SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from to
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Commission File Number 1-3491
PENNSYLVANIA POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 25-0718810
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1 EAST WASHINGTON STREET
P.O. BOX 891, NEW CASTLE, PENNSYLVANIA 16103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 652-5531
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
4.24% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
4.25% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
4.64% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
7.64% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
8.00% Preferred Stock, $100 par value Philadelphia Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
---
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
--- ---
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: None
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: $30 par value -
6,290,000 shares outstanding at March 23, 1994.
Documents incorporated by reference PART OF FORM 10-K INTO WHICH
(to extent indicated herein) DOCUMENT IS INCORPORATED
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1993 Annual Report to Stockholders Part II
(Pages 1-4 and 6-19)
TABLE OF CONTENTS
Page
----
Part I
Item 1. Business 1
The Company 1
Central Area Power Coordination Group 1
Arrangements Among the CAPCO Companies 1
Reliance on the CAPCO Companies 1
Perry Unit 2 2
Financing and Construction 2
Future Financing 2
Coverage Requirements 3
Utility Regulation 4
Nuclear Regulation 4
Nuclear Insurance 5
Environmental Matters 6
Air Regulation 6
Water Regulation 7
Waste Disposal 7
Summary 8
Fuel Supply 8
Nuclear Fuel 9
Capacity and Reserves 9
Regional Reliability 10
Competition 10
Employees 10
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 12
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 12
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of FinancialCondition and
Results of Operations 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure 12
Part III
Item 10. Directors and Executive Officers of the Registrant 13
Item 11. Executive Compensation 15
Summary Executive Compensation Table 15
Long-Term Incentive Plan Table 16
Supplemental Executive Retirement Plan 16
Pension Plan 17
Additional Information Regarding Compensation 17
Compensation of Directors 17
Item 12. Security Ownership of Certain Beneficial Owners and Management 18
Item 13. Certain Relationships and Related Transactions 18
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 19
PART I
ITEM 1. BUSINESS
The Company
Pennsylvania Power Company (Company) was organized under the laws
of the Commonwealth of Pennsylvania in 1930 and owns property and does
business as an electric public utility in that state. The Company is
authorized to do business and owns property in the State of Ohio. It is a
wholly owned subsidiary of Ohio Edison Company (Edison), an Ohio
corporation which does business as an electric public utility in Ohio. The
Company and Edison are referred to herein collectively as Companies.
The Company furnishes electric service to communities in a 1,500
square mile area of western Pennsylvania. The Company also provides
transmission services and electric energy for resale to certain
municipalities in Pennsylvania. The area served by the Company has a
population of approximately 360,000.
Central Area Power Coordination Group (CAPCO)
In September 1967, the CAPCO companies, consisting of the Company,
Edison, The Cleveland Electric Illuminating Company (CEI), Duquesne Light
Company (Duquesne) and The Toledo Edison Company (Toledo), announced a
program for joint development of power generation and transmission
facilities. Included in the program are Unit 7 at the W. H. Sammis Plant,
Units 1, 2 and 3 at the Bruce Mansfield Plant, Unit 1 at the Beaver Valley
Power Station and Unit 1 at the Perry Nuclear Power Plant, each now in
service. Perry Unit 2, a CAPCO nuclear generating unit whose construction
had been previously suspended, has been abandoned by the CAPCO companies
(see "Perry Unit 2").
Arrangements Among the CAPCO Companies
The present CAPCO Basic Operating Agreement provides, among other
things, for coordinated maintenance responsibilities among the CAPCO
companies, a limited and qualified mutual backup arrangement in the event
of outage of CAPCO units and certain capacity and energy transactions
among the CAPCO companies.
The agreements among the CAPCO companies generally treat the
Companies as a single system as between them and the other three CAPCO
companies, but, in agreements between the CAPCO companies and others, all
five companies are treated as separate entities. Subject to any rights
that might arise among the CAPCO companies as such, each member company,
severally and not jointly, is obligated to pay the cost of constructing
and operating only its proportionate share of the facilities and the cost
of required fuel. The CAPCO companies have agreed that any modification of
their arrangements or of their agreed-upon programs requires their
unanimous consent. Should any member become unable to continue to pay its
share of the costs associated with a CAPCO facility, each of the other
CAPCO companies could be adversely affected in varying degrees because it
may become necessary for the remaining members to assume such costs for
the account of the defaulting member.
Reliance on the CAPCO Companies
Under the agreements governing the construction and operation of
CAPCO generating units, the responsibility is assigned to a specific CAPCO
company. CEI has such responsibilities for Perry Unit 1 and Duquesne is
1
responsible for Beaver Valley Unit 1. The Companies monitor activities in
connection with these units but must rely to a significant degree on the
operating company for necessary information. The Companies in their
oversight role as a practical matter cannot be privy to every detail; it
is the operating company that must directly supervise activities and then
exercise its reporting responsibilities to the co-owners. The Companies
critically review the information given to them by the operating company,
but they cannot be absolutely certain that things that they would have
considered significant have been reported or that they would always have
reached exactly the same conclusion about matters that are reported. In
addition, the time that is necessarily part of the compiling and analyzing
process creates a lag between the occurrence of events and the time the
Companies become aware of their significance. The Company has similar
responsibilities to the other CAPCO companies with respect to Bruce
Mansfield Units 1, 2 and 3 and Edison has those responsibilities with
respect to W. H. Sammis Unit 7.
Perry Unit 2
In December 1993, the Company announced that it will not
participate in further construction of Perry Unit 2 and has abandoned
Perry Unit 2 as a possible electric generating plant. The Company expects
its Perry Unit 2 investment to be recoverable from its Pennsylvania Public
Utility Commission (PPUC) jurisdictional customers based on Section 520 of
the Pennsylvania Public Utility Code. Due to the anticipated delay in
commencement of recovery and taking into account the expected PPUC and
Federal Energy Regulatory Commission (FERC) rate treatment, the Company
recognized an impairment to its Perry Unit 2 investment of $24,458,000 in
1993, reducing net income by $14,165,000.
Financing and Construction
The Company accesses the capital markets from time to time to
provide funds for its construction program and to refinance existing
securities.
Future Financing
The Company's total construction costs, excluding nuclear fuel,
amounted to approximately $34,000,000 in 1993. Such costs included
expenditures for the betterment of existing facilities and for the
construction of transmission lines, distribution lines, substations and
other additions. For the years 1994-1998, such construction costs are
estimated to be approximately $140,000,000, of which approximately
$27,000,000 is applicable to 1994. See "Environmental Matters" below with
regard to possible environment-related expenditures not included in the
estimate for 1994-1998.
During the 1994-1998 period, maturities of, and sinking fund
requirements for, long-term debt (excluding nuclear fuel) and preferred
stock will require the expenditure by the Company of approximately
$58,000,000, of which approximately $2,000,000 is applicable to 1994. All
or a major portion of maturing debt is expected to be refunded at or prior
to maturity.
The Company leases its nuclear fuel requirements from OES Fuel,
Incorporated (a wholly owned subsidiary of Edison). Investments for
additional nuclear fuel during the 1994-1998 period are estimated to be
approximately $38,000,000, of which approximately $9,000,000 applies to
1994. During the same periods, the Company's nuclear fuel investments are
expected to be reduced by approximately $44,000,000 and $10,000,000,
respectively, as the nuclear fuel is consumed. The Company recovers the
cost of nuclear fuel consumed through its electric rates.
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Based on its present plans, the Company may provide for its cash
requirements in 1994 from: funds to be received from operations; available
cash and temporary cash investments (approximately $13,000,000 as of
December 31, 1993); funds available under short-term bank credit
arrangements presently aggregating $35,000,000; and the ability to borrow
up to $50,000,000 from Edison, if available, under a system funds pool
agreement. Additionally, the Company has $37,000,000 of unused bank
facilities which may be borrowed for up to several days at the banks'
discretion.
The Company currently expects that, for the period 1994-1998,
external financings may be necessary to provide a portion of its cash
requirements. The extent and type of future financings will depend on the
need for external funds as well as market conditions, the maintenance of
an appropriate capital structure and the ability of the Company to comply
with coverage requirements in order to issue first mortgage bonds and
preferred stock. The Company will continue to monitor financial market
conditions and, where appropriate, may take advantage of opportunities to
refund outstanding high-cost debt and preferred stock to the extent that
its financial resources permit.
Except as otherwise indicated, the foregoing statements with
respect to construction expenditures are based on estimates made in
February 1994 and are subject to change based upon the progress of and
changes required in the construction program, including periodic reviews
of costs, changing customer requirements for electric energy, the level of
earnings and resulting changes in applicable coverage requirements,
conditions in capital markets, changes in regulatory requirements and
other relevant factors.
Coverage Requirements
The coverage requirements contained in the first mortgage
indenture under which the Company issues first mortgage bonds provide
that, except for certain refunding purposes, the Company may not issue
first mortgage bonds unless applicable net earnings (before income taxes),
calculated as provided in the indenture, for any period of twelve
consecutive months within the fifteen calendar months preceding the month
in which such additional bonds are issued, are at least twice annual
interest requirements on outstanding first mortgage bonds, including those
being issued. The Company's articles of incorporation prohibit the sale of
preferred stock unless applicable gross income, calculated as provided in
the articles of incorporation, is equal to at least 1-1/2 times the
aggregate of the annual interest requirements on indebtedness outstanding
immediately thereafter plus the annual dividend requirements on all
preferred stock which will be outstanding at that time.
With respect to the issuance of first mortgage bonds, other
requirements also apply and are more restrictive than the earnings test at
the present time. The Company is currently able to issue $96,000,000
principal amount of first mortgage bonds, with up to $15,000,000 of such
amount issuable against property additions; the remainder could be issued
against previously retired bonds. The Company could issue approximately
$50,000,000 of additional preferred stock before the end of the first
quarter of 1994. For the remainder of 1994, however, the earnings
coverage test contained in the Company's charter precludes the issuance of
additional preferred stock due to the inclusion of the charge for the
Perry Unit 2 impairment in the earnings test. Additional preferred stock
capability is expected to be restored in January 1995. If the Company
were to issue additional debt at or prior to the time it issued preferred
stock, the amount of preferred stock which would be issuable would be
reduced.
To the extent that coverage requirements or market conditions
restrict the Company's ability to issue desired amounts of first mortgage
bonds or preferred stock, the Company may seek other methods of financing.
Such financings could include the sale of common stock to Edison, or of
such other types of securities as might be authorized by the PPUC which
would not otherwise be sold and could result in annual interest charges
and/or dividend requirements in excess of those that would otherwise be
3
incurred. In addition, the Company might, to the extent possible, reduce
its expenditures for construction and other purposes.
Utility Regulation
The Company is subject to broad regulation as to rates and other
matters by the PPUC. With respect to its wholesale and interstate electric
operations and rates, the Company is subject to regulation, including
regulation of its accounting policies and practices, by the FERC.
The Energy Policy Act of 1992 (1992 Act) amends portions of the
Public Utility Holding Company Act of 1935, providing independent power
producers and other nonregulated generating facilities easier entry into
the electric generation markets. The 1992 Act also amends portions of the
Federal Power Act, authorizing the FERC, under certain circumstances, to
mandate access to utility-owned transmission facilities. The Company is
currently unable to predict the ultimate effects on its operations
resulting from this legislation.
The Company sells power to its wholesale customers under
agreements which were accepted by the FERC in 1984. The agreements provide
that the Company's wholesale customers will be charged the applicable
prevailing retail electric rates, and will remain full requirements
customers through August 1994 as to three of these customers and through
August 1995 as to the other two customers. Negotiations are currently
underway to extend these agreements.
The Company uses a "levelized" energy cost rate (ECR) for the
recovery of fuel and net purchased power costs which are not otherwise
recovered through base rates from its customers. The ECR, which includes
adjustment for any over or under collection from customers, is
recalculated each year.
Nuclear Regulation
The construction and operation of nuclear generating units are
subject to the regulatory jurisdiction of the Nuclear Regulatory
Commission (NRC) including the issuance by it of construction permits and
operating licenses. The NRC's procedures with respect to application for
construction permits and operating licenses afford opportunities for
interested parties to request public hearings on health, safety,
environmental and antitrust issues. In this connection, the NRC may
require substantial changes in operation or the installation of additional
equipment to meet safety or environmental standards with resulting delay
and added costs. The possibility also exists for modification, denial or
revocation of licenses or permits. Full power operating licenses were
issued for Beaver Valley Unit 1 and Perry Unit 1 on July 1, 1976 and
November 13, 1986, respectively.
The construction permit and operating license issued by the NRC
applicable to Perry Unit 1 is conditioned to require, among other things:
(i) maintenance, emergency, economy and wholesale power and reserve
sharing to be made available to, (ii) interconnections to be made with,
and (iii) wheeling to be provided for, electric generating and/or
distribution systems (or municipalities or cooperatives with the right to
engage in such functions) if such entities so request and to permit such
entities to become members of CAPCO (subject to certain prerequisites with
respect to size), or to acquire a share of the capacity of Perry Unit 1 or
any other future nuclear units, if they so desire. In September 1987,
Edison asked the NRC to suspend these license conditions. In April 1991,
the NRC Staff denied Edison's application; accordingly, Edison petitioned
the NRC for a hearing. Pursuant to this request the matter was referred to
the Atomic Safety and Licensing Board (ASLB). The ASLB ruled against
4
Edison in November 1992. Edison petitioned the NRC to review the ASLB
decision in December 1992. On August 3, 1993, the NRC ruled that the
license conditions will not be suspended. On October 1, 1993, Edison
appealed the NRC decision in the United States Court of Appeals for the
District of Columbia Circuit. If these license conditions are not
suspended, they could have a materially adverse but presently
undeterminable effect on the Company's future business operations.
The NRC has promulgated and continues to promulgate additional
regulations related to the safe operation of nuclear power plants. The
Company cannot predict what additional regulations will be promulgated or
design changes required or the effect that any such regulations or design
changes, or the consideration thereof, may have upon Beaver Valley Unit 1
and Perry Unit 1. Although the Company has no reason to anticipate an
accident at any nuclear plant in which it has an interest, if such an
accident did happen, it could have a material but presently undeterminable
adverse effect on the Company's financial position. In addition, such an
accident at any operating nuclear plant, whether or not owned by the
Company, could result in regulations or requirements that could affect the
operation or licensing of plants that the Company does own with a
consequent but presently undeterminable adverse impact, and could affect
the Company's ability to raise funds in the capital markets.
Nuclear Insurance
The Price-Anderson Act limits the public liability which can be
assessed with respect to a nuclear power plant to $9,396,000,000 (assuming
116 units licensed to operate) for a single nuclear incident, which amount
is covered by: (i) private insurance amounting to $200,000,000; and (ii)
$9,196,000,000 provided by an industry retrospective rating plan required
by the NRC pursuant thereto. Under such retrospective rating plan, in the
event of a nuclear incident at any unit in the United States resulting in
losses in excess of private insurance, up to $75,500,000 (but not more
than $10,000,000 per unit per year in the event of more than one incident)
must be contributed for each nuclear unit licensed to operate in the
country by the licensees thereof to cover liabilities arising out of the
incident. Based on its present ownership interest in Beaver Valley Unit 1
and Perry Unit 1, the Company's maximum potential assessment under these
provisions (assuming the other CAPCO companies were to contribute their
proportionate share of any assessments under the retrospective rating
plan) would be $18,100,000 per incident but not more than $2,300,000 in
any one year for each incident.
In addition to the public liability insurance provided pursuant to
the Price-Anderson Act, the Company has also obtained insurance coverage
in limited amounts for economic loss and property damage arising out of
nuclear incidents. The Company is a member of Nuclear Electric Insurance
Limited (NEIL) which provides coverage (NEIL I) for the extra expense of
replacement power incurred due to prolonged accidental outages of nuclear
units. Under NEIL I, the Company has policies, renewable yearly,
corresponding to its interest in Beaver Valley Unit 1 and Perry Unit 1,
which provide an aggregate indemnity of up to approximately $53,000,000
for replacement power costs incurred during an outage after an initial 21-
week waiting period. Members of NEIL I pay annual premiums and are subject
to assessments if losses exceed the accumulated funds available to the
insurer. The Company's present maximum aggregate assessment for incidents
occurring during a policy year would be approximately $555,000.
The Company is insured as to its interest in Beaver Valley Unit 1
and the Perry Plant under property damage insurance provided by American
Nuclear Insurers (ANI) and Mutual Atomic Energy Liability Underwriters
(MAELU) to the operating company for each plant. Under the ANI/MAELU
arrangements, $500,000,000 of primary coverage and $800,000,000 of excess
coverage for decontamination costs, debris removal and repair and/or
replacement of property is provided for Beaver Valley Unit 1 and the Perry
5
Plant. The Company pays annual premiums for this coverage and is not
liable for retrospective assessments.
A secondary level of coverage for Beaver Valley Unit 1 and the
Perry Plant over and above the ANI/MAELU policy is provided by a
decontamination liability, excess property and decommissioning liability
insurance policy issued to each operating company by NEIL (NEIL II). Under
NEIL II a minimum of $1,400,000,000 of coverage is available to pay costs
required for decontamination operations in excess of the $1,350,000,000
provided by the primary ANI/MAELU policy. Additionally, a maximum of
$250,000,000, as provided by NEIL II, would cover decommissioning costs in
excess of funds already collected for decommissioning. Any remaining
portion of the NEIL II proceeds after payment of decontamination costs
will be available to pay excess property damage losses.Members of NEIL II
pay annual premiums and are subject to assessments if losses exceed the
accumulated funds available to the insurer. The Company's present maximum
assessment for NEIL II coverage for accidents occurring during a policy
year would be approximately $2,100,000. The NEIL II policy is renewable
yearly.
The Company intends to maintain insurance against nuclear risks as
described above as long as it is available. To the extent that replacement
power, property damage, decontamination, decommissioning, repair and
replacement costs and other such costs arising from a nuclear incident at
any of the Company's plants exceed the policy limits of the insurance from
time to time in effect with respect to that plant, to the extent a nuclear
incident is determined not to be covered by the Company's insurance
policies, or to the extent such insurance becomes unavailable in the
future, the Company would remain at risk for such costs.
The NRC requires nuclear power plant licensees to obtain minimum
property insurance coverage of $1,060,000,000 or the amount generally
available from private sources, whichever is less. The proceeds of this
insurance are required to be used first to ensure that the licensed
reactor is in a safe and stable condition and can be maintained in that
condition so as to prevent any significant risk to the public health and
safety. Within 30 days of stabilization, the licensee is required to
prepare and submit to the NRC a cleanup plan for approval. The plan is
required to identify all cleanup operations necessary to decontaminate the
reactor sufficiently to permit the resumption of operations or to commence
decommissioning. Any property insurance proceeds not already expended to
place the reactor in a safe and stable condition must be used first to
complete those decontamination operations that are ordered by the NRC. The
Company is unable to predict what effect these requirements may have on
the availability of insurance proceeds to the Company for the Company's
bondholders.
Environmental Matters
Various federal, state and local authorities regulate the Company
with regard to air and water quality and other environmental matters.
The Company has estimated capital expenditures for environmental
compliance of approximately $17,000,000, which is included in the
construction estimate given under "Financing and Construction - Future
Financing" for 1994 through 1998.
Air Regulation
Under the provisions of the Clean Air Act of 1970, both the
Commonwealth of Pennsylvania and the State of Ohio adopted ambient air
quality standards, and related emission limits, including limits for
sulfur dioxide (SO2) and particulates. In addition, the U.S. Environmental
Protection Agency (EPA) promulgated an SO2 regulatory plan for Ohio which
became effective for W. H. Sammis Unit 7 in 1977. Generating plants to be
constructed in the future and some future modifications of existing
6
facilities will be covered not only by the applicable state standards but
also by EPA emission performance standards for new sources. In both
Pennsylvania and Ohio the construction or modification of emission sources
requires approval from appropriate environmental authorities, and the
facilities involved may not be operated unless a permit or variance to do
so has been issued by those same authorities.
The Clean Air Act Amendments of 1990 require significant
reductions of SO2 and oxides of nitrogen from the Company's coal-fired
generating units by 1995 and additional emission reductions by 2000.
Compliance options include, but are not limited to, installing additional
pollution control equipment, burning less polluting fuel, purchasing
emission allowances from others, operating existing facilities in a manner
which minimizes pollution and retiring facilities. In a system compliance
plan for the Company and Edison submitted to the PPUC and to the EPA, the
Company stated that reductions for the years 1995 through 1999 are likely
to be achieved by burning lower sulfur fuel, generating more electricity
at their lower emitting plants and/or purchasing emission allowances. The
Company continues to evaluate its compliance plan and other compliance
options as they arise. Plans for complying with the year 2000 reductions
are less certain at this time.
The Company is required to meet federally approved SO2
regulations, and the violation of such regulations can result in
injunctive relief, including shutdown of the generating unit involved,
and/or civil or criminal penalties of up to $25,000 per day of violation.
The EPA has an interim enforcement policy for the SO2 regulations in Ohio
which allows for compliance with the regulations based on a 30-day
averaging period. The EPA has proposed regulations which could cause
changes in the interim enforcement policy including a revision of methods
of determining compliance with emission limits. The Company cannot
predict what action the EPA may take in the future with respect to the
interim enforcement policy.
Water Regulation
Various water quality regulations, the majority of which are the
result of the federal Clean Water Act and its amendments, apply to the
Company's plants. In addition, Pennsylvania and Ohio have water quality
standards applicable to the Company's operations. As provided in the Clean
Water Act, authority to grant federal National Pollutant Discharge
Elimination System (NPDES) water discharge permits can be assumed by a
state. Pennsylvania and Ohio have assumed such authority.
The Ohio Environmental Protection Agency (Ohio EPA) has issued an
NPDES Permit for the W.H. Sammis Plant. The plant is in compliance with
chemical limitations of the permit. The permit conditions would have
required the addition of cooling towers to the W. H. Sammis Plant,
however, the EPA and Ohio EPA have approved a variance request eliminating
the current need for cooling towers.
Waste Disposal
As a result of the Resource Conservation and Recovery Act of 1976,
as amended, and the Toxic Substances Control Act of 1976, federal and
state hazardous waste regulations have been promulgated. These regulations
may result in significantly increased costs to dispose of waste materials.
The ultimate effect of these requirements cannot presently be determined.
The Pennsylvania Department of Environmental Resources has issued
regulations dealing with the storage, treatment, transportation and
disposal of residual waste such as coal ash and scrubber sludge. These
regulations impose additional requirements relating to permitting, ground
7
water monitoring, leachate collection systems, closure, liability
insurance and operating matters. The Company is developing and analyzing
various compliance options and is currently unable to determine the
ultimate increase in capital and operating costs at existing sites.
Summary
Environmental controls are still in the process of development and
require, in many instances, balancing the needs for additional quantities
of energy in future years and the need to protect the environment. As a
result, the Company cannot now estimate the precise effect of existing and
potential regulations and legislation upon any of its existing and
proposed facilities and operations or upon its ability to issue additional
first mortgage bonds under its mortgage. The mortgage contains covenants
by the Company to observe and conform to all valid governmental
requirements at the time applicable unless in course of contest, and
provisions which, in effect, prevent the issuance of additional bonds if
there is a completed default under the mortgage. The provisions of the
mortgage, in effect, also require, in the opinion of counsel for the
Company, that certification of property additions as the basis for the
issuance of bonds or other action under the mortgage be accompanied by an
opinion of counsel that the Company certifying such property additions has
all governmental permissions at the time necessary for its then current
ownership and operation of such property additions. The Company intends to
contest any requirements it deems unreasonable or impossible for
compliance or otherwise contrary to the public interest. Developments in
these and other areas of regulation may require the Company to modify,
supplement or replace equipment and facilities, and may delay or impede
the construction and operation of new facilities, at costs which could be
substantial. The Company expects that the impact of any such costs would
eventually be reflected in its rate schedules.
Fuel Supply
The Company's sources of generation during 1993 were 76.8% coal
and 23.2% nuclear. With the 1993 expiration of a long-term coal contract,
the Company's coal supply for the New Castle Plant is currently supplied
through spot purchases of coal produced from nearby reserves.
The Company estimates its 1994 coal requirement to be 1,200,000
tons (including its share of the coal requirements of CAPCO's W. H. Sammis
Unit 7 and the Bruce Mansfield Plant). The coal requirements of W. H.
Sammis Unit 7 are furnished from mines located in Ohio, Pennsylvania and
West Virginia through spot purchases and Edison contracts which expire at
various times through February 28, 2003. See "Environmental Matters" for
factors pertaining to meeting environmental regulations affecting coal-
fired generating units.
The Company, together with the other CAPCO companies, has several
guarantees (the Company's composite percentage being approximately 6.7%)
of certain debt and lease obligations in connection with a coal supply
contract for the Bruce Mansfield Plant (see Note 8 of Notes to Financial
Statements). As of December 31, 1993, the Company's share of the
guarantees was $12,708,000. The price under the coal supply contract,
which includes certain minimum payments, has been determined to be
sufficient to satisfy the debt and lease obligations. This contract
extends to December 31, 1999.
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The Company's fuel costs (excluding disposal costs) for each of
the five years ended December 31, 1993, were as follows:
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Cost of Fuel consumed per million BTU's:
Coal $1.37 $1.42 $1.41 $1.39 $1.34
Nuclear $ .97 $ .94 $1.05 $ .98 $ .98
Average fuel cost per kilowatt-hour
generated (cents) 1.36 1.34 1.41 1.38 1.39
Nuclear Fuel
OES Fuel is the sole lessor for the Company's nuclear fuel
requirements (see "Financing and Construction - Future Financing" and Note
1 of Notes to Financial Statements).
The Company and OES Fuel have contracts for the supply of uranium
sufficient to meet projected needs through 2000 and conversion services
sufficient to meet projected needs through 2001. Fabrication services for
fuel assemblies have been contracted by the CAPCO companies for the next
two reloads for Beaver Valley Unit 1 (through approximately 1996), and the
next seven reloads for Perry Unit 1 (through approximately 2003). The
CAPCO companies have a contract with the U.S. Enrichment Corporation for
enrichment services for all CAPCO nuclear units through 2014.
Prior to the expiration of existing commitments, the Company
intends to make additional arrangements for the supply of uranium and for
the subsequent conversion, enrichment, fabrication, reprocessing and/or
waste disposal services, the specific prices and availability of which are
not known at this time. Due to the present lack of availability of
domestic reprocessing services, to the continuing absence of any program
to begin development of such reprocessing capability and questions as to
the economics of reprocessing, the Company is calculating nuclear fuel
costs based on the assumption that spent fuel will not be reprocessed. On-
site spent fuel storage facilities for the Perry Plant are expected to be
adequate through 2010; facilities at Beaver Valley Unit 1 are expected to
be adequate through 2011. After on-site storage capacity is exhausted,
additional storage capacity will have to be obtained which could result in
significant additional costs unless reprocessing services or permanent
waste disposal facilities become available. The Federal Nuclear Waste
Policy Act of 1982 provides for the construction of facilities for the
disposal of high-level nuclear wastes, including spent fuel from nuclear
power plants operated by electric utilities; however, the selection of a
suitable site has become embroiled in the political process. Duquesne and
CEI have each previously entered into contracts with the U.S. Department
of Energy for the disposal of spent fuel from Beaver Valley Unit 1 and the
Perry Plant, respectively.
Capacity and Reserves
The 1993 net maximum hourly demand on the Company of 690,000 kW
(including 63,000 kW of firm power sales which extend through 2005 as
discussed under "Competition") occurred on August 26, 1993. The seasonal
capability of the Company on that day was 901,000 kW. Of that system
capability, 23% was available to serve additional load, after giving
effect to term power sales to other utilities. Based on existing capacity,
the load forecast made in November 1993 and anticipated term power sales
to other utilities, the capacity margins during the 1994-1998 period are
expected to range from about 16% to 23%.
9
Regional Reliability
The Companies participate with 26 other electric companies
operating in nine states in the East Central Area Reliability Coordination
Agreement (ECAR), which was organized for the purpose of furthering the
reliability of bulk power supply in the area through coordination of the
planning and operation by the ECAR members of their bulk power supply
facilities. The ECAR members have established principles and procedures
regarding matters affecting the reliability of the bulk power supply
within the ECAR region. Procedures have been adopted regarding: i) the
evaluation and simulated testing of systems' performance; ii) the
establishment of minimum levels of daily operating reserves; iii) the
development of a program regarding emergency procedures during conditions
of declining system frequency; and iv) the basis for uniform rating of
generating equipment.
Competition
The Company competes with other utilities for intersystem bulk
power sales and for sales to municipalities. The Company competes with
suppliers of natural gas and other forms of energy in connection with its
industrial and commercial sales and in the home climate control market,
both with respect to new customers and conversions, and with all other
suppliers of electricity. To date, there has been no substantial
cogeneration by the Company's customers.
In an effort to more fully utilize its facilities and hold down
rates to its other customers, the Company has entered into a long-term
power sales agreement with another utility. Currently, the Company is
selling 63,000 kW annually under this contract through December 31, 2005.
The Company has the option to reduce this commitment by 21,000 kW
beginning June 1, 1996.
Employees
At December 31, 1993, the Company had 1,355 employees.
ITEM 2. PROPERTIES
The Company's First Mortgage Indenture dated as of November 1,
1945, between the Company and Citibank, N.A. (successor to The First
National Bank of the City of New York), as amended and supplemented,
constitutes, in the opinion of the Company's counsel, a direct first lien
on substantially all of the Company's physical property, subject only to
excepted encumbrances, as defined in the Indenture. See Notes 5 and 6 of
Notes to the Financial Statements for information concerning leases and
financing encumbrances affecting certain of the Company's properties.
10
The Company owns, individually or, together with one or more of
the other CAPCO companies as tenants in common, the generating units in
service shown below:
Net Demonstrated
Capacity (kW)
-------------------------
Company's Ownership
Plant-Location Unit Total Entitlement Interest
-------------- ---- ----- ----------- ---------
Coal-Fired Units
- ----------------
New Castle-West Pittsburg, PA 3-5 333,000 333,000 100.00%
Bruce Mansfield-Shippingport, PA 1 780,000 33,000 4.20%
2 780,000 53,000 6.80%
3 800,000 50,000 6.28%
W. H. Sammis-Stratton, OH 7 600,000 125,000 20.80%
Nuclear Units
- -------------
Beaver Valley-Shippingport, PA 1 810,000 142,000 17.50%
Perry-North Perry Village, OH 1 1,194,000 63,000 5.24%
Oil-Fired Units
- ---------------
Various 164,000 25,000 15.18%
-------
Total 824,000
=======
Prolonged outages of existing generating units might make it
necessary for the Company, depending upon the state of demand from time to
time for electric service upon its system, to use to a greater extent than
otherwise, less efficient and less economic generating units, or purchased
power, and in some cases may require the reduction of load during peak
periods under the Company's interruptible programs, all to an extent not
presently determinable.
The Company's generating plants and load centers are connected by
a transmission system consisting of elements having various voltage
ratings ranging from 23 kilovolts (kV) to 345 kV. The Company's
transmission lines aggregate 605 miles.
Its electric distribution systems include 5,002 miles of pole line
carrying primary, secondary and street lighting circuits. It owns,
individually or, together with one or more of the other CAPCO companies as
tenants in common, 84 substations with a total installed transformer
capacity of 3,710,960 kilovolt-amperes, of which 16 are transmission
substations, including 8 located at generating plants.
The Company's transmission lines also interconnect with those of
Edison, Duquesne and West Penn Power Company. These interconnections make
possible utilization by the Company of generating capacity constructed as
a part of the CAPCO program, as well as providing opportunities for the
sale of power to other utilities.
ITEM 3. LEGAL PROCEEDINGS
See "Item 1 - Business - Nuclear Regulation" for information with
respect to legal proceedings.
11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company is a wholly owned subsidiary of Ohio Edison Company.
Quarterly dividends of $.85 and $1.10 per share were paid on the Company's
common stock during 1993 and 1992, respectively.
For information with respect to certain restrictions on the payment
of cash dividends on common stock, see Note 6(a) of Notes to Financial
Statements.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by Items 6 through 8 is incorporated
herein by reference to the Selected Financial Data, Management's
Discussion and Analysis of Results of Operations and Financial Condition,
and Financial Statements included on pages 1 through 4 and 6 through 19,
respectively, in the Company's 1993 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The present term of office of each director extends until the next
succeeding annual meeting of stockholders and until his successor is
elected and shall qualify.
The executive officers are elected at the annual organization
meeting of the Board of Directors, held immediately after the annual
meeting of stockholders, and hold office until the next such organization
meeting, unless the Board of Directors shall otherwise determine, or
unless a resignation is submitted.
H. Peter Burg-Age 47
Senior Vice President and Chief Financial Officer of the Company's
parent, Ohio Edison Company, since 1989. Vice President of Ohio
Edison Company from 1986 to 1989. Director of the Company since
1988. Mr. Burg is also a director of Ohio Edison Company, Society
National Bank, Akron District, and Energy Insurance Mutual.
Robert H. Carlson-Age 67
Retired. President and Chief Executive Officer from 1988 to 1989 of
Universal-Rundle Corporation, New Castle, Pennsylvania, a manufacturer
of plumbing fixtures. Director of the Company since 1983. Mr. Carlson
is also a director of Ohio Edison Company, First Federal Savings Bank
of New Castle and its parent, First Shenango Bancorp, Inc.
J. R. Edgerly-Age 63
Vice President, Secretary and General Counsel of the Company since
1987. Director of the Company since 1973.
Willard R. Holland-Age 57
Chairman of the Board, Chief Executive Officer, and Chief Financial
Officer of the Company and President and Chief Executive Officer of the
Company's parent, Ohio Edison Company, since 1993. President and Chief
Operating Officer of Ohio Edison Company from 1991 to 1993. Senior
Vice President from 1988 to 1991 of Detroit Edison Company, an electric
utility. Director of the Company since 1991. Mr. Holland is also a
director of Ohio Edison Company.
Robert L. Kensinger-Age 59
President of the Company since 1991. Division Manager of the Company's
parent, Ohio Edison Company, from 1982 to 1991. Director of the Company
since 1991. Mr. Kensinger is also a director of First Western Bank,
N.A., New Castle, Pennsylvania, a subsidiary of First Western
Bancorp, Inc.
13
Joseph J. Nowak-Age 62
Retired. Consultant during 1993 and Vice President during 1992 of Armco
Inc., and Executive Vice President-Operations from 1988 to 1992 of
Cyclops Industries, Inc., manufacturers of steel products. Cyclops
Industries, Inc. merged with Armco Inc. in 1992. Director of the
Company since 1982.
Jack E. Reed-Age 51
Vice President of the Company since 1992. Manager, Substation and
Distribution, from 1991 to 1992 and Manager, Transmission and
Distribution Maintenance, from 1988 to 1991 of the Company's parent,
Ohio Edison Company. Director of the Company since 1992.
Richard L. Werner-Age 62
Chairman of the Board, President, and Chief Executive Officer since
1980 of R. D. Werner Co., Inc., manufacturer of aluminum extrusions,
ladders and scaffolding. Director of the Company since 1993. Mr.
Werner is also a director of Integra National Bank/North, Oil City,
Pennsylvania, a subsidiary of Integra Financial Corporation.
Robert P. Wushinske-Age 54
Vice President and Treasurer of the Company since 1987.
David W. McKean-Age 41
Comptroller of the Company since 1992. Director of Financial Reporting
of the Company's parent, Ohio Edison Company, from 1985 to 1992.
14
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY EXECUTIVE COMPENSATION TABLE
Annual Compensation
Name and --------------------------- All Other
Principal Position Year Salary Bonus(1) Other(2) Compensation(3)
------------------ ---- ------ -------- -------- --------------
Willard R. Holland (4) 1993 $67,280 $16,427 $892 $4,337
Chairman of the Board and 1992 -0- -0- -0- -0-
Chief Executive Officer 1991 -0- -0- -0- -0-
J. T. Rogers, Jr. (4) 1993 22,661 4,288 3,415 11,186
Retired Chairman of the
Board 1992 99,583 21,535 2,787 18,110
and Chief Executive
Officer 1991 86,120 9,567 2,787 20,256
R. L. Kensinger (5) 1993 151,610 18,551 588 11,214
President 1992 146,292 16,010 3,302 10,241
1991 116,083 8,836 3,408 7,882
J. E. Reed (6) 1993 103,951 5,267 7,994 6,518
Vice President 1992 99,067 5,487 215 5,448
1991 -0- -0- -0- -0-
J. R. Edgerly 1993 99,986 8,487 189 7,409
Vice President, Secretary 1992 98,516 8,769 234 7,126
and General Counsel 1991 91,040 6,478 229 6,068
R. P. Wushinske 1993 97,386 9,222 180 4,149
Vice President and
Treasurer 1992 94,966 9,225 305 3,990
1991 87,924 6,478 52 3,993
(1) See Long-Term Incentive Plan Table for Incentive Compensation Plan
awards mandatorily or voluntarily deferred into the Common Stock
Equivalent Account.
(2) Consists of reimbursement for income tax obligations on Executive
Indemnity Program premium and on certain other executive
perquisites.
(3) For 1993, amount is comprised of (1) matching Edison Common Stock
contributions under the tax qualified Savings Plan: Holland - $706;
Rogers - $559; Kensinger - $5,806; Reed -$4,604; Edgerly - $4,513;
Wushinske - $2,930; (2) the current dollar value of the Executive
Supplemental Life Plan benefit at age 65 that is attributable to the
Company's portion of the premiums it paid in 1993: Holland - $1,930;
Rogers - $4,840; Kensinger - $2,797; Reed - $933; Edgerly - $2,896;
Wushinske - $1,219; (3) above market interest earned under the
Executive Deferred Compensation Plan: Holland - $1,701; Rogers -
1,989; Kensinger -$2,539; Reed -$960; Edgerly - $0; Wushinske - $0;
and (4) a portion of the Executive Indemnity Program premium
reportable as income: Holland - $0; Rogers -$3,798; Kensinger - $72;
Reed - $21; Edgerly - $0; Wushinske - $0.
(4) Mr. Holland was elected Chairman of the Board effective March 1,
1993, the day of Mr. Rogers' retirement.
(5) Mr. Kensinger was elected President effective August 24, 1991. For
1991, amounts include compensation by Edison and the Company.
(6) Mr. Reed was elected Vice President effective August 18, 1992. For
1992, amounts include compensation by Edison and the Company.
15
LONG-TERM INCENTIVE PLAN TABLE
AWARDS IN LAST FISCAL YEAR
Performance or Estimated Future Payouts Under
Other Period Non-Stock Price Based Plan
Dollar Number of Units (Number of Performance Shares)
Amount Performance Maturation ------------------------------
Name Deferred Shares or Payout Threshold Target Maximum
---- -------- ----------- ----------- --------- ------ -------
Willard R. Holland-CEO $15,332 735 4 years 699 931 1,149
R. L. Kensinger 15,378 738 4 years 701 934 1,153
J. E. Reed 4,504 216 4 years 205 238 261
J. R. Edgerly -0- -0- 4 years -0- -0- -0-
R. P. Wushinske -0- -0- 4 years -0- -0- -0-
Messrs. Holland and Kensinger must defer 50% of their annual
Executive Incentive Compensation Plan award into a Common Stock Equivalent
Account. Messrs. Reed, Edgerly, and Wushinske may voluntarily defer a
portion of their annual incentive award into the Common Stock Equivalent
Account. At the end of a four-year performance period, the Common Stock
Equivalent Account attributed to the deferred award for that period will
be valued as if the compensation deferred into the account had been
invested in Edison's Common Stock and any dividends that would have been
paid on such stock were reinvested on the date paid. This value may be
increased or decreased based upon the total return of Edison's Common
Stock relative to an electric utility industry index during the period and
the Companies' price change to residential customers relative to a peer
group of twenty electric utilities. The final value of an executive's
account will be paid to the executive in cash. If an executive retires,
dies or otherwise leaves the employment of the Company prior to the end of
the four-year deferral period, the executive's account will be valued and
paid to the executive or the executive's beneficiary in the year following
such event. Mr. J. T. Rogers, Jr. retired on March 1, 1993. His account
was valued and paid on March 1, 1994.
The maximum amount in the above table will be earned if the
Companies' price change to residential customers is ranked in the lowest
(fifth) quintile of the peer group (i.e., the lowest 20 percent of the
peer group) and Edison's total shareholder return is in the top (first)
quintile compared to the index. The target amount will be earned if the
Companies' price change to residential customers is in the fourth quintile
and Edison's total shareholder return is in the second quintile. The
threshold amount will be earned if the Companies' price change to
residential customers is above the third quintile and Edison's total
shareholder return is below the third quintile.
Supplemental Executive Retirement Plan
The Company participates in the Ohio Edison System Supplemental
Executive Retirement Plan. Currently, two of the executive officers listed
above (W. R. Holland and R. L. Kensinger) are eligible to participate in
the Plan. At normal retirement, eligible senior executives of the Company
who have five or more years of service with the Ohio Edison System are
provided a retirement benefit equal to 65 percent of their highest annual
salary from the Company, reduced by the executive's pensions under tax-
qualified pension plans of the Company or other employers, any
supplementary pension under the Company's Executive Deferred Compensation
Plan, and Social Security benefits. Subject to exceptions that might be
made in specific cases, senior executives retiring prior to age 65, or
with less than five years of service, or both, may receive a similar but
reduced benefit. This Plan also provides for disability and surviving
spouse benefits. As of the end of 1993, the estimated annual retirement
benefits of W. R. Holland from all of the above sources was $49,584 and
the estimated annual retirement benefits of R. L. Kensinger from such
sources was $98,547. Mr. J. T. Rogers, Jr. retired on March 1, 1993 with
an annual retirement benefit from the above sources of $64,729.
16
Pension Plan
The Company's trusteed noncontributory Pension Plan covers
substantially all full-time employees including officers of the Company.
Pension benefits are determined using a formula based on a Pension Plan
participant's years of accrued service and average rate of monthly
earnings for the highest 60 months of the last 120 months of accrued
service immediately preceding retirement or termination of service.
Compensation covered by the Pension Plan consists of basic cash
wages and compensation deferred through the Savings Plan up to the maximum
amount permitted under the Internal Revenue Code of 1986, as adjusted in
accordance with regulations. This amount was $235,840 per year for 1993
and is $150,000 per year for 1994. In addition, a supplementary pension
benefit may be payable to participants in the Executive Deferred
Compensation Plan. Compensation for 1993 covered by these two plans for
the officers shown in the Executive Compensation Table who are not
currently participants in the Ohio Edison System Supplemental Executive
Retirement Plan is shown under the Salary column of the Table. The
credited years of service for these same officers are as follows: J. E.
Reed-27 years; J. R. Edgerly-28 years and R. P. Wushinske-20 years.
The following table shows the estimated annual amounts payable
upon retirement as pension benefits under the Pension Plan and the
supplemental pension benefit under the Executive Deferred Compensation
Plan, based on specified compensation and years of credited service
classifications, assuming continuation of both such present Plans and
employment until age 65. Retirement prior to age 62 results in a reduction
of pension benefits. The amounts shown are subject to a reduction based on
an individual's covered compensation, date of birth and years of credited
service as defined by the Pension Plan and its optional survivorship
provision and to limitations based on requirements contained in the
Internal Revenue Code of 1986, as amended, which limited the maximum
annual retirement benefits under the Plans to $115,641 in 1993 and would
limit benefits to $118,800 in 1994.
Estimated Annual Retirement Payment from the
Pension Plan and the Annual Supplementary Pension
Benefit under the Executive Deferred Compensation Plan
------------------------------------------------------
Applicable 15 Years 25 Years 35 Years 45 Years
Annual Earnings Service Service Service Service
--------------- --------- --------- --------- ---------
$ 80,000 $22,800 $36,000 $ 45,600 $ 55,600
100,000 28,500 45,000 57,000 69,500
120,000 34,200 54,000 68,400 83,400
140,000 39,900 63,000 79,800 97,300
160,000 45,600 72,000 91,200 111,200
180,000 51,300 81,000 102,600 125,100
Additional Information Regarding Compensation
The Board of Directors has no compensation committee. The
Company's practice is to have the board, other than Mr. Holland, establish
the compensation of Mr. Holland as chief executive officer and have Mr.
Holland establish the compensation of the other executive officers of the
Company. J.R. Edgerly, R.L. Kensinger and J.E. Reed are executive
officers of the Company who also serve as directors. Both Mr. Holland and
Mr. Burg are directors and executive officers of Edison.
Compensation of Directors
Directors who are not employees of the Companies receive an annual
retainer of $4,200 and 100 shares of Edison Common Stock for each full
year of service. Such directors are also paid a meeting fee of $375 for
each board meeting attended and are reimbursed for expenses for the
17
attendance thereof, if any. Directors who are also employees of the
Company or of Edison receive no compensation for serving as directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners at March 23, 1994:
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
-------------- -------------------- -------------------- --------
Common Stock, Ohio Edison Company 6,290,000 shares 100%
$30 par value 76 South Main Street held directly
Akron, Ohio 44308
(b) Security Ownership of Management at January 1, 1994:
Title of Class Percent of Class
-------------- ----------------
Edison Nature of Edison
Common Stock Beneficial Common
------------ Ownership Stock
No. of Shares
-------------
H. Peter Burg 7,624 Direct or Indirect Less than one percent
Robert H. Carlson 3,069 " "
J. R. Edgerly 1,649 " "
Willard R. Holland 3,227 " "
Robert L. Kensinger 1,369 " "
Joseph J. Nowak 7,110 " "
Jack E. Reed 2,961 " "
Richard L. Werner 85
Robert P. Wushinske 1,208 " "
All directors and officers
as a group (12 persons) 34,352 " "
(c) Changes in Control: Not applicable
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) 1. Financial Statements
Included in Part II of this report and incorporated herein by
reference to the Company's 1993 Annual Report to Stockholders (Exhibit 13
below) at the pages indicated.
Page No.
--------
Statements of Income-Three Years Ended December 31, 1993 6
Balance Sheets-December 31, 1993 and 1992 7
Statements of Capitalization-December 31, 1993 and 1992 8
Statements of Retained Earnings-Three Years Ended December 31, 1993 9
Statements of Capital Stock and Other Paid-In Capital-
Three Years Ended December 31, 1993 9
Statements of Cash Flows-Three Years Ended December 31, 1993 10
Statements of Taxes-Three Years Ended December 31, 1993 11
Notes to Financial Statements 12-19
Report of Independent Public Accountants 19
2. Financial Statement Schedules
Included in Part IV of this report:
Page No.
--------
Report of Independent Public Accountants on Schedules 27
Schedules - Three Years Ended December 31, 1993:
V - Property, Plant and Equipment 28-30
VI - Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment 31-33
VIII - Valuation and Qualifying Accounts and Reserves 34
IX - Short-Term Borrowings 35
X - Supplementary Income Statement Information 36
Schedules other than those listed above are omitted for the reason that
they are not required or are not applicable, or the required information
is shown in the financial statements or notes thereto.
19
3. Exhibits
Exhibit
Number
- ------
3-1 - Agreement of Merger and Consolidation dated April 1, 1929, among
Pennsylvania Power Company ("Penn Power"), Harmony Electric
Company and Peoples Power Company (consummated May 31, 1930),
copies of Letters Patent issued thereon, together with the
Election Return and Treasurer's Return, relative to decrease of
capital stock; Election Return authorizing change of capital
stock and increase of indebtedness; Election Return authorizing
change of capital stock; Election Return authorizing increase
of capital stock; Election Return establishing 4.24% Preferred
Stock; Certificate with respect to the establishment of the
4.64% Preferred Stock; Election Returns and Certificates of
Actual Sale in connection with the purchase by Penn Power of all
the property of Pine-Mercer Electric Company, Industry Borough
Electric Company, Ohio Township Electric Company, and
Shippingport Borough Electric Company; Certificate of Change of
Location of Penn Power's principal office; Certificate of
Consent authorizing increase in authorized Common Stock;
Certificate of Consent with respect to the removal of
limitations on the authorized amount of indebtedness of Penn
Power; Election Returns and Certificates of Actual Sale in
connection with the purchase by Penn Power of all the property
of Borolak Public Service Company, Eastfax Public Service
Company, Norango Public Service Company, Sadwick Public Service
Company, Sosango Public Service Company, Surrick Public Service
Company, Wesango Public Service Company, and Westfax Public
Service Company; Certificate of Change of Location of Penn
Power's principal office; Amendment to the Charter extending the
territory in which Penn Power may operate in the Borough of
Shippingport, Beaver County, Pennsylvania; Certificate of
Consent authorizing increase in authorized Common Stock;
Certificate with respect to the establishment of the 8%
Preferred Stock; Certificate accepting Business Corporation Law
of Pennsylvania for government and regulation of affairs of Penn
Power; Articles of Amendment incorporating certain protective
provisions relating to Preferred Stock, increasing amount of
authorized Preferred Stock and authorizing future increases in
amounts of authorized Preferred Stock without a vote of the
holders of Preferred Stock; Articles of Amendment increasing the
authorized number of shares of Common Stock; Statement Affecting
Class or Series of Shares with respect to the establishment of
the 7.64% Preferred Stock; Articles of Amendment increasing the
authorized number of shares of Common Stock; Articles of
Amendment increasing the number of authorized shares of
Preferred Stock; Statement Affecting Class or Series of Shares
with respect to the establishment of the 8.48% Preferred Stock;
Articles of Amendment authorizing sinking fund requirements for
Preferred Stock; Statement Affecting Class or Series of Shares
with respect to the establishment of the 11% Preferred Stock;
Articles of Amendment increasing the authorized number of shares
20
Exhibit
Number
- ------
of Common Stock; Statement Affecting Class or Series
of Shares with respect to the establishment of the
9.16% Preferred Stock; Articles of Amendment
increasing authorized number of shares of Common
Stock; Articles of Amendment increasing authorized
number of shares of Preferred Stock; Statement
Affecting Class or Series of Shares with respect to
the establishment of the 8.24% Preferred Stock;
Statement Affecting Class or Series of Shares with
respect to the establishment of the 10.50% Preferred
Stock; Articles of Amendment increasing authorized
number of shares of Common Stock; Articles of
Amendment increasing authorized number of shares of
Preferred Stock; Statement Affecting Class or Series
of Shares with respect to the establishment of the
15.00% Preferred Stock; Statement Affecting Class or
Series of Shares with respect to the establishment of
the 11.50% Preferred Stock; Articles of Amendment
increasing authorized number of shares of Preferred
Stock; Statement Affecting Class or Series of Shares
with respect to the establishment of the 13.00%
Preferred Stock; Statement Affecting Class or Series
of Shares with respect to the establishment of the
11.50% Preferred Stock, Series B; Articles of
Amendment effective April 2, 1987, adding a standard
of care for, and limiting the personal liability of,
officers and directors; Articles of Amendment
effective April 1, 1992, setting forth corporate
purposes of the Company; and Statement With Respect
to Shares with respect to the
establishment of the 7.625% Preferred Stock.(Physically filed
and designated respectively, as follows: in Form A-2,
Registration No. 2-3889, as Exhibit A-1; in Form 1-MD for 1938,
File No. 2-3889, as Exhibit (a)-1; in Form 1-MD for 1945, File
No. 2-3889, as Exhibit A; in Form U-1, File No. 70-2310, as
Exhibit A-3 (d); in Form 8-K for March 1951, File No. 1-3491,
as Exhibit B; in Form 8-K for June 1958, File No. 1-3491B, as
Exhibit 1; in Form 10-K for 1959 as Exhibits 1, 2, 3 and 4; in
Form 8-K for March 1960, File No. 1-3491B as Exhibit A; in Form
U-1, File No. 70-3971, as Exhibit A-2; in Form U-1, File No. 70-
4055, as Exhibit A-2; as Exhibits 1 through 8 in Form 8-K for
January 1962, File No. 1-3491; as Exhibit A in Form 8-K for
August 1963, File No. 1-3491; as Exhibits A and B in Form 8-K
for September 1969, File No. 1-3491; as Exhibit B in Form 8-K
for April 1971, File No. 1-3491; as Exhibit B in Form 8-K for
September 1971, File No. 1-3491; in Form U-1, File No. 70-5264,
as Exhibit A-2; as Exhibit A in Form 8-K for September 1972,
File No. 1-3491; as Exhibit A in Form 8-K for December 1972,
File No. 1-3491; as Exhibit A in Form 8-K for March 1973, File
No. 1-3491; as Exhibit A in Form 8-K for December 1973, File No.
1-3491; as Exhibits A and C in Form 8-K for February 1974, File
No. 1-3491; as Exhibits A and B in Form 8-K for January 1975,
File No. 1-3491; as Exhibit F in Form 8-K for May 1975, File No.
1-3491; as Exhibit A in Form 8-K for April 1976, File No. 1-
3491; as Exhibit G in Form 10-Q for quarter ended June 30, 1977,
File No. 1-3491; as Exhibit C in Form 10-K for 1977, File No.
1-3491; as Exhibit A in Form 10-K for 1977, File No. 1-3491; as
Exhibit D in Form 10-Q for quarter ended June 30, 1980, File No.
1-3491; as Exhibit (4) in Form 10-Q for quarter ended June 30,
1981, File No. 1-3491; as Exhibit 4 in Form 10-Q for quarter
ended June 30, 1982, File No. 1-3491; as Exhibit 4 in Form 10-Q
for quarter ended September 30, 1982, File No. 1-3491; as
Exhibit 4 in Form 10-Q for quarter ended September 30, 1983,
File No. 1-3491; as Exhibit 4 in Form 10-Q for quarter ended
March 31, 1984, File No. 1-3491; as Exhibit 4 in Form 10-Q for
quarter ended June 30, 1984, File No. 1-3491; as Exhibit 4 in
Form 10-Q for quarter ended September 30, 1985, File No. 1-3491;
as Exhibit 3-2 in Form 10-K for 1987 File No. 1-3491; as Exhibit
3-2 in Form 10-K for 1992 File No. 1-3491; and as Exhibit 19-2
in Form 10-K for 1992 File No. 1-3491.)
(A)3-2 - Statement With Respect to Shares with respect to the
establishment of the 7.75% Preferred Stock.
3-3 - By-Laws of the Company as amended March 25, 1992.(1992
Form 10-K, Exhibit 3-3, File No. 1-3491.)
21
Exhibit
Number
- -------
4-1* - Indenture dated as of November 1, 1945, between the
Company and The First National Bank of the City of
New York (now Citibank, N.A.), as Trustee, as
supplemented and amended by Supplemental Indentures
dated as of May 1, 1948, March 1, 1950, February 1,
1952, October 1, 1957, September 1, 1962, June 1,
1963, June 1, 1969, May 1, 1970, April 1, 1971,
October 1, 1971, May 1, 1972, December 1, 1974,
October 1, 1975, September 1, 1976, April 15, 1978,
June 28, 1979, January 1, 1980, June 1, 1981, January
14, 1982, August 1, 1982, December 15, 1982, December
1, 1983, September 6, 1984, December 1, 1984, May 30,
1985, October 29, 1985, August 1, 1987, May 1, 1988,
November 1, 1989, December 1, 1990, September 1,
1991, May 1, 1992, July 15, 1992, and August 1,
1992.(Physically filed and designated as Exhibits
2(b) (1)-1 through 2(b) (l)-15 in Registration
Statement File No. 2-60837; as Exhibits 2(b) (2),
2(b) (3), and 2 (b) (4) in Registration Statement
File No. 2-68906; as Exhibit 4-2 in Form 10-K for
1981 File No. 1-3491; as Exhibit 19-1 in Form 10-K
for 1982 File No. 1-3491; as Exhibit 19-1 in Form 10-
K for 1983 File No. 1-3491; as Exhibit 19-1 in Form
10-K for 1984 File No. 1-3491; as Exhibit 19-1 in
Form 10-K for 1985 File No. 1-3491; as Exhibit 19-1
in Form 10-K for 1987 File No. 1-3491; as Exhibit 19-
1 in Form 10-K for 1988 File No. 1-3491; as Exhibit
19 in Form 10-K for 1989 File No. 1-3491; as Exhibit
19 in Form 10-K for 1990 File No. 1-3491; as Exhibit
19 in Form 10-K for 1991 File No. 1-3491; and as
Exhibit 19-1 in Form 10-K for 1992 File No. 1-3491.)
- ----------------
* Pursuant to paragraph (b) (4) (iii) (A) of Item 601 of Regulation S-K,
the Company has not filed as an exhibit to this Form 10-K any
instrument with respect to long-term debt if the total amount of
securities authorized thereunder does not exceed 10% of the total
assets of the Company, but hereby agrees to furnish to the Commission
on request any such instruments.
(A)4-2 - Supplemental Indentures dated as of May 1, 1993, July 1, 1993,
August 31, 1993, September 1, 1993, September 15, 1993,
October 1, 1993, and November 1, 1993, between the Company and
Citibank, N.A., as Trustee.
10-1 - Administration Agreement between the CAPCO Group dated as of
September 14, 1967. (Registration Statement of Ohio Edison
Company, File No. 2-43102, Exhibit 5 (c) (2).)
10-2 - Amendment No. 1 dated January 4, 1974 to Administration
Agreement between the CAPCO Group dated as of September 14,
1967. (Registration Statement No. 2-68906, Exhibit 5 (c) (3).)
10-3 - Transmission Facilities Agreement between the CAPCO Group dated
as of September 14, 1967. (Registration Statement of Ohio Edison
Company, File No. 2-43102, Exhibit 5 (c) (3).)
10-4 - Amendment No. 1 dated as of January 1, 1993 to Transmission
Facilities Agreement between the CAPCO Group dated as of
September 14, 1967. (1993 Form 10-K, Exhibit 10-4, Ohio Edison
Company.)
10-5 - Agreement for the Termination or Construction of Certain
Agreements effective September 1, 1980 among the CAPCO Group.
(Registration Statement No. 2-68906, Exhibit 10-4.)
10-6 - Amendment dated as of December 23, 1993 to Agreement for the
Termination or Construction of Certain Agreements effective
September 1, 1980 among the CAPCO Group. (1993 Form 10-K,
Exhibit 10-6, Ohio Edison Company.)
10-7 - CAPCO Basic Operating Agreement, as amended September 1, 1980.
(Physically filed and designated in Registration Statement No.
2-68906, as Exhibit 10-5.)
22
10-8 - Amendment No. 1 dated August 1, 1981 and Amendment No. 2 dated
September 1, 1982, to CAPCO Basic Operating Agreement as amended
September 1, 1980. (September 30, 1981 Form 10-Q, Exhibit 20-1,
and 1982 Form 10-K, Exhibit 19-3, File No. 1-2578, of Ohio
Edison Company.)
10-9 - Amendment No. 3 dated as of July 1, 1984, to CAPCO Basic
Operating Agreement as amended September 1, 1980. (1985 Form 10-
K, Exhibit 10-7, File No. 1-2578, of Ohio Edison Company.)
10-10 - Basic Operating Agreement between the CAPCO Companies as amended
October 1, 1991. (1991 Form 10-K, Exhibit 10-8, File No. 1-2578,
of Ohio Edison Company.)
10-11 - Basic Operating Agreement between the CAPCO Companies, as
amended January 1, 1993. (1993 Form 10-K, Exhibit 10-5, Ohio
Edison Company.)
10-12 - Memorandum of Agreement effective as of September 1, 1980, among
the CAPCO Group. (1991 Form 10-K, Exhibit 19-2, Ohio Edison
Company.)
10-13 - Operating Agreement for Beaver Valley Power Station Units Nos.
1 and 2 as Amended and Restated September 15, 1987, by and
between the CAPCO Companies. (1987 Form 10-K, Exhibit 10-15,
File No. 1-2578, of Ohio Edison Company.)
10-14 - Construction Agreement with respect to Perry Plant between the
CAPCO Group dated as of July 22, 1974. (Registration Statement
of Toledo Edison Company, File No. 2-52251, as Exhibit 5 (yy).)
10-15 - Participation Agreement No. 1 relating to the financing of the
development of certain coal mines, dated as of October 1, 1973,
among Quarto Mining Company, the CAPCO Group, Energy Properties,
Inc., General Electric Credit Corporation, the Loan Participants
listed in Schedules A and B thereto, Central National Bank of
Cleveland, as Owner Trustee, National City Bank, as Loan
Trustee, and National City Bank, as Bond Trustee. (Registration
Statement of Ohio Edison Company, File No. 2-61146, Exhibit 5
(e) (1).)
10-16 - Amendment No. 1 dated as of September 15, 1978, to Participation
Agreement No. 1 dated as of October 1, 1973, among Quarto Mining
Company, the CAPCO Group, Energy Properties, Inc., General
Electric Credit Corporation, the Loan Participants listed in
Schedules A and B thereto, Central National Bank of Cleveland,
as Owner Trustee, National City Bank, as Loan Trustee, and
National City Bank, as Bond Trustee. (Registration Statement No.
2-68906, Exhibit 5 (e) (2).)
10-17 - Participation Agreement No. 2 relating to the financing of the
development of certain coal mines, dated as of August 1, 1974,
among Quarto Mining Company, the CAPCO Group, Energy Properties,
Inc., General Electric Credit Corporation, the Loan Participants
listed in Schedules A and B thereto, Central National Bank of
Cleveland, as Owner Trustee, National City Bank, as Loan
Trustee, and National City Bank, as Bond Trustee. (Ohio Edison
Company, File No. 2-53059, Exhibit 5 (h) (2).)
10-18 - Amendment No. 1 dated as of September 15, 1978, to Participation
Agreement No. 2 dated as of August 1, 1974, among Quarto Mining
Company, the CAPCO Group, Energy Properties, Inc., General
Electric Credit Corporation, the Loan Participants listed in
Schedules A and B thereto, Central National Bank of Cleveland,
as Owner Trustee, National City Bank, as Loan Trustee, and
National City Bank, as Bond Trustee. (Registration Statement No.
2-68906, Exhibit 5 (e) (4).)
10-19 - Participation Agreement No. 3 relating to the financing of the
development of certain coal mines, dated as of September 15,
1978, among Quarto Mining Company, the CAPCO Group, Energy
Properties, Inc., General Electric Credit Corporation, the Loan
Participants listed in Schedules A and B thereto, Central
National Bank of Cleveland, as Owner Trustee, National City
Bank, as Loan Trustee, and National City Bank, as Bond Trustee.
(Registration Statement No. 2-68906, Exhibit 5 (e) (5).)
23
Exhibit
Number
- -------
10-20 - Participation Agreement No. 4 relating to the financing of the
development of certain coal mines, dated as of October 31, 1980,
among Quarto Mining Company, the CAPCO Group, the Loan
Participants listed in Schedule A thereto and National City
Bank, as Bond Trustee. (Registration Statement No. 2-68906,
Exhibit 10-16.)
10-21 - Participation Agreement No. 5 dated as of May 1, 1986, among
Quarto Mining Company, the CAPCO Companies, the Loan
Participants listed in Schedule A thereto, and National City
Bank, as Bond Trustee. (1986 Form 10-K, Exhibit 10-22, File No.
1-2578, Ohio Edison Company.)
10-22 - Participation Agreement No. 6 dated as of December 1, 1991,
among Quarto Mining Company, the CAPCO Companies, the Loan
Participants listed in Schedule A thereto, National City Bank,
as Mortgage Bond Trustee, and National City Bank, as Refunding
Bond Trustee. (1991 Form 10-K, Exhibit 10-19, File No. 1-2578,
Ohio Edison Company.)
10-23 - Agreement entered into as of October 20, 1981, among the CAPCO
Companies regarding the use of Quarto Coal at Mansfield Units
Nos. 1, 2 and 3. (1981 Form 10-K, Exhibit 20-1 Form 10-K, File
No. 1-2578, Ohio Edison Company.)
10-24 - Restated Option Agreement dated as of May 1, 1983, by and
between The North American Coal Corporation and the CAPCO
Companies. (1983 Form 10-K, Exhibit 19-1, File No. 1-2578, Ohio
Edison Company.)
10-25 - Trust Indenture and Mortgage dated as of October 1, 1973,
between Quarto Mining Company and National City Bank, as Bond
Trustee, together with Guaranty, dated as of October 1, 1973,
with respect thereto by the CAPCO Group. (Registration Statement
of Ohio Edison Company, File No. 2-61146, Exhibit 5 (e) (5).)
10-26 - Amendment No. 1 dated August 1, 1974, to Trust Indenture and
Mortgage dated as of October 1, 1973, between Quarto Mining
Company and National City Bank, as Bond Trustee, together with
Amendment No. 1 dated August 1, 1974, to Guaranty dated as of
October 1, 1973, with respect thereto by the CAPCO Group.
(Registration Statement of Ohio Edison Company, File No. 2-
53059, Exhibit 5 (h) (2).)
10-27 - Amendment No. 2 dated as of September 15, 1978, to Trust
Indenture and Mortgage dated as of October 1, 1973, as amended,
between Quarto Mining Company and National City Bank, as Bond
Trustee, together with Amendment No. 2 dated as of September 15,
1978, to Bond Guaranty dated as of October 1, 1973, as amended,
between the CAPCO Group and National City Bank, as Bond Trustee.
(Registration Statement No. 2-68906, Exhibits 5 (e) (11) and 5
(e) (12).)
10-28 - Amendment No. 3 dated as of October 31, 1980, to Trust Indenture
and Mortgage dated as of October 1, 1973, as amended, between
Quarto Mining Company and National City Bank, as Bond Trustee.
(Registration Statement No. 2-68906, Exhibit 10-16.)
10-29 - Amendment No. 4 dated as of July 1, 1985, to Trust Indenture and
Mortgage dated as of October 1, 1973, as amended, between Quarto
Mining Company and National City Bank, as Bond Trustee. (1985
Form 10-K, Exhibit 10-28 in Form 10-K, File No. 1-2578, Ohio
Edison Company.)
10-30 - Amendment No. 5 dated as of May 1, 1986, to Trust Indenture and
Mortgage dated as of October 1, 1973, as amended, between Quarto
Mining Company and National City Bank, as Bond Trustee. (1986
Form 10-K, Exhibit 10-30, File No. 1-2578, Ohio Edison Company.)
10-31 - Amendment No. 6 dated as of December 1, 1991, to Trust Indenture
and Mortgage dated as of October 1, 1973, as amended, between
Quarto Mining Company and National City Bank, as Bond Trustee.
(1991 Form 10-K, Exhibit 10-28, File No. 1-2578, Ohio Edison
Company.)
24
Exhibit
Number
- -------
10-32 - Trust Indenture dated as of December 1, 1991, between Quarto
Mining Company and National City Bank, as Bond Trustee. (1991
Form 10-K, Exhibit 10-29, File No. 1-2578, Ohio Edison Company.)
10-33 - Amendment No. 3 dated as of October 31, 1980, to the Bond
Guaranty dated as of October 1, 1973, as amended, with respect
to the CAPCO Group. (Registration Statement No. 2-68906, Exhibit
10-16.)
10-34 - Amendment No. 4 dated as of July 1, 1985, to the Bond Guaranty
dated as of October 1, 1973, as amended, by the CAPCO Companies
to National City Bank, as Bond Trustee. (1985 Form 10-K, Exhibit
10-30 , File No. 1-2578, Ohio Edison Company.)
10-35 - Amendment No. 5 dated as of May 1, 1986, to the Bond Guaranty
dated as of October 1, 1973, as amended, by the CAPCO Companies
to National City Bank, as Bond Trustee. (1986 Form 10-K, Exhibit
10-33, File No. 1-2578, Ohio Edison Company.)
10-36 - Amendment No. 6A dated as of December 1, 1991, to the Bond
Guaranty dated as of October 1, 1973, as amended, by the CAPCO
Companies to National City Bank, as Bond Trustee. (1991 Form 10-
K, Exhibit 10-33, File No. 1-2578, Ohio Edison Company.)
10-37 - Amendment No. 6B dated as of December 30, 1991, to the Bond
Guaranty dated as of October 1, 1973, as amended, by the CAPCO
Companies to National City Bank, as Bond Trustee. (1991 Form 10-
K, Exhibit 10-34, File No. 1-2578, Ohio Edison Company.)
10-38 - Bond Guaranty dated as of December 1, 1991, by the CAPCO
Companies to National City Bank, as Bond Trustee. (1991 Form 10-
K, Exhibit 10-35, File No. 1-2578, Ohio Edison Company.)
10-39 - Open End Mortgage dated as of October 1, 1973, between Quarto
Mining Company and the CAPCO Companies and Amendment No. 1
thereto dated as of September 15, 1978. (Registration Statement
No. 2-68906, Exhibit 10-23.)
10-40 - Restructuring Agreement dated as of April 1, 1985, among Quarto
Mining Company, the CAPCO Companies, Energy Properties, Inc.,
General Electric Credit Corporation, the Loan Participants
listed in schedules thereto, Central National Bank of Cleveland,
as Owner Trustee, National City Bank, as Loan Trustee, and
National City Bank, as Bond Trustee. (1985 Form 10-K, Exhibit
10-33, File No. 1-2578, Ohio Edison Company.)
10-41 - Unsecured Note Guaranty dated as of July 1, 1985, by the CAPCO
Companies to General Electric Credit Corporation. (1985 Form 10-
K, Exhibit 10-34, File No. 1-2578, Ohio Edison Company.)
10-42 - Memorandum of Understanding dated as of March 31, 1985, among
the CAPCO Companies. (1985 Form 10-K, Exhibit 10-35, File No.
1-2578, Ohio Edison Company.)
(B)10-43- Ohio Edison Company Executive Incentive Compensation Plan (which
includes, by definition, Pennsylvania Power Company). (1984 Form
10-K, Exhibit 19-2, File No. 1-2578, Ohio Edison Company.)
(B)10-44- Ohio Edison Company Executive Incentive Compensation Plan as
amended February 16, 1987. (1986 Form 10-K, Exhibit 10-40, File
No. 1-2578, Ohio Edison Company.)
(B)10-45- Ohio Edison System Restated and Amended Executive Deferred
Compensation Plan. (1989 Form 10-K, Exhibit 10-36, File No. 1-
2578, Ohio Edison Company.)
(B)10-46- Ohio Edison System Restated and Amended Supplemental Executive
Retirement Plan. (1989 Form 10-K, Exhibit 10-37, File No. 1-
2578, Ohio Edison Company.)
10-47- Operating Agreement for Perry Unit No. 1 dated March 10, 1987,
by and between the CAPCO Companies. (1987 Form 10-K, Exhibit 28-
24, File No. 1-2578, Ohio Edison Company.)
25
Exhibit
Number
- -------
10-48- Operating Agreement for Bruce Mansfield Units Nos. 1, 2 and 3
dated as of June 1, 1976, and executed on September 15, 1987,
by and between the CAPCO Companies. (1987 Form 10-K, Exhibit 28-
25, File No. 1-2578, Ohio Edison Company.)
10-49- Operating Agreement for W. H. Sammis Unit No. 7 dated as of
September 1, 1971, by and between the CAPCO Companies. (1987
Form 10-K, Exhibit 28-26, File No. 1-2578, Ohio Edison Company.)
10-50- OE-APS Power Interchange Agreement dated March 18, 1987, by and
among Ohio Edison Company and Pennsylvania Power Company, and
Monongahela Power Company and West Penn Power Company and The
Potomac Edison Company. (1987 Form 10-K, Exhibit 28-27, File No.
1-2578, of Ohio Edison Company.)
10-51- OE-PEPCO Power Supply Agreement dated March 18, 1987, by and
among Ohio Edison Company and Pennsylvania Power Company and
Potomac Electric Power Company. (1987 Form 10-K, Exhibit 28-28,
File No. 1-2578, of Ohio Edison Company.)
10-52- Supplement No. 1 dated as of April 28, 1987, to the OE-PEPCO
Power Supply Agreement dated March 18, 1987, by and among Ohio
Edison Company, Pennsylvania Power Company and Potomac Electric
Power Company. (1987 Form 10-K, Exhibit 28-29, File No. 1-2578,
of Ohio Edison Company.)
10-53- APS-PEPCO Power Resale Agreement dated March 18, 1987, by and
among Monongahela Power Company, West Penn Power Company, and
The Potomac Edison Company and Potomac Electric Power Company.
(1987 Form 10-K, Exhibit 28-30, File No. 1-2578, of Ohio Edison
Company.)
10-54- Pennsylvania Power Company Master Decommissioning Trust
Agreement for Beaver Valley Power Station Unit No. 1 dated as
of March 15, 1988. (1988 Form 10-K, Exhibit 10-41, File No. 1-
3491.)
10-55- Pennsylvania Power Company Qualified Decommissioning Trust
Agreement for Perry Nuclear Power Plant Unit No. 1 dated March
10, 1989. (1988 Form 10-K, Exhibit 10-42, File No. 1-3491.)
10-56- First Amendment dated May 31, 1991 to Pennsylvania Power Company
Qualified Decommissioning Trust Agreement for Perry Nuclear
Power Plant Unit No. 1. (1991 Form 10-K, Exhibit 10-46, File No.
1-3491.)
10-57- Nuclear Fuel Lease dated as of March 31, 1989, between OES Fuel,
Incorporated, as Lessor, and Pennsylvania Power Company, as
Lessee. (1989 Form 10-K, Exhibit 10-39, File No. 1-3491.)
(A)13- 1993 Annual Report to Stockholders. (Only those portions
expressly incorporated by reference in this Form 10-K are to be
deemed "filed" with the Securities and Exchange Commission.)
18 - Letter from Independent Public Accountants regarding a change
in accounting.
23 - Consent of Independent Public Accountants.
(A) Provided herein in electronic format as an exhibit.
(B) Management contract or compensatory plan contract or arrangements
filed pursuant to Item 601 of Regulation S-K.
(b) Reports on Form 8-K
The Company filed one report on Form 8-K since September 30, 1993.
A report dated December 13, 1993, reported the abandonment of
Perry Unit 2 as a possible electric generating plant.
26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Pennsylvania Power Company:
We have audited, in accordance with generally accepted
auditing standards, the financial statements included in Pennsylvania
Power Company's Annual Report to stockholders incorporated by reference in this
Form 10-K and have issued our report thereon dated February 1, 1994. Our
audit was made for the purpose of forming an opinion on those statements
taken as a whole. The schedules listed in Item 14 are the responsibility
of the Company's management and are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the
basic financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN & CO.
New York, N.Y.
February 1, 1994
27
SCHEDULE V
Page 1
PENNSYLVANIA POWER COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
Beginning Additions Other Ending
Classification Balance at Cost Retirements Changes(a) Balance
-------------- --------- --------- ----------- ---------- -------
(In Thousands)
UTILITY PLANT AT ORIGINAL COST:
ELECTRIC:
Intangibles-
Organization expense $ 23 $ -- $ -- $ -- $ 23
Franchises and consents 64 -- -- -- 64
Production-
Steam 259,518 5,768 1,135 (11,014) 253,137
Nuclear 509,980 6,131 (227) 38,526 554,864
Other 3,454 7 1 11 3,471
Transmission 117,096 8,008 265 5,732 130,571
Distribution 178,172 14,675 1,945 (4,649) 186,253
General 15,323 371 498 396 15,592
Construction work in progress 60,239 (965) -- (48,278)(b) 10,996
Plant held for future use 9,390 9 -- 13,944 23,343
--------- -------- ------- ------- ----------
Total electric 1,153,259 34,004 3,617 (5,332) 1,178,314
NUCLEAR FUEL 61,193 2,248 12,194 -- 51,247
--------- -------- ------- ------- ----------
Total utility plant at original cost 1,214,452 36,252 15,811 (5,332) 1,229,561
NONUTILITY PROPERTY AT ORIGINAL COST 539 -- 126 -- 413
--------- -------- ------- ------- ----------
Total property, plant and equipment $1,214,991 $36,252 $15,937 $(5,332) $1,229,974
========== ======== ======= ======= ==========
- --------------------
<FN>
(a) Represents increases of approximately $42,557,000 and $4,839,000 to plant
in-service and construction work in progress, respectively, as a result of
adopting Statement of Financial Accounting Standards No. 109 and transfers
within property, plant and equipment, unless otherwise noted.
(b) Includes the write-off of Perry Unit 2 construction costs of approximately
$53,117,000.
28
SCHEDULE V
Page 2
PENNSYLVANIA POWER COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
Beginning Additions Other Ending
Classification Balance at Cost Retirements Changes(a) Balance
-------------- --------- --------- ----------- ---------- -------
(In Thousands)
UTILITY PLANT AT ORIGINAL COST:
ELECTRIC:
Intangibles-
Organization expense $ 23 $ -- $ -- $ -- $ 23
Franchises and consents 64 -- -- -- 64
Production-
Steam 257,161 3,099 756 14 259,518
Nuclear 505,754 5,481 1,500 245 509,980
Other 3,368 106 20 -- 3,454
Transmission 114,868 4,032 1,561 (243) 117,096
Distribution 166,833 13,297 1,957 (1) 178,172
General 16,650 1,790 3,102 (15) 15,323
Construction work in progress 60,141 98 -- -- 60,239
Plant held for future use 9,406 (16) -- -- 9,390
---------- ------- ------- ------ ---------
Total electric 1,134,268 27,887 8,896 -- 1,153,259
NUCLEAR FUEL 53,773 9,965 2,545 -- 61,193
---------- ------- ------- ------ ---------
Total utility plant at original cost 1,188,041 37,852 11,441 -- 1,214,452
NONUTILITY PROPERTY AT ORIGINAL COST 498 238 197 -- 539
---------- ------- ------- ------ ---------
Total property, plant and equipment $1,188,539 $38,090 $11,638 $ -- $1,214,991
========== ======= ======= ====== ==========
- --------------------
<FN>
(a) Represents transfers within property, plant and equipment.
29
SCHEDULE V
Page 3
PENNSYLVANIA POWER COMPANY
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
Beginning Additions Other Ending
Classification Balance at Cost Retirements Changes(a) Balance
-------------- --------- --------- ----------- ---------- -------
(In Thousands)
UTILITY PLANT AT ORIGINAL COST:
ELECTRIC:
Intangibles-
Organization expense $ 23 $ -- $ -- $ -- $ 23
Franchises and consents 64 -- -- -- 64
Production-
Steam 254,334 4,613 1,788 2 257,161
Nuclear 502,414 7,423 4,098 15 505,754
Other 3,360 10 2 -- 3,368
Transmission 112,878 1,123 78 945(b) 114,868
Distribution 155,703 12,865 1,735 -- 166,833
General 16,088 1,452 967 77(b) 16,650
Construction work in progress 64,570 (4,429) -- -- 60,141
Plant held for future use 9,411 (5) -- -- 9,406
---------- ------- ------- ------ ----------
Total electric 1,118,845 23,052 8,668 1,039 1,134,268
NUCLEAR FUEL 67,334 3,157 16,718 -- 53,773
---------- ------- ------- ------ ----------
Total utility plant at original cost 1,186,179 26,209 25,386 1,039 1,188,041
NONUTILITY PROPERTY AT ORIGINAL COST 473 133 108 -- 498
---------- ------- ------- ------ ----------
Total property, plant and equipment $1,186,652 $26,342 $25,494 $1,039 $1,188,539
========== ======= ======= ====== ==========
- --------------------
<FN>
(a) Represents transfers within property, plant and equipment, unless
otherwise noted.
(b) Includes a $1,039,000 adjustment to previously capitalized leases.
30
SCHEDULE VI
Page 1
PENNSYLVANIA POWER COMPANY
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
Additions
-----------------------
Provisions
Charged to
--------------------
Beginning Other Other Ending
Description Balance Income Accounts(a) Retirements Changes(b) Balance
----------- --------- ------ ----------- ----------- ---------- -------
(In Thousands)
UTILITY PLANT:
ELECTRIC:
Production-
Steam . . . . . . . . . . . $116,218 $ 6,889 $ 96 $ 1,302 $(12,925) $108,976
Nuclear . . . . . . . . . . 106,103 15,235 -- (373) 5,780 127,491
Other . . . . . . . . . . . 2,318 107 -- 2 6 2,429
Transmission. . . . . . . . . 38,680 2,164 474 85 2,471 43,704
Distribution. . . . . . . . . 61,373 4,546 11 2,237 (2,150) 61,543
General . . . . . . . . . . . 6,505 319 716 472 3 7,071
Plant held for future use . . 4,019 -- -- -- 13,943 17,962
-------- ------- ------- ------- -------- --------
Total electric. . . . . . . 335,216 29,260 1,297 3,725 7,128 369,176
NUCLEAR FUEL. . . . . . . . . . 30,035 -- 7,513 12,194 -- 25,354
-------- ------- ------- ------- -------- --------
Total utility plant . . . . 365,251 29,260 8,810 15,919 7,128 394,530
NONUTILITY PROPERTY. . . . . . . 15 -- 2 -- -- 17
-------- ------- ------- ------- -------- --------
Total property, plant
and equipment . . . . . . . $365,266 $29,260 $ 8,812 $15,919 $ 7,128 $394,547
======== ======= ======= ======= ======== ========
-------------------
<FN>
(a) Represents amortization of capital leases and nuclear fuel,
and depreciation charged to clearing accounts.
(b) Represents approximately $6,815,000 resulting from the
adoption of Statement of Financial Accounting Standards No.
109, transfers of provisions for depreciation within property,
plant and equipment and interest earned on external
decommissioning funds.
31
SCHEDULE VI
Page 2
PENNSYLVANIA POWER COMPANY
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
Additions
-----------------------
Provisions
Charged to
-----------------------
Beginning Other Other Ending
Description Balance Income Accounts(a) Retirements Changes(b) Balance
----------- -------- ----- ---------- ----------- ---------- -------
(In Thousands)
UTILITY PLANT:
ELECTRIC:
Production-
Steam. . . . . . . . . . . $108,338 $ 8,875 $ 97 $ 1,092 $ -- $116,218
Nuclear. . . . . . . . . . 93,656 14,135 -- 1,837 149 106,103
Other. . . . . . . . . . . 2,162 176 -- 20 -- 2,318
Transmission. . . . . . . . . 37,094 2,429 431 1,274 -- 38,680
Distribution. . . . . . . . . 58,579 4,947 9 2,162 -- 61,373
General . . . . . . . . . . . 8,601 294 738 3,128 -- 6,505
Plant held for future use . . 4,019 -- -- -- -- 4,019
-------- ------- ------ ------- ---- --------
Total electric . . . . . . 312,449 30,856 1,275 9,513 149 335,216
NUCLEAR FUEL . . . . . . . . . 19,989 -- 12,591 2,545 -- 30,035
-------- ------- ------- ------- ---- --------
Total utility plant. . . . 332,438 30,856 13,866 12,058 149 365,251
NONUTILITY PROPERTY. . . . . . . 15 -- -- -- -- 15
-------- ------- ------- ------- ---- --------
Total property, plant
and equipment. . . . . . . $332,453 $30,856 $13,866 $12,058 $149 $365,266
======== ======= ======= ======= ==== ========
-------------------
<FN>
(a) Represents amortization of capital leases and nuclear fuel,
and depreciation charged to clearing accounts.
(b) Represents interest earned on external decommissioning funds.
32
SCHEDULE VI
Page 3
PENNSYLVANIA POWER COMPANY
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
Additions
-----------------------
Provisions
Charged to
-----------------------
Beginning Other Other Ending
Description Balance Income Accounts(a) Retirements Changes(b) Balance
----------- --------- ------ ----------- ----------- ---------- -------
(In Thousands)
UTILITY PLANT:
ELECTRIC:
Production-
Steam . . . . . . . . . . . $101,581 $ 8,923 $ 81 $ 2,247 $ -- $108,338
Nuclear . . . . . . . . . . 84,274 13,569 -- 4,267 80 93,656
Other . . . . . . . . . . . 1,934 230 -- 2 -- 2,162
Transmission. . . . . . . . . 34,036 2,414 381 (263) -- 37,094
Distribution. . . . . . . . . 56,769 3,671 8 1,869 -- 58,579
General . . . . . . . . . . . 8,568 359 602 928 -- 8,601
Plant held for future use . . 4,019 -- -- -- -- 4,019
-------- ------- ------ ------- --- --------
Total electric. . . . . . . 291,181 29,166 1,072 9,050 80 312,449
NUCLEAR FUEL. . . . . . . . . . 26,718 -- 9,989 16,718 -- 19,989
-------- ------- ------- ------- --- --------
Total utility plant . . . . 317,899 29,166 11,061 25,768 80 332,438
NONUTILITY PROPERTY. . . . . . . 15 -- -- -- -- 15
-------- ------- ------- ------- --- --------
Total property, plant
and equipment . . . . . . . $317,914 $29,166 $11,061 $25,768 $80 $332,453
======== ======= ======= ======= === ========
-------------------
<FN>
(a) Represents amortization of capital leases and nuclear fuel,
and depreciation charged to clearing accounts.
(b) Represents interest earned on external decommissioning funds.
33
SCHEDULE VIII
PENNSYLVANIA POWER COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Additions
--------------------------------
Charged Charged
Beginning (Credited) to Other Ending
Description Balance to Income Accounts Deductions Balance
----------- --------- ---------- ---------- ---------- -------
(In Thousands)
Year Ended December 31, 1993:
Accumulated provision for
uncollectible accounts. . . . . . . $ 429 $ 1,050 $ 288(a) $ 1,208(b) $ 559
======= ======= ===== ======= ======
Reserve for injuries and damages. . . $ 949 $ (166) $ 19(c) $ 57(d) $ 745
======= ======= ===== ======= ======
Year Ended December 31, 1992:
Accumulated provision for
uncollectible accounts. . . . . . . $ 419 $14,548 $ 264(a) $14,802(b) $ 429
======= ======= ===== ======= ======
Reserve for injuries and damages. . . $ 1,031 $ (3) $ -- $ 79(d) $ 949
======= ======= ===== ======= ======
Year Ended December 31, 1991:
Accumulated provision for
uncollectible accounts. . . . . . . $ 881 $ 1,325 $ 201(a) $ 1,988(b) $ 419
======= ======= ===== ======= ======
Reserve for injuries and damages. . . $ 1,178 $ (121) $ -- $ 26(d) $1,031
======= ======= ===== ======= ======
- -------------------
<FN>
(a) Represents recoveries and reinstatements of accounts previously
written off.
(b) Represents the write-off of accounts considered to be uncollectible.
(c) Represents net provisions to utility plant on the basis of direct
costs of construction of certain classes of property.
(d) Represents payments for claims and other related expenses.
34
SCHEDULE IX
PENNSYLVANIA POWER COMPANY
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
----------------------------- ------------------------------ ------------------------------
Notes Payable Notes Notes Payable Notes Notes Payable Notes
to Parent Payable to Parent Payable to Parent Payable
Company To Banks Company To Banks Company To Banks
Balance at End of Period. . . $ -- $ -- $ -- $15,000,000 $ 8,000,000 $ --
Weighted Average Interest
Rate at End of Period . . . -- -- -- 3.95% 4.93% --
Maximum Amount Outstanding
During the Period. . . . . $ -- $68,000,000 $ 8,000,000 $36,500,000 $25,000,000 $41,500,000
Average Amount Outstanding
During the Period (a). . . $ -- $13,944,000 $428,000 $ 7,807,000 $ 3,307,000 $22,930,000
Weighted Average Interest Rate
During the Period (a)(b) -- 3.64% 4.97% 3.66% 5.45% 6.76%
- -------------------
<FN>
(a) Based on the daily amounts outstanding.
(b) Excluding the effect of commitment fees.
35
SCHEDULE X
PENNSYLVANIA POWER COMPANY
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
Charged to Expense
------------------------------------------------------
Item 1993 1992 1991
---------------------------------- ---- ---- ----
Maintenance and repairs . . . . . . . $25,160,000 $22,378,000 $28,527,000
<FN>
Other items required by this schedule are omitted due to the required
information being shown in the financial statements or being less than 1%
of total sales.
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PENNSYLVANIA POWER COMPANY
BY /s/Willard R.Holland
---------------------------------
Willard R. Holland
Chairman of the Board and
Chief Executive Officer
Date: March 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated:
/s/Willard R. Holland /s/Robert P. Wushinske
- -------------------------------------- ---------------------------
Willard R. Holland Robert P. Wushinske
Chairman of the Board and Chief Vice President and Treasurer
Executive Officer (Principal Executive (Principal Accounting Officer)
Officer and Principal Financial Officer)
/s/H. Peter Burg /s/Robert L. Kensinger
- -------------------------------------- ---------------------------
H. Peter Burg Robert L. Kensinger
Director Director
/s/Robert H. Carlson /s/Joseph J. Nowak
- -------------------------------------- ---------------------------
Robert H. Carlson Joseph J. Nowak
Director Director
/s/J. R. Edgerly /s/Jack E. Reed
- -------------------------------------- ---------------------------
J. R. Edgerly Jack E. Reed
Director Director
---------------------------
Richard L. Werner
Director
Date: March 23, 1994
37