-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L6xqd1y36c5TfXQxEaQ/5x91PvAqwbgLRo1SO6G3jxg1EgrEoDfgTAmIhvE3wf4N O4WRjZhRtwMd1T4zVXOusA== 0000061339-97-000004.txt : 19970515 0000061339-97-000004.hdr.sgml : 19970515 ACCESSION NUMBER: 0000061339-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MADISON GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000061339 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 390444025 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01125 FILM NUMBER: 97604020 BUSINESS ADDRESS: STREET 1: 133 S BLAIR ST STREET 2: PO BOX 1231 CITY: MADISON STATE: WI ZIP: 53701 BUSINESS PHONE: 6082527923 MAIL ADDRESS: STREET 1: POST OFFICE BOX 1231 CITY: MADISON STATE: WI ZIP: 53701-1231 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: MARCH 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 0-1125 MADISON GAS AND ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Wisconsin 39-0444025 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 133 South Blair Street, Madison, Wisconsin 53703 (Address of principal executive offices and ZIP code) (608) 252-7000 (Registrant's telephone number including area code) Common Stock Outstanding at May 14, 1997: 16,079,718 Shares 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, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] PART I. FINANCIAL INFORMATION Item 1. Financial Statements Madison Gas and Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME AND RETAINED INCOME (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, 1997 1996 STATEMENTS OF INCOME Operating Revenues: Electric . . . . . . . . . . . . . . . . . . $37,431 $36,078 Gas . . . . . . . . . . . . . . . . . . . . 47,482 43,977 Total Operating Revenues . . . . . . . . . 84,913 80,055 Operating Expenses: Fuel for electric generation . . . . . . . . 7,509 6,559 Purchased power . . . . . . . . . . . . . . 4,314 1,892 Natural gas purchased . . . . . . . . . . . 33,176 29,568 Other operations . . . . . . . . . . . . . . 15,358 14,068 Maintenance . . . . . . . . . . . . . . . . 2,540 2,140 Depreciation and amortization . . . . . . . 6,364 6,197 Other general taxes . . . . . . . . . . . . 2,214 2,245 Income tax items . . . . . . . . . . . . . . 4,085 5,642 Total Operating Expenses . . . . . . . . . 75,560 68,311 Net Operating Income . . . . . . . . . . . . . 9,353 11,744 Allowance for funds used during construction - equity funds . . . . . . . . . . . . . . . . 12 10 Other income, net . . . . . . . . . . . . . . 531 233 Non-utility operating income/(loss), net, . . 786 (1,912) Income before interest expense. . . . . . . . 10,682 10,075 Interest expense: Interest on long-term debt . . . . . . . . . 2,404 2,516 Other interest . . . . . . . . . . . . . . . 248 198 Allowance for funds used during construction - borrowed funds . . . . . . . . . . . . . . (6) (5) Net Interest Expense . . . . . . . . . . . . 2,646 2,709 Net Income. . . . . . . . . . . . . . . . . . $ 8,036 $ 7,366 Earnings per share of common stock (Note 3). . $0.50 $0.46 STATEMENTS OF RETAINED INCOME Balance - beginning of period. . . . . . . . . $50,451 $64,499 Earnings on common stock. . . . . . . . . . . 8,036 7,366 Cash dividends on common stock (Note 3). . . . (5,146) (5,092) Balance - end of period. . . . . . . . . . . . $53,341 $66,773 The accompanying notes are an integral part of the above statements. /TABLE Madison Gas and Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, 1997 1996 Operating Activities: Net income . . . . . . . . . . . . . . . . . . . . $ 8,036 $ 7,366 Items not affecting working capital: Depreciation and amortization . . . . . . . . . 6,364 6,197 Deferred income taxes . . . . . . . . . . . . . 17 (1,027) Amortization of nuclear fuel . . . . . . . . . . - - 755 Amortization of investment tax credits . . . . . (191) (188) Allowance for funds used during construction - equity funds . . . . . . . . . . . . . . . . . (12) (10) Other . . . . . . . . . . . . . . . . . . . . . 180 (975) Net funds provided from operations . . . . . 14,394 12,118 Changes in working capital, excluding cash equivalents, sinking funds, maturities, and interim loans: Decrease in current assets . . . . . . . . . . . 22,801 4,340 (Decrease)/increase in current liabilities . . . (13,812) 11,162 Other noncurrent items, net . . . . . . . . . . . 7,096 3,181 Cash provided by Operating Activities . . . . . 30,479 30,801 Financing Activities: Cash dividends on common and preferred stock . . . (5,146) (5,092) Other decreases in First Mortgage Bonds . . . . . 9 9 Decrease in interim loans . . . . . . . . . . . . (21,250) (20,500) Cash used for Financing Activities . . . . . . . (26,387) (25,583) Investing Activities: Additions to utility plant and nuclear fuel . . . (3,317) (3,350) Allowance for funds used during construction - borrowed funds . . . . . . . . . . . . . . . . . (6) (5) Increase in nuclear decommissioning fund . . . . . (1,141) (1,076) Cash used for Investing Activities . . . . . . . (4,464) (4,431) Change in Cash and Cash Equivalents (Note 6) . . . . (372) 787 Cash and cash equivalents at beginning of period . 5,288 2,844 Cash and cash equivalents at end of period . . . $ 4,916 $ 3,631 The accompanying notes are an integral part of the above statements.
Madison Gas and Electric Company and Subsidiaries CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) (Unaudited)
Mar. 31, Dec. 31, 1997 1996 ASSETS Utility Plant, at original cost, in service: Electric . . . . . . . . . . . . . . . . . . . . . $503,436 $500,690 Gas . . . . . . . . . . . . . . . . . . . . . . . 179,089 178,312 Gross plant in service . . . . . . . . . . . . . 682,525 679,002 Less accumulated provision for depreciation . . . (380,432) (374,315) Net plant in service . . . . . . . . . . . . . . 302,093 304,687 Construction work in progress . . . . . . . . . . 6,744 7,517 Nuclear decommissioning fund (Note 2) . . . . . . 45,961 44,617 Nuclear fuel, net . . . . . . . . . . . . . . . . 9,111 8,378 Total Utility Plant . . . . . . . . . . . . . . 363,909 365,199 Other property and investments . . . . . . . . . . . 7,177 7,115 Current Assets: Cash and cash equivalents . . . . . . . . . . . . 4,916 5,288 Accounts receivable, less reserves of $1,555 and $1,220, respectively . . . . . . . . . . . . . . 31,328 39,145 Unbilled revenue . . . . . . . . . . . . . . . . . 7,622 13,852 Materials and supplies, at average cost . . . . . 5,766 5,740 Fossil fuel, at average cost . . . . . . . . . . . 1,653 1,808 Stored natural gas, at average cost . . . . . . . 1,729 7,189 Prepaid taxes . . . . . . . . . . . . . . . . . . 4,421 7,258 Other prepayments . . . . . . . . . . . . . . . . 1,099 1,429 Total Current Assets . . . . . . . . . . . . . . 58,534 81,709 Deferred charges . . . . . . . . . . . . . . . . . . 22,674 30,146 Total Assets . . . . . . . . . . . . . . . . $452,294 $484,169 CAPITALIZATION AND LIABILITIES Capitalization (see statement) . . . . . . . . . . . $310,874 $307,975 Current Liabilities: Long-term debt sinking fund requirements (Note 4) . 200 200 Interim loans - commercial paper outstanding . . . 8,500 29,750 Accounts payable . . . . . . . . . . . . . . . . . 15,275 30,094 Accrued taxes . . . . . . . . . . . . . . . . . . 1,456 79 Accrued interest . . . . . . . . . . . . . . . . . 3,598 2,322 Accrued nonregulated items . . . . . . . . . . . . - - 7,923 Other . . . . . . . . . . . . . . . . . . . . . . 13,930 7,653 Total Current Liabilities . . . . . . . . . . . 42,959 78,021 Other Credits: Deferred income taxes . . . . . . . . . . . . . . 46,988 46,972 Regulatory liability - SFAS 109 . . . . . . . . . 23,915 23,914 Investment tax credit - deferred . . . . . . . . . 11,248 11,439 Other regulatory liabilities. . . . . . . . . . . 16,310 15,848 Total Other Credits . . . . . . . . . . . . . . 98,461 98,173 Commitments . . . . . . . . . . . . . . . . . . . . . - - - Total Capitalization and Liabilities . . . . $452,294 $484,169 The accompanying notes are an integral part of the balance sheets.
Madison Gas and Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF CAPITALIZATION (Thousands of Dollars) (Unaudited)
Mar. 31, Dec. 31, 1997 1996 Common Shareholders' Equity: Common stock - par value $1 per share: Authorized 50,000,000 shares Outstanding 16,079,718 shares . . . . . . . $ 16,080 $ 16,080 Amount received in excess of par value . . . . 112,558 112,558 Retained income . . . . . . . . . . . . . . . 53,341 50,451 Total Common Shareholders' Equity . . . . . 181,979 179,089 First Mortgage Bonds: 6 1/2%, 2006 series: Pollution Control Revenue Bonds . . . . . . 6,875 6,875 8.50%, 2022 series . . . . . . . . . . . . . . 40,000 40,000 6.75%, 2027A series: Industrial Development Revenue Bonds . . . . 28,000 28,000 6.70%, 2027B series: Industrial Development Revenue Bonds . . . . 19,300 19,300 7.70%, 2028 series . . . . . . . . . . . . . . 25,000 25,000 First Mortgage Bonds Outstanding . . . . . . 119,175 119,175 Unamortized discount and premium on bonds, net. (1,080) (1,089) Long-term debt sinking fund requirements Note 4) . . . . . . . . . . . . . . . . . . . (200) (200) Total First Mortgage Bonds . . . . . . . . . 117,895 117,886 Other Long-Term Debt: 6.01%, due 2000 . . . . . . . . . . . . . . . 11,000 11,000 Total Capitalization . . . . . . . . . . . . $310,874 $307,975 The accompanying notes are an integral part of the above statements.
Notes to Consolidated Financial Statements (Unaudited) March 31, 1997 The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of Company management, all adjustments (consisting of only normal recurring adjustments) necessary to fairly present results have been made. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto set forth on pages 14 through 19 of the Company's 1996 Annual Report to Shareholders and in the Company's 1996 Annual Report on Form 10-K. 1. Summary of Significant Accounting Policies The accounting and financial policies relative to the following items have been described in the "Notes to Consolidated Financial Statements" in the Company's 1996 Annual Report to Shareholders and have been omitted herein because they have not changed materially through the date of this report. a. General b. Utility plant c. Nuclear fuel d. Joint plant ownership e. Depreciation f. Income taxes g. Pension plans h. Postretirement benefits other than pensions i. Fair value of financial instruments j. Capitalization matters: First Mortgage Bonds and other long-term debt; preferred stock; and notes payable to banks, commercial paper, and lines of credit k. Gas marketing subsidiaries l. GLENCO economic benefit m. Commitments n. Segments of business o. Regulatory assets and liabilities 2. Nuclear Decommissioning Nuclear decommissioning costs are accrued over the estimated service life of the Kewaunee Nuclear Power Plant (Kewaunee), which is through the year 2013. These costs are currently recovered from customers in rates and are deposited in external trusts. The Company is presently funding decommissioning costs at the $3.1 million level. A higher annual amount is being requested by the Company in its pending rate case (see Item 5 - Other Information). These trusts are shown on the balance sheet in the utility plant section, and as of March 31, 1997, these trusts totaled $46.0 million (fair market value). Decommissioning costs are recovered through depreciation expense, exclusive of earnings on the trusts. Net earnings on the trusts are included in other income. The long-term, after-tax earnings assumption on these trusts is 6.2 percent. The Company's share of Kewaunee decommissioning costs is estimated to be $71.8 million in current dollars based on a site-specific study performed in 1992 using immediate dismantlement as the method of decommissioning. Decommissioning costs are assumed to inflate at an average rate of 6.1 percent. Physical decommissioning is expected to occur during the period 2014 through 2021, with additional expenditures being incurred during the period 2022 through 2050 related to the storage of spent nuclear fuel at the site. 3. Per-Share Amounts Earnings per share of common stock are computed on the basis of the weighted average of the daily number of shares outstanding. For the three months ended March 31, 1997 and 1996, there were 16,079,718 shares. Dividends declared and paid per share of common stock for the three months ended March 31, 1997 and 1996, were $0.320 and $0.317, respectively. 4. Rate Matters In September 1996, the Company announced its intention to increase electric rates for the test period beginning July 1, 1997, by $7.7 million, or 5.1 percent, annually and increase natural gas rates by $3.7 million, or 3.8 percent, annually for the same time period. The proposed changes are based on a requested return on common equity of 12.0 percent and would remain in effect through 1998. The proposed early recovery of the Kewaunee investment and accelerated decommissioning collections are the primary reasons for the increase in electric rates. Hearings were held during April 1997 with a decision expected by the end of the second quarter of 1997. The Company received an interim rate order from the PSCW in March 1997. The order provides for a 0.507 cent per kilowatt-hour surcharge on customers' bills to cover the continuing costs that are being incurred by the Company while Kewaunee remains out of service. The interim electric rate order is scheduled to remain in effect until either Kewaunee returns to service or the Company receives its final rate order. Rates for electric service have not been increased since 1990 and were reduced in 1993 and 1994. Gas rates have not been increased since 1989 and were reduced in 1990, 1992, and 1993. 5. Supplemental Cash Flow Information For purposes of the Consolidated Statements of Cash Flows, the Company considers cash equivalents to be those investments that are highly liquid with maturity dates of less than three months. Cash payments for interest, net of amounts capitalized, and income taxes were as follows: Three Months Ended March 31, (Thousands of dollars) 1997 1996 Interest, net of amounts capitalized $1,302 $1,422 Income taxes (received)/paid ($256) $2,102 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Company's internally generated funds were greater than the funds used for construction and nuclear fuel expenditures during the three months ended March 31, 1997 and 1996. It is anticipated that 1997 construction and nuclear fuel expenditures will be approximately $30.8 million. Cash provided by operating activities decreased $0.3 million, or 1.1 percent, from the same three-month period a year ago due to a decrease in current liabilities. Cash used for financing activities increased $0.8 million, or 3.1 percent, compared to the same period a year ago. This was mainly attributable to a decrease in the Company's short-term debt. Bank lines of credit available to the Company as of March 31, 1997, were $45 million. The Company's capitalization ratios were as follows: Mar. 31, 1997 Dec. 31, 1996 Common shareholders' equity 56.9% 53.0% Long-term debt* 40.4 38.2 Short-term debt 2.7 8.8 *Includes current maturities and current sinking fund requirements. The Company's bonds are currently rated Aa2 by Moody's Investors Service, Inc., and AA by Standard & Poor's Corporation. The Company's dealer-issued commercial paper carries the highest ratings assigned by Moody's and Standard & Poor's. Business Environment On May 1, 1995, Northern States Power Company and Wisconsin Energy Corporation announced a proposed merger. If approved, the two companies would form a holding company called Primergy Corporation (Primergy), creating the tenth largest utility company in the United States. The merger has been approved by the shareholders of both companies. Various regulatory agency approvals are required including the SEC, the Nuclear Regulatory Commission, the Federal Energy Regulatory Commission (FERC), and state regulatory agencies. The Company and a broad coalition of customer groups are opposing approval of the merger on the grounds that the merger would violate antitrust laws and principles by increasing the exercise of anticompetitive market power by Primergy. Studies show Primergy could significantly raise prices for electric customers in Wisconsin by exercising anticompetitive market power. Hearings on the proposed merger have been concluded before the FERC and Public Service Commission of Wisconsin (PSCW). Regulatory Environment In December 1995, the PSCW outlined its plan for the restructuring of the electric utility industry in Wisconsin. The PSCW's plan generally followed a plan proposed by the Company and a broad coalition of customers, public interest groups, cooperative associations, municipal power entities, organized labor, and others. Under the proposed PSCW plan, the Company is developing plans illustrating how it intends to separate generation, transmission, distribution, and energy services into separate business units. The PSCW would continue distribution and transmission regulation. To limit the market power of current transmission owners, the PSCW proposes moving either to appointment of an independent system operator or to organization of a single statewide transmission system. Additional proceedings and presentation to the state legislature on the PSCW's electric utility restructuring proposal are planned prior to the target implementation date. The targeted date under the PSCW proposal is the year 2001, at which time consumers will be able to choose their electricity provider. On November 8, 1996, the PSCW issued an order stating that the Company must file a modified one-for-one recovery mechanism or an incentive mechanism. On February 7, 1997, the Company filed a modified one-for-one recovery mechanism and supporting testimony. Approval of a mechanism from the PSCW is expected by July 1, 1997. The proposed implementation date is November 1, 1997. The proposed modified one-for-one recovery mechanism provides appropriate price signals to the Company's customers while minimizing the risk to shareholders. Results of Operations Electric Sales and Revenues Electric retail sales increased 2.5 percent in the three-month period ending March 31, 1997, over the comparable period last year. Three Months Ended March 31, Electric Sales (megawatt-hours) 1997 1996 % Change Residential 188,905 193,420 (2.3)% Large commercial and industrial 230,809 223,912 3.1 Small commercial and industrial 172,841 172,573 0.2 Other 87,070 73,246 18.9 Total Retail 679,625 663,151 2.5 Resale 5,584 9,159 (39.0) Total Sales 685,209 672,310 1.9 The increased sales were due, in part, to an increased customer base over the comparative three-month period ended a year ago. Electric operating revenues for the same period increased approximately $1.4 million, or 3.8 percent. The increase in electric operating revenues was the result of increased sales and an electric rate surcharge effective March 6, 1997, which is related to the extended outage at Kewaunee (see table on previous page). Gas Sales and Revenues The decrease in gas delivered was due to the warmer weather experienced in the first quarter of this year (see table below). The average temperature for the three months ended March 31, 1997, was 24.9 degrees Fahrenheit as compared to 22.0 degrees Fahrenheit for the same three months ended last year, or 2.9 percent warmer than last year's first quarter. Three Months Ended March 31, Gas Deliveries (thousands of therms) 1997 1996 % Change Residential 40,961 44,682 (8.3)% Commercial and industrial 36,399 39,231 (7.2) Total Retail 77,360 83,913 (7.8) Transport 9,342 9,309 0.4 Total Gas Deliveries 86,702 93,222 (7.0) For the three months ended March 31, 1997, gas revenues increased $3.5 million, or 8.0 percent, compared to last year despite a 7.0 percent decrease in gas deliveries for the same time period. This was the result of higher unit gas costs. Higher gas costs are passed on to customers in the form of higher rates through the purchased gas adjustment clause, thus increasing natural gas revenues on a one-for-one basis. Electric Fuel and Natural Gas Costs Fuel cost for electric generation and purchased power increased 39.9 percent, or $3.4 million, for the first three months of 1997 when compared to the same time period in 1996. The electric margin decreased $2.0 million, or 7.3 percent, for the first quarter of 1997 compared to last year's first quarter. The primary factor for the decrease in the electric margin is the increase in replacement power costs due to the extended outage at Kewaunee. The Company was granted a surcharge March 6, 1997, to offset these higher costs. Natural gas costs for the three months ended March 31, 1997, versus the 1996 comparative period increased about $3.6 million, or 12.2 percent. This is mainly due to an increase in the cost per therm of $0.08, or 21.6 percent. Other Operating Expenses Income tax items decreased 27.6 percent for the first three months of 1997 when compared to the same time period in 1996. This was mainly attributable to a decrease in pretax operating income. Operations and maintenance costs increased $1.7 million, or 10.4 percent, for the three months ended March 31, 1997, compared to the same time period a year ago. This is due to an increase in industry restructuring costs and costs associated with participation in proposed utility merger filings. Other Items Interest expense for the three months ended March 31, 1997, decreased 2.3 percent when compared to the same time period for 1996. This is due to lower interest rates in the first quarter of 1997 compared to the same period last year. Non-utility operating income for the three months ended March 31, 1997, increased $2.7 million from last year's first quarter. The Company's two gas marketing subsidiaries, Great Lakes Energy Corp. and American Energy Management, Inc., formed a joint venture effective January 1, 1997, with National Gas & Electric L.P. to market natural gas and energy services to industrial and commercial customers in the Great Lakes region. The joint venture is called National Energy Management, L.L.C., and is based in Chicago. The Company's non-utility operating income was $0.8 million for the three months ended March 31, 1997. For the same three months ended a year ago, the Company's two gas marketing subsidiaries experienced net operating losses of $1.9 million. PART II. OTHER INFORMATION Item 4 Results of Votes of Security Holders The Company's Annual Meeting of Shareholders was held on May 5, 1997, in Middleton, Wisconsin. Proxies for the meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act. The election of a slate of nominees for directors of Class II to hold office until 2000 were voted upon by the shareholders at the meeting. Listed below are the results of the shareholders' votes. The election of members of the Board of Directors Class II to hold office until 2000: Withhold For Authority/Against H. Lee Swanson 13,095,776.8676 189,501.5522 Frank C. Vondrasek 13,086,008.3095 199,270.1103 Item 5 Other Information Kewaunee Nuclear Power Plant Kewaunee is operated by Wisconsin Public Service Corporation. The Company has a 17.8 percent ownership interest in Kewaunee. Kewaunee is operating with a license that expires in 2013. Kewaunee continues to be out of service for additional repairs to the steam generators. These repairs could enable Kewaunee to return to service sometime in mid-1997 and are expected to cost approximately $7.5 million, of which the Company's share is approximately $1.3 million. The PSCW has authorized deferral of steam generator repair costs at Kewaunee incurred on or after March 20, 1997. The owners will request future rate recovery of these deferred costs. The PSCW authorization to defer repair costs does not constitute absolute assurance of future recovery; however, future recovery is probable. The Company is also incurring costs associated with the acquisition of replacement power while Kewaunee remains out of service. The Company's cost to use other generating units and to purchase replacement power is expected to cost on average $38,000 a day. Effective March 6, 1997, the Company received an interim rate order from the PSCW authorizing a 0.507 cent per kilowatt- hour electric rate surcharge on customers' bills to cover the continuing costs that will be incurred while Kewaunee remains out of service. The interim electric rate order is effective until Kewaunee returns to service or a final rate order is issued, whichever comes first. The Company anticipates it will have sufficient sources to meet its customers' energy requirements during the Kewaunee repair outage. At December 31, 1996, the net plant carrying amount of the Company's investment in Kewaunee was approximately $21.7 million. The Company's share of the current estimated costs to decommission Kewaunee, assuming early retirement, exceeds the fair market value of decommissioning trust assets at December 31, 1996, by $26.2 million. The PSCW approved the accelerated recovery of the current undepreciated Kewaunee plant balance and the unfunded estimated costs to decommission the plant through 2002. This was prompted by the substantial uncertainty regarding the expected useful life of the plant. If Kewaunee is retired early, the Company believes it will be able to meet its commitments to supply energy to its customers through either (1) possible investments in new generating units, and/or (2) contracting for additional purchased power. The Company is considering various options with respect to Kewaunee, including divestiture or early closure of the nuclear plant. For additional information regarding Kewaunee, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Summer Power Demand Some areas of Wisconsin and the Upper Midwest region are facing unusual electric supply challenges that could affect business and residential customers over the next six months. About one-third of the region's nuclear generating capacity is temporarily out of service due to a series of maintenance outages. This includes Kewaunee and the Point Beach nuclear plant, which is owned by Wisconsin Electric Power Company, in eastern Wisconsin and several nuclear units owned by Commonwealth Edison in Illinois. Unless these plants can be brought back on line, Wisconsin may have to rely on importing more electricity than normal. However, the capacity of the regional transmission system for imports into eastern and central Wisconsin is limited. Needed maintenance also is reducing output at some of the region's coal-fired power plants this spring, adding to the energy supply challenges. Wisconsin utilities are working together and with the PSCW to assure adequate power supplies for their customers in the coming months. Specifically, the Wisconsin Reliability Assessment Group members are taking the following actions: 1. Rescheduling maintenance to keep key plants available this summer; 2. Upgrading the transmission system to improve its capacity; and 3. Working aggressively to bring nuclear plants back on line during May and June. Item 6(a) Exhibits Exhibit 4 Indenture of Mortgage and Deed of Trust between the Company and Firstar Trust Company, as Trustee (and supplements) reference was provided in the Company's 1996 Annual Report on Form 10-K (Commission File No. 0-1125). Exhibit 12 Ratio of Earnings to Fixed Charges Exhibit 27 Appendix E to Item 601(c) of Regulation S-K: Public Utility Companies Financial Data Schedule UT. Exhibit Page Exhibit 4 NA Exhibit 12 17 Exhibit 27 18 Item 6(b) Reports on Form 8-K No reports on 8-K were filed during the quarter for which this report is filed. SIGNATURES 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. MADISON GAS AND ELECTRIC COMPANY (Registrant) Date: May 14, 1997 /s/ David C. Mebane David C. Mebane Chairman, President and Chief Executive Officer (Duly Authorized Officer) Date: May 14, 1997 /s/ Joseph T. Krzos Joseph T. Krzos Vice President - Finance (Chief Financial and Accounting Officer) EX-27 2
UT This schedule contains summary financial information extracted from SEC Form 10-Q. Items 1 through 22 are as of March 31, 1997. Items 23 through 38 are for the three months ended March 31, 1997. 1,000 3-MOS DEC-31-1997 MAR-31-1997 PER-BOOK 363,909 7,177 58,534 22,674 0 452,294 16,080 112,558 53,341 181,979 0 0 128,895 8,500 0 0 200 0 0 0 132,720 452,294 84,913 4,085 71,475 75,560 9,353 1,329 10,682 2,646 8,036 0 8,036 (5,146) 0 30,479 0.50 0
EX-12 3 Ratio of Earnings to Fixed Charges Exhibit 12 Three Months Ended (Thousands of dollars) March 31, 1997 Earnings Income before interest expense . . . . . . . . . $10,682 Add: Income tax items . . . . . . . . . . . . . . . . 4,085 Income tax on other income . . . . . . . . . . . 817 Amortization of debt discount, premium expense . 72 Allowance for funds used during construction - borrowed funds . . . . . . . . . . . . . . . . 6 Interest on rentals . . . . . . . . . . . . . . . 240 Total Earnings . . . . . . . . . . . . . . . . $15,902 Fixed Charges Interest on long-term debt . . . . . . . . . . . $ 2,404 Other interest . . . . . . . . . . . . . . . . . 248 Amortization of debt discount, premium expense . 72 Interest on rentals . . . . . . . . . . . . . . . 240 Total Fixed Charges . . . . . . . . . . . . . $ 2,964 Ratio of Earnings to Fixed Charges . . . . . . . 5.37x -----END PRIVACY-ENHANCED MESSAGE-----