SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-46795
OLD DOMINION ELECTRIC COOPERATIVE
(Exact Name of Registrant as Specified in Its Charter)
VIRGINIA 23-7048405
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4201 Dominion Boulevard, Glen Allen, Virginia 23060
(Address of Principal Executive Offices) (Zip Code)
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(804) 747-0592
(Registrant's Telephone Number, Including Area Code)
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 No X
---- ----
The Registrant is a membership corporation and has no authorized or outstanding
equity securities.
OLD DOMINION ELECTRIC COOPERATIVE
INDEX
Page
Number
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PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31, 2001 (Unaudited)
and December 31, 2000 3
Condensed Consolidated Statements of Revenues, Expenses and
Patronage Capital (Unaudited) - Three Months Ended
March 31, 2001 and 2000 4
Condensed Consolidated Statements of Comprehensive Income (Unaudited) -
Three Months Ended March 31, 2001 and 2000 4
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three
Months Ended March 31, 2001 and 2000 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
OLD DOMINION ELECTRIC COOPERATIVE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
------------------ ------------------
(in thousands)
ASSETS: (unaudited) (*)
- ----------------------------------------------------------------------
Electric Plant:
In service $ 902,099 $ 900,290
Less accumulated depreciation (325,330) (304,588)
------------------ ------------------
576,769 595,702
Nuclear fuel, at amortized cost 4,329 5,598
Construction work in progress 61,955 47,598
------------------ ------------------
Net Electric Plant 643,053 648,898
------------------ ------------------
Investments:
Nuclear decommissioning trust 61,448 60,530
Lease deposits 130,437 131,364
Other 56,828 54,836
------------------ ------------------
Total Investments 248,713 246,730
------------------ ------------------
Current Assets:
Cash and cash equivalents 37,314 20,259
Receivables 44,002 46,769
Fuel, materials and supplies, at average cost 10,079 10,236
Prepayments 1,617 1,508
Deferred energy 30,829 15,376
------------------ ------------------
Total Current Assets 123,841 94,148
------------------ ------------------
Deferred Charges 20,726 20,796
------------------ ------------------
Total Assets $ 1,036,333 $ 1,010,572
================== ==================
CAPITALIZATION AND LIABILITIES:
- ----------------------------------------------------------------------
Capitalization:
Patronage capital $ 226,554 $ 224,598
Accumulated other comprehensive income 657 (256)
Long-term debt 448,891 449,823
------------------ ------------------
Total Capitalization 676,102 674,165
------------------ ------------------
Current Liabilities:
Long-term debt due within one year 30,488 30,488
Accounts payable 32,178 29,091
Accounts payable - members 34,134 20,912
Accrued expenses 15,201 6,849
------------------ ------------------
Total Current Liabilities 112,001 87,340
------------------ ------------------
Deferred Credits and Other Liabilities:
Decommissioning reserve 61,448 60,530
Obligations under long-term leases 133,406 134,463
Other 53,376 54,074
------------------ ------------------
Total Deferred Charges and Other Liabilities 248,230 249,067
------------------ ------------------
Committments and Contingencies - -
------------------ ------------------
Total Capitalization and Liabilities $ 1,036,333 $ 1,010,572
================== ==================
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
(*) The Condensed Consolidated Balance Sheet at December 31, 2000, has been
taken from the audited financial statements at that date, but does not
include all disclosures required by generally accepted accounting
principles.
3
OLD DOMINION ELECTRIC COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF REVENUES,
EXPENSES AND PATRONAGE CAPITAL (UNAUDITED)
Three Months Ended
March 31,
-------------------------------------------
2001 2000
------------------ ------------------
(in thousands)
Operating Revenues $ 122,288 $ 104,885
------------------ ------------------
Operating Expenses:
Fuel 13,707 11,759
Purchased power 62,024 41,004
Operations and maintenance 8,537 8,526
Administrative and general 6,567 4,116
Depreciation, amortization, and decommissioning 20,229 25,173
Taxes other than income taxes 804 1,960
------------------ ------------------
Total Operating Expenses 111,868 92,538
------------------ ------------------
Operating Margin 10,420 12,347
Other Income/(Expense), net 490 (468)
Investment Income 767 1,093
Interest Charges, net (9,721) (10,798)
------------------ ------------------
Net Margin 1,956 2,174
Patronage Capital-Beginning of Period 224,598 216,369
------------------ ------------------
Patronage Capital-End of Period $ 226,554 $ 218,543
================== ==================
- ----------------------------------------------------------------------------------------------------------------------
OLD DOMINION ELECTRIC COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months
Ended
March 31,
-------------------------------------------
2001 2000
------------------ ------------------
(in thousands)
Net Margin $ 1,956 $ 2,174
Other Comprehensive Income:
Unrealized gain/(loss) on investments
913 (2,027)
------------------ ------------------
Comprehensive Income $ 2,869 $ 147
================== ==================
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
OLD DOMINION ELECTRIC COOPERATIVE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
-------------------------------------------
2001 2000
------------------ ------------------
(in thousands)
Operating Activities:
Net margin $ 1,956 $ 2,174
Adjustments to reconcile net margin to
net cash provided
by operating activities:
Depreciation, amortization, and decommissioning 20,229 25,173
Other noncash charges 1,976 1,951
Amortization of lease obligations 2,362 2,264
Interest on lease deposits (2,313) (2,214)
Change in current assets (12,638) 5,104
Change in current liabilities 24,661 12,248
Deferred charges and credits 10 (182)
--------------- ------------------
Net Cash Provided by
Operating Activities 36,243 46,518
--------------- ------------------
Investing Activities:
Lease deposits and other investments (1,079) 345
Electric plant additions (16,173) (4,624)
Decommissioning fund deposits (170) (170)
--------------- ------------------
Net Cash Used in Investing Activities (17,422) (4,449)
--------------- ------------------
Financing Activities:
Principal payments and purchases of long-term debt (1,587) (13,148)
Obligations under long-term leases (179) (177)
--------------- ------------------
Net Cash Used in Financing Activities (1,766) (13,325)
--------------- ------------------
Net Increase in Cash and Cash Equivalents 17,055 28,744
Cash and Cash Equivalents - Beginning of Period 20,259 25,088
--------------- ------------------
Cash and Cash Equivalents - End of Period $ 37,314 $ 53,832
=============== ==================
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
OLD DOMINION ELECTRIC COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the management of Old Dominion Electric Cooperative (Old
Dominion), the accompanying unaudited consolidated financial statements
contain all adjustments, which include only normal recurring adjustments,
necessary for a fair statement of Old Dominion's consolidated financial
position as of March 31, 2001, and its consolidated results of operations,
comprehensive income, and cash flows for the three months ended March 31,
2001 and 2000. The consolidated results of operations for the three months
ended March 31, 2001, are not necessarily indicative of the results to be
expected for the entire year. These financial statements should be read in
conjunction with the financial statements and notes thereto included in Old
Dominion's 2000 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
2. In 1997, Old Dominion adopted certain strategic objectives designed to
mitigate the effects of transition to a competitive electric market
(Strategic Plan Initiative or SPI). The SPI calls for the accumulation of
$241.0 million in cash and cash equivalents from 1998 through 2003 with the
objective of reducing Old Dominion's reliance on debt. A provision of the
SPI requires that it be updated periodically based on revised projections,
projected targets, legislation, and the status of the SPI in terms of
achieving its objective. The Board of Directors approves all revisions or
modifications.
In May 1999, Old Dominion's Board of Directors unanimously approved a
resolution to record accelerated depreciation on generation assets from
January 1, 1999, through December 31, 2003, and to recover the additional
expense through rates pursuant to the comprehensive rate formula filed
with and accepted by the Federal Energy Regulatory Commission. During the
first quarter of 2001, Old Dominion recorded $14.3 million of additional
depreciation compared to $17.9 million during the first quarter of 2000.
In May 2001, the Board of Directors approved a resolution to recover $18.8
million of additional depreciation in rates during the remainder of 2001
and $33.1 million per year in 2002 and 2003.
To date Old Dominion has collected a total of $156.1 million toward its
SPI target of $241.0 million and has purchased a total of $84.1 million of
its higher cost outstanding debt, including $1.6 million in the first
quarter of 2001.
3. Effective January 1, 2001, Old Dominion adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133), as amended by Statement of Financial
Accounting Standards No. 138 (SFAS 138), "Accounting for Certain Derivative
Instruments and Certain Hedging Activities." The adoption of these
accounting standards did not have a significant effect on Old Dominion's
financial statements. However, the Financial Accounting Standards Board
continues to finalize and release interpretive guidance, and therefore, no
assurance can be given that any new interpretive guidance, if contrary to
Old Dominion's current interpretation of SFAS 133 and SFAS 138, will not
have a significant impact on Old Dominion's future financial position,
results of operations, comprehensive income, or cash flows.
4. Certain reclassifications have been made to the accompanying prior year's
consolidated financial statements to conform to the current year's
presentation.
6
OLD DOMINION ELECTRIC COOPERATIVE
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements with respect to matters that
could have an impact on future operations of Old Dominion. These statements,
based on expectations and estimates of management, are not guarantees of future
performance and are subject to risks, uncertainties, and other factors that
could cause actual results to differ materially from those expressed in the
forward-looking statements. These risks, uncertainties, and other factors
include, but are not limited to: general business conditions, competition,
federal and state regulations, environmental issues, tax status, industry
restructuring, and weather. Given these uncertainties, undue reliance should not
be placed on such forward-looking statements.
Results of Operations
Operating Revenues
Old Dominion's operating revenues are derived from power sales to its
members and to nonmembers. Revenues from sales to members are a function of the
requirement for power by the members' consumers and Old Dominion's cost of
service in meeting that requirement. The major factors affecting members'
consumers' demand for power are the growth in the number of consumers, seasonal
weather fluctuations, and in the future, retail competition.
Sales to nonmembers represent sales of excess purchased energy and sales of
excess energy from the Clover Power Station (Clover). Excess purchased energy is
sold to the Pennsylvania-New Jersey-Maryland Interconnection, LLC (PJM) power
pool. Excess energy from Clover is sold to Virginia Electric and Power Company
(Virginia Power) pursuant to the requirements of the Clover Operating Agreement.
In light of deregulation initiatives in Virginia, Old Dominion and Virginia
Power have agreed that the Clover Operating Agreement will have to be
restructured prior to January 1, 2002, to permit Old Dominion to sell its excess
energy from Clover to others as well as to Virginia Power on changed terms.
The primary factors affecting member revenues are power sales volume,
demand and energy rates, fuel adjustment rate, and margin stabilization
adjustment. Cold weather in the first quarter of 2001 resulted in an increase in
member demand and energy sales of 12.0% and 7.5%, respectively, over the first
quarter of 2000, which, combined with an increase in the fuel adjustment rate
caused by higher energy costs, resulted in a $27.2 million increase in revenues
over the first quarter of 2000. The increases were offset by a $12.6 million
decrease in member revenues caused by a 4.0% reduction in the demand rate
effective April 1, 2000, and a $5.9 million change in the margin stabilization
adjustment. Nonmember revenues increased $2.8 million over the first quarter of
2000 primarily as a result of the sale of excess purchased energy to PJM.
Member demand and energy sales for the three months ended March 31, 2001
and 2000, were as follows:
Three Months Ended
March 31,
--------------------------
2001 2000
---------- --------
Demand sales (MW) 4,794 4,279
Energy sales (MWh) 2,460,548 2,288,644
Weather affects customer demand for electricity. Cold winters and hot
summers increase demand while mild weather reduces demand. The weather's effect
7
is measured using degree days. A degree day is the difference between the
average daily temperature and a baseline temperature of 65 degrees. Heating
degree days result when the average daily temperature is below 65 degrees;
cooling degree days result when the average daily temperature is above 65
degrees. Heating and cooling degree days for the first quarter of 2001 and 2000
were as follows:
Three Months Ended
---------------------------------
March 31,
---------------------------------
2001 2000 Normal
---- ---- ------
Heating degree days 2,119 1,894 1,969
Percentage change compared to prior year 11.90% (2.57)%
Cooling degree days - 6 6
Percentage change compared to prior year 100.0 -
Effective April 1, 2001, Old Dominion increased its energy rate to members
approximately 35% and, to partially offset this increase, reduced its demand
rate approximately 20%. The energy rate was increased to recover the current
deferred energy balance and to partially offset future deferred energy charges
anticipated from projected higher energy costs. Over a period of time, the
energy related component of Old Dominion's costs has increased more rapidly than
its energy rate.
Operating Expenses
Old Dominion has an 11.6% undivided ownership interest in the North Anna
Nuclear Power Station (North Anna) and a 50% undivided ownership interest in
Clover. Power plants, particularly nuclear power plants such as North Anna,
generally have relatively high fixed costs; however, such facilities operate
with relatively low variable costs due to lower fuel costs and technological
efficiencies. Owners of nuclear and other power plants, including Old Dominion,
incur the embedded fixed costs of these facilities whether or not the units
operate.
When either North Anna or Clover is off-line, Old Dominion must purchase
replacement energy from either Virginia Power, which is more costly, or the
market, which may be more or less costly. As a result, Old Dominion's operating
expenses, and therefore its rates to its members, are significantly affected by
the operation of North Anna and Clover.
Actual North Anna and Clover capacity factors for the first quarter of 2001
and 2000 were as follows:
North Anna Clover
-------------------------- ------------------------------
Three Months Ended Three Months Ended
March 31, March 31,
-------------------------- ------------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Unit 1 100.9% 71.4% 77.4% 91.2%
Unit 2 66.3 102.5 95.3 84.0
Combined 83.6 87.0 86.4 87.6%
As of March 31, 2001, North Anna Unit 1 had been on-line for 324
consecutive days. North Anna Unit 2 began a scheduled refueling outage on March
11, 2001, and was returned to service on April 10, 2001, four days ahead of
schedule. During the first quarter of 2000, North Anna Unit 1 ran for 522
consecutive days before it began a scheduled refueling outage on March 12, 2000.
The unit was returned to service on April 8, 2000. Unit 2 had been online for
120 consecutive days as of March 31, 2000.
During the first quarter of 2001, Clover Unit 1 was off-line 13 days for a
scheduled maintenance outage. Clover Unit 2 was not off-line during the first
quarter of 2001. Clover Units 1 and 2 each experienced minor outages during the
first quarter of 2000.
8
In addition to power generated at Clover and North Anna, Old Dominion
purchases power from Virginia Power, Public Service Electric & Gas, Conectiv
Energy, Pennsylvania Power & Light, and others. Old Dominion's energy supply for
2001 and 2000 was as follows:
Three Months Ended
March 31,
------------------------------------------------
2001 2000
--------------------- ---------------------
(MWh) (MWh)
Generated:
Clover 813,540 31.7% 835,669 35.0%
North Anna 386,134 15.0 394,461 16.5
---------- ---- ----------- ----
Total Generated 1,199,674 46.7 1,230,130 51.5
--------- ---- --------- ----
Purchased Power:
Virginia Area 727,747 28.3 572,824 24.0
Delmarva Area 576,769 22.5 524,985 21.9
Other 63,499 2.5 62,599 2.6
---------- ------- ---------- -------
Total Purchased Power 1,368,015 53.3 1,160,408 48.5
--------- ------ --------- ------
Total Available Energy 2,567,689 100.0% 2,390,538 100.0%
========= ===== ========= =====
Market forces influence the structure of new power supply contracts. Within
PJM, Old Dominion's contracts reflect the need to have capacity (either owned
generation or purchase contracts) to meet load. For supplying energy , Old
Dominion purchases energy from the market or utilizes the PJM power pool when
economical. In Virginia, demand and energy requirements contracts are provided
principally by Virginia Power, American Electric Power-Virginia, and Allegheny
Power System, although energy may be displaced under the Interconnection and
Operating Agreement with Virginia Power.
2001 Compared to 2000
Weather, higher energy costs, and accelerated depreciation recorded under
Old Dominion's Strategic Plan Initiative were the primary factors affecting
operating expenses in the first quarter of 2001.
Cold weather, a decrease in production, and higher energy costs resulted in
an increase in purchased power expenses.
Fuel costs increased in the first quarter of 2001 as compared to the first
quarter of 2000 because of higher coal costs and an inventory adjustment related
to 2000, which was not received until 2001.
Depreciation and amortization consists primarily of accelerated depreciation
recorded on generation assets in accordance with Old Dominion's Strategic Plan
Initiative. Accelerated depreciation for the three months ended March 31, 2001
and 2000, was $14.3 million and $17.9 million, respectively.
Investment income decreased in the first quarter of 2001 as compared to the
same period in 2000 because of a decrease in invested cash and cash equivalents
resulting from the purchase of $33.3 million of outstanding debt in 2000 and
$50.4 million in payments made on combustion turbine generators ($11.0 million
in the first quarter of 2001).
Interest on long-term debt decreased in the first quarter of 2001 as
compared to the first quarter of 2000 because of the purchase of $33.3 million
of outstanding debt and $28.5 million in debt principal payments in 2000.
Liquidity and Capital Resources
Operating activities in the first three months of 2001 and 2000 were
affected primarily by accelerated depreciation recorded on generation assets and
changes between periods in noncash working capital accounts. In the first
quarter of both 2001 and 2000, operating cash was sufficient to meet Old
Dominion's total cash requirements.
Investing activities in the first quarter of 2001 consisted primarily of
deposits for combustion turbine generators.
9
Old Dominion has entered into a joint development agreement with Con Edison
Development, an unregulated subsidiary of Consolidated Edison, Inc., to jointly
develop the first phase of a 1,020 MW peaking power generation facility near
Rock Springs, Maryland. In November 2000, Old Dominion obtained a Certificate of
Public Convenience and Necessity (CPCN) from the Maryland Public Service
Commission (MPSC) and all major environmental permits subject to the CPCN
conditions. Old Dominion expects to begin construction in mid-summer 2001 with
the first phase, consisting of three combustion turbine generators, scheduled to
be complete in 2003. Under the agreement with Con Edison Development, Old
Dominion will own two-thirds and Con Edison Development will own one-third of
the generation capacity of the first phase. The two companies will jointly own
the common facilities at the site. The second phase, consisting of three
additional combustion turbine generators, is scheduled to be complete in 2004.
Financing activities were minimal in the first quarter of 2001. However, in
the first quarter of 2000, financing activities resulted in a cash outflow
because Old Dominion used its available cash to purchase outstanding debt.
Strategic Plan Initiative
In 1997, Old Dominion adopted certain strategic objectives designed to
mitigate the effects of transition to a competitive electric market (Strategic
Plan Initiative or SPI). The SPI calls for the accumulation of $241.0 million in
cash and cash equivalents from 1998 through 2003 with the objective of reducing
Old Dominion's reliance on debt. A provision of the SPI requires that it be
updated periodically based on revised projections, projected targets,
legislation, and the status of the SPI in terms of achieving its objective. The
Board of Directors approves all revisions or modifications.
In May 1999, Old Dominion's Board of Directors unanimously approved a
resolution to record accelerated depreciation on generation assets from January
1, 1999, through December 31, 2003, and to recover the additional expense
through rates pursuant to the comprehensive rate formula filed with and accepted
by the Federal Energy Regulatory Commission. During the first quarter of 2001,
Old Dominion recorded $14.3 million of additional depreciation compared to $17.9
million during the first quarter of 2000. In May 2001, the Board of Directors
approved a resolution to recover $18.8 million of additional depreciation in
rates during the remainder of 2001 and $33.1 million per year in 2002 and 2003.
To date Old Dominion has collected a total of $156.1 million toward its SPI
target of $241.0 million and has purchased a total of $84.1 million of its
higher cost outstanding debt, including $1.6 million in the first quarter of
2001.
Competition and Changing Regulations
Each of the four states in which Old Dominion's members operate (Virginia,
Maryland, Delaware, and West Virginia) have enacted legislation that addresses
deregulation of the electric utility industry, and that outlines a process by
which electric utilities within their respective jurisdictions, including
cooperatives, will transition to competition. The individual deregulation plans
adopted by the Virginia, Maryland, and Delaware legislatures require previously
regulated electric utilities to unbundle the component parts of their
generation, transmission, and distribution. Power transmission and distribution
will remain under government regulation; however, power generation will be
deregulated and utilities will compete for customers in the open market. The
plans of Virginia, Maryland, and Delaware each indicate that cooperatives will
remain the default provider of power in their assigned territories, and will
retain the metering and billing functions. Each of these plans also provides for
recovery of stranded costs over a specified transition period; however, the
timing of implementation in each state is different. Additionally, each member
is legislatively required to submit a restructuring plan to its respective state
regulatory commission, including its assessment of stranded costs and proposed
unbundled rate structure. Specific and unique aspects of each state's
legislation are detailed below.
The following table estimates the cumulative percentage of Old Dominion's
load sales, based on 1999 demand sales, that will be subject to deregulation and
at risk of loss in the competitive market each year in Virginia, Maryland,
Delaware, and West Virginia. This data is based on the dates that the members'
individual classes of customers are free to choose an alternative power
supplier, as mandated by the individual state's legislative action.
10
Percentage of Old Dominion's Load Sales
---------------------------------------
2000 2001 2002-2004
---- ---- ---------
Virginia - % - % 78.8%(1)
Maryland - 9.5(2) 9.5 (2)
Delaware 0.6 11.5 11.5
West Virginia - - 0.2
------ ----- ------
Old Dominion's Total System 0.6% 21.0% 100.0%
====== ==== =====
- ------------------
(1) The opportunity for Virginia consumers to shop for electricity will be
phased in between January 1, 2002, and January 1, 2004.
(2) Old Dominion's Maryland member volunteered to offer customer choice by July
1, 2001.
Virginia. Electric utility restructuring legislation in Virginia provides
for retail choice to be phased in between January 1, 2002, and January 1, 2004,
in accordance with a schedule to be developed by the Virginia State Corporation
Commission (VSCC). Each utility was required to submit to the VSCC by January 1,
2001, its plan for functional separation. The cooperatives submitted their
individual plans for functional separation by the January 1, 2001, deadline. The
plans have been docketed and are pending at the VSCC.
The deregulation plan in Virginia calls for capping rates, excluding the
recovery of fuel costs, from January 1, 2002, to July 1, 2007, at levels that
were in effect on July 1, 1999. However, a utility could petition the VSCC for
an increase in rates prior to January 1, 2001. Four of Old Dominion's members
petitioned for such rate increases. During this period, utilities may collect
stranded costs through operation of the capped rates and a wires charge that is
applied to all customers who choose an alternative power supplier.
Maryland. Electric utility restructuring legislation in Maryland requires a
three-year phase-in of retail competition beginning with investor-owned
utilities on July 1, 2001. Such phase-in is to be completed by July 1, 2003, at
which time all customers will be able to choose their electric supplier. The
legislation calls for a 3.0% to 7.5% rate reduction for non-cooperative
residential customers upon commencement of competition; however, no such rate
reduction is required for cooperative customers. Rates for all customers are to
be frozen for four years from the date of commencement of competition.
The same legislation required the cooperatives in Maryland to present to
the MPSC a plan whereby all cooperative customers would have choice by July 1,
2003. Old Dominion's Maryland member, Choptank Electric Cooperative (Choptank),
made such a filing in July 1999. In this filing, Choptank requested recovery of
its stranded costs and volunteered to offer choice to all of its customers by
July 1, 2001. In July 2000, Choptank, the staff of the MPSC, and the Maryland
Office of the People's Counsel jointly filed with the MPSC an Agreement of
Stipulation and Settlement (Stipulation) that incorporated stranded cost
recovery for Choptank. No parties to the Stipulation objected to its terms or
conditions. In October 2000, a hearing was held before the commissioners of the
MPSC, wherein the commissioners were asked to accept the Stipulation. Choptank
is awaiting the final order regarding the matter.
Delaware. Electric utility restructuring legislation in Delaware required a
phase-in of retail competition beginning October 1, 1999, for customers of the
state's investor-owned electric utility (Conectiv) and April 1, 2000, for
customers of Delaware Electric Cooperative (DEC), Old Dominion's Delaware
member. As of April 1, 2001, all customers of DEC, representing approximately
11.5% of Old Dominion's total load sales, have the option to choose their power
supplier. To date none of these customers has changed to an alternative power
supplier.
Rates for Conectiv's residential customers were reduced 7.5% effective
October 1, 1999, and will remain frozen at those levels through September 30,
2003. Rates for Conectiv's non-residential customers are to remain frozen at
their October 1, 1999, levels through September 30, 2002. DEC's customers' rates
are to be frozen at current levels through March 31, 2005.
The Delaware legislation required that DEC file a restructuring and rate
unbundling plan, including any proposed collection of the member cooperative's
stranded costs. DEC filed such a plan in September 1999 and Old Dominion
11
intervened in this proceeding to represent the interests of all of its members.
In April 2000, the Delaware Public Service Commission (DPSC) issued its final
opinion and order indicating that it is the determination of the DPSC that DEC
has no stranded costs and therefore cannot collect such costs from those
customers who choose an alternative power supplier.
West Virginia. Restructuring legislation in West Virginia has been
delayed.
With the electric utility industry moving toward a competitive environment,
it has become necessary for Old Dominion and its members to develop innovative
approaches to serving traditional markets. In a competitive environment,
generating utilities are no longer guaranteed the recovery of prudently incurred
costs. Generating utilities with costs that exceed market prices could suffer
significant losses. Additionally, the loss of customers could also have a
significant impact on a utility's results of operations. In the case of Old
Dominion and its members, the loss of a significant portion of load could cause
a reduction in revenues and cash flows. The resulting decrease in member
revenues could also cause Old Dominion to lose its tax-exempt status. Management
is currently working with the members through the Strategic Plan Initiative to
improve Old Dominion's and the members' competitive position. See "Strategic
Plan Initiative." Old Dominion cannot predict the ultimate effect competition
will have on results of operations and future cash flows.
Other Matters
In March 2001, Old Dominion became a member of ACES Power Marketing LLC
(APM), an energy trading and risk management company. APM will act as agent to
provide wholesale power trading, settlement, modeling, and risk control
execution services related to Old Dominion's power supply portfolio.
12
OLD DOMINION ELECTRIC COOPERATIVE
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Other than certain legal proceedings arising out of the ordinary
course of business, which management believes will not have a
material adverse impact on the results of operations or financial
condition of Old Dominion, there is no other litigation pending or
threatened against Old Dominion.
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the quarter ended
March 31, 2001.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OLD DOMINION ELECTRIC COOPERATIVE
Registrant
Date: May 14, 2001 /s/Daniel M. Walker
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Daniel M. Walker
Senior Vice President of Accounting and Finance
(Chief Financial Officer)
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