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, 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 incorporation (I.R.S. Employer
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 July 31, 1996: 151,953,422.
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, 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, Six and Twelve Months Ended June 30, 1996,
As Compared With the Corresponding Periods One Year Earlier
___________________________________________________________
Operating Revenues: For the three, six and twelve months ended June 30,
1996, operating revenues were affected by the following factors (in millions):
Three Months Six Months Twelve Months
____________ __________ _____________
Weather $ 21 $ 52 $ 152
Customer Growth/Changes
In Usage Patterns 10 45 75
NCEMC Load Loss (20) (39) (40)
Price (13) (28) (41)
Other 6 29 65
____ ____ ____
Total $ 4 $ 59 $ 211
==== ==== ====
The increase in the weather component of revenue for the three months
ended June 30, 1996, is the result of warmer than normal weather in the
current period. The six and twelve-month increases reflect milder than
normal weather in the prior period compared to more extreme weather patterns
in the current period. The loss of 200 megawatts of load from North
Carolina Electric Membership Corporation began in January 1996. For all
periods, the majority of the decrease in the price component of revenue is
attributable to a decrease in the fuel cost component of revenue.
The increase in other for the six and twelve months is primarily due to
increased bulk power sales, which reflect weather impacts and the Company's
active participation in the bulk power market.
Operating Expenses: Purchased power increased for the twelve months
ended June 30, 1996, due to increased purchases from cogenerators
($9 million) and from other utilities ($29 million). The increase in
purchases from cogenerators was the result of certain cogenerators being
shut down in the prior year. Partially offsetting the increased purchases
was a $10 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.
For the three and six months ended June 30, 1996, operation and
maintenance expense decreased primarily due to increased expenses in the
prior periods due to the timing of nuclear plant outages. Excluding the
impact of a December 1994 insurance reserve adjustment, which reduced
expense in the twelve month prior period, operation and maintenance
expense decreased $37 million for the twelve months ended June 30, 1996
due to cost-cutting efforts and outage timing. In the prior period there
were several major fossil and nuclear plant outages that resulted
in higher expense for that period as compared to the current period.
The increase in income tax expense for all periods is due to an increase
in operating income and a reserve recorded for potential audit issues in
open tax years.
Other Income: The increase in the income tax credit for the twelve
months ended June 30, 1996, is primarily attributable to lower
non-operating income in the current period.
Interest Charges: Other interest charges increased for the twelve months
ended June 30, 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 June 30, 1996
and From June 30, 1995, to June 30, 1996
________________________________________
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 $350 million of commercial paper outstanding as
of June 30, 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 did not issue long-term debt in the twelve-month period
ended June 30, 1996. The proceeds of the issuance of short-term debt
and/or internally generated funds financed the redemption or retirement
of long-term debt totaling $378 million and $426 million during the six
and twelve months ended June 30, 1996, respectively.
The Company's capital structure as of June 30 was as follows:
1996 1995
____ ____
Common Stock Equity 49.32% 47.98%
Long-term Debt 47.99% 49.37%
Preferred Stock 2.69% 2.65%
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 8.8 million shares through June 30, 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, 1996.
)
)
Item 4. Submission of Matters to a Vote of Security Holders
_______ ___________________________________________________
(a) The Annual Meeting of the Shareholders was held on May 8, 1996.
(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 to expand the purposes for which the Company
exists and to broaden the powers of the Company was
approved by the shareholders. The number of shares voted for
the amendment was 130,408,274, and the number of shares voted
against the amendment was 2,117,895.
The total votes for the election of directors were as follows:
Class I Votes For Votes Withheld
_______ _________ ______________
(Term Expiring in 1999)
Leslie M. Baker, Jr. 132,601,648 2,750,919
William O. McCoy 132,713,230 2,639,337
Sherwood H. Smith, Jr. 132,665,812 2,686,755
J. Tylee Wilson 132,637,529 2,715,038
Item 5. Other Information
_______ __________________
1. (Reference is made to the Company's 1995 Form 10-K, Generating
Capability, paragraph 3, page 6. Reference is also made to
the Company's Form 10-Q for the quarter ended March 31,
1996, Item 5, paragraph 1.) With regard to the Company's
generation additions schedule, the Company has delayed plans
for construction of the 500 MW of combustion turbine capacity
adjacent to the Company's Lee Steam Electric Plant in Wayne
County, North Carolina. Construction of the 500 MW of capacity,
originally scheduled to begin this year, is now scheduled to
begin no earlier than 1997, with commercial operation now
anticipated to begin in 1999. In the interim, summer
1998 peaking requirements will be met with power purchases.
In June, the Company issued a Request for Proposals (RFP) for
purchased power of 700 to 1000 MW of capacity to meet
the Company's future generation needs in its service territory.
The Company projects a need of approximately 200 to 350 MW in
its western service territory, and approximately 350 to 650 MW
in its eastern service territory. The capacity was requested
to be available for delivery by June 1, 1999. Proposals were
invited from all potential suppliers who were capable of
meeting the conditions of the RFP. Due to increased economic
activity and growth in its western service territory, the
Company is also investigating the possibility of adding
combustion turbines at its Asheville plant in order to ensure
continuted reliable service to its customers. The
Company cannot predict the outcome of this matter.
2. (Reference is made to the Company's 1995 Form 10-K,
Interconnections with Other Systems, paragraph 3,
page 7). The Company has agreed with Cogentrix of North
Carolina, Inc. and Cogentrix Eastern North Carolina
Corporation to amend five purchased power contracts.
These amendments will become effective only after Cogentrix
obtains refinancing of the debt for the five plants covered
by the contracts. The amendments permit the Company
to dispatch the output of these plants. In return, the
Company will give up its right to purchase two of the five
plants. These amendments will result in substantial savings
to the Company over the life of these contracts.
3. (Reference is made to the Company's 1995 Form 10-K,
Competition and Franchises, paragraph 1.b., page 8.
Reference is also made to the Company's Form 10-Q for
the quarter ended March 31, 1996, Item 5, paragraph
2.) With regard to the final rules issued on April 24, 1996
in orders 888 and 889 by the Federal Energy Regulatory
Commission (FERC) regarding open access transmission and
stranded costs and on information systems and
standards of conduct, on May 24, 1996, the Company filed
a Request for Clarification and Rehearing of those orders,
as did many other entities. The orders vary in certain
respects from the proposed rules the FERC had issued, but
the final rules still require all transmitting utilities to
file an open access transmission tariff for wholesale
transactions. The Company filed its open access transmission
tariff with the FERC on July 9, 1996. On August 7, 1996,
North Carolina Eastern Municipal Power Agency (Power Agency)
filed with FERC a motion to intervene and protest
concerning the Company's tariff. That protest challenges
numerous aspects of the Company's tariff and requests that
an evidentiary proceeding be held. A number of other entities
have filed similar interventions since that time. The Company
cannot predict the outcome of this matter.
By order issued May 7, 1996, in Docket No. E-100, Sub 77,
which concerns retail competition, the North Carolina
Utilities Commission (NCUC) found that these FERC rules
essentially restructure the wholesale electric industry,
and therefore may provide a new focus for NCUC proceedings
with respect to competition in the electric industry.
As a result, the NCUC concluded: (i) that all parties should
concentrate their efforts on examining the impacts of
the FERC orders, (ii) that the filing of comments requested by
its order issued April 3, 1996 should be extended
indefinitely, and (iii) that this docket should be held in
abeyance pending further order. The Company cannot predict
the outcome of this matter.
By order issued May 15, 1996, the NCUC established a new docket
(Docket No. E-100, Sub 78) to address the FERC orders. In
accordance with the NCUC's order, the Company filed its
comments on July 16, 1996 regarding the implementation of the
FERC's orders, their impact on North Carolina customers and
what the NCUC can do to maximize the benefits of the wholesale
market. The Company cannot predict the outcome of this matter.
With regard to the issue of retail wheeling, legislation was
introduced in Congress on July 11, 1996 (HR 3790) mandating
retail wheeling in all 50 states no later than December 15,
2000. As proposed, the bill would require states to give all
customers the right to choose their electric
supplier. If this choice was not implemented by the
states, the bill proposes that the FERC would be responsible for
the implementation. The Company cannot predict the outcome of
this matter.
4. (Reference is made to the Company's 1995 Form 10-K, Competition
and Franchises, paragraph 1.h., page 10.) With regard to the
request made by one of the Company's industrial customers
to the City of Darlington, South Carolina ("City") that the
City become a municipal electric utility, both the
Company and the City have undertaken studies to determine
the feasibility of the municipalization proposal. The
results of the Company's study, which was conducted by the
consulting group Stone & Webster, found that municipalization
would increase the cost of electricity to the City.
The results of the City's study, conducted by the consulting
group Strategic Energy Limited, found that municipalization
will only benefit the City if the City is not required to pay
the Company for any of its lost revenues or stranded costs.
The Company cannot predict the outcome of this matter
5. (Reference is made to the Company's 1995 Form 10-K,
Competition and Franchises, paragraph 1, page 11.)
On August 7, 1996, North Carolina Eastern Municipal Power
Agency (Power Agency) notified the Company that
it intends to discontinue certain contractual purchases of
electricity from the Company effective September 1, 2001.
The contract between the parties requires that Power Agency give
appropriate notice five years prior to such event.
Power Agency stated that it intends to replace these contractual
purchases with purchases from the wholesale market
and that the Company will be considered as a supplier for those
purchases. 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 2, page 13.) With regard to the
Company's current retail rates, a petition was filed on
July 19, 1996 by the Carolina Industrial Group for Fair
Utility Rates (CIGFUR) with the NCUC requesting the NCUC
conduct an investigation of the Company's base rates.
The petition alleges that the Company's return on equity,
which was authorized by the NCUC in the Company's last general
rate proceeding in 1988, and earnings are too high.
The Company filed a response to the petition and motion to
dismiss on July 29, 1996, in which it argued that
the petition was without merit. It is not known at this time
if the NCUC will initiate a proceeding. The Company cannot
predict the outcome of this matter.
7. (Reference is made to the Company's 1995 Form 10-K, Retail
Rate Matters, paragraph 5, page 14. Reference is also made to
the Company's Form 10-Q for the quarter ended March 31, 1996,
Item 5, paragraph 6.) With regard to the Company's 1996 North
Carolina fuel case hearing, on June 7, 1996, the Company
filed its 1996 application proposing no change in its net fuel
factor. The Company cannot predict the outcome of this matter.
With regard to the South Carolina retail jurisdiction, the
South Carolina General Assembly made several modifications
during the 1996 legislative session to SC Code Ann. Section
58-27-865, which is the statute that governs the
recovery of fuel cost by electric utilities. The
modifications include: changing the test period from a
six month period to a twelve month period, which would
result in the frequency of fuel cost hearings being changed
from every six months to every twelve months; allowing
utilities to recover the cost of Clear Air Act allowances
through the fuel factor; and establishing a rebuttable
presumption of prudent operation of a utility's nuclear
generating facilities if the utility achieves a nuclear
system capacity factor of 92.5%, exclusive of refueling
and maintenance outages. Due to these modifications of
the statute, the Company's next South Carolina fuel
proceeding will be in March of 1997.
8. (Reference is made to the Company's 1995 Form 10-K, Fuel,
paragraph 2, page 24.) With regard to the Company's
coal-supply contracts, the Company and certain subsidiaries of
Zeigler Coal Holding Company (Zeigler) have renegotiated
their existing contract. Under the revised agreement,
which expires in 2006, the Company will continue to
purchase approximately 2.75 million tons of coal annually
from Zeigler's Marrowbone mine, and will purchase approximately
6 million tons of additional, lower cost coal from Zeigler
over a period of several years under a new contract. The
coal will be required to meet the same technical
specifications for sulfur and thermal content as the coal
supplied from the Marrowbone mine, and is expected to save the
Company more than $100 million over the life of the contract.
9. (Reference is made to the Company's 1995 Form 10-K, Other
Matters, page 27.) With regard to Hurricane Bertha
that struck the North Carolina coast on July 12, 1996, as a
precaution the Company's Brunswick nuclear power plant
was put into cold shutdown. Once the storm passed, the
Federal Emergency Management Agency completed its review
of the plant's offsite emergency plans and equipment, and
the plant was given permission to restart on July 15.
The cost of repairing the storm's damage to the Company's
system, estimated to be between $8 million and $10 million,
will not have a material impact on the results of operations
or financial position 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: August 12, 1996