UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-3382
CAROLINA POWER & LIGHT COMPANY
______________________________
(Exact name of registrant as specified in its charter)
North Carolina 56-0165465
____________________________________________________________________________
(State or other jurisdiction of incorporation (I.R.S. Employer Identifica-
or organization tion No.)
411 Fayetteville Street, Raleigh, North Carolina 27601-1748
___________________________________________________________
(Address of principal executive offices)
(Zip Code)
919-546-6111
____________
(Registrant's telephone number, including area code)
____________________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock (Without Par Value) shares outstanding at July 31,1995: 155,431,022
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
_______ ____________________
Reference is made to the attached Appendix containing the
Consolidated Interim Financial Statements for the periods ended June 30, 1995.
The amounts are unaudited but, in the opinion of management, reflect all
transactions necessary to fairly present the Company's financial position and
results of operations for the interim periods.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
_______ ___________________________________________________________
Results of Operations
For the Three, Six and Twelve Months Ended June 30, 1995,
As Compared With the Corresponding Periods One Year Earlier
___________________________________________________________
Operating Revenues: For the three, six and twelve months ended June
30, 1995, operating revenues increased (decreased) due to the following factors
(in millions):
Three Months Six Months Twelve Months
____________ __________ _____________
Customer Growth/Changes
In Usage Patterns $24 $54 $107
Weather (8) (24) (116)
Price (21) (49) (79)
Sales to North Carolina Eastern
Municipal Power Agency (9) (21) (38)
Sales to Other Utilities 9 18 36
___ ___ ___
Total $ (5) $ (22) $ (90)
=== === ===
The decrease in the weather component of revenue for the twelve
months ended June 30, 1995 is the result of mild weather in the current periods
as compared to more extreme weather in the prior periods. The decrease in the
price component of revenue for all periods is due primarily to the expiration of
a North Carolina rate rider. This reduction in revenue did not significantly
impact net income due to a corresponding decrease in amortization expense.
In addition, for the twelve-month period, approximately $20 million of the price
component decrease is attributable to a decrease in the fuel cost component of
revenue. Sales to North Carolina Eastern Municipal Power Agency (Power Agency)
decreased for all periods due to the greater availability of the jointly-owned
generating units. Sales to other utilities increased for the six-month and
twelve-month periods due to the greater availability of the Company's generating
units. For the three-month and six-month periods, the Company has become more
active in the bulk power market, contributing to the increase in sales to other
utilities for these periods.
Operating Expenses: Despite an increase in total generation, fuel for
generation decreased for the six months and twelve months ended June 30, 1995,
due to greater availability of the Company's nuclear generating units. During
these periods, lower-cost nuclear generation, as a percentage of total
generation, increased and higher-cost fossil generation correspondingly
decreased. For the three months ended June 30, 1995, fuel for generation
increased due to an increase in total generation.
For the six and twelve months ended June 30, 1995, deferred fuel cost
increased primarily due to lower fuel costs associated with increased nuclear
generation. For the twelve-month period, the increase due to lower fuel costs
more than offset a decrease of $33 million related to fuel settlements reached
with the Company's regulators. Pursuant to these settlements, the Company
agreed to forgo recovery of deferred fuel costs totaling approximately $8
million and $41 million for the twelve-month periods ended June 30, 1995, and
June 30, 1994, respectively.
Purchased power decreased for the six and twelve months ended June 30,
1995, due to decreased purchases from other utilities, resulting from greater
availability of the Company's generating facilities in the current periods, and
due to lower purchases from Power Agency in accordance with the Harris Plant
buyback agreement.
The decrease in maintenance expense for the twelve months ended June
30, 1995, is due to a decrease in expense associated with outages at the
Company's nuclear generating facilities.
For all periods, the decreases in depreciation and amortization are
primarily due to the completion of the amortization of abandoned plant costs for
Harris Unit No. 2 and of costs associated with the North Carolina rate rider.
The increase in income tax expense for all periods is primarily due to
a reduction of expense in the prior periods related to certain Internal Revenue
Service (IRS) audit issues. Additionally, for the twelve-month period, an
increase in income contributed to the increase in income tax expense.
Other Income (Expense): The decrease in Harris Plant carrying costs for
the twelve months ended June 30, 1995, is primarily related to the Company's
settlement with North Carolina Electric Membership Corporation in 1993.
The decrease in interest income for all periods is due to the June 1994
recording of interest income related to certain IRS audit issues. Additionally,
for the twelve months ended June 30, 1995, interest income decreased due to a
settlement recorded in 1993, which increased interest income in the prior
period.
Other income, net, decreased for the twelve months ended June 30,
1995, due to a decrease in accretion to present value associated with the
Company's abandonment costs and due to various other items, none of which is
individually significant.
The increase in the income tax credit for the twelve months ended June
30, 1995 is primarily attributable to lower income in the current period.
Material Changes in Capital Resources and Liquidity
From December 31, 1994, to June 30, 1995
and From June 30, 1994, to June 30, 1995
___________________________________________________
During the six and twelve months ended June 30, 1995, the Company
issued long-term debt of $185 million and $235 million, respectively. The
proceeds of these issuances, along with the issuance of short-term debt and
internally generated funds, financed the redemption or retirement of long-term
debt totaling $227.1 million during both the six and twelve months ended June
30, 1995.
In order to provide flexibility in the timing and amounts of long-term
financing, the Company uses short-term financing in the form of commercial
paper backed by revolving credit agreements. These revolving credit agreements
currently amount to $285 million. The Company had $82.7 million of
commercial paper outstanding at June 30, 1995.
The Company's capital structure at June 30, 1995, was 47.98% common
stock equity, 49.37% long-term debt and 2.65% preferred stock. At June 30,
1994, the Company's capital structure was 49.9% common stock equity, 47.4%
long-term debt and 2.7% preferred stock.
The Company's First Mortgage Bonds are currently rated "A2" by
Moody's Investors Service, "A" by Standard & Poors and "A+" by Duff &
Phelps. Moody's Investors Service, Standard & Poors and Duff & Phelps have
rated the Company's commercial paper "P-1", "A-1" and "D-1" respectively.
In 1994, the Board of Directors of the Company authorized the
Executive Committee of the Board to repurchase up to 10 million shares of the
Company's common stock on the open market. Under this stock repurchase
program, the Company has purchased approximately 4.6 million shares from July
1994 through June 1995. The decrease in average common shares outstanding
resulted in an increase in earnings per common share of approximately $.01, $.03
and $.05 for the three, six and twelve months ended June 30, 1995, respectively.
Other Matters
_____________
In 1994, the Company established a wholly-owned subsidiary, CaroNet,
Inc., which owns a ten percent interest in BellSouth Carolinas PCS, L.P., a
limited partnership led by BellSouth Personal Communications, Inc. (BellSouth).
In March 1995, BellSouth won its bid for a Federal Communications
Commission license to operate a personal communications services (PCS) system
covering most of North Carolina and South Carolina and a small portion of
Georgia. PCS, a wireless communications technology, is expected to provide
high-quality mobile communications. BellSouth will transfer the PCS license to
the limited partnership. BellSouth is the general partner and handles day-to-day
management of the business. In April 1995, the Company invested $50 million
in CaroNet, Inc. in anticipation of infrastructure construction. Construction
of the system infrastructure began in the spring of 1995 and service start-up
is expected to begin in mid-1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
_______ _________________
Legal aspects of certain matters are set forth in Item 5 below.
Item 2. Changes in Securities )
_______ _____________________ )
)
Item 3. Defaults upon Senior Securities ) Not
_______ _______________________________ ) applicable for
) the quarter ended
) June 30, 1995.
)
)
Item 4. Submission of Matters to a Vote
of Security Holders
_______ _________________________________
(a) The Annual Meeting of the Shareholders was held on
May 10, 1995.
(b) The meeting involved the election of directors. Proxies
for the meeting were solicited pursuant to Regulation 14,
there was no solicitation in opposition to the
management's nominees as listed below, and all such
nominees were elected.
(c) The Board of Directors' proposal to amend the
Company's Restated Charter and By-Laws to establish a
variable range for the size of the Company's Board of
Directors was approved by the shareholders. The number
of shares voted for the amendment was 123,301,566, the
number of shares voted against the amendment was
13,424,654 and the number of shares that abstained from
voting was 3,132,155. The Board of Directors' proposal
to amend the Company's By-Laws to provide for
Classification of the Board of Directors was approved by
the shareholders. The number of shares voted for the
amendment was 96,591,670, the number of shares voted
against the amendment was 20,511,125, the number of
shares that abstained from voting was 2,068,442, and the
number of shares represented by broker non-votes was
20,687,138.
The total votes for the election of directors were as
follows:
Votes For Votes Withheld
_________ ______________
Class I
(Term Expiring in 1996)
_______________________
Leslie M. Baker, Jr. 136,916,998 2,941,377
George H. V. Cecil 136,903,383 2,954,922
Sherwood H. Smith, Jr. 136,974,655 2,883,720
J. Tylee Wilson 136,980,130 2,878,245
Class II
(Term Expiring in 1997)
_______________________
Edwin B. Borden 137,080,180 2,778,195
Richard L. Daugherty 136,954,985 2,903,390
J. R. Bryan Jackson 137,108,169 2,750,206
Robert L. Jones 137,034,539 2,823,836
Class III
(Term Expiring in 1998)
_______________________
Felton J. Capel 136,941,665 2,916,710
William Cavanaugh III 136,921,201 2,937,174
Charles W. Coker 137,064,173 2,794,202
Estell C. Lee 137,085,472 2,772,903
(d) Not applicable.
Item 5. Other Information
_______ _________________
1. (Reference is made to the Company's 1994 Form 10-K,
Competition and Franchises, page 8, paragraph 1b.) With
regard to the petition filed with the North Carolina Utilities
Commission (NCUC) by the Carolina Utility Customers
Association, Inc. requesting that the NCUC hold a generic
hearing to address various retail wheeling issues (Docket No.
E-100, Sub 77), on July 21, 1995, the NCUC issued an order
indicating that it will not convene a formal hearing to
investigate these issues at this time. The NCUC's order noted
that North Carolina's territorial assignment statute appears to
prohibit retail wheeling, and the issue represents a number of
jurisdictional uncertainties. The NCUC concluded that for the
time being, it should monitor developments in other states and
at the Federal Energy Regulatory Commission (FERC)
regarding jurisdictional and other issues affecting retail
wheeling. Instead of convening a hearing, the NCUC
requested that interested parties suggest, by mid September
1995, specific issues for further consideration in this docket.
The NCUC also indicated that it is considering holding
informal proceedings to gather more information on
competition issues in the future. The Company cannot predict
the outcome of this matter.
2. (Reference is made to the Company's 1994 Form 10-K,
Competition and Franchises, page 8, paragraph 1c.) On
June 8, 1995, and July 5, 1995, the Company filed with the
NCUC and the South Carolina Public Service Commission
(SCPSC) respectively, an Economic Development Rider which
will permit the Company to provide a discount on the first five
years of electric service it provides to businesses that locate to
or expand within the Company's service territory if they meet
certain criteria, including threshholds for the size of new load,
the amount of investment and the number of new jobs
provided by the businesses. The Economic Development Rider
was approved by the NCUC on July 10, 1995, and by the
SCPSC on July 21, 1995.
3. (Reference is made to the Company's 1994 Form 10-K,
Competition and Franchises, page 8, paragraph 1d.) In March
1995, the Company submitted bids in response to each of
North Carolina Electric Membership Corporation's (NCEMC)
two requests for proposals to provide (for a minimum of ten
years) up to 225 MW per year of base load power to NCEMC
beginning in 2001, an additional block of up to 225 MW per
year beginning in 2002, and a third block of up to 225 MW
per year beginning in 2003. On June 30, 1995, the Company
was notified by NCEMC that one of Company's bids had been
selected for further negotiations. The Company is negotiating
with NCEMC and is developing new bids, which will include
a hybrid of the Company's two original bids. The Company
cannot predict the outcome of this matter.
4. (Reference is made to the Company's 1994 Form 10-K,
Competition and Franchises, page 8. Reference is also made
to the Company's Form 10-Q for the quarter ended March 31,
1995, Item 5, paragraph 2.) On July 29, 1995, the North
Carolina General Assembly (General Assembly) passed a bill
directing the Joint Legislative Utility Review Committee
(Utility Review Committee) to study whether or not the
extension of interstate natural gas pipelines into North Carolina
can and should be encouraged by amending the North Carolina
Public Utilities Act (Public Utilities Act) to exempt from
regulation as public utilities facilities that sell electric power
and thermal energy generated with natural gas from these
pipelines. The bill also directs the Utility Review Committee
to study whether the Public Utilities Act should be amended to
encourage the construction of new interstate pipelines in North
Carolina. The bill orders the Utility Review Committee to
report its findings and any recommendations regarding these
matters to the General Assembly in 1996. The Company
cannot predict the outcome of this matter.
5. (Reference is made to the Company's 1994 Form 10-K,
Competition and Franchises, page 8. Reference is also made
to the Company's Form 10-Q for the quarter ended March 31,
1995, Item 5, paragraph 3.) With regard to the bill introduced
in the General Assembly concerning public power agencies in
the state, a substantially amended version of the bill, which
authorizes internal reorganizational changes among the state's
municipal power agencies, and orders the Utility Review
Committee to study other issues contained in the bill as
originally introduced, was passed by the General Assembly
effective July 11, 1995. The Company cannot predict the
outcome of this matter.
6. (Reference is made to the Company's 1994 Form 10-K,
Financing Program, page 11, paragraph 4. Reference is also
made to the Company's Form 10-Q for the quarter ended
March 31, 1995, Item 5, paragraph 5.) Retirements since
March 31, 1995 consist of the following:
-- The retirement on April 1, 1995, of $77.1 million
principal amount of First Mortgage Bonds, 9.14%
Series, which matured on that date.
-- The retirement on June 8, 1995, of $25 million
principal amount of First Mortgage Bonds, 8.92%
Secured Medium-Term Notes, Series A, which
matured on that date.
-- The retirement on July 20, 1995, of $25 million
principal amount of First Mortgage Bonds, 8.86%
Secured Medium-Term Notes, Series A, which
matured on that date.
7. (Reference is made to the Company's 1994 Form 10-K, Retail
Rate Matters, page 12, paragraph 3.) The Company filed its
1995 Integrated Resource Plan (IRP) with the NCUC on
April 28, 1995, and with the SCPSC on June 30, 1995. The
NCUC has scheduled a hearing regarding the Company's 1995
IRP to begin on October 10, 1995. The Company cannot
predict the outcome of these matters.
8. (Reference is made to the Company's 1994 Form 10-K, Retail
Rate Matters, page 12, paragraph 5.) With regard to the
Company's annual North Carolina fuel case proceeding, on
June 2, 1995, the Company filed an application with the
NCUC to reduce the fuel expense portion of the Company's
rates by approximately 15% to reflect improved nuclear
performance and to refund, over a twelve-month period
beginning in September 1995, approximately $50 million in
fuel revenues, which exceeded actual costs for the test period,
and interest. The Company's North Carolina fuel case hearing
was held on August 1, 1995, but the NCUC has not yet
rendered a decision. The Company cannot predict the outcome
of this matter.
In the South Carolina retail jurisdiction, the Company's fall
1995 South Carolina fuel case is scheduled to begin on
September 13, 1995. The Company cannot predict the
outcome of this matter.
9. (Reference is made to the Company's 1994 Form 10-K, Retail
Rate Matters, page 12, paragraph 6.) With regard to the
NCUC's biennial avoided cost proceeding (Docket No. E-100,
Sub 75), on June 23, 1995, the NCUC approved, with one
minor exception, the Company's proposed lower avoided cost
rates. The Company anticipates that the revised lower rates
will result in savings to the Company, as it enters into new
purchase agreements with qualifying facilities.
10. (Reference is made to the Company's 1994 Form 10-K, Retail
Rate Matters, page 12, paragraph 7.) With regard to the
NCUC proceeding to consider whether the adoption of certain
standards would further the purposes of the Public Utility
Regulatory Policies Act, on May 16, 1995, the NCUC issued
an order stating that it has already adopted the standards
related to the use of integrated resource planning by electric
utilities and investments in conservation and demand-side
management. The order also states that the NCUC has
implemented the standards related to energy efficiency
investments in power generation and supply to the extent
permitted by state law.
11. (Reference is made to the Company's 1994 Form 10-K,
Wholesale Rate Matters, page 14.) By letter dated May 31,
1995, the Company requested that the FERC (Docket No. 95-
1139) establish a return on equity (ROE) in connection with
the formula rates provided in the Power Coordination
Agreement (PCA) dated August 27, 1993 between the
Company and NCEMC. The requested ROE is consistent with
the rate of return on common equity approved by the NCUC
in the Company's 1988 rate case. The Company cannot
predict the outcome of this matter.
12. (Reference is made to the Company's 1994 Form 10-K,
Wholesale Rate Matters, page 14.) On May 31, 1995, the
Company filed a petition with the FERC (Docket No. EL95-
50) seeking to recover certain fuel costs from the Company's
wholesale customers. These costs are related to the
Company's $6.8 million buyout of its contractual agreement
with The Arch Coal Sales Company (Arch Coal). As a result
of this buyout, the Company will purchase less coal from Arch
Coal in the future and will pay a lower purchase price for that
coal. The Company is seeking recovery of these costs from
the NCUC and the SCPSC. The Company cannot predict the
outcome of this matter.
13. (Reference is made to the Company's 1994 Form 10-K,
Wholesale Rate Matters, page 14.) On July 7, 1995,
Smithfield Foods, Inc., doing business as Carolina Foods
Processors, Inc. (Carolina Foods), filed a Complaint with the
FERC (Docket No. EL95-60) alleging that certain charges
imposed upon NCEMC under the PCA between the Company
and NCEMC are unreasonable. These charges are related to
generation installed by Carolina Foods, which receives electric
service from Four County EMC (a customer of NCEMC). The
Company filed its response to the Complaint on August 10,
1995. The Company cannot predict the outcome of this
matter.
14. (Reference is made to the Company's 1994 Form 10-K,
Environmental Matters, page 15, paragraph 3.a.) With regard
to the settlement negotiations involving the Maxey Flats
Nuclear Disposal Site in Fleming County, Kentucky, on June
5, 1995, a De Maximus Consent Decree (Consent Decree) was
filed on behalf of the Maxey Flats Steering Committee, which
includes the Company, and eleven federal agencies in the
United States District Court for the Eastern District of
Kentucky (Civil Action No. 95-58). The Consent Decree
provides for the performance of the Initial Remediation Phase
and the Balance of Remediation Phase, and for the
reimbursement of certain response costs incurred by the EPA.
The Department of Justice will receive comments relating to
the proposed Consent Decree until August 18, 1995. Although
the Company cannot predict the outcome of this matter, it does
not anticipate that costs associated with this site will be
material to the results of operations of the Company.
15. (Reference is made to the Company's 1994 Form 10-K,
Environmental Matters, page 15, paragraph 3.c.) With regard
to the remedial activities performed at the Elliot's Auto Parts
site in Benton, Arkansas, on July 12, 1995, the Company was
informed that the EPA had approved the final report regarding
the site on October 13, 1994. Now that the final report has
been approved, the settlement agreement between the Company
and the Elliot's Auto Parts Potentially Responsible Party
Committee will be implemented. Although the Company
cannot predict the outcome of this matter, it does not anticipate
that future costs associated with this site, if any, would be
material to the results of operations of the Company.
16. (Reference is made to the Company's 1994 Form 10-K,
Nuclear Matters, page 19, paragraph 3.) With regard to the
disposal of low-level radioactive waste, effective July 1, 1995,
South Carolina withdrew from the Southeast regional compact
and excluded North Carolina waste generators from the
existing disposal site in South Carolina. As a result, the State
of North Carolina does not have access to a low-level
radioactive waste disposal facility. The North Carolina Low-
Level Radioactive Waste Management Authority, which is
responsible for siting and operating a new low-level radioactive
waste disposal facility for the Southeast regional compact, has
submitted a license application for the site it selected in Wake
County, North Carolina to the North Carolina Division of
Radiation Protection. The Company's nuclear plants in North
Carolina are currently storing low-level waste on site and are
developing additional storage capacity to accommodate future
needs. The Company's nuclear plant in South Carolina has
access to the existing disposal site in South Carolina.
Although the Company cannot predict the outcome of this
matter, it does not expect the cost of providing additional on-
site storage capacity for low-level radioactive waste to be
material to the results of operations of the Company.
17. (Reference is made to the Company's 1994 Form 10-K, Other
Matters, page 27, paragraph 2. Reference is also made to the
Company's Form 10-Q for the quarter ended March 31, 1995,
Item 5, paragraph 6.) With regard to the independent safety
inspection report for the Marshall Hydroelectric Project, by
letter dated June 15, 1995, the FERC requested that the
Company perform further analyses and submit its findings to
the FERC by no later than August 14, 1995. The Company
cannot predict the outcome of this matter.
18. (Reference is made to the Company's 1994 Form 10-K, Other
Matters, page 27, paragraph 4.) With regard to the tax refund
dispute (Civil Action No. 5:94-CV-313-BR3) in which the
Company is seeking a refund of certain tax and interest related
to the Harris Plant depreciation deductions that were previously
disallowed by the Internal Revenue Service, it is anticipated
that a trial in this matter will begin in late 1995 or early 1996.
Item 6. Exhibits and Reports on Form 8-K
_______ ________________________________
(a) Exhibits
3(i) Restated Charter of Carolina Power & Light Company
as amended on May 10, 1995.
3(ii) By-Laws of Carolina Power & Light Company as
amended on May 10, 1995.
(b) Reports on Form 8-K filed during or with respect to the
quarter:
Date of Report
(Earliest Event Reported) Date of Signature Items Reported
_________________________ _________________ ______________
April 13, 1995 April 13, 1995 Item 7. Financial
Statements, Pro Forma
Financial Information
and Exhibits
April 20, 1995 April 20, 1995 Item 7. Financial
Statements, Pro Forma
Financial Information
and Exhibits
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAROLINA POWER & LIGHT COMPANY
(Registrant)
By /s/ Glenn E. Harder
Executive Vice President
By /s/ Paul S. Bradshaw
Vice President and Controller
(and Principal Accounting Officer)
Date: August 10, 1995