UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 17, 1997
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, TX 75202-1234
(214) 777-1000
0-343 Public Service Company of Oklahoma 73-0410895
(An Oklahoma Corporation)
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(918) 599-2000
FORWARD LOOKING INFORMATION
This report and other presentations made by Central and South West Corporation
(CSW) and its subsidiaries contain forward looking statements within the meaning
of Section 21E of the Exchange Act. Although CSW and each of its subsidiaries
believe that, in making any such statements, its expectations are based on
reasonable assumptions, any such statements may be influenced by factors that
could cause actual outcomes and results to be materially different from those
projected. Important factors that could cause actual results to differ
materially from those in the forward looking statements include, but are not
limited to: the impact of general economic changes in the U.S. and in countries
in which CSW either currently has made or in the future may make investments;
the impact of deregulation on the U.S. electric utility business; increased
competition and electric utility industry restructuring in the U.S.; federal and
state regulatory developments and changes in law which may have a substantial
adverse impact on the value of CSW System assets; timing and adequacy of rate
relief; adverse changes in electric load and customer growth; climatic changes
or unexpected changes in weather patterns; changing fuel prices, generating
plant and distribution facility performance; decommissioning costs associated
with nuclear generating facilities; uncertainties in foreign operations and
foreign laws affecting CSW's investments in those countries; the effects of
retail competition in the natural gas and electricity distribution and supply
businesses in the United Kingdom; and the timing and success of efforts to
develop or acquire domestic and international power projects and utility assets.
In the non-utility area, the aforementioned factors would also apply, and, in
addition, would include: the ability to compete effectively in new areas,
including telecommunications, power marketing and brokering, and other energy
related services, as well as evolving federal and state regulatory legislation
and policies that may adversely affect those industries generally or the CSW
System's business in areas in which it operates.
ITEM 5. OTHER EVENTS
Public Service Company of Oklahoma (PSO) Rate Review
As previously reported, in July, 1996, the Corporation Commission of the State
of Oklahoma (OCC) staff (OCC Staff) filed an application seeking a review of the
earnings and rate structure of PSO, a wholly owned subsidiary of CSW. The review
was initiated to investigate the potential impact on PSO's rates from the sale
of Transok, Inc., PSO's restructuring efforts and PSO's improved financial
results. Transok, Inc., which supplies natural gas to PSO, was sold by CSW in
1996.
PSO filed financial information with the OCC Staff in November, 1996 and cost of
service and rate design testimony in January, 1997.
At the time of its application, the OCC Staff did not seek to implement any rate
change on an interim basis. Since that time, PSO agreed that rates on all bills
rendered on or after May 30, 1997 would be considered "interim rates" and
subject to refund. Interest on any such refund is being accrued beginning June
25, 1997.
On July 17, 1997, the OCC Staff recommended to the OCC that PSO decrease its
rates by $76.8 million annually. The OCC Staff's revenue requirement
calculations include, based on OCC Staff estimates, an overall rate of return of
9.308% including a return on equity of 11.0%.
OCC Staff's
Recommended Rate Reduction
and Resulting Estimated Earnings Impact
(annualized effect, in millions)
OCC Staff recommended denial of PSO's requested
depreciation increase (1) $ (27.5)
Additional OCC Staff depreciation decrease (18.7)
Working capital (accounts receivable factoring) (3.3)
Construction work in progress (2.8)
Recovery of Inola Plant costs (6.3)
Marketing and advertising expense (7.4)
Payroll and benefits reduction (8.2)
Other (2.6)
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OCC Staff recommended rate decrease (76.8)
Decrease current depreciation expense 18.7
Storm cost recovery (2) 1.2
Recovery of deferred customer incentive costs (2) .5
Rate case expenses (.2)
Income taxes 22.2
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Total earnings impact $ (34.4)
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(1) OCC Staff exhibits reflect this decrease as a denial of PSO's requested
depreciation icnrese. However, since PSO has not recorded the depreciation
increase on its books, this item is effectively a reduction in PSO's allowed
rate of return.
(2) If the OCC Staff recommendation is accepted, a one-time after-tax write off
of the $6.4 million unamortized balance of these costs would be required.
The OCC Staff recommended rate reduction includes the effect of the OCC Staff
recommendation of a rate base decrease of $109 million for PSO from $997 million
to $888 million, as shown below.
OCC STAFF'S RECOMMENDED RATE BASE REDUCTION
(millions)
PSO's current rate base $ 997.0
Construction work in progress (21.1)
Recovery of Inola Plant costs (27.6)
Capitalized marketing incentives (7.2)
Working capital (accounts receivable factoring) (25.0)
Capitalized expenditures (6.6)
Pension funding level (7.8)
Other (13.7)
=============
OCC Staff recommended rate base reduction $ 888.0
=============
Other parties to PSO's rate review have filed testimony with the OCC which
recommend rate decreases that are lower than the OCC Staff recommendation.
Rebuttal testimony is scheduled to be filed in August 1997 and settlement
conferences have been scheduled for September 1997. The OCC is expected to issue
a final order in late 1997.
Management cannot predict the ultimate outcome of PSO's rate case. However, if
PSO ultimately is unsuccessful in reaffirming adequate rates, PSO could
experience a material adverse effect on its consolidated results of operations
and financial condition, and CSW could experience a material adverse effect on
its consolidated results of operations but not on its financial condition..
For background information regarding the PSO rate review, please see CSW's and
PSO's combined Form 10-K for the year ended December 31, 1996 and CSW's and
PSO's combined Form 10-Q for the quarter ended March 31, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTRAL AND SOUTH WEST CORPORATION
Date: July 23, 1997
By: /s/ Lawrence B. Connors
Lawrence B. Connors
Controller
PUBLIC SERVICE COMPANY OF OKLAHOMA
Date: July 23, 1997
By: /s/ R. Russell Davis
R. Russell Davis
Controller