FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
OR
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to ________
Commission File Number 1-5007
TAMPA ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
FLORIDA 59-0475140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
TECO Plaza
702 N. Franklin Street
Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813)228-4111
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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
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
The aggregate market value of the voting stock held by nonaffiliates
of the registrant as of February 28, 1998 was zero.
As of February 28, 1997, there were 10 shares of the registrant's
common stock issued and outstanding, all of which were held,
beneficially and of record, by TECO Energy, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
None
The registrant meets the conditions set forth in General Instruction
(I) (1) (a) and (b) of Form 10-K and is therefore filing this form
with the reduced disclosure format.
PART I
Item 1. BUSINESS.
Tampa Electric Company (the company) was incorporated in Florida
in 1899 and was reincorporated in 1949. As a result of a restructuring
in 1981, the company became a wholly owned subsidiary of TECO Energy,
Inc. (TECO Energy), a diversified energy-related holding company.
In June 1997, TECO Energy acquired Lykes Energy, Inc. As part of
this acquisition, Lykes' regulated gas distribution utility was merged
into the company and now operates as the Peoples Gas System division
of Tampa Electric Company (PGS). Also in June 1997, TECO Energy
completed its acquisition of West Florida Natural Gas Company (West
Florida Gas), a local distribution company, serving the Ocala and
Panama City, Florida areas. West Florida Gas now operates as part of
the Peoples Gas System division.
Tampa Electric Company is a public utility operating within the
state of Florida and is engaged in the generation, purchase,
t r ansmission, distribution and sale of electric energy (Tampa
Electric), and, through its Peoples Gas System division, in the
purchase, distribution and marketing of natural gas for residential,
commercial, industrial and electric power generation customers wholly
in the State of Florida. The retail electric service territory
comprises an area of about 2,000 square miles in west central Florida,
including Hillsborough County and parts of Polk, Pasco and Pinellas
Counties, and has an estimated population of over one million. The
principal communities served are Tampa, Winter Haven, Plant City and
Dade City. In addition, the company engages in wholesale sales to
other utilities. Tampa Electric has three electric generating stations
in or near Tampa, one electric generating station in southwestern Polk
County, Florida, and two electric generating stations (one of which is
on long-term standby) located near Sebring, a city located in
Highlands County in south central Florida. Total net winter generating
capability at Dec. 31, 1997 is 3,600 megawatts (MWs).
PGS, with 238,000 customers, has operations in Florida's major
metropolitan areas. Annual natural gas throughput (the amount of gas
delivered to its customers including transportation only service) in
1997 was 900 million therms.
P o w er Engineering & Construction, Inc. (PEC), a Florida
corporation formed in late 1996, is a wholly owned subsidiary of Tampa
Electric Company and is engaged in engineering and construction
services with principal focus on non Tampa Electric electric power
facilities. Operations of PEC in 1997 were not significant.
TAMPA ELECTRIC--Electric Operations
Tampa Electric had 2,771 employees as of Dec. 31, 1997, of which
1,123 were represented by the International Brotherhood of Electrical
Workers (IBEW) and 306 by the Office and Professional Employees
International Union.
2
In 1997, approximately 46 percent of Tampa Electric's total
operating revenue was derived from residential sales, 27 percent from
commercial sales, 9 percent from industrial sales and 18 percent from
other sales including bulk power sales for resale.
The sources of electric operating revenue for 1997 were as follows:
(millions) 1997
Residential $ 532.3
Commercial 326.7
Industrial-Phosphate 61.3
Industrial-Other 51.5
Other retail sales
of electricity 85.0
Sales for resale 94.3
Deferred revenues 30.5
Other 7.6
$1,189.2
No significant part of Tampa Electric's business is dependent
upon a single customer or a few customers, the loss of any one or more
of whom would have a significantly adverse effect on Tampa Electric,
except for IMC-Agrico (IMCA), a large phosphate producer representing
less than three percent of Tampa Electric's 1997 base revenues. In May
1996, IMCA issued a request for proposals (RFP) for electric power to
serve load currently served by Tampa Electric and others.
In 1997, IMCA and Duke Energy Power Services (Duke) announced the
results of IMCA's RFP and that they had signed a letter of intent for
the construction of a natural gas fired combined cycle power plant
with a minimum capacity of 240 megawatts to serve retail load
currently served by Tampa Electric and two other utilities.
Tampa Electric and others objected to the proposed project on the
grounds that it involved retail transactions within defined service
areas that are prohibited under existing Florida regulation. Prior to
an FPSC ordered evidentiary hearing to determine if the proposed
project should be considered permitted self-generation or a prohibited
retail sale, IMCA withdrew its petition. As a result, the status of
the proposed project and the RFP process initiated by IMCA are unclear
at this time. See further discussion on pages 23 and 24.
Tampa Electric's business is not a seasonal one, but winter peak
loads are experienced due to fewer daylight hours and colder
temperatures, and summer peak loads are experienced due to use of air
conditioning and other cooling equipment.
Regulation
The retail operations of Tampa Electric are regulated by the
Florida Public Service Commission (FPSC), which has jurisdiction over
retail rates, the quality of service, issuances of securities,
planning, siting and construction of facilities, accounting and
depreciation practices and other matters.
In general, the FPSC's pricing objective is to set rates at a
level that allows the utility to collect total revenues (revenue
requirements) equal to its cost of providing service, including a
reasonable return on invested capital.
The costs of owning, operating and maintaining the utility
system, other than fuel, purchased power, conservation and certain
environmental costs, are recovered through base rates. These costs
3
include operation and maintenance expenses, depreciation and taxes, as
well as a return on Tampa Electric's investment in assets used and
useful in providing electric service (rate base). The rate of return
on rate base, which is intended to approximate Tampa Electric's
weighted cost of capital, includes its costs for debt and preferred
stock, deferred income taxes at a zero cost rate and an allowed return
on common equity. Base prices are determined in FPSC price setting
hearings which occur at irregular intervals at the initiative of Tampa
Electric, the FPSC or other parties.
Fuel, conservation, certain environmental and certain purchased
p o w e r costs are recovered through levelized monthly charges
established pursuant to the FPSC's fuel adjustment and cost recovery
clauses. These charges, which are reset semi-annually (annually in the
case of conservation cost recovery) in an FPSC hearing, are based on
estimated costs of fuel, environmental compliance, conservation
programs and purchased power and estimated customer usage for a
specific recovery period, with a true-up adjustment to reflect the
variance of actual costs from the projected charges.
The FPSC may disallow recovery of any costs that it considers
imprudently incurred.
Tampa Electric is also subject to regulation by the Federal
Energy Regulatory Commission (FERC) in various respects including
wholesale power sales, certain wholesale power purchases, transmission
services and accounting and depreciation practices.
Federal, state and local environmental laws and regulations cover
air quality, water quality, land use, power plant, substation and
transmission line siting, noise and aesthetics, solid waste and other
environmental matters. See Environmental Matters on page 7 and 8.
T E C O Transport Corporation (TECO Transport), TECO Coal
Corporation (TECO Coal) and TECO Power Services Corporation (TECO
Power Services), subsidiaries of TECO Energy, sell transportation
services, coal, and generating capacity and energy, respectively, to
Tampa Electric and to third parties. The transactions between Tampa
Electric and these affiliates and the prices paid by Tampa Electric
are subject to regulation by the FPSC and FERC, and any charges deemed
to be imprudently incurred may not be allowed to be recovered from
Tampa Electric's customers.
Competition
Tampa Electric s retail electric business is substantially free
from direct competition with other electric utilities, municipalities
and public agencies. At the present time, the principal form of
competition at the retail level consists of natural gas for residences
and businesses and the self-generation option available to larger
users of electric energy. Such users may seek to expand their options
through various initiatives including legislative and/or regulatory
changes that would permit competition at the retail level. One such
initiative, described on page 3, involves a proposed merchant power
plant with part of the capacity claimed to be self generation. Tampa
Electric intends to take all appropriate actions to retain and expand
its retail business, including managing costs and providing high
quality service to retail customers. Such action might, with the
approval of the FPSC, include the use of load retention and/or
economic development service contracts and tariffs to reduce the loss
of existing load and/or acquire additional load.
There is presently active competition in the wholesale power
markets in Florida, and this is increasing largely as a result of the
Energy Policy Act of 1992 and related federal initiatives. This Act
4
removed certain regulatory barriers to independent power producers and
required utilities to transmit power from such producers, utilities
and others to wholesale customers as more fully described below.
In April 1996, the Federal Energy Regulatory Commission (FERC)
issued its Final Rule on Open Access Non-discriminatory Transmission,
Stranded Costs, Open Access Same-time Information System (OASIS) and
Standards of Conduct. These rules work together to open access for
wholesale power flows on transmission systems. Utilities owning
transmission facilities (including Tampa Electric) are required to
provide services to wholesale transmission customers comparable to
those they provide to themselves on comparable terms and conditions
including price. Among other things, the rules require transmission
services to be unbundled from power sales and owners of transmission
systems must take transmission service under their own transmission
tariffs.
Transmission system owners are also required to implement an
OASIS system providing, via the Internet, access to transmission
service information (including price and availability), and to rely
exclusively on their own OASIS system for such information for
purposes of their own wholesale power transactions. To facilitate
compliance, owners must implement Standards of Conduct to ensure that
personnel involved in marketing of wholesale power are functionally
separated from personnel involved in transmission services and
reliability functions. Tampa Electric, together with other utilities,
has implemented an OASIS system and believes it is in compliance with
the Standards of Conduct.
In addition to these transmission developments at the federal
level, there have been initiatives at the state level to facilitate
the construction of merchant power plants, i.e. plants built on
speculation with a portion or all of their capacity not subject to
purchase agreements. Tampa Electric has opposed these efforts and it
is uncertain at this time how the FPSC will proceed on this matter.
See Merchant Power Plants on pages 23 and 24 for a further description
of proposed projects and the issues they raise.
Fuel
About 98 percent of Tampa Electric's generation for 1997 was from
its coal-fired units. About the same level is anticipated for 1998.
5
Tampa Electric's average fuel cost per million BTU and average
cost per ton of coal burned for 1997 was as follows:
Average cost
per million BTU: 1997
Coal $ 1.97
Oil $ 3.76
Gas --
Composite $ 2.01
Average cost per ton
of coal burned $44.50
Tampa Electric's generating stations burn fuels as follows:
Gannon Station burns low-sulfur coal; Big Bend Station burns a
combination of low-sulfur coal and coal of a somewhat higher sulfur
content; Polk Power Station burns high-sulfur coal which is gasified;
Hookers Point Station burns low-sulfur oil; Phillips Station burns oil
of a somewhat higher sulfur content; and Dinner Lake Station, which
was placed on long-term reserve standby in March 1994, burned natural
gas and oil.
Coal. Tampa Electric burned approximately 8.1 million tons of
coal during 1997 and estimates that its coal consumption will be about
the same for 1998. During 1997, Tampa Electric purchased approximately
42 percent of its coal under long-term contracts with five suppliers,
including the affiliate TECO Coal, and 58 percent of its coal in the
spot market or under intermediate-term purchase agreements. About 12
percent of Tampa Electric's 1997 coal requirements were supplied by
TECO Coal. During December 1997, the average delivered cost of coal
(including transportation) was $42.27 per ton, or $1.88 per million
BTU. Tampa Electric expects to obtain approximately 40 percent of its
coal requirements in 1998 under long-term contracts with five
suppliers, including TECO Coal, and the remaining 60 percent in the
spot market or under intermediate-term purchase agreements. Tampa
Electric estimates that about 9 percent of its 1998 coal requirements
will be supplied by TECO Coal. Tampa Electric's long-term coal
contracts provide for revisions in the base price to reflect changes
in a wide range of cost factors and for suspension or reduction of
deliveries if environmental regulations should prevent Tampa Electric
from burning the coal supplied, provided that a good faith effort has
been made to continue burning such coal.
In 1997, about 61 percent of Tampa Electric's coal supply was
deep-mined, approximately 38 percent was surface-mined and one percent
was a processed oil by-product known as petroleum coke. Federal
surface-mining laws and regulations have not had any material adverse
impact on Tampa Electric's coal supply or results of its operations.
Tampa Electric, however, cannot predict the effect on the market price
of coal of any future mining laws and regulations. Although there are
reserves of surface-mineable coal dedicated by suppliers to Tampa
Electric's account, high-quality coal reserves in Kentucky that can be
economically surface-mined are being depleted and in the future more
coal will be deep-mined. This trend is not expected to result in any
significant additional costs to Tampa Electric.
Oil. Tampa Electric had supply agreements through Dec. 31, 1997
for No. 2 fuel oil and No. 6 fuel oil for its four combustion turbine
units, Polk Station, Hookers Point Station and Phillips Station at
prices based on Gulf Coast Cargo spot prices. Contracts for the supply
of No. 2 and No. 6 fuel oil through Dec. 31, 1998 are expected to be
finalized in early 1998. The price for No. 2 fuel oil deliveries taken
in December 1997 was $24.37 per barrel, or $4.20 per million BTU. The
6
average price for No. 6 fuel oil deliveries taken in December 1997 was
$19.44 per barrel, or $3.08 per million BTU.
Franchises
Tampa Electric holds franchises and other rights that, together
with its charter powers, give it the right to carry on its retail
business in the localities it serves. The franchises are irrevocable
and are not subject to amendment without the consent of Tampa
Electric, although, in certain events, they are subject to forfeiture.
Florida municipalities are prohibited from granting any franchise
for a term exceeding 30 years. If a franchise is not renewed by a
municipality, the franchisee has the statutory right to require the
municipality to purchase any and all property used in connection with
the franchise at a valuation to be fixed by arbitration. In addition,
all of the municipalities except for the cities of Tampa and Winter
Haven have reserved the right to purchase Tampa Electric's property
used in the exercise of its franchise, if the franchise is not
renewed.
Tampa Electric has franchise agreements with 13 incorporated
municipalities within its retail service area. These agreements have
various expiration dates ranging from December 2005 to September 2021.
Tampa Electric has no reason to believe that any of these franchises
will not be renewed.
Franchise fees payable by Tampa Electric, which totaled $19.9
million in 1997, are calculated using a formula based primarily on
electric revenues.
Utility operations in Hillsborough, Pasco, Pinellas and Polk
Counties outside of incorporated municipalities are conducted in each
case under one or more permits to use county rights-of-way granted by
the county commissioners of such counties. There is no law limiting
the time for which such permits may be granted by counties. There are
no fixed expiration dates for the Hillsborough County and Pinellas
County agreements. The agreements covering electric operations in
Pasco and Polk counties expire well after the year 2000.
Environmental Matters
Tampa Electric's operations are subject to county, state and
f e deral environmental regulations. The Hillsborough County
Environmental Protection Commission and the Florida Environmental
Regulation Commission are responsible for promulgating environmental
regulations and coordinating most of the environmental regulation
functions performed by the various departments of state government.
T h e Florida Department of Environmental Protection (FDEP) is
responsible for the administration and enforcement of the state
regulations. The U.S. Environmental Protection Agency (EPA) is the
primary federal agency with environmental responsibility.
Tampa Electric has all required environmental permits. In
addition, monitoring programs are in place to assure compliance with
permit conditions.
Tampa Electric Company has been identified as a potentially
responsible party (PRP) for certain superfund sites. While the total
costs of remediation at these sites may be significant, Tampa Electric
shares potential liability with other PRPs, many of which have
substantial assets. Accordingly, Tampa Electric expects that its
liability in connection with these sites will not be significant. The
environmental remediation costs associated with these sites are not
expected to have a material impact on customer prices.
7
Expenditures. During the five years ended Dec. 31, 1997, Tampa
E l e c tric spent $161.9 million on capital additions to meet
environmental requirements, including $106.9 million for the Polk
Power Station project. Environmental expenditures are estimated at $6
million for 1998 and $4 million in total for 1999 through 2002. These
totals exclude amounts required to comply with the 1990 amendments to
the Clean Air Act.
Tampa Electric is complying with the Phase I emission limitations
imposed by the Clean Air Act Amendments which became effective Jan. 1,
1995 by using blends of lower-sulfur coal, controlling stack emissions
and owning emission allowances.
Tampa Electric is currently evaluating options to comply with
Phase II sulfur dioxide emission standards set for the year 2000. The
options include scrubbing additional capacity or switching to lower
sulfur fuels. It is also evaluating options to comply with Phase II of
the Clean Air Act Amendments for nitrogen oxide (NOx) reductions.
These options include combustion modifications and retrofit control
technology. Tampa Electric s capital expenditure estimates reflected
in Note I on page 44 include $20 million for compliance with all Phase
II requirements including NOx reductions. The actual level of required
expenditures is uncertain at this time, however, it would be higher if
the option of scrubbing additional capacity is chosen. In any event,
Tampa Electric believes that the cost of compliance with Phase II,
which would be reflected in customers' bills, is not expected to have
a material impact on its prices.
In addition to recovering certain prudently incurred
environmental costs through base rates, Tampa Electric may petition
the FPSC for recovery of certain other environmental compliance costs
on a current basis pursuant to a statutory environmental cost recovery
procedure.
In 1997, Tampa Electric recovered $5.8 million of environmental
compliance costs through the environmental cost recovery clause. These
are costs incurred by Tampa Electric after April 1993 to comply with
e n v i ronmental regulations enacted, or which became effective
subsequent to the test year of Tampa Electric's most recent full
regulatory price setting proceeding but not included in current rates.
Tampa Electric plans to seek continuing recovery of these types of
costs through this clause until the next full regulatory price setting
proceeding. Under the October 1996 agreement with the FPSC the
earliest any such new prices could be in effect is in the year 2000.
PEOPLES GAS SYSTEM--Gas Operations
PGS is engaged in the purchase, distribution and marketing of
natural gas for residential, commercial, industrial and electric power
generation customers in the State of Florida. It has no gas reserves,
but relies on two interstate pipelines to deliver gas to it for sale
or other delivery to customers connected to its distribution system.
C u r r e n tly, PGS operates a distribution system that serves
approximately 238,000 customers. The system includes approximately
6,900 miles of mains and over 4,700 miles of service lines.
Industrial and power generation customers consume approximately
70 percent of the company's annual therm volume. Commercial customers
use approximately 23 percent with the balance consumed by residential
customers.
While the residential market represents only a small percentage
of total therm volume, residential operations generally comprise 23
p e r c ent of total revenues. New residential construction and
conversions of existing residences to gas have steadily increased
8
since the late 1980's.
Natural gas has historically been used in many traditional
industrial and commercial operations throughout Florida, including
production of products such as steel, glass, ceramic tile and food
products. Gas climate control technology is expanding throughout
F l orida, and commercial/industrial customers including schools,
hospitals, office complexes and churches are utilizing this new
technology.
Within the PGS operating territory, large cogeneration facilities
utilize gas technology in the production of electric power and steam.
Over the past three years, the company has transported more than 500
million therms annually to facilities involved in cogeneration.
The sources of gas operating revenues for 1997 were as follows:
(millions) 1997
Residential $ 56.3
Commercial 132.2
Interruptible 14.5
Transportation 27.1
Other revenues 19.5
Total $249.6
PGS had 1,046 employees as of Dec. 31, 1997. A total of 179
employees in six of the company's 13 operating divisions are
represented by various union organizations.
Regulation
The operations of PGS are regulated by the FPSC separate from the
FPSC regulation of Tampa Electric's electric operations. The FPSC has
jurisdiction over rates, service, issuance of certain securities,
safety, accounting and depreciation practices and other matters.
In general, the FPSC's pricing objective is to set rates at a
level that allows a utility such as PGS to collect total revenues
(revenue requirements) equal to its cost of providing service,
including a reasonable return on invested capital.
The basic costs, other than the costs of purchased gas and
interstate pipeline capacity, of providing natural gas service are
recovered through base rates, which are designed to recover the costs
of owning, operating and maintaining the utility system. The rate of
return on rate base, which is intended to approximate PGS' weighted
cost of capital, includes its cost for debt, deferred income taxes at
a zero cost rate, and an allowed return on common equity. Base prices
are determined in FPSC proceedings that occur at irregular intervals
at the initiative of PGS, the FPSC or other parties.
PGS recovers the charges (both reservation and usage) it pays for
transportation of gas for system supply through the purchased gas
adjustment charge. This charge is designed to recover the costs
incurred by PGS for purchased gas, and for holding and using
interstate pipeline capacity for the transportation of gas it sells to
its customers. These charges, which are reset annually in an FPSC
hearing, are based on estimated costs of purchased gas and pipeline
capacity, and estimated customer usage for a specific recovery period,
with a true-up adjustment to reflect the variance of actual costs and
usage from the projected charges for prior periods.
PGS' tariff approved by the FPSC contains incentives for a
transportation customer to maintain as close a balance as possible
between estimated gas requirements (nominated gas) and gas actually
9
used. These customers pay a set rate for the amount of gas nominated
and a premium if the amount of gas actually used varies from the
amount nominated by more than 5 percent. In contrast, system supply
customers are billed monthly for the amount of gas actually consumed
at the rates set forth in PGS' FPSC-approved tariff.
In addition to its base rates and purchased gas adjustment clause
c h a r g es for system supply customers, PGS customers (except
interruptible customers) also pay a per-therm charge for all gas
consumed to recover the costs incurred by the company in developing
and implementing energy conservation programs, which are mandated by
Florida law and approved and supervised by the FPSC. The company is
permitted to recover, on a dollar-for-dollar basis, expenditures made
in connection with these programs. PGS must demonstrate that the
programs are cost effective for its ratepayers in order to obtain FPSC
approval.
In June 1996, following informal workshops held in late 1995, the
FPSC initiated a proceeding for the purpose of investigating the
unbundling of natural gas services provided by PGS and other local
distribution companies subject to the FPSC's regulatory jurisdiction.
Although the proceeding was initially patterned after the FERC's
proceedings which culminated in the issuance of FERC Order 636, the
staff of the FPSC has indicated that the scope of the proceeding would
be broader than those preceding Order 636.
The FPSC staff has issued a draft tariff which would allow all
customers except residential the right to take transportation-only
service and purchase gas from third parties. PGS is opposed to this
proposal unless there is a showing of benefit to the general body of
customers. It is unclear whether the FPSC staff action will lead to
FPSC action requiring further unbundling.
In addition to economic regulation, PGS is subject to the FPSC's
safety jurisdiction, pursuant to which the FPSC regulates the
construction, operation and maintenance of PGS' distribution system.
In general, the FPSC has implemented this by adopting the Minimum
Federal Safety Standards and reporting requirements for pipeline
facilities and transportation of gas prescribed by the U.S. Department
of Transportation in Parts 191 and 192, Title 49, Code of Federal
Regulations.
10
PGS is also subject to Federal, state and local environmental
laws and regulations pertaining to air and water quality, land use,
noise and aesthetics, solid waste and other environmental matters.
Competition
PGS is not in direct competition with any other regulated
distributors of natural gas for customers within its service areas. At
the present time, the principal form of competition for residential
and small commercial customers is from companies providing other
sources of energy and energy services.
In general, PGS faces competition from other energy source
suppliers offering fuel oil, electricity and in some cases liquid
propane gas. PGS has taken actions to retain and expand its commodity
and transportation business, including managing costs and providing
high quality service to customers.
Competition is most prevalent in the large commercial and
industrial markets. In recent years, these classes of customers have
been targeted by competing companies seeking to sell gas directly
either using PGS facilities or transporting gas through other
f a c i lities, thereby bypassing PGS facilities. Many of these
competitors are large natural gas marketers with a national presence.
Gas Supplies
Because PGS has no natural gas reserves, it relies on purchases
of gas from various suppliers depending on the needs of its customers.
The gas is delivered to the PGS distribution system, for further
delivery by PGS to its customers, through two interstate pipelines on
which PGS has reserved firm transportation capacity.
Gas is delivered by Florida Gas Transmission (FGT) through 40
interconnections (gate stations) serving PGS' operating divisions
throughout the various metropolitan areas of Florida. In addition,
PGS' Jacksonville Division receives gas delivered by the South Georgia
Natural Gas Company (South Georgia) pipeline through a gate station
located northwest of Jacksonville.
P G S has commitments for pipeline capacity with various
transporters and with various expiration dates.
Companies with firm pipeline capacity receive priority in terms
of the right to nominate and schedule deliveries during times when the
pipeline is operating at its maximum capacity. PGS presently holds
sufficient firm capacity to permit it to meet the gas requirements of
its system supply customers except during localized emergencies
affecting the PGS distribution system, and on extremely cold days,
which have historically been rare in Florida.
Firm transportation rights on an interstate pipeline represent a
right to use the amount of the capacity reserved, for transportation
of gas up to the reserved amount, on any given day. PGS pays
reservation charges on the full amount of the reserved capacity
whether or not it actually uses such capacity on any given day. When
the capacity is actually used, PGS pays a usage charge for the amount
of the capacity actually used. The levels of the reservation and usage
charges are regulated by FERC.
11
PGS procures natural gas supplies using base load and swing
supply contracts distributed among various vendors along with spot
market purchases. Pricing generally takes the form of either a
variable price based on published indices, or a fixed price for the
contract term.
The current supply portfolio consists of approximately 8 percent
spot purchases, 17 percent swing purchases and 75 percent base load
purchases.
PGS has one long-term supply contract that expires in 2002. This
long-term contract has approximately 83 million therms remaining to
purchase with a total cost of $18 million over the remaining years.
The purchase price is $.22 per therm.
PGS occasionally faces situations when the demands of all of its
customers for the delivery of gas cannot be met. Neither PGS nor any
of its interconnected interstate pipelines has storage facilities. In
these instances, it is necessary that PGS interrupt or curtail
deliveries to its interruptible customers. In general, the largest of
PGS' industrial customers are in the categories that are first
c u rtailed in such situations. PGS tariff and transportation
agreements with these customers give PGS the right to divert these
customers gas to other higher priority users during the period of
curtailment or interruption. PGS pays these customers for such gas at
the price they paid their suppliers (if purchased by the customer
under a contract with a term of five years or longer), or at a
published index price (if purchased by the customer pursuant to a
contract with a term less than five years), and in either case pays
t h e c u stomer for charges incurred for interstate pipeline
transportation to the PGS system. In essence, gas being delivered into
the PGS system for the accounts of large-volume transportation
customers who are interrupted during these rare occasions represents a
de facto form of storage on the PGS system.
Franchise
PGS holds franchise and other rights with 75 municipalities
within its service area. These include the cities of Jacksonville,
Daytona Beach, Eustis, Orlando, Lakeland, Tampa, St. Petersburg,
Bradenton, Sarasota, Avon Park, Frostproof, Palm Beach Gardens,
Pompano Beach, Fort Lauderdale, Hollywood, North Miami, Miami Beach,
Miami, Panama City and Ocala. These agreements give PGS a right to
conduct its retail business in the localities it serves. The
franchises are irrevocable and are not subject to amendment without
the consent of PGS, although in certain events, they are subject to
forfeiture.
Municipalities are prohibited from granting any franchise for a
term exceeding 30 years. If a franchise is not renewed by a
municipality, the franchisee has the statutory right to require the
municipalities to purchase any and all property used in connection
with the franchise at a valuation to be fixed by arbitration. In
addition, several of the municipalities have reserved the right to
purchase PGS property used in the exercise of its franchise, if the
franchise is not renewed.
PGS franchise agreements with the incorporated municipalities
within its service area have various expiration dates ranging from
April 1998 to September 2025. PGS has no reason to believe that any of
these franchises will not be renewed.
12
Franchise fees payable by PGS, which totaled $7.7 million in
1997, are calculated using a formula based principally on revenues
from the sale of gas.
U t ility operations in areas outside of incorporated
municipalities are conducted in each case under one or more permits to
use county rights-of-way granted by the county commissioners of such
counties. There is no law limiting the time for which such permits may
be granted by counties. There are no fixed expiration dates and these
rights are, therefore, considered perpetual.
Environmental Matters
PGS's operations are subject to federal, state and local
statutes, rules and regulations relating to the discharge of materials
into the environment and to the protection of the environment that
r e quire monitoring, permitting and ongoing expenditures. Those
expenditures have not been prohibitive in the past, but the trend is
toward stricter standards, greater regulation and more extensive
permitting requirements.
PGS has been identified as a potentially responsible party for
certain former manufactured gas plant sites. While the joint and
several liability associated with these sites presents the potential
for significant response costs, the company estimates its ultimate
financial liability could be up to $15 million over the next ten
years. PGS is permitted to recover costs of environmental remediation
and cleanup associated with manufactured gas sites. The environmental
remediation costs associated with these sites are not expected to have
a material impact on customer prices.
To PGS knowledge, it is in substantial compliance with
applicable environmental laws, regulations, orders and rules.
Expenditures. During the five years ended Dec. 31, 1997, PGS has
not incurred any material capital additions to meet environmental
requirements, nor are any anticipated for 1998 through 2002.
P G S i s allowed to recover certain prudently incurred
environmental costs through rates charged to its customers.
Item 2. PROPERTIES.
The company believes that its physical properties are adequate to
carry on its business as currently conducted. The properties are
generally subject to liens securing long-term debt.
Electric Properties
At Dec. 31, 1997, Tampa Electric had five electric generating
plants and four combustion turbine units in service with a total net
winter generating capability of 3,600 MWS, including Big Bend (1,742-
MW capability from four coal units), Gannon (1,180-MW capability from
six coal units), Hookers Point (200-MW capability from five oil
units), Phillips (34-MW capability from two diesel units), Polk (250-
MW capability from one integrated gasification combined cycle unit
(IGCC)) and four combustion turbine units located at the Big Bend and
Gannon stations (194 MWS). The capability indicated represents the
demonstrable dependable load carrying abilities of the generating
units during winter peak periods as proven under actual operating
conditions. Units at Hookers Point went into service from 1948 to
1955, at Gannon from 1957 to 1967, and at Big Bend from 1970 to 1985.
The Polk IGCC unit began commercial operation in September 1996. In
1991, Tampa Electric purchased two power plants (Dinner Lake and
13
Phillips) from the Sebring Utilities Commission (Sebring). Dinner Lake
(11-MW capability from one natural gas unit) and Phillips were placed
in service by Sebring in 1966 and 1983, respectively. In March 1994,
Dinner Lake Station was placed on long-term reserve standby.
T a m pa Electric owns 182 substations having an aggregate
transformer capacity of 16,326,356 KVA. The transmission system
c o n s ists of approximately 1,198 pole miles of high voltage
transmission lines, and the distribution system consists of 6,894 pole
miles of overhead lines and 2,625 trench miles of underground lines.
As of Dec. 31, 1997, there were 525,236 meters in service. All of this
property is located in Florida.
All plants and important fixed assets are held in fee except that
title to some of the properties are subject to easements, leases,
contracts, covenants and similar encumbrances and minor defects, of a
nature common to properties of the size and character of those of
Tampa Electric.
Tampa Electric has easements for rights-of-way adequate for the
m a i ntenance and operation of its electrical transmission and
distribution lines that are not constructed upon public highways,
roads and streets. It has the power of eminent domain under Florida
law for the acquisition of any such rights-of-way for the operation of
transmission and distribution lines. Transmission and distribution
lines located in public ways are maintained under franchises or
permits.
Tampa Electric has a long-term lease for its office building in
downtown Tampa that serves as headquarters for TECO Energy, Tampa
Electric and certain other TECO Energy subsidiaries.
Gas Properties
PGS' distribution system extends throughout the areas it serves
in Florida, and consists of more than 11,600 miles of pipe, including
approximately 6,900 miles of mains and over 4,700 miles of service
lines.
P G S operating divisions are located in thirteen markets
throughout Florida. While most of the facilities are owned, a small
number of operations, storage and administrative facilities are
leased.
Item 3. LEGAL PROCEEDINGS.
None.
14
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
All of the company's common stock is owned by TECO Energy and,
therefore, there is no market for the stock.
The company pays dividends substantially equal to its net income
applicable to common stock to TECO Energy. Such dividends totaled
$145.9 million in 1997 and $145.0 million for 1996. See Note C on page
38 for a description of restrictions on dividends on the company's
common stock.
Item 7. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS.
EARNINGS SUMMARY
The acquisitions of Peoples Gas System (PGS) and West Florida
Natural Gas Company (West Florida) in June 1997, were accounted for as
poolings of interests and, accordingly, the 1997 financial and
operating data include the results of PGS and West Florida Gas,
combined for the full year. The amounts presented for 1996 have been
restated to reflect the merger with Peoples Gas System. However, prior
year financial statements have not been restated to reflect the
results of West Florida Natural Gas due to its size.
Net income for 1997 of $148.6 million declined 4 percent from
1996's restated results due primarily to an FPSC decision directing
the regulatory treatment of two wholesale power sales contracts.
Restated net income for 1996 of $155.5 million was 6 percent higher
than in 1995 due primarily to continued growth in energy sales at
Tampa Electric, lower operations and maintenance expenses, and higher
levels of capitalized financing costs (AFUDC), associated with the
investment in the Polk Power Station at Tampa Electric which entered
commercial service in September 1996.
Operating income of $217.6 million for 1997 increased 11 percent
from 1996 primarily due to the completion of Tampa Electric's Polk
Unit One generating plant and its inclusion in rate base for earnings
purposes. Operating income for 1996 increased 6 percent to $196.1
million from restated 1995's results, because of higher base electric
revenues from retail customer growth, favorable weather and an
improved economy together with lower operating and maintenance
expenses and the inclusion of Polk Unit One in rate base for earnings
purposes in the fourth quarter. Tampa Electric recorded essentially no
AFUDC in 1997 compared to $22.9 million in 1996. AFUDC affects net
income but not operating income.
Contributions by operating division (millions)
Operating Income 1997 Change 1996 Change 1995
Tampa Electric
(Electric operations) $193.1 11.9% $172.6 5.7% $163.3
Peoples Gas division 24.5 4.3% 23.5 4.4% 22.5
Total $217.6 11.0% $196.1 5.5% $185.8
15
TAMPA ELECTRIC -- ELECTRIC OPERATING RESULTS
In 1997, Tampa Electric's electric operations benefited from a
strong local economy, good customer growth and continued cost control.
Its 1997 operating income increased almost 12 percent, after the
recognition of $30.5 million of previously deferred revenues to
support the inclusion of Polk Unit One in rate base for earnings
purposes.
Tampa Electric's 1996 operating income increased six percent over
1995 results even after the deferral of $34.2 million of revenues.
Higher base revenues from retail customer growth, favorable weather
and an improved economy together with lower operating expenses and the
inclusion of Polk Unit One in rate base for earnings purposes in the
fourth quarter contributed to the improvement.
Tampa Electric Results 1997 Change 1996 Change 1995
(millions)
Revenues (1) $1,189.2 6.8% $1,112.9 1.9% $1,092.3
Operating expenses 996.1 5.9% 940.3 1.2% 929.0
Operating income $ 193.1 11.9% $ 172.6 5.7% $ 163.3
(1) 1997 revenues include the recognition of $30.5 million of
previously deferred revenues. 1996 and 1995 revenues are net of
$ 3 4 . 2 million and $50.8 million of deferred revenues,
respectively.
Tampa Electric's 1997 operating revenues increased almost seven
percent to $1.2 billion, after the recognition of $30.5 million of
previously deferred revenues. The company benefited from customer
growth of more than two percent and retail energy sales growth,
despite mild weather, of one percent. The 1996 electric operating
revenues, even after the deferral of $34.2 million of revenues,
increased due to more than two percent customer growth and higher
energy sales due to a colder than normal winter.
The economy in Tampa Electric's retail electric service area
continued to grow in 1997 with increased employment from corporate
relocations and expansions. Combined residential and commercial energy
sales declined slightly in 1997, as the effects of mild weather more
than offset the addition of over 12,000 new customers. Non-phosphate
industrial sales increased in 1997 primarily due to the strong local
economy and the shift of some commercial customers to the industrial
classification to take advantage of new favorable Florida tax law
changes on electricity used in manufacturing.
Sales to the phosphate industry increased in 1997 as production
increased to meet continued strong domestic and international demand
for phosphate products. Sales to the phosphate customer group
represented less than four percent of base revenues in 1997.
Non-fuel revenues from sales to other utilities were $39 million
in 1997 and $36 million in 1996. Non-fuel revenues increased in 1997
and 1996 due to a shift from broker system economy sales to longer-
term, higher-margin wholesale power sales. Megawatt hours sold to
other utilities decreased in 1997 primarily due to lower Tampa
Electric generating unit availability.
An adverse FPSC decision in 1997 which required Tampa Electric to
c h ange its regulatory treatment of two wholesale power sales
contracts, had the effect of reducing Tampa Electric Company s 1997
net income by about $6.5 million. The required treatment eliminates
certain assets from retail rate base and shifts certain costs from
retail to wholesale where they are not fully recovered. One of the
16
contracts has been terminated and efforts are being made to mitigate
the effects of the second. The impact of the remaining contract and
the mitigation effort is not expected to have a material impact on
1998 results. As a result of the FPSC decision, Tampa Electric will
concentrate its wholesale power sales efforts on energy broker and
other short-term sales through 1999, and not on longer-term capacity
contracts as in the past.
Tampa Electric megawatt-hour sales
1997 Change 1996 Change 1995
(thousands)
Residential 6,500 -1.6% 6,607 4.0% 6,352
Commercial(1) 4,901 1.8% 4,815 2.2% 4,710
Industrial(1) 2,466 7.0% 2,304 -2.4% 2,362
Other 1,223 1.7% 1,203 2.3% 1,176
Total retail 15,090 1.1% 14,929 2.3% 14,600
Sales for resale 3,160 -2.5% 3,241 19.8% 2,706
Total energy sold 18,250 0.4% 18,170 5.0% 17,306
Retail customers
(average) 518.4 2.4% 506.0 2.2% 495.2
(1) Results reflect the shift of some commercial customers to the
industrial classification to take advantage of new favorable
Florida tax law changes on electricity used in manufacturing.
This does not affect Tampa Electric s revenues.
Non-fuel operations and maintenance expenses rose almost six
percent, reflecting a full year of operations of Polk Unit One and
increased generating unit maintenance. Improved efficiency and the
continued focus on aggressive cost management throughout the company
l i m i ted other operations expense increases. Absent increased
generating unit maintenance expense, operations and maintenance
expense in all other areas increased less than one percent. Non-fuel
operations and maintenance expenses declined in 1996 due to the
continuing focus on managing costs in all areas of the company.
In September 1996, Tampa Electric completed the construction of
the 250-megawatt, state-of-the-art, clean-coal technology Polk Unit
One. The addition of this facility was the primary cause of increased
non-fuel operating expenses in 1997. During the first three years of
operations a total of $28 million from the U. S. Department of Energy
(DOE) is available to partially offset a significant portion of the
non-fuel operations and maintenance expenses. The FPSC has allowed
full recovery of the capital costs incurred in the construction of
plant as described in the Utility Regulation section.
17
Operating expenses
1997 Change 1996 Change 1995
(millions)
Other operating expenses $165.1 .5% $164.2 .6% $163.3
Maintenance 78.2 19.4% 65.5 -5.9% 69.6
Depreciation 141.4 17.6% 120.2 6.1% 113.3
Taxes-federal and state
income 78.5 10.1% 71.3 7.7% 66.2
Taxes, other than income 91.8 5.5% 87.0 -1.0% 87.9
Operating expenses 555.0 9.2% 508.2 1.6% 500.3
Fuel 373.4 -2.5% 383.1 -.3% 384.3
Purchased power 67.7 38.2% 49.0 10.4% 44.4
Total fuel cost 441.1 2.1% 432.1 .8% 428.7
Total operating expenses $996.1 5.9% $940.3 1.2% $929.0
Depreciation expense increased $21 million in 1997 due to normal
plant additions to serve the growing customer base and a full year of
service of Polk Unit One. Depreciation expense in 1996 increased from
normal plant additions and the fourth quarter addition of Polk Unit
One. Depreciation expense is projected to rise moderately for the
next several years due to normal utility plant additions.
Income tax expense increased in 1997 reflecting higher pretax
income and the effect of lower AFUDC on equity funds at Tampa
Electric. Income tax expense increased in 1996 primarily from
increases in pretax income.
Changes in taxes other than those on income reflected the
property taxes associated with Polk Unit One in 1997. Higher state
gross receipts taxes and franchise fees associated with higher energy
sales and changes in property values in 1996 were offset by decreases
in payroll related taxes.
Total fuel cost increased by two percent in 1997 due to higher
energy sales and a larger proportion of purchased power, a component
of total fuel cost, as a result of lower generating unit availability.
In 1996, total fuel cost was less than one percent higher than in 1995
despite a five-percent increase in total energy sales. The success in
controlling fuel cost is a result of Tampa Electric's use of lower-
priced coals and the mix in operating generating units. Average coal
costs, on a cents-per-million BTU basis, declined more than two
percent in 1997 after a six-percent decrease in 1996.
Purchased power increased in 1997 due to lower generating unit
availability. In 1996, purchased power increased primarily to meet
weather-related demand. Substantially all fuel and purchased power
expenses were recovered through the fuel adjustment clause.
PEOPLES GAS SYSTEM OPERATING RESULTS
Peoples Gas System's operating income of $24.5 million was 4
percent higher than in 1996, the result of the acquisition of West
Florida Natural Gas. The 1996 results reflect increases in residential
and commercial volumes from 1995 due to weather.
18
Peoples Gas System Results (1)
(millions) 1997 Change 1996 Change 1995
Revenues $249.5 -3.5% $258.6 17.2% $220.6
Cost of gas sold 119.6 -8.1% 130.1 32.1% 98.5
Operating expenses 105.4 .4% 105.0 5.3% 99.6
Operating income $ 24.5 4.3% $ 23.5 4.4% $ 22.5
Therms sold (millions) 1997 Change 1996 Change 1995
Residential 48.9 1.5% 48.2 11.1% 43.4
Commercial 207.8 -11.6% 235.1 2.2% 230.0
Industrial 35.9 -39.2% 59.0 -26.0% 79.7
Transportation 607.2 21.5% 499.8 -19.7% 622.6
Total 899.8 6.9% 842.1 -13.7% 975.7
Customers (thousands) 234.7 16.0% 202.4 2.7% 197.1
(1) Excludes the revenues and expenses for 1996 and 1995 of West
Florida Gas. Excludes approximately 28,000 customers and 57.5
million therms in 1996 and 28,000 customers and 50.1 million
therms in 1995 of West Florida Gas.
Residential gas sales increased in 1997 due to the additional
volume from West Florida Gas, which was partially offset by a mild
1997 winter after high levels of gas sales in 1996. The 1995-1996
winter was one of the coldest in Florida history.
P G S sales volumes and revenues are subject to seasonal
fluctuations. Typically sales volumes are higher during the winter
months reflecting greater demand for residential space heating, and
revenues are higher reflecting both increased demand and higher
demand-driven natural gas prices. Changes in the cost of gas sold are
reflected in customers bills through the FPSC-approved Purchased Gas
Adjustment clause.
I n 1997, residential customers represented 89 percent of
customers, used five percent of total gas and contributed 34 percent
of non-fuel revenues; commercial customers represented 10 percent of
customers, used 23 percent of total gas and contributed 53 percent of
non-fuel revenues.
Gas sales to large commercial and industrial customers have
d e c r e a sed as these customers shifted to increased use of
transportation only services. Large industrial and power generation
customers are permitted under current regulation to purchase natural
gas directly from gas marketers, with PGS providing gas delivery at
transportation only rates. Deliveries to these customers can vary
significantly from year to year due to price and availability of gas
compared to prices for other fuels that may be substituted for natural
g a s. In 1997, large industrial and transportation customers
represented one percent of the customers, used 72 percent of total gas
transported and contributed 13 percent of non-fuel revenues.
Transportation volumes increased in 1997 due to the addition of
West Florida Gas and the conversion of some large commercial customers
to transportation only service. Transportation gas volumes decreased
significantly in 1996 due to a power generation customer decreasing
gas usage and the scheduled removal from the system of a cogeneration
customer.
PGS is focused on cost control and held operating expenses flat
in 1997 despite the addition of West Florida Gas. Additional operating
expense savings are expected in 1998 as a result of merger related
synergies, mainly from the elimination of duplicative overhead and
19
administrative activities, as well as improved operating efficiencies
and lower interest costs.
Operating expenses increased in 1996 over 1995 due to the
implementation of an incentive compensation program for employees and
higher depreciation on normal additions to property, plant and
equipment.
NON-OPERATING ITEMS
Other Income (Expense)
The dividend requirement for Tampa Electric preferred stock,
included in Other Income (Expense), declined in 1996 and 1997
reflecting the redemption of all outstanding preferred stock.
Allowance for other funds used during construction (AFUDC) was
$.1 million in 1997 and $16.5 million in 1996.
Interest Charges
Interest charges were $66.4 million in 1997, up 16.5 percent,
reflecting lower AFUDC on borrowed funds at Tampa Electric. In 1996,
interest charges were $57.0 million, up nine percent from 1995
primarily due to the expiration of an interest rate swap agreement.
ENVIRONMENTAL COMPLIANCE
Tampa Electric Company is subject to various environmental
regulations and believes it is substantially in compliance with the
c u r r e ntly applicable standards of the various environmental
enforcement agencies and that potential environmental liabilities are
not material.
Tampa Electric Company is a potentially responsible party for
certain superfund sites and, through its Peoples Gas System division,
for certain former manufactured gas plant sites. While the joint and
several liability associated with these sites presents the potential
for significant response costs, Tampa Electric Company estimates its
ultimate financial liability could be up to $15 million over the next
ten years. The environmental remediation costs associated with these
sites are not expected to have a material impact on customer prices.
Tampa Electric is complying with the Phase I emission limitations
imposed by the Clean Air Act Amendments which became effective Jan. 1,
1995 by using blends of lower-sulfur coal, controlling stack emissions
and using emission allowances.
Tampa Electric is currently evaluating options to comply with
Phase II sulfur dioxide emission standards set for the year 2000. The
options include adding a scrubber or switching to lower sulfur fuels.
It is also evaluating options to comply with Phase II of the Clean Air
Act Amendments for nitrogen oxide (NOx) reductions. These options
include combustion modifications and retrofit control technology.
While Tampa Electric s capital expenditure estimates for the 1999-2002
p e riod include $20 million for compliance with all Phase II
requirements including NOx reductions, the actual level of required
expenditures is uncertain at this time. Tampa Electric believes that
the cost of compliance with Phase II, which would be reflected in
customers' bills, is not expected to have a material impact on its
prices.
UTILITY REGULATION
Return on Equity (ROE) and Other Regulatory Agreements:
20
Rate Stabilization Strategy
Building on an FPSC approved agreement in 1994, Tampa Electric's
objective has been to place the Polk Power Station in service without
increasing the total price for electric service while earning a fair
r e turn. To meet this objective the company took action to
significantly reduce costs. Another key component of the strategy to
accomplish this objective was the deferral and subsequent recognition
of revenues. With the agreements approved by the FPSC in 1995 and
1996, the objectives of stabilizing prices through 1999 and securing
fair earnings opportunities during this period are being accomplished.
1995
In 1995, the FPSC approved a plan submitted by Tampa Electric to
defer revenues for 1995. Under this plan Tampa Electric's allowed ROE
increased to an 11.75 percent midpoint with a range of 10.75 percent
to 12.75 percent. For 1995 an initial $15 million of revenues were
deferred as well as 50 percent of actual revenues in excess of a ROE
of 11.75 percent up to a net earned ROE of 12.75 percent and all
actual revenues above a ROE of 12.75 percent. In 1995 Tampa Electric
deferred $50.8 million of revenues under this plan. The deferred
revenues accrue interest at the 30-day commercial paper rate as
specified in the Florida Administrative Code.
Also as part of this plan, Tampa Electric's oil backout tariff
w a s eliminated Jan. 1, 1996, an annual revenue reduction of
approximately $12 million.
1996 - 1999
In May 1996, the FPSC issued an order approving an agreement
among Tampa Electric, the Florida Office of Public Counsel (OPC) and
the Florida Industrial Power Users Group (FIPUG) on a multi-year base
rate freeze and refund plan. Under this plan, base rates were frozen
through 1998 and Tampa Electric's customers received a $25-million
refund over 12 months starting in October 1996. The refund consisted
of $10 million of revenues deferred from 1995 and $15 million of 1996
revenues.
In addition, the agreement set forth a multi-year plan for
allocating revenues based on Tampa Electric's ROE. For the years 1996
through 1998 Tampa Electric retains all revenues contributing to a ROE
up to 11.75 percent. Any additional revenues will be allocated
according to a formula.
In 1996, 40 percent of any actual revenues contributing to a ROE
in excess of 11.75 percent were included in 1996 revenues. The
remaining 60 percent were deferred for use in 1997 and 1998.
In 1997, 40 percent of any revenues that contributed to a ROE in
excess of 11.75 percent up to 12.75 percent were included in revenues.
The remaining 60 percent were deferred for use in 1998 as were any
revenues contributing to a ROE in excess of 12.75 percent. The same 40
percent allocation will be made in 1998 after taking into account any
deferred revenues not used in previous years. The remaining 60
percent, as well as any revenues contributing to a ROE in excess of
12.75 percent will be refunded to customers in 1999.
Under these agreements $34.2 million of 1996 revenues were
deferred. Approximately $60 million of revenues deferred from 1996 and
1995 plus $8 million of interest, after the effect of the $25-million
refund, were available for use in 1997 and 1998. Tampa Electric
recognized $30.5 million in 1997 and is expected to recognize up to
$39 million of previously deferred revenues in 1998.
In October 1996, the FPSC unanimously approved an agreement among
Tampa Electric, OPC and FIPUG that resolved all pending regulatory
21
issues associated with the Polk Power Station. The agreement allows
the full recovery of the capital costs incurred in the Polk Power
Station project. The agreement also calls for an extension of the base
rate freeze established in the May agreement through 1999. Tampa
Electric has the option of filing an application with the FPSC on or
after July 1, 1999 for authorization to adjust base rates after Jan.
1, 2000.
U n der the October 1996 agreement, the $25-million refund
established in the May 1996 agreement remained intact and, in
addition, customers began receiving a $25-million temporary base rate
reduction reflected as a credit on customer bills over a 15-month
period beginning Oct. 1, 1997. This temporary base rate reduction will
be netted against any refunds that otherwise might have been made in
1999 under the May agreement.
In 1999, 60 percent of the revenues contributing to a ROE in
excess of 12.0 percent will be refunded to customers in 2000 along
with any 1999 revenues which contribute to a ROE above 12.75 percent.
Tampa Electric agreed to remove from rate base the $5-million
investment made in land at Port Manatee. This land has value for uses
other than as a power plant site, and will continue to be recorded as
an asset of Tampa Electric. In 1990 a citizens task force recommended
using previously mined land in Polk County over the Manatee site as
the preferred location for the Polk Power Station.
Tampa Electric's results under these agreements are subject to
FPSC review and audit.
Wholesale Power Sales Contracts
In September, the FPSC ruled that costs associated with two long-
term, wholesale power sales contracts should be assigned to the
wholesale jurisdiction and that for retail rate making purposes, the
costs transferred from retail to wholesale should reflect average
costs rather than the lower incremental costs on which the two
contracts are based. As a result of this decision and the related
reduction of the retail rate base upon which Tampa Electric is allowed
to earn a return, these contracts became uneconomic.
Environmental Cost Recovery Clause
In 1997, Tampa Electric recovered $5.8 million of environmental
compliance costs through the environmental cost recovery clause. These
are costs incurred by Tampa Electric after April 1993 to comply with
environmental regulations enacted, or which became effective
subsequent to the test year of Tampa Electric's most recent full
regulatory price setting proceeding but not included in current rates.
Tampa Electric will continue to seek recovery of these types of costs
through this clause until the next full regulatory price setting
proceeding. Under the October 1996 agreement the earliest any such new
prices could be in effect is in the year 2000.
Utility Competition: Electric
Tampa Electric's retail electric business is substantially free
from direct competition with other electric utilities, municipalities
and public agencies. At the present time, the principal form of
competition at the retail level consists of natural gas for residences
and businesses and the self-generation option available to larger
users of electric energy. Such users may seek to expand their options
through various initiatives including legislative and/or regulatory
changes that would permit competition at the retail level. One such
initiative, described below, involves a proposed merchant power plant
22
with a claimed self generation use. Tampa Electric intends to take all
appropriate actions to retain and expand its retail business,
including managing costs and providing high quality service to retail
customers. Such action might, with the approval of the FPSC, include
the use of load retention and/or economic development service
contracts and tariffs to reduce the loss of existing load and/or
acquire additional load.
There is presently active competition in the wholesale power
markets in Florida, and this is increasing largely as a result of the
Energy Policy Act of 1992 and related federal initiatives. This Act
removed certain regulatory barriers to independent power producers and
required utilities to transmit power from such producers, utilities
and others to wholesale customers as more fully described below.
In April 1996, the Federal Energy Regulatory Commission (FERC)
issued its Final Rule on Open Access Non-discriminatory Transmission,
Stranded Costs, Open Access Same-time Information System (OASIS) and
Standards of Conduct. These rules work together to open access for
wholesale power flows on transmission systems. Utilities owning
transmission facilities (including Tampa Electric) are required to
provide services to wholesale transmission customers comparable to
those they provide to themselves on comparable terms and conditions
including price. Among other things, the rules require transmission
services to be unbundled from power sales and owners of transmission
systems must take transmission service under their own transmission
tariffs.
Transmission system owners are also required to implement an
OASIS system providing, via the Internet, access to transmission
service information (including price and availability), and to rely
exclusively on their own OASIS system for such information for
purposes of their own wholesale power transactions. To facilitate
compliance, owners must implement Standards of Conduct to ensure that
personnel involved in marketing of wholesale power are functionally
separated from personnel involved in transmission services and
reliability functions. Tampa Electric, together with other utilities,
has implemented an OASIS system and believes it is in compliance with
the Standards of Conduct.
Merchant Power Plants
In a 1997 FPSC informational workshop to address long range power
supply planning, questions were raised as to whether merchant power
plants, i.e plants built on speculation with a portion or all of their
capacity not subject to purchase agreements, could or should be
p e r m itted to serve growing customer demand for electricity.
Subsequently, utilities, cogeneration/independent power producers and
power marketers presented views before the FPSC on the applicability
of existing law and regulations to merchant power plants.
Tampa Electric presented its position that only utilities or
entities with contracts to serve the long term needs of an individual
utility could legally be applicants under the Florida Power Plant
Siting Act (PPSA). The PPSA governs the building of new generation and
requires the applicant to demonstrate that a plant is needed prior to
receiving construction and operating permits.
I n subsequent declaratory statement proceedings addressing
specifically a proposed Duke/IMCA power plant discussed below, and a
project with a municipal utility, proposed by Duke, the FPSC denied
Duke's petitions and determined that the issue of the ability of
merchant power plants to be applicants under the PPSA needed to be
addressed in a more inclusive proceeding. It is uncertain at this time
whether or how the FPSC will proceed on this issue.
23
In 1997, IMCA and Duke announced that they had signed a letter of
intent for the construction of a natural gas fired combined cycle
power plant with a minimum capacity of 240 megawatts to serve retail
load currently served by Tampa Electric and two other utilities, and
the merchant wholesale function described above.
Tampa Electric and others objected to the proposed project on the
ground that it involved retail transactions within defined service
areas that are prohibited under existing Florida regulation. Prior to
an FPSC- ordered evidentiary hearing to determine if the proposed
project should be considered permitted self-generation or a prohibited
retail sale, IMCA withdrew its petition. As a result, the status of
the proposed project is unclear at this time.
If the Duke/IMCA project or similar projects by others is
successfully pursued there would be an adverse effect on Tampa
Electric's retail operations, with some likely cost shifting to other
retail customers. Likewise, if necessary regulatory or legislative
actions are taken that result in the construction of wholesale
merchant power plants, Tampa Electric's wholesale operations would be
adversely affected.
Utility Competition: Gas
PGS is not in direct competition with any other regulated
distributors of natural gas for customers within its service areas. At
the present time, the principal form of competition for residential
and small commercial customers is from companies providing other
sources of energy and energy services.
Competition is most prevalent in the large commercial and
industrial markets. In recent years, these classes of customers have
been targeted by companies seeking to sell gas directly either using
PGS facilities or transporting gas through other facilities, thereby
bypassing PGS facilities. In response to this competition, various
programs have been developed by PGS including the provision of
transportation services at discounted rates.
In general, PGS faces competition from other energy source
suppliers offering fuel oil, electricity and in some cases liquid
propane gas. PGS has taken actions to retain and expand its commodity
and transportation business, including managing costs and providing
high quality service to customers.
Purchased Gas Adjustment
Changes in the cost of gas sold are passed along to customers
through the FPSC approved Purchased Gas Adjustment (PGA) clause.
Gas Unbundling
In some areas of the country, gas service for large customers has
become unbundled, with these customers able to choose a third party
supplier of the gas commodity and to secure from the distribution
company transportation-only service. PGS is already largely unbundled
with 60 percent of the system throughput coming from third-party
suppliers.
The FPSC staff has issued a draft tariff which would allow all
customers, except residential, the right to take transportation-only
service and purchase gas from third parties. PGS is opposed to this
proposal unless there is a showing of benefit to the general body of
customers. It is unclear whether the FPSC staff action will lead to
FPSC action requiring further unbundling.
FINANCING ACTIVITY
24
In July 1997, Tampa Electric retired all of its outstanding shares
of cumulative preferred stock at per share redemption prices of
$103.75 for Series A, $102.875 for Series B and $101.00 for Series D.
In April 1996 Tampa Electric retired Series E and Series F preferred
stock at redemption prices of $102.00 and $101.00, respectively.
In 1997, PGS redeemed $16 million of long-term debt assumed in the
West Florida Natural Gas merger.
Derivatives and Hedging Policy
During 1997, Peoples Gas System entered into natural gas options
contracts, from time to time, to limit its exposure to gas price
increases. Tampa Electric Company does not use derivatives or other
financial products for speculative purposes.
25
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
No.
Report of Independent Accountants 27
Balance Sheets, Dec. 31, 1997 and 1996 28
Statements of Income for the years ended
Dec. 31, 1997, 1996 and 1995 29
Statements of Cash Flows for the years ended
Dec. 31, 1997, 1996 and 1995 30
Statements of Retained Earnings for the years ended
Dec. 31, 1997, 1996 and 1995 31
Statements of Capitalization, Dec. 31, 1997 and 1996 31-33
Notes to Financial Statements 34-44
Financial Statement Schedules have been omitted since they are not
required, are inapplicable or the required information is presented in
the financial statements or notes thereto.
26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Tampa Electric Company,
We have audited the accompanying balance sheets and statements of
capitalization of Tampa Electric Company, (a wholly owned subsidiary
of TECO Energy, Inc.) as of Dec. 31, 1997 and 1996, and the related
statements of income, cash flows and retained earnings for each of the
three years in the period ended Dec. 31, 1997. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
s t atement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Tampa
Electric Company as of Dec. 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the
period ended Dec. 31, 1997, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Tampa, Florida
Jan. 15, 1998
27
BALANCE SHEETS
(millions)
Assets
Dec. 31, 1997 1996
Property, Plant and Equipment,
At Original Cost
Utility plant in service
Electric $3,632.0 $3,536.6
Gas 471.1 410.4
Construction work in progress 40.6 40.2
4,143.7 3,987.2
Accumulated depreciation (1,595.3) (1,456.7)
2,548.4 2,530.5
Other property 6.5 6.0
2,554.9 2,536.5
Current Assets
Cash and cash equivalents 2.8 3.5
Receivables, less allowance
for uncollectibles 161.4 162.0
Inventories, at average cost
Fuel 69.5 57.0
Materials and supplies 45.6 42.9
Prepayments 7.3 4.9
286.6 270.3
Deferred Debits
Unamortized debt expense 17.5 18.3
Deferred income taxes 112.2 102.9
Regulatory asset-tax related 41.8 44.8
Other 85.9 53.1
257.4 219.1
$3,098.9 $3,025.9
Liabilities and Capital
Capital
Common stock $ 972.1 $ 961.7
Retained earnings 289.6 285.7
1,261.7 1,247.4
Preferred stock, redemption not required -- 20.0
Long-term debt, less amount due
within one year 727.1 740.2
1,988.8 2,007.6
Current Liabilities
Long-term debt due within one year 4.1 3.8
Notes payable 219.1 98.6
Accounts payable 118.4 153.7
Customer deposits 77.3 77.0
Interest accrued 18.7 15.9
Taxes accrued 8.5 11.9
446.1 360.9
Deferred Credits
Deferred income taxes 415.6 382.4
Investment tax credits 49.7 53.8
Regulatory liability-tax related 77.0 80.6
Other 121.7 140.6
664.0 657.4
$3,098.9 $3,025.9
The accompanying notes are an integral part of the financial
statements.
28
STATEMENTS OF INCOME
(millions)
Year ended Dec. 31, 1997 1996 1995
Operating Revenues
Electric 1,189.2 1,112.9 1,092.2
Gas 249.5 258.6 220.6
1,438.7 1,371.5 1,312.8
Operating Expenses
Operation
Fuel 373.4 383.1 384.3
Purchased power 67.7 49.0 44.4
Natural gas sold 119.6 130.1 98.5
Other 215.7 216.9 215.1
Maintenance 83.4 70.3 74.4
Depreciation 161.2 137.4 129.5
Taxes-Federal and state income 87.5 79.9 74.2
Taxes-Other than income 112.6 108.7 106.6
1,221.1 1,175.4 1,127.0
Operating Income 217.6 196.1 185.8
Other Income (Expense)
Allowance for other funds
used during construction .1 16.5 13.7
Other income (expense), net (2.7) (.1) (.5)
(2.6) 16.4 13.2
Income before interest charges 215.0 212.5 199.0
Interest Charges
Interest on long-term debt 50.7 46.5 45.5
Other interest 15.8 16.9 12.4
Allowance for borrowed funds
used during construction (.1) (6.4) (5.6)
66.4 57.0 52.3
Net Income 148.6 155.5 146.7
Preferred dividend
requirements .5 1.8 3.6
Balance Applicable to
Common Stock $ 148.1 $ 153.7 $ 143.1
The accompanying notes are an integral part of the financial
statements.
29
STATEMENTS OF CASH FLOWS
(millions)
Year ended Dec. 31, 1997 1996 1995
Cash Flows from
Operating Activities
Net income $148.6 $ 155.5 $ 146.7
Adjustments to reconcile net
income to net cash
Depreciation 161.2 137.4 129.5
Deferred income taxes 21.1 9.4 (12.3)
Investment tax credits, net (4.7) (4.7) (4.8)
Allowance for funds used
during construction (.2) (22.9) (19.3)
Deferred clause revenues
(expenses) 2.7 7.4 (17.9)
Deferred revenue (30.5) 34.2 50.8
Coal contract buyout 2.7 2.7 2.0
Refund to customers (19.8) (6.0) --
Receivables, less allowance
for uncollectibles 2.7 (10.0) (19.9)
Inventories (15.2) 10.8 24.6
Taxes accrued (3.5) (8.4) 16.0
Accounts payable (15.0) (15.9) 10.4
Other (26.0) 6.6 29.2
224.1 296.1 335.0
Cash Flows from
Investing Activities
Capital expenditures (155.3) (229.3) (360.5)
Allowance for funds used
during construction .2 22.9 19.3
Investment in short-term
investments -- -- (.2)
(155.1) (206.4) (341.4)
Cash Flows from
Financing Activities
Proceeds from contributed
capital from parent 5.0 83.0 76.0
Proceeds from long-term debt
-- 78.1 2.6
Repayment of long-term debt (16.7) (26.3) (2.0)
Net borrowings (payments)
under credit lines (10.0) -- 5.0
Net increase (decrease)
in short-term debt 118.9 (45.9) 50.7
Redemption of preferred stock (20.4) (35.5) --
Dividends (146.5) (147.1) (128.8)
(69.7) (93.7) 3.5
Net decrease in cash and
cash equivalents (.7) (4.0) (2.9)
Cash and cash equivalents at
beginning of year 3.5 7.5 10.4
Cash and cash equivalents at
end of year $ 2.8 $ 3.5 $ 7.5
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest $ 57.1 $ 48.6 $ 49.9
Income taxes $ 85.3 $ 91.1 $ 76.7
The accompanying notes are an integral part of the financial
statements.
30
STATEMENTS OF RETAINED EARNINGS
(millions)
Year ended Dec. 31, 1997 1996 1995
Balance, Beginning of Year $285.7 $277.3(1) $260.5
Add-Net income 148.6 155.5 146.7
West Florida Natural Gas Merger 2.3 -- --
436.6 432.8 407.2
Deduct-
Cash dividends on capital stock
Preferred .6 2.1 3.6
Common 145.9 145.0 125.2
Other - adjustment .5 -- --
147.0 147.1 128.8
Balance, End of Year $289.6 $285.7 $278.4
(1) The Retained Earnings balance was reduced by $1.1 million
related to the retirement of preferred stock Series E and F on
April 29, 1996.
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF CAPITALIZATION
Capital Stock
Outstanding Paid in 1997(1)
Current
Redemption Per
Price Shares Amount(2) Share Amount(2)
Common stock-Without par value
25 million shares
authorized N/A 10 $972.1 N/A $145.9
Preferred Stock-$100 Par Value
1.5 million shares authorized, none outstanding.(3)
Preferred Stock - no Par
2.5 million shares authorized, none outstanding.
Preference Stock - no Par
2.5 million shares authorized, none outstanding.
_________________
(1) Quarterly dividends paid on Feb. 15, May 15, Aug. 15 and Nov. 15.
(2) Millions.
(3) In July 1997, Tampa Electric retired all of its outstanding
shares ($20 million aggregate par value) of 4.32% Series A, 4.16%
Series B and 4.58% Series D preferred stock at redemption prices
of $103.75, $102.875 and $101.00 per share, respectively.
Cash dividends paid in 1997 were $0.2 million, $0.1 million and
$0.3 million for Series A, Series B and Series D, respectively. These
amounts reflect dividends paid through July 16, 1997, the date that
these series were redeemed.
31
STATEMENTS OF CAPITALIZATION (continued)
Long-Term Debt Outstanding at Dec. 31, Due 1997 1996
Tampa Electric
First mortgage bonds (issuable in series):
7 3/4% 2022 $ 75.0 $ 75.0
5 3/4% 2000 80.0 80.0
6 1/8% 2003 75.0 75.0
Installment contracts payable(2)
5 3/4% 2007 23.8 24.1
7 7/8% Refunding bonds(3) 2021 25.0 25.0
8% Refunding bonds(3) 2022 100.0 100.0
6 1/4% Refunding bonds(4) 2034 86.0 86.0
5.85% 2030 75.0 75.0
Variable rate: 3.55% for 1997 and
3.56% for 1996(1) 2025 51.6 51.6
Variable rate: 3.45% for 1997 and
3.43% for 1996(1) 2018 54.2 54.2
Variable rate: 3.78% for 1997 and
3.67% for 1996(1) 2020 20.0 20.0
665.6 665.9
Peoples Gas System
Senior Notes(5)
10.35% 2007 7.4 8.0
10.33% 2008 9.2 9.4
10.3% 2009 9.4 9.6
9.93% 2010 9.6 9.8
8.0% 2012 33.5 35.0
Variable rate long term revolving
credit note: 6.07% for 1996(1) 2001 -- 10.0
69.1 81.8
Unamortized debt premium (discount), net (3.5) (3.7)
731.2 744.0
Less amount due within one year(6) 4.1 3.8
Total long-term debt $ 727.1 $ 740.2
(1) Composite year-end interest rate.
(2) Tax-exempt securities.
(3) Proceeds of these bonds were used to refund bonds with interest
rates of 11 5/8% - 12 5/8%. For accounting purposes, interest
expense has been recorded using blended rates of 8.28%-8.66% on
the original and refunding bonds, consistent with regulatory
treatment.
(4) Proceeds of these bonds were used to refund bonds with an
interest rate of 9.9% in February 1995. For accounting purposes,
interest expense has been recorded using a blended rate of 6.52%
on the original and refunding bonds, consistent with regulatory
treatment.
32
STATEMENTS OF CAPITALIZATION (continued)
(5) These long-term debt agreements contain various restrictive
covenants, including provisions related to interest coverage,
maximum levels of debt to total capitalization and limitations on
dividends.
(6) Of the amount due in 1998, $.8 million may be satisfied by the
substitution of property in lieu of cash payments.
Substantially all of the property, plant and equipment of the
company is pledged as collateral. Maturities and annual sinking fund
requirements of long-term debt for the years 1999, 2000, 2001 and 2002
are $4.6 million, $84.8 million, $5.2 million, and $6.0 million,
respectively. Of these amounts $.8 million per year for 1998 through
2001 may be satisfied by the substitution of property in lieu of cash
payments.
At Dec. 31, 1997, total long-term debt had a carrying amount of
$727.1 million and an estimated fair market value of $828.6 million.
The estimated fair market value of long-term debt was based on quoted
market prices for the same or similar issues, on the current rates
offered for debt of the same remaining maturities, or for long-term
debt issues with variable rates that approximate market rates, at
carrying amounts. The carrying amount of long-term debt due within one
year approximated fair market value because of the short maturity of
these instruments.
The company had an interest rate exchange agreement, which
expired Jan. 11, 1996, to reduce the cost of $100 million of fixed
rate long-term debt. The agreement reduced interest expense by $2.3
million in 1995.
The accompanying notes are an integral part of the financial
statements.
33
NOTES TO FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies
Basis of Accounting
Tampa Electric Company's regulated electric and gas operations
maintain their accounts in accordance with recognized policies
prescribed or permitted by the Florida Public Service Commission
(FPSC). In addition, Tampa Electric maintains its accounts in
accordance with recognized policies prescribed or permitted by the
Federal Energy Regulatory Commission (FERC). These policies conform
w i th generally accepted accounting principles in all material
respects.
The impact of Financial Accounting Standard (FAS) No. 71,
Accounting for the Effects of Certain Types of Regulation, has been
minimal in the company's experience, but when cost recovery is ordered
over a period longer than a fiscal year, costs are recognized in the
period that the regulatory agency recognizes them in accordance with
FAS 71. Also as provided in FAS 71, Tampa Electric has deferred
revenues in accordance with the various regulatory agreements approved
by the FPSC in 1995 and 1996. Revenues are recognized as allowed
under the terms of the agreements.
Tampa Electric Company's regulated utility retail businesses are
regulated by the FPSC, and Tampa Electric's wholesale business is
regulated by FERC. Prices allowed by both agencies are generally based
on recovery of prudent costs incurred plus a reasonable return on
invested capital.
The use of estimates is inherent in the preparation of financial
s t a t e ments in accordance with generally accepted accounting
principles.
Revenues and Fuel Costs
Revenues include amounts resulting from cost recovery clauses
which provide for monthly billing charges to reflect increases or
decreases in fuel, purchased capacity, oil backout, conservation and
environmental costs for Tampa Electric and purchased gas, interstate
pipeline capacity and conservation costs for Peoples Gas System. These
adjustment factors are based on costs projected by the company for a
specific recovery period. Any over-recovery or under-recovery of costs
plus an interest factor are taken into account in the process of
setting adjustment factors for subsequent recovery periods. Over-
recoveries of costs are recorded as deferred credits and under-
recoveries of costs are recorded as deferred debits.
In August 1996, the FPSC approved Tampa Electric's petition for
recovery of certain environmental compliance costs through the
environmental cost recovery clause.
On May 10, 1995, the FPSC approved the termination of the oil
backout clause effective Jan. 1, 1996. Any oil backout project costs
incurred beginning Jan 1, 1996 were no longer recovered through the
cost recovery clause.
In December 1994, Tampa Electric bought out a long-term coal
supply contract which would have expired in 2004 for a lump sum
payment of $25.5 million and entered into two new contracts with the
supplier. The coal supplied under the new contracts is competitive in
price with coals of comparable quality. As a result of this buyout,
Tampa Electric customers will benefit from anticipated net fuel
savings of more than $40 million through the year 2004. In February
1995, the FPSC authorized the recovery of the $25.5 million buy-out
amount plus carrying costs through the Fuel and Purchased Power Cost
34
Recovery Clause over the ten-year period beginning April 1, 1995. In
1997, 1996 and 1995, $2.7 million, $2.7 million and $2 million,
respectively, of buy-out costs were amortized to expense.
Certain other costs incurred by the regulated utilities are
allowed to be recovered from customers through prices approved in the
regulatory process. These costs are recognized as the associated
revenues are billed.
Both Tampa Electric and Peoples Gas System accrue base revenues
for services rendered but unbilled to provide a closer matching of
revenues and expenses.
In May 1996, the FPSC issued an order approving an agreement
among Tampa Electric, the Office of Public Counsel (OPC) and the
Florida Industrial Power Users Group (FIPUG) regarding 1996 earnings.
This agreement provided for a $25-million revenue refund to customers
to be made over the 12-month period beginning Oct. 1, 1996. This
refund consisted of $15 million of revenues deferred from 1996 and $10
million of revenues deferred from 1995, plus accrued interest.
In October 1996, the FPSC approved an agreement among Tampa
Electric, OPC and FIPUG that resolved all pending regulatory issues
associated with the Polk Power Station. The agreement allows the full
recovery of the capital costs incurred in the construction of the Polk
Power project, and calls for an extension of the base rate freeze
established in the May agreement through 1999. Under the October
agreement, the $25-million refund established in the May agreement
remains intact and customers began receiving a $25-million temporary
base rate reduction, reflected as a credit on customer bills over the
15-month period which began Oct. 1, 1997.
Depreciation
The company provides for depreciation primarily by the straight-
line method at annual rates that amortize the original cost, less net
salvage, of depreciable property over its estimated service life. The
provision for utility plant in service, expressed as a percentage of
the original cost of depreciable property, was 4.0% for 1997, 1996 and
1995.
The original cost of utility plant retired or otherwise disposed
of and the cost of removal less salvage are charged to accumulated
depreciation.
Asset Impairment
The company periodically assesses whether there has been a
permanent impairment of its long-lived assets and certain intangibles
held and used by it, in accordance with FAS 121, Accounting for the
Impairment of Long-lived Assets and Long-Lived Assets to be Disposed
of. No write-down of assets due to impairment was required in 1997 or
1996.
Deferred Income Taxes
The liability method is utilized in the measurement of deferred
income taxes. Under the liability method, the temporary differences
b e tween the financial statement and tax bases of assets and
liabilities are reported as deferred taxes measured at current tax
rates. Tampa Electric and Peoples Gas System are regulated, and their
books and records reflect approved regulatory treatment, including
certain adjustments to accumulated deferred income taxes and the
establishment of a corresponding regulatory tax liability reflecting
the amount payable to customers through future rates.
Investment Tax Credits
35
Investment tax credits have been recorded as deferred credits and
are being amortized to income tax expense over the service lives of
the related property.
Allowance for Funds Used During Construction (AFUDC)
AFUDC is a non-cash credit to income with a corresponding charge
to utility plant which represents the cost of borrowed funds and a
reasonable return on other funds used for construction. The rate used
to calculate AFUDC is revised periodically to reflect significant
changes in Tampa Electric's cost of capital. The rate was 7.79% for
1997, 1996 and 1995. The base on which AFUDC is calculated excludes
construction work in progress which has been included in rate base.
Hedges - Gas Prices
During 1997, Peoples Gas System entered into natural gas options
contracts, from time to time, to limit its exposure to gas price
increases.
Tampa Electric Company does not use derivatives or other
financial products for speculative purposes.
Mergers
In June 1997, TECO Energy, Inc. completed its merger with Lykes
E n e rgy, Inc. Concurrent with this merger, the regulated gas
distribution utility, Peoples Gas System, Inc., was merged into Tampa
Electric Company and now operates as the Peoples Gas System division
of Tampa Electric Company.
Also in June 1997, TECO Energy completed its merger with West
Florida Gas Inc. (West Florida). Concurrent with this merger, West
Florida's regulated gas distribution utility, West Florida Natural Gas
Company, was merged into Tampa Electric Company and now operates as
part of the Peoples Gas System division.
These mergers were accounted for as poolings of interests and,
accordingly, the company's Balance Sheet as of Dec. 31, 1997 and its
Statements of Income and Cash Flows for the period ended Dec. 31, 1997
include the results of Peoples Gas System and West Florida.
Financial statements and all financial information presented for
periods prior to 1997 have been restated to include the results of the
Peoples Gas System. Prior period financial statements have not been
restated to reflect the operations and financial position of West
Florida Natural Gas due to its size.
36
Tampa Electric Company's combined restated revenues and net
income for the years ended Dec. 31, 1997, 1996 and 1995 were as
follows:
Revenues Net Income
(thousands) (thousands)
Year Ended Dec. 31, 1997
Tampa Electric pre-merger $ 572.8 $ 64.2
Peoples Gas System pre-merger 133.9 9.7
706.7 73.9
Merger related(2) - (1.3)
706.7 72.6
Tampa Electric Company post-merger 732.0 76.0
Combined $1,438.7 $ 148.6
Revenues Net Income
(thousands) (thousands)
Year Ended Dec. 31, 1996
Tampa Electric pre-merger(1) $1,112.9 $ 141.6
Peoples Gas System pre-merger 258.6 13.9
Combined $1,371.5 $ 155.5
Year Ended Dec. 31, 1995
Tampa Electric pre-merger(1) $1,092.2 $ 133.7
Peoples Gas System pre-merger 220.6 13.0
Combined $1,312.8 $ 146.7
(1) The 1996 and 1995 amounts were previously reported on Form 10-K
for the years ended Dec. 31, 1996 and 1995.
(2) Reflects a net, after-tax, one-time charge for all merger related
transactions.
Reclassifications and Restatements
Certain prior year amounts were reclassified or restated to
conform with current year presentation.
37
B. Common Stock
The company is a wholly owned subsidiary of TECO Energy, Inc.
Common Stock Issue
(thousands) Shares Amount Expense Total
Balance Dec. 31, 1994
As previously reported 10 $777.3 $(1.4) $775.9
Pooling of interests with PGS - 26.2 -- 26.2
Balance Dec. 31, 1994 as restated 10 803.5 (1.4) 802.1
Contributed capital from parent - 76.0 -- 76.0
Balance Dec. 31, 1995 10 879.5 (1.4) 878.1
Contributed capital from parent - 83.0 -- 83.0
Costs associated with Preferred
Stock retirements (1) -- .6 .6
Balance Dec. 31, 1996 10 962.5 (.8) 961.7
Contributed capital from parent - 5.0 -- 5.0
Costs associated with Preferred
Stock retirements (2) -- .1 .1
West Florida Natural Gas merger - 5.3 -- 5.3
Balance Dec. 31, 1997 10 $972.8 $ (.7) $972.1
(1) In April 1996, the Tampa Electric retired $35 million aggregate
par value of 8.00% Series E and 7.44% series F preferred stock.
In connection with this retirement, $.6 million of associated
issuance costs were recognized.
(2) In July 1997, Tampa Electric retired all of its outstanding
shares ($20 million aggregate par value) of 4.32% Series A.
4.16% Series B and 4.58% Series D preferred stock at redemption
prices of $103.75, $102.875 and $101.00 per share, respectively.
In connection with this retirement, $.1 million of associated
issuance costs were recognized.
C. Retained Earnings
Tampa Electric Company's Restated Articles of Incorporation and
certain series of Tampa Electric's first mortgage bonds and certain of
Peoples Gas System's long-term debt issues contain provisions that
limit the dividend payment on the company's common stock. At Dec. 31,
1997, substantially all of the company's retained earnings were
available for dividends on its common stock.
D. Retirement Plan
Tampa Electric is a participant in the comprehensive retirement
plan of TECO Energy, including a non-contributory defined benefit
retirement plan which covers substantially all employees. Benefits are
based on employees' years of service and average final earnings.
TECO Energy's policy is to fund the plan within the guidelines
set by ERISA for the minimum annual contribution and the maximum
allowable as a tax deduction by the IRS. About 67 percent of plan
assets were invested in common stocks and 33 percent in fixed income
investments at Dec. 31, 1997.
38
Components of net pension expense, reconciliation of the funded
status and the accrued pension liability are presented below for TECO
Energy consolidated.
Components of Net Pension Expense
(millions) 1997 1996 1995
Service cost
(benefits earned during the period) $ 9.2 $ 8.5 $ 7.2
Interest cost on projected
benefit obligations 19.9 18.8 17.3
Less: Return on plan assets-Actual 65.6 43.4 66.4
Less net amortization of unrecognized
transition asset and deferred return 38.8 18.6 43.3
Net return on assets 26.8 24.8 23.1
Net pension expense recognized in TECO
Energy's Consolidated Statements
of Income (1) $ 2.3 $ 2.5 $ 1.4
(1) Tampa Electric's portion was $.7 million, $1.8 million and $.2
million for 1997, 1996 and 1995, respectively.
Reconciliation of the Funded Status of the Retirement Plan and the
Accrued Pension Prepayment/(Liability)
Dec. 31, Dec. 31,
(millions) 1997 1996
Fair market value of plan assets $ 365.9 $ 320.5
Projected benefit obligation (297.1) (262.2)
Excess of plan assets over projected
benefit obligation 68.8 58.3
Less unrecognized net gain from past
experience different from that assumed 78.8 65.9
Less unrecognized prior service cost (10.8) (11.7)
Less unrecognized net transition asset
(being amortized over 19.5 years) 7.5 8.5
Accrued pension(liability)(2) $ (6.7) $ (4.4)
Accumulated benefit obligation
(including vested benefits of
$221.6 for 1997 and $196.7 for 1996) $ 248.1 $ 220.0
(2) Tampa Electric's portion was $6.6 million and $5.9 million at Dec.
31, 1997 and 1996, respectively.
Assumptions Used in Determining Actuarial Valuations
1997 1996
Discount rate to determine projected
benefit obligation 7.25% 7.75%
Rates of increase in compensation levels 3.3-5.3% 3.3-5.3%
Plan asset growth rate through time 9% 9%
Peoples Gas System Retirement Plan
The Peoples Gas System retirement plan was merged with the TECO
Energy retirement plan effective Jan. 1, 1998. As of Dec. 31, 1997,
Peoples Gas System had a non-contributory defined benefit retirement
plan which covered substantially all employees. Benefits were based on
employees' years of service and average compensation during specified
years of employment.
Peoples Gas System's retirement plan was funded annually by the
company within the guidelines set by ERISA for the minimum annual
39
contribution and the maximum allowable as a tax deduction by the IRS.
Plan assets were invested primarily in a collective investment trust
consisting of equity securities, fixed income securities and cash
equivalents.
Components of Net Pension Expense
(millions) 1997 1996 1995
Service cost
(benefits earned during the period) $ 2.1 $ 2.0 $ 1.9
Interest cost on projected
benefit obligations 3.0 2.6 2.4
Less: Return on plan assets-Actual 6.7 4.1 5.8
Less net amortization of unrecognized
transition asset and deferred return 3.5 1.2 3.1
Net return on assets 3.2 2.9 2.7
Net pension expense 1.9 1.7 1.6
Voluntary employee retirement program - - 0.8
Net pension expense recognized in the
Statements of Income $ 1.9 $ 1.7 $ 2.4
Reconciliation of the Funded Status of the Retirement Plan and the
Accrued Pension Prepayment/(Liability)
Dec. 31, Dec. 31,
(millions) 1997 1996
Fair market value of plan assets $ 48.9 $ 40.6
Projected benefit obligation (47.6) (39.3)
Excess of plan assets over projected
benefit obligation 1.3 1.3
Less unrecognized net gain from past
experience different from that assumed 4.9 4.7
Less unrecognized prior service cost (0.2) (0.2)
Less unrecognized net transition asset
(being amortized over 19.5 years) 0.6 0.8
Accrued pension(liability) $ (4.0) $ (4.0)
Accumulated benefit obligation
(including vested benefits of
$34.0 for 1997 and $28.1 for 1996) $ 34.4 $ 28.4
Assumptions Used in Determining Actuarial Valuations
1997 1996
Discount rate to determine projected
benefit obligation 7.25% 7.75%
Rates of increase in compensation levels 6% 6%
Plan asset growth rate through time 8% 8%
40
E. Postretirement Benefit Plan
Tampa Electric Company currently provides certain postretirement
health care benefits for substantially all employees retiring after
age 55 meeting certain service requirements. The company contribution
toward health care coverage for most employees retiring after Jan. 1,
1990 is limited to a defined dollar benefit based on years of service.
Postretirement benefit levels are substantially unrelated to salary.
Tampa Electric Company reserves the right to terminate or modify the
plan in whole or in part at any time.
Components of Postretirement Benefit Cost
(millions)
1997 1996 1995
Service cost (benefits earned
during the period) $1.3 $1.4 $1.4
Interest cost on projected
benefit obligations 4.4 4.6 5.1
Amortization of transition obligation
(straight line over 20 years) 2.1 2.1 2.2
Amortization of actuarial loss/(gain) (0.1) 0.2 0.2
Net periodic Postretirement
benefit expense $7.7 $8.3 $8.9
Reconciliation of the Funded Status of the Postretirement Benefit Plan
and the Accrued Liability (millions)
Dec. 31, Dec. 31,
1997 1996
Accumulated Postretirement benefit obligation
Active employees eligible to retire $ (3.9) $(2.4)
Active employees not eligible to retire (23.7) (20.9)
Retirees and surviving spouses (34.0) (38.9)
(61.6) (62.2)
Less unrecognized net loss
from past experience (4.9) (7.3)
Less unrecognized transition obligation (31.6) (33.7)
Liability for accrued postretirement benefit $(25.1) $(21.2)
Assumptions Used in Determining Actuarial Valuations
1997 1996
Discount rate to determine projected
benefit obligation 7.25% 7.75%
The assumed health care cost trend rate (excluding the employees
of Peoples Gas System)for medical costs prior to age 65 was 9.5% in
1997 and decreases to 5.75% in 2002 and thereafter. The assumed health
care cost trend rate for medical costs after age 65 was 7.0% in 1997
and decreases to 5.75% in 2002 and thereafter.
The assumed health care cost trend rate (for employees of Peoples
Gas System)for medical costs prior to age 65 was 6% in 1997 and
decreases to 5% in 2003 and thereafter. The assumed health care cost
trend rate for HMO medical costs prior to age 65 was 4% for all future
years.
41
A 1% change in the medical trend rates would produce a 7% ($0.4
million) change in the aggregate service and interest cost for 1997
and a 7% ($4.3 million) change in the accumulated Postretirement
benefit obligation as of Dec. 31, 1997.
F. Income Tax Expense
The company is included in the filing of a consolidated Federal income
tax return with its parent and affiliates. The company's income tax
expense is based upon a separate return computation. Income tax
expense consists of the following components:
(millions) Federal State Total
1997
Currently payable $ 62.9 $ 7.1 $ 70.0
Deferred 15.0 6.1 21.1
Amortization of investment
tax credits (4.7) -- (4.7)
Total income tax expense $ 73.2 $ 13.2 86.4
Included in other income, net (1.1)
Included in operating expenses $ 87.5
(millions)
1996
Currently payable $ 63.9 $ 11.1 $ 75.0
Deferred 8.3 1.1 9.4
Amortization of investment
tax credits (4.7) - (4.7)
Total income tax expense $ 67.5 $ 12.2 79.7
Included in other income, net (.2)
Included in operating expenses $ 79.9
1995
Currently payable $ 77.8 $ 13.5 $ 91.3
Deferred (10.5) (1.8) (12.3)
Amortization of investment
tax credits (4.8) - (4.8)
Total income tax expense $ 62.5 $ 11.7 74.2
Included in other income, net --
Included in operating expenses $ 74.2
42
Deferred taxes result from temporary differences in the
recognition of certain liabilities or assets for tax and financial
reporting purposes. The principal components of the company's deferred
tax assets and liabilities recognized in the balance sheet are as
follows:
Dec. 31, Dec. 31,
(millions) 1997 1996
Deferred tax assets(1)
Property related $ 87.4 $ 84.4
Leases 5.2 5.4
Insurance reserves 9.2 7.2
Early capacity payments 2.2 2.2
Other 8.2 3.7
Total deferred income tax assets 112.2 102.9
Deferred income tax liabilities(1)
Property related (450.9) (428.4)
Other 35.3 46.0
Total deferred income tax liabilities (415.6) (382.4)
Accumulated deferred income taxes $(303.4) $(279.5)
_________________
(1) Certain property related assets and liabilities have been netted.
The total income tax provisions differ from amounts computed by
applying the federal statutory tax rate to income before income taxes
for the following reasons:
(millions) 1997 1996 1995
Net income $148.6 $155.5 $146.7
Total income tax provision 86.4 79.7 74.2
Income before income taxes $235.2 $235.2 $220.9
Income taxes on above at federal
statutory rate of 35% $ 82.3 $ 82.3 $ 77.4
Increase (decrease) due to
State income tax, net of federal
income tax 8.6 8.0 7.6
Amortization of investment tax
credits (4.7) (4.7) (4.8)
Equity portion of AFUDC .0 (5.8) (4.9)
Other .2 (.1) (1.1)
Total income tax provision $ 86.4 $ 79.7 $ 74.2
Provision for income taxes as
a percent of income before
income taxes 36.7% 33.9% 33.6%
G. Short-term Debt
Notes payable consisted primarily of commercial paper with
weighted average interest rates of 5.72% and 5.43% at Dec. 31, 1997
a n d 1996, respectively. The carrying amount of notes payable
approximated fair market value because of the short maturity of these
instruments. Unused lines of credit at Dec. 31, 1997 were $230
million. Certain lines of credit require commitment fees ranging from
.05% to .075% on the unused balances.
43
H. Related Party Transactions (millions)
Net transactions with affiliates are as follows:
1997 1996 1995
Fuel and interchange related, net $140.5 $154.9 $166.4
Administrative and general, net $ 9.5 $ 10.6 $ 11.3
Amounts due from or to affiliates of the company at year-end are as
follows:
1997 1996
Accounts receivable $ 7.7 $ 6.2
Accounts payable $ 20.1 $ 17.7
Accounts receivable and accounts payable were incurred in the ordinary
course of business and do not bear interest.
I. Commitments and Contingencies
Tampa Electric's capital expenditures are estimated to be $129
million in 1998 and $515 million for 1999 through 2002 for equipment
and facilities to meet customer growth and generation reliability
programs.
Peoples Gas System's capital expenditures are estimated to be $59
million for 1998 and $190 million for 1999 through 2002 for
infrastructure expansion to grow the customer base and normal asset
replacement.
44
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
During the period from Jan. 1, 1996 to the date of this report,
the company has not had and has not filed with the Commission a report
as to any changes in or disagreements with accountants on accounting
principles or practices, financial statement disclosure or auditing
scope or procedure.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) 1. Financial Statements - See index on page 26.
2. Financial Statement Schedules - See index on page 26.
3. Exhibits
*3.1 A r ticles of Incorporation (Exhibit 3.1 to
Registration Statement No. 2-70653).
*3.2 Bylaws, as amended, effective April 16, 1997 (Exhibit
3, Form 10-Q for the quarter ended June 30, 1997 of
Tampa Electric Company).
*4.1 Indenture of Mortgage among Tampa Electric Company,
State Street Trust Company and First Savings & Trust
Company of Tampa, dated as of Aug. 1, 1946 (Exhibit
7-A to Registration Statement No. 2-6693).
*4.2 Thirteenth Supplemental Indenture, dated as of Jan.
1, 1974, to Exhibit 4.1 (Exhibit 2-g-l, Registration
Statement No. 2-51204).
*4.3 Sixteenth Supplemental Indenture, dated as of Oct.
30, 1992, to Exhibit 4.1 (Exhibit 4.1, Form 10-Q for
the quarter ended Sept. 30, 1992 of Tampa Electric
Company).
*4.4 Eighteenth Supplemental Indenture, dated as of May 1,
1993, to Exhibit 4.1 (Exhibit 4.1, Form 10-Q for the
quarter ended June 30, 1993).
*4.5 Installment Purchase and Security Contract between
t h e Hillsborough County Industrial Development
Authority and Tampa Electric Company, dated as of
March 1, 1972 (Exhibit 4.9, Form 10-K for 1986 of
Tampa Electric Company).
*4.6 First Supplemental Installment Purchase and Security
Contract, dated as of Dec. 1, 1974 (Exhibit 4.10,
Form 10-K for 1986 of Tampa Electric Company).
*4.7 Third Supplemental Installment Purchase Contract,
dated as of May 1, 1976 (Exhibit 4.12, Form 10-K for
1986 of Tampa Electric Company).
*4.8 Installment Purchase Contract between the
Hillsborough County Industrial Development Authority
and Tampa Electric Company, dated as of Aug. 1, 1981
(Exhibit 4.13, Form 10-K for 1986 of Tampa Electric
Company).
*4.9 Amendment to Exhibit A of Installment Purchase
Contract, dated as of April 7, 1983 (Exhibit 4.14,
Form 10-K for 1989 of Tampa Electric Company).
*4.10 Second Supplemental Installment Purchase Contract,
dated as of June 1, 1983 (Exhibit 4.11, Form 10-K for
1994 of Tampa Electric Company).
*4.11 Third Supplemental Installment Purchase Contract,
45
dated as of Aug. 1, 1989 (Exhibit 4.16, Form 10-K for
1989 of Tampa Electric Company).
*4.12 Installment Purchase Contract between the
Hillsborough County Industrial Development Authority
and Tampa Electric Company, dated as of Jan. 31, 1984
(Exhibit 4.13, Form 10-K for 1993 of Tampa Electric
Company).
*4.13 First Supplemental Installment Purchase Contract,
dated as of Aug. 2, 1984 (Exhibit 4.14, Form 10-K for
1994 of Tampa Electric Company).
*4.14 Second Supplemental Installment Purchase Contract,
dated as of July 1, 1993 (Exhibit 4.3, Form 10-Q for
the quarter ended June 30, 1993).
*4.15 Loan and Trust Agreement among the Hillsborough
C o u nty Industrial Development Authority, Tampa
Electric Company and NCNB National Bank of Florida,
dated as of Sept. 24, 1990 (Exhibit 4.1, Form 10-Q
for the quarter ended Sept. 30, 1990 of Tampa
Electric Company).
*4.16 Loan and Trust Agreement, dated as of Oct. 26, 1992
among the Hillsborough County Industrial Development
Authority, Tampa Electric Company and NationsBank of
Florida, N.A., as trustee (Exhibit 4.2, Form 10-Q for
the quarter ended Sept. 30, 1992 of Tampa Electric
Company).
*4.17 Loan and Trust Agreement, dated as of June 23, 1993,
among the Hillsborough County Industrial Development
Authority, Tampa Electric Company and NationsBank of
Florida, N.A., as trustee (Exhibit 4.2, Form 10-Q for
the quarter ended June 30, 1993 of Tampa Electric
Company).
*4.18 Loan and Trust Agreement, dated as of Dec. 1, 1996,
a m o n g the Polk County Industrial Development
Authority, Tampa Electric Company and the Bank of New
York, as trustee (Exhibit 4.18, Form 10-K for 1996 of
Tampa Electric Company).
*10.1 1980 Stock Option and Appreciation Rights Plan, as
amended on July 18, 1989 (Exhibit 28.1, Form 10-Q for
the quarter ended June 30, 1989 of TECO Energy,
Inc.).
*10.2 TECO Energy Group Supplemental Executive Retirement
Plan, as amended and restated as of Oct. 16, 1996.
*10.3 TECO Energy Group Supplemental Retirement Benefits
Trust Agreement, as amended and restated as of Jan.
15, 1997.
10.4 Annual Incentive Compensation Plan for TECO Energy
and subsidiaries, as revised April 1997.
*10.5 TECO Energy, Inc. Group Supplemental Disability
Income Plan, dated as of March 20, 1989 (Exhibit
10.19, Form 10-K for 1988 of Tampa Electric Company).
*10.6 Forms of Severance Agreements between TECO Energy,
Inc. and certain senior executives, as amended and
restated as of March 20, 1996.
46
*10.7 TECO Energy, Inc. 1991 Director Stock Option Plan as
amended on Jan. 21, 1992 (Exhibit 10.20, Form 10-K
for 1991 of Tampa Electric Company).
*10.8 Supplemental Executive Retirement Plan for T.L.
Guzzle, as amended and restated as of Oct. 16, 1996.
*10.9 Supplemental Executive Retirement Plan for R.H.
Kessel, as amended and restated as of Jan. 15, 1997.
*10.10 Supplemental Executive Retirement Plan for H.L.
Culbreath, as amended on April 27, 1989 (Exhibit
10.14, Form 10-K for 1989 of TECO Energy, Inc.).
*10.11 Supplemental Executive Retirement Plan for A.D. Oak,
as amended and restated as of Oct. 16, 1996.
*10.12 Supplemental Executive Retirement Plan for K.S.
Surgenor, as amended and restated as of Oct. 16,
1996.
*10.13 Supplemental Executive Retirement Plan for G.F.
Anderson, as amended and restated as of Oct. 16,
1996.
*10.14 TECO Energy Directors' Deferred Compensation Plan, as
amended and restated effective April 1, 1994 (Exhibit
10.1, Form 10-Q for the quarter ended March 31, 1994
of Tampa Electric Company).
*10.15 TECO Energy Group Retirement Savings Excess Benefit
Plan, as amended and restated effective Aug. 1, 1994
(Exhibit 10.20, Form 10-K for 1994 of Tampa Electric
Company).
*10.16 Severance Agreement between TECO Energy, Inc. and H.
L. Culbreath, dated as of April 28, 1989 (Exhibit
10.24, Form 10-K for 1989 of TECO Energy, Inc.).
*10.17 Supplemental Executive Retirement Plan for R.A. Dunn,
as amended and restated as of Jan. 15, 1997.
*10.18 Form of Nonstatutory Stock Option under the TECO
Energy, Inc. 1996 Equity Incentive Plan (Exhibit
10.1, Form 10-Q for the quarter ended June 30, 1996
of Tampa Electric Company).
*10.19 Form of Restricted Stock Agreement between TECO
Energy, Inc. And certain senior executives under the
TECO Energy, Inc. 1996 Equity Incentive Plan (Exhibit
10.2, Form 10-Q for the quarter ended June 30, 1996
of Tampa Electric Company).
*10.20 Form of Restricted Stock Agreement between TECO
Energy, Inc. and G. F. Anderson under the TECO
Energy, Inc. 1996 Equity Incentive Plan (Exhibit
10.3, Form 10-Q for the quarter ended June 30, 1996
of Tampa Electric Company).
*10.21 TECO Energy, Inc. 1997 Director Equity Plan (Exhibit
10.1, Form 8-K dated April 16, 1997 of Tampa Electric
Company).
*10.22 Form of Nonstatutory Stock Option under the TECO
Energy, Inc. 1997 Director Equity Plan (Exhibit 10,
Form 10-Q for the quarter ended June 30, 1997 of
Tampa Electric Company).
12. Ratio of earnings to fixed charges.
23. Consent of Independent Accountants.
24.1 Power of Attorney.
24.2 Certified copy of resolution authorizing Power of
Attorney.
27.1 Financial Data Schedule-1997 (EDGAR filing only).
47
27.2 Financial Data Schedule-1996 restated (EDGAR filing
only).
27.3 Financial Data Schedule-1995 restated (EDGAR filing
only).
_____________
* Indicates exhibit previously filed with the Securities and
Exchange Commission and incorporated herein by reference.
Exhibits filed with periodic reports of Tampa Electric
Company and TECO Energy, Inc. were filed under Commission
File Nos. 1-5007 and 1-8180, respectively.
Certain instruments defining the rights of holders of
long-term debt of Tampa Electric Company authorizing in each
case a total amount of securities not exceeding 10 percent of
total assets on a consolidated basis are not filed herewith.
Tampa Electric Company will furnish copies of such instruments
to the Securities and Exchange Commission upon request.
Executive Compensation Plans and Arrangements
Exhibits 10.1 through 10.22 above are management contracts or
compensatory plans or arrangements in which executive officers or
directors of TECO Energy, Inc. and its subsidiaries participate.
(b) The company filed the following report on Form 8-K during the
last quarter of 1997.
The registrant filed a Current Report on Form 8-K dated Nov. 13,
1997 reporting under "Item 5. Other Events" certain officer
changes.
48
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 on the 30th day of March, 1998.
TAMPA ELECTRIC COMPANY
By G. F. Anderson*
G. F. Anderson, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf
of the registrant and in the capacities indicated on March 30, 1998:
Signature Title
G. F. ANDERSON* Chairman of the Board,
G. F. ANDERSON Director and Chief Executive
Officer (Principal Executive
Officer)
/S/J. B. RAMIL Vice President-Finance
J. B. RAMIL and Chief Financial Officer
(Principal Financial Officer)
W. L. GRIFFIN* Vice President-Controller
W. L. GRIFFIN (Principal Accounting Officer)
C. D. AUSLEY* Director
C. D. AUSLEY
S. L. BALDWIN* Director
S. L. BALDWIN
H. L. CULBREATH* Director
H. L. CULBREATH
J. L. FERMAN, JR.* Director
J. L. FERMAN, JR.
E. L. FLOM* Director
E. L. FLOM
49
H. R. GUILD, JR.* Director
H. R. GUILD, JR.
T. L. RANKIN* Director
T. L. RANKIN
R. L. RYAN* Director
R. L. RYAN
W. P. SOVEY* Director
W. P. SOVEY
J. T. TOUCHTON* Director
J. T. TOUCHTON
J. A. URQUHART* Director
J. A. URQUHART
J. O. WELCH, JR.* Director
J. O. WELCH, JR.
*By: /s/ J. B. RAMIL
J. B. RAMIL, Attorney-in-fact
50
INDEX TO EXHIBITS
Exhibit Page
No. Description No.
3.1 Articles of Incorporation (Exhibit 3.1 to *
Registration Statement No. 2-70653).
3.2 Bylaws, as amended, effective April 16, 1997 *
(Exhibit 3, Form 10-Q for the quarter ended June 30,
1997 of Tampa Electric Company).
4.1 Indenture of Mortgage among Tampa Electric *
Company, State Street Trust Company and First Savings &
Trust Company of Tampa, dated as of Aug. 1, 1946
(Exhibit 7-A to Registration Statement No. 2-6693).
4.2 Thirteenth Supplemental Indenture, dated as of *
Jan. 1, 1974, to Exhibit 4.1 (Exhibit 2-g-l,
Registration Statement No. 2-51204).
4.3 Sixteenth Supplemental Indenture, dated as of *
Oct. 30, 1992, to Exhibit 4.1 (Exhibit 4.1,
Form 10-Q for the quarter ended Sept. 30, 1992
of Tampa Electric Company).
4.4 Eighteenth Supplemental Indenture, dated as of May 1, *
1993, to Exhibit 4.1 (Exhibit 4.1, Form 10-Q for the
quarter ended June 30, 1993).
4.5 Installment Purchase and Security Contract *
between and the Hillsborough County Industrial
Development Authority and Tampa Electric Company,
dated as of March 1, 1972 (Exhibit 4.9, Form 10-K
for 1986 of Tampa Electric Company).
4.6 First Supplemental Installment Purchase and *
Security Contract, dated as of Dec. 1, 1974
(Exhibit 4.10, Form 10-K for 1986 of
Tampa Electric Company).
4.7 Third Supplemental Installment Purchase Contract, *
dated as of May 1, 1976 (Exhibit 4.12, Form 10-K
for 1986 of Tampa Electric Company).
4.8 Installment Purchase Contract between the *
Hillsborough County Industrial Development
Authority and Tampa Electric Company, dated
as of Aug. 1, 1981 (Exhibit 4.13, Form 10-K for
1986 of Tampa Electric Company).
4.9 Amendment to Exhibit A of Installment Purchase *
Contract, dated as of April 7, 1983 (Exhibit 4.14,
Form 10-K for 1989 of Tampa Electric Company).
4.10 Second Supplemental Installment Purchase Contract, *
dated as of June 1, 1983 (Exhibit 4.11, Form 10-K for
1994 of Tampa Electric Company).
4.11 Third Supplemental Installment Purchase Contract, *
dated as of Aug. 1, 1989 (Exhibit 4.16, Form 10-K
for 1989 of Tampa Electric Company).
4.12 Installment Purchase Contract between the *
Hillsborough County Industrial Development
Authority and Tampa Electric Company, dated
as of Jan. 31, 1984 (Exhibit 4.13, Form 10-K
for 1993 of Tampa Electric Company).
4.13 First Supplemental Installment Purchase Contract, *
dated as of Aug. 2, 1984 (Exhibit 4.14, Form 10-K for
1994 of Tampa Electric Company).
4.14 Second Supplemental Installment Purchase Contract, *
dated as of July 1, 1993 (Exhibit 4.3, Form 10-Q
51
for the quarter ended June 30, 1993).
4.15 Loan and Trust Agreement among the Hillsborough *
County Industrial Development Authority,
Tampa Electric Company and NCNB National
Bank of Florida, dated as of Sept. 24, 1990
(Exhibit 4.1, Form 10-Q for the quarter ended
Sept. 30, 1990 of Tampa Electric Company).
4.16 Loan and Trust Agreement, dated as of *
Oct. 26, 1992 among the Hillsborough County
Industrial Development Authority, Tampa Electric
Company and NationsBank of Florida, N.A., as
trustee (Exhibit 4.2, Form 10-Q for the quarter
ended Sept. 30, 1992 of Tampa Electric Company).
4.17 Loan and Trust Agreement, dated as of June 23, *
1993, among the Hillsborough County Industrial
D e velopment Authority, Tampa Electric Company and
NationsBank of Florida, N.A., as trustee (Exhibit 4.2,
Form 10-Q for the quarter ended June 30, 1993 of Tampa
Electric Company).
4.18 Loan and Trust Agreement, dated as of Dec. 1, 1996, *
among the Polk County Industrial Development Authority,
Tampa Electric Company and the Bank of New York, as
trustee (Exhibit 4.18, Form 10-K for 1996 of Tampa
Electric Company).
10.1 1980 Stock Option and Appreciation Rights Plan, *
as amended on July 18, 1989 (Exhibit 28.1,
Form 10-Q for the quarter ended June 30, 1989 of
TECO Energy, Inc.).
10.2 TECO Energy Group Supplemental Executive Retirement *
Plan, as amended and restated as of Oct. 16, 1996.
10.3 TECO Energy Group Supplemental Retirement Benefits *
Trust Agreement as amended and restated as of Jan. 15,
1997.
10.4 Annual Incentive Compensation Plan for TECO Energy and 55
subsidiaries, as revised April 1997.
10.5 TECO Energy, Inc. Group Supplemental Disability *
Income Plan, dated as of March 20, 1989 (Exhibit 10.19,
Form 10-K for 1988 of Tampa Electric Company).
10.6 Forms of Severance Agreements between TECO Energy, Inc. *
and certain senior executives, as amended and restated
as of March 20, 1996.
10.7 TECO Energy, Inc. 1991 Director Stock Option Plan *
as amended on Jan. 21, 1992 (Exhibit 10.20, Form 10-K
for 1991 of Tampa Electric Company).
10.8 Supplemental Executive Retirement Plan for *
T.L. Guzzle, as amended and restated as of Oct. 16,
1996.
10.9 Supplemental Executive Retirement Plan for *
R.H. Kessel, as amended and restated as of Jan. 15,
1997.
10.10 Supplemental Executive Retirement Plan for *
H.L. Culbreath, as amended on April 27, 1989 (Exhibit
10.14, Form 10-K for 1989 of TECO Energy, Inc.).
10.11 Supplemental Executive Retirement Plan for *
A.D. Oak, as amended and restated as of Oct. 16, 1996.
10.12 Supplemental Executive Retirement Plan for *
K.S. Surgenor, as amended and restated as of Oct. 16,
1996.
10.13 Supplemental Executive Retirement Plan for *
52
G.F. Anderson, as amended and restated as of Oct. 16,
1996.
10.14 TECO Energy Directors' Deferred Compensation Plan, *
as amended and restated effective April 1, 1994
(Exhibit 10.1, Form 10-Q for the quarter ended March 31,
1994 of Tampa Electric Company).
10.15 TECO Energy Group Retirement Savings Excess Benefit *
Plan, as amended and restated effective Aug. 1, 1994
(Exhibit 10.20, Form 10-K for 1994 of Tampa Electric
Company).
10.16 Severance Agreement between TECO Energy, Inc. and *
H.L. Culbreath, dated as of April 28, 1989 (Exhibit
10.24, Form 10-K for 1989 of TECO Energy, Inc.).
10.17 Supplemental Executive Retirement Plan for R.A. Dunn, *
as amended and restated as of Jan. 15, 1997.
10.18 Form of Nonstatutory Stock Option under the TECO Energy, *
Inc. 1996 Equity Incentive Plan (Exhibit 10.1, Form 10-Q
for the quarter ended June 30, 1996 of Tampa Electric
Company).
10.19 Form of Restricted Stock Agreement between TECO Energy, *
Inc. And certain senior executives under the TECO
Energy, Inc. 1996 Equity Incentive Plan (Exhibit 10.2,
Form 10-Q for the quarter ended June 30, 1996 of Tampa
Electric Company).
10.20 Form of Restricted Stock Agreement between TECO Energy, *
Inc. And G. F. Anderson under the TECO Energy, Inc. 1996
Equity Incentive Plan (Exhibit 10.3, Form 10-Q for the
quarter ended June 30, 1996 of Tampa Electric Company).
10.21 TECO Energy, Inc. 1997 Director Equity Plan *
(Exhibit 10, Form 10-Q for the quarter ended June 30,
1997 of Tampa Electric Company).
10.22 Form of Nonstatutory Stock Option under the TECO *
Energy, Inc. 1997 Director Equity Plan (Exhibit 10, Form
10-Q for the quarter ended June 30, 1997 of Tampa
Electric Company).
53
12. Ratio of earnings to fixed charges. 58
23. Consent of Independent Accountants. 59
24.1 Power of Attorney. 60
24.2 Certified copy of resolution authorizing Power 62
of Attorney.
27.1 Financial Data Schedule-1997 (EDGAR filing only).
27.2 Financial Data Schedule-1996 restated (EDGAR filing only).
27.3 Financial Data Schedule-1995 restated (EDGAR filing only).
* Indicates exhibit previously filed with the Securities and
Exchange Commission and incorporated herein by reference.
Exhibits filed with periodic reports of Tampa Electric Company
and TECO Energy, Inc. were filed under Commission File Nos.
1-5007 and 1-8180, respectively.
58