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 September 30, 1995
__________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _________
Commission file 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 (I.R.S. Employer
incorporation or organization) Identification 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
October 31, 1995: 153,889,022
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 September 30, 1995. The amounts are unaudited but, in the
opinion of management, reflect all adjustments 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, Nine and Twelve Months Ended September 30, 1995,
As Compared With the Corresponding Periods One Year Earlier
_______________________________________________________________
Operating Revenues: For the three, nine and twelve months
ended September 30, 1995, operating revenues increased due to the
following factors (in millions):
Three Months Nine Months Twelve Months
____________ ___________ _____________
Customer Growth/Changes
In Usage Patterns $33 $88 $118
Weather 31 7 (25)
Price (6) (55) (73)
Sales to North Carolina Eastern
Municipal Power Agency 1 (21) (27)
Sales to Other Utilities 11 29 36
___ ___ ____
Total $ 70 $ 48 $ 29
==== ==== ====
The increase in the weather component of revenue for the
three months ended September 30, 1995, is the result of warmer
weather in the current period as compared to the prior period.
The decrease in the price component of revenue for the nine- and
twelve-month periods is due primarily to the expiration in July
1994 of a North Carolina rate rider under which the Company was
allowed recovery of abandoned plant costs. The reduction in
revenue did not significantly impact net income due to a
corresponding decrease in amortization expense. In addition,
approximately $15 million of the price component decrease for the
nine-month period and approximately $20 million for the twelve-
month period is attributable to a decrease in the fuel cost
component of revenue. Sales to North Carolina Eastern Municipal
Power Agency (Power Agency) decreased for the nine- and twelve-
month periods due to greater availability of the jointly-owned
generating units. Sales to other utilities increased for the nine-
and twelve-month periods due to greater availability of the
Company's generating units. In addition, the Company was more
active in the bulk power market, contributing to the increase in
sales to other utilities for all periods.
Operating Expenses: The increase in fuel for generation for
the three and nine months ended September 30, 1995, is primarily
the result of 9% and 7% increases in total generation,
respectively. Also contributing to the increase for the three-
month period is a decrease in lower-cost nuclear generation
primarily attributable to a nuclear plant outage during the
current period. Despite a 6% increase in total generation, fuel
for generation decreased for the twelve months ended
September 30, 1995, due to greater availability of the Company's
nuclear generating units in the current period. During this
period, lower-cost nuclear generation, as a percentage of total
generation, increased and higher-cost fossil generation
correspondingly decreased.
For the three months ended September 30, 1995, deferred fuel
cost decreased primarily due to higher fuel costs resulting from a
nuclear plant outage in the current period. In addition, greater
demand in the current period resulted in increased generation at
the higher-cost fossil plants.
Purchased power decreased for the nine and twelve months
ended September 30, 1995, due to reduced purchases from Power
Agency in accordance with the Harris Plant buyback agreement that
stipulates a decrease in the buyback percentage from 50% in 1993
and 1994 to 33% in 1995. For the twelve-month period, the
decrease also reflects lower purchases from other utilities, as a
result of greater availability of Company generating facilities in
the current period. For the three-month period, purchased power
increased due to increased purchases from other utilities as a
result of warmer weather and a nuclear plant outage in the current
period.
For the nine and twelve months ended September 30, 1995,
maintenance expense decreased due to shorter nuclear outages in
the current periods as compared to the prior periods. The
increase in the three-month period is primarily due to a nuclear
plant outage during the current period.
For all periods, the decreases in depreciation and
amortization reflect the completion of the amortization of
abandoned plant costs for Harris Unit No. 2. For the nine- and
twelve-month periods, the decrease also reflects the completion of
amortization of costs associated with the North Carolina rate
rider.
The increase in income tax expense for all periods is
primarily due to an increase in operating income. Additionally,
contributing to the increase for the nine- and twelve-month periods is a
reduction of expense in the prior periods related to certain Internal
Revenue Service (IRS) audit issues.
Other Income (Expense): The increase in the income tax
credit for all periods ended September 30, 1995, is primarily
attributable to lower non-operating income in the current periods.
The decrease in Harris Plant carrying costs for the twelve
months ended September 30, 1995, is primarily related to the
Company's settlement with North Carolina Electric Membership
Corporation in 1993.
The decrease in interest income for the nine- and twelve-
month periods is primarily due to the June 1994 recording of
interest income related to certain IRS audit issues.
Interest Charges: Other interest charges increased for all
periods ended September 30, 1995, primarily due to a $6 million
interest accrual related to the 1995 North Carolina Utilities
Commission Fuel Order. Due to the improved performance of the
Company's nuclear facilities during the test year ended March 31,
1995, the fuel component of customer rates exceeded actual fuel
costs incurred. As a result, the Company must refund this over-
recovery of fuel cost with interest over the twelve month period
beginning September 15, 1995.
Material Changes in Capital Resources and Liquidity
From December 31, 1994, to September 30, 1995
and From September 30, 1994, to September 30, 1995
__________________________________________________
During the nine and twelve months ended September 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 $252 million during the nine and twelve months ended
September 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. As
of September 30, 1995, the Company's credit facilities total $285
million, consisting of long-term agreements totaling $185 million
and a $100 million short-term agreement. The Company had $17
million of commercial paper outstanding at September 30, 1995.
The Company's capital structure as of September 30 was as
follows:
1995 1994
____ ____
Common Stock Equity 48.22% 49.82%
Long-term Debt 49.15% 47.46%
Preferred Stock 2.63% 2.72%
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 6.8 million shares from July 1994 through September
1995. The decrease in average common shares outstanding resulted
in an increase in earnings per common share of approximately $.04,
$.07 and $.07 for the three, nine and twelve months ended
September 30, 1995, respectively.
Impact of New Accounting Standard
_________________________________
The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of." The provisions of the Statement, which must
be implemented by the Company for the year beginning January 1,
1996, require a review of long-lived assets and certain
identifiable intangibles for impairment whenever events or changes
in circumstances indicate the carrying amount may not be
recoverable. If such a review indicates that the carrying amount
of an asset is not recoverable, an impairment loss must be
recognized. The Company's initial review indicates that the
implementation of this Statement will not have a material impact
on the results of operations. In accordance with the requirements
of the Statement, the Company will periodically review its long-
lived assets to determine if an impairment loss exists.
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 September 30, 1995.
)
)
Item 4. Submission of Matters to a Vote )
of Security Holders )
______ _______________________________ )
Item 5. Other Information
______ _________________
1. (Reference is made to the Company's 1994 Form 10-K
General, page 3, paragraph 4.a.). A 60-minute
system peak demand record of 10,156 megawatts (MW)
was reached on August 14, 1995. At the time of
this peak demand, the Company's capacity margin
based on installed capacity (less unavailable
capacity) and scheduled firm purchases and sales
was approximately 5.45%.
2. (Reference is made to the Company's 1994 Form 10-
K, Generating Capability, page 4, paragraph 3.)
With regard to the Company's plan to construct ten
new combustion turbine generating units adjacent
to the Company's Lee Steam Electric Plant in Wayne
County, North Carolina, on September 27, 1995, the
Company filed an Application for a Certificate of
Public Convenience and Necessity with the North
Carolina Utilities Commission (NCUC) seeking
permission to construct combustion turbines with a
combined capacity of 500 MW at the Wayne County
site. The units are scheduled to begin commercial
service in 1998. The NCUC hearing in this matter
is scheduled for January 9, 1996. Although the
Company's resource addition plans have not
changed, the Company elected not to seek
permission at the present time to construct the
entire amount of capacity as set forth in its
preliminary plans so that it can evaluate other
resource options. The Company cannot predict the
outcome of this matter.
3. (Reference is made to the Company's 1994 Form 10-
K, Competition and Franchises, page 8, paragraph
1.b. Reference is also made to the Company's Form
10-Q for the quarter ended March 31, 1995, Item 5,
paragraph 1.) With regard to the Notice of
Proposed Rulemaking (Proposal) issued by the
Federal Energy Regulatory Commission (FERC) on
March 29, 1995, that would establish guidelines
for wholesale wheeling of electric power, the
Company filed comments regarding the Proposal with
the FERC on August 7, 1995. In those comments, the
Company disagreed with the FERC's approach to
regulating wholesale wheeling, and indicated that
in issuing the proposed guidelines the FERC
exceeded its authority. The Company also
suggested ways to improve the proposed guidelines,
in the event that they are enacted. On August 11,
1995, the Company filed comments concerning the
FERC's inquiry regarding the potential
environmental impact of the Proposal. In those
comments, the Company questioned whether the FERC
had complied with the requirements of the National
Environmental Policy Act. On October 4, 1995,
the Company filed reply comments which addressed a
number of specific points made in the initial
comments other parties filed regarding the
Proposal. 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,
paragraph 1.b. Reference is also made to the
Company's Form 10-Q for the quarter ended
June 30, 1995, Item 5, paragraph 1.) With regard
to the petition filed with the NCUC on February 8,
1995 by the Carolina Utility Customers
Association, Inc. requesting that the NCUC hold a
generic hearing to address various retail wheeling
issues, in an order dated July 21, 1995, the NCUC
requested that interested parties suggest specific
issues for further consideration. On September
19, 1995, the Company filed with the NCUC a list
of specific issues it believes should be addressed
prior to any form of retail wheeling being allowed
in the state of North Carolina. The issues
include, but are not limited to, (i) concerns
about system planning and service reliability;
(ii) the drastic changes to the laws governing
utility regulation that would need to be
implemented before retail wheeling could be
allowed; (iii) whether retail choice promotes cost
reduction rather than cost shifting; and (iv) how
will stranded costs be determined and recovered.
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,
paragraph 1.d. Reference is also made to the
Company's Form 10-Q for the quarter ended June 30,
1995, Item 5, paragraph 3.) With regard to the
bids submitted by the Company in response to North
Carolina Electric Membership Corporation's (NCEMC)
two requests for proposals, on September 13, 1995,
NCEMC notified the Company that it had decided to
suspend negotiations regarding the Company's bids
at this time, but requested that the Company leave
its bids open for future consideration. Under
the terms of the Power Coordination Agreement,
dated August 27, 1993, between the Company and
NCEMC, reductions in the baseload capacity NCEMC
purchases from the Company beyond the year 2000
are subject to specific limits and require five
years notice. NCEMC has not officially notified
the Company that the baseload power to be supplied
to NCEMC by the Company beginning in 2001 will be
provided by another entity. The Company cannot
predict the outcome of this matter.
6. (Reference is made to the Company's 1994 Form 10-
K, Financing Program, page 10, paragraph 5.) As
of September 30, 1995, the Company's credit
facilities total $285 million, consisting of long-
term agreements totaling $185 million and a $100
million short-term agreement.
7. (Reference is made to the Company's 1994 Form 10-
K, Retail Rate Matters, page 12, paragraph 3.
Reference is also made to the Company's Form 10-Q
for the quarter ended June 30, 1995, Item 5,
paragraph 7.) With regard to the Company's 1995
Integrated Resource Plan (IRP), which was filed
with the NCUC on April 28, 1995, by order dated
September 8, 1995, the NCUC revised the filing and
hearing schedule in this proceeding. The NCUC has
indefinitely postponed the hearing that was
scheduled for October 10, 1995, in order to better
identify and refine the evidentiary issues so that
the hearing can be more clearly focused and
efficiently managed. The order also required all
parties not previously filing testimony to file
comments on the utilities' prefiled testimony by
October 10, 1995, and allowed all parties to file
reply comments by October 23, 1995. In a
subsequent order, the NCUC established November 7,
1995 as the deadline for intervenors to respond to
the reply comments, and allowed the electric
utilities to file rebuttal comments by November
14, 1995. The Company cannot predict the outcome
of this matter.
8. (Reference is made to the Company's 1994 Form 10-
K, Retail Rate Matters, page 12, paragraph 5.
Reference is also made to the Company's Form 10-Q
for the quarter ended June 30, 1995, Item 5,
paragraph 8.) With regard to the Company's annual
North Carolina fuel case proceeding, by order
dated September 6, 1995, the NCUC approved the
Company's request for a reduction in the fuel
expense portion of the Company's rates, reflecting
the Company's improved nuclear performance, and
refunding approximately $44 million
in fuel-related revenues, which exceeded actual
costs for the test period, and $6 million in
related interest. The new fuel factor became
effective on September 15, 1995, and will remain
in effect for one year.
With regard to the South Carolina jurisdiction,
the Company's fall 1995 fuel case hearing was held
on September 13, 1995, and by order dated
September 25, 1995, the South Carolina Public
Service Commission (SCPSC) approved the
continuation of the existing fuel factor of 1.34
cents/kwh for the six month period October 1, 1995
through March 31, 1996, as requested by the
Company.
9. (Reference is made to the Company's 1994 Form 10-
K, Nuclear Matters, page 19, paragraph 7.b.) With
regard to the Individual Plant Examinations (IPEs)
required by the Nuclear Regulatory Commission, in
June 1995, the Company completed and submitted the
results of the second phase of the IPEs (for
externally initiated events) for the Company's
three nuclear plants. The results of the IPEs
indicated that some procedural changes may be
required for the Harris and Brunswick Plants.
Those results also indicated that both minor
procedural changes and minor plant modifications
may be required for the Robinson Plant. Although
the Company cannot predict at this time the exact
magnitude of the financial and operational impacts
of the second phase of the IPEs, it does not
expect those impacts to be material to the results
of operations of the Company.
10. (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 Forms 10-Q for the
quarter ended March 31, 1995, Item 5, paragraph 6,
and for the quarter ended June 30, 1995, Item 5,
paragraph 17.) With regard to the independent
safety inspection report for the Marshall
Hydroelectric Project, on August 17, 1995, a
meeting was held between the Company and the FERC
to discuss the FERC's June 15, 1995, request for
further analyses. As a result of that meeting,
the Company submitted the first phase of the
requested analyses to the FERC by letter dated
September 15, 1995. The Company cannot predict
the outcome of this matter.
11. (Reference is made to the Company's 1994 Form 10-
K, Other Matters, page 27, paragraph 4. Reference
is also made to the Company's Form 10-Q for the
quarter ended June 30, 1995, Item 5, paragraph
18.) 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, on August 31, 1995, the
U.S. Government (Government) filed a Motion for
Summary Judgment. The Company filed a response in
opposition to the Government's Motion. By Order
dated October 18, 1995, the court denied the
Government's Motion for Summary Judgment. It is
anticipated that a trial in this matter will begin
in late 1995 or early 1996. The Company cannot
predict the outcome of this matter.
12. (Reference is made to the Company's 1994 Form 10-
K, Other Matters, page 27, paragraph 6. Reference
is also made to the Company's Form 10-Q for the
quarter ended March 31, 1995, Item 5, paragraph
9.) With regard to the Company's wholly-owned
subsidiary, CaroNet, Inc. (CaroNet), in addition
to participating in the regional partnership that
will operate a personal communications services
system, CaroNet plans to provide intrastate and
interstate telecommunications services as a
wholesaler. On May 15, 1995 and May 22, 1995,
CaroNet filed applications with the NCUC and the
SCPSC, respectively, for a Certificate of Public
Convenience and Necessity, seeking permission to
provide wholesale intrastate telecommunications
services in North Carolina and South Carolina. By
order dated November 3, 1995, the NCUC stated that
it will no longer regulate the provision of
wholesale intrastate telecommunications services.
As a result of this order, the application CaroNet
filed with the NCUC will be withdrawn. The
hearing regarding the application filed with the
SCPSC was held on November 1, 1995, but the SCPSC
has not yet issued its decision. The Company
cannot predict the outcome of this matter.
Item 6. Exhibits and Reports on Form 8-K
______ ________________________________
(a) Exhibits
None.
(b) Reports on Form 8-K filed during or with respect
to the quarter
None.
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
Executve Vice President
and Chief Financial Officer
Date: November 9, 1995