ML20042A892

Annual Financial Rept 1981

ML20042A892
Person / Time
Site:	Salem
Issue date:	03/18/1982
From:	Public Service Enterprise Group
To:
Shared Package
ML18086B376	List: ML18086B375 ML20042A892
References
NUDOCS 8203240247
Download: ML20042A892 (40)

Text

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O! I; g., +n f ". y l?;T;} ~ Q Results of Operations 1981 - 1980 h,r, 1981 1980 0/o Change

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f Electric Operating Revenues. S 469,683,000 S 358,391,000 31.1 ([. }$ Operating Expenses. S 396,172,000 S 302,158,000 31.1 29D Fuel Costs. S 154,652,000 $ 131,894,000 17.3 . JJ ~ "3 Net income S 46,986,000 38,538,000 21.9

xd 7 i Earnings Per Common Share S

3.03 S 2.62 15.6 .,b Dividends Paid Per Common Share S 2.04 S 1.90 7.4 '"*n d. Total Assets S1,013,789,000 $ 879,795,000 15.2 n Q/. Cash Construction Expenditures. S 113,221,000 88,791,000 27.5 Sales of Electricity (KWH) 5,675,367,000 5,633,904,000 .7 Total Customer Service gw-W..,.9 Installations (Year end). 386,046 379,242 1.8 Q. Nur, ber of Shareholders gMg4 (Common Stock) (Year-end). 48,424 47,762 1.4 y Cl' ', 'M Number of Employees (Year-end). 2,035 1,968 3.4 Book Value S 22.40 S 22.22 .8 Jky, q The Corporate Name and Trade Name jipfh"9D ' Atlantic City Electric Company,1600 Pacific Avenue, Atlantic City, New Jersey 08404, is the official name of the Company as it appears in the Articles of Incorporation. The Company m. also uses the registered trade name Atlantic Electric in various publications to shareholders n and customers, and in its day to-day operations. Notice of Annual Meeting The 1982 Annual Meeting of Shareholders will be held Tuesday, Apnl 27,1982, at Quail HillInn, Route 9, Smithville, New Jersey. A Notice of Meeting will be mailed in March to those shareholders entitled to vote. q ,. --: im. g >~ 3 Y x g g *g : w,p u mp~g 1 4.,,'* . g-9{ +' _ '

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,.*3 4 l m ;- c .w.: a. - nw ~ To Our Shareholders: (ec( ~ 1981 was a successful year for your Company. Atlantic Electric had a successful year making ~ substantial progress in the f ace of major challenges and adversities. These successes oc-F 1 -37,- curred in a number of areas: y Earnings increased by more than 15% to S3.03 per share, representing the fourth con-secutive year of growth in earnings for the Company. Dividends paid in 1981 were increased 4 's g.: to S2.04 per share, compared to $1.90 in 1980, an increase of over 7%. This represents the m-29th consecutive year that the Company has increased its dividend payment-a truly ~ t 't remarkable record. The current annual dividend rate established in July 1981 is $2.12 per share. Atlantic Electric made further progress in reducing its dependence on overseas oil. Only sy ,j 20% of the kilowatt-hours our customers used were produced with oil, compared to 24% in _yw eQ l 1980 and 32% in 1979. We are moving away from oil by means of greater use of coal and ,V - uranium; and are converting more units back to coal as well as importing coal-produced elec-tricity from the Midwest. With the commercial operation of Salem Nuclear Unit No. 2 in Oc- 'n. w.. y.-

3 tober 1981, nuclear's contribution to our electric energy supply is growing.

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a .j 1, By the end of 1981, Atlantic Electric was successfulin reducing its 5-year forecast of con-a j struction expenditures by some $362 million. As a result, cash expenditures for 1982-1986 t

• b-j will drop from $970 million to a much-more-manageable $608 million. We have been able to lower our forecast of load growth and to reschedule major capacity additions because of J

the greater conservation and energy efficiency of our customers. These developments are y

• q consistent with our "New Direction" program announced at the Annual Meeting last year,

'1 U Q This New Direction recognizes that growth in e!ectrical demand is extremely costly to serve M<* .8 u n$-. n s l{ y in these days of high inflation and high interest rates, and that all our efforts should be directed @ s.b 4 toward reducing our capital expenditures. We made real progress in that direction in 1981, f,' - ' eg b ,,W - 3 as evidenced by this reduction W /, h' r . a <., - l1 in projected capital expenditures. , 7,i y ~ i+. + 9 l, t. h + q C<1 S4 'h} 1 e. VQ:Q, ' jW .g N w M. 7 y#. Yg ,s .l A ,,3 Q3&() 3 W f 9 L m: ^} F Q; _ } ~ _, n " g 9 m,+:J, g o Q> s

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?f ' 4&%: % % egga 17: In 1981, Atlantic Electric was successfulin attaining one.of its long term goals. Some years W;n s. 4 %. q back, we set a five year goal to achieve a level of excellence that would warrant national g.,,.v.pyy?g., recognition in the form of the Electric Light & Power Magazine's annual award. We are pleased ?,yvi[w:i that your Company was selected by this prominent trade magazine (through a panel of judges) Q n ~ gr as the Outstanding Electric Utility of the Year 1981! We are doubly pleased that the Com- . e.,.. . a.:pf., .k.y;i',' pany achieved this high level of excellence and that this excellence has been recognized. r. ../' pp But most of all, we are grateful that the management and personnel of Atlantic Electric set %Mfh[gg%pkWh such a challenging goal for themselves and then made it happen. Truly,1981 was a successful year for your Company. However, Atlantic Electric faces ma-4"'. mg jor challenges in 1982 in order to continue its successful performance. Our major challenge ,);.N.... is to maintain good earnings and to finance our planned heavy construction program. Both g ,g ~w - n, %4,A, - 4j;fj7 %.j' problems are more severe in 1982 because we are in a transition period in which many -- ] p [my measures taken in 1981 will bear fruit beyond 1982. chihhh.~.fM For example, major cuts made in our five year capital expenditure program will result in ~ x m.,x; s, n: w:WrJ sizable reductions in our capital outlays in 1983, '84, '85 and '86. But our capital expenditures j M,VM.90 ~~ will still be at a high level in 1SG2-some S160 million compared to approximately S98 million m w.M. +4, in 1983 and $91 million in 1984. These capital expenditures remain high in 1982 because 5 ,J Q%wc U y IM h j,3 g we have rr ljor ongoing programs to convert units from oil back to coal and to rebuild major A;4WM+5?MQ furnace components in our existing coal burning units. These measures will ultimately lower %v 4 m;w @g g.f costs and improve performance and efficiency in our system, but involve sizable outlays in 1982. paw u p; wp.. c' L W;. Earnings performance in 1982 hinges to a large oegree on the timing and adequacy of a rate increase in our base rates. We filed a rate increase request in the amount of S172 4' million on February 19,1982 and will be aggressively pursuing specdy rate relief. We A ~- g t.

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1 .- / m ~,. - s Once we are beyond 1982, the benefits of our New Direction program will be more dramatic in terms of lowered capital expenditures and improved financial parameters. We are con-i ~ vinced that the New Direction program will be in the best interest of the shareholder, the I h' customer and the Nation's efforts to contain inflation and lower interest rates. f-Your Company faces the challenges of 1982 and beyond with a great deal of confidence. This confidence comes from our successes over many years and is highlighted by sorne record { successes in 1981. We have a strong Company.. a Company which gets its strength from k its diversity. We are strong because of the diversity of our service area. We are strong because E of the diversity of our fuels. We are strong because of the diversity of our generating capa-j city. We are strong because of the diversity of our management team. 1 We appreciate the confidence the shareholders have placed in this Company and this ~ j management. We intend to continue to advance the interest of the shareholders while fulfill-c. ing our obligations to serve the customer. Our goal is to continue to be successful so that 4 we may continue to warrant the confidence of our shareholders. j For the Board of Directors, 7' - '5 h, } Dr.c.$ M*C l. }l A C. Lons:etter j Charrman of tne Board 7

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m N7.T.*/.@g 3,, 4 y. g, ~ r,s. e :-- m;, ns.m:n1 The New Direction . $.-l:Q~k - 'j We are pleased that we made substantial progress in 1981 by achieving the Company's S. i,4 _. basic goal of effecting a reduction in growth of the peak demand for electricity and a reduc-4 61-4 "y i tion of estimated construction expenaitures for the next five years. However, we face a major o - gio ".., "j.3 j challenge of reducing projected major cash construction requirements beyond that period 383_$,$ into the 1990s. For that reason we will be expanding the "New Direction Program" in 1982 e ,g;fQf.,6" and in future years as we aggressively pursue energy efficiency and conservation. y g. u., r. i; A,.. We believe that the letter we received from Mrs. Mary Owen, and the comments of Mr. v;WW ce lw.7;[n;;n, 'a ul Joseph Muldoon (see page 13), describe the recognition we hope the "New Direction Pro-x' ~ m /MJ7 j gram" will receive throughout our service area.. and that our present customers, and future .. g~, g.y!l m.w. y 34.- w customers, will adopt the energy efficiency measures which are becoming available.

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,o pk r: o "You and your Company a*re to be most heartily congratulated for the wisdom of your ap- ,j proach to energy conservation and growth limitatiori. Would that other utilities, businesses and corporations would followyourprudent example! ,g p D Your customers are indeed fortunate. " i5 Q~' t. M ' b i . j ^f } ,'\\

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Mrs. Robert i Owen [ y' ' l~ y' T West Long Branch, New Jersey G' r b y n} sy ~r + 4. >y y., v a:< 1 7 l ,, if . y_.: 1. ~ c a:[ a a p

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b{ i g+ h. i ) .f i n "On December 11th, Atlantic City Electric Company announced, as part ofits New Direction g , Program, that it was reducing its 1982-1986 construction budget from S970 million to about X, ) &~ d S610 million, basically due to lowering of its long term peak demand growth rate from 2. 790 [l to 2.40b. We view this decision. and the New Direction Program. favorably as it will i I reduce the necessity for debt and equity financing approximately 3790 over the next five years. l[~ ~ Atlantic City Electric has followed a prudent expansion program and this decision to reduce future expenditures should eliminate the possibility l. ym fk 4~ $ of excess capacity later in the eighties. " Q y % ~, . g-g, g *a v < % < g v,; ~ V~ y i 7 m.- Ia }S Joseph B. Muldoon, Certified Fina' cal Analyst ,M ,Q o -y ; }id &:, q Phdadelphia. Pennsytvania Q'1 a)l iC l Janney Montgomery scott Inc. y 2 w. . + ,,'y Q, \\ ..g n y 3 Q t, ' > -...( w - .A l [, g ', % ..- 4 .- a h.;::su p N-+i w- 't . O) 'Y~ y.s .Y.: b ' ;.:$

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g , m! ; ~^ % 3h y,,y M' , zy ~ bb "K 'q.'a ;' m [ jW . w a1:aY W ' .m i -o-w a i q .w + , ^ W.m Board of Directors ,;e,. Sea +ed se*t to right Richard M. Wilton, Retired Formerly Senior Vce President of the Company. John D. Feehan, President and / + ? Chief Esecutwe Off cer of the Com:,any. Alfred C. Linkletter, Consultant Cha.rman of the Board of Directors of the Company; t}_ ~ '" Mack C. Jones Eng:neer Retired. Eleanor S. Daniel, Se!!-employed Vce Presodent and Director of severalrealestate corporabons. Stand.ng. le't to rignt trying K. Kessler, Executive Mce President RCA Corporation; Matthew Holden, Jr., Professor of Gove nment - '- i; and Foreign A" airs. Universey of Vrgania Richard M. Dicke, Counselor at law Partner of the law Isrm of Sampson Thacher and BaTett. ,L.. L y'. Jos. Michael Gatvin, Jr., President and Enecutwe Director of Salem County Memonal Hospita!; Frank H. Wheaton, Jr., President of ^~*;'~ Wheaton Industres Manufacturer of g! ass and plastic products: John M. Msner, Senior Vce President of Crocker National Bank. 4s.~

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Committee Listings [ Mr unkietter, Cha rman of the Board. serves as an en officio member of all committees and Mr. Feehan, President, serves as an ex ott.cio member of all committees except the Aud;t Committee. 4 Audit Committee Personnel Committee

John M M.ner, Chairman Jos Michael Galvin, Jr., Chairman w

,;, m/b W, Eleanor S Dan +el Eleanor S. Daniel i Jos M.chael Galvin, Jr. Richard M. Diclie WiM ; W. 0^ 4",;"' " ( 3 Mack C Jones Irving K. Kessler Frank H. Wheaton. Jr. -t: ? Irving K. Kewer Corporate Development Committee Shareholder, Community and Government Relations Committee , fp-: Frank H Wheaton, Jr., Cha:rman Eleanor S Daniet. Chairman 2g ] Eleanor S. Daniel Jos Michael Gafvin, Jr. 4 Matthew Holden. Jr. Mattnew Holden, Jr. , j.b. - @6 Mack C. Jones Frank H Wheaton, Jr.

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John M Miner Richard M. Wilson E Energy. Operations and Research Committee Mack C. Jones. Chairman %3p, a g.. 0 Richard M Dicke M, Jos. Schael Galvin, Jr. i ?s, Matthew Holden, Jr. trying K. Kessler R. chard M Wilson E 4 Finance Committee , j.g, John M. Miner, Chairman r a Eleanor S Daniel . &9 - 8 ~~

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- * ' j Pension and Insurance Committee ,s + m.... % e Jr.<. Q:y yJ M-V; g Q', p',.. l Richard M. Ocke, Cha.rman ,gg, , m.4 ;, , i Matthew Holden, Jr. M 'M'. , V ej John M. Miner j$ _ '[ c"' lj Frank H. Wheaton, Jr. djg Richard M Wilson MM' h .y', f,,.1 (,J,$ SW 4,. g m If Officers Q[' Q c Q;, ? ',~ '_3 John D. Feehan. President and Chief Executive Off cer e J- -M Frank J Ficadenti, Senior %ce President n s;. g d Ernest D Huggard. Senior %ce President S $.W[F'gbi%g ' + ' 'I Jerro:d L Jacot>s. Senior %ce President

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..p[p.m;E.'?~. The Company continues to offer a Dividend Reinvestment and Stock Purchase Plan which 9 i M 4(q d.e% - I enables shareholders and employees to automatically invest their cast cividends in Company .t v., _. . :.J stock, and also make optional cash payments without paying brokerage commissions or ser- ., ~ E e3d..R. u t'L M p -[Qfjy vice charges. Over 302,000 shares were purchased through tne Plan in 1981 with proceeds n. , d4fL W W ' ' ' * ' ~ :' ny%g q to the Company in excess of $5 million. There were 12,711 participants in the Plan at year-h ~ r&* gWl @y e n.M.)g end. To enroll, please contact our Investor Records Department. See address on page 40. M m. m.,

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7. t M $Qq Common Stock of the Company is listed on the New York Stock Exchange and the [jh% Philadelphia Stock Exchange. The 5 7/8% Cumulative Convertible Preferred Stock of the pe Fo. #rM.E5

• Company is listed on the New York Stock Exchange.

s$./p. @m..r...v - w M% y r u p, p. m,7 jo.K Report Available n-v;p . - n w. y;gsg f.; The annual report to the Secunties and Exchange Commission on Form 10-K is available to s.- L ' y&%y$~.M. s M w$ shareholders and may be obtained by writing to the Company, Attention: Mr. M. R. Meyer, a:n av m Secretary. See address on page 1. H w n fv % $ w@l79reggif i. "j @$gtR4L v g y. ;.3 Transfer Agents k A 1-r :* p*; ; 4 % MP?;Hw 23 For Common and Preferred Stock .,3.w );&@W E P,. o 1 Morgan Guaranty Trust Company of New York ..WM %,s 30 West Broadway, New York, New York 10015 .mc Me n %...w. %n w L g m :2M W 1 For Common Stock ? %> a.; > M y' F W. $ J First National State Bank of South Jersey pm..e...,as,..y 5 ~+ v 5 Atlantic City, New Jersey 08404 ~ ~ ' $2W: WM WiiD + W G gl.{.-7pf.hg %.J. - *;;....m' g, 4.s,2=k.:4..

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4 w ;r 4 y vw ; w : xm y;. _-- g y - m w q mw n n.: w h I h ' 5 N cm,:B W is: ~. y WM @/,,y: r:A i .s M *:e :3 ~, _w - l f. Report of Management 1 ^n 1 g7 9 - The financial statements presented herem have been prepared by management m conformity with Genera!Iy Accepted Ac-i l gyLA counting Pnnciples apphcabfe to rare-regulated pubt'c ut.hties. Such Account.ng Pnnciples are consistent in all matenal respects g33 - with the accounting presenbed by the Federal Energy Regu!atory Commission and the New Jersey Department of Energy. Board NVA > - et 'ubhc Ut+t:es in prepanng the f,nancial statements. management makes informed judgments and estimates relat:ng to events f %ng, q,, and transactions that are currently being reported The Corrpany has estabhshed a s..*em of internal accounting and financ!at i.VM ' A((?Ii U,, j controls and procedures des 4gned to insure that the books and recoros reflect the transactions of the Company and that estabbshed polces 5ME ~7F and procedures are followed This system is examined by management on a continuing basis for effectiveness and e*f ciency DP,k. "!M ~. j and is reviewed on a regular basis by an internal audt staff that reports d.rectly to the Aud t Committee of the Board of Directors 4/ W W.' M 4 $ m ^,, .3 The financial statements have been examined by Deloitte Haskins & Sells. Cert fied Pubhc Accountants, whose report thereon i n G, Wct P i appears below The auditors provide an objectme, independent review as to management's discharge of its responsibilities in- $%" gif 'I sofar as they relate to the fa:rness of reported operating results and financial cond tion. The,r examination includes procedares y Ed O ' ~ f bel'eved by them to provide reasonab!e assurance that the financial statements are not misteadeng and includes a review of the pc3

QJi l Company's system of internal accounting and financial controls and a test of transactions.

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,[ g5 The Board of D. rectors has overs'ght responsibihty for determining that management has fulfdled its obligation in the prepara-a ? M'JRM'C7 tion of financial statements and the ongoing examination of the Company's system of internal accounting control. The Audit Com-t f

Mc.e mittee, which is composed solely of outsioe directors and reports to the Board of Directors, meets rebutarty with management.

ys,, . s cy. 4 7 7r.; Deloitte Hasions & Seus and the internal aud.t staff to discuss accounting. auditing and financial reporting matters The Aud t ,, DMU;h(M;M*, Comm6ttee reviews the prog'am of audit work performed by the internal audit staff. To insure auditor mdependence, both Deio.tte

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5 4/ f %+_ 6 A, LgJ ' ' Auditors' Opinion 1 h Niht@; h iI Deloitte Haskins & Sells One World Trade Center 4-R,,..g .. [G, Certified Public Accountants New York, New York 10048 -um.m. gf Q Q d @,,- To the Shareholders and the Board of Directors of Atlantic City Electnc Company: k,Q*kM4 { ' ,p3** We have esamined the balance sheets of Atiant c City Electne Company as of December 31,1981 and 1980 and the related N'i statements of income and reta'ned earnrngs and of changes in financeci position for each of the three years in the penod ended kf December 3'.1981. Our esaminatio.s were made in accordance with generatty accepted auditing standards and according!y. jp c,( @3%y, L.g;.1 (M included such tests of the account:ng recNds and such other aud: ting procedures as we cons.dered necessary in the circumstances , ys. ,- Q [,. fn our op:nion, the accompanying financial statements present fa,rly the financial pos. lion of the Company at December 31 a Q+Wn k M &DDa,w , eded December 30 1981 in confonn.ty wdh geeraVy accepted accounting pnne eles applied on a cons. stent bas:s 7 1981 and 1980 and the results of its ope *ations and the changes in its financial positron for each of the three years in the penod 6Ae-ap % b $~ WSe i

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. 5 x7+, t jN, 47.,. A q g ,7.%'.,a y g; g 4 = A ,n"'A w ii W O M MM I W 7' E ' t ' ! d.e# [ ? d, D. _ i.; ~ n Q;Lff: Ic.~m'i' m C Statement of income and Retained Earnings M~, For the Years Ended December 31 h' $MN S (Thousands of Dollars Escept Per Share Amounts) + F.. 1981 1980 1979 u. , W;rff ; OPERATING REVENUES-ELECTRIC (Notes 1 and 3). S469,683 $358.391 $283.106 y w, e .V. O, OPERATING EXPENSES: m, g% .f j Er'ergy (Note 1) +3 G Fuel. 154,652 131.894 100 472 i,. $. ty interchange. 39,312 38.029 19.0M (P. i,, ( C ^*>' ?) Deferred Costs _14 043 _120.281) J20 30. 1 Net Energy.... 208.007 149.642 99.230 f. t 1 Purchased Power-Excluswe of Fuel. 7,238 1.827 ' % ;* ~ * ~ 1 Power Productron-Operation and Maintenance 36,206 28.819 24.717 ^ 5. Other Ope *at,on and Ma.ntenance 50,366 44.890 36.145 g%@, ';* Q '? % y, ; ', t[ Federat income Tax Expense (Notes 1 and 2). _24 994 17.841 17.8jj

q?

Depreciat>on (Note 1).... 25,161 23.593 22.593 P 1, Taxes Other Than Federal Income Taxes (Note 13). 44.200 35.546 356E3 2 C W [N U y::<f Total Operating Expenses. _396 E2 302,158 _236 428 ~a m W 6* m . c, - a OPER ATING INCOME. 73 511 56 233 46 Ele i -1 w ,

• j

~a F v.t. ! OTHER INCOME: O MF' 9 u : ';'e,' Allowance for Equitf Funds Used During Construction (Note 1). 6,045 4.997 3 6C3 M.scellaneous Non. Operating income Less Mcome Deductions. _ 3 684 2 609 1 611 1 f d } ' *,,,.,- INCOME BEFORE INTEREST CHARGES. 83.240 63 839 51.955 %,/ s Total Other income. o. _9 729 7.606 52K 1 l Q {b,. ' ~ N.4 Interest on Long Term Debt..... 30,621 26,705 18.094 ] lNTEREST CHARGES: fx, g g ]j' Amortization of Debt Expense and Premium-Net. 210 57 41 >"~ d-,n interest on Short Term Debt 8.150 1,573 1,632 7Q b. %"., Other Interest Expense. 1,323 321 493 + .. + .

• e{ ", ~ i- -

Total Interest Charges..... 40,304 28.656 2020 'g Allowance for Debt Funds Used During Construction (Note 1). _(4.052) _ 13 355) __12 f @ Net Interest Charges. 36 252 25.301 17.051 .% y. , p.., 1 mo. --

• ( 3 NET INCOME 46,988 38.538 34.307
• a t

4. ~WV g. w ', _L i,

.y/'q*u;, n.-- RETAINED EARNINGS AT BEGINNING OF YEAR. _1_08 977 100.697 94 052 1 $ 4. [ IJ DIVIDENDS DECLARED: . 55365 139.235 128 E y ~,Im; ,,'4 "W - P, On Cumulatwe Preferred Stock. 7,508 6.340 6.039 W -*M fd? h: cf. y "Cl4N.lfy j+a y d.N g v j On Common Stock _27,379 23 918 21.623 ,f, % C Total Dmdends Declared 34 887 30 258 27.6C2 v+ k +,'.7 I b.[q.< RETAINED EARNINGS AT END OF YEAR. $121,078 $108 977 $100 697 1 D ta% =. = -m MMMNhGMd EARNINGS FOR COMMON STOCK: i y1, g\\,yM N.' 7 ]9 Less Preferred Dmdend Regwrements. _ 7,531 6.161 6 066 f Net income.... $ 46,988 $ 38.538 $ 34.307 [g$+$>; N

7. 3 Balance Available for Common Stock

$ 39 457 $_32.377 $_28,241 i% '.. x Fy.3 vg 1 r v. gf O ;,. ..' L AVERAGE NUMBER OF SHARES OF COMMON ' 7.;. ;;L,. E STOCK OUTSTANDING (in thousands). /p, 4 y 13,034 12.372 11.980 . -- [ y f;?3;~g% f* 4 g-af s ,d [g.. PER COMMON SHARE: 1. Meyt @. );' ] Earnings 3.03 $ 2 62 $ 2 36 W> C . ~..,. W,,m 1 Dmdends Declared. 2.08 1 93 1 79 y (J, g.g~g/A:. &f Dmdends Pa.d _ 2.04 1 90 $ 1.765 a c i o a.. _ ] w w;3 w ww; d 4 _..v. e % w.e r .s,ngzw w.r h um&. w w 4m.mn, im ;,' W Atlantic Elecmc .' k. 4 ,a q w y1

,.; ;o s

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'><t ,,,V-g Statement of Changes in Financial Position N "a., For the Years Ended December 31 _i. (Thoesands of Dottars) 1 1981 1980 1979 f 'I SOURCE OF FUNDS: Fu ds from Operations ,g n $ 46,988 $ 38.538 5 34.307 Net income........ l ~ Principal Non. Cash Charges (Credits) to income: r ?q ', Depreciation.... 25,161 23.593 22.590 W i An. ort.tation of Nuclear Fuel..... 2,951 1.595 732 l AHowance for Funds Used Dunng Construction. (10.097) (8.539) (6.363) ~ Federal Income Tames-Deferred-Net. 14,648 6.158 6.281 ~ investment Tan Cred.t Adjustments-Net. 7,141 5,045 4.354 Other-Net. 458 422 308 F ' I" Total Funds from Operations _ 87,250 66 812 62 209 1 Funds from Outs.de Sources: J Long Term Debt............... 60,000 75.000 '9, Less Pollution Control Funds Held by Trustees. ~27,874 l.L

c?

~.# Subtotal 32,1 5 75.000 ~ Sa!e of Common Stock 32,441 6.514 24.934 Sate of Preferred Stock 20,000 G, J A W:? ~:. Increase (Decrease) m Short Term Debt. 10.525 _{2_4g5) 39.475 Total Funds from Outside Sources. _75,092 77,33_9 64 409 Q' .m Other-Net _ {3,4 51) (717) 633 <y/ Total Source of Funds. $158.891 $143 434 $127.251 l lf, r j APPLICATION OF FUNDS: r,l Gross Additions to Utihty Plant. $123,318 $ 97,330 $ 72,773 d [P' Property Abandonment Costs....... (15,956) [, Anowance for Funds Used Dunng Construction _110 097) _J8_J39) _ 16 363) 2 1 Net.......... 97,265 88,791 66.410 Dividends on Preferred Stock. 7,508 6.340 6.039 )'~ r t -i D.vidends on Common Stock........ 27,379 23.918 21.623 J,p.% Retirement and Matunty of Long Term Debt. S682 23.847 3.222 l ?' 'C Property Abandonmerit Costs. 15,956 Conversion of Preferred Stock 1,993 877 1,331 W * * -, s 4 }<l:W 's+ ..'} Redemption of Preferred Stock. 800 1.600 1,600 I~ Investments in Subsidiary Companies (96) 320 391 increase (Decrease)in Working Capital

• __2J04 J2 259) 26 635 1

f ir4, _ Total Apphcation of Funds $158.891 $1_43d3_4 $127.251 ,a Q. s.,p < 7 _.M n,17

• INCREASE (DECREASE) IN WORKING CAPITAL *

.%C -,-6 Cash and Cash items. $ 3,845 $ (889) $ 1,064 "*- ' 4 ,4 * ! Accounts Receivable 10,740 6.727 2.392 (l:,N[' .. -. SL

3-E Fuel.

5,890 1,422 3.240 ' N Materials and Supphes. 2,365 1,500 3.030 j.; fl }(; 1 E. m, W, Deferred Energy Corts. (14,104) 18.741 23,529 /.9/; 7* A y Accounts Payable. 2,959 (11.202) (5.366) ~ Taxes Accrued (5,285) (4,587) 7.509

• sc%[Q[i T, i 6r' Incrtase (Decrease) n Working Capitat.

1; 9 - s M 2p - g, Accumulated Deterred Taxes 3,894 (6.500) (8.102) ( if Other. ._{7,90_0) (7,471) _ 1661) ,404 5_{2.m2a) $ 26.635 2 59 --- = y nw >.w ,a.

• ,y gg. y' MQ gi o a W N..

wg~ "E I 'Enctsdes Short Term Debt. Notes and Current Matunties of Long Term Debt and Cumulatnre Pre' erred Stock Sub eCl to Mandatory RedemptlOn. h.1.'@i 3 .2 s ' [J q~l " l y A 4 7 '. See Notes to Financial Statements Y.. fyQ $1.X ;A} f 0mq'j - ~ 3 ~ a k jff. m&h: $ *^ g m f .%sy[+h.'%; - 2 );., gn.x w *, 9 - l-

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• de'^

Balan e Sheet gge M N sW $ fr - December 31,1991 and 1980 M C;1F (Thousands of Dollars)

1. ,, g t ; -

7 w-v - 3 m Assets 1981 1983 I' 7.% E.h '

• /A t

t..

i 4 U J ELECTRIC UTILITY PLANT (Notes 1 and 5). 4 1 in Service; %wwy. ~e J '; (> s.kg.) Production. $ 422,162 5339.722 154.418 137.076 ., r e-t a Transmission. g' Q @ $ ] 'q Distribution. 280,842 262.074 General. 20-a274 17.692 1 j @o,.p. M.., M',V Total........... s 877,696 756.554 .- / q w v./,' M J.d Less Accumulated Depreciation. 225 372 205,5e 8 rb 2 Z <,. [j ' a Net 7 52,324 550 9CI ^* Y $[0gf 641 q.Y [ 4., h7 Canstruction Work in Progress. 158.995 183 215 Nuclear Fuel........ 28,237 22 283 Less Accumulated Amortization. 7,692 4.741 AA ,g af

i..f f,.e t...

,.i(g.3 ;t Q. .9 Net 20 545 17,542 /1 ' ' g'; % %. ;P$ p; A j pfN - i Electnc Utihty Fiant-Net. 831,864 751,723

w;m & &,,

C e* r%;d INVESTMENTS (',cte 6). 5,537 5 352 s 7} - %g ) q. ;g .p

gg POLLUTION CONTROL CONSTRUCTION FUNDS UNEXPENDED-HELD BY TRUSTEES.

27,8B Y{ }, i

• s.

p._ < p CURRENT ASSETS: df l yd. ~ W 'i - ' q h,. Temporary " ash Investments... 5,800 300 Cash (Note 10)... 1,034 3.157 [G, % *.N J .bV' l Special Deposits and WorkMg Funds. 1,881 1.413 s/ A, q; l, Accounts Receivable: e 1 Uwy Service 35,410 26.761 fd 'h'.Th% *--D: h,rC%; h,o;GY y% < Miscellaneous....... 5,659 3.076 s NNCc Allowance for Doubtful Accounts. (1.000; (500 29,576 23.655 Fue' (at aarage cost). M ':. g. Y ' i it ', *.. ' y'm >+- 2; Matenals and Suppbes (at average cost). 16,641 14 276 i - 7 (' 7 3, 3 Prepayments..... 3,771 3.924 Defet ed Energy Costs (Notes 1 and 3). 23,177 37.281 j ,d,-.. 4... Total Current Assets. 121,959 113.376 N..yW ,o @U, #, - ~ u y qT"Li [,c., h 3 DETERED DEBITS: 3 ; gg . r g; & Property Abandonment Costs (Notes 1 and 11). 19,934 4.236 wo Qm Unamodized Debt Expensa (Note 1). 3,598 2.074 % q M i s N.. @ "'N W Ii p Otner. 3,023 3 034 k-hj _ hh jd Total Deferred Debits 1 26,555 9.344 @hMgyggy .m. m om mo .m ..m.mm m $@ 3.789 $879 795 WAL ASSETS i My Wf& % i 4Q ' 4 i g #Q/fyy See Notes to Finanaal Statements M' Q. W M t%p m % p lk.W2 ^

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b 6% Liabitatoes and Capitalization 1981 1980 ' M, m ~ CAPITALIZATION: Common Shareholders' Equity: Common Stock (Note 7). 43,284 $ 37.617 a;1 Premium on Capital Stock. 160,499 133.714 [y% Cap,tal Stock Purchase Plan. 78 39 l Capital Stock Expense. (1,730) (1.744) 'L Reta.ned Earnings 121.078 108 977 + Total Common Shareholders' Equity.... 323,209 278.603

p; y Cumulative Preferred Stock Not Subject to Mandatory Redemption (Note 8).

43,531 45.524 -a Cumulat ve Preferred Stock Sub ect to Mandatory Redemption (Note 8)- 55.200 56.000

e. f M [

[-k.. ,,q s ~~ Total Cap <tal+zation (less long term debt due and cumulative preferred stock Long Term Debt (Note 9). 37_1 769 337,488 1 ' L.Q -d e M.,, y ~. l'. subject to mandatory redemption ethin one year). 793,709 71L615 tAv. ) e CURRENT LIABILITIES: lf,* -- ~- ,j Current Portion-r- Cumulative Preferred Stock Sub;ect to Mandatory Redemption (Note 8). 800 800 im ': f' Long Term Debt (Note 9).... 19,620 IfW Notes Payable to Banks (Note 10) 7,500 3.500 j th. r . 4 ? Commercial Paper (Note 10). 18,325 11.800 4 Accounts Payable. 25.869 28.8:8 1 Customer Depos:ts. 2,810 3 613 ., y Taxes Accrued 12,980 7.695 4-i Interest Accrued.. 5,757 3,720 9.509 8.090 k. ' D vidends Declared.... 16,245 20.139 M' i Accumulated Deterred Taxes (Notes 1 and 2). g4 ,G' Other. 7,505 2 409 l Total Current LiabAtees. 126 920 90 594 3. , Nx

j

-e 1 Ln; i DEFERRED CREDITS: 1 Accumulated Deferred Investment Tau Credits (Notes 1 and 2). 36,725 29.5S4 $0 f"* - -- ~ 1 Accumulated Deterred income Taxes (Notes 1 and 2) 53,509 38.861 d@='

l..

Other 2,926 3.141 ^*- ' s - y Total Deferred Cred.ts. 9h160 71.586 ,+ COMMITMENTS AND CONTINGENT LIABILITIES (Note 11) '(, _#.MCy,., g.

,x p/.

,['K '; '.j TOTAL LIABILITIES AND CAPITALIZATION $1,013J89 $879.795 k,% Q zi fe ', 9) I k, v'

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• y Notes to Financial Statements FEDERAL INCOVE TAXES-Deferred Federa! Income Taves C h ' ~,

NOTE 1. StGN!FICANT ACCOUNTING POLICIES are provided on depreciab:e prope ty added a**er 1973 but t>e': 4 i REGULATION-The accounting and rates of the Company are January 1.1981, for the d'tvence between tan acce! crated aN N { b[ M C; i sub ect to the regulations of the State of New Jersey. Depart. tax straight-kne depreciation under the ADR system Ta= ret 3 plyw, & i ment of Energy. Board of Pubhc UtJ.t:es (BPU) and in certa.n tions relating to the d f*erence between tax stra ght4ne and bcS JUM W k.j, respects to the Federa: Energy Regulatory Commission (FERC) depreciation are refiected currently (fiowed through)in Fece a income Tau Expense as a4 owed by the BPU 6 er 4 h,.,. ' 7 i ELECTRIC UTILITY PLANT-Prope ty is stated at origtnal cost. For alI property placed in senece a**er December 31,19E pgr# M G ]p, Q. j Generatly the plant is sub;ect to a f,rst mortgage I.en The cost the Company providos de'er ed Federal locome Tames for the c '

b. 3.*

• jfa 7 cf property add:t.ons,includ ng replacement of units of property ference betaeen tax depreciaSon computed usmg tne Acce e aw 0

, y- .Q' and betterments. is cap tat zed included in c rta<n add:tions is Ccst Recovery System ( ACRS) unoer the Economic RecoveS Ta + .n ,y an Anoaance for Funds Used Dunng Construct on ( AFDC) which Act of 1981, and tax oepreciation computed us ng book knes %[pM.% y y X-s4,6}1 y 7 ' " ' p ; {,^M'Qi~'I is defined in the apphcable regulatory systems of accounts as In add teon, the Company provides defer'ed Fede a' Inco~e .wiy the net cost dunng the penod of construct;on of borrowed funds Tames relabng to the de'erral of energy costs and up to Decem-h NN fjy'A. _.,a n used for co 1struction purposes and a reasonaD!e rate on other 31.1960, the use of the repair a40wance prov@ons Cf ADR In-gf g funds wher so used AFDC has been calculated using a rate or vestment Tax Cred ts are deferred on the ba:ance sheet and a e gp}hh,MMANNL, DEFERRED ENERGY COSTS-The Company has a Levehzed purposes and as a reduct<on of property accounts for tan pa Bi for all years reported Such rate is less than the maximum restored to income over the I.fe of the related property yy 4, @~ Q.Q J o allowed under a FERC order Ga.ns on reacquired debt are recogn. zed cu rently for oca m'g W p 1h;; h @W,. :.4 f,. P Energy Clause (LEC) which util;zes pro;ected energy costs and poses Tan ga!ns, the efore, are be.ng returned to inco~e b s " i f1 %.O + W hp includes 9 provision for poor penod under or over recovenes. reduced tax depreciabon enpense over the lives of the prope > .{J N:%MA$ 2<, hp 4h N.*,' 4 The recovery of energy costs is made through leve!. zed rnon-Accord ng!y, the Company provides deferred Federa' ince e }(v M[hMiNjNQ' TUy Y.Q. thiy charges over the penod of pro;ect on. Any under or over Tames on its books 7'* i4 recovenes are deferred in balance sheet accounts as a currerit RETIREMENT PLAN-The Company has in effect a non-i h. y asset or current liabihty as appropnate Such deferrats are contnbutory det.ned benett ret'rerrent plan covenng an reg; (Q.[, f C 3 I recogmzed in the Statement of income in the penod in which employees. Concurrent w:th a 1979 amendment. the Boam c' W- + they are subsequently recovered through the clause. Directo's estabbshed a fund.ng policy prov'd ng for d: rect p,- e DEPRECI ATION AND MAINTENANCE-The Company provides ment, from plan assets, of rehrement benet.ts relat.ng to se% a > M*Y%j[1C kM^X. a W fd@: on or subsequent to January 1.1979. (Benet ts were prev;ous y % % 4 I for stratght-l.ne depreciabon based on the est: mated rema:n- .o,,.. ing life of transmrssion and d;stnbut!on property and. based on P'0*'ded b/ the purchase of ndividual anqu t.es upon the re' <e. MN QY p.'O the est mated service I.fe. for att other depreciable property. ment of Pian partic pants } Such fund 99 arrangement was a a tCP]% b"* lp-Deprec-aSon apphcable to nuclea' plant includes certa:n amounts extanded to service poor to January 1.1979 for those emp:0,ees hp - '~.i for d:smanthng or decommissioning The overan compos;te rate consent ng to the change Costs of the plan are determ.ned uu Qt S.(ff Q; i of depreciaton was approximately 3 3% for 1981,1980 and the aggregate cost method. J[d$d@Nlhl,. E 'f(kgf.d( < Q.y@.. SM 1979 Accumulated depreciation is charged w.th the cost of PROPERTY ABANDONVENT COSTS-These costs cors st c' dep'eciable prope'+y umts ret; red together with removal costs less the Company's unamort zed insestment in Hope Cree

• Un t N:

idhi Q k_ q sa'vage and other recovenes

2. a nuclear gene'aSng unit which was cancelled in Decemw 1981, and four o*f-shore nuclear units which were cancebe :n W,M:

S W.Y ' M NDtQ.[i-NUCLEAR FUEL-The Company's amortization of Salem Units 3 December 1978 No.1 & 2 nuclear fuel is based on a rate ustng the number of rEV % /M?MT94 i units of thermal energy prodJCed over the estimated total ther-The o't-shore nuclear umts are bemg amort > zed, w th t*e 'W M W W:M vd 8M[ b mal units to be produced dunng the I.fe of the fue!, plus a facto, concurrence of the BPU, over a 20 year penod See Note i t c' Notes to Financ a1 Statements for add,tiona! detals on the 195 t MN representing the est mated future costs (storage and disposa! hiW"% y[%[ l% for the d spos; tion of spent nuclear fue4 Hope Creek Umt No. 2 canceUation. [

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• g Nuclear fuel requirements for Peach Bottom Units No 2 and OTHER-Capital Stock expense is being amort. zed on a ratab c

I

? m M[Sg 5rg;b,9 eC 3 are being provided by the operat.ng company for Peach Bot-bas s over 20 years i y &.e' tom through a fuel pu chase cont act Presenity, such costs Debt premium. discount and expenses are amo t. zed ove r I Q Q M M $y y $ : .hd/; y are calcu:ated us.ng a zero net sa% age va!ue The Company is the l'fe of the re:atec debt in conformsty w:th amed BPU ra e- - Wg responobie for pay ment of its proportronate interest (7 51%) cf maung accountmg all ga ns or losses re!at.ng to reacwed cer S $ g-W MMtM;A y w /. ;p3 the cost of the fuel consumed and of certain operat ng costs and a'e recogmzed current:y. q inte est espe %e dunng the term of the contract The cost of wpv h [ h.. N( $ f j C { S M 9 W nuclea fuel consumed is included in the Statement of income y3,y yQ y&y f,n ym%@S as a charge to fuel expense M p g., W3 g9 > = aw h"&r$q2.& ; yw A.h m;M? 4 e s ,m O hMdWf s k WM. A ' r d edlS <NllA1 e . J.p:" g{)y,$..m L. m 1 -n pg \\ ,f pT Q, - l l,l, t'?, t' w. , vy i w q[u,s,u. 3 - m +- 7q I S r m I - :Vf4 i I _ n_n, s n Rj,A ly,$'jf' $,Q % Og" 1 A ~% -c - l =l G.y% < -% ;;Qk Adanuc Electnc J ,s..h.. wy -4.. rs Y M'h,5. wu n, kMMYQ M AMj

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.' %,-h +~u= sW 2L-' - ^~ c" -wn 3:6 = s AiWy. ;... ..a If 7* f l h l %'ls&G,..% m. y n w,a u w,g? ".. A pe ,1 NOTE 2 FEDERAL INCOVE TAXES 7e i t-Federat income tax expense appkcable to current operations is less than the amoun? computed by applying the statutory rate [ P1 Qj C.), - : on book kcome subject to tax for the fonowing reasons: < 4 ~M k ) Years Ended December 31 ,., ;. /, e,,xJ. s, '. M (In Thousands) m, 1981 1980 1979 .4vt, Net income.... $46,988 $38 538 $34.307 -'f r? r t .m !..,>.. '? * ' O -, MN W> ;

• Federal income Tax Expense (as beloa) 27 332 19.700 18 868 2

lO, r Book income Subject to Tax $74,320 $58 238 $53,175 M 8r;A44

income Tax at Statutory Rate (46%).

$34,187 $26.789 $24,461 0 i Less A f. ' < " n .,E Caprtahzed Ove heads 1,242 1,179 1.041 by.. j Aflowance for Funds Used Dunng Construction. 4.645 3.842 2,888 @ i m N Qn L. J ' ', investment Tax Credits-Used. 1,075 914 735 l '.. / " sBt .1 Other (107) 1.154 929 ge W ', W Q 0 % ~ Total Federal income Tax Expense $27,332 - - - - -$19.700 $18 BE8 --- m ,. q.f, ~ E.1 Federal Income Tax Expense is compnsed of the fo'lowir.g: d@ y P' 9,5"'373 m.# 7 ht .j Federal income Tax Currently Payable. $13,124 $ (667) $ (1,550) Deferred Federal income Tames (as below) 4,438 12.657 14.383 ey. 3 Y t' e4 1 investment Tax Cred.t-Earned. 8,507 6.765 5.788 g.V 4 K.'[ %e, investment Tax Credit-Used J1,075) (914) (735) 1 h M.N '. .I I Federalincome Tax Expense _2_4,994 17.841 17.886 d9 i i < MM P W, Federal Income Tax-Other income. y %A Currently Payable 826 1.859 982

• t.

, ~ I Deferred (as below). 1,512 a .~.;<. ~ ;~- a.. Total 2,338 1.859 982 ! Q$.,%yc. O,S,. Total Federal income Tax Expense $. 27,332 $ 19.700_ --.868 $18 -- o,7,, Mfy. '* h i* Deferred Federal income Taxes result from the fotow:ng timing d,tferences: j,. Liberal zed Depreciation. S 6,195 $ 4,189 $ 3.830 a Repair Anowance 2.551 2.967 ?? 71_ ]' Amort:zation-Accele'ated Depreciat,on Repair Allowance and c 4,. 9( %,f i ~ we-u 4 & Property Abandonment Costs. (708) (625) (516) WIC*J ' U,, RM, W* '.h Property Abandonment Costs 6,700 6 b y.dh yA;& M W J' Ga,ns on Reacquired Debt and Purchased Tax Benefits. 1,512 . w w,. y yM,$,,j - Total 14,648 6.158 6.281 Other 949 43 (6) , WM,j y 3 /' kQQ, ;j T d$ Current babshties (;y'86 gV #4. N.i';1 Deferred Energy Costs. (6.488) 8.620 8.528 Mf Mp@j&77W.Q y." J2 210) _[2.121) (426) Deferred Revenue. 1 p h,g,'g;g-n yv ?guun.] - - -$12.657 - - - - -$14.383 W Totat Deferred Federal Taxes. S 5,950 Q'.A VS%N. Investment tax credit earned in 1981,1980 and 1979 includes $291,000. $806.000 and $699.000 respectively, representing ke.Q.WM- = M(e W,- r the Company's use of the add t onal investment tax cred.t avadable i.:nder the Tax Reduction Act of 1975. mm %.x r %g. - On December 30,1981, the Company entered into an agreement with a corporation to purchase the tax benef;ts on equipment Q, M,*y,f'y d gyyW~M e n, naving a tax bas,s of $2.636.371. Sucn tax benef ts include 6% investment Tax Cred.1 and an ACRS hfe of 3 years w+ .. ~ x, ~ NE k, s %y n[.f" f. ' ,j CI +g m y:1 I NQ h* *k/$, A ( l 2,$m' d N [i&.:n::WWW.; D kv n i dW:y x t >; S p**R* G M. w s:

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NOTE 3 RATE INCREASES-ftp;M b Dunng the three year penod ended December 31.1981 rate increases have been approved by the BPU as follows, based in each M$,, g. l. : case on the apphcable test year ind,cated. , g !, g "YK Date Amount Date Amount increase Test T.7'i;M %,i '>. G: P_etition Requested Effective Approved in Revenue Y_ ear '#^Y#- tmahons) (millions) M J 'dfM ' i, March 1978 $35 7 (1) July 1.1979 $10 0 40% 1978 $6]A.M ?. : 4 p 'i November 1979 85 7 September 26,1980 50 6 16 0 % June 30.1930 MEQ FP k f August 1981 (2) 14 4 January 29,1982 11 3 June 30.1981 hyy%',Nh"y $,? 'I (1) $14.800.000 of the requested amount had previously been granted on a prehmina y basis in July 1978. - <4 (2) The Company's request was to recogmze the cost of ownrng and operat;ng its 7.41% share of the Salem Unit No 2 Nuctea* h% g W.j' 3 Q.g, "- C y_ gg Generating Stat:on (not cons.dered in the $50.600.000 increase approved effective September 26.1980) The un,t went into hNd, full commercial operation in October 1981 The $11.300,000 increase granted was based on the Company's investment in h M. h$a W ~,.h, e-c N Q 'sa the un-t as of June 30,1980 r %m% On September 9.1981, tne BPU issued a decis.on with respect to the destgn of the Company's residentia!, commercial anc g@h,$ w.yGTfhM industna! rates in this decision. the BPU rewgnized a separate customer class consisting of casino hotels in Atlantic City, and w M-uCX e ..a g-f @Q.. N. h[jy ordered the Company to provide a separate base rate and a separate energy adjustment clause for such customers. The effect 4 a.gp 4 of this change is to increase the rates of such customers with a correspond ng reduction in the revenues received from aff other

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,t0 @Qt ? j '? customers The revised rates became ef*ect.ve on October 1.1981. The casino hotels are seeking further proceed ngs before M ^ $1,py{j yt the BPU and in tr,e courts on this issue The Company cannot presently predict the final outcome of these proceedings or the C/. , 9 /,, effect. if any, on the Company. Q@d, C n' *,- 7 ~ h;Q M : Effective January 1.1981. the BPU authonzed an annua! increase of approximately $41.600,000 in the Company's LEC f<om

g p y O*NO lQ 1.1019 cents per kwh to 1.7914 cents per kwh and at the same time transferred 1.0 cent per kwh from the LEC to base rates M/g@h pa. OQ-Q,4 requesting an emergency increase in the LEC. Effect ve August 21.1981, the BPU granted an emergency LEC of 2 4582 cents in Ma'ch 1981, as a result of a sigmficant projected under-recovery of energy costs, the Company fded a pet t.on with the Board th av

@3 5'/M, h i@i per h wh to be effective through the remainder of 1981 and ordered an add tional 10 cent per kwh transfer ed from the LEC to 'g v base rates. effective October 1.1981. resoft.ng in an LEC of 1.4582 cents per kwh The BPU set the LEC at this level to acw N.( h ; xw.. the Company to conect $25.600.000 by December 31.1981. In December 1981 the Company proposed a reduction in the LEC N y), ' 7 3,wF- % 7, $ Uj M U jP' ' based on projected unrecovered energy costs of $33.100.000, and a shght decrease in the projected 1982 total cost of energy On January 6.1982, the BPU ordered an interim reduction in the Company's LEC to 0.7602 cent per kwn. This represents an @,%qMM;p v.lf Q% - 7 m ; ' ;'

gmg, approximate $39.300.000 reduction in the Company's LEC revenues on an annual basis Concurrently, the BPU reduced. on an kNg XQ4 intenm bas's. the energy ad,ustment clause rate appbet to casino hotels (marg nal energy ad,ustment clause-MEAC) from 2 Co6 pg;nj % ~d j W-W / M '

cents per kwh to 1.7616 cents per kwh. Th:s represents an approximate $1,900.000 reduction in MEAC revenues on an annuaf i islMOMEWd dp y; basis. The BPU order that the LEC and MEAC reductions, whch a'e effective January 1,1982. would go into e"ect simuttaneous-ty with the Company's $11.300.000 base rate increase for Salem Unit No. 2 on January 29.1982. The net effect of these rate %M M @dayrg hfg q changes is a decrease of approximately $30.000.000 on an annual bas's in add. tron, the BPU has re' erred the Company's LEC WT Ma g M Q !.', g W *W'*'J. and ME AC f hngs to the Office of Administratwe Law for evident.ary heanngs. The Company cannot presently pred:ct the t.m ng N ,d WW~ I :s J tm or the final dectsion of the BPU on the ultimate level of the LEC and MEAC. n an.. -

m. my -

in February 1982, the Company vett fde a pet: tion with the BPU request'ng a base rate increase of $172.400.000, based on LQ cZ:~M O,N3 - .G. a pro;ected September 30,1982 test year. The requested amount represents an increase of approximately 33.7% of total enmated 59@M@. J @f, 1982 revenues The Company cannot presently predict either the amount if any, of the increase which might be granted or the %D.v.sMMMM' M;] g.p v -d o V timing of the decision by the BPU W 7 a mm.g sg ; m /, u. %. u :. .eafg %y,g O wm mn NCTE 4 RETIREMENT PLAN .g.V3

• cpWB, -

The cost to the Company in providing a ret:rement plan for its employees was $5.476.000. $4.652.000 and $4.238.000 in 1981. pb WW[W[45 Mb~. f 1980 and 1979, respectwely. Approximately 80% of these costs were cha ged to operating expense and the remaining 20%. which T.Qh$$ kMg was associated w'th construction labor, was charged to the cost of new utihty plant WD.d hh3%., - A companson of accumulated plan benefits and plan net assets (including purchased annuity contract amounts) for the Com-D pany s Plan is as follows- ' WUMpe,h'Grg4 &p:4 MW - Janua y 1 o mm)s m a.W ' ~, t U 4.g 1981 1980 1979 6 : C w:-m ka:/? Q @ w w.n .s s p (in Thousands) MRgWW s,q:/ ~ WY WC Actuar'ai present value of accumulated plan benefits: N!g%G hhi$w.d 4 Vested.. $67,810 $66.091 $63,497 -yyA,. oy% Nonvested 1 370 1.528 1497 t . => E.N, ff Total $69.180 $67.619 $64 994 w. W, g yppg)j4a y n f.m-U L Net assets avattable for benefits. .$ 83.98_9 ,$_70 303 _$61,316 MMid The we g5ted average assumed rate of return used in determining the actuarial present value of accumulated plan benefits was "$ @$kh 9 7% for 1991 and 6% for 1980 and 1979 The Company's Plan is :n comphance w>th the Employee Retirement income Secunty f WMThd.W-/@ ( Act of 1974. r b@%WWWh +y e wgg

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y ~ of NOTE 5 JOINTLY-OWNED CENERATING STATIONS-The Company participates wita other utilit es in the construction and operation of several jointly-owned electnc production facil.t'es .N. ~ ". ' ' The amounts shown represtrnt the Company's share of each jointly-owned plant at December 31, and includes an allowance for funds used dunng construction. b' Electnc Plant Construction Generation $N :, (('M y VWT'P Energy Company's in Service Work in Progress (KWHs) "7; l Station Source Share 1981 1980 1981 1980 1981 1980

• w" (Dollars in Thousands)

W%. q,p%@5 g, Keystone Coal 2 47 % $ 5.752 $ 5.607 $ 173 $ 139 213.104 262.768 j gMQ,NQ ' Conemaugh Coal 3 83 11,189 10.786 165 433 290.209 403 660 Peach Bottom Nuclear 7.51 63.778 61.485 7,438 6.142 730.034 865.946 y.*c :New < r t - - ggj$MQ g;s Salem (1) Nuclear 7.41 140.849 77.485 3.647 57.458 577,113 420,148 >j

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• J t

Hope Creek (2) Nuclear 5 00 72.207 64.743 O.$k;'J 5/M 9 2 (1) Salem Unit No 2 was placed in commercial operation on October 13,1981. ,.pg+,WF;Ji[,'M;p D) (2) As of December 23.1981 Hoon Creen Unit No. 2 has been cancelled See Note 11 of Notes to Financial Statements. + .,mww grppgy;pg, The Company provides its own financing dunng the construction penod for its share of the jointly 4Wned plants and includes its .W share of direct operat6ons and maintenance expenses in its Statement of Income Rt7.m. W QgMMh rv, 4A u m 9 UO NOTE 6 INVESTMENT IN SUBSIDIARY COMPAN!ES: d The Company's investment in Deepwater Operating Company (Deepwater). a wholly-owned subsidiary which operates generating W : L +,Q (Cg ch,M and process steam untts owned by the Company, was $2.841.000 at December 31,1981 and 1980. The assets of Deepwater d$MNk pnnc,pairy consist of working capital in which the equity of the Company is fairly represented by its investment in Deepwater. 5% o.r The net production costs of Deepwater (a'ter deducting contract charges) are charged to the Company. These costs are included , V % q,. W in the Company's accounts classified as to operation, maintenance and taxes. W"U,u * & The Company a'so has an investment in Atlantic Housing. Inc. (Housing), a whollyewned sutGdiary which amounted to p. '$ $820 538 and $916.455 at December 31,1981 and 1980. respectively. Housing's pnncipal nvestment is a 20% undmded interest i g MA C'T s as tenant in common in a future generating station and industnal site.

• E ;iM @

gx o NOTE 7. COMMON STOCK. Ms As of December 31,1981 and 1980, the Company's Common Stock included 18.000.000 authonzed shares of Common Stock % C M t. $ g # ($3 par value), respectively. L,j$@;Ml$iY Shares issued and outstanding 1981 1980 1979 o. 2d5 MW Beginning of Year... 12.538,880 12,196.486 10 916.308 -%WA hG M Sale of Common Stock....... 1,500,000 1.000.000 / Dmdend Reinvestment and Stock Purchase. 302.726 257,095 184.889 q.g g Employee Stock Ownership Plan 16,641 54.616 48,710 Cgg;[h ,,s Conversion of Preferred Stock __ 69 743 30,683 46.579 3 8.-* ' Shares at end of year. 14,427,990 12.538_880 12,196 466 a

• P.o At $3 Par Value.

. $43,283..,970 $37.616.640 $36_589. 458 Premium on Capital Stock was credited in 1981,1980 and 1979 with $26.785.552. $5.428,822 and $21,114.141 respectively, representing the excess of proceeds over the par value of shares of Common Stock issued, sold and converted At December 31,1981 there were 340,769 shares of Common Stock authonzed for issuance pursuant to its Omdend Reinvestment ano Stock Purchase Plan which became efiectrve in 1976 and 77.638 shares of Common Stock authonzed for issuance pursuant to its Employee Stock Ownership Plan. At December 31, 1981, 123.603 shares of Common Stock were reserved for the conversion of 5-7/8% Convertible Senes of Preferred Stock. w3 NOTE 8. CUMULATIVE PPEFERRED STOCK: The Company has authonzed 799.979 shares of Cumulative Preferred Stock. $100 Par Value, 2.000.000 shares of cumulative preferred stock. No Par Value, and 3.000.000 shares of Preference Stock No Par Value Unissued shares may, or may not possess mandatory redemption charactenstics upon issuance in certain circurnstances,if d,vidends on issued Cumulative Preferred Stock are in arrears voting rights for the election of a majonty of the Board of Directors becomes operative. m se 29 4,9 y N .m.'*. d__ .._ad_m-'. 1 N.-_ b A7 g

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~ tg ' ' ' + ) ' + + -i [j1, n,- + ,.<,t %m, ry Mp q ' AWN,yp:.0 LN,V. _ y ne s y m* 4 +.e m*4 y NOTE 8(A). Cumulative Preferred Stock Not Subject To Mandatory Redemption: d Ku Nr e Current I December 31 Premium on Redemptcn 44 , y i u, : T: 1981 1980 Captal Stock Pnce Per Share Whyp - (in Thousands) AWq $100 Par Value-Cumulat<ve and Non-participating y 97' l.I p J shares issued and outstanding [ 'g?y-yh i U m Senes: ' %%[.3$ E 4% 77,000 Shares 5 7.700 $ 7,700 $93 $105 50 M'AR'g; 4.10 % 72,000 Shares gWr r - 4 35 % 15.000 Shares 7.200 7,200 101.00 1,500 1,500 101.00 - P.g'd V * ' 4 35 % 36.000 Shares 3.600 3.600 101.00 ildh a f. M MsY ' - 4 75 % 50.000 Shares 5.000 5.000 101.00 b r.i W 7 @ %! $0% 50.000 Shares 5.000 5.000 100 00 Ym/p. 4Qf,W. 5-7/8% Convertible Senes: ,.hhlf.@!d k%!. 35.310 Shares (1981). '3.531 103 00 WMi% 3 M,C.t ?' 7.52 % 100.000 Shares. 10.000 10.000 106.77 55.240 Shares (1980). 5.524 r 64 ' M Mc S.g;. g-4\\m pbM&%y@h J d.d. Tota!. . $43J31 ,$45124 bM MNb Cumulative Preferred Stock Not Subject to Mandatory Redemption is redeemable solely at the option of the Company upon pay hik, $[Q.U[hbMh ment of the redemption pnce plus accumulated and unpaid d;vidends to the date fixed for redemption. 41 -Q % The 5-7/8% Convertible Senes, of which 19.927,8.767 and 13.309 shares were converted rn 1981,1980 and 1979 respectweh ' 'f %J4' t M*w. FW;m,j M M-is convertible (subject to adjustment in certain events)into Common Stock at the rate of 3.5 shares of Common Stock for ea* gg m b.,%itcAQr, 9. A share of Preferred .o.M%p., m 4se m u e -- e s F. Mkh k. g, NOTE 8(B). Cumulative Preferred Stock Subject To Mandatory Redemption:

g. WA Q.3.m:W.%

Current Refund:ng h 4hQgr ^L AA.W M.[. A, n Par December 31 Redemption Restncted c. <, Value 1981 1980 Pnce Per Share Pnor to

g 4 m.~

.r M EWM. (in Thousands) MhI.hM'kdgd Shares issued and Ou* standing: W3 G.y Wy:Q/W ' Senes: $ Y ^M M W ' M 8 40 % 100,000 Shares. .5100 $10.000 $10.000 $115 00 %MGMf7 ] 9 96 % 160.000 Shares (1981). .100 16.000 107.50 August 1,1984 Mhg#g%N 168.000 Shares (1980). .. 100 16.800 yyy&%jJ VF ~ $9 45 200.000 Shares. .None 20.000 20.000 November 1,198~ y,q";. NM$yt $8 25 100.000 Shares. .None 10.000 10.000 107.41 November 1,1987 f k' Q 4Tij + 1 '94?.e V; 56.000 56.800 Less Portion due within one year. 800 800 R@Z:k@% v@ M M Total. . $55.200-- $56,000 g yea W On October 24,1980, the Company sold 200,000 shares of $9 45 No Par Preferred Stock ($100 stated value) m a pnvate placement -sen s y fg gnx ~.w On August 1. annually 8.000 shares of the 9 96% Series must be redeemed through the operation of a sinking fund at a Y:Q WL. redemption pnce of $100 per share At the option of the Company, an addrtional 8.000 shares may be redeemed on any sineng . Mf*@gl%j fund date, without premium, up to 40.000 shares in the aggregate. The Company redeemed 8.000 and 16.000 shares at par in $h4Q4 1981 and 1980, respectively J IMNNY On November 1,1983. and annually thereafter,2.500 shares of the $8.25 No Par Preferred Stock Senes must be redeemec y,% h through the operation of a sinking fund at a redemption pnce of $100 per share. At the option of the Company, an add tiona' phj.hyg number of shares not tv exceed 2,500 may be redeemed on any sinking fund date without premium. s - *QCHL i On Februarv 1.1905, and annually therea*ter,4,000 shares of the 8 40% Senes must be redeemed through the operat on .' *$3 4 of a s.nking fund h4 a redemption pnce of $100 per share. At the option of the Company, an add.tional 4.000 shares may be redeemed . N .,@%^ on any sinking fund date without premium, up to 32.000 shares in the aggregate. On November 1,1986, and annually thereaMer. 40.000 shares of the $9 45 No Par Preferred Stock Senes must be redeemed %$. ~ through the operation of a s nkmg fund at a redemption price of $100 per shart At the option of the Company, an add.tional,! NbW 40.000 shares may be redeemed on any sinnung fund date, without premium, up to 50.000 shares m the aggregate %j The mmimum s.nking fund provisions of the above senes agg*egate $800.000 in 1982, $1.050.000 in 1983 and 1984. $1.450.000 .g in 1985, and $5.450.000 in 1986. T.

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Atlantic Electric yum) s'

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e. C~ NOTE 9 LONG TERM DEBT: (g " y. December 31 s 1981 1980 hy[-D s '9 (in Thousands) ' :~. N First Mortgage Bonds: $$$ [~,a i 3-1/4% Senes due (March 1) 1982.. $ 4,620 $ 4.620 j 3-1/4% Senes due (January 1) 1983. 4,050 4.050 yf4 Sp%rd & ( j 9-114% Senes due (May 1) 1983. 35,000 35.000 W$y ff < J 9% Pollution Control Senes due (May 1) 1984 21,000 3% Senes due (March 1) 1984....., 5,000 5,000 M~%s ga: hm r -l 6 gp 3-1/4% Senes due (March 1) 1985.. 10,000 10.000 NONM[JM 3 7/8% Senes due (April 1) 1988 10,000 10.000 7 NC 41/2% Senes due (January 1) 1987. 10,000 10.000 M Zhn.eUhy;p < 1 ' '1 4-1/2% Ser,es due (March 1) 1991. 10,000 10,000 41/2% Senes due (Apnl 1) 1989. 5,000 5.000 WO MO W j]. ' " g.M6W A. : I< 4-1/2% Senes due (July 1) 1992... 12.350 15.000 Nig@6MCUMbdh yd 4-3/8% Senes due (March 1) 1993... 13,500 15.000 @pirW "J~ q 51/8% Senes due (February 1) 1996. 9,980 10.000 D AYM.4 8-7/8% Senes due (September 1) 2000. 20,000 20.000 'ughC O(.h,h'S C 8% Senes due (May 1) 2001. 27,000 27.000 %%yprty 3n ? 71/2% Senes due (Apol 1) 2002. 20,000 20.000 ,i%hj /P 'qE C ~ 7-3/4% Series due (June 1) 2003..... 30,000 30.000 NMQWE-7 5/8% Pollution Control Senes due (January 1) 2005.. 6,500 6.500 'F@g@d@@pf Q i" 6-3'8% Pollut,on Control Senes due (December 1) 2006 2,500 2.500 y 9.k ["N Yl 12-5/8% Senes due (January 1) 2010... 75,000 75.000 w Q., Nhkh 115/8% Pollution Control Senes due (May 1) 2011 39.000 t y d. h 5."..+ U l 370 500 314,670 @yw%.k%@. M 2~ .s

• M jfg j

pj W 'g-Debentures' e Mr. A.pp.O ' Y4 & 5-114% Sinking Fund Debentures due (February 1) 1996. 2.267 2.840 M Jd M - 2" # 7 % 71/4% Sinking Fund Debentures due (May 1) 1998. 2,786 3,725 M. hk kikI#'9 5,053 6.565

ggg%

Notes-7.90% Notes due (December 15) 1982. 15,000 15 000 . wa y J Jn I'd.i umM4/$hi.[M. MD 4,

• ek.4 Unamort zed Premtum and D:scount-Net.

836 1,253 391,389 337,4811 k h.hhhh Deduct First Mortgage Bonds and Notes due within one year. 119M0) dFMhhhM$ $371769 $337.488 1 khh**Mfh Deposits in s:nking funds for retirement of debentures are required on February 1 of each year through 1995 for the 51/4% deben- ??g~ ~q-@hhD, e% tures, and on May 1 of each year through 1997 for the 71/4% debentures in amounts in each case sufficient to redeem $100.000 i principal amount plus. at the election of the Company, up to an add;tional $100,000 pnneipal amount in each year. At December u. 6-DM 31,1981 the Company had reacquired and cancelled $1,533.000 pnneipal amount of the 5-1/4% debentures and $1,314.000 pnn-Qg/- cipal amount of the 7-1/4% debentures toward its requirements for 1982 and subsequent penods. O^ JJM Current sinking fund requirements of $386.700 in connection with certain first mortgage bonds outstanding. are being satisfied ((k A [ by certification of property add tions as provided for in the related mortgage indentures. Annual sinking fund deposits are also required each year from 1926 ttcough 2010 suffsent to redeem $3.000.000 pnneipal amount of the 12 5/8% first mortgage bonds plus, at the election of the Company, an additional $3.000.000 in each year. .J In add. tion, annual sinking fund depostts of $3.500.000 in 2007 and 2008 and $10.000.000 in 2009 and 2010 are required l .M, Q in order to redeem pnncipal amounts of the 115/8% Pollution Control Senes. NOTE 10. SHORT TERM DEBT AND COMPENSATING BALANCES-. 1981 1980 1979 The Company had arrangements for short term debt as follows: (Dollars in Thousands) g[m%%g l s As of end of year-g g. We gt. tad average interest rate for short term debt outstanding: Commercial Paper... _ 12.2 % 18 3 % 13 2 % oe#M ]$h Notes Payable to Banks. 12.8 % 19.3 % 14.7 %

• N For the year enced-Nb Monthly amount of short term debt at any month-end:

a

4. N Commercial Paper.....

$62,475 $16,725 $31,975 j Notes Payable to Banks. $ 7,500 $ 3.500 $ 7,500 Average amount of short term debt (based on daily outstanding balames): e Commercial Paper.. $43,284 $ 8.879 $ 9,352 Notes Payable to Banks. $ 3,661 $ 1,810 $ 2.260 W. ;. Weighted daily average interest rates on short term debt. Commercial Paper.... 16.4 % 11.4 % 12 4 % Notes Payable to Banks. 16.7 % 13.1 % 13.0 % 31 1.3 kiM@9s c# a .m y s j.- "1 % a. pse. _..m ,o

l a ; ern u mm ~ L g g, fMu p : ~ ^ qty }Ql%&b$:%&y lN. h${ l 6 %.< NOTE 10 Cont;nued "~ ^ N y .T^ In Apnl of 1981, the Company negotiated new agreements providing for $115.000.000 of bank Ones of credit, $108.000 000 cf y f I.* *. which were unused at December 31,1981. The Company is required. with respect to $17.000 000 of these credit bnes, to ma nta n ,,y. .} average compensat r*g balances of $1.070.000 plus an equiva!ent add tional amount if these hnes are fully util: zed These cc - m.g;fff p., p(( y[& J h S pensating balances are mainta.ned in demand deposits which are not legally restncted. The Company is in comphance with sus -y compensating ba ance arrangements With respect to the remaining avadable cred.t hnes of $98.000.000 the Company pays com WbkhNW ~ ~ "" " * ' " * " * " ' ' "~'"~~~""'***~9"'#'#

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NOTE 11. COMMITMENTS AND CONTINGENCIES: from the output of DPL's coaLfired Ind<an River Staton. Ind an R.e Nty & 7; % Constructon expend tures including nuclear fuel but excluding pro-Staton commenced commercial operation on October 1.1960 A.ss, M [ Q $ ?i h d '1 ~; Commitments for the construction of mapr producton and transmis-ton (Vienna No 9) which has been sized to accommodate a 251 ducton plant are ast, mated at approntmately $60.000.000 for 1982 DPL is planning to construct a 500 MW coal-f, red generatag sia ,, M ' r jd ; j. $ ' ~. iMfG7p M ib son fac ht.es arnount to approx,mately $274.000.000 of which it is ownershrp (125 MW) by A!! antic Electnc. Such un:t is schehe: + af ] A~J4 * ' %W, feB y estimated that approximately $24 000.000 wm be expended in 1982. to be placed in commercial operation in 1990. The Company anc } M. KA

• These amounts encue aDowance for funds used dunng cmstructon.

Pennsylvania Power & Ught Company (PPL) have entered into a' Q, Wi i 14j,

• The Price Anderson Act places a hability limit of agreement wnereby the Company will purchase 5 94% of tre w

< ~49 @Ia M M U "':M.VJt $560.000.000 on each nuclear generating umt for pubhc habil1ty capacity and energy output of each of two PPL 1050 MW nuca NQ cla ms that could anse from a nuclear incident. In the e.ent of generating units scheduled to be placed in service in the seconc i$ )4 $@p # On

• any such incent, all owners of nuclear generating units hcens-quarter of 1983 and the fourth quarter of 1984, respect.vely TN d/MbNN:59 ed to operate would be required to contr bute toward satisfac-purchase of power from PPL will commence with commercial ope a m

iC - l W rn F^% tion of such ctatms The Company. as a co-owner of the Peach ton of the stations and Continue through September 30.1991 7, - @M $ ' W b - gft O Bottom and Sa:em Stations has part.aily insured for this exposure in 1981, the Company entered into a new agreement a : I wow! by purchasing. through the principal owners. private insurance Allegheny Power Systems ( APS) which will entatte the Compam [ 3GW.P %g K);(' j in the man mum available amount of $160.000.000. The re-to 50 MW of coal-fired capacity from the APS Pleasants Stat : g.@+D datory program of retrospectrve premiums to be assessed against add tton, the Company has a commitment with Pubhc Ses a mainoer ($400.000.000)is provided by a combinat:on of a man-in St. Mary's. West Virginia for the years 1982 through 1965 l-j}Mf W % [4 @2 ' 1 a 7

Ri owners of nuclear reactors a'ter a nuclear inc' dent (up to Electne and Gas Company (PSE&G) where they will proode w

'"jld $5.000.000 per incident but not more than $10.000.000 in any to 125 MW of power for the years 1968 through 1995. jfD y'f,j C :Q[3 A % Nd $g A. calendar year for each bcensed nuclear reactor in the Un'ted As a result of these changes, the planned $$50 milhon 2r 9 A States) and by endemnrty agreements with the Nuclear MW coal.f4 red Cumberland Unit No 1, which was to go in se Reguiatory Commrssion. Accord'ng!y, in the event of a nuclear vice in the spong of 1988 has been rescheduled for conyet or fAp. $ Q 7 /ft N [ ; Q incident involong any hcensed nuclear reactor in the United in the fall of 1991. h g3Og MQVf Sta'es which was not covered by the $160.000 000 pnvate in. The Company had planned to participate as a 5% owne ir-QQ@W[.f,T.;.;f *, i" C 5 surance. the Company could be assessed. based on the four the construction of two 1.067 MW nuclear units. known as Hopc y gr f l nuclear reactors now in service. a manimum amount in relation Creek Unit No. I and 2 to be located in Salem County, New Je'se, v fW .'.y j @w N% %I.-{T'p .A J to its ownersh.p participation (approximately $1,492.000 for any On December 23,1981, PSE&G who owns 953o of the project. a, ] such incident but not more than $2.984.000 in any year). nounced the cancellation of Hope Crak Unit No 2. Hope Creek r , & /. s i* b 4 M The Company is a member of Nuclear Mutual Ltd which Untt No.1 is currently planned far complet.on in 1986 AccCrd 9 ( y, M.N d 1 [ D U@ N. %[ d ;, 4 % proedes insurance coverage up to $450,000.000 for property ly. on December 23,1981 the Company cance!Ied its 5 0% shas M% 7b damages to nuclear generating facil.t.es of the member com-of Hope Creek Untt No 2 The Company's investment in Hepr 'M MNNkM@ pan +es in the event of major loss at any plant covered by the Creek Unit No. 2 has been wntten off for federalincome tai pu-q gg.%:N W e U group, the Company could be assessed up to $4.007.644. four-poses. For book pu poses. as of December 23,1981 the Ccm-Yh% %@d teen times its annual premium. pany's investment of $15 956.476, including $2.390.676 of AFDC l ng J uaF $y The Company is also a member of Nuclear Electnc insurance has been transferred from Const uct. Work in Progress to Pro-6$WUkt Ltd which prowdes insurance coverage for the extra expense of perty Abandonment Cos's and an appcopnate amount of defe"er Wh"g%yy([A id replacement power dunng prolongad accidental outages of nuclear federal income taxes have been prowded. dh plants After a deduct ble penod of 26 weeks. weekty payments of On December 15.1981, t.u BPU held pubbe heanngs o-f%b$:U@%QJf' cumu'ated funds ava.labie to the g oup. the Company could be presented the BPU a joint pos' tion paper which supports tre Y

.5 q^ts up to $2.300,000 are prowded for one year and up to $1,150,000 the Hope Creek Unit No. 2 abandonment issue Dunng thcse i

igyp uf4g for an additional year, for each insu ed unit if losses exceed ac-beanngs, PSE&G and the New Jersey Pubhc Advocal y' Mf %d "%p&hky [ assessed up to $2.421.252. five times its current annual premium abandonment of Hope Creek Umt No 2 and recommends tne . l in add. ton. Naciear Electnc insu*ance Ltd a'so prowdes insurance recovery of the abandonment costs over either a 12 or 15 yea' l p j l ypg"p 80r property damages to nuclear generating faceties in the amount penod Such joint position paper also recommends a sim.ia-p1 .a %4Fy.M 6 i l of $247.000 000 for any camages in excess of $500.000.000 in the recovery for the Company. The Company, in its next rate reauest V A ;, @W %, event of a mafo' loss. the Company muid be assessed $1230.648, plans to ask for a shorter amortzation penod and for carry r; y' g ',t _gj seven and onehaff times its annual premium. costs associated with the unamort. zed balance The Company 3]. c.- ,O5 The Company has an ag'eement expinng May 31.1985, witt cannot presently p'ed'ct the outcome or the timing of the ceco t..,.. t d Delmarva Power & Light (DPL) for the purchase of 50 MW of power sion which will be rendered by the BPU. Y'Y [,%,, NOTE 12. LEASES , g JMN The Company has certain leases for property and equipment which meet the u. Sna for capitah2ation. but in accordance wttn ra?e ne ifU rnaking treatment are accounted for as operatng leases The capital.zation of such leases would not have a sigmf. cant e'fect on assets Rt,,. ( habiktes or operatng expenses g,s d.w ww ~ , A., f *l h1 C - f i I

r

,m' A J M Adandc Dectric v l . m . gxt ; gh %yk 7 hb ki. O hK AMg TM"'i "'I T[j74 DFT GD[M. Wg[%,., '" JU g;w~ QQp$pq 'l a m a %, 34W _ e b m l j gggg ygg m& Q{ $n$a. ,a,2+ 4~ h. ~ knkfh TV

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g' ' Jphh, ?? w g WN;. .f %. g,., Ly,- + %, 4., - <+ ww ~~ NOTE 13. SUPPLEMENTARY INCOVE STATEMENT INFORMATION. g. @ g ;j f ~ q Operat.ng expenses include taxes and other items not separately identified in the Statement of incom 1 Year Ended December 31 1981 1980 1979 , e % qv . Ms.Jy;gCW.'s ;;si, (in Thousands) F id

1. M, Taxes Other Than Federal income Taxes.

f M; w@ y <^+- Real and Personal Property Taxes. $ 918 $ 944 $ 1.266 State Gross Rece, pts. Sates. Excise and Franchise Taxes and ' q.y'v, g;;#g;, A.V.W j. M,sce!!aneous State and Local Taxes. 41.204 32.924 33.149 } # y y ug[' Payroll Taxes-Federal and State. 2,078 1.678 _$35 860 1,445 rp.b M 8 Total. $44.200 $35.54_6 rp;g. ngy:; Av. a,ny% p ,s. A g gyf $24.251---- $20 565 W Maintenance Expense. $28.087 h-8 Charges to income for roya ties and advertising are less than 1% of gross revenue. W N d.$]j..

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NOTE 14 OUARTERLY FINANCIAL RESULTS (UNADUITED). gyov K' k Quarterly financial data which reflect all adjustments (which consist of only normal recurring accruals) necessary in the opinion of the Company fc' a fa.r presentation of such amounts are as follows: , %,. x.#fwgYMS.?.g %.4 Operating Operating Net Earnings for Earnings r e j %$GM.($DCp Ouarter Revenues income income Common Stock Per Share (in Thousands) m. M..*.Z. M @ pn.u Z ? f.& g % ;. r p W'. 1_98.1 t -g_ wu K:gg g." ist. $112.762 $18.969 $13.760 $11.856 $.94 gg4 gA 2nd. 101.908 15.194 8.739 6.845 .54 w -. s 4. n s 3rd 133.552 24,963 17,499 15.627 1.22 ,. Mc < s,wh.NPI 4th _121 461 14.385 6.990 5.129 .36 g%Q $e $469,683 $73.511 _54_6 988_ $39A5.7 $3_03{1) m y %m W y 1980 w. %p. d/9$,"h~[MS D5%O 1st. $ 86.521 $12.61; $ 8.043 $ 6.560 $.54 up e-7-% 2nd. 77,378 9.572 5.995 4.514 .37 pfk 3rd 103.651 19.201 14.471 13.023 1.05 a 4tn 90.841 14.849 10.029 8.280 .66 W$yd gy

J/gpghgg

$358 391 $56.233 $38 538 $32.377 $2 62 sh .Tu. uVf-% m,n (1) The indmdual quarters do not add to the total due to the increasing average number of Common shares outstanding at the JM p ' r.A%tdkNE end of each quarter, kE h The revenues of the Company are subject to seasonal fluctuations due to increased sates and higher resident lat rates dunng ^ 4pp3 CyW +w the summer months. Supplementary Information Concerning The Effects Of Changing Prices (Unaudited) . The following supplementary information about the effects of chargng pncn it sculated under two d.fferent methods. 4 The first method. which uses the Consumer Price Index for All Urban Customers (CPI U). adjusts data for general is ton, 4 providrng financial information in dollars of equivalent value or purchasing power (constant dollars) The purpose of this method is to make financial data more comparable by reporting the financial statement effects of the Company's investment in Utsty my Plant over a penod of time in terms of a common unit of purchasing power. jg,k' The second method adjusts the financial data for changes in specific prices of the components of the Company's utility plant by applying the Handy-Whitman Index of Public Utility Construction Costs to histoncal cost by vintage years, reflecting the current Cost of replacing resources actua4y used in the Company's operations (current Costs) Constant dollar amounts differ from current cost amounts because, over the penod ut.lity plant is held, specific pnces increase more or less rapidly than generalinfiation Both of these methods invoNe the use of assumptions, approx,mations and estimates and therefore, the resulting measurements should be viewed in that content and not as precise indicators of the e'fects of.nflation. c c 33 I . } 9 T. 3 3 N A! C'_ ki p. _gg ., y 4

Vfh$f& W%if' MW WV"n R.2&N N W g g,G Q g:?l9 W.s.l ? - %-id u y n-W&M %iuvA %ma - ef =. r y:wh. n,m mi ~~, y _- w pfM,axxww. MA. w Supplementary Information Concerning $7f I The Effects Of Changing Prices (Unaudited)-Continued t M]D Y. Statement Of income From Continuing 'k N Operations Adjusted For Changing Pnces

• , NJ Year Ended December 31,1981

1. @hh # Q< ;a:

(in Average 1981 Donars) QQ%$me5 N (;" u Results of Operations: nN . : M X^ In Constant At Current % h$Qg%[f 3 H:sfoncal Dollars Cost f. (in Thousands) Q@MQp,myU.T;. Operation and Maintenance Expenses. 346.017 346.0*7 346 017 Q;Q$9 Operatang Revenues. $469.683 $469.683 $469f83 - g% 9 yyy y~,. Depreciation and Amortization Expense. 25,161 64,352 64 500 V'Mb MM h{$;dp $y'y ^ FeoeralIncome Tax Expense 24,994 24.994 24.934 Other. 26,523 26 523 26 523 NMhMi7, j $422.695 $461,886 $462 034 income from Continuing Operations. $ 46.988 $ 7 79_7 $ _7,649 t . M h. % $ N..;j Depreciation and amortization expense expressed in constant dollar and current cost amounts were determined using the rates and 1 " I; methods used for computing book depreciation and emort.zation apphed to utihty plant balances reexpressed in terms of constant m ;M "1; c: 7 p%g.5s@M C @ ]Mp" J I dolfars and current costs WEM ^ $kk,^.9 M, only depreciation and amort 2tation of nuclear fuel have been specifica!!y adjusted for mflation in the 9tbove thedule Operat ng revenues and other operating expenses were generany incurred rateably over the year, according!y. the stated amounts a: ready J*%%gp h4.y , g rettect, in effect, average 1981 dollars. 4: MMn ,,.tMICi C Signif> cant to this data is the impact of a fixed income tax rata income taxes were not ad usted becau!..ne present tax laws i do not anow a deduction for depreciat:on and amort:zat,on ad;usted for the impact of mflation. Therefore, the Company's e"ectae c p[yt441wyts-hhYhbSD tax rate nses from 36 8% under the histoncal cost basis to 77.8% and 78.1% under the respective constant dollar and current cost bas s i-This supplementary informat.on should not be used to assess the probabsty of future cash flows when existing ut!hty plant is Wpy# W ?( _ JG ,i replaced The est, mates do not reflect the effects of the regulatory process nor the specific plans of the Company for the replaceme-t ,v

g. -

or modernization of utAty plant. A meaning'u! estrmate of the est mated level of future capital expend:tures is set forth on page 17 [ MM)J(bp.pp. of the annual report m[ %AQg b.jf %.% $r i 'hW M. p ' s M C.3 nZ' Curren' Year Effect of increased Pnce Levels: 7 ;. [h M M ;) h y UQi w hjir (in Thousands) increases in Specific Pnces on Ut.hty Plant Held... $153.000 ky%gbQ increases m General Pnce Levels on Ut&ty Plant Held. b%. _127.796 y WJbgMQ gg. Excess of increase in Specific Pnces Over increases in General Pnce Levels. h.oy'Mu " < 9 n. $ 25.204 At December 31,1981 the cost of utaty plant, net of accumulated depreciation was $1.537,305.000 on a constant dollar bas:s e +- .,k ca J and $ t.600.527,000 on a current cost basis, while histoncal cost was $831,864.000. The accumulated provtsions for depreciat,on

• -Mb and amortization under both constant dollar and current cost methods were estimated for each major class of utAty plant (produc.

teon, transmission, distnbution and general plant) by multiplying the respect:ye cost data by a percentage representing the expired - $J( ' f hfe of existmg facAties of each class at December 31,1981. Fuel inventones, the cost of fossil fuels used in generation, have not been restated from their histoncal cost New Jersey regu'ation controls fuel costs, through the operation of a levelized energy clause, such that recovery is ultimately hm.ted to actua! _M / ',M cost For this reason fuel inventones are effectively monetary assets Ch Net Utsty Plant Costs Recoverable: t Under rate malung presenbed by the regulatory commissions to which the Company is subject only the histoncal cost of utAty piant is recoverable in revenues as depreciation Therefore, the excess of the cost of utity plant stated n terms of constant dollars or current cost over the historical cost of plant is not presently recoverable Due to this feature, the value of utity plant and its

• M[

et'ect on ncome from continuing operation ad,usted for changing prices must be considered in terms of its net recoverabte cost which is histoncal cost Whi e the rate malung process gtves no recognition to the current cost of replacmg utsty plant. based l on past practices the Company beheves it will be allowed to earn on the increased cost of its net investment when replacement of faciht.es actuaVy occurs. s. Current Year Dechne m Purchasing Power of Net Amounts Owed: { a - The current year decline in purchasing power of net amounts owed was $39.573 000 Dunng a penod of inftation, holders of mon assets such as cash and receivables su*fer a loss of general purchasmg power while holders of monetary habet.es. generany long term debt. expenence a gain because debt will be repaid in dollars having less purchasing power The Company's gain from the dechne m purchasing power of its net amounis owed is primanly attnbutable to the substantial amount of debt and cumulative preferred stock subject to mandatory redemption which has been used to finance utility plant This gain, however, should not be Considered as providing funds to the Company, since the Company is lim;ted under rate making procedure to the recovery only of its embedded cost of debt. g Atlantic Electric

-- jg - h,.p. s '=MUnm mm; - ~ - - ' ~ ': '~~ hkl'( -b [k! k L. ,.7, ? ~ ..W S; Ar m yx M w:p&n, Mey@ 4 Five Year Comparison v ;g Of Selected Financial Data including Unaudited Supplementary Data Adjusted For Changing Prices .] (In Thousands of Dollars Encept Per Share Amounts-N .~. p F M. r OV i 9 8 Constant Dollar and Current Cost Amounts Empressed in 1977 Dollars) i McW, - j g' (h r: +Q g Years Ended December 31 ~ mo = aw th 1981 1980 1979 1978 1977 .j m av - Operating Revenue pp$$2NE c ( e -. -histoncal $ 469,683 $358.391 $283,106 $255.058 $234.995 r WT76[%.$. 1' -in constant dottars (a) 312.950 263,566 236,356 236.914 234.995 yhl: income from Continumg Operations 3 ' - gph ge ;; ;,c." -histoncal $ 46,988 $ 38.538 $ 34.307 $ 30.064 $ 27,358 my g@g - Gy{i d@$, . yj. .Q Y; -in constant dollars (a) 5,195 6.339 10.108 l -at current cost (a) 5.096 4.078 5.806 QD$ income from Continumg Operations per

• M%du:

Share of Common Stock !k s.g?W j u @ ; 9 -histoncal 3.03 $ 2 62 2.36 2.21 $ 2 06 F $N g'L -m constant dollars .01 .15 .43 45 eQ -at current cost .01 ( 03) .06 ,h,' Ml.N h D +g $D$pMhhQ Effective income Tax Rate -histoncal 36 8 % 33 8 % 35.5 % 38 8 % 34.1 % .*gyg g.t;;.4 fW t -constant collar basis 77.8 73 8 63 9 6 -current cost basis 78.1 81 4 75.5 e.g(Jfh hr h $ $e7 h '.yr%/ V Excess of increases m General Poce levels Over q,V increases in Spec.fic Pnces (a) $ (16.i93) $ 32.032 $ 37,783 Tj.5 W'.j *;'f - J1 Op o; Decline in Purchasmg Power of Net Amount Owed (a) $ 26.367 $ 33,106 $ 39.500 er wf

- J Net Assets at Year End W-s

@kM~ -h stoncal $ 338.846 $324.127 $310.231 $279 897 $271,135 4 jg.ah,[ j -in constant dollar? (average) 218,474 227.667 243.753 286.941 281.493 / w n,[ [k Net income as a Percent of Operating Revenue f ydy W r; ~histoncal 10.00 % 10.75 % 12.12 % 11.79 % 11 64 % $N M:g: w M a y$j g y@, N. -trended m 1977 dollars 6 66 7.9. 10.12 10 95 11 64 Earned Ra'e of Return on Shareholders' Equity %, m, hM,Mt T -histoncal 12.21 % 11 62 % 10.70 % 10 26 % 9 87% %g -trended in 1977 dollars 8.14 8 55 8 93 9 53 9 87 Q?fgB, Total Assets at Year End-histoncal $1.013,789 $879,795 $779.026 $699.861 $662.614 ts, ga T M ~ C C # Long Term Debt and Cumulative Preferred Stock s Sub;ect to Mandatory Redemption

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p 3Mm. _h,stoncal $ 442,769 $394.283 $324 848 $329.781 $330,120

1..

WW-Qg-M G., - Dividends Declared per Share of Common Stock Q4f- -histoncal 5 2.08 1.93 1.79 1.70 1 62 A-W -in constant dollars 1.39 1.42 1 49 1.58 1 62 .Ikk" Market Pnce per Common Share at Year End ,;M %( -hrstoncal 17 25 $ 15 75 $ 17.125 $ 18 00 $ 23 00 -in constant dollars 11.49 11.58 14 30 16 72 23 00 t yRy Average Consumer Fnce index 272 4 24'8 217 4 195 4 181.5 7%ae 1 Q93' Certain comparative per share data trended in average 1981 dollars (without ado tment of eammgs for the pro forma effects ss af mitation on depreciation amounts) are as follows: zw Ea nmgs 3 03 $ 2 89 2.96 3.08 $ 3 09 Dividends Declared 2 08 2.13 2 24 2.37 2 43 .%) / Marmet Pnce (Year End) 17 25 17.38 21 46 25 09 34 51 'I (a) These amour'ts will d<fter from those shown for constant dollar and current costs in Staterrent of income From Continumg Operat.ons Adjusted for Chang ng Pnces because a d.fierent base year has been used (1977 in the data presented above and

j e 1981 in the Changing Pnce nformation)in order to illustrate the impact of changing pnces m attemateve forms.

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W C 2 m W a y D M & L-Vgem &~ h 4 9$2156%L Tt:: %My }Aw,:.&@ N M 3 p [> W % g ) &$l$ } MA?JAGEMENT'S DISCUSSION AND ANALYSIS + sc OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS m,:$.;t g o ] Atlantic Electoc is an investor-owned pubbc utAty which provides electnc energy to our customers in the southern one-thed M M.hu <.4'. of New Jersey Our rates are subject to the approval of the New Jersey Board of Public Utst+es (BPUL The Company's goa:s %%$$ 7 ' ". '. ' ~ cont.nue to be the assurance of continued financial stabaty, provid,ng for the necessary return on investment needed to attract 4k[M.y W N cap tal at a reasonabie cost and offsetting the effects of inf!ateon on our operating costs A deta led analysis of our Results of Operations. Liqu+d,ty and Cap.tal Resources fo!!ows. M$kx %p?%W5 ' ~ REVENUES RESULTS OF OPERATIONS. %bh hk h, Operat.ng revenues have increased dunng the three-year penod end.ng December 31,1981, primanly as a result of base W ey 8 ' % rate increases. increases in the Leveltzed Energy Clause (LEC) and increased kilowatt hour sales The relative impact of these M"hMM < @P-. increases are shown beiow (dona s in thousands)- Gyd increase (Decrease) Over Previcus Year kkdS%qg 1981 1980 UA @ g@t$tWj% Base Rate Increase $ 37,977 10 6 % $ 4.160 60% gCC l -4 4/ LLC increase' 70.677 19 8 53.755 19 0 4 76 e% $fW Knowatt-hour Sa!es increase 2.638 07 17,370 16 %, A6% $111.292 31 1 % $75.285 26 6 % M D h g$ M, b,, 4 ' includes transfers to General Rates See Note 3 of Notes to Financial Statements. hh +fy%Qp>Q hhh.:SM ~ Future operating revenues will be effected by general economic cond.tions. timehness and adequacy of rate rel ef and the A if %td/C M ettect.veness of our efforts to promote customer conservation and improve our load management techniques. %Q WWR OPERATION AND MAINTENANCE EXPENSES ]b O: M Net E nergy Costs, includ ng purchased powar, have increased approximately 110% over the three year penod primaNy as a result 3.,%@N7 ~ M.,2c(af-d, e-of the increased cost of imported od and increased generaton due to higher sates We ant.cipate reducing the impact of ine eas ng ii; r+s energy costs due to a nurr.ver of factors 1) Sa:em Unit *2 became commercially operable on October 13,1981, and provides us w4tn ' Tf:L ; 17

• B2 MW cf low cost nuclea generation,2) on June 1,1981. we became a full member of the Pennsyhania-New Jersey-Mayand Inter-hmiS5W% _..

connect on. and we anticipate a reducton of approximately 15% in the cost of interchange power as a result of aod,tional benef.ts %fhMkid@ P'0V'ded to full rnembe's and 3) conversion of two peaong power jet units at our Carifs Comer Stat on to natural gas w 4pyQi Net De erred Energy Costs of $14.043.000 in 1981 represents the recognition of $36 233.000 of pnor penod unrecovered s fdM ~ Nh.$2m@am a energy costs coincident w:th recovery of such costs through increased revenue and the de'erra! of $22.190.000 of unrecovered 1981 costs On January 6,1982. the BPU. in an intenm order, reduced the Company's LEC (See Note 3) However. we pro;ect {Wih Tj > M.:. that the reduced LEC will be suffrcient to result in the recovery of all unrecovered energy costs in 1982 dQh6 QJ- The increased cost of purchased power is due to an agreernent reached in Apnl 1981 w:th Auegheny Power Systems. whereoy +% MMW4%7% we purchase capacity to the extent it is ava:lable on a week-by nck basis. The impact of these purchases in 1981 resWted in M p @k @Q C j _...Mh a savings to our customers over what it would have cost the Company to acquire this capacity from afternative sources p gp. Increases in other operation and ma'ntenance expenses are pnmanly the result of increases in labor costs and the cost of ifMpggdQA matenals and supphes (u.,WQWEf%h%; OTHER _.Q% s, u 'I hCl3 hAi O Interest expense has increased substantially in 1981 over the 1980 and 1979 levels. as a resu!t of 1) significant short-term 'MhY[5 EN borrowings riecessary to finance unrecovered fuel costs and to continue our expanded construction program until more favorab'e q gM m. _3 fong term financing cou'd be arranged,2) the issuance of add.tional pollution control series first mortgage bonds and 3) interest i cg related to Federal income Tax settiements. ~ '- h LIOUtDITY AND CAPITAL RESOURCES Of our gross capital requirements for the penod 1979 to 1981. approx:mately 27%, a'ter deducting dividends declared on s% %w$. ' common and preferred stock, was generated interna!Iy. The remainder was ra, sed through the issuance of common and preferred stock, long-term debt. po81utron control bonds and short-term debt on an intenm basis (., Although we are maiong a concerted effort to reduce our capital expend;tures by encouraging conservation, use of a!!ernate W *~ # energy sources and by e'fect.ve load managemert, the need to replace exist;ng plant. upg'ade our transmission and d:stnbut on system and provide for g'owth, indicate the need to provide approximately $608 milhon over the next frye years for cash construc-h g y tron expend tures Due to inflation and Changes in techfiology. depreciation accruats are not adeqJate to fund the replacement l yk, f of existing uttlity plant when necessary (see supplementary information concerning the effects of inflation, page 33). n-n,.k Q .% cq 4Q v rg m yy ~pm. m- - - - - - - p ng w~ +, 4 aA mc ewb- + ~~ m . m

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.r, sY s ,gnc;wamm e. ... w. mem i os. -- k ' I4 y Statistical Review 1981-1971 3 i Q4' Facihties for Service ? n i j,g% 1981 1980 1979 Total Utihty Plant (Thousands).... $1.064,928 $ 962.052 $ 870.075 .,,sR O 5-Myl Gross Add.tions to Utihty Plant (Thousands).. + $ %WgidW, " Pole Miles of Transmission and Drstnbution Lines. $ 123.318 $ 97.330 $ 72.773 f.# hM ^t l'j;; 7-6.910 6.879 6.831 3M we ' - Maomum Utity System Demand-Kw............. 1.263.800 1.261.700 1,192.630 Generating Capacity (Kilowatts)(a)(b). 1.524.600 1.434.700 1.384.700 NNQ@pA ~ Margin of Reserve at Times of Peak (% of Avail. Gen ). M M P I fj g '~ Energy Supply (Thousands of Kwh) 17.1 % 12.1 % 13 9 $MdNMfp.1,Q,- Net Generation 5.302.023 5.533.178 5.397.336 vw, :.y g w N/%%) y,. - - L Pu chased and Interchanged - Net r 946.241 643.106 464143 Total System Load. '%SM;S Mg; < Electnc Sales (Thousands of Kwh) 6.248.264 6.176.284 5.861.431 .;J M6 /W Residential. 141;% Off [ W ) %A

• N Commercial.

2.480.225 2.514.738 2.411.732 Eh:u W yl industnal 1.849.863 1.769.200 1,580.364 4. , _ ggtg@Qig@s ; All Others. 1,279.724 1.286.205 1.255,304 hMliT & ;j 65.555 63.753 60.799 pr TGb,+fdM 'M J Total. 79 C 5.675.367 5.633.904 5,308.219 W@hENWMhI, < M - Residential Electne Service (Average per Customer) bMZ1iNED Amount of Electncity used dunng the year (Kwh).- 7.751 8.003 7,849 Amount paid for a year's service. [Wri.YdE, pp ~~;J Pnce paid per Kilowa't. hour. $ 670.66 $ 536.99 $ 439 92 i

7'NJZW% M.%

8.65C 6 71C 5 610 7 Customer Data (Average) '5&ASQrf Pi Residential With Electnc Heating. h[r, ,{i.D.M I., -. h, 56.100 52.225 48 339 Resident.al Without Electnc Heating. .o 263.904 _ _261,988 256 941

$;.1 s C'

( [4.gr Total residential > 4,.%cc?Mg, i '! Commercial. 320.004 314.213 307.280 43.219 43.267 43.219 sa SQyq:.mp..eQ p, id' Industnal gy n mx. Other 1.032 1,041 1.048 d i m W M " m~ A J ' A.9 634 654 667 Total Customers. kAN.E ddj Q i 'Q $ Total Service Locations, 364.889 359,175 352.214 386.046 379.242 371.362 CA C y ' , de Population Served. N 1,056,000 1,037.000 1.015.000

• • hM Financial Data (Thousa,ds of Dollars)

WAy#h{h"i1 i y AN _, Energy Sa!es ypfr Residentiat. g 9. 'hhy.# TEMM ' Commercial $ 214.614 $ 168.733 $ 135.178 M^,d ygg ~,#[Ory. " f'{ (ndustnat. 156.624 115.973 88.819 % " QR g.~ All Others. 82.908 60,512 47.590 dpW Total. 9.700 7.836 6.624 g i$'O., Other Electnc Revenue. 463.846 353.054 278.211 5 837 5.337 4 895 "L%ypnSW Total p +;T. $ 469 683 d r(MNQ investor information $ 358.391 $ 283.10E "$U$$. Earnings per Average Common Share ji 3 03 2.62 2.36 i M M.eGj Average Number of Snares Outstanding i. -yhN.$$, zyi$ (in Thousands)..... 13.034 12.372 11.980 '~,' E Dividends Paid on Common Stock (Cash). '7C g4 2.04 1.90 1.765 J." Dividend Payout Ratao...... - 7Mf '" 670ti 73 % 75 % Book Vafue Per Share (Year End). g* W 22 40 22.22 21 63 Pnce Earnings Ratio (Year End). 'h ~ -, Q Times Fixed Charges Eamed (before income taxes) - 6 6 7 4 2.84 3.03 3 62 Sha eholders and Employees (Year End) G-Common shareholders Q Employees. 48.424 47,762 48.194 2.035 1.968 1.903 1 ,u-yy d p.O (a) Excludes capacrty allocated to a large industnal customer. U

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~ (b) includes unit purchase of Capactty 50.000 kilowatts under contract with Delmarva Power and Light Company. u w j 1

%qa,.M.&Q R y M p;>~Q.AWh d Projected Construction Expenditures a _gm~ 4' (Millions of Dollars) %mn.:QQ~ W hfi!.*f. ~ ya eq - $ p. W r a; g $200 . W:r %,v:Vf.p >~~n .w Ni k i 4 %',, U. AA n " q s, ' s I# 1%d[" '54%Sk % ' * ; ;. p-m f%WfydVe ' ~ ~ ~ ' ' '

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• % ".D.L!DU ; ?.3 1982 1983 1984 1985 1986 h f D t. W W &.

p%;y;Q &F 7 g% h. f Assuming adequate rate rehef, our estimates indicate that over the five year penod from 1982 to 1986 an average of 45% % MW. . D f.= of our total cash construction requirements will be generated intemally. i,, R H M*iS : ' n The additional requirement will be raised through the capital markets with the objective of maintaining a cap:tal structure Q Q % N b M' of less than 48% long-term debt, approximately 41% common equity with the balance composed of preferred stock. Our current A 3 mrW.M 9 capitahzation ratios are 48% long-term debt. 40% common and 12% preferred stock. We use short-term financing on an interim 7.Q% z'- bas;s and maintain total lines of credit of $115.000.000. Refer to Note 10 for add tional detatis on short-term financing ei,2% er We are currently investigating alternative methods of financing our program for converteng oil-fired units to coal and natural y g4 gas Our proposal, included in our December 4.1981 LEC fihng. would allow us to recoup our investment by retaining a portion @;.q, g (two thirds) of the fuel cost savings generated by the conversions until the investment is recovered. One-third of the savings is yp, passed on to the customer, immed;ately. If approved, this would enable us to reduce our financing requirements and would pro-jgp.3q, vide substaritial savings to our customers through reduced rates and financing costs. A-T! ' i" 1981 1980 1979 - Sy.g" ' W - Sources: c/kwh c/kwh c!a a h a) Coal 45 2.177 37 1.504 34 1.334 x ~ Oil 20 5.771 24 4783 32 3 161 - h, Nuclear 22 .384 21 .379 21 367 7% Natural Gas 4 5 249 8 4.191 5 3 399 4: Interchange 9 7.529 10 5 987 8 4.115 m \\ p - Total 100 3 083 100 2.731 100 2 032 Our embedded cost of capital, as of December 31,1981, is 8 54% for long-term debt and 7.50% for preferred stock. With our sinkmg fund requirements, refinancing of matunng low cost debt and financing our operations, we anticipate our embedded cost to rise. [" The tabulation on page 35 includes key indicators which we beheve are helpfulin evaluating the performance of the Company over the past five years. The tabulation a!so includes certa n unaudited supplementary information showing estimates of the ef-fects of changing prices. This data, which should be viewed as estimates of the approximate effects of inflation rather than as precise measures,is expressed in the dollars of the earliest comparative year (1977) The trends demonstrated reflect the need F L to control costs and point out the responsibibty of regulatory agencies to provide timely and adequate rate rehef. Add <ttonal sup-t piementary information concerning the effects of changing pnces is included on page 33 of the annual report. e. e 37 ? ' / y,. y v "~ ' jq. \\ '~ ' ( ',. O S'4 d M. __'Yl'

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• v. + fM M N s M ~6 h E, June 17.1982 Deceder 16.1982 July 15.1982 Januay 15.19 a

r . mis %.M/7 ' *+ i ', '3;' .y j Investor Records Communications regard,ng stock transfer requ+rements or lost cer1.ficates should be directed to the ap Transfer Agent Changes of address. anguiries on divdends or matters concerning the Dmoend Re nvestment and Stock P. m l Wpy M,Pw ,1 W a.-.t chase Plan should be addressed to. p.,., q >. +' ', v,

• -A

[g; t i ' C>Na, .,a p Atlantic City Electnc Company J ZrC f ,Q. investor Records Department

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f ff%4: - " 5.%~., - W hf.h % 1978 1977 1976 1975 1974 1973 1972 1971 f Q.? s.y $ 802.473 $ 753.269 $ 710.343 $ 675,617 5 637.250 $ 572,555 $ 511,274 $ 455.956 99 WC $ 58.073 $ 48,733 $ 41,702 $ 46.745 $ 71.200 $ 67,864 5 58.434 $ 54.151 M5?Z 6.786 6,735 6.696 6.645 6,580 6.506 6,408 6.333 l [' liq \\ I 1.414.700 1.414.700 1.334,700 1,334,700 1,278.700 1,013,500 965.900 897.600 l ~ 1,177,400 1,176.000 1,030,300 1.069,400 1,004,400 1,051,400 920,400 829.300 l 51 4 / 16 7 % 16 9 % 22.8 % 19 9 % 21.5 % 4.7% 76% y. .a,, cm @d . r

• C/N$3,) ' $$ 4 5,625.988 5.293 019 4.918.906 4.715.357 4.651.334 4.236.083 4.071.225 4.262.062 g.NM C GT 130,037 224,169 324,196 190.852 229 3 665.558 458.050

- 74.395 '.a' h.h(l W 5.756.025 5,517,188 5.243,102 ' 4,906,209 4.880,531 4.901,641 4,529.275 4,187.667 R [%mMJ4p. mo Q fgpf g " 2.377,202 2,221.250 2.070.766 1,938.724 1,882,560 1,899.122 1,741,895 1.624.793 -> d$[h! YN*k't g 74 M/i 1.586.097 1,478.559 1.392,029 1,346,216 1,298.858 1,351,974 1,183.668 1.059 498 A. 1.250.636 1.220.260 1,143.170 1.036,755 1,136.935 1,119.478 1,061,932 990.363 w %c;. n 60,705 58 866 57,667 56.465 57,477 58.129 64,531 88.963

77. hs u -qQ 5.274.640 4,978.935 4.663.632 4.378.160 4.375.830 4,428.703 4.052.026 3,763.617 d

y w u @E.m a, ~ n.w g p f.-y g f, w. siy*,- 7.951 7.653 7.320 7,018 6.982 7.303 7.008 6,793 M4.Mgg,gsg,', $ 406 18 $ 378.36 $ 349 64 $ 329 25 $ 291.21 $ 230 19 $ 207.37 $ 178 19 j gpN{ &.hyd'W 5.11C 4 94C 4.78C 4 69C 4.17C 3.15C 2.96C 2.62 ^ hkQCh.- M f D %' e[ p[$ p [ d (( ' ' j 44.387 40.318 37.581 35.235 32.215 28.627 25.105 22.228 Q 254.592 249.927 245 296 241.019 237.397 231,408 223.449 216.970 I-.< W Q. 4.- n J 298.979 290,245 282,877 276.254 269.612 260.035 248.554 239,198

.Q D $I M 42.672 42.033 41,170 40,608 40,351 39,810 38.009 35.921 (ld.MN 1,034 1.047 1,071 1,100 1.080 948 1,011 1,047

.[ N N Q %.'l. 673 676 681 684 679 678 757 997 35M!py%M[;9 lt.F i i3N . AN8 b 343.358 334.001 325.799 318.646 311,722 301,471 288.331 277,163 '4-%ii4g f 362.131 352,205 343.147 336,105 330,758 320,834 309.393 297,437 ggkQNN j., 990.000 961,000 937,000 915,000 894,000 865.000 828,000 796.000 mgym a. O g, .3 ywm 4 w,. q&. Y[{ ' .f Q 4 s WW..,q;jgf _ $ 121.440 $ 109.818 $ 98.904 $ 90.956 $ 78,512 $ 59.856 $ 51.544 5 42.623 c .4 7N M V. 80,539 73,354 66.354 63.544 55.713 42,804 35.868 28.648 9 kWQQ [y..s E. W 42.185 40.885 36.438 34.974 33.565 22.008 19.350 16.529 .] ' $Uy,g N' 5,973 5 630 5.406 4,881 4,207 3.861 3,763 3 919 34NW 250,137 229 687 207,102 194.355 171,997 128,529 110.525 91,719 4.921 5.308 4.92.5 4,724 4,614 4.365 4,128 3,687 1 E. $ 255,058 $ 234 995 $ 212.027 $ 199.079 $ 176.611 $ 132.894 $ 114 653 $ 95.406 D L.~ v .M a> A " ~W 2 21 2 06 2.60 2.41 2.54 5 2.40 2.26 1.89 g 7. $7, 10.791 10.630 9,747 9,490 8.973 8,453 7,810 7,437 g =g 1 67 5 1 62 1.56 1 51 1.50 1.4688 1.4144 1.36 . GM., 76 % 79 % 60 % 63 % 59 % 61 % 63 % 72 % ~% 21 27 20.71 20 25 5 19.34 18.45 17.85 16.77 15.59 k.m 8 11 9 7 5 7 10 12 r N.. s 3 62 3 17 3 14 2 88 2.33 2 62 2.70 2 34 4 ng}F K' 5 d 44,490 43.826 42,516 39.232 39.054 36.835 35.549 33.839 'l 1,797 1,739 1,714 1,741 1,811 1,810 1,743 1,747 s f, j= s This Annual Report has been p epared for the purpose of providing general and statistical information concerning the Com-pany and not in connection with any saie, offer for sale or sohcitation of an offer to buy any secunties. r h 39 e lf.,. v 6.y n ' > L, ? l .f - YhQ 'Q 4- _y 3 g g,s r n_ 7i t Ay. M L; D 4 v. n k h, J.l'Su h h !& y m.$ W & % k i $ ? N & -~ y h-.. ,a ,p

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