-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Svr6wMZSHFmZ7E0q3/Y9gBIxmvRyzYOPg+3vJKvaamYO5fanpEWM7Y7M8HTCfTsj g+EL7gDP6oPXFFBOicEuPQ== 0000073960-95-000002.txt : 19950616 0000073960-95-000002.hdr.sgml : 19950616 ACCESSION NUMBER: 0000073960-95-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950321 SROS: MSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO EDISON CO CENTRAL INDEX KEY: 0000073960 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 340437786 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02578 FILM NUMBER: 95522059 BUSINESS ADDRESS: STREET 1: 76 S MAIN ST CITY: AKRON STATE: OH ZIP: 44308 BUSINESS PHONE: 2163845100 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ------------------ ----------------- Commission File Number 1-2578 OHIO EDISON COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO 34-0437786 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 76 SOUTH MAIN STREET, AKRON, OHIO 44308 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-736-3402 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Each registered on Common Stock, $9 par value New York Stock Exchange Rights to Purchase Common Stock and Chicago Stock Exchange Cumulative Preferred Stock, $100 par value 3.90% Series 7.24% Series 4.40% Series 7.36% Series All series registered on 4.44% Series 8.20% Series New York Stock Exchange 4.56% Series and Chicago Stock Exchange Cumulative Preferred Stock, $25 par value Registered on 7.75% Series New York Stock Exchange and Chicago Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No --- --- State the aggregate market value of the voting stock held by non- affiliates of the registrant: $2,992,557,650 as of March 7, 1995. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: CLASS OUTSTANDING AT MARCH 21, 1995 ----- ----------------------------- Common Stock, $9 par value 152,569,437 Documents incorporated by reference (to the extent indicated herein): PART OF FORM 10-K INTO WHICH DOCUMENT DOCUMENT IS INCORPORATED -------- ---------------------------- Annual Report to Stockholders for the fiscal year ended December 31, 1994 (Pages 12-30) Part II Proxy Statement for 1995 Annual Meeting of Stockholders to be held April 27, 1995 Part III TABLE OF CONTENTS Page ---- Part I Item 1. Business 1 The Company 1 Central Area Power Coordination Group 1 Financing and Construction 2 Future Financing 2 Coverage Requirements 3 Utility Regulation 4 PUCO Rate Matters 4 FERC Rate Matters 4 Fuel Recovery Procedures 4 Nuclear Regulation 5 Nuclear Insurance 5 Environmental Matters 7 Air Regulation 7 Water Regulation 7 Waste Disposal 8 Summary 8 Fuel Supply 8 Nuclear Fuel 9 System Capacity and Reserves 10 Regional Reliability 10 Competition 10 Research and Development 10 Executive Officers 11 Item 2. Properties 12 Item 3. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 13 Item 6. Selected Financial Data 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 8. Financial Statements and Supplementary Data 13 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 13 Part III Item 10. Directors and Executive Officers of the Registrant 14 Item 11. Executive Compensation 14 Item 12. Security Ownership of Certain Beneficial Owners and Management 14 Item 13. Certain Relationships and Related Transactions 14 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14 PART I ITEM 1. BUSINESS The Company Ohio Edison Company (Company) was organized under the laws of the State of Ohio in 1930 and owns property and does business as an electric public utility in that state. The Company also has ownership interests in certain generating facilities located in the Commonwealth of Pennsylvania. The Company furnishes electric service to communities in a 7,500 square mile area of central and northeastern Ohio. It also provides transmission services and electric energy for resale to certain municipalities in the Company's service area and transmission services to certain rural cooperatives. The Company also engages in the sale, purchase and interchange of electric energy with other electric companies. The area it serves has a population of approximately 2,530,000. The Company owns all of the outstanding common stock of Pennsylvania Power Company (Penn Power), a Pennsylvania corporation, which furnishes electric service to communities in a 1,500 square mile area of western Pennsylvania. Penn Power also provides transmission services and electric energy for resale to certain municipalities in Pennsylvania. The area served by Penn Power has a population of approximately 340,000. The Company has three additional wholly owned subsidiaries. OES Fuel, Incorporated (OES Fuel) provides advantages in nuclear fuel financing and procurement, including greater fuel management flexibility. OES Capital, Incorporated (OES Capital) provides a specifically tailored financing structure which achieves cost savings in financing certain of the Company's electric service accounts receivable and assists in loans to commercial and industrial customers for energy efficiency improvements. OES Finance, Incorporated (OES Finance) provides the collateral securing reimbursement obligations relating to certain letters of credit supporting the Company's obligations to lessors under the Beaver Valley Unit 2 sale and leaseback arrangements. Central Area Power Coordination Group (CAPCO) In September 1967, the CAPCO companies, consisting of the Company, Penn Power, The Cleveland Electric Illuminating Company (CEI), Duquesne Light Company (Duquesne) and The Toledo Edison Company (Toledo), announced a program for joint development of power generation and transmission facilities. Included in the program are Unit 7 at the W. H. Sammis Plant, Units 1, 2 and 3 at the Bruce Mansfield Plant, Units 1 and 2 at the Beaver Valley Power Station and Unit 1 at the Perry Nuclear Power Plant, each now in service. The present CAPCO Basic Operating Agreement provides, among other things, for coordinated maintenance responsibilities among the CAPCO companies, a limited and qualified mutual backup arrangement in the event of outage of CAPCO units and certain capacity and energy transactions among the CAPCO companies. - 1 - The agreements among the CAPCO companies generally treat the Company and Penn Power (Companies) as a single system as between them and the other three CAPCO companies, but, in agreements between the CAPCO companies and others, all five companies are treated as separate entities. Subject to any rights that might arise among the CAPCO companies as such, each member company, severally and not jointly, is obligated to pay only its proportionate share of the costs associated with the facilities and the cost of required fuel. The CAPCO companies have agreed that any modification of their arrangements or of their agreed-upon programs requires their unanimous consent. Should any member become unable to continue to pay its share of the costs associated with a CAPCO facility, each of the other CAPCO companies could be adversely affected in varying degrees because it may become necessary for the remaining members to assume such costs for the account of the defaulting member. Under the agreements governing the construction and operation of CAPCO generating units, the responsibility is assigned to a specific CAPCO company. CEI has such responsibilities for Perry Unit 1 and Duquesne is responsible for Beaver Valley Units 1 and 2. The Company monitors activities in connection with these units but must rely to a significant degree on the operating company for necessary information. The Company in its oversight role as a practical matter cannot be privy to every detail; it is the operating company that must directly supervise activities and then exercise its reporting responsibilities to the co-owners. The Company critically reviews the information given to it by the operating company, but it cannot be absolutely certain that things that it would have considered significant have been reported or that it would always have reached exactly the same conclusion about matters that are reported. In addition, the time that is necessarily part of the compiling and analyzing process creates a lag between the occurrence of events and the time the Company becomes aware of their significance. The Companies have similar responsibilities to the other CAPCO companies with respect to W.H. Sammis Unit 7 and Bruce Mansfield Units 1, 2 and 3. Financing and Construction The Companies access the capital markets from time to time to provide funds for their construction programs and to refinance existing securities. Future Financing The Companies' total construction costs, excluding nuclear fuel, amounted to approximately $227,000,000 in 1994. Such costs included expenditures for the betterment of existing facilities and for the construction of transmission lines, distribution lines, substations and other additions. For the years 1995-1999, such construction costs are estimated to be approximately $800,000,000, of which approximately $180,000,000 is applicable to 1995. See "Environmental Matters" below with regard to possible environment- related expenditures not included in this estimate. During the 1995-1999 period, maturities of, and sinking fund requirements for, long-term debt and preferred stock will require expenditures by the Companies of approximately $1,301,000,000, of which approximately $227,000,000 is applicable to 1995. - 2 - Nuclear fuel purchases are financed through OES Fuel commercial paper and loans, both of which are supported by a $225,000,000 long-term bank credit agreement. Investments for additional nuclear fuel during the 1995-1999 period are estimated to be approximately $172,000,000, of which approximately $30,000,000 applies to 1995. During the same periods, the Companies' nuclear fuel investments are expected to be reduced by approximately $225,000,000 and $56,000,000, respectively, as the nuclear fuel is consumed. Also, the Companies have operating lease commitments of approximately $575,000,000 for the 1995-1999 period, of which approximately $106,000,000 relates to 1995. The Companies recover the cost of nuclear fuel consumed and operating leases through their electric rates. Short-term borrowings of $174,642,000 at December 31, 1994, included $104,642,000 of OES Capital debt, which is secured by customer accounts receivable. OES Capital can borrow up to $120,000,000 under a receivables financing agreement at rates based on certain bank commercial paper. The Companies also had $55,000,000 of unused short-term bank lines of credit as of December 31, 1994. In addition, $72,000,000 was available through bank facilities that provide for borrowings on a short-term basis at the banks' discretion. OES Fuel had approximately $30,000,000 of unused borrowing capability at the end of 1994 that was available for reloan to the Company. OES Finance was established during the third quarter of 1994 for the sole purpose of maintaining deposits pledged as collateral to secure reimbursement obligations relating to certain letters of credit supporting the Company's obligations to lessors under the Beaver Valley Unit 2 sale and leaseback arrangements. The deposits pledged to the financial institution providing those letters of credit are the sole property of OES Finance. In the event of liquidation, OES Finance, as a separate corporate entity, would have to satisfy its obligations to creditors before any of its assets could be made available to the Company as sole owner of OES Finance common stock. Based on their present plans, the Companies could provide for their cash requirements in 1995 from the following sources: funds to be received from operations; available cash and temporary cash investments (approximately $23,000,000 as of December 31, 1994); the issuance of long-term debt (for refunding purposes) and funds available under short-term bank credit arrangements. For the period 1995-1999, external financings may be used to provide a portion of the Companies' cash requirements. The extent and type of future financings will depend on the need for external funds as well as market conditions, the maintenance of an appropriate capital structure and the ability of the Companies to comply with coverage requirements in order to issue first mortgage bonds and preferred stock. The Companies will continue to monitor financial market conditions and, where appropriate, may take advantage of economic opportunities to refund debt and preferred stock to the extent that their financial resources permit. Except as otherwise indicated, the foregoing statements with respect to construction expenditures are based on estimates made in February 1995 and are subject to change based upon the progress of and changes required in the construction program, including periodic reviews of costs, changing customer requirements - 3 - for electric energy, the level of earnings and resulting changes in applicable coverage requirements, conditions in capital markets, changes in regulatory requirements and other relevant factors. Coverage Requirements The coverage requirements contained in the first mortgage indentures under which the Companies issue first mortgage bonds provide that, except for certain refunding purposes, the Companies may not issue first mortgage bonds unless applicable net earnings (before income taxes), calculated as provided in the indentures, for any period of twelve consecutive months within the fifteen calendar months preceding the month in which such additional bonds are issued, are at least twice annual interest requirements on outstanding first mortgage bonds, including those being issued. The Companies' respective articles of incorporation prohibit the sale of preferred stock unless applicable gross income, calculated as provided in the articles of incorporation, is equal to at least 1- 1/2 times the aggregate of the annual interest requirements on indebtedness and annual dividend requirements on preferred stock outstanding immediately thereafter. With respect to the issuance of first mortgage bonds under the Company's first mortgage indenture, the availability of property additions is more restrictive than the earnings test at the present time and would limit the amount of first mortgage bonds issuable against property additions to $447,000,000. The Company is currently able to issue $1,044,000,000 principal amount of first mortgage bonds against previously retired bonds without the need to meet the above restrictions. Based upon earnings for 1994, the Company would be permitted, under the earnings coverage test contained in its charter, to issue at least $1,089,000,000 of preferred stock at an assumed dividend rate of 9.50%. If the Company were to issue additional debt at or prior to the time it issued preferred stock, the amount of preferred stock which would be issuable would be reduced. To the extent that coverage requirements or market conditions restrict the Companies' abilities to issue desired amounts of first mortgage bonds or preferred stock, the Companies may seek other methods of financing. Such financings could include the sale of common stock and preference stock in amounts greater than otherwise planned, or of such other types of securities as might be authorized by applicable regulatory authorities which would not otherwise be sold and could result in annual interest charges and/or dividend requirements in excess of those that would otherwise be incurred. Utility Regulation The Companies are subject to broad regulation as to rates and other matters by the Public Utilities Commission of Ohio (PUCO) and the Pennsylvania Public Utility Commission (PPUC). With respect to their wholesale and interstate electric operations and rates, the Companies are subject to regulation, including regulation of their accounting policies and practices, by the Federal Energy Regulatory Commission (FERC). Under Ohio law, municipalities may regulate rates, subject to appeal to the PUCO if not acceptable to the utility. - 4 - In 1986, a law was passed which extended the jurisdiction of the PUCO to nonutility affiliates of holding companies exempt under Section 3(a)(1) and 3(a)(2) of the Public Utility Holding Company Act of 1935 (1935 Act) to the extent that the activities of such affiliates affect or relate to the cost of providing electric utility service in Ohio. The law, among other things, requires PUCO approval of investments in, or the transfer of assets to, nonutility affiliates. Investments in such affiliates are limited to 15% of the aggregate capitalization of the holding company on a consolidated basis. The Company is an exempt holding company under Section 3(a)(2) of the 1935 Act, but the law has not had any effect on its operations as they are currently conducted. The Energy Policy Act of 1992 (1992 Act) amends portions of the 1935 Act, providing independent power producers and other nonregulated generating facilities easier entry into the electric generation markets. The 1992 Act also amends portions of the Federal Power Act, authorizing the FERC, under certain circumstances, to mandate access to utility-owned transmission facilities. The Companies are currently unable to predict the ultimate effects on their operations resulting from this legislation. PUCO Rate Matters The Company's Rate Stabilization and Service Area Development Program provides for base electric rates to remain at 1990 levels until at least 1997, absent any significant changes in regulatory, environmental or tax requirements. Among other things, the program also provides for the adoption of demand side management programs and a tariff option for customer retention and service area stabilization. FERC Rate Matters Rates for the Companies' respective wholesale customers are regulated by the FERC. The Company's tariff for its customers was approved by the FERC in 1989. Penn Power sells power to four wholesale customers under agreements which were extended in 1994; two of the agreements expire in March 1997, and the other two will be in effect until September 1999. Penn Power also sells power to a fifth municipality which received bids from third parties for power and filed a request with the FERC in September 1994 to require Penn Power to provide transmission services. On January 25, 1995, FERC ordered Penn Power to provide transmission services to the municipality and directed both parties to resolve the pricing, terms and conditions of this service. If Penn Power cannot reach an agreement with the municipality on these issues by April 5, 1995, FERC will establish the final terms. Fuel Recovery Procedures Under the laws of the State of Ohio, an electric utility is required to have annual hearings before the PUCO with respect to its fuel and net purchased power policies and practices. At these hearings a utility is required to show that its electric fuel component (EFC) charges are "fair, just and reasonable". The law also requires additional auditing of, and additional reporting by, the utility with respect to its fuel costs and fuel procurement policies and practices. The law provides for the recovery of fuel - 5 - costs, including any over or under collection of fuel costs applicable to a prior six month period, by adjusting an electric utility's EFC rate every six months. Penn Power uses a "levelized" energy cost rate (ECR) for the recovery of fuel and net purchased power costs from its customers. The ECR, which includes adjustment for any over or under collection from customers, is recalculated each year. Nuclear Regulation The construction and operation of nuclear generating units are subject to the regulatory jurisdiction of the Nuclear Regulatory Commission (NRC) including the issuance by it of construction permits and operating licenses. The NRC's procedures with respect to application for construction permits and operating licenses afford opportunities for interested parties to request public hearings on health, safety, environmental and antitrust issues. In this connection, the NRC may require substantial changes in operation or the installation of additional equipment to meet safety or environmental standards with resulting delay and added costs. The possibility also exists for modification, denial or revocation of licenses or permits. Full power operating licenses were issued for Beaver Valley Unit 1, Perry Unit 1 and Beaver Valley Unit 2 on July 1, 1976, November 13, 1986 and August 14, 1987, respectively. The construction permit and operating license issued by the NRC applicable to Perry Unit 1 is conditioned to require, among other things: (i) maintenance, emergency, economy and wholesale power and reserve sharing to be made available to, (ii) interconnections to be made with, and (iii) wheeling to be provided for, electric generating and/or distribution systems (or municipalities or cooperatives with the right to engage in such functions) if such entities so request and to permit such entities to become members of CAPCO (subject to certain prerequisites with respect to size), or to acquire a share of the capacity of Perry Unit 1 or any other future nuclear units, if they so desire. In September 1987, the Company asked the NRC to suspend these license conditions. In April 1991, the NRC Staff denied the Company's application; accordingly, the Company petitioned the NRC for a hearing. Pursuant to this request the matter was referred to the Atomic Safety and Licensing Board (ASLB). The ASLB ruled against the Company in November 1992. The Company petitioned the NRC to review the ASLB decision in December 1992. On August 3, 1993, the NRC ruled that the license conditions will not be suspended. On October 1, 1993, the Company appealed the NRC decision in the United States Court of Appeals for the District of Columbia Circuit. If these license conditions are not suspended, they could have a materially adverse but presently undeterminable effect on the Companies' future business operations. The NRC has promulgated and continues to promulgate additional regulations related to the safe operation of nuclear power plants. The Companies cannot predict what additional regulations will be promulgated or design changes required or the effect that any such regulations or design changes, or the consideration thereof, may have upon the Beaver Valley and Perry plants. Although the Companies have no reason to anticipate an accident at any nuclear plant in which they have an interest, if such an accident did happen, it could have a material but presently - 6 - undeterminable adverse effect on the Company's consolidated financial position. In addition, such an accident at any operating nuclear plant, whether or not owned by the Companies, could result in regulations or requirements that could affect the operation or licensing of plants that the Companies do own with a consequent but presently undeterminable adverse impact, and could affect the Companies' abilities to raise funds in the capital markets. Nuclear Insurance The Price-Anderson Act limits the public liability which can be assessed with respect to a nuclear power plant to $8,920,000,000 (assuming 110 units licensed to operate) for a single nuclear incident, which amount is covered by: (i) private insurance amounting to $200,000,000; and (ii) $8,720,000,000 provided by an industry retrospective rating plan required by the NRC pursuant thereto. Under such retrospective rating plan, in the event of a nuclear incident at any unit in the United States resulting in losses in excess of private insurance, up to $75,500,000 (but not more than $10,000,000 per unit per year in the event of more than one incident) must be contributed for each nuclear unit licensed to operate in the country by the licensees thereof to cover liabilities arising out of the incident. Based on their present ownership and leasehold interests in the Beaver Valley Station and the Perry Plant, the Companies' maximum potential assessment under these provisions (assuming the other CAPCO companies were to contribute their proportionate share of any assessments under the retrospective rating plan) would be $102,800,000 per incident but not more than $13,000,000 in any one year for each incident. In addition to the public liability insurance provided pursuant to the Price-Anderson Act, the Companies have also obtained insurance coverage in limited amounts for economic loss and property damage arising out of nuclear incidents. The Companies are members of Nuclear Electric Insurance Limited (NEIL) which provides coverage (NEIL I) for the extra expense of replacement power incurred due to prolonged accidental outages of nuclear units. Under NEIL I, the Companies have policies, renewable yearly, corresponding to their respective interests in the Beaver Valley Station and the Perry Plant, which provide an aggregate indemnity of up to approximately $345,000,000 for replacement power costs incurred during an outage after an initial 21-week waiting period. Members of NEIL I pay annual premiums and are subject to assessments if losses exceed the accumulated funds available to the insurer. The Companies' present maximum aggregate assessment for incidents at any covered nuclear facility occurring during a policy year would be approximately $3,200,000. The Companies are insured as to their respective interests in the Beaver Valley Station and Perry Plant under property damage insurance provided by American Nuclear Insurers (ANI) and Mutual Atomic Energy Liability Underwriters (MAELU) to the operating company for each plant. Under the ANI/MAELU arrangements, $500,000,000 of primary coverage and $850,000,000 of excess coverage for decontamination costs, debris removal and repair and/or replacement of property is provided for the Beaver Valley Station and the Perry Plant. The Companies pay annual premiums for this coverage and are not liable for retrospective assessments. - 7 - A secondary level of coverage for the Beaver Valley Station and Perry Plant over and above the ANI/MAELU policy is provided by a decontamination liability, excess property and decommissioning liability insurance policy issued to each operating company by NEIL (NEIL II). Under NEIL II a minimum of $1,400,000,000 of coverage is available to pay costs required for decontamination operations in excess of the $1,350,000,000 provided by the primary ANI/MAELU policy. Additionally, a maximum of $250,000,000, as provided by NEIL II, would cover decommissioning costs in excess of funds already collected for decommissioning. Any remaining portion of the NEIL II proceeds after payment of decontamination costs will be available to pay excess property damage losses. Members of NEIL II pay annual premiums and are subject to assessments if losses exceed the accumulated funds available to the insurer. The Companies' present maximum assessment for NEIL II coverage for accidents at any covered nuclear facility occurring during a policy year would be approximately $12,000,000. The NEIL II policy is renewable yearly. The Companies intend to maintain insurance against nuclear risks as described above as long as it is available. To the extent that replacement power, property damage, decontamination, decommissioning, repair and replacement costs and other such costs arising from a nuclear incident at any of the Companies' plants exceed the policy limits of the insurance from time to time in effect with respect to that plant, to the extent a nuclear incident is determined not to be covered by the Companies' insurance policies, or to the extent such insurance becomes unavailable in the future, the Companies would remain at risk for such costs. The NRC requires nuclear power plant licensees to obtain minimum property insurance coverage of $1,060,000,000 or the amount generally available from private sources, whichever is less. The proceeds of this insurance are required to be used first to ensure that the licensed reactor is in a safe and stable condition and can be maintained in that condition so as to prevent any significant risk to the public health and safety. Within 30 days of stabilization, the licensee is required to prepare and submit to the NRC a cleanup plan for approval. The plan is required to identify all cleanup operations necessary to decontaminate the reactor sufficiently to permit the resumption of operations or to commence decommissioning. Any property insurance proceeds not already expended to place the reactor in a safe and stable condition must be used first to complete those decontamination operations that are ordered by the NRC. The Companies are unable to predict what effect these requirements may have on the availability of insurance proceeds to the Companies for the Companies' bondholders. Environmental Matters Various federal, state and local authorities regulate the Companies with regard to air and water quality and other environmental matters. The Companies have estimated capital expenditures for environmental compliance of approximately $70,000,000, which is included in the construction estimate given under "Financing and Construction - Future Financing" for 1995 through 1999. - 8 - Air Regulation Under the provisions of the Clean Air Act of 1970, both the State of Ohio and the Commonwealth of Pennsylvania adopted ambient air quality standards, and related emission limits, including limits for sulfur dioxide (SO2) and particulates. In addition, the U.S. Environmental Protection Agency (EPA) promulgated an SO2 regulatory plan for Ohio which became effective for the Company's plants in 1977. Generating plants to be constructed in the future and some future modifications of existing facilities will be covered not only by the applicable state standards but also by EPA emission performance standards for new sources. In both Ohio and Pennsylvania the construction or modification of emission sources requires approval from appropriate environmental authorities, and the facilities involved may not be operated unless a permit or variance to do so has been issued by those same authorities. The Clean Air Act Amendments of 1990 require significant reductions of SO2 and nitrogen oxides (NOx) from the Companies' coal-fired generating units by 1995 and additional emission reductions by 2000. Compliance options include, but are not limited to, installing additional pollution control equipment, burning less-polluting fuel, purchasing emission allowances, operating facilities in a manner that minimizes pollution, and retiring facilities. In compliance plans submitted to the PUCO and to the EPA, the Company stated that SO2 reductions for the years 1995 through 1999 likely will be achieved by burning lower-sulfur fuel, generating more electricity from lower-emitting plants, and/or purchasing emission allowances. Equipment already installed, or to be installed by May 1995, is expected to provide NOx reductions sufficient to meet 1995 requirements. Plans for complying with the year 2000 and later reductions have not been finalized. EPA is conducting additional studies which could indicate the need for additional NOx reductions from the Companies' Pennsylvania facilities by the year 2003. The cost of such reductions, if required, may be substantial. The Company continues to evaluate its compliance plans and other compliance options. The Companies are required to meet federally approved SO2 regulations. Violations of such regulations can result in shutdown of the generating unit involved and/or civil or criminal penalties of up to $25,000 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that allows for compliance based on a 30-day averaging period. The EPA has proposed regulations that could change the interim enforcement policy, including the method of determining compliance with emission limits. The Companies cannot predict what action the EPA may take in the future with respect to proposed regulations or the interim enforcement policy. Water Regulation Various water quality regulations, the majority of which are the result of the federal Clean Water Act and its amendments, apply to the Companies' plants. In addition, Ohio and Pennsylvania have water quality standards applicable to the Companies' operations. As provided in the Clean Water Act, authority to grant federal National Pollutant Discharge Elimination System (NPDES) water discharge permits can be assumed by a state. Ohio and Pennsylvania have assumed such authority. - 9 - The Ohio Environmental Protection Agency (Ohio EPA) has issued NPDES Permits for the R.E. Burger, Edgewater, Niles, W.H. Sammis and West Lorain plants and has proposed a water discharge permit for the Mad River Plant. The West Lorain Plant is in compliance with all permit conditions. The other plants are in compliance with chemical limitations of the permits. The permit conditions would have required the addition of cooling towers at all of the above plants except West Lorain. However, the EPA and Ohio EPA have approved variance requests for the W.H. Sammis, R.E. Burger, Edgewater and Niles plants, eliminating the current need for cooling towers at those plants. Waste Disposal As a result of the Resource Conservation and Recovery Act of 1976, as amended, and the Toxic Substances Control Act of 1976, federal and state hazardous waste regulations have been promulgated. These regulations may result in significantly increased costs to dispose of waste materials. The ultimate effect of these requirements cannot presently be determined. The Pennsylvania Department of Environmental Resources has issued regulations dealing with the storage, treatment, transportation and disposal of residual waste such as coal ash and scrubber sludge. These regulations impose additional requirements relating to permitting, ground water monitoring, leachate collection systems, closure, liability insurance and operating matters. The Companies are considering various compliance options but are presently unable to determine the ultimate increase in capital and operating costs at existing sites. Summary Environmental controls are still in the process of development and require, in many instances, balancing the needs for additional quantities of energy in future years and the need to protect the environment. As a result, the Companies cannot now estimate the precise effect of existing and potential regulations and legislation upon any of their existing and proposed facilities and operations or upon their ability to issue additional first mortgage bonds under their respective mortgages. These mortgages contain covenants by the Companies to observe and conform to all valid governmental requirements at the time applicable unless in course of contest, and provisions which, in effect, prevent the issuance of additional bonds if there is a completed default under the mortgage. The provisions of each of the mortgages, in effect, also require, in the opinion of counsel for the respective Companies, that certification of property additions as the basis for the issuance of bonds or other action under the mortgages be accompanied by an opinion of counsel that the company certifying such property additions has all governmental permissions at the time necessary for its then current ownership and operation of such property additions. The Companies intend to contest any requirements they deem unreasonable or impossible for compliance or otherwise contrary to the public interest. Developments in these and other areas of regulation may require the Companies to modify, supplement or replace equipment and facilities, and may delay or impede the construction and operation of new facilities, at costs which could be substantial. The Companies expect that the impact of any such costs would eventually be reflected in their rate schedules. - 10 - Fuel Supply The Companies' sources of generation during 1994 were 76.2% coal and 23.8% nuclear. Over two-thirds of the Company's annual coal purchase requirements are supplied under long-term contracts. These contracts have minimum annual tonnage levels of approximately 5,300,000 tons (including the Company's portion of the coal purchase contract relating to the Bruce Mansfield Plant discussed below). This contract coal is produced primarily from mines located in Ohio, Pennsylvania, Kentucky and West Virginia; the contracts expire at various times through February 28, 2003. The Companies estimate their 1995 coal requirements to be approximately 9,700,000 tons (including their respective shares of the coal requirements of CAPCO's W. H. Sammis Unit 7 and the Bruce Mansfield Plant). See "Environmental Matters" for factors pertaining to meeting environmental regulations affecting coal- fired generating units. The Companies, together with the other CAPCO companies, have each severally guaranteed (the Company's and Penn Power's composite percentages being approximately 46.8% and 6.7%, respectively) certain debt and lease obligations in connection with a coal supply contract for the Bruce Mansfield Plant (see Note 7 of Notes to Consolidated Financial Statements). As of December 31, 1994, the Companies' shares of the guarantees were $87,159,000. The price under the coal supply contract, which includes certain minimum payments, has been determined to be sufficient to satisfy the debt and lease obligations. This contract extends to December 31, 1999. The Companies' fuel costs (excluding disposal costs) for each of the five years ended December 31, 1994, were as follows: 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Cost of fuel consumed per million BTUs: Coal $1.36 $1.37 $1.40 $1.40 $1.39 Nuclear $ .75 $ .76 $ .83 $ .87 $ .84 Average fuel cost per kilowatt-hour generated (cents) 1.26 1.31 1.31 1.34 1.34 Nuclear Fuel OES Fuel is the sole lessor for the Companies' nuclear fuel requirements (see "Financing and Construction - Future Financing" and Note 5E of Notes to Consolidated Financial Statements). The Companies and OES Fuel have contracts for the supply of uranium sufficient to meet projected needs through 2000 and conversion services sufficient to meet projected needs through 2001. Fabrication services for fuel assemblies have been contracted by the CAPCO companies for the next four reloads for Beaver Valley Unit 1, three reloads for Beaver Valley Unit 2 (through approximately 2000 and 1998, respectively), and the next six reloads for Perry Unit 1 (through approximately 2004). The CAPCO companies have a contract with the U.S. Enrichment Corporation for enrichment services for all CAPCO nuclear units through 2014. - 11 - Prior to the expiration of existing commitments, the Companies intend to make additional arrangements for the supply of uranium and for the subsequent conversion, enrichment, fabrication, reprocessing and/or waste disposal services, the specific prices and availability of which are not known at this time. Due to the present lack of availability of domestic reprocessing services, to the continuing absence of any program to begin development of such reprocessing capability and questions as to the economics of reprocessing, the Companies are calculating nuclear fuel costs based on the assumption that spent fuel will not be reprocessed. On-site spent fuel storage facilities for the Perry Plant are expected to be adequate through 2010; facilities at Beaver Valley Units 1 and 2 are expected to be adequate through 2011 and 2005, respectively. After on-site storage capacity is exhausted, additional storage capacity will have to be obtained which could result in significant additional costs unless reprocessing services or permanent waste disposal facilities become available. The Federal Nuclear Waste Policy Act of 1982 provides for the construction of facilities for the disposal of high-level nuclear wastes, including spent fuel from nuclear power plants operated by electric utilities; however, the selection of a suitable site has become embroiled in the political process. Duquesne and CEI have each previously entered into contracts with the U.S. Department of Energy for the disposal of spent fuel from the Beaver Valley Power Station and the Perry Plant, respectively. System Capacity and Reserves The 1994 net maximum hourly demand on the Companies of 5,744,000 kilowatts (kW) (including 450,000 kW of firm power sales which extend through 2005 as discussed under "Competition") occurred on July 20, 1994. The seasonal capability of the Companies on that day was 5,980,000 kW. Of that system capability, 3.9% was available to serve additional load, after giving effect to net firm purchases at that hour of 443,000 kW and term power sales to other utilities. Based on existing capacity plans, the load forecast made in November 1994 and anticipated term power sales to other utilities, the capacity margins during the 1995-1999 period are expected to range from about 6% to 10%. Regional Reliability The Company participates with 26 other electric companies operating in nine states in the East Central Area Reliability Coordination Agreement (ECAR), which was organized for the purpose of furthering the reliability of bulk power supply in the area through coordination of the planning and operation by the ECAR members of their bulk power supply facilities. The ECAR members have established principles and procedures regarding matters affecting the reliability of the bulk power supply within the ECAR region. Procedures have been adopted regarding: i) the evaluation and simulated testing of systems' performance; ii) the establishment of minimum levels of daily operating reserves; iii) the development of a program regarding emergency procedures during conditions of declining system frequency; and iv) the basis for uniform rating of generating equipment. Competition The Companies compete with other utilities for intersystem bulk power sales and for sales to municipalities and cooperatives. - 12 - The Companies compete with suppliers of natural gas and other forms of energy in connection with their industrial and commercial sales and in the home climate control market, both with respect to new customers and conversions, and with all other suppliers of electricity. To date, there has been no substantial cogeneration by the Companies' customers. Technological advances and regulatory changes are driving forces toward increasing competition in the energy market. In addition, many large electricity users continue to push for some form of retail wheeling, which would enable retail customers to purchase electricity from producers other than the local utility. While regulators appear to be increasingly reluctant to move in this direction (primarily because of the adverse impact retail wheeling would have on small users) the debate is expected to place downward pressure on the Companies' prices in the future. In an effort to more fully utilize their facilities and hold down rates to their other customers, the Companies have entered into a long-term power sales agreement with another utility. Currently, the Companies are selling 450,000 kW annually under this contract through December 31, 2005. The Companies have the option to reduce this commitment by 150,000 kW, with three years advance notice. Research and Development The Company participates in funding the Electric Power Research Institute (EPRI), which was formed for the purpose of expanding electric research and development under the voluntary sponsorship of the nation's electric utility industry - public, private and cooperative. Its goal is to mutually benefit utilities and their customers by promoting the development of new and improved technologies to help the utility industry meet present and future electric energy needs in environmentally and economically acceptable ways. EPRI conducts research on all aspects of electric power production and use, including fuels, generating, delivery, energy management and conservation, environmental effects and energy analysis. The major portion of EPRI research and development projects is directed toward practical solutions and their applications to problems currently facing the electric utility industry. In 1994, approximately 86% of the Company's research and development expenditures were related to EPRI. The Company also participates in various research and development efforts by sponsoring clean coal technology demonstration projects at Company-owned coal-fired units. These projects are designed to derive alternate ways of using coal that would otherwise be environmentally unacceptable. In addition to researching environmentally acceptable ways of burning coal, the Company is also researching technology which will produce ash waste with properties and characteristics different from present fly ash and bottom ash, with the initial goal of producing marketable products for use in agronomy applications. Executive Officers The executive officers are elected at the annual organization meeting of the Board of Directors, held immediately after the annual meeting of stockholders, and hold office until the next such organization meeting, unless the Board of Directors shall - 13 - otherwise determine, or unless a resignation is submitted. Position Held During Name Age Past Five Years Dates - --------------- --- --------------------------- ------------ W. R. Holland 58 President and Chief Executive Officer 1993-present President and Chief Operating Officer 1991-1993 Senior Vice President of Detroit Edison Company *-1991 A. J. Alexander 43 Senior Vice President and General Counsel 1991-present Vice President and General Counsel *-1991 H. P. Burg 48 Senior Vice President and Chief Financial Officer *-present A. N. Gorant 64 Senior Vice President- Division Operations and Customer Service 1994-present Vice President-Division Operations and Customer Service *-1994 R. J. McWhorter 62 Senior Vice President- Generating Plant and Transmission Operations *-present E. T. Carey 52 Vice President-Marketing and Customer Service Support 1994-present Manager, Performance Initiatives 1993-1994 Division Manager *-1993 A. R. Garfield 56 Vice President-System Operations 1991-present Manager, System Operations *-1991 J. A. Gill 57 Vice President- Administration *-present B. M. Miller 62 Vice President-Engineering and Construction *-present D. L. Yeager 60 Vice President-Special Projects *-present D. P. Zeno 64 Vice President-Governmental Affairs 1991-present Manager, Governmental Affairs *-1991 N. C. Brink 47 Secretary 1994-present Assistant Secretary *-1994 - 14 - Position Held During Name Age Past Five Years Dates - --------------- --- --------------------------- ------------ R. H. Marsh 44 Treasurer 1991-present Manager, Assets Administration *-1991 H. L. Wagner 42 Comptroller 1990-present Assistant Comptroller *-1990 * Indicates position held at least since January 1, 1990. At December 31, 1994, the Company had 3,911 employees and Penn Power had 1,255 employees for a total of 5,166 employees for the Companies. ITEM 2. PROPERTIES The Companies' respective first mortgage indentures constitute, in the opinion of the Companies' counsel, direct first liens on substantially all of the respective Companies' physical property, subject only to excepted encumbrances, as defined in the Indentures. See Notes 4 and 5 to the Consolidated Financial Statements for information concerning leases and financing encumbrances affecting certain of the Companies' properties. The Companies own, individually or, together with one or more of the other CAPCO companies as tenants in common, and/or lease, the generating units in service as of March 1, 1995, shown on the table below. - 15 - Net Demonstrated Interest ------------------ Capacity (kW) ------------------ Penn Companies Ohio Edison Power ------------ Plant-Location Unit Total Entitlement Owned Leased Owned - ------------------- ---- ------- ----------- ------ ------ ----- Coal-Fired Units R.E. Burger- 3-5 406,000 406,000 100.00% - - Shadyside, OH B. Mansfield- 1 780,000 501,000 60.00% - 4.20% Shippingport, PA 2 780,000 360,000 39.30% - 6.80% 3 800,000 335,000 35.60% - 6.28% New Castle- 3-5 333,000 333,000 - - 100.00% W. Pittsburg, PA Niles-Niles, OH 1-2 216,000 216,000 100.00% - - W.H. Sammis- 1-6 1,620,000 1,620,000 100.00% - - Stratton, OH 7 600,000 413,000 48.00% - 20.80% Nuclear Units Beaver Valley- 1 810,000 425,000 35.00% - 17.50% Shippingport, PA 2 820,000 343,000 20.22% 21.66% - Perry- 1 1,194,000 421,000 17.42% 12.58% 5.24% N. Perry Village, OH Oil/Gas-Fired Units Edgewater- Lorain, OH 4 100,000 100,000 100.00% - - Other 164,000 164,000 84.82% - 15.18% --------- Total 5,637,000 ========= Prolonged outages of existing generating units might make it necessary for the Companies, depending upon the state of demand from time to time for electric service upon their system, to use to a greater extent than otherwise, less efficient and less economic generating units, or purchased power, and in some cases may require the reduction of load during peak periods under the Companies' interruptible programs, all to an extent not presently determinable. The Companies' generating plants and load centers are connected by a transmission system consisting of elements having various voltage ratings ranging from 23 kilovolts (kV) to 345 kV. The Companies' overhead and underground transmission lines aggregate 4,565 miles. The Companies' electric distribution systems include 26,002 miles of overhead pole line and underground conduit carrying primary, secondary and street lighting circuits. They own, individually or, together with one or more of the other CAPCO companies as tenants in common, 434 substations with a total installed transformer capacity of 23,867,749 kilovolt-amperes, of - 16 - which 64 are transmission substations, including 8 located at generating plants. The Company's transmission lines also interconnect with those of CEI, Columbus Southern Power Company, The Dayton Power and Light Company, Duquesne, Monongahela Power Company, Ohio Power Company and Toledo; Penn Power's interconnect with those of Duquesne and West Penn Power Company. These interconnections make possible utilization by the Company and Penn Power of generating capacity constructed as a part of the CAPCO program, as well as providing opportunities for the sale of power to other utilities. ITEM 3. LEGAL PROCEEDINGS In 1991, the CAPCO companies, as co-plaintiffs, filed suit against Westinghouse Electric Corporation in the United States District Court for the Western District of Pennsylvania, for design flaws relating to Beaver Valley Units 1 and 2 steam generators supplied by Westinghouse. The suit principally alleged that the Westinghouse steam generators contain serious design defects causing such problems as tube corrosion and cracking, which has led to higher maintenance costs and the possible replacement of the steam generators earlier than the 40-year design life. The Court rejected the claims of the CAPCO companies in December 1994. The CAPCO companies have appealed the verdict to the United States Court of Appeals for the Third Circuit. See "Item 1 - Business - Nuclear Regulation" for information with respect to legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ITEM 6. SELECTED FINANCIAL DATA ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by Items 5 through 8 is incorporated herein by reference to the Common Stock Data, Classification of Holders of Common Stock as of December 31, 1994, Selected Financial Data, Management's Discussion and Analysis of Results of Operations and Financial Condition, and Consolidated Financial Statements included on pages 12 through 30 in the Company's 1994 Annual Report to Stockholders (Exhibit 13). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. - 17 - PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10, with respect to Identification of Directors and with respect to reports required to be filed under Section 16 of the Securities Exchange Act of 1934, is incorporated herein by reference to the Company's 1995 Proxy Statement filed with the Securities and Exchange Commission (SEC) pursuant to Regulation 14A and, with respect to Identification of Executive Officers, to "Part I, Item 1. Business- Executive Officers" herein. ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Items 11, 12 and 13 is incorporated herein by reference to the Company's 1995 Proxy Statement filed with the SEC pursuant to Regulation 14A. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements Included in Part II of this report and incorporated herein by reference to the Company's 1994 Annual Report to Stockholders (Exhibit 13 below) at the pages indicated. Page No. -------- Report of Independent Public Accountants 12 Consolidated Statements of Income- Three Years Ended December 31, 1994 17 Consolidated Balance Sheets- December 31, 1994 and 1993 18 Consolidated Statements of Retained Earnings- Three Years Ended December 31, 1994 19 Consolidated Statements of Capital Stock and Other Paid-In Capital- Three Years Ended December 31, 1994 19 Consolidated Statements of Capitalization- December 31, 1994 and 1993 20-21 Consolidated Statements of Cash Flows- Three Years Ended December 31, 1994 22 Consolidated Statements of Taxes- Three Years Ended December 31, 1994 23 Notes to Consolidated Financial Statements 24-30 - 18 - 2. Financial Statement Schedules Included in Part IV of this report: Page No. -------- Report of Independent Public Accountants 29 Schedule - Three Years Ended December 31, 1994: II-Consolidated Valuation and Qualifying Accounts 30 Schedules other than the schedule listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. 3. Exhibits Exhibit Number - ------- (A) 3-1 - Amended Articles of Incorporation, Effective June 21, 1994, constituting the Company's Articles of Incorporation. 3-2 - Code of Regulations of the Company as amended April 24, 1986. (Registration No. 33-5081, Exhibit (4)(d).) (B) 4-1 - Indenture dated as of August 1, 1930 between the Company and Bankers Trust Company, as Trustee, as amended and supplemented by Supplemental Indentures: Dated as of File Reference Exhibit No. ---------------- -------------- ------------------ March 3, 1931 2-1725 B-1,B-1(a),B-1(b) November 1, 1935 2-2721 B-4 January 1, 1937 2-3402 B-5 September 1, 1937 Form 8-A B-6 June 13, 1939 2-5462 7(a)-7 August 1, 1974 Form 8-A, August 28, 1974 2(b) July 1, 1976 Form 8-A, July 28, 1976 2(b) December 1, 1976 Form 8-A, December 15, 1976 2(b) June 15, 1977 Form 8-A, June 27, 1977 2(b) Supplemental Indentures: Dated as of File Reference Exhibit No. ------------------ -------------- ------------------ September 1, 1944 2-61146 2(b)(2) April 1, 1945 2-61146 2(b)(2) September 1, 1948 2-61146 2(b)(2) May 1, 1950 2-61146 2(b)(2) January 1, 1954 2-61146 2(b)(2) May 1, 1955 2-61146 2(b)(2) August 1, 1956 2-61146 2(b)(2) March 1, 1958 2-61146 2(b)(2) - 19 - Exhibit Number - ------- Supplemental Indentures: (Cont'd) Dated as of File Reference Exhibit No. --------------- ---------------------- -------------- April 1, 1959 2-61146 2(b)(2) June 1, 1961 2-61146 2(b)(2) September 1, 1969 2-34351 2(b)(2) May 1, 1970 2-37146 2(b)(2) September 1, 1970 2-38172 2(b)(2) June 1, 1971 2-40379 2(b)(2) August 1, 1972 2-44803 2(b)(2) September 1, 1973 2-48867 2(b)(2) May 15, 1978 2-66957 2(b)(4) February 1, 1980 2-66957 2(b)(5) April 15, 1980 2-66957 2(b)(6) June 15, 1980 2-68023 (b)(4)(b)(5) October 1, 1981 2-74059 (4)(d) October 15, 1981 2-75917 (4)(e) February 15, 1982 2-75917 (4)(e) July 1, 1982 2-89360 (4)(d) March 1, 1983 2-89360 (4)(e) March 1, 1984 2-89360 (4)(f) September 15, 1984 2-92918 (4)(d) September 27, 1984 33-2576 (4)(d) November 8, 1984 33-2576 (4)(d) December 1, 1984 33-2576 (4)(d) December 5, 1984 33-2576 (4)(e) January 30, 1985 33-2576 (4)(e) February 25, 1985 33-2576 (4)(e) July 1, 1985 33-2576 (4)(e) October 1, 1985 33-2576 (4)(e) January 15, 1986 33-8791 (4)(d) May 20, 1986 33-8791 (4)(d) June 3, 1986 33-8791 (4)(e) October 1, 1986 33-29827 (4)(d) July 15, 1989 33-34663 (4)(d) August 25, 1989 33-34663 (4)(d) February 15, 1991 33-39713 (4)(d) May 1, 1991 33-45751 (4)(d) May 15, 1991 33-45751 (4)(d) September 15, 1991 33-45751 (4)(d) April 1, 1992 33-48931 (4)(d) June 15, 1992 33-48931 (4)(d) September 15, 1992 33-48931 (4)(e) April 1, 1993 33-51139 (4)(d) June 15, 1993 33-51139 (4)(d) September 15, 1993 33-51139 (4)(d) November 15, 1993 1-2578 (4)(2) 10-1 - Administration Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-43102, Exhibit 5(c)(2).) - 20 - Exhibit Number - ------- 10-2 - Amendment No. 1 dated January 4, 1974 to Administration Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-68906, Exhibit 5(c)(3).) 10-3 - Transmission Facilities Agreement between the CAPCO Group dated as of September 14, 1967. (Registration No. 2-43102, Exhibit 5(c)(3).) 10-4 - Amendment No. 1 dated as of January 1, 1993 to Transmission Facilities Agreement between the CAPCO Group dated as of September 14, 1967. (1993 Form 10-K, Exhibit 10-4.) 10-5 - Agreement for the Termination or Construction of Certain Agreements effective September 1, 1980 among the CAPCO Group. (Registration No. 2-68906, Exhibit 10-4.) 10-6 - Amendment dated as of December 23, 1993 to Agreement for the Termination or Construction of Certain Agreements effective September 1, 1980 among the CAPCO Group. (1993 Form 10-K, Exhibit 10-6.) 10-7 - CAPCO Basic Operating Agreement, as amended September 1, 1980. (Registration No. 2-68906, Exhibit 10-5.) 10-8 - Amendment No. 1 dated August 1, 1981, and Amendment No. 2 dated September 1, 1982 to CAPCO Basic Operating Agreement, as amended September 1, 1980. (September 30, 1981 Form 10-Q, Exhibit 20-1 and 1982 Form 10-K, Exhibit 19-3, respectively.) 10-9 - Amendment No. 3 dated July 1, 1984 to CAPCO Basic Operating Agreement, as amended September 1, 1980. (1985 Form 10-K, Exhibit 10-7.) 10-10 - Basic Operating Agreement between the CAPCO Companies as amended October 1, 1991. (1991 Form 10-K, Exhibit 10-8.) 10-11 - Basic Operating Agreement between the CAPCO Companies as amended January 1, 1993. (1993 Form 10-K, Exhibit 10-11.) 10-12 - Memorandum of Agreement effective as of September 1, 1980 among the CAPCO Group. (1982 Form 10-K, Exhibit 19-2.) 10-13 - Operating Agreement for Beaver Valley Power Station Units Nos. 1 and 2 as Amended and Restated September 15, 1987, by and between the CAPCO Companies. (1987 Form 10-K, Exhibit 10-15.) 10-14 - Construction Agreement with respect to Perry Plant between the CAPCO Group dated as of July 22, 1974. - 21 - Exhibit Number - ------- (Registration No. 2-52251 of Toledo Edison Company, Exhibit 5(yy).) 10-15 - Participation Agreement No. 1 relating to the financing of the development of certain coal mines, dated as of October 1, 1973, among Quarto Mining Company, the CAPCO Group, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland, as Owner Trustee, National City Bank, as Loan Trustee, and Owner Trustee, National City Bank, as Loan Trustee, and National City Bank, as Bond Trustee. (Registration No. 2-61146, Exhibit 5(e)(1).) 10-16 - Amendment No. 1 dated as of September 15, 1978 to Participation Agreement No. 1 dated as of October 1, 1973 among Quarto Mining Company, the CAPCO Group, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland as Owner Trustee, National City Bank as Loan Trustee and National City Bank as Bond Trustee. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 5(e)(2).) 10-17 - Participation Agreement No. 2 relating to the financing of the development of certain coal mines, dated as of August 1, 1974, among Quarto Mining Company, the CAPCO Group, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland, as Owner Trustee, National City Bank, as Loan Trustee, and National City Bank, as Bond Trustee. (Registration No. 2-53059, Exhibit 5(h)(2).) 10-18 - Amendment No. 1 dated as of September 15, 1978 to Participation Agreement No. 2 dated as of August 1, 1974 among Quarto Mining Company, the CAPCO Group, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland as Owner Trustee, National City Bank as Loan Trustee and National City Bank as Bond Trustee. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 5(e)(4).) 10-19 - Participation Agreement No. 3 dated as of September 15, 1978 among Quarto Mining Company, the CAPCO Companies, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central National Bank of Cleveland as Owner Trustee, and National City Bank as Loan Trustee - 22 - Exhibit Number - ------- and Bond Trustee. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 5(e)(5).) 10-20 - Participation Agreement No. 4 dated as of October 31, 1980 among Quarto Mining Company, the CAPCO Group, the Loan Participants listed in Schedule A thereto and National City Bank as Bond Trustee. (Registration No. 2- 68906 of Pennsylvania Power Company, Exhibit 10-16.) 10-21 - Participation Agreement dated as of May 1, 1986, among Quarto Mining Company, the CAPCO Companies, the Loan Participants thereto, and National City Bank as Bond Trustee. (1986 Form 10-K, Exhibit 10-22.) 10-22 - Participation Agreement No. 6 dated as of December 1, 1991 among Quarto Mining Company, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company, the Loan Participants listed in Schedule A thereto, National City Bank, as Mortgage Bond Trustee and National City Bank, as Refunding Bond Trustee. (1991 Form 10-K, Exhibit 10-19.) 10-23 - Agreement entered into as of October 20, 1981 among the CAPCO Companies regarding the use of Quarto coal at Mansfield Units 1, 2 and 3. (1981 Form 10-K, Exhibit 20-1.) 10-24 - Restated Option Agreement dated as of May 1, 1983 by and between the North American Coal Corporation and the CAPCO Companies. (1983 Form 10-K, Exhibit 19-1.) 10-25 - Trust Indenture and Mortgage dated as of October 1, 1973 between Quarto Mining Company and National City Bank, as Bond Trustee, together with Guaranty dated as of October 1, 1973 with respect thereto by the CAPCO Group. (Registration No. 2- 61146, Exhibit 5(e)(5).) 10-26 - Amendment No. 1 dated August 1, 1974 to Trust Indenture and Mortgage dated as of October 1, 1973 between Quarto Mining Company and National City Bank, as Bond Trustee, together with Amendment No.1 dated August 1, 1974 to Guaranty dated as of October 1, 1973 with respect thereto by the CAPCO Group. (Registration No. 2-53059, Exhibit 5(h)(2).) 10-27 - Amendment No. 2 dated as of September 15, 1978 to the Trust Indenture and Mortgage dated as of October 1, 1973, as amended, between Quarto Mining Company and National City Bank, as Bond Trustee, together with Amendment No. 2 dated as of September 15, 1978 to Guaranty dated as of - 23 - Exhibit Number - ------- October 1, 1973 with respect to the CAPCO Group. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibits 5(e)(11) and 5(e)(12).) 10-28 - Amendment No. 3 dated as of October 31, 1980, to Trust Indenture and Mortgage dated as of October 1, 1973, as amended between Quarto Mining Company and National City Bank as Bond Trustee. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 10-16.) 10-29 - Amendment No. 4 dated as of July 1, 1985 to the Trust Indenture and Mortgage dated as of October 1, 1973, as amended between Quarto Mining Company and National City Bank as Bond Trustee. (1985 Form 10-K, Exhibit 10-28.) 10-30 - Amendment No. 5 dated as of May 1, 1986, to the Trust Indenture and Mortgage between Quarto and National City Bank as Bond Trustee. (1986 Form 10-K, Exhibit 10-30.) 10-31 - Amendment No. 6 dated as of December 1, 1991, to the Trust Indenture and Mortgage dated as of October 1, 1973, between Quarto Mining Company and National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-28.) 10-32 - Trust Indenture dated as of December 1, 1991, between Quarto Mining Company and National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-29.) 10-33 - Amendment No. 3 dated as of October 31, 1980 to the Bond Guaranty dated as of October 1, 1973, as amended, with respect to the CAPCO Group. (Registration No. 2- 68906 of Pennsylvania Power Company, Exhibit 10-16.) 10-34 - Amendment No. 4 dated as of July 1, 1985 to the Bond Guaranty dated as of October 1, 1973, as amended, by the CAPCO Companies to National City Bank as Bond Trustee. (1985 Form 10-K, Exhibit 10-30.) 10-35 - Amendment No. 5 dated as of May 1, 1986, to the Bond Guaranty by the CAPCO Companies to National City Bank as Bond Trustee. (1986 Form 10-K, Exhibit 10-33.) 10-36 - Amendment No. 6A dated as of December 1, 1991, to the Bond Guaranty dated as of October 1, 1973, by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-33.) - 24 - Exhibit Number - ------- 10-37 - Amendment No. 6B dated as of December 30, 1991, to the Bond Guaranty dated as of October 1, 1973 by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-34.) 10-38 - Bond Guaranty dated as of December 1, 1991, by The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, the Toledo Edison Company to National City Bank, as Bond Trustee. (1991 Form 10-K, Exhibit 10-35.) 10-39 - Open end Mortgage dated as of October 1, 1973 between Quarto Mining Company and the CAPCO Companies and Amendment No. 1 thereto, dated as of September 15, 1978. (Registration No. 2-68906 of Pennsylvania Power Company, Exhibit 10-23.) 10-40 - Repayment and Security Agreement and Assignment of Lease dated as of October 1, 1973 between Quarto Mining Company and Ohio Edison Company as Agent for the CAPCO Companies and Amendment No. 1 thereto, dated as of September 15, 1978. (1980 Form 10-K, Exhibit 20-2.) 10-41 - Restructuring Agreement dated as of April 1, 1985 among Quarto Mining Company, the Company and the other CAPCO Companies, Energy Properties, Inc., General Electric Credit Corporation, the Loan Participants signatories thereto, Central National Bank of Cleveland, as Owner Trustee and National City Bank as Loan Trustee and Bond Trustee. (1985 Form 10-K, Exhibit 10-33.) 10-42 - Unsecured Note Guaranty dated as of July 1, 1985 by the CAPCO Companies to General Electric Credit Corporation. (1985 Form 10-K, Exhibit 10-34.) 10-43 - Memorandum of Understanding dated March 31, 1985 among the CAPCO Companies. (1985 Form 10-K, Exhibit 10-35.) (C) 10-44 - Ohio Edison Company Executive Incentive Compensation Plan. (1984 Form 10-K, Exhibit 19-2.) (C) 10-45 - Ohio Edison Company Executive Incentive Compensation Plan as amended February 16, 1987. (1986 Form 10-K, Exhibit 10-40.) (C) 10-46 - Restated and Amended Executive Deferred Compensation Plan. (1989 Form 10-K, Exhibit 10-36.) (C) 10-47 - Restated and Amended Supplemental Executive Retirement Plan. (1989 Form 10-K, Exhibit 10-37). - 25 - Exhibit Number - ------- (D) 10-48 - Participation Agreement dated as of March 16, 1987 among Perry One Alpha Limited Partnership, as Owner Participant, the Original Loan Participants listed in Schedule 1 Hereto, as Original Loan Participants, PNPP Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1986 Form 10-K, Exhibit 28-1.) (D) 10-49 - Amendment No. 1 dated as of September 1, 1987 to Participation Agreement dated as of March 16, 1987 among Perry One Alpha Limited Partnership, as Owner Participant, the Original Loan Participants listed in Schedule 1 thereto, as Original Loan Participants, PNPP Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company (now The Bank of New York), as Indenture Trustee, and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-46.) (D) 10-50 - Amendment No. 3 dated as of May 16, 1988 to Participation Agreement dated as of March 16, 1987, as amended among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-47.) (D) 10-51 - Amendment No. 4 dated as of November 1, 1991 to Participation Agreement dated as of March 16, 1987 among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10- 47.) (D) 10-52 - Amendment No. 5 dated as of November 24, 1992 to Participation Agreement dated as of March 16, 1987, as amended, among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPPII Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company as Lessee. (1992 Form 10-K, Exhibit 10-49.) (D) 10-53 - Amendment No. 6 dated as of January 12, 1993 to Participation Agreement dated as of March 16, 1987 among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, - 26 - Exhibit Number - ------- as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10- 50.) (A)(D) 10-54 - Amendment No. 7 dated as of October 12, 1994 to Participation Agreement dated as of March 16, 1987 as amended, among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (D) 10-55 - Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee, with Perry One Alpha Limited Partnership, Lessor, and Ohio Edison Company, Lessee. (1986 Form 10-K, Exhibit 28-2.) (D) 10-56 - Amendment No. 1 dated as of September 1, 1987 to Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee, Lessor and Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit 10-49.) (D) 10-57 - Amendment No. 2 dated as of November 1, 1991, to Facility Lease dated as of March 16, 1987, between The First National Bank of Boston, as Owner Trustee, Lessor and Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit 10-50.) (D) 10-58 - Amendment No. 3 dated as of November 24, 1992 to Facility Lease dated as of March 16, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Perry One Alpha Limited Partnership, as Owner Participant and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-54.) (A)(D) 10-59 - Amendment No. 4 dated as of January 12, 1993 to Facility Lease dated as of March 16, 1987 as amended, between, The First National Bank of Boston, as Owner Trustee, with Perry One Alpha Limited Partnership, as Owner Participant, and Ohio Edison Company, as Lessee. (A)(D) 10-60 - Amendment No. 5 dated as of October 12, 1994 to Facility Lease dated as of March 16, 1987 as amended, between, The First National Bank of Boston, as Owner Trustee, with Perry One Alpha Limited Partnership, as Owner Participant, and Ohio Edison Company, as Lessee. (D) 10-61 - Letter Agreement dated as of March 19, 1987 between Ohio Edison Company, Lessee, and The First - 27 - Exhibit Number - ------- National Bank of Boston, as Owner Trustee under a Trust dated March 16, 1987 with Chase Manhattan Realty Leasing Corporation, required by Section 3(d) of the Facility Lease. (1986 Form 10-K, Exhibit 28-3.) (D) 10-62 - Ground Lease dated as of March 16, 1987 between Ohio Edison Company, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with the Owner Participant, Tenant. (1986 Form 10-K, Exhibit 28-4.) (D) 10-63 - Trust Agreement dated as of March 16, 1987 between Perry One Alpha Limited Partnership, as Owner Participant, and The First National Bank of Boston. (1986 Form 10-K, Exhibit 28-5.) (D) 10-64 - Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of March 16, 1987 with Perry One Alpha Limited Partnership, and Irving Trust Company, as Indenture Trustee. (1986 Form 10-K, Exhibit 28-6.) (D) 10-65 - Supplemental Indenture No. 1 dated as of September 1, 1987 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston as Owner Trustee and Irving Trust Company (now The Bank of New York), as Indenture Trustee. (1991 Form 10-K, Exhibit 10- 55.) (D) 10-66 - Supplemental Indenture No. 2 dated as of November 1, 1991 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee and The Bank of New York, as Indenture Trustee. (1991 Form 10-K, Exhibit 10-56.) (D) 10-67 - Tax Indemnification Agreement dated as of March 16, 1987 between Perry One, Inc. and PARock Limited Partnership as General Partners and Ohio Edison Company, as Lessee. (1986 Form 10-K, Exhibit 28-7.) (D) 10-68 - Amendment No. 1 dated as of November 1, 1991 to Tax Indemnification Agreement dated as of March 16, 1987 between Perry One, Inc. and Parock Limited Partnership and Ohio Edison Company. (1991 Form 10-K, Exhibit 10-58.) (A)(D) 10-69 - Amendment No. 2 dated as of January 12, 1993 to Tax Indemnification Agreement dated as of - 28 - Exhibit Number - ------- March 16, 1987 between Perry One, Inc. and Parock Limited Partnership and Ohio Edison Company. (A)(D) 10-70 - Amendment No. 3 dated as of October 12, 1994 to Tax Indemnification Agreement dated as of March 16, 1987 between Perry One, Inc. and Parock Limited Partnership and Ohio Edison Company. (D) 10-71 - Partial Mortgage Release dated as of March 19, 1987 under the Indenture between Ohio Edison Company and Bankers Trust Company, as Trustee, dated as of the 1st day of August, 1930. (1986 Form 10-K, Exhibit 28-8.) (D) 10-72 - Assignment, Assumption and Further Agreement dated as of March 16, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1986 Form 10-K, Exhibit 28-9.) (D) 10-73 - Additional Support Agreement dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, and Ohio Edison Company. (1986 Form 10-K, Exhibit 28-10.) (D) 10-74 - Bill of Sale, Instrument of Transfer and Severance Agreement dated as of March 19, 1987 between Ohio Edison Company, Seller, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership. (1986 Form 10-K, Exhibit 28- 11.) (D) 10-75 - Easement dated as of March 16, 1987 from Ohio Edison Company, Grantor, to The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, Grantee. (1986 Form 10-K, File Exhibit 28-12.) 10-76 - Participation Agreement dated as of March 16, 1987 among Security Pacific Capital Leasing Corporation, as Owner Participant, the Original Loan Participants listed in Schedule 1 Hereto, as Original Loan Participants, PNPP Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1986 Form 10-K, as Exhibit 28-13.) - 29 - Exhibit Number - ------- 10-77 - Amendment No. 1 dated as of September 1, 1987 to Participation Agreement dated as of March 16, 1987 among Security Pacific Capital Leasing Corporation, as Owner Participant, The Original Loan Participants Listed in Schedule 1 thereto, as Original Loan Participants, PNPP Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-65.) 10-78 - Amendment No. 4 dated as of November 1, 1991, to Participation Agreement dated as of March 16, 1987 among Security Pacific Capital Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10-66.) 10-79 - Amendment No. 5 dated as of November 24, 1992 to Participation Agreement dated as of March 16, 1987 as amended among Security Pacific Capital Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-71.) (A) 10-80 - Amendment No. 6 dated as of January 12, 1993 to Participation Agreement dated as of March 16, 1987 as amended among Security Pacific Capital Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (A) 10-81 - Amendment No. 7 dated as of October 12, 1994 to Participation Agreement dated as of March 16, 1987 as amended among Security Pacific Capital Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. 10-82 - Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee, with Security Pacific Capital Leasing - 30 - Exhibit Number - ------- Corporation, Lessor, and Ohio Edison Company, as Lessee. (1986 Form 10-K, Exhibit 28-14.) 10-83 - Amendment No. 1 dated as of September 1, 1987 to Facility Lease dated as of March 16, 1987 between The First National Bank of Boston as Owner Trustee, Lessor and Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit 10-68.) 10-84 - Amendment No. 2 dated as of November 1, 1991 to Facility Lease dated as of March 16, 1987 between The First National Bank of Boston as Owner Trustee, Lessor and Ohio Edison Company, Lessee. (1991 Form 10-K, Exhibit 10-69.) 10-85 - Amendment No. 3 dated as of November 24, 1992 to Facility Lease dated as of March 16, 1987, as amended, between, The First National Bank of Boston, as Owner Trustee, with Security Pacific Capital Leasing Corporation, as Owner Participant and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-75.) 10-86 - Amendment No. 4 dated as of January 12, 1993 to Facility Lease dated as of March 16, 1987 as amended between, The First National Bank of Boston, as Owner Trustee, with Security Pacific Capital Leasing Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-76.) (A) 10-87 - Amendment No. 5 dated as of October 12, 1994 to Facility Lease dated as of March 16, 1987 as amended between, The First National Bank of Boston, as Owner Trustee, with Security Pacific Capital Leasing Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. 10-88 - Letter Agreement dated as of March 19, 1987 between Ohio Edison Company, as Lessee, and The First National Bank of Boston, as Owner Trustee under a Trust, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, required by Section 3(d) of the Facility Lease. (1986 Form 10-K, Exhibit 28-15.) 10-89 - Ground Lease dated as of March 16, 1987 between Ohio Edison Company, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Perry One Alpha Limited Partnership, Tenant. (1986 Form 10-K, Exhibit 28-16.) 10-90 - Trust Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation, as Owner Participant, and The First National Bank of Boston. (1986 Form 10-K, Exhibit 28-17.) - 31 - Exhibit Number - ------- 10-91 - Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, and Irving Trust Company, as Indenture Trustee. (1986 Form 10-K, Exhibit 28- 18.) 10-92 - Supplemental Indenture No. 1 dated as of September 1, 1987 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee and Irving Trust Company (now The Bank of New York), as Indenture Trustee. (1991 Form 10-K, Exhibit 10- 74.) 10-93 - Supplemental Indenture No. 2 dated as of November 1, 1991 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee and The Bank of New York, as Indenture Trustee. (1991 Form 10-K, Exhibit 10-75.) 10-94 - Tax Indemnification Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1986 Form 10-K, Exhibit 28-19.) 10-95 - Amendment No. 1 dated as of November 1, 1991 to Tax Indemnification Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation and Ohio Edison Company. (1991 Form 10-K, Exhibit 10-77.) (A) 10-96 - Amendment No. 2 dated as of January 12, 1993 to Tax Indemnification Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation and Ohio Edison Company. (A) 10-97 - Amendment No. 3 dated as of October 12, 1994 to Tax Indemnification Agreement dated as of March 16, 1987 between Security Pacific Capital Leasing Corporation and Ohio Edison Company. 10-98 - Assignment, Assumption and Further Agreement dated as of March 16, 1987 among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1986 Form 10-K, Exhibit 28-20.) - 32 - Exhibit Number - ------- 10-99 - Additional Support Agreement dated as of March 16, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, and Ohio Edison Company. (1986 Form 10-K, Exhibit 28-21.) 10-100 - Bill of Sale, Instrument of Transfer and Severance Agreement dated as of March 19, 1987 between Ohio Edison Company, Seller, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, Buyer. (1986 Form 10-K, Exhibit 28-22.) 10-101 - Easement dated as of March 16, 1987 from Ohio Edison Company, Grantor, to The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of March 16, 1987, with Security Pacific Capital Leasing Corporation, Grantee. (1986 Form 10-K, Exhibit 28-23.) 10-102 - Refinancing Agreement dated as of November 1, 1991 among Perry One Alpha Limited Partnership, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee, The Bank of New York, as Collateral Trust Trustee, The Bank of New York, as New Collateral Trust Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10- 82.) 10-103 - Refinancing Agreement dated as of November 1, 1991 among Security Pacific Leasing Corporation, as Owner Participant, PNPP Funding Corporation, as Funding Corporation, PNPP II Funding Corporation, as New Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee, The Bank of New York, as Collateral Trust Trustee, The Bank of New York, as New Collateral Trust Trustee and Ohio Edison Company, as Lessee. (1991 Form 10-K, Exhibit 10- 83.) 10-104 - Ohio Edison Company Master Decommissioning Trust Agreement for Perry Nuclear Power Plant Unit One, Perry Nuclear Power Plant Unit Two, Beaver Valley Power Station Unit One and Beaver Valley Power Station Unit Two dated July 1, 1993. (1993 Form 10-K, Exhibit 10-94.) 10-105 - Nuclear Fuel Lease dated as of March 31, 1989, between OES Fuel, Incorporated, as Lessor, and Ohio Edison Company, as Lessee. (1989 Form 10-K, Exhibit 10-62.) - 33 - Exhibit Number - ------- (A) 10-106 - Receivables Purchase Agreement dated as November 28, 1989, as amended and restated as of April 23, 1993, between OES Capital, Incorporated, Corporate Asset Funding Company, Inc. and Citicorp North America, Inc. 10-107 - Guarantee Agreement entered into by Ohio Edison Company dated as of January 17, 1991. (1990 Form 10-K, Exhibit 10-64). 10-108 - Transfer and Assignment Agreement among Ohio Edison Company and Chemical Bank, as trustee under the OE Power Contract Trust. (1990 Form 10-K, Exhibit 10-65). 10-109 - Renunciation of Payments and Assignment among Ohio Edison Company, Monongahela Power Company, West Penn Power Company, and the Potomac Edison Company dated as of January 4, 1991. (1990 Form 10-K, Exhibit 10-66). (A) 10-110 - Transfer and Assignment Agreement dated May 20, 1994 among Ohio Edison Company and Chemical Bank, as trustee under the OE Power Contract Trust. (A) 10-111 - Renunciation of Payments and Assignment among Ohio Edison Company, Monongahela Power Company, West Penn Power Company, and the Potomac Edison Company dated as of May 20, 1994. (A) 10-112 - Transfer and Assignment Agreement dated October 12, 1994 among Ohio Edison Company and Chemical Bank, as trustee under the OE Power Contract Trust. (A) 10-113 - Renunciation of Payments and Assignment among Ohio Edison Company, Monongahela Power Company, West Penn Power Company, and the Potomac Edison Company dated as of October 12, 1994. (E) 10-114 - Participation Agreement dated as of September 15, 1987, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, the Original Loan Participants listed in Schedule 1 Thereto, as Original Loan Participants, BVPS Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-1.) (E) 10-115 - Amendment No. 1 dated as of February 1, 1988, to Participation Agreement dated as of September 15, 1987, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, the Original Loan Participants listed in Schedule 1 Thereto, as Original Loan Participants, BVPS Funding Corporation, as Funding Corporation, The First - 34 - Exhibit Number - ------- National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-2.) (E) 10-116 - Amendment No. 3 dated as of March 16, 1988 to Participation Agreement dated as of September 15, 1987, as amended, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, BVPS Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-99.) (E) 10-117 - Amendment No. 4 dated as of November 5, 1992 to Participation Agreement dated as of September 15, 1987, as amended, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-100.) (A)(E) 10-118 - Amendment No. 5 dated as of September 30, 1994 to Participation Agreement dated as of September 15, 1987, as amended, among Beaver Valley Two Pi Limited Partnership, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (E) 10-119 - Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee, with Beaver Valley Two Pi Limited Partnership, Lessor, and Ohio Edison Company, Lessee. (1987 Form 10-K, Exhibit 28-3.) (E) 10-120 - Amendment No. 1 dated as of February 1, 1988, to Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee, with Beaver Valley Two Pi Limited Partnership, Lessor, and Ohio Edison Company, Lessee. (1987 Form 10-K, Exhibit 28-4.) (E) 10-121 - Amendment No. 2 dated as of November 5, 1992 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Beaver Valley Two Pi Limited Partnership, as Owner Participant, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-103.) (A)(E) 10-122 - Amendment No. 3 dated as of September 30, 1994 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of - 35 - Exhibit Number - ------- Boston, as Owner Trustee, with Beaver Valley Two Pi Limited Partnership, as Owner Participant, and Ohio Edison Company, as Lessee. (E) 10-123 - Ground Lease and Easement Agreement dated as of September 15, 1987, between Ohio Edison Company, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, Tenant. (1987 Form 10-K, Exhibit 28- 5.) (E) 10-124 - Trust Agreement dated as of September 15, 1987, between Beaver Valley Two Pi Limited Partnership, as Owner Participant, and The First National Bank of Boston. (1987 Form 10-K, Exhibit 28-6.) (E) 10-125 - Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, and Irving Trust Company, as Indenture Trustee. (1987 Form 10-K, Exhibit 28-7.) (E) 10-126 - Supplemental Indenture No. 1 dated as of February 1, 1988 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with Beaver Valley Two Pi Limited Partnership and Irving Trust Company, as Indenture Trustee. (1987 Form 10-K, Exhibit 28-8.) (E) 10-127 - Tax Indemnification Agreement dated as of September 15, 1987, between Beaver Valley Two Pi Inc. and PARock Limited Partnership as General Partners and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-9.) (A)(E) 10-128 - Amendment No. 1 dated as of November 5, 1992 to Tax Indemnification Agreement dated as of September 15, 1987, between Beaver Valley Two Pi Inc. and PARock Limited Partnership as General Partners and Ohio Edison Company, as Lessee. (A)(E) 10-129 - Amendment No. 2 dated as of September 30, 1994 to Tax Indemnification Agreement dated as of September 15, 1987, between Beaver Valley Two Pi Inc. and PARock Limited Partnership as General Partners and Ohio Edison Company, as Lessee. (E) 10-130 - Tax Indemnification Agreement dated as of September 15, 1987, between HG Power Plant, Inc., as Limited Partner and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-10.) - 36 - Exhibit Number - ------- (A)(E) 10-131 - Amendment No. 1 dated as of November 5, 1992 to Tax Indemnification Agreement dated as of September 15, 1987, between HG Power Plant, Inc., as Limited Partner and Ohio Edison Company, as Lessee. (A)(E) 10-132 - Amendment No. 2 dated as of September 30, 1994 to Tax Indemnification Agreement dated as of September 15, 1987, between HG Power Plant, Inc., as Limited Partner and Ohio Edison Company, as Lessee. (E) 10-133 - Assignment, Assumption and Further Agreement dated as of September 15, 1987, among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company and Toledo Edison Company. (1987 Form 10-K, Exhibit 28-11.) (E) 10-134 - Additional Support Agreement dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Beaver Valley Two Pi Limited Partnership, and Ohio Edison Company. (1987 Form 10-K, Exhibit 28-12.) (F) 10-135 - Participation Agreement dated as of September 15, 1987, among Chrysler Consortium Corporation, as Owner Participant, the Original Loan Participants listed in Schedule 1 Thereto, as Original Loan Participants, BVPS Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-13.) (F) 10-136 - Amendment No. 1 dated as of February 1, 1988, to Participation Agreement dated as of September 15, 1987, among Chrysler Consortium Corporation, as Owner Participant, the Original Loan Participants listed in Schedule I Thereto, as Original Loan Participants, BVPS Funding Corporation, as Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-14.) (F) 10-137 - Amendment No. 3 dated as of March 16, 1988 to Participation Agreement dated as of September 15, 1987, as amended, among Chrysler Consortium Corporation, as Owner Participant, BVPS Funding Corporation, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-114.) - 37 - Exhibit Number - ------- (F) 10-138 - Amendment No. 4 dated as of November 5, 1992 to Participation Agreement dated as of September 15, 1987, as amended, among Chrysler Consortium Corporation, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10-115.) (A)(F) 10-139 - Amendment No. 5 dated as of January 12, 1993 to Participation Agreement dated as of September 15, 1987, as amended, among Chrysler Consortium Corporation, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (A)(F) 10-140 - Amendment No. 6 dated as of September 30, 1994 to Participation Agreement dated as of September 15, 1987, as amended, among Chrysler Consortium Corporation, as Owner Participant, BVPS Funding Corporation, BVPS II Funding Corporation, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee and Ohio Edison Company, as Lessee. (F) 10-141 - Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, Lessor, and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28-15.) (F) 10-142 - Amendment No. 1 dated as of February 1, 1988, to Facility Lease dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, Lessor, and Ohio Edison Company, Lessee. (1987 Form 10-K, Exhibit 28-16.) (F) 10-143 - Amendment No. 2 dated as of November 5, 1992 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, as Owner Participant and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 118.) (F) 10-144 - Amendment No. 3 dated as of January 12, 1993 to Facility Lease dated as of September 15, 1987, as amended, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1992 Form 10-K, Exhibit 10- 119.) (A)(F) 10-145 - Amendment No. 4 dated as of September 30, 1994 to Facility Lease dated as of September 15, 1987, as - 38 - Exhibit Number - ------- amended, between The First National Bank of Boston, as Owner Trustee, with Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (F) 10-146 - Ground Lease and Easement Agreement dated as of September 15, 1987, between Ohio Edison Company, Ground Lessor, and The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation, Tenant. (1987 Form 10-K, Exhibit 28-17.) (F) 10-147 - Trust Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and The First National Bank of Boston. (1987 Form 10-K, Exhibit 28-18.) (F) 10-148 - Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of September 15, 1987, between the First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation and Irving Trust Company, as Indenture Trustee. (1987 Form 10-K, Exhibit 28-19.) (F) 10-149 - Supplemental Indenture No. 1 dated as of February 1, 1988 to Trust Indenture, Mortgage, Security Agreement and Assignment of Facility Lease dated as of September 15, 1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with Chrysler Consortium Corporation and Irving Trust Company, as Indenture Trustee. (1987 Form 10-K, Exhibit 28-20.) (F) 10-150 - Tax Indemnification Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (1987 Form 10-K, Exhibit 28- 21.) (A)(F) 10-151 - Amendment No. 1 dated as of November 5, 1992 to Tax Indemnification Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (A)(F) 10-152 - Amendment No. 2 dated as of January 12, 1993 to Tax Indemnification Agreement dated as of September 15, 1987, between Chrysler Consortium Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (A)(F) 10-153 - Amendment No. 3 dated as of September 30, 1994 to Tax Indemnification Agreement dated as of September 15, 1987, between Chrysler Consortium - 39 - Exhibit Number - ------- Corporation, as Owner Participant, and Ohio Edison Company, as Lessee. (F) 10-154 - Assignment, Assumption and Further Agreement dated as of September 15, 1987, among The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation, The Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, and Toledo Edison Company. (1987 Form 10-K, Exhibit 28-22.) (F) 10-155 - Additional Support Agreement dated as of September 15, 1987, between The First National Bank of Boston, as Owner Trustee under a Trust Agreement, dated as of September 15, 1987, with Chrysler Consortium Corporation, and Ohio Edison Company. (1987 Form 10-K, Exhibit 28-23.) 10-156 - Operating Agreement dated March 10, 1987 with respect to Perry Unit No. 1 between the CAPCO Companies. (1987 Form 10-K, Exhibit 28-24.) 10-157 - Operating Agreement for Bruce Mansfield Units Nos. 1, 2 and 3 dated as of June 1, 1976, and executed on September 15, 1987, by and between the CAPCO Companies. (1987 Form 10-K, Exhibit 28-25.) 10-158 - Operating Agreement for W. H. Sammis Unit No. 7 dated as of September 1, 1971 by and between the CAPCO Companies. (1987 Form 10-K, Exhibit 28-26.) 10-159 - OE-APS Power Interchange Agreement dated March 18, 1987, by and among Ohio Edison Company and Pennsylvania Power Company, and Monongahela Power Company and West Penn Power Company and The Potomac Edison Company. (1987 Form 10-K, Exhibit 28-27.) 10-160 - OE-PEPCO Power Supply Agreement dated March 18, 1987, by and among Ohio Edison Company and Pennsylvania Power Company and Potomac Electric Power Company. (1987 Form 10-K, Exhibit 28-28.) 10-161 - Supplement No. 1 dated as of April 28, 1987, to the OE-PEPCO Power Supply Agreement dated March 18, 1987, by and among Ohio Edison Company, Pennsylvania Power Company, and Potomac Electric Power Company. (1987 Form 10-K, Exhibit 28-29.) 10-162 - APS-PEPCO Power Resale Agreement dated March 18, 1987, by and among Monongahela Power Company, West Penn Power Company, and The Potomac Edison Company and Potomac Electric Power Company. (1987 Form 10-K, Exhibit 28-30.) - 40 - Exhibit Number - ------- 11 - Calculation of fully diluted earnings per common share. 12 - Consolidated fixed charge ratios. (A) 13 - 1994 Annual Report to Stockholders. (Only those portions expressly incorporated by reference in this Form 10-K are to be deemed "filed" with the SEC.) 21 - List of Subsidiaries of the Registrant at December 31, 1994. 23 - Consent of Independent Public Accountants. 27 - Financial Data Schedule. (A) Provided herein in electronic format as an exhibit. (B) Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, the Company has not filed as an exhibit to this Form 10-K any instrument with respect to long-term debt if the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis, but hereby agrees to furnish to the SEC on request any such instruments. (C) Management contract or compensatory plan contract or arrangement filed pursuant to Item 601 of Regulation S-K. (D) Substantially similar documents have been entered into relating to three additional Owner Participants. (E) Substantially similar documents have been entered into relating to five additional Owner Participants. (F) Substantially similar documents have been entered into relating to two additional Owner Participants. Note: Reports of the Company on Forms 10-Q and 10-K are on file with the SEC under number 1-2578. Pursuant to Rule 14a - 3 (10) of the Securities Exchange Act of 1934, the Company will furnish any exhibit in this Report upon the payment of the Company's expenses in furnishing such exhibit. (b) Reports on Form 8-K None. - 41 - REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Ohio Edison Company: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Ohio Edison Company's Annual Report to Stockholders incorporated by reference in this Form 10-K and have issued our report thereon dated February 3, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14 is the responsibility of the Company's management and is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Cleveland, Ohio February 3, 1995 - 42 - SCHEDULE II OHIO EDISON COMPANY CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Additions Charged Charged (Credited) (Credited) Beginning to to Other Ending Description Balance Income Accounts Deductions Balance - --------------------------- --------- ---------- ---------- ---------- ------- (In Thousands) Year Ended December 31, 1994: Accumulated provision for uncollectible accounts $6,907 $ (32) $1,998 (a) $ 6,356 (b) $2,517 ====== ======== ====== ========= ====== Year Ended December 31, 1993: Accumulated provision for uncollectible accounts $6,432 $ 8,002 $1,751 (a) $ 9,278 (b) $6,907 ====== ======== ====== ======== ====== Year Ended December 31, 1992: Accumulated provision for uncollectible accounts $5,312 $ 20,034 $1,875 (a) $ 20,789 (b) $6,432 ====== ======== ====== ======== ====== - ----------------- (a) Represents recoveries and reinstatements of accounts previously written off. (b) Represents the write-off of accounts considered to be uncollectible.
- 43 - 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. OHIO EDISON COMPANY BY /s/W. R. Holland ---------------------------------------- W. R. Holland President and Chief Executive Officer Date: March 21, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated: /s/W. R. Holland /s/H. P. Burg - --------------------------------- -------------------------- W. R. Holland H. P. Burg President and Chief Senior Vice President Executive Officer and Director and Director (Principal Executive Officer) (Principal Financial Officer and Principal Accounting Officer) /s/Donald C.Blasius /s/Glenn H. Meadows - --------------------------------- -------------------------- Donald C. Blasius Glenn H. Meadows Director Director /s/Robert H.Carlson /s/Paul J. Powers - --------------------------------- -------------------------- Robert H. Carlson Paul J. Powers Director Director /s/Robert M. Carter /s/Charles W. Rainger - --------------------------------- -------------------------- Robert M. Carter Charles W. Rainger Director Director /s/Carol A.Cartwright /s/George M. Smart - -------------------------------- -------------------------- Carol A. Cartwright George M. Smart Director Director /s/R. L.Loughhead /s/Jesse T. Williams, Sr. - -------------------------------- -------------------------- R. L. Loughhead Jesse T. Williams, Sr. Director Director Date: March 21, 1995 - 44 - EX-11 2 EXHIBIT 11 OHIO EDISON COMPANY CALCULATION OF FULLY DILUTED EARNINGS PER COMMON SHARE Year Ended December 31, ----------------------------- 1992 1993 1994 -------- -------- -------- (In thousands, except per share amounts) EARNINGS - -------- Income before cumulative effect ..... $276,986 $ 24,523 $303,531 Add: Tax benefit from employee stock ownership plan dividends ...... 5,592 - - Less: Preferred and preference stock dividend requirements ......... 23,926 23,707 21,679 -------- -------- -------- Earnings before cumulative effect ... 258,652 816 281,852 Cumulative effect of a change in accounting ..................... - 58,201 - -------- -------- -------- Earnings after cumulative effect .... $258,652 $ 59,017 $281,852 ======== ======== ======== SHARES - ------ Weighted average number of common shares outstanding ......... 152,569 152,569 143,237 ======== ======== ======== Earnings per share of Common Stock: Before cumulative effect of a change in accounting ..................... $1.70 $ .01 $1.97 Cumulative effect of a change in accounting ..................... - .38 - ----- ----- ----- Earnings per share of Common Stock .. $1.70 $ .39 $1.97 ===== ===== ===== NOTE: These calculations are submitted in accordance with Securities Exchange Act of 1934 Release No. 9083 although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because they result in dilution of less than 3%. Statement of Differences ------------------------ Exhibit Number 11, Calculation of fully diluted earnings per common share, is not included in the printed document. EX-12 3 EXHIBIT 12 Page 1 OHIO EDISON COMPANY CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
Year Ended December 31, ---------------------------------------------------- 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- (Dollars in Thousands) EARNINGS AS DEFINED IN REGULATION S-K: Income before extraordinary items $281,676 $264,823 $276,986 $ 24,523 $303,531 Interest and other charges, before reduction for amounts capitalized 329,520 324,017 296,292 285,169 283,849 Provision for income taxes 170,804 173,725 147,407 32,431 188,886 Interest element of rentals charged to income (a) 126,804 125,777 117,224 104,700 108,463 -------- -------- -------- -------- -------- Earnings as defined $908,804 $888,342 $837,909 $446,823 $884,729 ======== ======== ======== ======== ======== FIXED CHARGES AS DEFINED IN REGULATION S-K: Interest on long-term debt $293,993 $288,599 $275,835 $262,861 $259,554 Other interest expense 25,545 27,696 13,958 16,445 18,931 Subsidiary's preferred stock dividend requirements 9,982 7,722 6,499 5,863 5,364 Adjustment to subsidiary's preferred stock dividends to state on a pre-income tax basis 6,009 5,018 3,420 7,659 3,294 Interest element of rentals charged to income (a) 126,804 125,777 117,224 104,700 108,463 -------- -------- -------- -------- -------- Fixed charges as defined $462,333 $454,812 $416,936 $397,528 $395,606 ======== ======== ======== ======== ======== CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES (b) 1.97 1.95 2.01 1.12 2.24 ==== ==== ==== ==== ==== - --------------------- (a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined. (b) These ratios exclude fixed charges applicable to the guarantee of the debt of a coal supplier aggregating $16,922,000, $13,298,000, $9,762,000, $8,565,000 and $7,424,000 for each of the five years ended December 31, 1994, respectively.
- 1 - EXHIBIT 12 Page 2 OHIO EDISON COMPANY CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS)
Year Ended December 31, ---------------------------------------------------- 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- (Dollars in Thousands) EARNINGS AS DEFINED IN REGULATION S-K: Income before extraordinary items $281,676 $264,823 $276,986 $ 24,523 $303,531 Add- Interest and other charges, before reduction for amounts capitalized 329,520 324,017 296,292 285,169 283,849 Provision for income taxes 170,804 173,725 147,407 32,431 188,886 Interest element of rentals charged to income (a) 126,804 125,777 117,224 104,700 108,463 -------- -------- -------- -------- -------- Earnings as defined $908,804 $888,342 $837,909 $446,823 $884,729 ======== ======== ======== ======== ======== FIXED CHARGES AS DEFINED IN REGULATION S-K PLUS PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS): Interest on long-term debt $293,993 $288,599 $275,835 $262,861 $259,554 Other interest expense 25,545 27,696 13,958 16,445 18,931 Preferred and preference stock dividend requirements 37,610 32,476 30,425 29,570 27,043 Adjustment to preferred and preference stock dividends to state on a pre-income tax basis 22,421 20,887 15,854 38,265 16,444 Interest element of rentals charged to income (a) 126,804 125,777 117,224 104,700 108,463 -------- -------- -------- -------- -------- Fixed charges as defined plus preferred and preference stock dividend requirements (pre-income tax basis) $506,373 $495,435 $453,296 $451,841 $430,435 ======== ======== ======== ======== ======== CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS (PRE-INCOME TAX BASIS) (b) 1.79 1.79 1.85 0.99 (c) 2.06 ==== ==== ==== ==== ==== - ---------------------- (a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined. (b) These ratios exclude fixed charges applicable to the guarantee of the debt of a coal supplier aggregating $16,922,000, $13,298,000, $9,762,000, $8,565,000 and $7,424,000 for each of the five years ended December 31, 1994, respectively. (c) Earnings were deficient in 1993 by $5,018,000 to cover fixed charges plus preferred stock dividend requirements.
- 2 - EX-13 4 Report of Independent Public Accountants To the Stockholders and Board of Directors of Ohio Edison Company: We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of Ohio Edison Company (an Ohio corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, retained earnings, capital stock and other paid-in capital, cash flows and taxes for each of the three years in the period ended December 31, 1994. 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 statement 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 Ohio Edison Company and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Notes 1 and 2 to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for unbilled revenues, income taxes and postretirement benefits other than pensions. ARTHUR ANDERSEN LLP Cleveland, Ohio February 3, 1995 - 1 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS We accomplished a great deal in 1994 as we continued preparing for the significant changes expected to take place in the electric utility industry. For the second straight year, the Companies achieved record retail sales. This accomplishment, in combination with our aggressive cost control efforts, raised earnings on common stock to $1.97 per share in 1994 compared to $1.82 a year earlier. The 1993 amount, up from $1.70 per share in 1992, excludes nonrecurring charges of $1.43 per share, which included a $276,578,000 after-tax write-off of Perry Unit 2, the expected resolution of fuel cost recovery issues in Pennsylvania and certain costs associated with our Performance Initiatives program. The effect of the write-off was partially offset by a $58,201,000 credit from the cumulative effect of a change in accounting to accrue metered but unbilled revenue (see Note 2). Our ongoing commitment to cost control is producing good results. Although total revenues dropped slightly in 1994, lower operation and maintenance expenses pushed operating income to its highest level in our history. A review of the work we do was an integral part of the Performance Initiatives program that began in 1993. As a result of this review, efficiencies were identified and the workforce has been reduced by 812 employees since the beginning of 1994 through voluntary retirements, layoffs and normal attrition. This 14% reduction is expected to produce annual savings of at least $40,000,000. Operating revenues decreased 0.1% from 1993 levels, which were 1.6% higher than 1992. The following table summarizes the sources of changes in operating revenues for 1994 and 1993 as compared to the previous year: 1994 1993 ------ ------ (In millions) Change in retail kilowatt-hour sales $ 2.4 $ 95.9 Change in average retail electric price ( 3.1) (37.8) Sales to utilities 2.2 (17.0) Other (3.2) (3.5) ------ ------ Net Increase (Decrease) $ (1.7) $ 37.6 ====== ====== An improving local economy helped us achieve record retail sales of 25.1 billion kilowatt-hours in 1994, which occurred despite milder weather conditions during the second half of the year as compared to 1993. More importantly, we added more than 13,100 new retail customers in 1994 after gaining approximately 14,500 customers the previous year. Commercial sales rose 1.4% in 1994, which follows a 4.7% gain in the previous year. Residential sales fell slightly in 1994 after posting a healthy 7.2% increase in 1993. Industrial sales were also down slightly in 1994 because of reduced production (until mid-1995) by a major steel customer - 2 - that is modernizing its facilities. Sales to all other industrial customers were up 3.5% for the year, following a 1.3% increase in 1993. Reduced demand for bulk power and capacity constraints reduced our opportunity sales to other utilities in 1994 and 1993, falling 18.2% and 11.7%, respectively. As a result of these factors, total kilowatt-hour sales were down 3.9% compared with sales in 1993, which were up slightly over 1992. Because of lower total kilowatt-hour sales, we spent 3.4% less on fuel and purchased power in 1994. However, we experienced higher nuclear expenses in 1994 and 1993 mainly due to corrective maintenance work at the Perry Plant. Due to mechanical failures and an extended refueling outage in 1994, Perry's availability was below expected levels during both years. The plant's operator has developed a comprehensive plan that is expected to improve Perry's performance. A major portion of the corrective action plan was completed during the 1994 outage, and the remainder will be implemented during Perry's next refueling, which is scheduled for early 1996. The plant returned to service on August 14, 1994, and ran continuously for the remainder of the year. Our other operating costs were down markedly in 1994 compared with the two previous years. Costs in 1993 included a one-time $39,000,000 charge related to the Performance Initiatives program. Both 1994 and 1993 include higher expenses associated with the January 1, 1993, adoption of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." These comparative increases were partially offset in 1993 by the previous year's additional provision for uncollectible accounts. Our cost-containment efforts resulting from the initiatives also contributed to lower operation and maintenance expenses in 1994. Lower general taxes in 1994 resulted primarily from property taxes recognized in 1993 related to prior years. Penn Power provided an $8,728,000 reserve for deferred postretirement benefit costs (see Note 1) in 1994, which was responsible for the majority of the change in net amortization of regulatory assets compared to 1993. The change between 1993 and 1992 was due to the deferral of incremental costs resulting from the adoption of SFAS No. 106 and the amortization of regulatory liabilities. Other income was lower in 1994 than in 1993 because of a change in accounting for interest income from the Employee Stock Ownership Plan Trust (see Note 1). The effect of this accounting change on other income was partially offset by increased income from other investments. These include deposits by OES Finance as collateral for reimbursement obligations relating to certain letters of credit supporting our obligations to lessors under the Beaver Valley 2 sale and leaseback arrangements (see Note 4). The decrease in 1993 resulted from 1992's amortization of investment tax credits associated with disallowed Perry Unit 1 and Beaver Valley Unit 2 construction costs (see Note 1). The electric utility industry is subject to the same inflationary pressures as those experienced by other industries. To the extent that we incur additional costs or receive benefits resulting from the effects of inflation, those effects are generally reflected in our electric rates through the traditional rate making process. - 3 - CAPITAL RESOURCES AND LIQUIDITY Over the past decade, we have improved our financial position significantly. Because of higher revenues and aggressive cost controls, cash generated from operations was 42% higher in 1994 than it was ten years ago. By the end of 1994, we were serving about 104,000 more customers than at the end of 1984, with approximately 2,400 fewer employees. In 1984, our customer-employee ratio was 129 to 1. That ratio has improved significantly over the years, standing at 210 customers per employee at the end of 1994. In addition, capital expenditures have dropped significantly during that period. Expenditures in 1994 were less than one-third of what they were in 1984, and annual depreciation charges have exceeded property additions since the end of 1987. We have also taken advantage of opportunities in the financial markets to reduce our embedded capital costs during the past decade. Through refinancing activities, we have reduced the average cost of outstanding debt from 11.04% at the end of 1984 to 8.17% at the end of 1994. Also, the cost of outstanding preferred and preference stock was reduced from 9.87% at the end of 1984 to 7.15% at the end of 1994. As a result of these actions, we have improved our financial position. For example, we have enhanced our coverage ratios and the percentage of common equity to total capitalization. Our indenture ratio, which is used to determine the ability to issue first mortgage bonds, improved from 3.18 at the end of 1984 to 5.34 at the end of 1994. Over the same period, our charter ratio, a measure of the ability to issue preferred stock, improved from 1.72 to 2.11, and, our common equity percentage of capitalization rose from approximately 33% at the end of 1984 to about 40% at the end of 1994. At the end of 1994, we had the capability to issue $1,461,000,000 principal amount of first mortgage bonds and $1,089,000,000 of preferred stock. However, our projections for 1995 indicate no need to issue new long-term securities during the year. We had about $23,000,000 of cash and temporary investments and $175,000,000 of short-term indebtedness on December 31, 1994. OES Fuel had approximately $30,000,000 of unused borrowing capability at the end of 1994 that was available for reloan to the Company. We also had $55,000,000 of unused short-term bank lines of credit, and $72,000,000 of bank facilities that provide for borrowings on a short-term basis at the banks' discretion. OES Capital had approximately $15,000,000 of unused, short-term borrowing capability on December 31, 1994. During the past five years, we spent approximately $1,100,000,000 on our construction programs (excluding nuclear fuel). During that period, the Employee Stock Ownership Plan Trust was also funded with $200,000,000. We estimate our construction programs and capital lease requirements for the period 1995-1999 to be about $800,000,000 (excluding nuclear fuel), of which approximately $180,000,000 applies to 1995. We also have cash requirements of approximately $1,301,000,000 for the 1995-1999 period to meet maturities of, and sinking fund requirements for, long-term debt and preferred stock. Of that amount, approximately $227,000,000 applies to 1995. - 4 - Investments for additional nuclear fuel during the 1995-1999 period are estimated to be approximately $172,000,000, of which about $30,000,000 applies to 1995. During the same periods, our nuclear fuel investments are expected to be reduced by approximately $225,000,000 and $56,000,000, respectively, as the nuclear fuel is consumed. Also, we have operating lease commitments of approximately $575,000,000 for the 1995-1999 period, of which approximately $106,000,000 relates to 1995. We recover the cost of nuclear fuel consumed and operating leases through our electric rates. Reference is made to Note 1 for a discussion of regulatory assets. Although the recoverable amounts are significant, about 83% of these deferred costs are already reflected in our rates, and are being recovered over approximately 22 years. Recovery of the remaining amounts will be requested in a future rate proceeding. The Central Area Power Coordination Group (CAPCO) companies filed suit against Westinghouse Electric Corporation in 1991, alleging that six steam generators supplied by Westinghouse for the Beaver Valley Plant are defective and that replacement could be required earlier than the 40-year design life. A federal court rejected the claims of the CAPCO companies in December 1994, after a three-month trial. The CAPCO companies have appealed the verdict. The plant's operator has no current plans to replace the steam generators and is evaluating the feasibility of applying new technologies to repair the generators. If the generators need to be replaced and the companies decide to do so, the capital costs to the CAPCO companies could range from $100,000,000 to $150,000,000 per unit. That estimate is based upon costs other utilities have experienced. We have a 52.5% interest in Beaver Valley Unit 1 and a 41.88% interest in Unit 2. OUTLOOK We will be facing many competitive challenges in the years ahead as the electric utility industry becomes more deregulated and more energy suppliers enter the marketplace. Retail wheeling, which would allow retail customers to purchase electricity from other energy producers, would be one of those challenges if legislators choose to move in that direction. In any event, changing market forces make it imperative that we continue to find ways to reduce costs, increase revenues and enhance shareholder value. The Company's Rate Stabilization and Service Area Development Program will help respond to these market forces by freezing base electric rates at 1990 levels until at least 1997, absent any significant changes in regulatory, environmental or tax requirements. In addition, we have a corporate goal of extending the rate freeze until the year 2000. Effective operation of the nuclear facilities we jointly own will also help meet these competitive challenges. Proper planning to eventually decommission those facilities is also important to our competitive position. Beginning in 1995, we plan to increase our annual funding of the decommissioning obligation. Also, the staff of the Securities and Exchange Commission (SEC) has raised questions regarding the recognition, measurement and classification of decommissioning costs in the financial statements of electric utilities. Any future SEC actions are uncertain at this time (see Note 1). - 5 - The Clean Air Act Amendments of 1990, discussed in Note 7, require significant reductions of sulfur dioxide and nitrogen oxides from our coal-fired generating units by 1995 and additional emission reductions by 2000. We are well-positioned to meet the 1995 requirements at minimal costs, and we are pursuing cost- effective compliance strategies for meeting the reduction requirements that begin in 2000. Through the Performance Initiatives program, we have identified substantial savings that will better position us to successfully compete in the future. In addition, the program ensures that an economic value added-based justification will be required for capital expenditures. We are also conducting studies to identify other opportunities to increase revenues and operating efficiency. The focus of the entire organization is to improve our competitive position in order to maximize the value of our shareholders' investment in the Company. - 6 - OHIO EDISON COMPANY SELECTED FINANCIAL DATA
1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------------------- (In thousands, except per share amounts) Operating Revenues $2,368,191 $2,369,940 $2,332,378 $2,358,946 $2,240,646 ------------------------------------------------------------------ Operating Income $557,254 $525,330 $522,115 $550,452 $510,279 ------------------------------------------------------------------ Net Income $303,531 $ 82,724 $276,986 $264,823 $281,676 ------------------------------------------------------------------ Earnings on Common Stock $281,852 $ 59,017 $253,060 $240,069 $254,048 ------------------------------------------------------------------ Earnings per Share of Common Stock $1.97 $0.39 $1.70 $1.60 $1.67 Dividends Declared per Share of Common Stock $1.50 $1.50 $1.50 $1.50 $1.73 ------------------------------------------------------------------ Total Assets $8,993,964 $8,918,267 $7,830,026 $7,812,345 $7,841,621 ------------------------------------------------------------------ Capitalization at December 31: Common Stockholders' Equity $2,317,197 $2,243,292 $2,408,164 $2,371,946 $2,545,159 Preferred and Preference Stock: Not Subject to Mandatory Redemption 328,240 328,240 354,240 354,240 354,240 Subject to Mandatory Redemption 40,000 45,500 59,862 65,582 62,822 Long-Term Debt 3,166,593 3,039,263 3,121,647 3,243,167 3,105,248 ------------------------------------------------------------------ Total Capitalization $5,852,030 $5,656,295 $5,943,913 $6,034,935 $6,067,469 ------------------------------------------------------------------ COMMON STOCK DATA The Company's Common Stock is listed on the New York and Chicago stock exchanges and is traded on other registered exchanges. PRICE RANGE OF COMMON STOCK 1994 1993 - ---------------------------- ---- ---- First Quarter High-Low 22-3/4 18-7/8 25-3/8 22-1/8 ------------------------------------- Second Quarter High-Low 19-1/4 16-1/2 26 22-3/4 ------------------------------------- Third Quarter High-Low 19-5/8 17-1/2 25-7/8 24-3/8 ------------------------------------- Fourth Quarter High-Low 19-1/4 17-7/8 25-1/4 21 ------------------------------------- Yearly High-Low 22-3/4 16-1/2 26 21 ------------------------------------- Prices are based on reports published in The Wall Street Journal for ----------------------- New York Stock Exchange Composite Transactions. - 7 - CLASSIFICATION OF HOLDERS OF COMMON STOCK AS OF DECEMBER 31, 1994 Holders of Record Shares Held Number % Number % ------- ------- -------- ------- Individuals 121,289 82.87 53,849,390 35.30 Fiduciaries 23,167 15.83 9,510,404 6.23 Nominees 68 .05 87,448,432 57.32 All Others 1,834 1.25 1,761,211 1.15 ---------------------------------------- Total 146,358 100.00 152,569,437 100.00 ---------------------------------------- As of January 31, 1995, there were 145,578 holders of 152,569,437 shares of the Company's Common Stock. Quarterly dividends of 37.5 cents per share were paid on the Company's Common Stock during 1994 and 1993. Information regarding retained earnings available for payment of cash dividends is given in Note 5A.
- 8 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1994 1993 1992 - -------------------------------------------------------------------------------------------------------- (In thousands, except per share amounts) OPERATING REVENUES $2,368,191 $2,369,940 $2,332,378 ---------- ---------- ---------- OPERATING EXPENSES AND TAXES: Fuel and purchased power 440,936 456,494 463,599 Nuclear operating costs 304,716 290,321 274,719 Other operating costs 427,133 474,241 440,425 ---------- ---------- ---------- Total operation and maintenance expenses 1,172,785 1,221,056 1,178,743 Provision for depreciation 220,502 217,980 223,497 General taxes 237,020 245,554 229,332 Amortization (deferral) of net regulatory assets (884) (6,753) 18,333 Income taxes 181,514 166,773 160,358 ---------- ---------- ---------- Total operating expenses and taxes 1,810,937 1,844,610 1,810,263 ---------- ---------- ---------- OPERATING INCOME 557,254 525,330 522,115 ---------- ---------- ---------- OTHER INCOME AND EXPENSE: Perry Unit 2 termination (Note 3) - (390,835) - Income tax benefit from Perry Unit 2 termination - 142,092 - Other 16,459 19,921 36,283 ---------- ---------- ---------- Total other income (expense) 16,459 (228,822) 36,283 ---------- ---------- ---------- TOTAL INCOME 573,713 296,508 558,398 ---------- ---------- ---------- NET INTEREST AND OTHER CHARGES: Interest on long-term debt 259,554 262,861 275,835 Deferred nuclear unit interest (8,511) (8,518) (8,392) Allowance for borrowed funds used during construction and capitalized interest (5,156) (4,666) (6,488) Other interest expense 18,931 16,445 13,958 Subsidiary's preferred stock dividend requirements 5,364 5,863 6,499 ---------- ---------- ---------- Net interest and other charges 270,182 271,985 281,412 ---------- ---------- ---------- INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING 303,531 24,523 276,986 Cumulative effect to January 1, 1993 of a change in accounting for unbilled revenues (net of income taxes of $33,632,000) (Note 2) - 58,201 - ---------- ---------- ---------- NET INCOME 303,531 82,724 276,986 - 9 - PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS 21,679 23,707 23,926 ---------- ---------- ---------- EARNINGS ON COMMON STOCK $ 281,852 $ 59,017 $ 253,060 ========== ========== ========== EARNINGS PER SHARE OF COMMON STOCK: Before cumulative effect of a change in accounting $1.97 $ .01 $1.70 Cumulative effect to January 1, 1993 of a change in accounting for unbilled revenues (Note 2) - .38 - ----- ----- ----- EARNINGS PER SHARE OF COMMON STOCK $1.97 $ .39 $1.70 ===== ===== ===== DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $1.50 $1.50 $1.50 ===== ===== ===== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 10 - OHIO EDISON COMPANY CONSOLIDATED BALANCE SHEETS
At December 31, 1994 1993 - ----------------------------------------------------------------------------------------------- (In thousands) ASSETS UTILITY PLANT: In service, at original cost $8,518,050 $8,380,430 Less--Accumulated provision for depreciation 2,910,587 2,732,527 ---------- ---------- 5,607,463 5,647,903 ---------- ---------- Construction work in progress-- Electric plant 174,970 182,894 Nuclear fuel 52,470 46,879 ---------- ---------- 227,440 229,773 ---------- ---------- 5,834,903 5,877,676 ---------- ---------- OTHER PROPERTY AND INVESTMENTS: Letter of credit collateralization (Note 4) 277,763 - Other 197,546 181,815 ---------- ---------- 475,309 181,815 ---------- ---------- CURRENT ASSETS: Cash and cash equivalents 23,291 159,690 Receivables-- Customers (less accumulated provisions of $2,517,000 and $6,907,000, respectively, for uncollectible accounts) 254,515 298,913 Other 54,713 42,428 Materials and supplies, at average cost-- Fuel 40,528 41,513 Other 81,809 87,689 Prepayments 71,836 72,889 ---------- ---------- 526,692 703,122 ---------- ---------- DEFERRED CHARGES: Regulatory assets 2,005,333 1,993,795 Unamortized sale and leaseback costs 106,883 110,656 Other 44,844 51,203 ---------- ---------- 2,157,060 2,155,654 ---------- ---------- $8,993,964 $8,918,267 ========== ========== - 11 - CAPITALIZATION AND LIABILITIES CAPITALIZATION (See Consolidated Statements of Capitalization): Common stockholders' equity $2,317,197 $2,243,292 Preferred stock-- Not subject to mandatory redemption 277,335 277,335 Subject to mandatory redemption 25,000 25,000 Preferred stock of consolidated subsidiary-- Not subject to mandatory redemption 50,905 50,905 Subject to mandatory redemption 15,000 20,500 Long-term debt 3,166,593 3,039,263 ---------- ---------- 5,852,030 5,656,295 ---------- ---------- CURRENT LIABILITIES: Currently payable preferred stock and long-term debt 227,496 444,170 Short-term borrowings (Note 6) 174,642 104,126 Accounts payable 100,884 127,895 Accrued taxes 140,629 107,687 Accrued interest 65,743 72,667 Other 152,856 141,251 ---------- ---------- 862,250 997,796 ---------- ---------- DEFERRED CREDITS: Accumulated deferred income taxes 1,799,324 1,798,551 Accumulated deferred investment tax credits 223,827 231,863 Property taxes 106,458 101,182 Other 150,075 132,580 ---------- ---------- 2,279,684 2,264,176 ---------- ---------- COMMITMENTS, GUARANTEES AND CONTINGENCIES (Notes 4 and 7) ---------- ---------- $8,993,964 $8,918,267 ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
- 12 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1994 1993 1992 - ------------------------------------------------------------------------------------- (In thousands) Balance at beginning of year $322,821 $490,564 $462,087 Net income 303,531 82,724 276,986 Tax benefit from ESOP dividends - 5,256 5,592 -------- -------- -------- 626,352 578,544 744,665 - ------------------------------------------------------------------------------------- Cash dividends on preferred and preference stock 21,926 23,275 23,874 Cash dividends on common stock 214,826 228,855 228,855 Premium on redemption of preferred stock - 3,593 1,372 -------- -------- -------- 236,752 255,723 254,101 -------- -------- -------- Balance at end of year (Note 5A) $389,600 $322,821 $490,564 - ------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CAPITAL STOCK AND OTHER PAID-IN CAPITAL Preferred and Preference Stock ------------------------------------------ Not Subject to Subject to Common Stock Mandatory Redemption Mandatory Redemption ------------------------ Unallocated ------------------------------------------ Other ESOP Par or Par or Number Par Paid-In Common Number Stated Number Stated of Shares Value Capital Stock of Shares Value of Shares Value ----------- ---------- -------- ---------- --------- ------ --------- ------- Balance, January 1, 1992 152,569,437 $1,373,125 $731,793 $(195,059) 3,542,399 $354,240 636,216 $70,102 Allocation of ESOP Shares 7,741 Sale of 7.625% Preferred Stock 150,000 15,000 Redemptions-- $102.50 Series (1,800) (1,800) 8.24% Series (5,000) (500) 11.00% Series (8,000) (800) 15.00% Series (54,400) (5,440) 10.50% Series (100,000) (10,000) 11.50% Series (15,000) (1,500) 13.00% Series (10,000) (1,000) - ---------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1992 152,569,437 1,373,125 731,793 (187,318) 3,542,399 354,240 592,016 64,062 Allocation of ESOP Shares 6,799 Sale of 7.75% Class A Preferred Stock (3,361) 4,000,000 100,000 Sale of 7.75% Preferred Stock (345) 250,000 25,000 - 13 - Redemptions-- $102.50 Series (216) (5,400) (5,400) 8.24% Series (45,000) (4,500) 8.48% Series (6) (80,000) (8,000) 8.64% Series (400,000) (40,000) 9.12% Series (450,000) (45,000) 9.16% eries (80,000) (8,000) 11.00% Series (8,000) (800) 11.50% Series (60,000) (6,000) 13.00% Series (10,000) (1,000) - ---------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993 152,569,437 1,373,125 727,865 (180,519) 6,782,399 378,240 463,616 46,362 Minimum liability for unfunded retirement benefits (3,053) Allocation of ESOP Shares 36 10,143 Redemptions-- Market Auction Series (500,000) (50,000) 11.00% Series (3,616) (362) 13.00% Series (60,000) (6,000) - ---------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 152,569,437 $1,373,125 $724,848 $(170,376) 6,282,399 $328,240 400,000 $40,000 ============================================================================================================================ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 14 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31, 1994 1993 - ------------------------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) COMMON STOCKHOLDERS' EQUITY: Common stock, $9 par value, authorized 175,000,000 shares- l52,569,437 shares outstanding $1,373,125 $1,373,125 Other paid-in capital 724,848 727,865 Retained earnings (Note 5A) 389,600 322,821 Unallocated employee stock ownership plan common stock- 9,076,489 and 9,608,739 shares, respectively (Note 5B) (170,376) (180,519) ---------- ---------- Total common stockholders' equity 2,317,197 2,243,292 ---------- ---------- Number of Shares Optional Outstanding Redemption Price ---------------- --------------------- 1994 1993 Per Share Aggregate PREFERRED STOCK (Note 5C): Cumulative, $100 par value- Authorized 6,000,000 shares Not Subject to Mandatory Redemption: 3.85% -- 500,000 $ -- $ -- -- 50,000 3.90% 152,510 152,510 103.63 15,804 15,251 15,251 4.40% 176,280 176,280 108.00 19,038 17,628 17,628 4.44% 136,560 136,560 103.50 14,134 13,656 13,656 4.56% 144,300 144,300 103.38 14,917 14,430 14,430 7.24% 363,700 363,700 101.98 37,090 36,370 36,370 7.36% 350,000 350,000 101.74 35,609 35,000 35,000 8.20% 450,000 450,000 102.07 45,932 45,000 45,000 Optional Redemption-February 1994 -- (50,000) --------- --------- -------- --------- ---------- 1,773,350 2,273,350 182,524 177,335 177,335 Cumulative, $25 par value- Authorized 8,000,000 shares Not Subject to Mandatory Redemption: 7.75% 4,000,000 4,000,000 25.00 100,000 100,000 100,000 --------- --------- -------- --------- ---------- Total not subject to mandatory redemption 5,773,350 6,273,350 $282,524 277,335 277,335 ========= ========= ======== --------- ---------- Cumulative, $100 par value- Subject to Mandatory Redemption (Note 5D): 8.45% 250,000 250,000 25,000 25,000 ========= ========= --------- ---------- - 15 - PREFERRED STOCK OF CONSOLIDATED SUBSIDIARY (Note 5C): Cumulative, $100 par value- Authorized 1,200,000 shares Not Subject to Mandatory Redemption: 4.24% 40,000 40,000 $103.13 $ 4,125 4,000 4,000 4.25% 41,049 41,049 105.00 4,310 4,105 4,105 4.64% 60,000 60,000 102.98 6,179 6,000 6,000 7.64% 60,000 60,000 101.42 6,085 6,000 6,000 7.75% 250,000 250,000 100.00 25,000 25,000 25,000 8.00% 58,000 58,000 102.07 5,920 5,800 5,800 --------- --------- ---------- ---------- ---------- Total not subject to mandatory redemption 509,049 509,049 $ 51,619 50,905 50,905 ========= ========= ========== ---------- ---------- Subject to Mandatory Redemption (Note 5D): 7.625% 150,000 150,000 $107.63 $ 16,144 15,000 15,000 11.00% -- 3,616 -- -- -- 362 13.00% -- 60,000 -- -- -- 6,000 Redemption within one year -- (862) ---------- --------- ---------- ---------- ---------- Total subject to mandatory redemption 150,000 213,616 $ 16,144 15,000 20,500 ========== ========= ========== ---------- ----------
- 16 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION (Cont'd)
At December 31, 1994 1993 1994 1993 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- (In thousands) LONG-TERM DEBT (Note 5E): First mortgage bonds: Ohio Edison Company- Pennsylvania Power Company- 8.800% due 1994-96 -- 27,600 9.000% due 1996 50,000 50,000 13.430% due 1994 -- 30,000 9.740% due 1999-2019 20,000 20,000 12.740% due 1995 30,000 30,000 7.500% due 2003 40,000 40,000 8.500% due 1996 150,000 150,000 6.375% due 2004 50,000 50,000 8.750% due 1998 150,000 150,000 6.625% due 2004 20,000 20,000 6.875% due 1999 150,000 150,000 8.500% due 2022 50,000 50,000 6.375% due 2000 80,000 80,000 7.625% due 2023 40,000 40,000 ------- ------- 7.375% due 2002 120,000 120,000 7.500% due 2002 34,265 34,265 8.250% due 2002 125,000 125,000 8.625% due 2003 150,000 150,000 6.875% due 2005 80,000 80,000 9.750% due 2019 35,300 150,000 8.750% due 2022 100,000 100,000 7.625% due 2023 75,000 75,000 7.875% due 2023 100,000 100,000 --------- --------- Total first mortgage bonds 1,379,565 1,551,865 270,000 270,000 1,649,565 1,821,865 --------- --------- ------- ------- --------- --------- Secured notes: Ohio Edison Company- Pennsylvania Power Company- 9.345% due 1994 -- 50,000 4.750% due 1998 850 850 8.380% due 1996 53,718 87,987 6.080% due 2000 23,000 23,000 7.930% due 2002 77,997 -- 5.400% due 2013 1,000 1,000 7.680% due 2005 200,000 -- 12.000% due 2014 -- 12,700 9.200% due 2014 -- 50,000 8.125% due 2015 14,250 14,250 10.500% due 2015 60,000 60,000 5.400% due 2017 10,600 10,600 10.625% due 2015 40,000 40,000 7.150% due 2017 17,925 17,925 7.450% due 2016 47,725 47,725 5.900% due 2018 16,800 16,800 7.100% due 2018 26,000 26,000 8.100% due 2018 10,300 10,300 7.000% due 2021 69,500 69,500 8.100% due 2020 5,200 5,200 7.150% due 2021 443 443 7.150% due 2021 14,482 14,482 7.625% due 2023 50,000 50,000 6.150% due 2023 12,700 -- 8.100% due 2023 30,000 30,000 6.450% due 2027 14,500 14,500 7.750% due 2024 108,000 108,000 5.450% due 2028 6,950 6,950 5.625% due 2029 50,000 50,000 5.950% due 2029 238 238 ------- ------- 5.950% due 2029 56,212 56,212 5.450% due 2033 14,800 14,800 -------- -------- 884,395 740,667 148,795 148,795 1,033,190 889,462 -------- -------- ------- ------- - 17 - OES Fuel- 5.72% weighted average interest rate 124,984 131,611 ---------- ---------- Total secured notes 1,158,174 1,021,073 ---------- ---------- Unsecured notes: Ohio Edison Company- 9.440% due 1995 75,000 75,000 7.380% due 1997 100,000 100,000 8.635% due 1997 50,000 50,000 4.900% due 2012 50,000 50,000 4.250% due 2014 50,000 50,000 3.450% due 2015 50,000 50,000 4.250% due 2018 56,000 56,000 4.750% due 2018 57,100 57,100 3.450% due 2032 53,400 53,400 -------- -------- Total unsecured notes 541,500 541,500 541,500 541,500 -------- -------- ---------- ---------- Capital lease obligations (Note 4) 54,180 59,312 ---------- ---------- Net unamortized discount on debt (9,330) (11,179) ---------- ---------- Long-term debt due within one year (227,496) (393,308) ---------- ---------- Total long-term debt 3,166,593 3,039,263 ---------- ---------- TOTAL CAPITALIZATION $5,852,030 $5,656,295 ============================================================================================================================ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 18 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994 1993 1992 - --------------------------------------------------------------------------------------------------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $303,531 $ 82,724 $ 276,986 Adjustments to reconcile net income to net cash from operating activities: Provision for depreciation 220,502 217,980 223,497 Nuclear fuel and lease amortization 72,141 59,858 85,419 Deferred income taxes, net 21,156 (26,233) 18,221 Investment tax credits, net (8,036) (8,345) (17,857) Deferred revenue - - 19,517 Allowance for equity funds used during construction (5,277) (4,257) (3,025) Deferred fuel costs, net (2,656) (1,078) 5,130 Perry Unit 2 termination - 390,835 - Cumulative effect of a change in accounting for unbilled revenues - (58,201) - Other amortization, net 8,422 1,184 9,941 -------- -------- ---------- Internal cash before dividends 609,783 654,467 617,829 Receivables 32,113 (1,962) 2,278 Materials and supplies 6,865 41,467 (14,889) Accounts payable (18,261) 9,823 (19,986) Other 64,564 19,088 4,727 -------- -------- ---------- Net cash provided from operating activities 695,064 722,883 589,959 -------- -------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: New Financing-- Preferred stock - 121,294 15,000 Long-term debt 434,759 765,358 937,797 Short-term borrowings, net 70,516 - 56,716 Redemptions and Repayments-- Preferred and preference stock 56,362 122,502 22,412 Long-term debt 483,347 773,128 1,065,377 Short-term borrowings, net - 47,445 - Dividend Payments-- Common stock 216,782 224,943 234,188 Preferred and preference stock 21,483 20,926 23,786 -------- -------- ---------- Net cash used for financing activities 272,699 302,292 336,250 -------- -------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions 258,249 256,746 241,508 Letter of credit collateralization deposit 277,763 - - Sale and leaseback restructuring fees 1,507 10,417 37,654 Other 21,245 7,950 14,133 -------- -------- ---------- - 19 - Net cash used for investing activities 558,764 275,113 293,295 -------- -------- ---------- Net increase (decrease) in cash and cash equivalents (136,399) 145,478 (39,586) Cash and cash equivalents at beginning of year 159,690 14,212 53,798 -------- -------- ---------- Cash and cash equivalents at end of year $ 23,291 $159,690 $ 14,212 ======== ======== ========== SUPPLEMENTAL CASH FLOWS INFORMATION: Cash Paid During the Year-- Interest (net of amounts capitalized) $267,319 $262,410 $ 290,420 Income taxes 143,202 94,272 134,768 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 20 - OHIO EDISON COMPANY CONSOLIDATED STATEMENTS OF TAXES
For the Years Ended December 31, 1994 1993 1992 (In thousands) GENERAL TAXES: Real and personal property $113,484 $124,709 $111,533 State gross receipts 100,996 97,348 94,415 Social security and unemployment 14,822 15,626 15,166 Other 7,718 7,871 8,218 -------- -------- -------- Total general taxes $237,020 $245,554 $229,332 ======== ======== ======== PROVISION FOR INCOME TAXES: Currently payable- Federal $161,219 $ 61,920 $132,712 State 14,547 5,544 14,331 -------- -------- -------- 175,766 67,464 147,043 -------- -------- -------- Deferred, net- Federal 20,796 489 17,586 State 360 6,455 635 -------- -------- -------- 21,156 6,944 18,221 -------- -------- -------- Investment tax credits, net of amortization (8,036) (8,345) (17,857) -------- -------- -------- Total provision for income taxes $188,886 $ 66,063 $147,407 ======== ======== ======== INCOME STATEMENT CLASSIFICATION OF PROVISION FOR INCOME TAXES: Operating income $181,514 $166,773 $160,358 Other income 7,372 (134,342) (12,951) Cumulative effect of a change in accounting - 33,632 - -------- -------- -------- Total provision for income taxes $188,886 $ 66,063 $147,407 ======== ======== ======== RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXES: Book income before provision for income taxes $492,417 $148,787 $424,393 ======== ======== ======== Federal income tax expense at statutory rate $172,346 $ 52,075 $144,294 Increases (reductions) in taxes resulting from- Excess of book over tax depreciation - - 19,741 Amortization of investment tax credits (8,036) (8,345) (32,092) State income taxes net of federal income tax benefit 9,690 7,799 9,878 Amortization of tax regulatory assets 14,503 15,412 - Other, net 383 (878) 5,586 -------- -------- -------- Total provision for income taxes $188,886 $ 66,063 $147,407 ======== ======== ======== - 21 - SOURCES OF DEFERRED TAX EXPENSE: Excess of tax over book depreciation, net $ 27,627 Difference between tax and book revenue, net (9,084) Alternative minimum tax credits utilized 12,467 Other, net (12,789) -------- Net deferred tax expense $ 18,221 ======== ACCUMULATED DEFERRED INCOME TAXES AT DECEMBER 31: Property basis differences $1,024,737 $ 972,501 Allowance for equity funds used during construction 278,172 282,525 Deferred nuclear expense 272,516 277,555 Customer receivables for future income taxes 237,826 244,540 Deferred sale and leaseback costs 87,068 90,878 Unamortized investment tax credits (82,491) (85,459) Other (18,504) 16,011 ---------- ---------- Net deferred income tax liability $1,799,324 $1,798,551 ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
- 22 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The consolidated financial statements include Ohio Edison Company (Company) and its wholly owned subsidiaries, Pennsylvania Power Company (Penn Power), OES Capital, Incorporated (OES Capital), OES Finance, Incorporated (OES Finance) and OES Fuel, Incorporated (OES Fuel). All significant intercompany transactions have been eliminated. The Company and Penn Power (Companies) follow the accounting policies and practices prescribed by the Public Utilities Commission of Ohio (PUCO), the Pennsylvania Public Utility Commission (PPUC) and the Federal Energy Regulatory Commission (FERC). REVENUES- The Companies' retail customers are metered on a cycle basis. Revenue was recognized for electric service based on meters read through the end of the year for years prior to 1993. Beginning in 1993, revenue is recognized to include unbilled sales through the end of the year (see Note 2). Receivables from customers include sales to residential, commercial and industrial customers located in the Companies' service area and sales to wholesale customers. There was no material concentration of receivables at December 31, 1994 or 1993, with respect to any particular segment of the Companies' customers. FUEL COSTS- The Companies recover fuel-related costs not otherwise included in base rates from retail customers through separate energy rates. Any over or under collection resulting from the operation of these rates are included as adjustments to subsequent energy rates. Accordingly, the Companies defer the difference between actual fuel-related costs incurred and the amounts currently recovered from their customers. UTILITY PLANT AND DEPRECIATION- Utility plant reflects the original cost of construction, including payroll and related costs such as taxes, employee benefits, administrative and general costs and financing costs (allowance for funds used during construction). The Companies provide for depreciation on a straight-line basis at various rates over the estimated lives of property included in plant in service. The annual composite rate for electric plant was approximately 3.0% in 1994, 1993 and 1992. The Companies recognize approximately $5,000,000 annually (as depreciation expense) for future decommissioning costs applicable to their ownership and leasehold interests in three nuclear generating units. The Companies' share of the future obligation to decommission these units is approximately $388,000,000 in current dollars and (using a 2.8% escalation rate) approximately $865,000,000 in future dollars. The estimated obligation (based on site specific studies) and the escalation rate were developed using information obtained from consultants. Payments for decommissioning are expected to begin in 2016, when - 23 - actual decommissioning work begins. The Companies have recovered approximately $48,000,000 for decommissioning through their electric rates from customers through December 31, 1994; such amounts are reflected in the reserve for depreciation on the Consolidated Balance Sheet. If the actual costs of decommissioning the units exceed the accumulated amounts recovered from customers, the Companies expect that difference will be recoverable from their customers. The Companies have approximately $34,400,000 invested in external decommissioning trust funds as of December 31, 1994. Earnings on these funds are reinvested with a corresponding increase to the depreciation reserve. The Companies have also recognized an estimated liability of approximately $19,900,000 related to decontamination and decommissioning of nuclear enrichment facilities operated by the United States Department of Energy (DOE), as required by the Energy Policy Act of 1992. The Companies recover these costs through their respective energy rates. The staff of the Securities and Exchange Commission has raised questions regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in the financial statements of electric utilities. In response to these questions, the Financial Accounting Standards Board (FASB) has agreed to review the accounting for nuclear decommissioning costs. If current electric utility industry accounting practices for decommissioning are changed: (1) annual provisions for decommissioning could increase; (2) the full estimated cost for decommissioning could be recorded as a liability rather than as accumulated depreciation; and (3) income from the external decommissioning trusts could be reported as investment income. The FASB's review is expected to be completed in 1995. COMMON OWNERSHIP OF GENERATING FACILITIES- The Companies and other Central Area Power Coordination Group (CAPCO) companies own, as tenants in common, various power generating facilities. Each of the companies is obligated to pay a share of the costs associated with any jointly owned facility in the same proportion as its interest. The Companies' portions of operating expenses associated with jointly owned facilities are included in the corresponding operating expenses on the Consolidated Statements of Income. The amounts reflected on the Consolidated Balance Sheet under utility plant at December 31, 1994, include the following: Companies' Utility Accumulated Construction Ownership/ Plant Provision for Work in Leasehold Generating Units in Service Depreciation Progress Interest - ------------------------------------------------------------------- (In thousands) W.H. Sammis #7 $ 308,000 $ 88,200 $ 3,300 68.80% Bruce Mansfield #1,#2 and #3 762,800 335,000 9,600 50.68% Beaver Valley #1 and #2 1,847,400 544,500 2,900 47.11% Perry #1 1,623,000 281,700 4,300 35.24% - ----------------------------------------------------------------- Total $4,541,200 $1,249,400 $20,100 - ----------------------------------------------------------------- - 24 - NUCLEAR FUEL- Nuclear fuel is recorded at original cost, which includes material, enrichment, fabrication and interest costs incurred prior to reactor load. The Companies amortize the cost of nuclear fuel based on the rate of consumption. The Companies' electric rates include amounts for the future disposal of spent nuclear fuel based upon the formula used to compute payments to the DOE. INCOME TAXES- Details of the total provision for income taxes are shown on the Consolidated Statements of Taxes. Deferred income taxes result from timing differences in the recognition of revenues and expenses for tax and accounting purposes. Investment tax credits (ITC), which were deferred when utilized, are being amortized over the estimated life of the related property. ITC amortization in 1992 included $21,300,000 associated with portions of the Company's investments in Perry Unit 1 and Beaver Valley Unit 2 which are not recoverable from retail customers. The Companies adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," on January 1, 1993, which requires the liability method to be used to account for deferred income taxes. Under this standard, deferred income tax liabilities related to tax and accounting basis differences are recognized at the statutory income tax rates in effect when the liabilities are expected to be paid. The components of accumulated deferred income taxes as of December 31, 1994 and 1993, are disclosed on the Consolidated Statements of Taxes. RETIREMENT BENEFITS- The Companies' trusteed, noncontributory defined benefit pension plans cover almost all full-time employees. Upon retirement, employees receive a monthly pension based on length of service and compensation. The Companies use the projected unit credit method for funding purposes and were not required to make pension contributions during the three years ended December 31, 1994. The following sets forth the funded status of the plans and amounts recognized on the Consolidated Balance Sheets as of December 31: - 25 - 1994 1993 - --------------------------------------------------------------- (In thousands) Actuarial present value of benefit obligations: Vested benefits $483,850 $471,205 Nonvested benefits 27,312 28,180 - --------------------------------------------------------------- Accumulated benefit obligation $511,162 $499,385 =============================================================== Plan assets at fair value $719,310 $770,240 Actuarial present value of projected benefit obligation 593,931 605,848 - --------------------------------------------------------------- Plan assets in excess of projected benefit obligation 125,379 164,392 Unrecognized net loss (gain) 8,868 (6,743) Unrecognized prior service cost 12,755 14,074 Unrecognized net transition asset (49,775) (57,719) - --------------------------------------------------------------- Net pension asset $ 97,227 $114,004 =============================================================== The assets of the plans consist primarily of common stocks, United States government bonds and corporate bonds. Net pension costs for the three years ended December 31, 1994, were computed as follows: 1994 1993 1992 - ---------------------------------------------------------------- (In thousands) Service cost-benefits earned during the period $ 15,159 $ 13,171 $ 13,278 Interest on projected benefit obligation 45,299 42,723 40,291 Return on plan assets 8,344 (97,849) (59,297) Net deferral (amortization) (89,324) 14,954 (22,378) Voluntary early retirement program expense 37,299 6,014 7,289 - ---------------------------------------------------------------- Net pension cost $16,777 $(20,987) $(20,817) ================================================================ The assumed discount rate used in determining the actuarial present value of the projected benefit obligation was 8.5% in 1994, 7.5% in 1993 and 9% in 1992. The assumed rate of increase in future compensation levels used to measure this obligation was 4.5% in each year. Expected long-term rates of return on plan assets were assumed to be 10% in 1994 and 11% in 1993 and 1992. The Companies provide a minimum amount of noncontributory life insurance to retired employees in addition to optional contributory insurance. Health care benefits, which include certain employee deductibles and copayments, are also available to retired employees, their dependents and, under certain circumstances, their survivors. The Companies pay insurance premiums to cover a portion of these benefits in excess of set limits; all amounts up to the limits are paid by the Companies. In 1993 the Companies adopted SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions," which - 26 - requires companies to recognize the expected cost of providing other postretirement benefits to employees and their beneficiaries and covered dependents from the time employees are hired until they become eligible to receive those benefits. The Companies do not currently fund these future benefits. Costs paid by the Companies for retiree health care and life insurance benefits of $9,689,000 were charged to income in 1992. The following sets forth the accrued postretirement benefit cost on the Consolidated Balance Sheets as of December 31: 1994 1993 - ----------------------------------------------------------------- (In thousands) Accumulated postretirement benefit obligation allocation: Retirees $165,386 $136,288 Fully eligible active plan participants 12,381 36,827 Other active plan participants 77,599 67,597 -------- -------- Accumulated postretirement benefit obligation 255,366 240,712 Unrecognized transition obligation (183,196) (193,374) Unrecognized net loss (23,425) (25,048) -------- -------- Accrued postretirement benefit cost $ 48,745 $ 22,290 ================================================================== Net periodic postretirement benefit costs for the years ended December 31, 1994 and 1993, were computed as follows: 1994 1993 - ----------------------------------------------------------------- (In thousands) Service cost-benefits attributed to the period $ 4,865 $ 3,929 Interest cost on accumulated benefit obligation 19,332 18,039 Amortization of transition obligation 10,178 10,178 Amortization of loss 787 - Voluntary early retirement program expense 2,815 1,533 -------- ------- Net periodic postretirement benefit cost 37,977 33,679 Benefits paid 11,522 11,389 -------- ------- Increase in accrued postretirement benefit cost $26,455 $22,290 ================================================================= The health care trend rate assumption is 7.89% in the first year gradually decreasing to 3.5% for the year 2008 and later. The discount rates used to compute the accumulated postretirement benefit obligation in 1994 and 1993 were 8.5% and 7.5%, respectively. An increase in the health care trend rate assumption by one percentage point in all years would increase the accumulated postretirement benefit obligation by approximately $33,200,000 and the aggregate annual service and interest costs by approximately $3,700,000. - 27 - The PUCO and PPUC have authorized the Companies to defer the incremental costs resulting from adopting SFAS No. 106 (compared to costs computed under the former accounting basis) for future recovery from their retail customers. Similar authorizations relating to other utilities regulated by the PPUC were appealed by the Office of Consumer Advocate to the Commonwealth Court of Pennsylvania. The Commonwealth Court has issued conflicting opinions and both cases have been appealed to the Pennsylvania Supreme Court. Due to the uncertainty resulting from these conflicting opinions, Penn Power provided a reserve in 1994 against the full amount deferred. EARNINGS PER SHARE OF COMMON STOCK- The American Institute of Certified Public Accountants issued its Statement of Position 93-6 (SOP) in late 1993, which changes generally accepted accounting principles relating to employee stock ownership plans (ESOP) for shares purchased after December 31, 1992. The Company's ESOP shares were purchased prior to that date, but the Company elected to adopt the SOP effective January 1, 1994. This change in accounting reduced net income by approximately $8,700,000 in 1994; the net effect to earnings per common share resulting from this change was an increase of six cents after eliminating unallocated ESOP shares from the computation. Earnings per share of common stock shown on the Consolidated Statements of Income for the three years ended December 31, 1994, were computed as follows: 1994 1993 1992 - --------------------------------------------------------------- (In thousands, except per share amounts) Earnings: Income before cumulative effect $303,531 $ 24,523 $276,986 Preferred and preference stock dividend requirements (21,679) (23,707) (23,926) Tax benefit from employee stock ownership plan dividends - - 5,592 - --------------------------------------------------------------- Earnings before cumulative effect 281,852 816 258,652 Cumulative effect of a change in accounting - 58,201 - - --------------------------------------------------------------- Earnings after cumulative effect $281,852 $ 59,017 $258,652 - --------------------------------------------------------------- Shares: Weighted average number of common shares outstanding 143,237 152,569 152,569 Earnings per share of Common Stock: Before cumulative effect of a change in accounting $1.97 $.01 $1.70 Cumulative effect of a change in accounting - .38 - - --------------------------------------------------------------- Earnings per share of Common Stock $1.97 $.39 $1.70 =============================================================== - 28 - SUPPLEMENTAL CASH FLOWS INFORMATION- All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets. The Companies reflect temporary cash investments at cost, which approximates their market value. Noncash financing and investing activities included capital lease transactions amounting to $3,613,000, $1,487,000 and $5,831,000 for the years 1994, 1993 and 1992, respectively. OES Fuel commercial paper transactions have initial maturity periods of three months or less, are reported net within financing activities under long-term debt and are reflected as long-term debt on the Consolidated Balance Sheets (see Note 5E). All borrowings with initial maturities of less than one year are defined as financial instruments under generally accepted accounting principles and are reported on the Consolidated Balance Sheets at cost which approximates their fair market value. The following sets forth the approximate fair value and related carrying amounts of all other long-term debt, preferred stock subject to mandatory redemption and investments other than cash and cash equivalents as of December 31: 1994 1993 - ---------------------------------------------------------------- Carrying Fair Carrying Fair Value Value Value Value -------- ------ -------- ------ (In Millions) Long-term debt $3,224 $3,062 $3,253 $3,451 Preferred stock $ 40 $ 38 $ 46 $ 48 Investments other than cash and cash equivalents $ 320 $ 317 $ 37 $ 37 The fair values of long-term debt and preferred stock reflect the present value of the cash outflows relating to those securities based on the current call price, the yield to maturity or the yield to call, as deemed appropriate at the end of each respective year. The yields assumed were based on securities with similar characteristics offered by a corporation with credit ratings similar to the Companies' ratings. The fair value of investments other than cash and cash equivalents represent cost (which approximates fair value) or the present value of the cash inflows based on the yield to maturity. The yields assumed were based on financial instruments with similar characteristics and terms. All of the Companies' financial instruments are for purposes other than trading. REGULATORY ASSETS- The Companies recognize, as regulatory assets, costs which the FERC, PUCO and PPUC have authorized for recovery from customers in future periods. Without such authorization, the costs would have been charged to income as incurred. Amounts shown below as being recovered currently would be recovered over approximately 22 years based upon amounts amortized during 1994. Amortization of the remaining assets, which are deferred for recovery in future rate proceedings, would increase revenues by less than 2% on an annual basis. - 29 - Regulatory assets on the Consolidated Balance Sheets are comprised of the following: 1994 1993 - ---------------------------------------------------------------- (In thousands) Currently being recovered through rates: Nuclear unit expenses $ 503,625 $ 519,533 Customer receivables for future income taxes 639,592 658,115 Sale and leaseback costs 242,033 252,625 Property taxes 106,458 101,182 Loss on reacquired debt 99,384 103,158 DOE decommissioning and decontamination costs 21,170 19,275 Uncollectible customer accounts 44,368 13,425 Other 15,669 12,987 - ---------------------------------------------------------------- 1,672,299 1,680,300 - ---------------------------------------------------------------- Not currently recovered through rates: Nuclear unit interest expense 267,913 259,402 Employee postretirement benefit costs 27,055 16,456 Perry Unit 2 termination 38,066 37,637 - ---------------------------------------------------------------- 333,034 313,495 - ---------------------------------------------------------------- Total $2,005,333 $1,993,795 ================================================================ 2. CHANGE IN ACCOUNTING FOR UNBILLED REVENUES: On January 1, 1993, the Companies changed their accounting policies to recognize revenue relating to metered sales which remain unbilled at the end of the accounting period. This change was made to more closely match the Companies' revenues with the costs of services provided. The effect of this change increased net income for the year ended December 31, 1993 (before the cumulative effect from periods prior to 1993) by approximately $4,600,000 ($.03 per share of common stock). The cumulative effect to January 1, 1993 was $58,201,000 (net of $33,632,000 of income taxes) or $.38 per share. The reported results of operations for the year ended December 31, 1992, would not have been materially different if this new accounting policy had been in effect during that year. 3. PERRY UNIT 2 TERMINATION: In December 1993, the Companies announced that they would not participate in further construction of Perry Unit 2 and abandoned Perry Unit 2 as a possible electric generating plant. The Company determined that recovery from customers of its Perry Unit 2 investment was not probable, resulting in a $366,377,000 write-off of its investment in 1993. Penn Power expects its Perry Unit 2 investment to be recoverable from its retail customers. However, due to the anticipated delay in commencement of recovery and taking into account the expected rate treatment, Penn Power recognized an impairment to its Perry Unit 2 investment of $24,458,000 in 1993. As a result, net income for the year ended December 31, 1993, was reduced by $248,743,000 ($1.63 per share of common stock). - 30 - 4. LEASES: The Companies lease a portion of their nuclear generating facilities, certain transmission facilities, computer equipment, office space and other property and equipment under cancelable and noncancelable leases. In 1987, the Company sold portions of its ownership interests in Perry Unit 1 and Beaver Valley Unit 2 and simultaneously entered into operating leases on the portions sold for basic lease terms of approximately 29 years. During the terms of the leases the Company continues to be responsible, to the extent of its combined ownership and leasehold interest, for costs associated with the units including construction expenditures, operation and maintenance expenses, insurance, nuclear fuel, property taxes and decommissioning. The basic rental payments are adjusted when applicable federal tax law changes. The Company has the right, at the end of the respective basic lease terms, to renew the leases for up to two years. The Company also has the right to purchase the facilities at the expiration of the basic lease term or renewal term (if elected) at a price equal to the fair market value of the facilities. OES Finance was established during the third quarter of 1994 for the sole purpose of maintaining deposits pledged as collateral to secure reimbursement obligations relating to certain letters of credit supporting the Company's obligations to lessors under the Beaver Valley Unit 2 sale and leaseback arrangements. The deposits pledged to the financial institution providing those letters of credit are the sole property of OES Finance. In the event of liquidation, OES Finance, as a separate corporate entity, would have to satisfy its obligations to creditors before any of its assets could be made available to the Company as sole owner of OES Finance common stock. Consistent with the regulatory treatment, the rental payments for capital and operating leases are charged to operating expenses on the Consolidated Statements of Income. Such costs for the three years ended December 31, 1994, are summarized as follows: 1994 1993 1992 - -------------------------------------------------------------- (In thousands) Operating leases Interest element $100,980 $ 96,804 $108,870 Other 14,530 15,418 13,308 Capital leases Interest element 7,483 7,896 8,354 Other 6,960 6,843 6,985 - -------------------------------------------------------------- Total rental payments $129,953 $126,961 $137,517 ============================================================== - 31 - The future minimum lease payments as of December 31, 1994, are: Capital Operating Leases Leases - --------------------------------------------------------------- (In thousands) 1995 $ 16,744 $ 106,073 1996 15,076 108,501 1997 13,540 113,826 1998 12,434 120,741 1999 11,117 125,595 Years thereafter 103,858 2,362,768 - --------------------------------------------------------------- Total minimum lease payments 172,769 $2,937,504 ========== Executory costs 43,086 - ------------------------------------------------ Net minimum lease payments 129,683 Interest portion 75,503 - ------------------------------------------------ Present value of net minimum lease payments 54,180 Less current portion 6,573 - ------------------------------------------------ Noncurrent portion $ 47,607 ================================================ 5. CAPITALIZATION: (A) RETAINED EARNINGS- Under the Company's first mortgage indenture, the Company's consolidated retained earnings unrestricted for payment of cash dividends on the Company's common stock were $322,781,000 at December 31, 1994. (B) EMPLOYEE STOCK OWNERSHIP PLAN- The Companies fund the matching contribution for their 401(k) savings plan through an ESOP Trust. All full-time employees eligible for participation in the 401(k) savings plan are covered by the ESOP. The ESOP borrowed $200,000,000 from the Company and acquired 10,654,114 shares of the Company's common stock on the open market. Dividends on ESOP shares are used to service the debt. Shares are released from the ESOP on a pro-rata basis as debt service payments are made. In 1994, 1993 and 1992, 532,250 shares, 369,956 shares and 412,167 shares, respectively, were allocated to employees with the corresponding expense recognized based on the shares allocated method. The fair value of 9,076,489 shares unallocated as of December 31, 1994, was approximately $168,000,000. Total ESOP related compensation expense was calculated as follows: - 32 - 1994 1993 1992 - --------------------------------------------------------------- (In thousands) Base compensation $ 10,179 $ 6,799 $ 7,741 Interest on ESOP debt - 19,985 19,985 Dividends on common stock held by the ESOP and used to service debt (1,966) (15,944) (15,970) Interest earned by the ESOP - (275) (317) - --------------------------------------------------------------- Total expense $ 8,213 $ 10,565 $ 11,439 =============================================================== (C) PREFERRED STOCK- Penn Power's 7.625% and 7.75% series of preferred stock have restrictions which prevent early redemption prior to October 1997 and July 2003, respectively. The Company's 8.45% series of preferred stock has no optional redemption provision, and its 7.75% series is not redeemable before April 1998. All other preferred stock may be redeemed by the Companies in whole, or in part, with 30-60 days' notice. The optional redemption price for Penn Power's 7.625% series shown on the Consolidated Statements of Capitalization will decline to $100 per share by 2007. (D) PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION- The Company's 8.45% series of preferred stock has an annual sinking fund requirement for 50,000 shares beginning on September 16, 1997. Penn Power's 7.625% series has an annual sinking fund requirement for 7,500 shares beginning on October 1, 2002. Preferred shares are retired at $100 per share plus accrued dividends. Sinking fund requirements for the next five years are $5,000,000 in each year from 1997 through 1999. (E) LONG-TERM DEBT- The first mortgage indentures and their supplements, which secure all of the Companies' first mortgage bonds, serve as direct first mortgage liens on substantially all property and franchises, other than specifically excepted property, owned by the Companies. Based on the amount of bonds authenticated by the Trustee through December 31, 1994, the Company's annual sinking and improvement fund requirement for all bonds issued under the mortgage amounts to $30,056,000. The Company expects to deposit funds in 1995 which will be withdrawn upon the surrender for cancellation of a like principal amount of bonds, which are specifically authenticated for such purposes against unfunded property additions or against previously retired bonds. This method can result in minor increases in the amount of the annual sinking fund requirement. Sinking fund requirements for first mortgage bonds and maturing long-term debt (excluding capital leases) for the next five years are: - 33 - - ------------------------------------------------------------------ 1995 $220,923,000 1996 382,675,000 1997 334,845,000 1998 161,521,000 1999 162,036,000 - ------------------------------------------------------------------ The Companies' obligations to repay certain pollution control revenue bonds are secured by several series of first mortgage bonds and, in some cases, by subordinate liens on the related pollution control facilities. Certain pollution control revenue bonds are entitled to the benefit of irrevocable bank letters of credit of $338,831,000. To the extent that drawings are made under those letters of credit to pay principal of, or interest on, the pollution control revenue bonds, the Company is entitled to a credit against its obligation to repay those bonds. The Company pays an annual fee of 0.625% to 0.925% of the amounts of the letters of credit to the issuing banks and is obligated to reimburse the banks for any drawings thereunder. Nuclear fuel purchases are financed through the issuance of OES Fuel commercial paper and loans, both of which are supported by a $225,000,000 long-term bank credit agreement which expires March 31, 1997. Accordingly, the commercial paper and loans are reflected as long-term debt on the Consolidated Balance Sheets. OES Fuel must pay an annual facility fee of 0.1875% on the total line of credit and an annual commitment fee of 0.0625% on any unused amount. 6. SHORT-TERM BORROWINGS AND BANK LINES OF CREDIT: Short-term borrowings outstanding at December 31, 1994, include OES Capital debt which is secured by customer accounts receivable. OES Capital can borrow up to $120,000,000 under a receivables financing agreement at rates based on certain bank commercial paper. OES Capital is required to pay an annual fee of 0.46% on the amount of the entire finance limit. The receivables financing agreement expires April 23, 1996. The Companies have lines of credit with domestic banks that provide for borrowings of up to $55,000,000 under various interest rate options. Short-term borrowings may be made under these lines of credit on the Companies' unsecured notes. To assure the availability of these lines, the Companies are required to pay annual commitment fees that vary from 0.22% to 0.50%. These lines expire at various times during 1995. The weighted average interest rates on short-term borrowings outstanding at December 31, 1994 and 1993, were 5.76% and 3.23%, respectively. 7. COMMITMENTS, GUARANTEES AND CONTINGENCIES: CONSTRUCTION PROGRAM- The Companies' current forecasts reflect expenditures of approximately $800,000,000 for property additions and improvements from 1995-1999, of which approximately $180,000,000 is applicable to 1995. Investments for additional nuclear fuel during the 1995- 1999 period are estimated to be approximately $172,000,000, of which approximately $30,000,000 applies to 1995. During the same periods, the Companies' nuclear fuel investments are expected to be - 34 - reduced by approximately $225,000,000 and $56,000,000, respectively, as the nuclear fuel is consumed. NUCLEAR INSURANCE- The Price-Anderson Act limits the public liability relative to a single incident at a nuclear power plant to $8,920,000,000. The amount is covered by a combination of private insurance and an industry retrospective rating plan. Based on their present ownership and leasehold interests in the Beaver Valley Station and the Perry Plant, the Companies' maximum potential assessment under the industry retrospective rating plan (assuming the other CAPCO companies were to contribute their proportionate share of any assessments under the retrospective rating plan) would be $102,800,000 per incident but not more than $13,000,000 in any one year for each incident. The Companies are also insured as to their respective interests in the Beaver Valley Station and the Perry Plant under policies issued to the operating company for each plant. Under these policies, up to $2,750,000,000 is provided for property damage and decontamination and decommissioning costs. The Companies have also obtained approximately $345,000,000 of insurance coverage for replacement power costs for their respective interests in Perry and Beaver Valley. Under these policies, the Companies can be assessed a maximum of approximately $15,200,000 for accidents at any covered nuclear facility occurring during a policy year which are in excess of accumulated funds available to the insurer for paying losses. The Companies intend to maintain insurance against nuclear risks as described above as long as it is available. To the extent that replacement power, property damage, decontamination, decommissioning, repair and replacement costs and other such costs arising from a nuclear incident at any of the Companies' plants exceed the policy limits of the insurance from time to time in effect with respect to that plant, to the extent a nuclear incident is determined not to be covered by the Companies' insurance policies, or to the extent such insurance becomes unavailable in the future, the Companies would remain at risk for such costs. GUARANTEES- The Companies, together with the other CAPCO companies, have each severally guaranteed certain debt and lease obligations in connection with a coal supply contract for the Bruce Mansfield Plant. As of December 31, 1994, the Companies' shares of the guarantees (which approximate fair market value) were $87,159,000. The price under the coal supply contract, which includes certain minimum payments, has been determined to be sufficient to satisfy the debt and lease obligations. The Companies' total payments under the coal supply contract were $99,774,000, $114,572,000 and $103,657,000 during 1994, 1993 and 1992, respectively. Under the coal supply contract, the Companies' minimum payments in each year during the period 1995 through 1999 are approximately $35,000,000. ENVIRONMENTAL MATTERS- Various federal, state and local authorities regulate the Companies with regard to air and water quality and other environmental matters. The Companies have estimated additional capital expenditures for environmental compliance of approximately - 35 - $70,000,000, which is included in the construction forecast given above under "Construction Program" for 1995 through 1999. The Clean Air Act Amendments of 1990 require significant reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx) from the Companies' coal-fired generating units by 1995 and additional emission reductions by 2000. Compliance options include, but are not limited to, installing additional pollution control equipment, burning less-polluting fuel, purchasing emission allowances, operating facilities in a manner that minimizes pollution, and retiring facilities. In compliance plans submitted to the PUCO and to the Environmental Protection Agency (EPA), the Company stated that SO2 reductions for the years 1995 through 1999 likely will be achieved by burning lower-sulfur fuel, generating more electricity from lower-emitting plants, and/or purchasing emission allowances. Equipment already installed, or to be installed by May 1995, is expected to provide NOx reductions sufficient to meet 1995 requirements. Plans for complying with the year 2000 and later reductions have not been finalized. EPA is conducting additional studies which could indicate the need for additional NOx reductions from the Companies' Pennsylvania facilities by the year 2003. The cost of such reductions, if required, may be substantial. The Company continues to evaluate its compliance plans and other compliance options. The Companies are required to meet federally approved SO2 regulations. Violations of such regulations can result in shutdown of the generating unit involved and/or civil or criminal penalties of up to $25,000 for each day the unit is in violation. The EPA has an interim enforcement policy for SO2 regulations in Ohio that allows for compliance based on a 30-day averaging period. The EPA has proposed regulations that could change the interim enforcement policy, including the method of determining compliance with emission limits. The Companies cannot predict what action the EPA may take in the future with respect to proposed regulations or the interim enforcement policy. The Pennsylvania Department of Environmental Resources has issued regulations dealing with the storage, treatment, transportation and disposal of residual waste such as coal ash and scrubber sludge. These regulations impose additional requirements relating to permitting, ground water monitoring, leachate collection systems, closure, liability insurance and operating matters. The Companies are considering various compliance options but are presently unable to determine the ultimate increase in capital and operating costs at existing sites. Legislative, administrative and judicial actions will continue to change the way that the Companies must operate in order to comply with environmental laws and regulations. With respect to any such changes and to the environmental matters described above, the Companies expect that any resulting additional capital costs which may be required, as well as any required increase in operating costs, would ultimately be recovered from their customers. 8.SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED): The following summarizes certain consolidated operating results by quarter for 1994 and 1993. - 36 - March 31, June 30, September 30, December 31, Three Months Ended 1994 1994 1994 1994 - ------------------------------------------------------------------ (In thousands, except per share amounts) Operating Revenues $601,248 $585,428 $614,390 $567,125 Operating Expenses and Taxes 468,850 447,353 462,573 432,161 - ------------------------------------------------------------------ Operating Income 132,398 138,075 151,817 134,964 Other Income 2,255 3,534 5,032 5,638 Net Interest and Other Charges 66,723 67,569 68,624 67,266 - ------------------------------------------------------------------ Net Income $ 67,930 $ 74,040 $ 88,225 $ 73,336 - ------------------------------------------------------------------ Earnings on Common Stock $ 62,329 $ 68,681 $ 82,869 $ 67,973 - ------------------------------------------------------------------ Earnings per Share of Common Stock $.44 $.48 $.58 $.47 - ------------------------------------------------------------------ - 37 - March 31, June 30, September 30, December 31, Three Months Ended 1993 1993 1993 1993 - ------------------------------------------------------------------ (In thousands, except per share amounts) Operating Revenues $593,214 $563,349 $624,524 $588,853 Operating Expenses and Taxes 461,719 425,354 472,341 485,196 - ------------------------------------------------------------------ Operating Income 131,495 137,995 152,183 103,657 Other Income (Expense) 4,016 4,988 4,079 (241,905) Net Interest and Other Charges 68,287 68,438 68,041 67,219 - ------------------------------------------------------------------ Income (Loss) Before Cumulative Effect of a Change in Accounting 67,224 74,545 88,221 (205,467) Cumulative Effect of a Change in Accounting 58,201 - - - - ------------------------------------------------------------------ Net Income (Loss) $125,425 $ 74,545 $ 88,221 $(205,467) - ------------------------------------------------------------------ Earnings (Loss) Applicable to Common Stock $119,520 $ 68,310 $ 82,462 $(211,275) - ------------------------------------------------------------------ Earnings (Loss) per Share of Common Stock Before Cumulative Effect of a Change in Accounting $.40 $.45 $.54 $(1.38) Cumulative Effect of a Change in Accounting .38 - - - - ------------------------------------------------------------------ Earnings (Loss) per Share of Common Stock $.78 $.45 $.54 $(1.38) - ------------------------------------------------------------------ - 38 - EX-21 5 EXHIBIT 21 LIST OF SUBSIDIARIES OF THE REGISTRANT AT DECEMBER 31, 1994 Pennsylvania Power Company - Incorporated in Pennsylvania OES Fuel, Incorporated - Incorporated in Ohio OES Capital, Incorporated - Incorporated in Ohio OES Finance, Incorporated - Incorporated in Ohio Statement of Differences ------------------------ Exhibit Number 21, List of Subsidiaries of the Registrant at December 31, 1994, is not included in the printed document. EX-23 6 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included or incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements, File No. 33-49135, No. 33-49259, No. 33-49413 and No. 33-51139. ARTHUR ANDERSEN LLP Cleveland, Ohio March 21, 1995 EX-27 7
OPUR1 (Amounts in 1,000's, except earnings per share) Income tax expense includes $7,372,000 related to other income. 12-MOS DEC-31-1994 DEC-31-1994 PER-BOOK 5,834,903 475,309 526,692 2,157,060 0 8,993,964 1,373,125 554,472 389,600 2,317,197 40,000 328,240 3,166,593 70,000 0 104,642 220,923 0 0 6,573 2,739,796 8,993,964 2,368,191 188,886 1,629,423 1,810,937 557,254 16,459 573,713 270,182 303,531 21,679 281,852 214,826 259,554 695,064 1.97 1.97
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