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 March 31, 1996
______________
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 Identification No.)
incorporation or organization)
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 April 30, 1996:
152,086,922.
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 March 31, 1996.
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 and Twelve Months Ended March 31, 1996,
As Compared With the Corresponding Periods One Year Earlier
___________________________________________________________
Operating Revenues: For the three and twelve months ended March 31, 1996,
operating revenues increased due to the following factors (in millions):
Three Months Twelve Months
____________ _____________
Customer Growth/Changes
In Usage Patterns $ 15 $ 81
Weather 31 111
Price (15) (48)
Other 24 58
_____ _____
Total $ 55 $ 202
===== =====
The increase in the weather component of revenue for the three months ended
March 31, 1996, is the result of colder weather in the current period as
compared to the prior period, which was milder than normal. The twelve-month
increase lso reflects more extreme weather patterns in the current period than
in the prior period. Approximately $13 million of the decrease in the price
componet of revenue for the three-month period and approximately $32 million for
the twelve-month period are attributable to a decrease in the fuel cost
component of revenue. In addition, for the twelve months, the price component
decreased due to the expiration in July 1994 of a North Carolina rate rider
under which the Company was allowed recovery of certain abandoned plant costs.
This reduction in revenue did not significantly impact net income due to a
corresponding decrease in amortization expense. The increase in the other
component for both periods is due to increased bulk power sales, which reflect
weather impacts and to the Company's active participation in the bulk power
market. The loss of 200 megawatts of load from North Carolina Electric
Membership Corporation, beginning in January 1996, is included as a reduction
in the customer growth component.
Operating Expenses: The increase in fuel expense for the three and twelve
months ended March 31, 1996, is primarily due to a change in the generation mix.
For the three months, fossil generation, as a percentage of total generation,
increased from 43% to 59% and lower-cost nuclear generation decreased from 55%
to 39%. For the twelve months, fossil generation increased from 47% to 57%, and
nuclear generation decreased from 51% to 41%. The change in the generation mix
is due primarily to the timing of refueling outages of the Company's nuclear
facilities. Also contributing to the increase in fuel expense for both periods
is an increase in total generation due to higher sales.
Purchased power increased for the three months ended March 31, 1996, due to
reduced purchases from cogenerators in the prior period. For the twelve months
ended March 31, 1996, purchased power increased due to the reduced purchases
from cogenerators in the prior period ($15 million) and increased purchases from
other utilities ($24 million). These increases were partially offset by a $14
million decrease in purchases from Power Agency, which was primarily due to the
provisions of the Company's 1993 agreement with Power Agency. Pursuant to this
agreement, the Company's buyback percentage of capacity and energy from the
Harris Plant decreased from 50% in 1994 to 33% in 1995 and 1996.
Excluding the impact of a December 1994 insurance reserve adjustment, which
reduced expense in the prior period, operation and maintenance expense decreased
$20 million for the twelve months ended March 31, 1996. In the prior year there
were several major fossil plant outages that resulted in higher expense for that
period as compared to the current period.
For the twelve months ended March 31, 1996, the decrease in depreciation
and amortization reflects the completion of the amortization of abandoned plant
costs for Harris Unit No. 2 ($14 million decrease) and the completion in July
1994 of the amortization of certain abandoned plant costs associated with a
North Carolina rate rider ($13 million decrease). Partially offsetting the
decreases was an increase of $11 million in depreciation expense.
The increase in income tax expense for both periods is primarily due to an
increase in operating income.
Other Income: The increase in the income tax credit for the twelve months
ended March 31, 1996, is primarily attributable to lower non-operating income in
the current period.
The decrease in interest income for the twelve-month period is primarily
due to the recording in June 1994 of interest income related to certain IRS
audit issues.
Other income, net, decreased for the twelve-month period due to an increase
in charitable contributions of approximately $7 million and decreases in various
income items, none of which is individually significant.
Interest Charges: Other interest charges increased for the twelve months
ended March 31, 1996, primarily due to a $6 million interest accrual related to
the 1995 North Carolina Utilities Commission Fuel Order.
Material Changes in Capital Resources and Liquidity
From December 31, 1995, to March 31, 1996
and From March 31, 1995, to March 31, 1996
___________________________________________________
During the twelve months ended March 31, 1996, the Company issued long-term
debt of $125 million. The Company did not issue long-term debt in the
three-month period. The proceeds of this issuance, and/or the issuance of
short-term debt and internally generated funds, financed the redemption or
retirement of long-term debt totaling $248 million and $399 million during the
three and twelve months ended March 31, 1996, respectively.
In the first quarter of 1996, the Company entered into two new long-term
revolving credit facilities totaling $350 million, which support the Company's
commercial paper borrowings. The Company is required to pay minimal annual
commitment fees to maintain these facilities. Consistent with management's
intent to maintain its commercial paper on a long-term basis, and as supported
by its long-term credit facilities, the Company has included in long-term debt
$339 million of commercial paper outstanding as of March 31, 1996. In addition
to these new facilities, the Company has other long-term credit agreements
totaling $235 million and a $100 million short-term credit agreement.
The Company's capital structure as of March 31 was as follows:
1996 1995
____ ____
Common Stock Equity 49.47% 48.94%
Long-term Debt 47.83% 48.37%
Preferred Stock 2.70% 2.69%
The Company's First Mortgage Bonds are currently rated "A2" by Moody's
Investors Service, "A" by Standard & Poor's and "A+" by Duff & Phelps. Moody's
Investors Service, Standard & Poor's 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 repurchase
of up to 10 million shares of the Company's common stock on the open market. In
accordance with the stock repurchase program, the Company has purchased
approximately 8.6 million shares through March 31, 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 ) Not applicable for the
Securities ) quarter ended March 31, 1996.
_______ ____________________ )
)
Item 4. Submission of Matters to )
a Vote of Security Holders )
_______ __________________________ )
Item 5. Other Information
_______ _________________
1. (Reference is made to the Company's 1995 Form 10-K, Generating
Capability, paragraph 3, page 6.) With regard to the Company's
generation additions schedule, the Company filed an Application
for a Certificate of Public Convenience and Necessity with the
North Carolina Utilities Commission (NCUC) on September 27,
1995, seeking permission to construct 500 MW of combustion
turbine capacity adjacent to the Company's Lee Steam Electric
Plant in Wayne County, North Carolina. The NCUC hearing in this
matter was held on January 9, 1996, and by order issued March
21, 1996, the NCUC granted the Company a certificate to
construct these combustion turbine units.
The Company issued a Notice of Inquiry (NOI) on March 12, 1996
concerning short-term power purchases for the peak winter months
of 1998 and 1999, and the peak summer months of 1998. The NOI
was sent to a number of electric utilities, independent power
producers and power marketers. The Company has received a
number of bids, which are under review and evaluation. The
Company currently plans to issue a request for bids during the
second quarter of 1996 relating to its next two blocks of
capacity additions. The Company cannot predict the outcome of
these matters.
2. (Reference is made to the Company's 1995 Form 10-K, Competition
and Franchises, paragraph 1.b., page 8). On April 24, 1996 the
Federal Energy Regulatory Commission (FERC) issued its final
rules on open access transmission and stranded costs and on
information systems and standards of conduct. The rule as
announced will require all transmitting utilities to have on
file an open access transmission tariff and it contains
provision for the recovery of stranded costs. The rule also
contains numerous other items that could impact the sale of
electric energy at the wholesale level. These final rules
become effective sixty (60) days after the rules are published
in the Federal Register. FERC also issued a notice of proposed
rulemaking (NOPR) on Capacity Reservation Open Access
Transmission Tariffs. Comments on this new NOPR are due to FERC
by August 1, 1996. The Company cannot predict the outcome of
this matter.
With regard to the issue of retail competition in the Company's
retail jurisdictions, in 1995, the NCUC concluded that for the
time being it should monitor developments in other states and at
the FERC regarding jurisdictional and other issues affecting
retail competition. The NCUC also requested that interested
parties suggest specific issues it should consider in connection
with this matter. In response to those suggestions, on April 3,
1996, the NCUC issued an order seeking comments regarding the
impact of retail competition on system reliability, obligation
to serve, stranded costs and ancillary costs. These comments
are due June 3, 1996. The NCUC continues to believe there is no
need to hold hearings at this time. The Company cannot predict
the outcome of this matter.
3. (Reference is made to the Company's 1995 Form 10-K, Competition
and Franchises, paragraph 1.f., page 10.) On April 26, the
Joint Utility Review Committee adopted a resolution stating
"that no further amendments to Chapter 62 of the General
Statutes are necessary at this time to encourage the
construction of new interstate pipelines in North Carolina (and)
that the Committee will continue to review the efforts to expand
natural gas service in North Carolina on a regular basis, as the
Committee has done since 1987." The Company cannot predict the
outcome of this matter.
4. (Reference is made to the Company's 1995 Form 10-K, Financing
Program, paragraph 4, page 12.) Additional retirements and
redemptions during 1996 were as follows:
-- The retirement on April 1, 1996, of $30 million principal
amount of First Mortgage Bonds, 5.125% Series, which matured
on that date.
-- The redemption on April 1, 1996, of $100 million principal
amount of First Mortgage Bonds, 9% Series due April 1, 2022,
at 105.89% of the principal amount of such bonds plus accrued
interest to the date of redemption.
5. (Reference is made to the Company's 1995 Form 10-K, Retail Rate
Matters, paragraph 3, page 14.) With regard to the South
Carolina Public Service Commission's (SCPSC) proceeding to
consider the Company's 1995 Integrated Resource Plan, the South
Carolina Consumer Advocate and Nucor Corporation have intervened
in this proceeding. The Company cannot predict the outcome of this
matter.
6. (Reference is made to the Company's 1995 Form 10-K, Retail Rate
Matters, paragraph 5, page 14.) With regard to the Company's
spring 1996 South Carolina fuel case hearing, by order dated
March 29, 1996, the SCPSC granted the Company's request to
maintain the fuel factor at its current level of 1.34 cents/kWh
for the six month period from April 1, 1996 through September 30,
1996.
7. (Reference is made to the Company's 1995 Form 10-K, Retail Rate
Matters, paragraph 6, page 15.) With regard to the Company's
South Carolina avoided cost proceeding, the SCPSC has opened
Docket No. 95-1192-E to establish avoided cost rates for all
electric utilities in South Carolina, and hearings are scheduled
for August 8 and 9, 1996.
8. (Reference is made to the Company's 1995 Form 10-K, Wholesale
Rate Matters, paragraph 2.a., page 15.) With regard to the
offer of settlement the Company filed with the FERC on February
6, 1996, concerning the return on equity (ROE) in connection
with the formula rates provided in the Power Coordination
Agreement dated August 27, 1993, between the Company and the
North Carolina Electric Membership Corporation, on April 11,
1996 the FERC issued an order approving the 10.75% ROE and
ordered refunds of excess revenues collected since January 1,
1996. These refunds are not material to the results of
operations of the Company.
9. (Reference is made to the Company's 1995 Form 10-K,
Environmental Matters, paragraph 3, page 16.) By letter dated
March 7, 1996, the Environmental Protection Agency (EPA)
notified the Company that it is a potentially responsible party
(PRP) with respect to the disposal of hazardous substances at
the Cherokee Oil Company (Cherokee) sites in Charlotte, North
Carolina. The materials sent from the Company's facilities to
the Cherokee sites were associated with tank cleanings at the
Company's former Wilmington Oil Terminal. The EPA has performed
removal actions at the sites and is now seeking information for
purposes of cost recovery. Although the Company cannot predict
the outcome of this matter, it does not anticipate costs
associated with this site will be material to the results of
operations of the Company.
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:
Date of Report
(Earliest Event Reported) Date of Signature Items Reported
_________________________ _________________ ______________
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
Executive Vice President
By /s/ Mark F. Mulhern
Vice President and Controller
(and Principal Accounting Officer)
Date: May 14, 1996