.9$10.4 million
during the firstsecond quarter of 1994 due primarily as a result ofto prior year tax
adjustments partially offset by higher pre-tax income. See NOTE
6. Federal Income Taxes for additional information related to
the tax adjustments.
Interest on Short-Term Debt and Other. Interest expense on
short-
termshort-term debt and other increased approximately $1.3 million, or 83%, during
the second quarter of 1995 when compared to the second quarter of
1994 due primarily to higher levels of short-term borrowings anddebt
outstanding at higher short-term interest rates.
31COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 34% to $52.0 million during the six months ended June
30, 1995 from $38.7 million during the six months ended June 30,
1994. This increase was due primarily to an increase in non-fuel
revenue and prior year tax adjustments.
SWEPCO RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
Electric Operating Revenues. Electric operating revenues
decreased $19.9 million, or 5%, during the first six months of
1995 when compared to the first six months of 1994 due primarily
to a $37.4 million decrease in fuel revenues that resulted from
lower average unit fuel cost. Partially offsetting the decrease
in fuel revenue was a $17.7 million increase in non-fuel revenue,
which reflected a 3.5% increase in retail Kwh sales.
Fuel. Fuel expense decreased 19% to $141.8 million during
the first six months of 1995 when compared to the first six
months of 1994 due primarily to a decrease in the average unit
cost of fuel from $1.81 per Mmbtu in 1994 to $1.65 per Mmbtu in
1995 and a 9% decrease in generation. The decrease in the
average unit fuel cost was due primarily to the settlement of
litigation with fuel suppliers and lower natural gas prices.
Purchased Power. Purchased power expense increased $1.1
million, or 13%, during the first six months of 1995 as compared
to the first six months of 1994 primarily due to contractual
terms which call for increased operating reserves and on-peak
capacity negotiated as a part of the 1993 purchase of Bossier
Rural Electric Membership Corporation and a net increase in
economy purchases.
Maintenance. Maintenance increased $0.9 million, or 4%, in
the first six months of 1995 from $19.9 million during the first
six months of 1994 due primarily to increased scheduled power
plant maintenance partially offset by decreased overhead line
maintenance. Overhead line maintenance expense was higher in the
first six months of 1994 as a result of an ice storm that
impacted SWEPCO's distribution system during that period.
Depreciation. Depreciation increased $1.0 million, or 3%,
during the first six months of 1995 when compared to the first
six months of 1994 due to an increase in depreciable plant.
Taxes, Other than Federal Income. Taxes, other than Federal
income decreased $2.6 million, or 10%, during the first six
months of 1995 when compared to the first six months of 1994 due
primarily to a decrease in ad valorem taxes partially offset by
an increase in state franchise taxes.
Federal Income Taxes. Federal income taxes decreased $1.5
million, or 11%, to $12.7 million during the first six months of
1995 from $14.2 million during the first six months of 1994 due
primarily to prior year tax adjustments, which was partially
offset by higher pre-tax income. See NOTE 6. Federal Income
Taxes for additional information related to the tax adjustments.
Interest on Short-Term Debt and Other. Interest expense on
short-term debt and other increased $2.6 million, or 81%, during
the first six months of 1995 when compared to the first six
months of 1994 due primarily to higher levels of short-term debt
outstanding at higher short-term interest rates.
WTU
WEST TEXAS UTILITIES COMPANY 32
WEST TEXAS UTILITIES COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(Thousands) (Thousands)
ELECTRIC OPERATING REVENUES $ 74,92183,049 $ 83,31983,016 $157,970 $166,335
OPERATING EXPENSES AND TAXES
Fuel 31,165 39,53029,763 31,198 60,928 70,728
Purchased power 1,343 7872,482 1,251 3,825 2,038
Other operating 14,064 15,96317,497 17,373 31,561 33,336
Maintenance 2,949 3,9394,048 3,847 6,997 7,786
Depreciation and amortization 8,064 7,8058,053 7,852 16,117 15,657
Taxes, other than Federal income 5,826 5,4995,514 5,661 11,340 11,160
Federal income taxes 1,614 1,309
65,025 74,8322,506 2,876 4,120 4,185
69,863 70,058 134,888 144,890
OPERATING INCOME 9,896 8,48713,186 12,958 23,082 21,445
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used
during construction (3) 3113 -- 110 2
Other 211 280
208 283723 819 934 1,100
836 819 1,044 1,102
INCOME BEFORE INTEREST CHARGES 10,104 8,77014,022 13,777 24,126 22,547
INTEREST CHARGES
Interest on long-term debt 4,840 4,3835,298 4,744 10,138 9,127
Interest on short-term debt
and other 1,198 884956 902 2,154 1,786
Allowance for borrowed funds used
during construction (167) (43)
5,871 5,224(158) (61) (325) (104)
6,096 5,585 11,967 10,809
NET INCOME 4,233 3,5467,926 8,192 12,159 11,738
Preferred stock dividends 66 151 132 302
NET INCOME FOR COMMON STOCK $ 4,1677,860 $ 3,3958,041 $ 12,027 $ 11,436
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
33
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Thousands)
ASSETS
ELECTRIC UTILITY PLANT
Production $ 427,769427,797 $ 427,736
Transmission 194,397194,387 194,402
Distribution 307,388307,069 308,905
General 72,98673,147 73,938
Construction work in progress 32,48542,838 23,257
1,035,0251,045,238 1,028,238
Less - Accumulated depreciation 369,709376,161 364,383
665,316669,077 663,855
CURRENT ASSETS
Cash 3,8274,169 2,501
Accounts receivable 26,55429,738 23,165
Materials and supplies, at average cost 16,56816,622 16,519
Fuel inventory, at average cost 9,1748,210 9,229
Coal inventory, at LIFO cost 6,16010,226 6,442
Accumulated deferred income taxes 3,6053,171 3,068
Prepayments and other 1,7592,675 1,091
67,64774,811 62,015
DEFERRED CHARGES AND OTHER ASSETS
Deferred Oklaunion costs 26,70826,503 26,914
Other 21,70525,838 26,111
48,41352,341 53,025
$ 781,376796,229 $ 778,895
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
34
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
(Unaudited)
March 31,June 30, December 31,
1995 1994
(Thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $25 par value, authorized
7,800,000 shares; issued and
outstanding 5,488,560 shares $ 137,214 $ 137,214
Paid-in capital 2,236 2,236
Retained earnings 136,671133,531 132,504
Total Common Stock Equity 276,121272,981 271,954
Preferred stock 6,291 6,291
Long-term debt 250,415250,997 210,047
TOTAL CAPITALIZATION 532,827530,269 488,292
CURRENT LIABILITIES
Long-term debt due within twelve months 650 650
Advances from affiliates 16,59215,123 46,315
Accounts payable 20,60327,591 35,407
Accrued taxes 3,2486,688 7,452
Accrued interest 3,9135,535 4,394
Over-recovered fuel costs 3,622 1,586
Other 4,554 4,329
49,5604,481 2,743
63,690 98,547
DEFERRED CREDITS
Accumulated deferred income taxes 147,225132,440 146,146
Income tax related regulatory liabilities,
net 9,24525,076 9,217
Investment tax credits 31,55231,221 31,882
Other 10,96713,533 4,811
198,989202,270 192,056
$ 781,376796,229 $ 778,895
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
35
WEST TEXAS UTILITIES COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
ThreeSix Months Ended
March 31,June 30,
1995 1994
(Thousands)
OPERATING ACTIVITIES
Net Income $ 4,233 $ 3,546$12,159 $11,738
Non-cash Items Included in Net Income
Depreciation and amortization 8,411 8,18316,809 16,456
Deferred income taxes and
investment tax credits 239 3,0871,389 3,099
Allowance for equity funds used during
construction (110) (2)
Changes in Assets and Liabilities
Accounts receivable (3,389) 3,479(6,573) 3,264
Accounts payable (14,863) (28,416)(7,845) (25,873)
Accrued taxes (4,204) (7,452)
Under-recovered(764) (2,442)
Over- and under-recovered fuel costs 1,424 (4,871)2,036 (4,299)
Accrued restructuring charges (202) (2,534)
Other 9,326 (4,455)
1,177 (26,899)
NVESTING9,149 (2,810)
26,048 (3,403)
INVESTING ACTIVITIES
Construction expenditures (9,311) (8,516)(20,421) (18,816)
Allowance for borrowed funds used during
construction (325) (104)
Other (298) (433)
(9,609) (8,949)(735) (774)
(21,481) (19,694)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 39,547 39,42239,491 39,356
Reacquisition of long-term debt -- (12,125)(12,127)
Change in advances from affiliates (29,723) 17,570(31,192) 6,988
Payment of dividends (66) (5,151)
9,758 39,716(11,198) (10,302)
(2,899) 23,915
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,326 3,8681,668 818
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,501 706
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,8274,169 $ 4,5741,524
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $ 5,9559,588 $ 2506,965
Income taxes paid $ 7,6628,009 $ 5,8275,834
The accompanying notes to financial statements as they relate
to WTU are an integral part of these statements.
36
WEST TEXAS UTILITIES COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED MARCH 31,JUNE 30, 1995 AND 1994.
Net Income for Common Stock. Net income for common stock
decreased 2% to $7.9 million during the second quarter of 1995
from $8.0 million in the second quarter of 1994. This decrease
was due primarily to higher interest expense on long-term debt.
Electric Operating Revenues. Electric operating revenues
increased 23%slightly in the second quarter of 1995 as compared to
$4.2the second quarter of 1994. The increase was attributable
primarily to a $0.4 million increase in non-fuel revenues
resulting from increased on-system sales for resale to additional
customers, partially offset by the implementation of an interim
retail rate reduction of approximately $5.7 million on an annual
basis effective October 1, 1994. The increase in non-fuel
revenues was offset by a $0.3 million decrease in fuel revenues.
Fuel. Fuel expense decreased $1.4 million, or 5%, during
the second quarter of 1995 as compared to the second quarter of
1994 due primarily to an 8% decrease in generation. Partially
offsetting the effects of this decrease in generation was an
increase in average unit fuel costs to $1.78 per Mmbtu in 1995
from $1.75 per Mmbtu in 1994. The increase in unit fuel costs
resulted from an increase in the per unit cost of coal, which was
due to a higher level of minimum contract purchases during the
second quarter of 1995 and an increase in higher unit fuel cost
gas-fired generation. Such increases were partially offset by a
decrease in the price of natural gas.
Purchased Power. Purchased power increased $1.2 million
during the second quarter of 1995 as compared to the second
quarter of 1994, primarily as a result of additional economy
energy purchases made during the second quarter of 1995 and the
planned maintenance outage at Oklaunion that was longer in
duration in 1995 than in 1994.
Federal Income Taxes. Federal income taxes decreased $0.4
million, or 13%, during the second quarter of 1995 as compared to
the second quarter of 1994 due primarily to prior year tax
adjustments recorded in the second quarter of 1995. See NOTE 6.
Federal Income Taxes for additional information related to the
tax adjustments.
Interest on Long-Term Debt. Interest charges on long-term
debt increased 12% to $5.3 million during the second quarter of
1995 from $4.7 million in the second quarter of 1994 due to
higher levels of long-term debt outstanding.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Net Income for Common Stock. Net income for common stock
increased 5% to $12.0 million during the first quartersix months of 1995
from $3.4$11.4 million in the first quartersix months of 1994. ThisThe increase
was due primarily to decreased other operating and maintenance
expenses.expenses partially offset by increased interest on long-term
debt.
Electric Operating Revenues. Electric operating revenues
decreased $8.4 million, or 10%5%, in the first quartersix months of 1995 as
compared to the first quartersix months of 1994. This decrease was
attributable primarily to a $5.5an $8.6 million decrease in fuel revenues,
andpartially offset by a $2.8$0.2 million decreaseincrease in lower margin off-systemnon-fuel revenues
which resulted primarily from increased on-system sales for
resale. Also
contributingresale to additional customers, partially offset
WTU RESULTS OF OPERATIONS (continued)
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (continued)
by the decrease was a 3% decrease in total Kwh sales andimplementation of an interim retail rate reduction of
approximately $5.7 million on an annual basis effective October
1, 1994.
Fuel. Fuel expense decreased $8.4$9.8 million, or 21%14%, for the
first quartersix months of 1995 as compared to the first quartersix months of
1994 due primarily to a 6% decrease in generation and a 7%
decrease in average unit fuel costs from $2.38$2.05 per Mmbtu in 1994
to $2.03$1.90 per Mmbtu in 1995. The decrease in unit fuel costs was
due primarily to lower spot market natural gas prices andprices. The decreases were
partially offset by an increase in gas-fired generation during a
4% decreaseplanned maintenance outage at Oklaunion that was longer in
generation.duration in 1995 than in 1994.
Purchased Power. Purchased power increased 71% to $1.3$1.8 million
during the first quartersix months of 1995 from $0.8 duringwhen compared to the
first
quartercomparable period of 1994 primarily as a result of additional
economy energy purchases made during the first quartersix months of 1995.1995
and the planned maintenance outage at Oklaunion that was longer
in duration in 1995 than in 1994.
Other Operating. Other operating expenses decreased $1.9$1.8
million, or approximately 12%5%, in the first quartersix months of 1995 as compared to
the first quartersix months of 1994 due primarily to decreased
transmissionproduction expenses related to the planned maintenance outage at
Oklaunion which was longer in duration in 1995 than in 1994,
decreased outside services,environmental expenditures and lowerdecreased employee
benefitrelated costs.
Maintenance. Maintenance expenses decreased by $1$0.8
million, or 25%10%, during the first quartersix months of 1995 as compared
to the first quartersix months of 19941994. This decrease was due primarilyin part
to decreased electric plant expenses that reflect plant overhauls
undertaken during the first six months of 1994 but not during the
comparable period in 19941995. In addition, decreased distribution
expenses associated with tree trimming activities which have not occurredbeen
delayed until later in 1995 decreased transmission station equipment expenses which reflectalso contributed to the accrualoverall
decrease in maintenance expenses. These decreases were partially
offset by increased maintenance expense associated with the
planned outage at Oklaunion that was longer in duration in 1995
than in 1994.
Interest on Long-Term Debt. Interest charges on long-term
debt increased 11% to $10.1 million during the first six months
of warranty reimbursements, and decreased miscellaneous
distribution expenses.
371995 from $9.1 million in the first six months of 1994 due to
higher levels of long-term debt outstanding.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Principles of Preparation
CSW, CPL, PSO, SWEPCO and WTU
The condensed CSW, CPL, PSO, SWEPCO and WTU financial
statements included herein have been prepared by each registrant
pursuant to the rules and regulations of the SEC. Certain
information and note disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although each registrant believes
that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial
statements and the notes thereto included in each
registrant'sthe registrants'
combined Annual Report on Form 10-K for the year ended December
31, 1994.1994 and combined Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.
The unaudited financial information furnished herewith
reflects all adjustments which are, in the opinion of management
of such registrant, necessary for a fair statement of the results
of operations for the interim periods. Information for quarterly
periods is affected by seasonal variations in sales, rate
changes, timing of fuel expense recovery and other factors.
Certain financial statement items for prior years have been
reclassified to conform to the 1995 presentation.
2. Litigation and Regulatory Proceedings
CSW, CPL, PSO, SWEPCO and WTU
See each registrant'sthe registrants' combined Annual Report on Form 10-K for
the year ended December 31, 1994 and combined Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 for additional
discussion of litigation and regulatory proceedings. Reference
is also made to Part II-OTHER INFORMATION-Item 1. Legal
Proceedings for additional discussion of litigation matters.
CSW and CPL
Reference is made to CSW's and CPL's Annual Reports on Form 10-K
for the year ended December 31, 1994, for a discussion of regulatory
and other issues involving STP.
CPL Rate Cases
CSW and CPL
The Texas Commission General Counsel, several Cities in
CPL's service territory and others initiated actions in late 1993
and early 1994 requesting a review by the Texas Commission of
CPL's base rates. The requests for a review of CPL's rates arose
out of the unscheduled 1993-1994 STP outage.
On April 5, 1995, CPL reached an Agreement in Principle with
four
majorother parties to pending regulatory proceedings involving base
rate, fuel and prudence issues relating to STP. A final agreement is
expected inOn May 1995. The final agreement will then be presented to16, 1995,
CPL filed with the Texas Commission for approval.the CPL Settlement Agreement.
As discussed below, pursuant to the CPL Settlement Agreement, in Principle,
base rate and fuel refunds and the reduction of CPL's fuel
factors are to bebeing implemented on an interim basis during the
summer of 1995. Hearings on the final agreement are expected
during the summer ofCPL Settlement Agreement were
held on July 19, 1995, and the final Texas Commission order
approving the CPL Settlement Agreement is expected in the fall ofSeptember
1995.
Under the CPL Settlement Agreement, in Principle, CPL will provide
customers a one-time base rate refund of $50 million. In
addition, CPL will refund approximately $24$30 million as a result of an agreement that
customersin over-
recovered fuel cost through April 1995 and will not be chargedcharge
customers for $62.25 million in replacement power costs and
related interest primarily associated with the 1993-1994 STP
outage. There will be no ongoing change in base rate levels.
However, CPL will reducereduced its future fuel factors by approximately $55
million on an annual basis beginning no later than Augustwith the billing month of
July 1995, due to projections of lower fuel costs. CPL will
continue to seek resolution 38 of its remaining non-nuclear fuel
costs through the current fuel reconciliation proceeding, Docket
No. 13650.
Neither CSW nor CPL experienced any significant earnings
impact during the second quarter of 1995 as a result of the
Agreement in Principle. Details of the items in the Agreement in
Principle which had
significantsignificantly impacted CSW's and CPL's earnings impact
during the first quarter of 1995, including several accounting
provisions, are set forth in the table below:
Earnings Impact of Significant Provisions of
Agreement in Principle
Pre-tax After-tax
(millions)
Base Rate Refund $ (50) $ (33)$(33)
Fuel Write-off (62) (40)
Current Flowback of Excess
Deferred Federal Income Taxes 34 34
Capitalization of Previously
Expensed Restructuring and
Rate Case Costs 26 17
Recognition of Factoring
Income 12 8
The CPL Settlement Agreement in Principle additionally resolves (a) all
STP prudence issues through June 30, 1994, (b) potential claims
of excessive earnings for the five year period ending December
31, 1994 (a period in which CPL's rates were frozen), (c) certain
issues with respect to the treatment of mirrorMirror CWIP and (d)
certain other pending issues. The CPL Settlement Agreement in Principle
resolves two cases now pending at the Texas Commission, the rate
inquiry in Docket No. 12820 and the prudence inquiry in Docket
No. 13126. Other parties to the Agreement
in Principle besides CPL include the CPL Cities Steering Committee,
the Texas Commission General Counsel, the Texas Office of Public
Utility Counsel and the Texas Industrial Energy Consumers. The
Agreement in Principle may be subject to further hearings if any
party opposes the settlement conditions.
CPL has operated with its current rates in effect for more
than four years under a previous rate freeze agreement. That
rate freeze expired December 31, 1994. Under the Agreement in
Principle, CPL has agreed not to file before September 28, 1995 for a
change in base rates. CPL anticipates that it will file a new
rate case with the Texas Commission after September 28, 1995
seeking to recover a retail revenue deficiency and to replace non-cashnon-
cash earnings from mirrorMirror CWIP with cash earnings. CPL is
amortizing its mirrorMirror CWIP liability in declining amounts over
the years 1991-1995.1991 through 1995. Non-cash earnings of $68 million
were recognized in 1994, a decrease from the $75.7 million
recognized in 1993. The remaining liability to be amortized for
1995 is $41 million, which will fully amortize the mirrorMirror CWIP
liability.
Civil Penalties
CSW and CPL
In May 1995, the NRC staff informed STP management that it
revoked a proposed $100,000 civil penalty and associated
violations filed against HLP in October 1994. As previously
reported, the proposed penalty was the result of what the NRC
believed was discrimination against a contractor employee at STP
who brought complaints of possible safety problems to the NRC's
attention. These actions resulted from the findings of an NRC
investigation of alleged violations of STP security and work
procedures in 1992. The incident cited by the NRC iswas the
subject of a contested hearing that is
scheduledconcluded in the spring ofJuly 1995 before a United
States Department of Labor judge.
39judge with a ruling not expected
before 1996.
Power Purchases and Sales
CSW and PSO
MCPC
Reference is made to CSW's and PSO's 1994combined Annual Report
on Form 10-K for the year ended December 31, 1994 and combined
Quarterly Report on Form 10-Q for the quarter ended March 31,
1995 for background on agreements PSO entered into in 1989 with
MCPC, a cogeneration development company located in northeastern
Oklahoma. The agreements provided, among other matters, that PSO
would deliver natural gas to MCPC for conversion to electrical
energy and that MCPC would supply energy to PSO. Subsequent to
1989, a series of disputes arose between PSO and MCPC relating to
the delivery of electric energy by MCPC to PSO and the charges
for the energy. The disputes involved both a lawsuit in the
District Court of Tulsa County, Oklahoma and proceedings before
the Oklahoma Commission.
On March 31, 1995, PSO, MCPC and the Oklahoma Commission
Staff signed a joint settlement resolving all issues pursuant to
the various proceedings before the Oklahoma Commission and the
District Court. The settlement, among other things, eliminated a
requirement that MCPC deliver an annual minimum of 394,200 Mwh of
Assured Delivery Energy and related provisions associated with
underdelivery charges. Most other provisions of the agreement
between PSO and MCPC were kept intact. Approval of the settlement by theThe Oklahoma Commission
throughissued an order is expected in late May 1995.1995 approving the settlement. The
settlement is on terms satisfactory to PSO and will not have a
material adverse effect on CSW's or PSO's consolidated results of
operations or financial condition.
Rate Proceeding - Docket No. 13369
CSW and WTU
On August 25, 1994, WTU filed a petition with the Texas
Commission and cities with original jurisdiction to review WTU's
rates, proposed an interim across-the-board base retail rate
reduction of 3.25%, or approximately $5.7 million, effective
October 1, 1994, and sought until February 28, 1995, to develop
and file a RFP. WTU also requested the ability to "true-up","true-up,"
back to October 1, 1994, any difference in revenue requirements
upon final order of the Texas Commission and proposed that any
increases over the pre-October 1, 1994, base rates be implemented
prospectively on the effective date of the final order. WTU's
fuel reconciliation, Docket No. 13172, which was filed with the
Texas Commission on June 30, 1994, was consolidated with this
proceeding in September 1994.
On February 28, 1995, WTU filed with the Texas Commission
and cities with original jurisdiction an RFP which indicates a
revenue increase of approximately $14.5 million. However, WTU
simultaneously filed with the parties a settlement proposal to
reduce overall base rate revenue by 3.25%, effective October 1,
1994, which would have an annual impact in the rate year
beginning January 1, 1996 of approximately $5.9 million. The
settlement proposal reflects WTU's desire to maintain competitive
rates, recognizes the importance of competitive rates in the
changing electric service marketplace, and demonstrates WTU's
strong commitment to the long-term success of WTU and its
customers. Although settlement was not reached by the May 8
extended deadline, WTU continues to remain open to settlement
negotiations.settlement.
On May 9, 1995, WTU filed an errata to its rate filing
package requesting a revised revenue increase of $12.6 million.
Unless a settlement acceleratesOn June 8, 1995, WTU filed an additional errata but did not
revise the process, hearingsrequested revenue increase at that time, citing no new
cost-of-service calculations.
Hearings are schedulescheduled to begin August 14, 1995 at the Texas
Commission, with a final order anticipated in the fourth quarter
of 1995. On July 17, 1995 and July 24, 1995, the other parties
to the rate case and the Texas Commission staff filed testimony
that recommends WTU reduce rates by $14 million to $43 million
and make fuel refunds to customers of up to $8.7 million. The
proposed rate reductions assume the exclusion of Oklaunion-
related deferred accounting costs from WTU's rate base.
Management cannot predict the outcome of the rate proceeding or
the fuel reconciliation, but believes that the ultimate
resolution of these matters may, if not favorably resolved, have
a material adverse effect on WTU's results of operations and
financial condition. Management believes the ultimate resolution
of WTU's rate proceeding and the fuel reconciliation will not 40
have a material adverse effect on CSW's or WTU'sconsolidated results of
operations or financial condition.
Rate Case Proceeding - Docket No. 7510
CSW and WTU
On February 15, 1995, the Court of Appeals affirmed all
aspects of the District Court judgment relating to the Texas
Commission's allowance of non-Oklaunion depreciation rates and
the surcharge of rate case expenses, reversed the District
Court's judgment relating to the exclusion of deferred Oklaunion
carrying costs in rate base, and remanded the case to the Texas
Commission to reexamine the issue of deferred costs in light of
the remand of Docket No. 7289.7289, Application of WTU for Deferred
Accounting Treatment of Certain Oklaunion - Related Costs. WTU
filed a motion for rehearing at the Court of Appeals seeking
clarification of certain aspects of its order and arguing that
the Court of Appeals erred in remanding the case to the Texas
Commission for it to determine to what extent deferred costs are
necessary to preserve WTU's financial integrity because the issue
was not briefed or argued to the Court of Appeals and was,
therefore, waived. Other parties to the proceeding also filed
motions for rehearing. All motions were denied by the Court of
Appeals on April 26, 1995.
Further appeals of this case would be byIn May 1995, WTU filed its Application for Writ of Error to
the Supreme Court of Texas seeking discretionary review by that
Court. WTU intends to file an Application for Writ of Error with
the Supreme Court of Texas to advance its argument that waiver has occurred. Other
parties to the appeal may also seeksought review by the Supreme Court of
Texas. WTU's Application for Writ of Error may, if granted,
prevent further review of financial integrity issues with respect
to deferred accounting in any remand of Docket No. 7510. If a
broader remand is permitted and if the Texas Commission concludes
in Docket No. 7289 that deferred accounting was necessary to
preserve WTU's financial integrity during the deferral period,
the Texas Commission must decide to what extent the deferred
Oklaunion costs, including carrying costs, were necessaryshould be included in
rates in order to preserve WTU's financial integrity. See
Deferred Accounting below for a discussion of potential effects
of an adverse decision in the Docket No. 7289 remand.
For additional information regarding WTU's regulatory
matters, see CSW's and WTU's combined Annual ReportsReport on Form 10-K
for the year ended December 31, 1994.1994, combined Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995 and
combined Current Report on Form 8-K dated July 10, 1995.
Deferred Accounting
CSW CPL and WTU
In September 1987, WTU received the 1987 Order from the
Texas Commission approving its request in Docket No. 7289,
Application of WTU for Deferred Accounting Treatment of Certain
Oklaunion - Related Costs. The 1987 Order authorized WTU to
defer operating expenses and carrying costs associated with
Oklaunion incurred subsequent to its December 1986 commercial
operation date until December 1987 when retail rates including
Oklaunion in WTU's rate base became effective. As a result, WTU
originally recorded approximately $32 million of Oklaunion
deferred costs, of which approximately $25 million were carrying
costs, to be recovered and amortized over the remaining life of
the plant.
Following a series of appeals challenging the 1987 Order,
the Supreme Court of Texas in October 1994 remanded WTU's
deferred accounting case to the Texas Commission to make a formal
finding whether the deferral of Oklaunion costs was necessary to
protect WTU's financial integrity during the deferral period.
The Texas Commission utilized a measurable harm standard in the
1987 Order approving the deferral of the Oklaunion costs.
On July 10, 1995, the ALJ in the WTU remand proceeding
before the Texas Commission, Docket No. 13949, issued a PFD and
Proposed Order. The PFD recommended that the 1987 Order be
reversed and WTU's request for deferred accounting treatment for
Oklaunion be denied.
In recommending denial of deferred accounting treatment for
WTU, the PFD asserts that deferred accounting was not necessary
to protect WTU's financial integrity. If the Texas Commission
adopts the ALJ's recommendation, WTU would be required to write
off the $26.5 million current balance of unamortized deferred
accounting costs related to Oklaunion.
Further, WTU has been recovering deferred accounting costs
since December 1987 through rates approved in Texas rate case
proceeding Docket No. 7510. As discussed above, the final Texas
Commission order in Docket No. 7510 has been the subject of
several legal proceedings and the issue of deferred accounting in
Docket No. 7510 remains on appeal. If the Texas Commission
adopts the PFD as proposed, WTU may be required at some point in
the remand of Docket No. 7510 to refund to customers deferred
accounting costs recovered in rates since December 1987. The refund
could potentially be up to $37 million including interest of
approximately $7 million as of June 30, 1995.
The Texas Commission is scheduled to consider the ALJ's
recommendation at its final order meeting to be held on August 2,
1995. The timing of a decision in WTU's currently pending rate
case, Docket No. 13369, could be impacted by the resolution of
WTU's deferred accounting case in Docket No. 13949.
While management can give no assurances as to the outcome of
the remanded proceeding, management believes that all of the
Oklaunion deferred costs were necessary to preserve WTU's
financial integrity during the deferral period and, accordingly,
that the 1987 Order should be upheld. Although WTU will continue
to pursue its position vigorously before the Texas Commission,
WTU can give no assurance as to what action the Texas Commission
will take or the results of any appeals that may arise therefrom.
If WTU's deferred accounting treatment is ultimately reversed and
not favorably resolved, WTU could experience a material adverse
effect on its results of operation and financial condition and
CSW could experience a material adverse effect on its
consolidated results of operation in the year recorded but not on
its continuing consolidated results of operation or financial
condition.
CSW and CPL
CPL was granted deferred accounting treatment for certain
STP Unit 1 and 2 costs and WTU was granted deferred accounting for certain Oklaunion
costs by Texas Commission orders. Decisions onorders issued in
October 1990 and December 1990, respectively. In 1994, the
Supreme Court of Texas sustained deferred accounting have been renderedas an
appropriate mechanism for the Texas Commission to use in
legal proceedings involving third parties in
1994 and 1995 that interpret the need to apply deferred accounting to
maintainpreserving the financial integrity of CPL. Because the Texas
Commission formally concluded that deferred accounting treatment
with respect to the STP costs was necessary to preserve the
financial integrity of CPL, the WTU deferred accounting
proceedings discussed above are not expected to affect CPL's
continued use of deferred accounting. CPL believes that the
language of the Supreme Court of Texas' opinion suggests that the
appropriateness of allowing deferred accounting may again be
reviewed under a utility. These decisions mayfinancial integrity standard in the first case
in which the deferred STP costs will begin being recovered through
rates. If the courts decide that subsequent review under the
financial integrity standard is required, that review would be
conducted in a remand of the subject of additional appeals.STP Unit 1 and 2 orders. Pending
the ultimate resolution of CPL's deferred accounting issues, by the courts and the Texas Commission, CPL
and WTU areis unable to predict how theirits deferred accounting orders will
ultimately be ultimately resolved by the Texas Commission.
If CPL's deferred accounting matters are not favorably
resolved, CSW and CPL could experience a material adverse effect
on their respective results of operations and financial
condition. While CPL's management cannotis unable to predict the
ultimate outcome of these matters, management believes CPL will
receive approval of its deferred accounting orders or will be
successful in renegotiation of its rate orders, so that there
will be no material adverse effect on CSW's or CPL's results of
operations or financial condition.
If WTU's deferred accounting treatment is ultimately reversed or
is substantially reduced, WTU could experience a material adverse
effect on its results of operations. While management cannot predict
the ultimate outcome of these matters, management believes that WTU's
deferred accounting will be sustained by the Texas Commission on the
basis of the financial integrity standard and therefore the ultimate
41
resolution of the issue will not have a material adverse effect on
CSW's or WTU's results of operationsoperation or financial condition.
For additional information on CPL's and WTU's deferred
accounting proceedings, see CPL's and WTU's combined Annual
ReportsReport on Form 10-K for the year ended December 31, 1994.1994 and
combined Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
3. Dividends
CSW, CPL, PSO, SWEPCO and WTU
The subsidiary companies' mortgage indentures, as amended
and supplemented, contain certain restrictions on the use of
their retained earnings for cash dividends on their common stock.
These restrictions do not limit the ability of CSW to pay
dividends to its shareholders. At March 31,June 30, 1995, approximately
$1.4$1.5 billion of the subsidiary companies' retained earnings were
available for payment of cash dividends by CSW to its
shareholders. At March 31,June 30, 1995, the amount of retained earnings
available for payment of cash dividends to CSW by the Electric
Operating Companies was as follows:
Retained Earnings
Available for
Company Dividends
(millions)
CPL $608$752
PSO 132142
SWEPCO 312327
WTU 137134
4. Earnings and Dividends Per Share of Common Stock
CSW
Earnings per share of common stock are computed by dividing
net income for common stock by the average number of common
shares outstanding for the respective periods. Dividends per
common share reflect per share amounts paid during the periods.
5. Commitments and Contingent Liabilities
ProposedTermination of El Paso Merger
CSW
For information regarding the commitments and contingent
liabilities relating to the proposed El Pasotermination of the Merger, reference
is made to PART II - OTHER INFORMATION-Item 5. Other Information.1. Legal
Proceedings.
Environmental
CSW and SWEPCO
For information regarding environmental issues, reference is
made to PART II - OTHER INFORMATION-Item 5. Other Information.
42
CSWE Projects
CSW
Mulberry
The 117 Mw facility, which is 50% owned by Dev-I (a
wholly-owned subsidiary of CSWE), achieved commercial operation
in August 1994. CSWE has provided construction services to the
Mulberry cogeneration facility through a wholly-owned subsidiary, CSW
Development-I, Inc. The project achieved commercial operation in
August 1994 and added 117 Mws of on-line capacity of which CSW
Development-I, Inc. owns 50%.Dev-I. CSWE's maximum
potential liability under the fixed price contract is $29 million
and willis expected to decrease to zero over the next two years as
contractual standards are met. Additionally, CSW Development-I, Inc. hasDev-I entered into
a fixed price contract of $14 million to construct the Mulberry
thermal host facility. At March 31,June 30, 1995, the estimated contract costs to completeof
the host facility were approximately $42$48 million. The host
facility is expected to be completed by the end of the secondfourth
quarter of 1995. Negotiations are ongoing to determine ifhow the
$34 million of costs exceeding the contract will be absorbed by CSW Development-I, Inc. or allocated
between Dev-I and its partner, each of whom has alleged that the
partnersother party is responsible for the cost overruns. Dev-I has
sought to resolve the cost overruns with its business partner
through binding arbitration and has entered into a non-binding
memorandum of understanding intended to settle the Mulberry cost
overrun issues, as well as certain other outstanding issues
between the parties with respect to the Mulberry project and
other projects in which Dev-I and its business partner are
involved. The memorandum of understanding contemplates a capital contribution.final
settlement during the third quarter of 1995 that would, if
implemented, result in the disassociation of Dev-I and its
business partner. CSW has provided additional guarantees to the
project totaling approximately $42 million. Management cannot
predict whether the memorandum of understanding will lead to a
final settlement and, if not, whether the parties will submit to
binding arbitration or pursue litigation. While management
cannot predict the ultimate resolution of this matter, management
does not believe that an unfavorable resolution of this issueit will have a material adverse impact on
CSW's consolidated results of operations or financial condition.
CSW has provided additional guarantees to the
project totaling approximately $42 million.
Ft.Fort Lupton
CSWE has entered into a purchasean agreement on the Fort Lupton
project through a wholly-owned subsidiary, CSW Ft.Fort Lupton Inc.,
to providepurchase 50% of the 272 Mw project for $79.5 million of
equity upon the occurrence of certain events.equity. As of March 31,June 30, 1995, $43 million of equity had been
provided. CSWE has provided threefour letters of credit to the
project totaling $18.3 million. During March 1995, CSW Fort
Lupton Inc. closed permanent project financing on the Fort Lupton
facility which allowed CSW Fort Lupton Inc. to repay its $100
million construction borrowings to CSW.
Orange
The 103 Mw facility commenced commercial operation in June
1995. CSWE has committed to provide up to $125$130 million of
construction financing to the Orange cogeneration project in
which CSWE owns a 50% interest through CSW Development-I, Inc.Dev-I. Of this total, CSW
Development-I, Inc. hasDev-
I had provided $85$100 million at March 31,June 30, 1995. The
103 Mw facility is expected to commence commercial operation in June
1995. CSW Development-I, Inc.Dev-I expects to
obtain third party permanent financing for this project by year
end. In addition, CSW has provided five letters of credit to the
project totaling $5.3 million.
Other
As of June 30, 1995, CSWE hashad posted security deposits and
other security instruments of approximately $14$13 million on fivefour
additional projects in various stages of development,
construction and operation.
Nuclear Insurance
CSW and CPL
As previously reported, in connection with the licensing and
operation of STP, the owners have purchased the maximum limits of
nuclear liability insurance, as required by law, and have
executed indemnification agreements with the NRC in accordance
with the financial protection requirements of the Price-Anderson
Act.
The Price-Anderson Act, a comprehensive statutory
arrangement providing limitations on nuclear liability and
governmental indemnities, is in effect until August 1, 2002. The
limit of liability under the Price-Anderson Act for licensees of
nuclear power plants is $8.92 billion per incident, effective as
of January 1995. The owners of STP are insured for their share
of this liability through a combination of private insurance
amounting to $200 million and a mandatory industry-wide program
for self-insurance totaling 43 $8.72 billion. The maximum amount
that each licensee may be assessed under the industry-wide
program of self-insurance following a nuclear incident at an
insured facility is $75.5 million per reactor, which may be
adjusted for inflation, plus a five percent charge for legal
expenses, but not more than $10 million per reactor for each
nuclear incident in any one year. CPL and each of the other STP
owners are subject to such assessments, which CPL and other
owners have agreed will be allocated on the basis of their
respective ownership interests in STP. For purposes of these
assessments, STP has two licensed reactors.
The owners of STP currently maintain on-site decontamination
liability and property damage insurance in the amount of $2.75
billion provided by ANI and NEIL. Policies of insurance issued
by ANI and NEIL stipulate that policy proceeds must be used first
to pay decontamination and clean-up costs before being used to
cover direct losses to property. Under project agreements, CPL
and the other owners of STP will share the total cost of
decontamination liability and property insurance for STP,
including premiums and assessments, on a pro rata basis,
according to each owner's respective ownership interest in STP.
CPL purchases, for its own account, a NEIL I Business
Interruption and/or Extra Expense policy. This insurance will
reimburse CPL for extra expenses incurred, up to $1.65 million
per week, for replacement generation or purchased power as the
result of a covered accident that shuts down production at STP
for more than 21 weeks. The maximum amount recoverable for Unit
1 is $111.3 million and for Unit 2 is $111.8 million. CPL is
subject to an additional assessment up to $2.1 million for the
current policy year in the event that losses as a result of a
covered accident at a nuclear facility insured under the NEIL I
policy exceeds the accumulated funds available under the policy.
On August 28, 1994, CPL filed a claim under the NEIL I
policy relating to the 1993 - 1994 outage at STP Units 1 and 2.
NEIL is currently reviewing the claim. CPL management is unable
to predict the ultimate outcome of this matter.
Henry W. Pirkey Power Plant
CSW and SWEPCO
In connection with the lignite mining contract for its Henry
W. Pirkey Power Plant, SWEPCO has agreed, under certain
conditions, to assume the obligations of the mining contractor.
As of March 31,June 30, 1995, the maximum SWEPCO would have to assume is
$82.5$73 million. The maximum amount may vary as the mining
contractor's need for funds fluctuates. The contractor's actual
obligation outstanding as of March 31,June 30, 1995 is approximately $61.8$60.7
million. 44
6. Federal Income Taxes
CSW, CPL, PSO, SWEPCO and CPLWTU
Due to the tax implications of the Agreement in Principle on
the financial statements of CSW and CPL recorded in the first quarter
of 1995 and the effects of the prior year tax adjustments on the
financial statements of CSW, CPL, PSO, SWEPCO and WTU recorded during
the second quarter of 1995, the following reconciliation is presented.
CSW 3 Months 6 Months
Ended March 31,June 30, 1995 (millions)Ended June 30, 1995
($ in millions) ($ in millions)
Tax at statutory rates $ 2.5$42.7 35.0% $43.8 35.0%
Differences
Amortization of ITC (3.5) (2.9)% (7.0) (5.6)%
Mirror CWIP (2.7) (2.2)% (5.4) (4.3)%
Prior period adjustments (35.3)(22.2) (18.2)% (57.4) (45.9)%
Other (.2)
$(39.1)2.0 1.0% 2.7 2.2%
$16.3 12.7% ($23.3) (18.6)%
Prior period adjustments of $22.2 million for tax balances
which are not required for future tax obligations are the primary
cause of the effective tax rate being lower than the statutory
rate for the three months ending June 30, 1995. In addition, prior
period adjustments for the six months ending June 30, 1995 reflect the
accelerated flowback of $34.3 million of unprotected excess
deferred income taxes in accordance with the Agreement in
Principle and are the primary reason for differences
between the statutory income tax rate and the effective tax rate for
the first quarter of 1995.Principle.
CPL 3 Months 6 Months
Ended March 31,June 30, 1995 (thousands)Ended June 30, 1995
($ in thousands) ($ in thousands)
Tax at statutory rates $(11,822)$32,064 35.0% $20,242 35.0%
Differences
Amortization of ITC (1,447) (1.6)% (2,895) (5.0)%
Mirror CWIP (2,711) (3.0)% (5,421) (9.4)%
Prior period adjustments (35,289)(11,893) (13.0)% (47,182) (81.6)%
Other 1,129
$(50,140)(45) -- 1,083 1.9%
$15,968 17.4% ($34,173) (59.1)%
Prior period adjustments of $11.9 million for tax balances
which are not required for future tax obligations are the primary
cause of the effective tax rate being lower than the statutory
rate for the three months ending June 30, 1995. In addition, prior
period adjustments for the six months ending June 30, 1995 reflect the
accelerated flowback of $34.3 million of unprotected excess
deferred income taxes in accordance with the Agreement in
PrinciplePrinciple.
PSO 3 Months 6 Months
Ended June 30, 1995 Ended June 30, 1995
($ in thousands) ($ in thousands)
Tax at statutory rates $8,309 35.0% $11,498 35.0%
Differences
Amortization of ITC (697) (2.9)% (1,395) (4.2)%
Prior period adjustments (3,624) (15.2)% (3,624) (11.0)%
Other (761) (3.2)% (1,588) (4.8)%
$3,227 13.7% $4,891 15.0%
Prior period adjustments of $3.6 million for tax balances
which are not required for future tax obligations and the
amortization of deferred investment tax credits are the primary
reason for differences
between the statutory income tax rate andcause of the effective tax rate being lower than the statutory
rate for the first quarterthree and six month periods ending June 30, 1995.
SWEPCO 3 Months 6 Months
Ended June 30, 1995 Ended June 30, 1995
($ in thousands) ($ in thousands)
Tax at statutory rates $15,709 35.0% $22,679 35.0%
Differences
Amortization of ITC (1,019) (2.3)% (2,037) (3.1)%
Prior period adjustments (6,253) (13.9)% (6,253) (9.7)%
Other (1,624) (3.6)% (3,188) (4.9)%
$6,813 15.2% $11,201 17.3%
Prior period adjustments of $6.3 million for tax balances
which are not required for future tax obligations and the
amortization of deferred investment tax credits are the primary
cause of the effective tax rate being lower than the statutory
rate for the three and six month periods ending June 30, 1995.
45WTU 3 Months 6 Months
Ended June 30, 1995 Ended June 30, 1995
($ in thousands) ($ in thousands)
Tax at statutory rates $3,638 35.0% $5,571 35.0%
Differences
Amortization of ITC (330) (3.2)% (661) (4.2)%
Prior period adjustments (663) (6.4)% (663) (4.2)%
Other (176) (1.7)% (489) (3.0)%
$2,469 23.7% $3,758 23.6%
Prior period adjustments of $0.7 million for tax balances
which are not required for future tax obligations and the
amortization of deferred investment tax credits are the primary
cause of the effective tax rate being lower than the statutory
rate for the three and six month periods ending June 30, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Reference is made to Management's Discussion and Analysis of
Financial Condition and Results of Operations included in each
registrant's 1994the
registrants' combined Annual Report on Form 10-K.10-K for the year
ended December 31, 1994 and combined Quarterly Report on Form 10-
Q for the quarter ended March 31, 1995. Reference is also made
to each registrant's unaudited Financial Statements and related
Notes to Financial Statements included herein. The information
included therein and herein should be read in conjunction with, and is
essential in understanding, the following discussion and
analysis.
Results of Operations
CSW, CPL, PSO, SWEPCO and WTU
Reference is made to in PART I-FINANCIAL INFORMATION ITEM- Item 1.
Financial Statements.
Capital Requirements, Liquidity and Financing
CSW, CPL, PSO, SWEPCO and WTU
Construction and Capital Expenditures
Construction expenditures for the CSW System for the first
quarter ofsix
months ended June 30, 1995 were $96$206 million. These construction
expenditures were primarily for improvements to existing
production, transmission and distribution facilities, as well as
enhancements by Transok of existing gas gathering and
transmission systems. The improvements are required to meet the
needs of new customers and to satisfy the changing requirements
of existing customers. The CSW System anticipates that the
majority of all funds required for construction for the remainder
of the year will be provided from internal sources.
Short-Term Financing
The CSW System uses short-term debt to meet fluctuations in
working capital requirements and other interim capital needs.
The registrants, together with other members of the CSW System,
have established a money pool to coordinate short-term borrowings
and to make borrowings outside the money pool through theCSW's
issuance of CSW's commercial paper. As of June 30, 1995, the CSW
System had entered into two revolving credit facilities totaling
$1.2 billion which replaced bank lines of credit used to back up
its commercial paper program.
Long-Term Financing
The CSW System is committed to maintaining financial
flexibility by maintaining a strong capital structure and
favorable securities ratings which help to assure future access
to capital markets when required. CSW, in order to strengthen
its capital structure and support growth from time to time, may
issue additional shares of its common stock. At March 31,June 30, 1995,
the capitalization ratios of each of the registrants were as
follows:
Company Common Preferred Long TermLong-Term
Equity Stock Debt
CSW 48% 5% 47%
CPL 45%46% 8% 47%46%
PSO 54%55% 2% 44%43%
SWEPCO 52% 4% 44%
WTU 52% 1% 47%
CSW and WTUCPL
On March 2,July 19, 1995, WTUCPL sold to underwriters in a negotiated
offering $40$200 million of 7.50% First Mortgage Bonds,6
5/8% FMB, Series T,KK, due AprilJuly 1, 2000.2005. The proceeds will be used
principally to redeem $139.2 million of 9 3/8% FMB, Series Z, due
December 1, 2019. The remainder of the bonds wereproceeds will be used to
repay a portion
of WTU's short-term debt, to provide working capital and for other
general corporate purposes.
46
Recent Developments
Consolidated Taxes
As previously reported, in 1992 the Texas Commission changed its
methodOn July 27, 1995, CPL sold to underwriters $100.6 million of
calculating the federal income tax component6.1% Pollution Control Revenue Refunding Bonds, Series 1995, due
July 1, 2028. The proceeds will be used to redeem two separate
outstanding PCRB issues, $68.9 million of rates to the
"actual tax approach." This approach reduces rates by the tax
benefits10 1/8%, Series 1984
PCRB, due October 15, 2014 and $31.8 million of deductions which are not considered for or included in
setting rates for the utility.
On April 13, 1995, the Texas Supreme Court issued a decision
which holds that the Texas Commission is not required to use the tax
benefits associated with the losses of unregulated affiliates to
reduce tax expense in cost of service. The Texas Supreme Court also
ruled that the Texas Commission cannot include the income tax
deductions taken by the utility for disallowed expenses when
determining the utility's federal income tax liability.
This decision will allow CSW shareholders to retain the tax
benefits associated with disallowed expenditures. The decision also
does not require the Texas Commission to reduce rates by the tax
benefits associated with the losses of unregulated affiliates.9 3/4%, Series U
FMB (secures Series 1985A collateralized PCRB), due July 1,
2015.
Regulatory Matters
CSW, CPL, PSO, SWEPCO and WTU
Reference is made to NOTE 2. Litigation and Regulatory
Proceedings for a discussion of each of the Electric Operating
CompaniesCompanies' regulatory matters.
ProposedLitigation Relating to Termination of El Paso Merger
CSW
ReferenceFor information regarding the commitments and contingent
liabilities relating to the termination of the Merger, reference
is made to PART II-OTHER INFORMATION-Item 5. Other
Information for information regarding the proposed Merger with El
Paso.
For additional information relating to the proposed El Paso
Merger, See CSW's Annual Report on Form 10-K for the year ended
December 31, 1994.
471. Legal Proceedings.
PART II - OTHER INFORMATION
For background and earlier developments relating to Part II
information reference is made to each registrant's 1994the registrants' combined Annual
Report on Form 10-K.10-K for the year ended December 31, 1994 and
combined Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
Item 1. Legal Proceedings.
Litigation Relating to Termination of El Paso Merger
CSW
In May 1993, CSW entered into a Merger Agreement pursuant to
which El Paso would emerge from bankruptcy as a wholly-owned
subsidiary of CSW. El Paso is an electric utility company
headquartered in El Paso, Texas, which had filed a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy
Code on January 8, 1992.
On June 9, 1995, CSW sent a letter to El Paso declining to
extend the termination date under the Merger Agreement as
requested by El Paso and terminating the Merger Agreement. CSW's
June 9, 1995 letter also informed El Paso that it was revoking
the Modified Third Amended Plan of Reorganization for the
proposed Merger with El Paso by a contemporaneous filing with the
United States Bankruptcy Court for the Western District of Texas,
Austin Division, before which the El Paso bankruptcy
reorganization proceeding is pending.
On June 9, 1995, following CSW's notification that it was
terminating the Merger and withdrawing the Modified Third Amended
Plan of Reorganization, El Paso filed the El Paso Suit against
CSW in state district court in El Paso, Texas, claiming breach of
contract, breach of duty of good faith and fair dealing, breach
of fiduciary duty, business disparagement, tortious interference
with contract and fraud in the inducement. El Paso's suit seeks
a $25 million termination fee from CSW, CSW's share of certain
costs related to the Modified Third Amended Plan of
Reorganization, additional unspecified damages, punitive damages,
interest as permitted by law, reasonable attorneys fees and court
costs. On June 15, 1995, CSW filed suit against El Paso in the
United States Bankruptcy Court in Austin, Texas seeking a $25
million termination fee from El Paso due to El Paso's breaches of
the Merger Agreement, at least $3.6 million in rate case expenses
incurred by CSW on behalf of El Paso related to state regulatory
merger proceedings and a declaratory judgment that CSW properly
terminated the Merger Agreement. CSW also removed the El Paso
Suit from state district court to the United States Bankruptcy
Court in El Paso, Texas and requested that the action be
transferred to the United States Bankruptcy Court in Austin,
Texas, the bankruptcy court that has jurisdiction over El Paso's
bankruptcy case. The action has since been transferred to the
United States Bankruptcy Court in Austin, Texas. El Paso may
file a motion with the Austin bankruptcy court to remand its
lawsuit back to the state district court in El Paso or to change
venue from Austin to El Paso. CSW believes that it has
substantial defenses to the El Paso Suit and intends to defend
the El Paso Suit, and to pursue the CSW Suit, vigorously.
However, the outcome of the two lawsuits cannot presently be
predicted.
Background Information
For background information and earlier developments related
to the Merger, reference is made to CSW's Annual Report on Form
10-K for the year ended December 31, 1994, Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995, Current Report on
Form 8-K dated May 23, 1995 and the documents referenced therein.
For further information related to the termination of the Merger,
the El Paso Suit and the CSW Suit, reference is made to CSW's
Current Reports on Form 8-K (i) dated June 9, 1995 and filed June
9, 1995 and (ii) dated June 9, 1995 and filed June 28, 1995, and
the documents referenced therein.
Cimmaron Litigation
CSW
On January 12, 1994, Cimmaron brought suit against CSW and
its wholly-ownedwholly owned subsidiary, CSWE, in the 125th District Court of
Houston, Harris County, Texas. Cimmaron allegesalleged that CSW and
CSWE breached commitments to participate with Cimmaron in thea
failed BioTech Cogeneration project located in Colorado.
Cimmaron claimsalleged breach of contract, fraud and negligent
misrepresentation with allegedclaims in its petition and sought damages
totaling $250 million, punitive damages of an unspecified amount
as
well asand recovery of attorney's fees.
CSWE filed a counterclaim against Cimmaron and third-party
claims against the principals of Cimmaron on December 22, 1994,
alleging that they misrepresented and omitted material facts
about their experience and background and about the proposed
cogeneration project. CSWE seekssought damages of $500,000 the(the
earnest money paid when the letter of intent was executed,executed), the
costs associated withincurred by CSWE in its due diligence investigation and
unspecified punitive damages. On January 10, 1995, Cimmaron
filed a first amended original petition suing CSWEto add claims of
negligence and gross negligence against the members of CSWE's
board membersof directors at the time personally.
Pre-trial discovery on the case is presently underway with
depositions of the parties being taken during March, April and May
1995. Trial was originally set for the week of April 10,failed project.
Effective July 27, 1995, but the parties filedagreed upon a
joint motion for continuance andsettlement whereby they would dismiss their respective claims in
the court re-setBioTech Cogeneration litigation. The terms of the case for January 17, 1996. Management of CSW cannot predict the
outcome of this litigation, but believes thatsettlement
are on terms satisfactory to CSW and CSWE have
defenses to these complaints and are pursuing them vigorously and that
the ultimate resolution will not have a
material adverse effectimpact on CSW's consolidated results of
operations or financial condition.
Westinghouse Litigation
CSW and CPL
CPL and other owners of STP are plaintiffs in a lawsuit
filed in October 1990 in District Court in Matagorda County,
Texas against Westinghouse seeking damages and other relief. The
suit alleges that Westinghouse supplied STP with defective steam
generator tubes that are susceptible to stress corrosion
cracking. Westinghouse filed an answer to the suit in March 1992
denying the plaintiffsplaintiffs' allegations. The suit is set forA jury trial commenced on
July 5, 1995 in July 1995.Bay City, Texas.
Inspections have detected early indications of stress corrosion
cracking in steam generator tubes at STP. Management believes
the steam generator tubes will continue to deteriorate. The STP
owners have authorized the plant to solicit competitive bids for
replacement of the STP steam generators in 1999 for Unit 1 and 2000
for Unit 2.
A preliminary damages report prepared by experts for the STP
owners estimates that replacement of the STP Unit 1 and Unit 2
steam generators will cost approximately $285 million, of which
CPL's share would be approximately 25 percent. The estimated
replacement cost of $285 million does not include replacement
power costs, additional operating expenses and other costs that
are being sought from Westinghouse in the pending litigation.
Recoverability of these amounts and the steam generator
replacement costs from Westinghouse is uncertain. ManagementHowever,
management believes that the ultimate resolution of this 48 matter
will not have a material adverse effect on CSW's or CPL's results
of operations or financial condition.
Burlington Northern Transportation Contracts
CSW and PSO
In June 1992, PSO filed suit in Federal District Court in
Tulsa, Oklahoma, against Burlington Northern seeking declaratory
relief under a long-term contract for the transportation of coal.
In July 1992, Burlington Northern asserted counterclaims against
PSO alleging that PSO breached the contract. The counterclaims
sought damages in aan unspecified amount. In December 1993, PSO
amended its suit against Burlington Northern seeking damages and
declaratory relief under federal and state anti-trust laws. PSO
and Burlington Northern filed motions for summary judgment dispositive ofon
certain issues in the litigation. In March 1994, the court
issued an order granting PSO's motions for summary judgment and
denying Burlington Northern's motion. It was not necessary for
the court to decide the federal and state anti-trust claims
raised by PSO. Judgment was rendered in favor of PSO by the
United States District Court in May 1994. In June 1994,
Burlington Northern appealed this judgment to the United States
Court of Appeals for the Tenth Circuit. In April 1995, the Tenth
Circuit entered an order reversing the District Court's decision
in part and affirming the order in part. On May 2, 1995, PSO
filed a petition for rehearing by the Tenth Circuit. Additional litigation inThe
petition for rehearing was denied May 31, 1995 and the case has
been remanded to the District Court may be necessary if PSO's petition for rehearing is not
successful.further proceedings.
Management believes the ultimate resolution of this matter will
not have a material adverse effect on CSW's or PSO's consolidated
results of operations or financial condition.
CSW and SWEPCO
On January 20, 1995, a state district court in Bowie County,
Texas, entered judgment in favor of SWEPCO against Burlington Northern
in a lawsuit regarding rates charged under two rail transportation
contracts for delivery of coal to SWEPCO's Welsh and Flint Creek power
plants. The court awarded SWEPCO approximately $72 million covering
damages for the period from April 27, 1989 through September 26, 1994
and post-judgment interest and attorneys' fees and granted certain
declaratory relief requested by SWEPCO. Burlington Northern has
appealed the state district court's judgment to the Texas Court of
Appeals. This appeal is now pending.
PCB Cases
CSW and PSO
As previously reported, PSO has been named defendant in
complaints filed in state court in Oklahoma alleging, among other
things, that some of the plaintiffs were contaminated with PCBs
and other toxic by-
productsby-products following transformer malfunctions.
As of May 1,July 28, 1995, the complaints totaled approximately $395
million, of which amount approximately one-third represents
punitive damages. Some claims have been dismissed, certain of
which resulted in settlements among the parties. The settlements
have not had a material adverse effect on CSW's or PSO's
consolidated results of operations or financial condition.
Although management cannot predict the outcome of these
proceedings, management believes that PSO has defenses to these
claims and intends to pursue them vigorously. Moreover,
management has reason to believe that PSO's insurance may cover
some of these claims. Management also believes that the ultimate
resolution of these cases will not have a material adverse effect
on CSW's or PSO's consolidated results of operations or financial
condition.
49
Other Legal Claims and Proceedings
CSW, CPL, PSO, SWEPCO and WTU
The CSW System is party to various other legal claims and
proceedings arising in the normal course of business. Management
does not expect disposition of these matters to have a material
adverse effect on the registrants' results of operations or
financial condition. See NOTE 2. Litigation and Regulatory
Proceedings for a discussion of each of the Electric Operating
Companies regulatory matters.
50
Item 4. Submission of Matters to a Vote of Security Holders.
CSW, (a)CPL, PSO, SWEPCO and WTU
The annual meetinginformation required for Item 4 was previously reported
in Item 4 of stockholders of CSW was held on April 20,the registrants' combined Form 10-Q for the quarter
ended March 31, 1995.
(b) The stockholders elected five directors at the annual meeting.
The name of each nominee and the number of shares voted for or
against were as follows:
Nominee Votes for Votes against
Glenn Biggs 165,629,077 929,897
E.R. Brooks 165,533,583 1,025,391
Robert W. Lawless 165,601,238 957,736
James L. Powell 165,582,313 976,661
Donald M. Carlton 165,597,922 961,052
In addition, stockholders voted to approve the appointment of Arthur
Andersen LLP independent public accountants, as CSW's auditors for
1995, with 165,288,978 votes cast for approval, 664,580 votes cast
against approval and 605,416 votes abstaining.
(c) Other matters voted upon at the annual meeting of stockholders.
No other matters (other than procedural matters) were voted upon
at the annual meeting.
CPL
(a) The annual meeting of stockholders of CPL was held on April 13, 1995.
(b) Directors elected at the annual meeting were:
E. R. Brooks Pete Morales, Jr.
Robert R. Carey S. Loyd Neal, Jr.
Ruben M. Garcia H. Lee Richards
David L. Hooper Melanie J. Richardson
Harry D. Mattison J. Gonzalo Sandoval
Robert A. McAllen Gerald E. Vaughn
(c) Other matters voted upon at the annual meeting of stockholders.
No other matters (other than procedural matters) were voted upon
at the annual meeting.
51
PSO
(a) The annual meeting of stockholders of PSO was held on April 18, 1995.
(b) Directors elected at the annual meeting were:
E. R. Brooks William R. McKamey
Harry A. Clarke Mary M. Polfer
Paul K. Lackey, Jr. Dr. Robert B. Taylor, Jr.
Paula Marshall-Chapman Robert L. Zemanek
Harry D. Mattison Waldo J. Zerger, Jr.
(c) Other matters voted upon at the annual meeting of stockholders.
No other matters (other than procedural matters) were voted upon
at the annual meeting.
SWEPCO
(a) The annual meeting of stockholders of SWEPCO was held on April 12, 1995.
(b) Directors elected at the annual meeting were:
Richard H. Bremer Dr. Frederick E. Joyce
E. R. Brooks Michael H. Madison
James E. Davison Harry D. Mattison
Al P. Eason, Jr. Marvin R. McGregor
W. J. Googe, Jr. William C. Peatross
(c) Other matters voted upon at the annual meeting of stockholders.
No other matters (other than procedural matters) were voted upon
at the annual meeting.
52
WTU
(a) The annual meeting of stockholders of WTU was held on April 25,
1995.
(b) Directors elected at the annual meeting were:
Richard F. Bacon Tommy Morris
C. Harwell Barber Dian G. Owen
E. R. Brooks James M. Parker
Paul. J. Brower Dennis M. Sharkey
T.D. Churchwell F. L. Stephens
Glenn Files Donald A. Welch
Harry D. Mattison
(c) Other matters voted upon at the annual meeting of stockholders.
No other matters (other than procedural matters) were voted upon
at the annual meeting.
53
Item 5. Other Information.
Proposed El Paso MergerEnvironmental Matters
Toxic Substances Control Act of 1976
CSW Backgroundand CPL
Under the TSCA, the storage, use and disposal, among other
things, of PCBs are regulated. Violations of the TSCA may lead to
fines and penalties. CPL was inspected by the EPA in 1992 and
found to have TSCA record-keeping and other violations for PCBs.
CPL negotiated a settlement with the EPA and has accepted a
penalty of approximately $76,000. CPL is awaiting the consent
agreement from the EPA.
Sol Lynn Superfund Site
CSW and CPL
The Sol Lynn salvage yard was declared a Superfund site by
the EPA after it was found to contain a number of contaminants
including PCBs. Gulf States Utilities Company remediated the site
for approximately $2 million and sought to recover a portion of
the remediation costs from alleged PRPs, including CPL. In May 1993, CSW entered into a Merger AgreementMarch
1995, CPL and Gulf States Utilities Company reached an agreement
pursuant to which El Paso would emerge from bankruptcyCPL agreed to pay $50,000 as its share of
remediation costs, pending court approval.
PCB Storage Facilities
CSW and PSO
PSO investigated and identified PCB contamination at one of
its PCB storage facilities in Sand Springs, Oklahoma. PSO made
proper notification to the EPA of the contamination that was
caused by spills prior to the adoption of PCB spill regulations.
PSO negotiated a remediation plan with the EPA. Remediation began
in November 1994, and the remediation costs were $235,000. As
part of the remediation plan, the EPA requested PSO to sample the
land surrounding the PCB storage building site. The land will
include an active PSO substation and an industrial area that is
privately owned. The extent of any PCB contamination has not been
determined on either site.
Suspected MGP Sites in Texarkana, Texas and Arkansas and
Shreveport, Louisiana
CSW and SWEPCO
SWEPCO owns a suspected former MGP site in Texarkana, Texas
and Arkansas. The EPA ordered an initial investigation of this
site, as well as a wholly-owned
subsidiarysite in Shreveport, Louisiana, which is no
longer owned by SWEPCO. The contractor who performed the
investigations of CSW. El Paso isthese two sites recommended to the EPA that no
further action be taken at this time. The contractor also
discovered that an electric utility company
headquarteredunderground storage tank was in El Paso, Texas, which had filedplace at the
Texarkana site and that it was leaking. SWEPCO removed the tank
in early 1995 and has made a voluntary petitionrequest for reorganization under Chapter 11closure from the Arkansas
Department of Pollution Control and Ecology based on soil and
ground water quality results.
Childress Substation Site
CSW and WTU
In response to its discovery of a prior release of
transformer oil from a 138 Kv (kilovolt) autotransformer at the
Bankruptcy Code on January
8, 1992.Childress substation, WTU contracted with a consultant in February
1995 to conduct a subsurface soil investigation to determine the
extent of soil contamination. The investigation showed that
hydrocarbon contamination was present in concentrations above the
TNRCC accepted levels. On July 30, 1993, El Paso filed a Modified Plan, and on
December 8, 1993,March 21, 1995, the Bankruptcy Court confirmedcontractor began
removing contaminated materials for disposal. Post-excavation
sample analyses indicated that the Modified Plan.
Under the Modified Plan, the total value of CSW's offersite was cleaned to acquire El
Paso is approximately $2.2 billion. The Modified Plan generally
provides for El Paso creditors and shareholders to receive shares of
CSW Common and/or securities of El Paso, or to have their claims cured
and reinstated.
The Merger is subject to numerous conditions set forth in the
Merger Agreement including, among others, receipt of all required
regulatory approvalsTNRCC
approved levels and the absence of a material adverse effect or
facts or circumstances that could reasonably be expectedexcavation was backfilled and restored to
result in
a material adverse effect on El Paso.its original condition. The Merger Agreement also
provides that CSW and El Paso have the right to terminate the Merger
Agreement under specified circumstances including, among others, the
failure of the Effective Date as defined in the Merger Agreement to
occur on or before the Termination Date, which is defined as 18 months
after the Confirmation Date or June 8, 1995. Required regulatory
approvals and filings in connection with the Merger include approvals
of the FERC, the SEC, the Texas Commission, the New Mexico Commission,
the NRC, and filings with the Department of Justice and the Federal
Trade Commission under the HSR Act. As of May 1, 1995 applications
for all federal and state required regulatory approvals were pending,
except that early termination of the waiting periodproject was granted
under the HSR Actcompleted on April 28,
1995. Although CSW contemplates that
one or more additional required regulatory approvals may be
forthcoming on or before June 8, 1995 CSW does not expect that all
such required approvals will have been issued and becomeat a cost of approximately $216,000. The final before
that date. The Termination Date can be extended up to six months to
December 8, 1995 upon the mutual agreement of the parties. To date no
request has been received from or sent to El Paso to extend the
Termination Date.
On September 12, 1994, in a letter responding to an earlier
letter from El Paso dated August 5, 1994, CSW reiterated its position
that continuing service to Las Cruces is a material element of CSW's
bargain with El Paso and advised El Paso that the muncipalization
efforts in Las Cruces and other matters, including (i) the potential
loss of other customers in El Paso's service area, including the
Holloman Air Force Base and the White Sands Missile Range in New
Mexico, (ii) cracking in steam generator tubes at Palo Verde, (iii)
intense political and regulatory oppositionclosure
report was submitted to the Merger, and (iv) a
new "comparable transmission service" standard being imposed on the
Merger by the FERC, place the completion of the MergerTNRCC in jeopardy.
CSW's September 12, 1994, letter further advised El Paso that the
foregoing matters, individually and cumulatively, constitute a
material adverse effect or failure of other closing conditions under
the Merger Agreement which, unless timely resolved, could preclude
closing of the proposed Merger.
By letter dated September 16, 1994, El Paso disagreed with the
positions set forth by CSW in its September 12 letter and asserted
that CSW's September 12 letter "has inflicted irreparable harm on El
Paso and the Merger process." Since September 1994, CSW and El Paso
have exchanged a number of letters relating both to their disagreement
with respect to the contingencies identified in CSW's September 12
letter as well as to various other issues under the Merger Agreement
and Modified Plan.
54
Recent Developments
On May 11, 1995, El Paso filed an amended complaint with the
Bankruptcy Court in a existing adversarial proceeding seeking to
enjoin the Texas Commission from entering rulings which El Paso
believes are inconsistent with findings of fact entered by the
Bankruptcy Court.
Although CSW continues to use its best efforts to obtain the
required regulatory approvals and work toward consummation of the
Merger, CSW continues to monitor the aforementioned contingencies
which could preclude the consummation of the Merger. Based upon the
failure of El Paso to resolve the contingencies set forth above, the
likelihood that the required regulatory approvals will not be
obtained by June 8, 1995, and the potential impacts of the pending
Bankruptcy Court hearings, CSW believes that it is uncertain and
cannot presently predict whether, or if so when, the Merger will be
consummated.
If the Merger is not consummated, then under certain
circumstances set forth in the Merger Agreement CSW or El Paso would
be required to pay a $25 million termination fee to the other party.
Additionally, under certain circumstances, if the Merger is not
consummated, the Merger Agreement provides for CSW to pay El Paso a
portion of certain interest costs and certain fees and expenses
estimated as of March 31, 1995 to be approximately $20.5 million;
however, the actual amount, if any, that CSW may be required to pay
pursuant to these provisions depends on a number of contingencies and
cannot presently be predicted. If the Merger Agreement is terminated,
whether or not any termination fee is payable, CSW could be required
to recognize as an expense deferred costs associated with the Merger,
which amounted to approximately $40 million at March 31, 1995.
In the event that the Merger is not consummated, there may be
ensuing litigation between El Paso and CSW or among other parties to
El Paso's bankruptcy proceedings and either or both El Paso and CSW.
As previously reported, on October 11, 1994, the Bankruptcy Court
granted an application by El Paso to employ special litigation counsel
to advise El Paso as to ongoing activities with CSW and to assist El
Paso as to the best means of preserving its rights. El Paso has
recently taken the position that if, CSW attempts to terminate the
Merger Agreement without proper justification or otherwise breaches
the Merger Agreement, then litigation could ensue. The Merger
Agreement provides for specific performance as a remedy and other
damages may be available in the event of breach by either party
of the Merger Agreement.
Regulatory Approvals
The following discussion updates previous disclosure concerning
regulatory approvals required for the consummation of the Merger.
Texas Commission Applications
As previously reported, on March 3, 1995, the Texas Commission
issued an interim order in the El Paso rate case and in the proceeding
relating to the Merger with CSW. The interim order found the proposed
Merger to be in the public interest and provides for a $24.9 million
base rate increase for El Paso. The interim order adopted most of the
recommendations of the presiding officers. A significant revision to
the presiding officers recommendations was an increase in the allowed
return on equity from 11.5% to 12%. The presiding officers'
recommendations were adopted in the interim order for several
significant issues even though agreement was not reached by the Texas
Commission. CSW has taken the position that the interim order does
not grant the regulatory rate treatment required by the Merger
Agreement. El Paso has disagreed with this position. Motions for
reconsideration on various issues were filed by CSW and El Paso and
various other parties to the rate case. These issues included
conditioning approval of the Merger on resolution of the Las Cruces
55
and Palo Verde issues, the rate treatment of the tax effects of lease
rejection damages, recovery of any acquisition adjustment and deferred
costs associated with the regulatory lag period prior to receiving
rate treatment for Palo Verde Unit 3. The Texas Commission considered
the motions for reconsideration at meetings on April 17 and May 3,
1995. On May 3, 1995, the Texas Commission heard oral arguments on
the motions for reconsideration of its interim order and the effect on
that order of the recent court decisions discussed below. The Texas
Commission held additional discussions on the motions for
reconsideration on May 10, 1995 and has scheduled a final interim
order meeting on May 16, 1995. It is uncertain whether the Texas
Commission will modify any of its previously adopted positions in its
initial first interim order. Pending resolution of these issues, the
Texas Commission allowed El Paso's bonded rates to remain in effect
until a subsequent interim decision is issued.
Recent court decisions at the Austin Court of Appeals and Supreme
Court of Texas may affect the Texas Commission's rulings on treatment
of the Palo Verde inventory plan for Unit 3 and actual taxes paid
methodology. At this time both court decisions are subject to motions
for rehearing. It is uncertain whether the courts' decisions will be
modified or whether the Texas Commission will modify its interim order
based upon such decisions.
The Texas Commission severed fuel related issues from the El Paso
rate case and issued a final order which allows for El Paso to lower
its fixed fuel factors by $14.3 million annually and to refund $13.7
million in over-collected fuel costs over a twelve month period.
New Mexico Commission Application
As previously reported, on March 14, 1994, CSW and El Paso filed
an application with the New Mexico Commission seeking approval of the
pending Merger, the reacquisition of the leased Palo Verde assets and
certain accounting treatments. On February 10, 1995, the New Mexico
Commission Staff filed testimony recommending approval of each of
these requests. Hearings in New Mexico were completed on March 2,
1995. This revised schedule allows for the issuance of a final order
by the New Mexico Commission by June 1995. It is uncertain when
a final order may be issued by the New Mexico Commission.
On April 5, 1995, El Paso filed an application with the New
Mexico Commission for authorization to issue the securities under the
plan of reorganization. On May 1, 1995, the hearing examiner issued a
procedural order setting a hearing on the application for May 25,
1995. The schedule established by the hearing examiner allows for the
issuance by the New Mexico Commission of a final order by June 8,
1995. It is uncertain when a final order may be issued by the New
Mexico Commission.
FERC Application
As previously reported, on August 1, 1994, the FERC issued orders
in two proceedings that relate to the Merger. In an order issued
under Section 211 of the Federal Power Act, the FERC preliminarily
found that "a final order requiring SPS to provide the transmission
service requested by the Applicants would comply with the statutory
standards, once reliability concerns have been met." The FERC also
issued an order under Section 203 of the FPA in which the FERC ruled
that it will require merging utilities to offer transmission service
to others on a basis that is comparable to their own uses of their
transmission systems and consolidated the Section 203 and 205
proceedings of the FPA for hearing purposes.
56
On April 11, 1995, the FERC ALJ who presided over the hearings
related to the Section 203 and Section 205 application issued a
decision finding the Merger to be consistent with the public interest.
The ALJ recommended that the Merger be approved subject to the FERC's
deciding a number of issues concerning transmission service. The FERC
will consider the ALJ's initial decision after all of the parties file
briefs setting forth their exception to the initial decision. It is
uncertain if the FERC will render a decision prior to June 8, 1995.
SEC Application
As previously reported, on January 10, 1994, CSW filed with the
SEC an application under the Holding Company Act seeking authorization
of the Merger and reacquisition of the Palo Verde leased assets. CSW
subsequently amended the application to eliminate the request for
authorization to engage in certain hedging transactions, at the
request of the SEC staff. CSW has subsequently amended and
supplemented the application and has filed a brief in response to
intervention petitions. On April 6, 1995, CSW filed an amendment to
the application in order to update and summarize for the SEC the
record of the other federal and state regulatory proceedings relating
to the Merger. In that filing, CSW requested the SEC to take action
promptly on the application and issue an appropriate order as soon as
possible. However, it is uncertain what action the SEC will take
with respect to the application, or when such action will be taken.
NRC Application
As previously reported, on January 13, 1994, APS, as operating
agent for Palo Verde, joined by El Paso, filed a request with the NRC
for (i) consent to the indirect transfer of El Paso's interest in the
operating licenses for Palo Verde Units 1, 2, and 3 that will occur as
a result of the Merger, and (ii) to amend the operating licenses for
Units 2 and 3 to delete provisions of those licenses related to El
Paso's sale and leaseback transactions involving those units. The
request to the NRC specifies that the proposed amendments to the
operating licenses and consent become effective on the Effective Date,
but it is uncertain whether and, if so, when the approvals and consent
will be granted.
HSR Act
On April 28, 1995, the FTC granted early termination of the
waiting period under the HSR Act.
Other
El Paso is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance
therewith files reports and other information with the SEC. For
additional information concerning El Paso, and the Proposed El Paso
Merger see El Paso's Annual Report on Form 10-K and the documents
referenced therein.
For additional information relating to the proposed El Paso
Merger see CSW's Annual Report on Form 10-K for the year ended
December 31, 1994.
Environmental Matters
CSW and SWEPCO
Biloxi, Mississippi MGP Site
SWEPCO has been notified by Mississippi Power Company that it may
be a PRP at the former Biloxi MGP site formerly owned and operated by a
predecessor of SWEPCO. SWEPCO is working with Mississippi Power
Company to investigate the extent of contamination at this site. The
MDEQ approved a site investigation work plan and, in January 1995,
SWEPCO and Mississippi Power Company initiated sampling pursuant to
that work plan. SWEPCO and Mississippi Power Company have learned that
57
the samples collected in January 1995 were held by the contractor for a
period of time in excess of the permitted period and will have to be
recollected.
On an interim basis, SWEPCO and Mississippi Power Company are each
paying fifty percent of the cost of implementing the site investigation
work plan. That interim allocation is subject to a final allocation in
the future. SWEPCO and Mississippi Power Company are investigating
whether there are other PRPs at the Biloxi site. Until the extent of
the contamination at the Biloxi site is identified, it is unknown what,
if any, additional investigation or cleanup may be required.
Marshall, Texas MGP Site
SWEPCO conducted another round of groundwater sampling from the
site's groundwater monitor wells. Sample results from each of the nine
monitor wells indicate that there were no drinking water standards
exceeded for RCRA Metals. In April 1995, additional off-site soil
samples were collected and are being analyzed for metals concentrations
to provide for statistical comparison of on-site soils metals
concentrations with off-site or background levels. If metals
concentrations are determined to be comparable to background levels,
then SWEPCO will proceed with closure of the site under the TNRCC Risk
Reduction Rules Option that enable SWEPCO to place a deed restriction
on the site documenting the levels of any substances determined to be
above lab detection levels. If on-site metals levels are above
background levels then SWEPCO will proceed with a site specific risk
assessment as required under the TNRCC Risk Reduction Rules.
58
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(3) Articles of Incorporation
Second Restated Certificate of Incorporation of CSW dated
April 23, 1990 - (Exhibit 3.1)
Certificate of Amendment to Second Restated Certificate of
Incorporation dated May 20, 1991 - (Exhibit 3.2)
(12) Computation of Ratio of Earnings to Fixed Charges
CPL - (Exhibit 12.1)
PSO - (Exhibit 12.3)
SWEPCO - (Exhibit 12.4)
WTU - (Exhibit 12.5)
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
CPL - (Exhibit 12.2)
(27) Financial Data Schedules
CSW - (Exhibit 27.1)
CPL - (Exhibit 27.2)
PSO - (Exhibit 27.3)
SWEPCO - (Exhibit 27.4)
WTU - (Exhibit 27.5)
(b) Reports on Form 8-K:
CSW
CSW filed a Current Report on Form 8-K, dated January 17,April
5, 1995, Item 5. Other Events, reporting developments in
CPL regulatory matters.
CSW filed a Current Report on Form 8-K dated May 23,
1995, Item 5. Other Events, reporting developments in the
proposed El Paso Merger.
CSW filed a Current Report on Form 8-K, dated April 5,June 9,
1995 and filed June 9, 1995, Item 5. Other Events,
reporting developments in CPL
regulatory matters.that CSW had declined to extend the termination
date under the Merger Agreement and revoking the Third
Amended Plan of Reorganization.
CSW filed a Current Report on Form 8-K, dated June 9,
1995 and filed June 28, 1995, Item 5. Other Events,
reporting litigation between CSW and El Paso.
CSW filed a Current Report on Form 8-K, dated July
10, 1995, Item 5. Other Events, reporting an ALJ
recommendation regarding WTU deferred accounting.
CPL
CPL filed a Current Report on Form 8-K, dated April
5, 1995, Item 5. Other Events, reporting developments in
its regulatory matters.
PSO
No Current Reports on Form 8-K were filed for PSO.
Item 6. Exhibits and Reports on Form 8-K. (continued)
(b) Reports on Form 8-K: (continued)
SWEPCO
No Current Reports on Form 8-K were filed for SWEPCO.
WTU
WTU filed a Current Report on Form 8-K, dated February 17,July
10, 1995, Item 5. Other Events, providing unaudited financial
information for the fiscal year ended December 31, 1994, in
anticipation of a debt offering by WTU.
59reporting an ALJ
recommendation regarding deferred accounting.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, each registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized. The
signature for each undersigned registrant shall be deemed to
relate only to matters having reference to such registrant or its
subsidiaries.
CENTRAL AND SOUTH WEST CORPORATION
Date: May 15,August 1, 1995 /s/ Wendy G.HargusG. Hargus
Wendy G. Hargus
Controller and Chief Accounting Officer
(Principal Accounting Officer)
CENTRAL POWER AND LIGHT COMPANY
PUBLIC SERVICE COMPANY OF OKLAHOMA
SOUTHWESTERN ELECTRIC POWER COMPANY
WEST TEXAS UTILITIES COMPANY
Date: May 15,August 1, 1995 /s/ R. Russell Davis
R. Russell Davis
Controller and Chief Accounting Officer
(Principal Accounting Officer)