ML20050D312

Annual Financial Rept 1981

ML20050D312
Person / Time
Site:	Beaver Valley
Issue date:	03/16/1982
From:	OHIO EDISON CO.
To:
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ML20050D307	List: ML20050D287 ML20050D312
References
NUDOCS 8204120126
Download: ML20050D312 (44)

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i Ohio Edison System Ohio Edison Company, with its head-Table of Contents quarters in Akron. Oho, provdes electnc service to about 839.000 customers in an Page area of approximately 7,500 square miles Oho Edison System

.2 in central and northeastern Oho. The Finanaaf Highlights.

.3 Compiny's whoffy owned subsdiary.

Presdent's Message.

. 4. 5 Finanaal Revew.

.6 Pennsylvania Power Company, wrth its headquarters in New Castle, Pennsylvania.

System Operatons

.8 provides ek ctric service to about 124.000 Electnc Rates and Regulatory customers in an area of approximately Developments

.Ii 1.500 square miles in western Pennsylvania. Finanang.

.12,15 Based on total kilowatt-hour sales. the CoalSuppfies

.15 Environmental Activites

.I6 Ohio Edison System is the 19th largest investor-owned electnc system in the PowerSuppfy Planning.

.l8 United States.

Customer Relatons.

.19 '

l The Companies' elecInc service reaches ManagementChanges.

.19 an estimated 2.8 million people in 666 Employees.

19 communities and rural areas and supphes Officers /Divison Managers /

Board of Directors

.20 '

power for resale by 26 munlopal eleanc "rtems and 8 rural cooperatives. Also.

Management Report.

.22 Ohio Edison partapites in the sale. pur.

Management's Discusson.

.22,23 l SelectedFinanaalData

.24 !

chase and interchange of power with l

Consoldated Finanaal other ek ctoc companies.

Statements.

.25-30 We own or share in the ownership of I

Notes to Consoldated II plants composing 44 generating units.

FinanaalStatements.

.31-40 i In 1981. Our total system power plant generating capaaty of 5.686 megawatts Auditors' Report

.40 Consoldated Finanaal included 86 3 percent (4,907 megawatts)

Statistics

.41 coal fired. 7.5 percent (425 megawatts) nuclear, and 6 2 fx?rcent (354 megawatt!)

Consohdated Operating Statistics

.42 oil fired generation.

StockholderInformation.

.43 ABOuT THE COVERT The 502-foot cooling g_ -

yW tower under construction at the Beaver I

p.. ~

Valley unit 2 nuclear plant in shippingport.

Pennsylvania. will process s07,400 gallons of l water every minute. It serves as a background to photographs showing three aspects of our power production. (Counterclockwise. top to bottom.) oclivered by barge, train or truck, the 10.1 mlfilon tons of coal burned represented 90 percent of our generation in 1981. Our plants (including ownership shares) produced 24.9 biHfon kifowatt-hours of electricity. The power produced was transmitted and distributed to customers through 32.000 miles of power lines.

Ohio Edison s new identification symbol also appears on the cover. The design was chosen for its modern graphic appeal to reflect the Company s progressive attitude toward meeting the challenges of the future.

i 2

l Financial Highlights l

l

,5ucy$$ttJl, Brief Summary of Operations industnal Sales-274 For the Years En(1e(1 Decemtser 31 1981 1980 Change Residential Sales-3 f t Kilowatt Hour Sales 24.7 Billion 22 4 Bilhon

+ 10. I %

commerciat sales-228 Operating Pevenues 1

1.3 81111on 5

1.1 Bdhon

+ 18 4 %

Fuel Enrnse

$413.7 Million 5364 9 Mahon

+ 13 4 %

Other Sources-f le Operating incorre

$252.4 Million 5169 4 Mahon

+ 49 0%

Allowant e for f uorls UsrN1 Sales to Utahties-St Dunnq Construction

$127.8 Million

$106 5 Mdhon

+ 20 0%

Interest Expense

$267.5 Million

$ 179.9 Mdhon

+ 48 7%

Other Elector Sales-44 incorre Before Extraortlinary item

$ 183.0 Million 5135 2 Mahon

+ 35 4%

Net lne orne

$197.1 Million 5135 2 Mdhon

+ 45 8%

Net income for Common St(x k

$ 163.9 Million 51014 Mdhon

+ 61 6%

DISTRIBUTION OF 1981 Net interest-144 INCOME DOLLAR Eam:ngs Per Common Share locome Hefore Extraorclinary item

$ 2.10 51 52

+ 38 2%

Other Operatson l

and Maintenance-15e Net incorne for Common Stock

$ 2.30 51 52

+ 51.3 %

Employee wages and Benefits-94 Div&n<h Per Common ruel Enpense-29t share

$ 1.76 51 76 Common Stock Divsdends-94 Capitat Stoc k Div+ntis

$159.2 Million 51519 Mdkon

+48%

Depreciation and Am rtization-7e Construc tion Egrndtures

$ 568.0 Million 5515 0 Mdkon

+ 10 3 %

Net finanong Activites

$385.6 Million 5514 6 Mahon

-25 I %

Preferred and Preference Dividends-34 Return on Average Common Retained in(ome-34 Eqmty 14.6 %

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Justin T Rogers. Jr The Companies achieved a marked improvement in 1981 The improved availabihty of the Beaver Val!ey Power Station earnings. despite a depressed economy ihat had adverse effects also contnbuted to our resuits and at the same time helped hold on us and the nation as a whole.

down the cost of fuel to our customers The 810-megawatt Rate increases received dunng the year. increased sales of nuclear generating unit had an equivaIent avaifabihty rating of electnoty. and continued improvement in the major facets of our 73.6 percent in 1981-a noteworthy achievement in its sixth

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operations were the marn contobuting factors to this achieve.

year of operation Due in part to the availabikty of Beaver Valley.

ment Operating results in 1981. compared to the previous year, our use of more expensrve oil-and coal-fired generation decreased from 99.3 percent of total generation in 1980 to 90.1 l

show that:

percent in 1981. We beheve this trend will continue when

• Operating revenues increased 18 4 percent to 51.3 bilhon,

• Operating income increased 49 0 percent to 5252.4 milhon.

Beaver Valley Unit 2 and Units 1 and 2 at the Perry Nuclear Plant assume more of our generating load after their scheduled and

• Earnings per share of common stock reached 52 30. an completion in the mid-to late-1980s.

increase of 513 percent from the 5152 earned in 1980 While 1981 was a good year, overall, it was not without j

(Of the 1981 earnings, approximately 30 cents per share problems:

represented the combined effect of the gain on the purchase in February 1981. The Pubhc Utihties Commission of Ohio of Company honds and settlement of a claimed tax habahty J (PUCOJ authonzed us to begin recovenng. through electnc rates i Rate increases totahng 5199 milhon on an annual basis helped over a ten-year penod. the prehminary costs for cancelled to bring our income closer to necessary levels. Also. In early generating units. However. in July the Supreme Court of Ohio 1

1982 Pennsylvania Power betyn collecting rates which will add ruled. in a case involving The Cleveland Electnc illuminating nearty 527 mt! hon to our annual revenue. Yet, recognizing the Company (CEl). that the PUCO could not authonze recovery of a

these costs as service-related costs in retail rate cases and an need to keep pace with inflation. Increased operating costs, and high interest rates, we continue our efforts to obtain rates that appeal by CEI to the U S Supreme Court was denied in January cover expenses and provn1e a fair rate of return to our 1982. Since that denial. CEI has appealed a subsequent order of stockhokk'rs Apphcations for addtronal rate increases now the PUCO requinng the utihty to reduce its rates to reflect the pendnq before the vanous regulatory commissions total more ehmination of these costs. A!though the outcome of this matter than 5131 milhon and are detaifed in the "Electnc Rates" section and its effect upon the Company are still uncertain. we face a of this report possible after-tax wnte-off of about 548 milhon, or 67 cents per share of common stock. based on the average number of shares Two things contnbuted to our 10.1 percent increase in 1981 outstanding dunng 1981. Whether a wnte-off will occur, and if total electnc energy sa es. which reached 24 7 bilhon kilowatt-

50. Its timing, will depend upon a number of developments.

hours First, while residential sales were down 0 8 percent. sales including the outcome of the CEI appeal and possible future to commeraal and industoal customers were up 2.2 percent and actions by the PUCO.

5 0 percent. respectivety Second. With the continued improve-As a result of the Ohio Supreme Court deosion. We were able ment in the performance and availabihty of our coal-fired gener-to obtain, within two weeks of that deosion. a $90 milhon rate r

ating units-76 3 percent compared to 72.1 percent in 1980-we sokt 574 mean worth of power to other electnc companies.

Increase (effectrve August IJ after reaching agreement with all That qmn marked the first time since the mid-1970s that we sou the partiopants in our pending rate case. All parties agreed to the level and the timing of the increase. The Company afso more power to other utitties than we bought for our own agreed. at the insistence of one of the parties. to a heanng to needs determine whether there should be a management aud;t of the Company. We agreed to the heanng in order to avoid any delay in receiving an immediate increase. However, in granting the 4

increase on an emergency basis, the Commission ordered a in the regulatory area, which has a dramatic influence on our rnanagement audit, without the hearing to which the partes business, there is evdence that government agencies at both the agreed.

state and federal levels are expressing concern for our industry's The Commisson selected Cresap. McCormick and Paget. Inc.

financal health. This concern is apparent in recent decisions by

-a rutionally recognized management consulting firm-to the PUCO. including: a quick response to our emergency rate conduct an audit of management and operations.

Increase request; the granting of higher rates of return on common equrty investment, which are essential to a utility's The audit. which began in January 1982, is nearing comple-economic stability; possible acceptance of a future test year ton, and. according to the PUCO. we can expect a final report concept in setting electnc rates, which would more accuratefy with recommendations later this spnng or early summer. We reflect the real costs of provding electnc service dunng the perod will, of course, make maximum use of any recommendarons that the rates are in effect; and a ruling that Oho's electnc which will benefit the Company and its stockholders, employees utilities should not be drawn into the socal welfare programs and customers through the establishment of so-called " lifeline" electnc rates.

Management audits are not new to us. In the md-1970s we Along with these encouraging developments, much of our hired an outsde consulting firm to conduct a management audit optimism lies in the contributons of our employees. They of Ohio Edison. While the firm dd recommend changes which continue to perform in an outstanding manner, as evdenced by we implemented. on the whole they found that our manage-the significant improvement in our sales to other utilites. Their ment compared very well with other utilites. but that economic skill and ingenuity. however, touch all aspects of our operatons.

and regulatory obstacles already at work could cause problems We hope you share our prde in what the employees have for all electnc companes in the future. Their findings were accomplished. Yet while those accompisshments have been obvously on target.

significant, they would not have been possible without your The current business climate is one of those obstacles. causin9 understanding and support, which is sincerely apprecated.

a lower-than-forecasted nse in electnc sales to customers.

espeaally the auto and steel industres We beleve. however, tfut when the economy recovers, we will benefit from the increased use of new and recentry expanded auto and steel y

s manufacturing faolites in our service areas. Major industnal gg{ /t

_y projects already underway in our service areas could. by the end "j

3 /s

,Cs C of 1982. increase our annual operating revenues by some 528 millon. In addition, we antiopate greater use of electnoty in industnal processes as the decontrol of oil and the expected decontrol of natural gas restnct the use of those fossil fuels.

Justin T. Rogers. Jr.

Presdent A wirding down of our plant and environmental constructon March 16.1982 programs should also improve our finanaal future. Although we will need about $2.9 bilhon in capital dunng the next five years, 1982 will be our peak year in expenditures at $726 million with a tapenng off in the years that follow. By 1985. Our plant constructon program will be limited to two nuclear units schedukx1 for completon in 1986 and 1988. At that time, our major constructon programs should be behind us until we are weh into the 1990s 5

Financial Review by Sil5 8 mdlon. or 12.7 percent. frorTf the 1982 through 1986. The five-year penod 1980 amount of 59I1.5 mdhon.

reflects substantial expenditures for three The purchase of fuel needed to generate nuclear generating units scheduled for electrioty continued to be our largest oper-completion between 1984 and 1988. and ating expenditure, accounting for 32 cents a large environmental program scheduled of every revenue dollar recerved in 1981.

for completion in 1984. A significant These costs totaled 5413.7 mdhon-a 13.4 portion of funds for these projects has and percent increase over 1980.

will come from the sale of secunties.

Net costs of power purchased and inter-Interest and Dividends Changed (exchanged with other electnc companies) reflected an expense of $29 3 Net interest and other charges increased mdhon in 1981 up 12.4 percent from 526.1 52.7 percent to 5200.2 mdhon in 1981.

mdkon in 1980 pnmardy because more compared to 5131.1 mdhon in 1980.

power was dehvered to other utihties as because of increased long-and short-term revenue sales in 1981 as opposed to inter-debt borrowing and high interest rates.

change sales Preferred and preference stock dividend Other operation and maintenance costs requirements decreased to 533.2 mdhon in for 1981 increased by $21.0 mdhon. or 7.0 1981. from 533 7 mdhon in 1980 because percent, to 5319.3 mdhon. These increases of sinking fund transactions and other pre-Electric Sales and Revenues resulted mainty from increases in the cost ferred stock repurchases dunng the year.

Increase of labor. materkils. and services. The total Ohio Edison and Pennsylvania Power increase was partially offset. however.

Net income for Common Stock sold 24.7 bilkon kilowatt hours of electnary because with the improved availabihty of Increases in 1981.10 I percent more than the our generating plants, maintenance costs After allowance was made for payment arnount sold in 1980 Led by a 10 6 per-were reduced by 53 7 mdhon-of preferred and preference stock dividends, cent increase in sales to the steel industry.

Taxes assoaated with utikty operatons net income available for common stock hlowatt hour sales to industnal customers increased to S165.1 mdhon in 1981 from was $163.9 milhon. compared to $101.4 inucasnf 5 0 percent. and sales to com-S 136.7 mdhon in 1980. Income taxes mdhon for 1980. With the November sale meraal customers increased 2.2 percent.

increased by $29 2 mdhon in 1981. but of 7 mdhon new shares and the issuance Sa!cs to residential customers dechned 0 8 general taxes decreased by 50.8 mdhon of 31 milkon shares through the Dividend percent from 1980 mainly because of a because of a $14.4 mdhon credit from the Reinvestment and Stock Purchase Pian, the drop in home construction and moderate settlement of a Pennsylvania exose tax on weighted average number of shares of temperatures that resulted in less use of gross receipts habdity which had been common stock outstanding increased heating and air conditioning Also, a major estabhshed in poor years. Ten cents per dunng the year to 71.2 milhon from 66.7 increase in sales to other utikties share of 1981 earnings resulted from the mdbon in 1980. On a per share basis.

contnbuted 2 0 bdhon kdowatt hc urs to the settlement of this tax.

earnings were 52.30 in 1981, compared overall increase in sales to SI 52 in 1980. However. 20 cents per This improvement in knowatt-hour sales. Construction Expenditures share resu!Ied from the Company's pur-(omhned with new rates. resulted in an Expenditures for environmental. plant.

chase of 565 8 mdhon of its outstanding 18 4 percent increase in operating reve-and other system improvement projects first mortgage bonds at market prices nues to Sl.3 bdhon. compared to Si i totaled 5568.0 mdhon in 1981, compared below their face value.

bdkon in 1980 to 5515.0 mdhon in 1980. The Companies Dividends of 44 cents per share on the currently estimate that construction costs, common stock of Ohio Edison Company l

Operating Expenses and Taxes including nuclear fuel costs. wdl total about were declared by the Company's Board of Operating expenses and taxes increased 5 726 mdhon in 1982 and $2.9 bdkon for D! rectors for each quarter of 1981.

Errnings and Dividends

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Plant Unit I which is 80 percent comp!cte and I

scheduled ror operation in 1984.

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System Operations system Dispatching Center Nearing Completion The 59.! million System Dispatching Center, which will increase the operating eff cency of our transmisson and distnbuton system is scheduled for Generating Unit Availability operaton in late 1982. The structure has been completed and work is continuing in Our major commrtment to improving preparaton for installation of the computer power plant performance continued to be equipment. The center's computer will successfulin 1981. Intensive maintenance provide for more efficent use of the programs and plant design modifications system s generating units. increase the contnbuted significantry to achieving a per ting security of the transmission generat:ng unit equrvaient availability of 76 3 percent in 1981. This was an systern, and improve generating unit improvement of 4 percentage points over resp nse to the minute-to-minute changes 1980 and approximately 18 percentage in customer demand for electnoty.

points better than the same penod in 1978 Youngstown Service Center when we initiated our generating unit reliability program. The improved Renovation Project Finished performance enabled us to sell 97.0 A 55 I million. nine-year renovation percent more power to other electnc project at the Youngstown Service Center companies than in 1980. Also, our pur-was completed in 1981. The three-phase chase of power to meet customer demand project alleviated crowded conditions and represented only 7.6 percent of total sales, improved the work environment. The first compared to i1.0 percent in 1980.

two phases were constructon of a service garage and parking deck. plus yard Beaver Valley Unit I improvements (completed in 1974) and Dunng 1981. Beaver Valley Unit I in constructon of a storeroorn and truck I

Shippingport. Pennsylvania with an avail-garage (completed in 1975). The final j

ability of 73.6 percent. expenenced its best phase included renovation of the faolites I

year of performance since it began opera-and the purchase of a building to house tion in 1976. We own 52.5 percent. or the substation maintenance section 425 megawatts of the BIO-megawatt nuclear unit, which is operated by Steam System Shut Down Duquesne Light Company of Pittsburgh.

With approval from the PUCO. the l

Pennsylvania Company closed its Last steam heating On December 25.1981. the unit was plant on May 1.1981. The plant, in shut down for refueling and maintenance.

Spongfield. Oho was shut down because i

i Dunng the scheduled 20-week shutdown.

of nsing fuel costs, a declining number of further modifications will be made to meet customers. and the prospect of having to operating requirements which the Nuclear install costly equipment to meet stnngent Regulatory Commission imposed on all environmental regubtions. Steam plants in l

nuclear plants after the Three Mile Island Akron and Youngstown. Oho, were sold

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I Electric Rates and 5321 mdhon retaa rate increase request was 75 percent complete by March 31.

filed with the Pennsylvania Pubhc Utihty 1979.

Regulatory Developments Commission in Apnl 198L Wholesale Rate Cases New Fuel Adjustment Used in August, the Company changed its In January 1981. the Federal Energy method of mcoeng fuel cous W u9ng a Regulatory Commission (FERC) authonzed new fM adjuument promm mpd W l

Ohio Edison to place into effect wholesale recent Ohio legislation. Under the new i

rates which wouk1 produce an additional 510 6 mdhon in revenue annually. The pr cedure. a flat rate is coercted for six rnonths based on a predetermined fuel increase, which is subject to refund repre-cost level. After that penod. the difference I

sents part of a 513 9 mdkon request that

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between the amount collected for fuel was fried in June 1980 and is currently costs and the actual fuel erpenses is calcu-being collected from the Company's 21 lated and. with approval of the PUCO. is muniopal customers.

The Company fded an apphcation with included as an adjustment in the fuel cost 4

level for a subsequent six-month penod.

FERC in November for authonty to increase i

wholesale rates in January 1982. The Lifeline Rates Commission has postponed the effective The PUCO ruled in November that Ohio date of the increase untd June 9.1982.

This proposed increase wouk1 produce an efectnc utihties wdl not be required to additional 514 2 milkon in revenue on an implement so-called "hfehne" rates for annual basis. compared to rates currentty which qualifying customers pay rates below the cost of service The Commission ff Retail Rate Cases

'" QIha Pomr n colmrmn said electnc utdity rates are not an apprcr

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in February. The Pubhc Utikties Commis~ add tional SI 7 million in January 1982 pnate or effroent method of providing

' sion of Ohio (PUCO) granted a 591 milkon from its five muniopal resa!e customers as finanaal assistance to low income or rate inc rease to Ohio Edison. which was the result of a tuhng by FERC on the first of elderly customers subsequently inacased to $98 mahon by a two part request made in September

, the PUCO This increase was the result of Future Test Year Concept Proposed 1981 in the request for a total increase o, a $1181 rndhon request fd"d in May 1980

$2 3 mdhon. PennsyNania Power proposed Last fall the PUCO permitted tne The PUCO granted the Company an that if. at the conclusion of heanngs. FERC Company to include two test penods in ernergnnr y rate inc rease of 590 mdkon in finds that more than the $17 mdhon in determining its need for revenue in the August after an agreement was reached addtional revenue is warranted the higher January 1982 rate increase apphcation between prinupal parties on a $139 2 rates Wdi be coHected annually from the The normal test year is based on actual rndkon retad rate inc rease request fded in date of the deosion past levels of revenue and expenses for the Marr h 1981 with the Commission first six months and on estmates for the Inc Company fded an apphcation with Construction Allowance Upheld second six months The future test year is the PUCO in January 198/ for a 9 8 A rukng by the Supmme Court of Ohio based entirely on estimates for the year pen ent rate inue.ise. w h(h is eyn ted to in May upheld a deosion by the PUCO after the normal test year Jse of the future

' becorne effet five in late 1982 ff granted in which aUowed the Company to include test year concept should enable the l the fun amount requested the increase 523 5 mdhon in construction costs for Company to more accurately reflect the

, would rmuit in approomately SI17 7 Bruce Mansfield Unit 3 in our rate base effects of inflation in its rates dunnq the l rnilh< >n in adational revenue annuauy.

poor to the unst% commeraal operation penod that the rates are in effect. The Also.n January 1982. Pennsylvania The recovery of costs lConstrucDon Work PUCO wdl base its deosion on one of the l Puwer was granted 524 9 mdhon of the in Progress) was allowed because the unit two test penods.

Tap sobstadons for transmisuon and Kilowatt-Hour sales Bdhons of datribution or power are an integral part or Kdowatt-Hours Other soppiying adequate and renable efer tr k servh c to more than %o.000 rustomers

' a Industnal m Cornmeru.d

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Financing mmon pnnapar amount of Ponuton C6n-833-megawatt nuclear generaong unit trol Revenue Bonds.1981 Series H These being built in Shippingport. Pennsylvania.

senes mature in 1983 and bear interest The Company's share of the estimated at 60 percent of the floating prime rate.

total constructon cost of the unit is 5107 In Apol. on behalf of the Company, the bilhon. The Trust anows us to increase our Oho Air Quakty Development Authonty finanaal flexibihty by defemng a portion of sold 5100 milhon of a new senes of poilu-the long-term finanong requirements for Security Sales ton control revenue bonds The new the project until investment in the unft can Dunng 1981. the Companies raised b nds.1981 Senes A (Ohio Edison Com-be included in electnc rates estabhshed by 5411 mdhon in long-term capital to finance pany Project). carry an interest rate of the regulatory commissions.

a major portjan of the Companies' con _

8-1/2 percent and mature in 1984 and are By the end of 1980. 5265 mdhon of the entitled to the benefit of a bank letter unit's constructon costs had been financed structon programs The majonty of pro _

of credit.

through the Trust. In 1981. an additional ceeds from the sales of vanous secunties Proceeds from the safe of these bonds 5167.5 mWon was provided.

were apphed to reduce short term debt Incurred for the constructon and by each Authonty have been or wm be acquisition of new faai.tres and other usal to finance the installation of arr System improvements.

ponution control faatties at vanous coai-Through provisons of the Economic fired power plants in Ohio or at the Bruce Recovery Tax Act of 1981. we were able Common Stock Mansfield Plant in Shippingport, to raise 537.5 milhon by transfernng certain in November. the Company received Pemsylvania tax benefits related to fachties placed into approximatety 585 milhon from the sale of seven mdkon shares of common stock at International Financing service dunng the year.

512 125 per share.

To expand our capital market oppor_

The transacton enabled us to gain immdate benefit from investment tax We also raised 535 9 mdhon from the tunities. the Company estabhshed a sub_

issuance of 31 mdhon shares of common sidiary. Ohio Edison Finance N V. in the crMts and accelerated tax deprecation stock through our Divaiend Reinvestment Netherlands Antmes (West Indies), which deductions that otherwise would not have and Stoc k Purchase Plan.

enables the Company to obtain funds been avadable for several years. Proceeds from the transfer were used to reduce First Mortgage Bonds through the sale of notes to foreign inves-tors he interest on these notes is exempt short-term loans incurred for System in June. Pennsylvania Power sold $20 mdhon of bonds This senes, at 16-l/8 per_

from Untred States and Netherlands Antmes improvements.

cent interest. will mature on June 1.1989_

withh lding taxes The first offenng made Securities Purchased in a pubhc offennq in September, the through the subsKliary was 17-1/2 percent Company issued 575 milhon of bonds.

Guaranteed Notes in the pnnopal amount To strengthen the Company's common carrying an interest rate of 18 3/4 percent of 5 75 mdkon The sale of these notes.

equity base and reduce long-term debt and and a matunty date of October I.1991 which will mature in 1988. was completed preferred stock. in 1981 We purchased in October. The Company has quaranteed some outstanding first mortgage bond and Pollution Control Bonds the payment of pnnopal and interest of preferred stock secuntfes at pnces below in January. 54 6 mdhon ponapal those notes and has secured its guaranty their face value in total. 565 8 mdkon of amount of PoHution Control Revenue with a pledg~ e of a new senes of its First first mortgage bonds were purchased.

Bonds 1981 Senes G. and si mdhon Mongage Bonds which resu!ted in an extraordinary gain pnnapal amount of Environmental equ va! erit to approximately 514 mdhon. or improvement Revenue Bonds.1981 Senes Ohio Edison Energy Trust 20 cents per share of common stock. We A. were issued. on behaff of Pennsyfvania in 1980. the Ohio Edison Energy Trust also purchased approximately 27.000 Power. by the Beaser County Industnaf was estabhshed to make avadable up to shares of our preferred stock. 5100 par Deselopment Authonty On l'eha:f of

$500 mahon to finance. in part. the value, further increasing common equity Ohio Edison. the Authonty sold 514 3 construction of Beaver VaHey Unit 2. an by approximatery 518 mdkon.

- - 5540 000.000 ryt inwe im mes r> mt c heney rv q u New Long-Term Capital w hah has r;assed through cost conectm p

eqwment is crunneled upa rd tNough the new 39 3 f xt struc twr

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Cdal Supplies North Amencan Coal Corporation, up to j

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1.2 millon tons of coal per year will be i

l dehvered through November 1982 to the R E. Burger Plant in Shadyside. Ohio Nuclear Fuel Financing Approximately 10 i millon tons of coal The coal will be washed and the resulting To provide funds for finanong the costs were burned at our nine coaf fired power lower ash content wdl assist us in meeting of nuck ar fuel, the Company entered into plants in 1981. About half of our coal environmental regulations at the plant.

i an arrangement in December involving the purchases are made through long-term This agreement resolved a lawso;t fded I

formation of a speaaf purpose corporation contracts for supplies coming from south.

by North Amencan in September 1980 unrelated to the Compiny. The corpora.

eastern Ohio and western Pennsylvania.

'nvolving a sales agreement to purchase a tion will essac :ommeraal paper or make The balance is purchased on the open minimum of I 6 million tons of coal per market from the same region and from year from two of North Amencan's south-bank borrowings to finance these costs and wdl lease the fuel to the Company eastern Kentucky and West Virginia.

eastern Ohio mines in June 1980. we Pennsylvania Power buys coal from central notified North Amencan of our intention to As the arrangement currently exists, up to a

Pennsylvania.

terminate the sales agreement because the SI35 m!! bon is avadable As of December mines were not produang coal in the

31. 515 mdhon was financed through this Coal Quality improved; quantity or quanty speofied in the arrangement. Pennsylvania Power expects By-Products Sold agreement.

to criter into a similar arrangement in earfy i

1982 for 530 mdhon to finance rts nuclear Dunng 1981, we continued to purchase Also included in the agreement is a revised pnang arrangement that wdl fuel c osts better-quahty coal for our power plants. lo initially save the Company approomately addition to higher heating values. the coal 53 per I n because it fixes the cost of coal l

Securities Ratings Lowered represented an approximately 22 percent at a level comparable to the average pr(e-i in July, two investor servKes lowered decrease in ash and an 18 percent decrease gj their ratings of the Company's secunties.

'n su! fur content compared to coal received ating the Company's finanaal condition, in 1977. The higher heat content of coal Quarto Coal Contract Amended l

high money costs and the continued high resofted in higher boiler efficency. less cash demands resulting from the maintenance, and lower ash handkng To reduce overall coal costs for the Bruce COSIS construction program.

Mansfield Plant. the Central Area Power Moody's Investors Servg e. Inc. lowered The Company has also continued to Coordination Group (CAPCO), which ratings on our 19 senes of pubhcly held first redum its expenditures for ash disposal by includes Ohio Edison and Pennsylvania l

mortgage bonds from A to Baa and finding buyers for some of its ash The ash Power. reached agreement with the downgraded the rating on six senes of can be used as a partial replacement for Quarto M,ning Company to amend two pollution control revenue bonds from Baa fxartland cement in concrete and concrete coal sales contracts The amendments to Ba However, their ratings on our products. in vanous construction apphca-allow CAPCO to speofy tonnage require-tions such as a structural fill or a road base preferred and preference stock remained ments and approve mrning plans for Baa and Ba. respectrvely.

matenal. and for highway snow and ice Quarto's three southeastern Ohio coal 1

control. The sale of coal ash in the last mines. Under the amendments, less Quarto Also. Standard and Poor's Corporation lowered our first mortgage bonds to Tople three years totaled approximatefy coal wdl be bought. enabkng CAPCO to 5236.000 8 minus from Tople B plus The Company's buy a greater portion of coal from more "C " *' cal s um that am n w avadable pollution control revenue bonds were North American Coal raded to Double B plus from Inple in a separate agreement with Quarto's downg' erred stock to Double B from Tople B Agreement Reached parent company. the North Amencan Coal B. pref and preference stock to Double B-minus As part of an agreement reached in Corporation. CAPCO was granted an from Double 8 March between Ohio Edison and the open-end option to acquire Quarto.

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Environmental Activities such as the current " ace rain" controversy.

The Coalition has ccmmissioned a study to determine the cost-effectivene3s of current and prope',ed environmental laws and regulations, and ;t has begun a senes of advertisements in major newspapers in the Northeast to bring focus to the issue.

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Air Quality Projects in Progress Retrofitting existing power plants to meet t

revised clean air standards wdl cost the Compan,es 5464 8 mdhon from 1981 through 1986. With 5119.4 inillion of that amount spent in 1981 l

Sammis Air Quality Control Project i

Legislative Developments The largest air quahty centrol project is Un Mway at the w fted W. H. Samrms With the Cean Air Act subject to review Plant neir Stratton Ohio The 5450 milhon in 1981, we were in frequent contact with federal legislators and their staffs with our project. which is p dared on this page is i

C" 5C hd# d"d P d"' *d IU' (C*PI"'0" '"

I suggestions for improving the Act. These Auguu N in w&r W81, me improvements would decrease the com_

bMge IAe deck (140 fee wale and 915 plemtres and administrative burdens im.

posed by the current Act.

fed long) needed to support pollution We are also working to discourage conUol quipment was compW inappropnate legislation directed at the so-Constructed over a four-lane tughway. the f

cal!Pd "acd rarn" problem in which deck wrH support six la ge dust coNectors r

preapitation is thought, by some people, which wiH replace emting equipment to conUol paMiculate emissions A seventh to contain aadic materials introduced by duM coMor wiu be consUuded on the the chemical transformation of industoal emissions. We beheve that the level of ground south of the plant. The project is scientific knowledge on "acsd rain" is about 25 percent complete.

insufficent tojustrfy enactment of Additional Air Qu*ty Control Projects legislation which could require utilities to In Ju'y we placed into service a 5 31.1 spend billions of dnllars on more air milhon installation of two electrostatic pollution control with no reasonable preapitators and a 393-foot chimney at the assurance that the theoretical effects of Ndes Plant in Nrles. Ohio. At the R. E.

"acd rain" would be reduced Burger P' ant in Shadysde. Ohio. two Also, we are actively partiopating in the electrostat( preapitators are being instalkx1 at tivities of the Coaktion for Environmentah for tuo hoi!crs at a cost of 545 3 mdhon Energy Balance (CEEB) Made up of and a e schedufed for completion in March approximately 30 mdwes*nrn uti!; ties and 1982. Also scheduled for March 1982 other industnes. CEEB is working to completion is a 5218 milhon electrostatic I

improve the level of public and legislative preopttator at the Edgewater Plant in understand:ng of enagy-related issues Lorain. Ohio.

Lef t: At the R. E. Burger Plant. two electro-g 4-III static precipitators for Units 7 and 8 wirl begin operation in April 1%2. The f

envirc,nmental proJ*ct includes a silo pef t) i, 6-which will 'oad truck s with f!/ ash for transportation M a badfiil.

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Power Supply Planning Nuclear Plant Construction In October 1982, that plant is schedubd Proceeds to begin 18 months of testing and demon-stration. It will process 600 tons of coal per Constructon is continuing on three day for use in an existing 50-megawatt nuclear-powered generating units being plant. In helping plants meet stnct air pollu-financed and burft by the five CAPCO tion standards the process will produce companies: Oho Edison. Pennsylvania ash and solid sulfur by-products which will Power. The Oeveland Electnc illuminating require minimal disposa!. Following suc-l Company. The Toledo Edison Company cessful demonstration, larger capaaty plants and Duquesne Light Company.

are expected to be built by Allis-Chalmers.

Constructon that began in 1974 con-To date, we have contnbuted 52.3 tinues at the 54 billion Perry Nuclear Plant million to the project, with 51.5 million in North Perry. Ohio, which is being built more scheduled through 1984.

and will be operated by The Cleveland Electric !!!uminating Company. The System Load Management 1.205-megawatt Unit i is now about 80 Program Reduces Demands porcent complete and scheduled for com-Through our load management pro-meraal operation in May 1984. The gram. We are activety encouraging our i.205-megawatt Unit 2 is also progressing customers to modify their time of electncal well and is scheduled for commercel oper-use-in effect, to shift their loads to off-ation in May 1988. Ohio Edison and eak penods so that system peak demand Pennsylvane Power will own 35.24 is reduced without adversely affecting elec-percent or 850 megawatts. of the total tric revenues. The emphasis of this ge rating capaaty from these nuclear rogram is to either help customers shift existing loads or help to design new Beaver Va!Iey Unit 2 at Shippingport.

customer loads to operate at off-peak Pennsylvania which is being built and will penods. Shifts to off-peak help reduce the be operated by Duquesne Light Company, need for costty new generating plants to is about 50 percent complete. Construction mea peak &ma2 aM @ & tme began in May 1974 and commercel oper-when we will have to finance and put ation is scheduled for May 1986. The 50 #U S 833-megawatt unit. of which we will own in 1981, the program resulted in a reduc-41.88 percent. or 349 megawatts, will cost tion of 20 megawatts in average system an estimated 52.4 bi!! ion.

peak demand. Over the five-year penod The projected rate of growth for Coal Gasification Research Project beginning in 1977. we wm able to reduce our customers' contnbution to peak customer demand is approximately 2 Along with the Allis-Chalmers Corpora-system demand by 132 megawatts.

percent per year for the penod 1982 tion, the state of Illinois and a number of Large industrel and commercef cus-thro Igh 1991. With the three nuclear other utilities. we are partiopating in a tomers were pnmanly responsible for the generanng units scheduled for commeraal 5135 million coal gasificaton research proJ-results achieved. Residentel customers are operation in the mid-to late-1980s.

ect at Illinois Power's Wood River Plant encouraged to install load control devices adequate generating capaaty should be near East Alton filinois. The project is in' and change the time of use for major available to n'eet the energy demands of tended to demonstrate the feasibility of appliances.

cur customers with adequate reserve convert:ng a high-sulfur coal. like that found margin' well snto the 1990s.

in Ohio, to a clean-burning gaseous fuel.

Power supply Planning

- - 54.200.000.000 night: The more than 7400 men and women who make up Chlo Edison and Pennsylvania i- }

Power know the irrportance of providing I

mt nms wah go d service. Their skills and

,a

-- 53.500.000.000 Ii Construction Work in Progress 5Ei

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deliver service which !s 99 9 percent rehabic.

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Custorrier C oritart Board Members Retire Employee Programs 4

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St.itr trier 1t Hillfrig Instituted Af fir rn, itis <> Ar tror1 P'r'rr10ted New Board Members Elected l

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Ohio EdisDn Company Officers Board of Directors Justin T. Rogers, Jr.

Donald C. Blasius Frank C. Watson Presulent President of The Tappan Company.

President of The Youngstown Welding Victor A. Owoc Mansfield. Ohio. manufacturer of and Engineenng Company.

Executive Vre President microwave ovens, appliances. kitchen Youngstown. Ohio, fabocator of non-Douglas W. Tschappat cabinets and bathroom vanities.

ferrous alloys Member. Nominating Ewr utive V(e President Member. Nominating Committee.

Committee. Audit Committee.

William A. Derrick Robert G. Zimmerman Lynn Firestone Sernor Vre Presalent Independmt Electocal and Mechanical Senior Vice President of this Company.

n n

n Robert J. McWhorter emba %mnaung Comme Senior Vice President Le we Industnes. Int Sandusky. Ohio-Fred H. Zuck developer of real estate and residential Robert G. Zimmerman Retired-formerly Chairman of the Board Duilding Chairman. Salary Committee.

of Sandusky Foundry & Machine Senior Vw Presnient John L. Feudner, Jr.

Company. Sandusky. Ohio.

Russell J. spetrino Executive Director of Akron Community manufacturer of centrifugal castings.

VK e Pr"vd"nt and Genera! Counsel Trusts. Akron. Ohio. Chairman. Audit Frank E. Derry Committee. Member. Finance Committee.

Vv e Presalent Dr. Lucille G. Ford Clyde W. Frederickson Vre President and D'?an of Business VK e President Administration. Er onomics. and Director.

Donald J. List Gill Center for Business and Economic Viw Prevdent Education. Ashland College. Ashland.

William B. Marvin Ohio Member. Nom;nating Committee.

Cnrnptruller Finance Committee.

Gregory F. LaFlame Robert L. Loughhead g y.tary President of Copperweld Steel Company.

Warren. Ohio, manufacturer of carbon H. Peter Burg in awrer and a!!oy blooms. billets. and bars Member. Salary Committee.

Warren G. Fouch D. Bruce Mansfleid Assistant Comptroller Retired-formerly President of this Charles N. Glasgow Company and Charrinan of the Board of Assistant Senetary its subs!drary. Pennsylvania Power Joanne Martin Company Member. Audit Committee.

Asustant Seuctary Glenn H. Meadows Mark Y. Clark President of McNeil Corporation. Akron.

Anistant heasurer Ohio. manufacturer of industnal and automouve lubncation systems. pumps.

Division M;inagers systems for automated production and David R. Gundry matenal handhng. heating and air Akron Divivon conditioning equipment swimming pool c m and equrpment and automauc Anthony N. Gorant Bay Division beverage dnpensing/contro! systems.

Member. Salary Committee.

James E. Markle Victor A. Owoc I Ac Ene Dwivon Execuuve Vice President of this Malcolm E. Cash Company. Member. Finance Committee.

Mansfield Divivon Justin T. Rogers, Jr.

Donald L. Rearick, Jr.

President of this Company and Chairman Manon DNivnn of the Board of its subsidiary.

N. Rod Monahan Pennsylvania Power Company.

Spongfreid Divivon Chairman. Finance Committee.

Robert E. Dawson Nominating Committee.

g Stark Division Douglas W. Tschappat rred H zum Irront) Juson T. 9egers. ;r.

David C. Bixler, Jr.

Executive Vice President of this and >ohn i reuoner. ;r Warren D4Ivofl Company.

to rli ht pef t t o right) riobert L Loughhead.

Peter A. Fetteroff R obe " G I""'"e""d " G *"" H

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Management Report The Audit Committee consists of three non-employee direc-The consoldated financial statements were prepared t;y the tors whose dutes include: inquiry into the number, extent, management of Oho Edison Company who takes respon.

adequacy and valdity of regular and specia audits conducted sibihty for the r integnty and objectivity. The statements were by independent pubhc accountants and the internal auditors; prepared in conformity with generaify accepted accounting the recommendaton of Odependent accountants to conduct pnnoples and are consistent wrth other financial informaton the normal annual audit and special purpose audits as may be appeanng elsewhere in this report. Arthur Andersen & Co., in-required; and reporting to the Board of Directors the Commit-dependent pubhc accountants. have expressed an opinon on tee's fodngs and any recommendaton for changes in scope.

the Company's financial statements, as shown on page 40.

methods, or procedures of the auditing functons. The Audtt The Company's internal auditors, who are responsble to Commrttee held three meeangs dunng 1981.

the Audit Committee of the Board of Directors, reytw the results and performance of operating units within the Com-pany for adequacy, effectiveness and rehabihty of accounting

• [

and reporting systems as well as managenal and operating controls.

V. A. Owoc W. B. Marvin Executive Vice Presdent Comptroller Chief FnancialOfficer Results of Operations due pnmanly to increased sales of short-term power to other Results of operatons for 1981 showed a significant sm.

utthtes. In additon to the effect of rate increases in 1980, provement over 1980 results with the Company acheving a approximately one-fourth of the revenue ncrease in that year rate of return on average common equity of 14.6% com.

was due to increased fueFrelated revenues. Kilowatt-hour sales to customers other than utiktes increased 1.4% in 1981 pared to 9.7% and 112% sn 1980 and 1979, respectively.

Two unusual factors were present in 1981 which helped to in_

after having decreased 2.8% in 1980. The 1981 increase was crease earnings. First, was an after-tax extraordinary gain of poncipally the result of a 5.0% increase in kilowatt-hour sales to industnal customers.

$ 14.042.000 appkcable to the Company's purchase of 565.821.000 panopal amount of its outstanding frst mort-The pnce of fuel has been increasing from 1979 through gage bonds. This program is further descnbed below. Second.

1981 but the increase in fuel costs in 1981 compared to 1980 was the successful settlement of a claimed Pennsylvania tax is pnmanty due to greater quantites of fuel consumed. This habihty which the Company, along with other utthtes had was due to the combined effect of plaang Bruce Mansfield disputed. The Company had made provison for possible pay-Unit No. 3 into commercal operaton n late September 1980 ment of the tax from 1977 through 1979; this settlement re-and the improved generatng unit availabihty acheved in sutted n an ncrease to 1981 net income of 57.012.000.

1981 compared to 1980. Were it not for the deferral of Quarto Absent these two factors. the average return on comrron coal costs, however, total fuel costs would have increased by equity would have been 12.9% in 1981.

approximately 543.200.000 more than the reported increase Rate ncreases implemented by the Companes n 1981 for 1981 (see below and Note I of Notes to Consoldated wcre the major factors toward the marked earnings improve-Fnancal Statements). Reduced dependence upon generaton ment. Approximately twothirds of the increase in operatog from more costfy oil-fred units in 1980 held down the ncrease revenues is a result of those rate ncreases. The remainder was in total fuel costs by approximately 519.000.000 under the 22

amount that the continually increasing prices for coal and oil in order to strengthen its common equity base by taking ad-would have otherwise produced in that year.

vantage of existing favorable market conditions, the Com-The large reducton in purchased and interchanged power, pany began a program of purchasing certain amounts of its net. in 1980 resulted pnmanly from improved generatng unit outstanding first mortgage bonds and preferred stock dunng performance compared to the pror year. The increase in 1981 the first half of 1981. The purchase of $65.821.000 pnncipal reflects a reduction of power dehveres to other utshtes classi-amount of first mortgage bonds and 26.650 shares of pre-fed as " interchange" power. Instead, the Company sold sub.

ferred stock under this program helped to increase the com-stantially more short-term power. which is included in operat-mon equity ratio from 34.2% at December 31.1980 to 35.7%

ing revenues on the Statements of Conso! dated income, as at December 31,1981.

discussed above. Companng ret power transactons with New methods of financing initiated by the Company in other utihtes by combining the short-term sales and net pur-3981 included estabhshing a wholly-owned finance sub-chased and interchanged power expense. the Companies sidiary. Ohio Edison Finance N.V. (Finance), and arrangements moved from a " net buyer" positon of 513.700.000 in 1980 to entered into with Ohio Edison Fuel Corportaton (see Note 5 a " net seller" positon of $44.600.000 in 1981.

of Notes to Consoldated Financial Statements). Because of Approximately one-third of the totalincrease in other oper-the effect of certain tax treates. Finance is better able to attract aton expenses is attnbutable to the increased operation of funds available from European investors than the Company Bruce Mansfeld Unit No. 3 and Beaver Valley Unit No. I in and rias enhanced the Company's financing flexibihty by 1981 compared to 1980. Correspondngly, substantially all of allowing it to take advantage of lower-cost money which the decrease in 1981 maintenance expense was from the re-may exist from time to time in foreign money markets.

sultog reduced maintenance at Beaver Valley Unit No. I. The The Company took advantage of a provision of the Eco-Companes' maintenance costs had been nsing substantialty nomic Recovery Tax Act of 1981 by selling tax benefits asso-n pror years because of efforts toward enhancing the avail-Ciated with property placed in service in 1981. The Company abihty of their generating units, the results of which have been received approximately 537.500.000 from the sale. This trans-indicated above.

action has greatly accelerated capital recovery associated with The significant ncrease in miscellaneous income included in this property since available tax credits and depreciation de-other income and deductions is mainly attnbutable to interest ductions would probably have taken many years to reahze in earned on funds held in escrow for the constructon of pollu-full.

ton control faciktes at the Companes' generating units-The Companies have deferred approximately $63.400.000 increased interest costs of 53% and 28% in 1981 and in unrecovered costs apphcable to Quarto coal as discussed in 1980, respectively, reflect significantry increased interest rates IJote I of Notes to Consolidated Financial Statements. The and increased borrowings during both years. The Companies Company was granted an allowance in a 1981 rate order for issued approximately $316.000.000 of new intermediate and the additonal fnancing costs which result from the deferred long-term debt dunng 1981 having interest rates which range recovery of the coal costs, but that allowance amounts to an from 8-1/2% for unsecured pollution control notes to 18-3/4%

annual return of only 4.3% based upon unrecovered costs as for first mortgage bonds. In addition. 5167.500.000 and of December 31.1981.

515.000.000 of finanang was completed through the Ohio The Supreme Court of Ohio decrsion declanng the impro-Edison Energy Trust and the Oho Edison Fuel Corporaton in prety under Ohio law of recovering the costs of a terminated 1981, respectively, at average costs of 18.7% and 13.9%. re.

construction project through electrc rates. as service related spectivery (see below and Note 5 of Notes to Consoldated costs, had an impact on 1981 operatons. As a result of that Frnanaal Statements). Average short-term borrowings in 1981 decison, the sale of common stock onginally planned for were at approximatety the same level as in 1980. however August was delayed until November. Also, an offenng for the average interest rate on those borrowings increased from

$ 75.000.000 pnncipal amount of first mortgage bonds, whch 14.9% to 18 0%.

had been pnced to carry an interest rate of 16-7/8%. was informaton with respect to the estimated effects of inflaton withdrawn in July after the Ohio Supreme Court decision.

upon the Companes is given in Note 10 of Notes to Con-The bond sale was delayed until October at whcn time the soldated Financial Statements.

nterest rate was increased to 18-3/4%. That delay will in-Capital Resources and Liquidity crease the Company's totalinterest costs by over 514.000.000 The cost of the Companes' constructon programs over the until the bonds mature in 1991. However, in hght of the Oho last five years was approximately $2.300.000.000. wh ch re-Supreme Court decision, the Company made apphcaton for, quired permanent finanang (net of debt and preferred stock and was granted, an emergency rate increase effective redemptons) of 51.400.000.000, in additon to the incurrence August 1.1981, whch is designed to provde additonal an-of long term obigatons of $447.500.000. The Companes ex-nauf revenues of $90.000.000.

pect to spend approximately 52.900.000.000 for new con-The Company filed an apphcaton with the PUCO for a rate structon from 1982 through 1986. A mapr porton of thrs increase in January 1982 which would ncrease annuai reve-new constructon will be funded through the issuance of nues by approximatery $1I7.700.000. This ncrease would additonal secuntes. In additon, the Companies' debt matun-take effect n the latter part of 1982. In a January 1982 deci-tes and preferred and preference stock sinking fund require-son. the PPUC granted Penn Power a rate increase which ments amount to approximatety 5422.500.000 dunng this will add approximately 524.900.000 to its annual operating five-year perod revenues.

23

1981 1980 1979 1978 1977 (in thousands. except per share amounts)

Operating Revenues.

. $ 1,279,649 51.080.869 5 994.585 5 862.956 5 796.289 Operating income.

252,38f 5 169.383

$ 163.744 5 123.945 5 146.508 income 8efore Extraordinaryitem 183,020 5 I35.150 5 134.807 5 86.030 5 I i 1.574 Net income.

197,062 5 135.150 5 134.807 5 86.030

$ 111.574 Net income for Common Stock.

163,892 5 101.403 5 105.120

$ 61.259 5 87.863 Earnings per Share of Common Stock:

(based on weighted average numtxt of shares outstanding dunng the year)

Income 8efore Extraordinaryltem.

$ 2.10

$ 1.52

$ 1.80

$ 1.19 s i.97 Netincome for Common Stock

$2.30

$ l.52 5I.80 51.19 5 f.97 Divdends Declared per Share of Common Stock

$ f.76 5I.76 51.76 51.76 51.7I5 Total Assets at December 3I

. $4,456,f 30 53.979.965 53.446.454 53.010.9I4 52.7I5.903 Preferred and Preference Stock Sub, lect ro Mandatory Redempton.

151,141 5 156.450 5 150.850 5 98.000 5 98.000 Long-Term Debt

.51,759,771 51.594.384 51.4 IO.782 51.343.195 51.189.821 Energy Trust and Nuclear Fuel Obhgatons 447,484 5 265.000 5 5

5 The Company's Common Stock is listed on the New York and Mdwest Stock Exhanges and is traded on other registered exchanges.

Price Range of Common Stock 1981 1980 First Quarter High-Low 13 11-3/4 15-l/4 Il-3/4 Second Ouarter High-Low.

13-1/2 11-7/8 15 12 Third Ouarter High-Low.

12-7/8 11 14-7/8 12 l/2 Fourth Ouarter High-Low 13 11 I3 l/2 11-1/8 Yearly High-Low 13 11 15-1/4 11-1/8 Pnces are as quoted on the New York Stock Exchange Composite Transactions.

Holders of Record Shares Held Number Number Indivduals.

16l,551 88.4 41.689.691 53.0 Fducianes 16.853 9.2 3.568.427 4.5 Brokers.

66 473.905 0.6 Nominees 995 0.6 30.415.022 38.7 8anks & Financiallnstitutions.

50 104.404 0.1 losurance Companies & Other Corporations.

1.594 0.9 I.438.371 1.8 Chantable. Rehgious & Educationalinstitutons.

552 0.3 441.873 06 Persms. Profit Shanng & Other Investment Trusts

1. I I 7 0.6 544.010 0.7 TOTAL.

182.778 100 0 78.675.703 100.0 As of January 31.1982. there were 183.434 holders of 78.774.178 shares of the Company's Common Stock.

Quarterfy divdends of 444 per share were pad on the Company's Common Stock dunng 198I and 1980. Informaton regarding retained earnings available for payment of cash divdends is given in Notes 2 and 4b.

24

Ohio Edison For the Years Ended December 31 1981 1980 1979 (in thousands, except per share amounts)

OPERATING REVENUES.

$ 1,279,649 51.080.869 5994.585 OPERATING EXPENSES AND TAXES:

Operation-Cost of fuel 413,698 364.894 316.536 Purchased and interchanged power net 29,321 26.089 60.313 Other operation expenses 195,075 170.351 138.712 Total operation.

638,094 561.334 515.561 Maintenance.

124,213 127.935 102.936 Provision for depreciation 95,830 85.455 81.224 Amortization of terminated construction projects (Note 2) 3,995 General taxes 84,316 85.143 89.122 income taxes.

80,820 51.619 41.998 Total operating expenses and taxes.

1,027,268 911.486 830.841 OPERATING INCOME 252,381 169.383 163.744 OTHER INCOME AND DEDUCTIONS:

Alluwance for equity funds used during construction.

60,421 57.715 50.57i Miscellaneous. net.

17,021 2.104 1.399 Income taxes-credit.

53,360 37.017 21.189 Total other income and deductions.

130,802 96.836 73.159 TOTAL INCOME 383,183 266.219 236.903 NET INTEREST AND OTHER CHARGES:

Interest on long-term debt 166,378 147.290 108.401 Interest on long-term obligations (Note 5) 69,183 5.057 Allowance for borrowed funds used dunng construction net of deferredincome taxes.

(67,381)

(48.814)

(29.388)

Other interest expense.

26,378 22.304 18.423 Subsidiary's preferred stock dividend requirements.

5,605 5.232 4.660 Net interest and other charges 200,163 131.069 102.096 INCOME BEFORE EXTRAORDINARY ITEM.

183,020 135.150 134.807 EXTRAORDINARY ITEM-Gain on reacquisition of first mortgage bonds. net of related income taxes (Note 8) 14,042 NET INCOME 197,062 135.150 134.807 PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS 33,170 33.747 29.687 NET INCOME FOR COMMON STOCK

$ 163,892 5101.403 S105.120 WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING 71,180 66.683 58.290 EARNINGS PER SHARE OF COMMON STOCK (based on weighted average number of shares outstandinq during the year)

Income before extraordinary item (after preferred and preference stock dividend requirements)

$ 2.10 5 1.52 5 1.80 Extraordinary item

.20 Net income for common stock

$ 2.30 5 1.52 5 1.80 DIVIDENDS DECLARED PER SHARE OF COMMON STOCK.

$ 1.76 5 1.76 5 I 76 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements 25

At December 31 1981 1980 ASSETS (In Thousands)

UTILITY PLANT:

In service, at onginal cost.......

53,160,271 53.010.662 Less-Accumulated provision for depreciation 871,740 806.739 2,288,531 2.203.923 Construction work in progress....

1,112,810 948.228 Energy trust construction (Note 5).

434,412 270.057 Nuclear fuelin process (Note 5).

32,004 13.059 3,867,757 3.435.267 OTHER PROPERTY ANDINVESTMENTS 43,338 54.946 CURRENT ASSETS:

Cash.

11,746 12,924 Temporary cash investments, at cost, which approximates market value.

4,300 Recervables-Customers (less accumulated provision of $ 1.863,000 and

$ 1.247,000, respectivery, for uncollecttle accounts).

105,037 96.586 Other 26,809 37.975 Matenals and supphes, at average cost-Fuel.

84,503 93.861 Other 40,602 34.393 Prepayments and other.

18, % 2 14.268 291,959 290.007 DEFERRED DEBITS:

Deferredfuelandenergycosts.

61,537 12.144 Property taxes applicable to subsequent penod 41,450 38.772 Unamortized costs of terminated construction projects (Note 2)

%,489 99.997 Other.

53,600 48.832 253,076 199.745

$ 4,456,130

$ 3.979.965 CAPITALIZATION AND LIABILITIES CAPITALIZATION (See Statements of Consohdated Capitalization):

Common stockholders

• equity.

$ 1,228,486 51.066.957 Preferred stock-Not subject to mandatory redemption.

262,851 265.525 Subject to mandatory redemption....

68,000 72.000 Preference stock subject to mandatory redemption 56,843 57.250 Preferred stock of consolidated subsidiary-Not subject to mandatory redemption.

41,947 41.947 Subject to mandatory redemption 26,298 27.200 Long-term debt.

1,759,771 1.594.384 3,444,196 3.125.263 LONG-TERM OBLIGATIONS (Note 5)-

Energy trust 432,500 265.000 Nudear fuel 14,984 447,484 265.000 CURRENT LIABILITIES:

Current matunties of long-term debt and preferred stock 7,581 157.000 Notes payable to banks (Note 6) 74,400 4I,482 Accounts payable.

142,718 103.525 Accrued taxes.

47,074 59.159 Accrued interest 39,982 39.697 Other.

25,468 21.840 337,223 422.703 DEFERRED CREDIT 5:

Accumulated deferred income taxes 124,279 84.630 Accumulated deferred investment tax credits..

40,646 28.743 Property ta xes apphcable to subsequent penod 41,450 38.772 Other.

20,852 14.854 227,227 166.999 COMMITMENTS. GUARANTEES AND CONTINGENCIES (Notes 2. 3 and 7).

54,456,130 S3.979.965 The accompanying Notes to Consohdated Financial Statements are an integral part of these balance sheets.

1

m Ohio Edison d

s--

3 At December 38 1981 1980 COMMON STOCKHOLDfR$' EOUlfY-Common stock. 59 par value. authoreed 100.0C00ry3 shares-78 675.703 and 68.526.112 shares ourwardag respectively(Note 4a).

5 708,08I 5 616.736 Other paid in capital 349,214 316.629 171.191 f 33.592 3

lietated earnrgs (Notes 2 and 4b).

Tcpal common stochholders'en; sty.

1.228,48.4 I 066.957

[

Optional Redempron Price Number of 5 hare 5 Aggregate Outstanding gin 1981 1980 Per Share ThousandQ Pkf f F RRED STOCK (Note 4r)

Curta;Iatme. 5 IW par value-Auffusrved 6 000 000 shares NOT SUBJECT TO MANDATORY REDE MPTION 390% -724%.

973.350 1.000.000

$ 103 '75-108 000

$ 102.693 97,335 100.000 736% -820%

800.000 fX)O 000 106 520 107 400 85 612 80,000 80.000 864%-912%

850.000 850.000 106 48& t09120 91.696 85.000 85.000 Premium

$16 525 Total rxx subject to mandatory redempnon.

2.623.350 2 650.000

$ 280.00 f 262.851 265 525 J*

$UBJECT TO MANDATORY Rf DE A* TION (Note 4d) 10 48 6 - 10 76 %

692.760 740.000 5!07 860LIII 870 5 76.005 69,276 74.000 (l.276)

(2.000)

F Redempnon within one year.

Total subjett to mandatory redempton.

68.000 72.000 i

PFI f E Rt NCE STOCK (Note 4()

Cunw;iatrve no par value-r,_

Authorved4 000 000 shares

$UBJECT TO MANDATORY REDf MPTON (Note 4c)

I

$95 00-5102 50 Seres 27.000 21.000 5I.095 000t.102 500 5 29.700 27,000 27.000 i

5180 5eres f.973.100 2.000.000 516 025 31 619 29.843 30.250 Total subject to mandatory redempnon 2.000.100 2.027.000

$ 61.319 56,843 57.250 PFE F FRRf D STOCK OF CONSOUDATED SU8*.lDtARY (Note 4c)

Cumulanve.1100 par value-Authorved 740 000 shares NOT SUBJECT TO MANDATORY FEDE MPTION 424%-916%

419.049 4 f 9.049 5102 980 107.320

$ 44 238 41.947 49.947

$UBff CT TO MANDATORY RE Of MPTION (Note 4d) 8 14 % - 1I.00 %

267.984 272.000 5108 240 112 110

$ 29.460 26,798 27.200 (500)

Redemption within one year 26.298 27.200 Total subject to mandatory redemption.

TONG TERM Of 8T (Note 4f)

Fnt mrrtrpje bonds Oho Ed.wn Company-150.000 10'E 5eres due 1981 3 lI4 % 5rresduc 1984 and 1985.

50.491 50.491 4 l/4 % - 18 3/4 % 5eres due 1986 through 2000.

325,000 250 000 8 3/8 % - 15 i/2 % 5eres due 2006 through 2010.

280.798 325 000 7 112% -91/4 % 5cres due 1995 through 2003 443.38I 465.000 1,099.670 1.240.49I i

=

Penrnytvarma Power Company-3 I /4 % - 16118% 5eres due 1981 through 2008.

2f 4.805 199.805 Torai farst mortgage boruJs t.314.475 f 440.196 Serurer1 rotes and otAgatons Oho Idwn Company-1973 Seres A. average swerest rate 5 62% due 1984 through 2008 35.000 35.000 1914 8 % ~ 8 3/8% Seees A and 8. due 1990 through 2004 30.453 30 453 1976 7 IS% 5eres D. due 1992 through 2006 40.000 40.000 t

t 9781301 Otilgaron. due 1988 through 2003 8.I86 8.I86 w.

1979 7 YB E -9 /0% 5eres A. F andG. duc 1995 through 2009 53,000 53.000 I 98010 E - 1O I /8 % 5eres B. due 1990 through 2010.

50.000 50.000 1981 $cres H 60 L of floating pnmc. due 1983.

14.275 230.914 216.639 Oho f dwn Frunce N V -

1981 17 1/2 % Guaranteed Notes. due 1988 75.000 PennwNarva Power Company-w I 9 71 - l 9815 3/4 % - 9 3 8 4 and 60% of floating pnme. due 1983 through 2007 53.606 47.96i r4 Totat secured rotes arst at9tions 359.520 264 600 y

Urneum1 notes of Oho Ednan Company 8-I/2% - 1313/I6% due 1984 through 1986 I76.000 50 000

-4 L en - An4M;nt hek1 Dy Trustee 75,686 inta unwt ured notes of Ohio Ednan Company (Note 4g) 100.314 50 000 r

Net urwtwtef dscount on dett (8.733) 15 S I2) t m; term dett due w tho one year (5.805)

(I55 000)

"g5 Total kna term den f.759.771 f 594.384 TOTA C APIT Ml2ATION(Note 7) 53.444.196 53 I25 263 De * ( nmpanpy Notes to Conschda!Pd FrurUal StatemerTs afe an integral pa't of thrie statements p

i' E

N Ib

~ l l"

_ 7 For the Years Ended December 31 1981 1980 1979 (In Thousands)

Balance at beginning of penod

$ 133,592

$ I 50.552

$ 149.615 Net income.

192,062 135.150 134.807 330,654 285.702 284.422 Deduct:

Preferred and preference stock dividends.

33,160 33.724 29.950 Common stock dividends 126,030 118.137 103.356 Capital stock issuance expense 273 249 564 159,463 152.110 133.870 Balance at end of penod (See Notes 2 and 4b for dividend restnction)

$ 171,191

$ 133.592

$ 150.552 Preferred and Preference Stock Subject to Not Subject to Mandatory Common Stock Mandatory Redemption Redemption Other Par or Number Par Paid-in Number Par Number Stated of Shares Value Capital of Shares Value Premium of Shares Value (Dollars in Thousands)

Balance. January 1.1979 52.120.230 5469.082 5232.422 3.069.049 5306.905 5 567 980.000 $ 98.000 Sale of Common Stock 6.000.000 54.000 41.820 Dividend Reinvestment Plan I.502.139 I3.520 8.068 Sale of Preference Stock-s95 00 Senes.

9,000 9.000 s 102.50 5enes 18.000 18.000

$ i 80 5enes 2.000.000 30.250 Sinking Fund Redemption of 10 76% Senes of Preferred Stock 79 (20.000)

(2.000)

Balance. December 31.1979.

59.622.369 536.602 282.389 3.069.049 306.905 567 2.987.000 153.250 Sale of Common Stock.

6.500.000 58.500 25.805 Dividend Reinvestment Plan 2.403.803 21.634 7.979 Me of 10 50% Senes of Preferred 5tock.

100.000 10.000 Preferred Stock Sinking Fund Redemptons-10 48% 5enes 260 (20.000)

(2.000) 10 76% Senes

!75 (20.000)

(2.000) 1 I 00% Senes 21 (8.000)

(800)

Balance. December 31.1980 68.526.172 616.736 316.629 3.069.049 306.905 567 3.039.000 158.450 Sale of Common Stock 7.000.000 63.000 2!.875 Davidend Reinvestment Plan 3.122.631 28.103 7.751 Preferred Stock Sinking Fund Redemptons-10 48% Seres 585 (27.240)

(2.724) 10 76% Senes 361 (20.000)

(2.000)

I 100% Senes 53 (4.016)

(402)

Other Preferred Stock Redemptions-3 90% Senes 271 (3.790)

(379) 4 40% Seres 254 (3.720)

(372)

(3) 4 44% Seres 902 (13.440)

(l.344)

(6) 4 56% Senes 386 (5.700)

(570)

Consersion of s 180 Preferenc e Stock 26.900 242 147 (26.900)

(407)

Batance. December 31.1981 78.675.703 $ 708.081 5349.214 3.042.399 5304.240 5 558 2.960.844 5152.917 The accompanying Notes to Consohdated Financial Statements are an integral part of these statements.

28

Ohio Edison For the Years Ended December 31 1981 1980 1979 (in Thousands)

SOURCES OF FUND 5:

Income before extraordinary item

$ 183,020 5135.150 5134.807 Pnncipal non-cash items-Depreciation and amortization-Charged to provision for depreciation.

95,830 85.455 81.224 Charged to other accounts.

1,318 1.282 1.596 Amortization of terminated construction projects 3,995 Deferredincome taxes net.

99,179 83.536 18.921 (772)

(27.201) 13.815 lovestment tax credits, net (60,421)

(57.715)

(50.57I)

Allowance for equity funds used dunng construction.

Deferred fuel and energy costs, net (49,393)

(9.114) 1.687 272,756 211.393 201.479 Less-Dividends on common stock...

126,030 118.137 103.356 Dividends on preferred and preference stock 33,160 33.724 29.950 Net funds from operating activities.

113,566 59.532 68.173 income from extraordinary item.

14,042 Gain on reacquisition of first mortgage bonds, a non-cash item (26,276)

Net funds from earning activities 101,332 59.532 68.173 Financing activities-Common stock 120,729 113.918 I I 7.408 Preferred stock.

10.000 Preference stock.

57.250 First mortgage bonds.

95,000 322.000 20.000 Secured notes and obligations 94,920 50.000 59.000 Unsecured long-term notes, net.

24,314 80.000 Energy trust and nuclear fuel obligations 182,484 265.000 Retirement of long-term debt and preferred stock (202,336)

(95.800)

(32.000) increase (decrease) in notes payable to banks.

32,918

(!50.517) 95.395 Safe of tax benefits 37,531 385,560 514.601 397.053 Net change in current assets and current liabilities excluding notes payable to banks and current matunties of long-term debt and preferred stock-Temporary cash investments (4,300)

Receivables 2,715 (29.171)

(13.235)

Matenals and supplies.

3,149 (33.843)

(12.075)

Accounts payable 39,193 1.474 6,500 Accrued taxes (12,085)

(1.186) 13.734 Miscellaneous. net 397 I2.323 (4.005) 29,069 (50.403)

(9.081)

Other. net-Construction funds held in escrow, including accrued interest 39,847 (20.938)

(3.545)

Allowance for equity funds used dunng construction.

60,421 57.715 50.571 Deferred income taxes on allowance for borrowed funds used dunng construction (59,530)

(38.690)

(16.892)

Miscellaneous, net.

11,345 (6.797)

(9.533) 52,083 (8.710) 20.601 GROSS PROPERTY ADDITIONS.

3568,044

$ 515.020 5476.746 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

I 29

)

For tivs Years Erufed December 31 1981 1980 1979 (In Thousands)

GENERAL TAXE5 Realand personalproperty

$ 39,193 5 37.183 5 41.042 State gross receipts (i)..

34,144 38.753 41.127 Unemployment and old age benefits.

8,010 6.408 5.569 Miscellaneous 2,969 2.799 1.384 Total general taxes.

S 84,316 S 85.143 5 89.122 PROVISION FOR INCOME TAXE5 Currently payable-Federal s

80 5 (3.043)

S 3.731 State 678 1.234 Foreign 59 817 (3.043) 4.965 Deferred, net (see below)-

Federal 96,218 81.105 17.984 State 2,961 2.431 937 99,179 83.536 18.92I Investment tax credits. net of amortization (ii).

(772)

(27.201) 13.815 Total provision for income taxes.

5 99,224 5 53.292 5 37.701 INCOME STATEMENT CLASSIFICATION OF PROVISION FOR INCOME TAXE5 Operating expenses.

$ 80,820 5 51.619 5 41.998 Otherincome.

(53,360)

(37.017)

(21.189)

Allowance for borrowed funds used during construction.

59,530 38.690 16.892 Extraordinary item 12,234 Totalprovision forincome taxes s 99,224 5 53.292 S 37.701 SOURCES OF DEFERRED TAX EXPENSE Cost of terminated construction projects, net (Note 2)

$ 5,197 5 33,181 5

Deferred fuel and energy costs, net 12,308 4.210 (881)

Excess of tax depreciation allowed pursuant to the Class Life ADR and ACRS depreciation systems, net 13,669 9.334 5.345 Deferred interest on leased nuclear fuel, net.

9,567 Other, net.

(1,092)

(1.879)

(2.435) 39,649 44.846 2.029 Allowance for borrowed funds used during construction, which is credited to plant 59,530 38.690 16.892 Total deferred tax expense, net S 99,179 583.536 5 18.921 RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXE5 Book income before provision for income taxes S296,286 5188.442 S172.508 Federalincome tax expense at statutory rate

$ 136,292 5 86.683 5 79.354 Reductions in taxes resulting from:

Allowance for funds used during construction, which does not constitute taxable income (iii).

(27,794)

(26.549)

(28.036)

Excess of tax over book depreciation (2,422)

(5.874)

(9.918)

Other. net (6,852)

(968)

(3.699)

Total provision for income taxes s 99,224 S 53.292 5 37.701

() Arnount for 1981 includes a credit of s 14.352.000 applicable to Pennsyfvania Exose Tax on Gross Receipts accrued during the penod January I.1977 through December 31.1979. The tax. which was enacted in 1977 was repealed effective January I.1980 and had been the subject of litigation A settlement was reached in December 1981 which provided for payment of approximately s1.596.000. representing 10% of the claimed tax liability.

(n) Amount for 1980 reflects the reversal of previously recorded investment tax credits and related amortizaton. carned forward due to the carryback of tax net operating losses (m) Represents the tax effects of the equity portion in 1981 and 1980. and the equity portion and 25% of the Company's debt portion in 1979 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

30

[

r The consolidated financial statements include Ohio Edison ing issued January 27,1982, deferred any action on the Company (Company) and its wholly-owned subsidiaries Company's request untilits next such hearing. In the mean-Pennsylvania Power Company (Penn Power) and Ohio time the Company will continue to defer and accumulate Edison Finance N.V. (Finance). All significant intercom-the cost of Quarto coal in excess of generally prevailing pany transactions have been eliminated. The Company market prices.

and Penn Power (Companies) follow the accounting Prior to May 1,1981. Penn Power deferred certain increased policies and practices prescobed by The Public Utilities energy costs which it estimated would be billable to most Commission of Ohio (PUCO), the Pennsylvania Public Utih,-

customers in future penods, in accordance with the energy ty Commission (PPUC) and the Federal Energy Regulatory clause adopted by the PPUC. The energy clause provided Commission (FERC). The more significant policies are sum-for: 1) the recovery or refund, over a six-month period manzed below.

beginning two months after incurrence, of energy costs which differed from established base energy costs; and 2)

Revenues The Companies' residential and commercial customers are an adjustment for any over or under collection resulting metered on a cycle basis. Revenue is recognized for electric from the operation of the clause. Effective May I,1981, by service based on meters read through the end of the order of the PPUC, a "levelized" energy cost rate (ECR) was initiated. The ECR in effect in 1981 was based upon month.

the anticipated energy costs for the last eight months of Operating revenues and net income for 198I include ap-1981. A new ECR which includes adjustment for any over proximately $8,905,000 and $4,755,000 (5.07 per share of or under collection from customers will be recalculated common stock), respectively, applicable to a wholesale rate each subsequent year in November with an effective date increase requested by the Company and permitted by the of January J. Accordingly, Penn Power defers the dif-FERC to become effective January 10,1981, which is sub.

ference between actual energy costs and the amounts re-ject to possible refund. Management believes that any covered from its customers.

refunds which may be required in this case would not have a matenal effect on 1981 results of operations.

In January 1981, the PPUC ordered that Penn Power not include the cost of Quarto coal in its energy clause and Deferred Fuel and Energy Costs The Companies record the cost of fuel when it is con.

subsequent ECR at more than generally prevailing market sumed, except as discussed below.

prices pending completion of a PPUC investigation to determine the reasonableness of the costs of Quarto coal.

Effective August I,1981, the Company replaced its fuel ad-Penn Power has deferred $5,428,000 of such costs justment clause (FAC) with a new electric fuel component through December 31,1981, of which $5,321,000 and (EFC), in accordance with a PUCO order. The EFC is an 5107.000 is applicable to 1981 and 1980, respectively.

estimated fixed rate per kilowatt-hour included on customer bills for a six-month period and is based upon fuel-related Reference is made to Note 7 for a further discussion of the costs for the preceding six month period. Any over or Quarto project.

under collection resulting from the operation of the EFC will be included as an adjustment to the new EFC rate in a Utility Plant and Depreciation subsequent six-month period. Accordingly, in August 1981.

Utility plant reflects the original cost of construction, in-the Company began defernng the difference between cluding payroll and related costs such as taxes, pensions actual fuel-related costs incurred and the amounts re-and other fringe benefits, administrative and general costs covered from its customers.

and allowance for funds used during construction (see The PUCO has ordered that the Company defer and not AFUDC).

include the cost of coal purchased from Quarto Mining Company (Quarto) (see Note 7) in the FAC and subse.

The Companies provide for depreciation on a straight-line basis at various rates over the estimated lives of the property.

quent EFC at more than generally prevailing market prices Without pnor PUCO approval. At December 31,1981 such The effective composite rate for electnc plant was 3.3 % in deferred costs amounted to $57,935,000, of which 1981,1980 and 1979. The Company's depreciation rates

$48,083.000 and 59,852,000 is applicable to 1981 and include provisions for the estimated decommissioning costs 1980, respectively, in its order, the PUCO stated that it will for its only nuclear generating unit in service. Penn Power permit the Company to recover its actual Quarto costs, in.

provides for the cost of decommissioning radioactive com-cluding the previously deferred costs, when the weighted ponents only, in accordance with a PPUC rate order, average pnce of Quarto coal for six consecutive months approaches the level of 25 % above the generally prevailing Common Ownership of Generating Facilities

[

market pnce of comparable coal. The Company, in connec-The Companies and other Central Area Power Coordina-tron with its regular semiannual fuel hearing. requested tion Group (CAPCO) companies own, as tenants in com-that the PUCO modify its present method for recovery of mon, various power generating facilities. Each of the com-these costs. Although the Company believes that the panies is obligated to pay a share of the costs of anyjointly methods it proposed at the heanng for recovery of the cost owned facility in the same proportion as its ownership in-i of Quarto coal, including recovery of the deferred costs, are terest. The Companies' portions of operating expenses l

reasonable, the PUCO in its order resulting from that hear-associated with thesejointly owned faolities are included in

(

31

l the corresponding operating expenses on the Statements of on the Statements of Consolidated Taxes. Deferred tax ex-Consolidated income. The amounts reflected on the Con-pense results from timing differences in the recognition of solidated Balance Sheet under utility plant at December 31, revenues and expenses for tax and accounting purposes.

1981 include the following:

The Companies allocate the income tax credit resulting A urnulated utary corrpaner from interest expense related pnmanly to construction work SeN co'n"s'tr%

in progress, to income taxes-credit included under other ceneranng unn e

income and deductions on the Statements of Consolidated pn inousandsl W H sarnrmse7.

5 f 21.ss!

5 22.8s3 5 29.430 68 80 %

Income.

2aI3 For income tax purposes, the Companies have claimed 677.477 71.523 10.838 50 68 %

scaver vancy s t -

383.t 37 N ss.468 46.286 52 50 %

liberalized depreciation (double-declining balance, re rNa7 '

2 Nsy Q I"I guideline lives. Class Ufe ADR System and Accelerated Cost

~

Tatar S t.182.16s 5:49.844 51.333.311 tent with the rate treatment, follow " normalization orrrnon racmces appocarse to seaver vaney e2 accounting except as indicated on the Statements of Con-i s lidated Taxes.

All nuclear fuel in process relates to the CAPCO units but is not segregated among them.

The Companies expect that deferred taxes not currently provided will be collected from their customers when the i

Nuclear Fuel taxes become payable, based upon the established rate The Companies charge the cost of nue. lear fuel to fuel ex-making practices of the PUCO. the PPUC and the FERC.

pense based on the rate of consumption. In addition, the Company includes in fuel expense the estimated spent The Company received 537,531,000 in 1981 resulting nuclear fuel disposal costs which are being recovered from a@amq q $@n j

sts customers. The storage of spent nuclear fuelis necessary service during 1981 in accordance with provisions of the until the manner of its disposM is determined. which may Economic Recovery Tax Act of 1981. Of the total.

$ 12.675.000 was recorded as additional deferred invest-take many years. Penn Power received an allowance for the est mated permanent disposal costs in a January l982 ment tax credits on the Company's Consolidated Balance

~

Sheet and will be amortized over thirty years. The remain-ing 524.856.000 was recorded as a reduction to utility Allowance for Funds Used During Construction plant in service and will serve to reduce the total provision (AFUDC) for depreciation over the life of the property.

AFUDC, a non-cash item charged to construction work in The Companies defer investment tax credits utilized and progress dunng the construction penod, represents the net amortize these credits to income over the estimated life of cost of borrowed funds and equity funds used for construc-the related property. At December 31.1981, approximately tion purposes. AFUDC varies according to changes in the 591,000,000 of unused investment tax credits were i

level of construction work in progress and in the cost of available to offset future Federal income taxes payable.

capital. The Companies compute AFUDC utilizing a net of These credits expire at the end of the following years:

tax rate consistent with the rate treatment granted by the PUCO and the PPUC. The rates used by the Company 1991.

.518.000.000 were 9.84%.10.14% and 8.75% dunng 1981.1980 and 1992.

20.000.000 1979, respectively. Penn Power used rates of 8.50% in 1993.

9.000.000 i

1981 and 8.00% in 1980 and 1979. AFUDC applicable to 1994.

7.000.000 fong-term obligations is based on actual interest accrued 1995.

33.000.000 dunng the penod (see Note 5),

1996.

4.000.000 The Company's 1980 net of tax AFUDC rate reflects an ad.

591.000.000 justment in the FERC formula used to calculate the rate.

The adjustment resulted from a Company study which In addition, the Companies had approximately found a significant undercapitalization of construction

$20.500.000 of tax net operating losses at December 31.

work in progress in 1980 as a result of the failure of the for-1981 available to carry forward until the end of 1995. Such mula to give adequate effect to interest costs actualfy in-tax net operating losses have been recognized by not pro-curred in financing construction activities. This adjustment viding deferred taxes of 53.500.000 and 55.700.000 in increased l980 AFUDC by approximately 5 f l.628.000, 1981 and 1980, respectively, which would otherwise have net of income tax effect. The Company received permission been provided' from the PUCO staff to record the additional AFUDC, sub-Pensions ject to determination by the PUCO of its includability in The Companies' trusteed, noncontnbutory pension plans future rate base. Management has no reason to believe that this amount will be disallowed in future PUCO rate cover almost all full-time employees. Upon retirement.

proceedings.

employees receive a monthly pension based on length of service and compensation. Pension costs for 1981.1980 income Taxes and 1979 were 5 I 5.3 I I,000. 5 I 4.931.000 and Details of the total provision for income taxes are shown 513.731.000. respectively. Of those amounts. 59.237.000.

32

i l

t 59.259,000 and 59.163.000, respectively, were charged to costs as service-related costs in that company's rate case, operating expenses. The balances were charged primanly even though the decisions to construct and terminate were to construction. Such costs include the amortization of past both, when made, prudent and reasonable. A subsequent service costs on an actuarial basis over 30 years. The Com-appeal to the U.S. Supreme Court by that company was panies fund pension costs accrued. A comparison of ac-denied on January 25,1982 because of the lack of a prop-cumulated plan benefits and plan net assets from the two erly presented Federal question. That company has since latest actuarial reports is as follows:

taken further action which may still affect the abihty of the June 30.

Company to recover these costs and. in any event, further 1981 1980 action by the PUCO is possible. The PUCO has in fact ordered the company that was a party to the Ohio Actuanal present value of accumulated plan benefits:

Supreme Court case not to wnte off any of its unrecovered vested.

5144.407.000 5128.808.000 costs in the terminated units pending among other things.

Nonvested.

I l.467.000 9.725.000 such further action as the PUCO may take in that com-5155.874.000 5138.533.000 pany's current rate case. Until an adequate resolution is reached of all uncertainties concerning the Company's Net assets available ability to ultimately recover these costs, the Company be-for benefits.

5213.749.000 $ 191.678.000 lieves a wnte-off of such costs would be premature. To the Assumed rate of return for extent that it is ultimately determined that the Company act I

tv e can never recover these costs, the Company will be re-8 8%

quired to wnte them off. The unrecovered balance of such costs allocable to the Company's PUCOjurisdictional cus-Effective January 1,1981 certain amendments were made tomers at December 31,1981 approximated $77.612,000 to the plans relative to the calculation of benefit payments to retired members. The effect of these amendments in-($47,742,000. net of income tax effect). Had the Company creased the actuarial present value of accumulated plan been required to wnte off the costs as of December 31, benefits by approximately 55.018,000 through June 30, 1981, the Company would have had approximately

$51.402.000 of consolidated retained earnings unrestricted 1981.

or pa ment of cash dividends on the Company's Com-The above total actuarial present value of accumulated plan benefits reflects pension benefits applicable to eligible employees based upon present salary levels and past years in light of the Ohio Supreme Court decision. the Company i

of service accumulated through the valuation date. This is and all intervening parties reached a settlement in the Com-the generally accepted reporting procedure set forth by the P,any's rate case which was pending at the time the deci-sion was announced. The settlement will add approximate-Financial Accounting Standards Board. The Companies-annual contnbutions to the plans, however, consider ly 590.000.000 to the Company's annual operating revenues, and was in lieu of the 5139.000.000 increase estimated ultimate salary increases due to inflation and other factors and the estimated total service expected to be previously sought by the Company. In order to make the accumulated by employees. This is a widely recognized settlement agreement effective with bills rendered on and funding technique and is consistent with the recommenda.

after August 1,1981, the Company made application for, tion of the Companies' actuary. In addition, the actuary and was granted, an emergency rate increase at the same recommends, and the Companies utilize, a discount rate of

$90.000.000 level. Neither the temporary emergency rates 6% for funding purposes. Differences between funding nor the permanent rate increase which is expected to bases and reporting requirements can have a significant ef-supersede those emergency rates includes or will include fect on the compansons above.

provision for any continued amortization after July 31.

1981 of the costs applicable to the terminated units and thus the new rates will in no event be subject to further ad-justment with respect to those costs. Accordingly, the in January 1980, the Companies and all other CAPCO Company discontinued amortization of those costs on companies terminated plans to construct the following four August I,1981.

nuclear generating units-Davis-Besse No. 2 and No 3.

The Babcock & Wilcox Company, as supplier for the and Ene No. I and No. 2. Construction costs unrecovered nuclear steam supply systems for the terminated units, has l

by the Company and Penn Power as of December 31, asserted claims in connection with delays in, and the ter-1981 applicable to these units amounted to 581.892.000 mination of, the units. The Company's and Penn Power's and 514.597.000, respectively. The PUCO had authorized shares of the claims are approximately 5109,300.000 and recovery of the applicable portion of the Company's share 519.200.000. respectively, before the application of certain of the construction costs from its PUCOjunsdictional cus-credits of undetermined amount. Representatives of Bab-tomers over a ten-year penod beginning in February 1981.

cock & Wilcox and the owners of the terminated nuclear On July 15. 1981. the Supreme Court of Ohio ruled in a units, including the Companies have been meeting to case involving another Ohio utihty company (also a co-discuss the matter and the discussions have been pro-(

owner of the terminated unitsj that under existing statutes ceeding in a manner that the Companies consider satisfac-the PUCO had exceeded its authonty in allowing these tory. The Companies cannot predict at this time what, if 33

any, amounts they may ultimately pay in connection with chases made with optional cash payments are made at a these claims nor when such amounts might be paid, but price equal to 97% of such average. The plan will be believe any amounts they may pay in the future as a result amended early in 1982 to include holders of shares of the of these claims will be substantially less than the amounts Company's preferred and preference stock. The purchase claimed. Depending on circumstances that exist at the of Common Stock made with reinvested cash dividends on time, any such payment allocable to the Company's retail preferred and preference stock will be at a price equal to customers may result in a write-off which would reduce 100% of the average market price. At December 31,1981, net income for the then current period, the effect of which the Company had I,676,416 shares reserved for issuance cannot be determined at this time.

under this plan and 1,973,100 shares of Common Stock The Companies are currently seeking approval from the reserved for possible conversion of the $1.80 Preference FERC to recover the construction costs and any contrac.

Stock. The Company has filed a Registration Statement tors' cancellation charges from FERC jurisdictional cus, with the Securities and Exchange Commission to increase tomers to the extent they are allocable to those customers.

the number of shares available for issuance under the Divi-Penn Power requested recovery of the construction costs dend Reinvestment and Stock Purchase Plan by 6,000,000 shares.

allocable to its PPUCjurisdictional customers in its recently concluded PPUC rate proceed ngs; the PPUC deferred its (b) Retained Earnings decision pending the outcome of a cur ent investigation of Under the Company's indenture, the Company's con-the entire CAPCO construction program. The FERC gave the solidated retained earnings unrestricted for payment of Companies permission, for accounting purposes only, to cash dividends on the Company's Common Stock were amortize these construction costs. plus contractors' cancel-

$99,144,000 at December 31,1981 (see Note 2). Under lation charges if any, over a ten-year period beginning Penn Power's Charter, $27.905,000 of retained earnings at with the date that rates in their next rate filings before such December 31,1981 were unrestricted for payment of cash agencies which provide for recovery of the costs become dividends to the Company.

effective. The Companies believe that the construction (c) Preferred and Preference Stock costs were prudently incurred and have no reason to be-The Company has 4.000,000 authorized and unissued lieve that the PPUC and the FERC will not act favorably shares of cumulative $25 par value Class A Preferred Stock, upon their requests.

At the Companies' option, all preferred and preference stock may be redeemed in whole, or in part, at any time up nn ss han O na mom than 60 days nodce. Wess The Companies lease nuclear fuel, certain transmission otherwise noted. Redemption of all preferred and facilities, computer equipment, office space and other in-preference stock issued within the past five years is subject cidental property and equipment under cancelable and to certain restrictions regarding refunding operations. The noncancelable leases. The total rental expenses included optional redemption prices shown on the Statements of.

on the Statements of Consolidated income for 1981,1980 Consolidated Capitalization will decline to eventual d

e $ 20, 3 00

$9 0 and minim ms per sh according to the Charter provisions commitments as of December 31,1981 for all non-cancelable leases are:

(d) Preferred Stock Subject 1982.

.5 19,223,000 to Mandatory Redemption 1983.

18,638.000 The Company's 10.48% Senes and 10.76% Series each in-1984.

16.040,000 crude provisions for a mandatory sinking fund to retire a 1985.

10,812,000 minimum of 20.000 shares every year on December I and 1986.

I I,84 I,000 January 1, respectively, at S100 per share plus accrued Years thereafter.

311,356,000 dividends. Penn Power's 11% Series includes a provision if all noncapitalized financing leases had been capitalized, for a mandatory sinking fund to retire a minimum of 4.000 the effect on total assets, total liabikties and expenses shares every year on January 1, at $ 100 per share plus ac-would not be material.

crued dividends, and its 8.24% Series includes a provision for a mandatory sinking fund to retire a minimum of 5,000 shares on December 1 in each year beginning in 1982, at

$100 per share plus accrued dividends. Penn Power's (a) Common Stock Through the Dividend Reinvestment and Stock Purchase 10.50% Series includes a provision for mandatory redemp-tion of the entire series on Apnl I,2040 at $100 per share Plan. holders of Common Stock and most of the Com-plus accrued dividends.

panies' full-time employees can acquire additional new shares of the Company's Common Stock by automatically The sinking fund requirements are 5 I,776,000 and reinvesting all or a portion of their Common Stock 54,898.000 for 1982 and 1983, respectively, and dividends and by making optional cash payments. Pur-900NomMWmm 1984 h@ 198&

chases made with reinvested Common Stock dividends are (e) Preference Stock Subject made at a pnce equal to 95% of the average of the high to Mandatory Redemption and low market prices on the investment dates, and pur-The $102.50 Senes and the 595.00 Senes each include 34

L 1

t F

E L

i provisions for a mandatory sinking fund to retire a bonds, the Company is entitled to a credit on the notes.

y minimum of 900 and 1.800 shares, respectively, on July 1 The Company pays an annual ree of 1/2% of the amount r

in each year beginning in 1984 and 1985, respectively, at of the letter of credit to the issuing bank and is obligated to b

$ 1.000 per share plus accrued dividends. The S I 80 Senes reimburse the bank for any draw:ngs thereunder.

y includes a provision for a mandatory sinking fund to retire (h) Subsequent Financing f

a minimum of 100.000 shares on October i in each year in January 1982. Penn Power sold 515.000.000 pnncipal e

beginning in 1985, at $15.125 per share plus accrued amount of first mortgage bonds,15-3/4% Senes due 1989, dividends.

and in February 1982, the Company sold $75,000.000

=

The sinking fund requirements will begin on July 1,1984 pnncipal amount of first mortgage bonds,17% Senes and will amount to 5900.000. 54,213.000 and 54,213.000 due 1992.

for 1984,1985 and 1986, respectively.

I The 51.80 Series is convertible at any time into Common Stock at a price of 515.125 per share. Holders will receive Ohio Edison Energy Trust (Trust)

E one share of Common Stock for each share of 51.80 Pref-In November 1980, the Trust was created for financing part

[

erence Stock converted, subject to adjustment under cer-of the Company's investment in Beaver Valley Unit No. 2.

[

tain conditions.

The Trust has two lines of revolving credit available to it for k

(f) Long-Term Debt

$400.000.000 and $100.000.000. The latter credit also p

The mortgages and their supplements, which secure all of serves as a stand-by facility in connection witn Trust the Companies' first mortgage bonds, serve as a direct first commercial paper sales; total borrowings under that credit i

mortgage lien on substantially all property and franchises, and commercial paper outstanding may not exceed F

other than specifically excepted property, owned by the

$ 100.000.000 at any time.

y respective Companies-The Company has transferred its interest in Beaver Valley b

Based on the amount of bonds authenticated by the Unit No. 2 (exclusive of common faolities and transmission F

Trustees through December 31.1981, the Companies' an-facilities) to the Trust, where the assets are used to secure nual sinking and improvement fund requirements amount Trust borrowings. All Trust obligations will be assumed by to 521.187.000. The Company contemplates that funds the Company when they become due, but not later than g

deposited in 1982 will be withdrawn upon the surrender December 31.1986. At the Company's option, all obliga-for cancellation of a like pnnapal amount of bonds, which tions outstanding under the 5400.000,000 revolving credit rf are specifically authenticated for such purposes against un-arrangement may be converted into a four-year term loan funded property additions or against previously retired to the Company.

r[

bonds. These methods can result in minor increases in the The Company accrues interest applicable to the Trust amount of the annual sinking fund requirements. Penn which is subsequently capitalized, net of income tax effect.

L Power contemplates that its requirements will be satisfied in Interest on borrowings under the 5400.000,000 line of g

1982 by permanently waiving its nght to issue bonds credit is computed at the appi: cable prevailing pnme interest against 52.439.000 of the 56.120.000 of retired bonds that rate plus 1/4%. plus a commitment fee of 1/2% on the un-

{

are presently available for that purpose. Under its mort-used portion of this line. No direct borrowings are expected gage. Penn Power is also permitted to fulfill its requirements to be made against the 5100.000.000 line of credit, but the t

by the issuance of bonds against unfunded property addi-Trust will issue and have outstanding commercial paper tions in the same manner as descnbed above for the supported by this faality. To the extent that borrowings are Company.

less than the 5100.000.000 available under this line of As of December 31. 1981, the Companies' sinking and credit, the Company must pay a commitment fee of I/2%.

improvement fund requirements and matunng long-term Under the stand-by support, an irrevocable bank letter of debt for the next five years are:

credit will be issued upon which the Trust will pay a fee of 1982.

.5 26.992.000 1/8% of the amount of commercial paper notes outstand-1983.

41.107,000 ing. The average annual interest rate on Trust borrowings 1984.

148.013.000 was 18.7% and 21.4% during 1981 and'1980, respec-1985 74.330.000 tively. Of the 5432,500.000 of Trust ob!gations outstand-1986 107.265.000 ing at December 31. 1981. 5100.000.000 relates to out-standing commercial paper and the balance to borrowings (g) Unsecured Notes under the 5400.000.000 line of credit.

Total unsecured notes outstanding at December 31.1981 exclude 575.686.000 of pollution control notes, the pro-Nuclear Fuel Financing ceeds of which were then in escrow pending their dis-In December 1981. Ohio Edison Fuel Corporation and bursement for construction of certain pollution control Pennsylvania Power Fuel Corporation (corporations in facilties. The polfurion control revenue bonds to which which the Companies have no ownership interest) were these notes relate are entitled to the benefit of an irre-created to provide funds for the procurement of nuclear vocable bank letter of credit of 5106.375 000 To the extent fuel The fuel corporations will lease the fuel to the Com-that drawings are made under that letter of credit to pay panies under separate fuel leases which require lease pay-pnnopal of. or interest on. the pollution control revenue ments sufficent to permit the fuel corporations to repay the 35

T obligations. Under ordinary orcumstances the lease pay-appbcable to 1982. In addition, the Companies expect to ments will be made at such time and in such amounts as fund through the Ohio Edison and Pennsylvania Power will coincide with the burn-up of the nuclear fuel.

Fuel Corporations approximately $ 150,000,000 for the pro-Financing on behalf of the Company of up to $ 135.000,000 curement of nuclear fuelfrom 1982-1986, of which approx-is available through the Ohio Edison Fuel Corporation, imately 555,000,000 is applicable to 1982. The major por-either through revolving credit arrangements or the issu.

tion of the Companies' construction activities during this ance of commercial paper which is supported by a bank five-year period relates to the CAPCO companies' program letter of credit. The Company accrues interest applicable to for the joint development of power generation and the fuel corporation which is subsequently capitalized, net transmission facihties, and to bnng the Companies' existing of income tax effect. Interest on bank borrowings is com.

generating uriits into comphance with environmental puted at 110% of the applicable prevailing prime interest regulations. The CAPCO companies have entered into rate, plus a commitment fee of 1/8% on the unused portion other commitments (the Companies' share being of the kne of credit. The fuel corporation also pays a 5/8%

5586,000,000) for the supply of nuclear fuel in connection letter of credit fee on the aggregate amount of outstanding with the future commercial operation of nuclear generating units.

borrowings. The average annual interest rate on outstand.

ing borrowings in 1981 was 13.9%.

The Companies' financing programs during 1982 through 1986 will include the sale or issuance, from time to time, of Pennsylvania Power Fuel Corporation did not make bank borrowings or issue commercal paper in 1981. Financing appropriate additional amounts of first mortgage bonds, of up to 530.000,000 on behalf of Penn Power will be secured or unsecured pollution control and environmental available in 1982 on terms similar to those of the Ohio notes and obligations, unsecured long-term notes, pre-Edison Fuel Corporation.

ferred stock, preference stock, common stock and proceeds from other long-term financing arrangements (see Note 5).

The Companies are limited by their respective indentures

)

and Charters as to the amounts of additional first mortgage The Companies have knes of credit with domestic banks that provide for borrowings of up to $287,000,000 at the Quarto Project prevailing pnme interest rates. Short-term borrowings may The Companies, together with the other CAPCO com-be made under these hnes of credit on the Companies' un-panies, have made long-term coal supply arrangements secured notes. All of the current hnes expire December 31, with Quarto, The CAPCO companies have agreed to 1982; however, all unused knes may be cancelled by the severally, and not jointly, guarantee their proportionate banks.

shares of Quarto's debt and lease obligations incurred The Companies maintain cash balances on deposit with while developing and equipping the mines. The guar-banks to provide operating funds, to assure availabihty of antees will remain even if environmental regulations pro-

$207.264.000 of the hnes of credit and for other banking habit the use of this coal. As of December 31,1981, the arrangements. Such compensating balances, net of float,

Companies' share of the guarantee was $240,712,000 are expected to be maintained at an average of approx.

(5128.554,000 -long-term debt; $87,658.000-lease smately 55.000.000 and are not subject to any contractual obligations; and $24,500,000- short-term bank credit).

restnction against withdrawal. Penn Power is required to The guarantee is expected to increase to $250,000,000 pay commitment fees that vary from a flat rate of 1/2% to a based on budgeted mine construction costs of variable rate of 8% of the apphcable pnme interest rate to

$43 I,000.000.

assure the availabikty of $21.000,000 of the lines of credit.

Under the terms of the coal supply contracts, which expire The Company also has a $30.000.000, Eurodollar hne of December 31,1999, the Companies must reimburse Ouarto credit from a group of foreign banks. Amounts borrowed for their share of the costs of operating the Quarto mines, are for a period of one, three or six months, and are including those costs associated with mine construction, renewable at the Company's option. The interest rate is whether or not they receive coal from Quarto. The Com-currently 5/8% above the London interbank Offered Rate.

panies' total payments under these contracts amounted to The Company is also required to pay a comm:tment fee of

$94.379.000 during 1981. The Companies' minimum pay-1/2% on the unused portion of this credit kne. There were ments under the coal supply contracts related to mine con-struction costs are:

no borrowings under this credit arrangement at December 31,1981 or 1980. The revolving credit facihty expires in 1982.

.5 26,306.000 August 1982.

1983.

.25,687,000 1984.

.25.069.000 1985.

.24.451,000 1986.

.23.833,000 Construction Program Years thereafter.

.279,680.000 The Companies expect to spend approximately Based on recent studies concerning the economics of the 52.800.000.000 for property additions and improvements Quarto project and the vanous alternatives available to from 1982-1986, of which approximately 5671,000.000is provide the long-term fuel requirements of the Bruce 36

i l

i Mansfield Plant, the coal supply contracts were amended ing costs would increase substantially. Penn Power expects and changes were made in the mode of operation of the that the impact of any such capital and operating expendi-Quarto mines which have the effect of reducing the annual tures would eventually be reflected in its rate schedules.

tonnage production of these mines. Additional coal re-On December 16, 1981, the United States Environmental guirements for the Bruce Mansfield Plant are currently being procured in the open market and the Company is Protection Agency (EPA) approved a change in the presently continuing to evaluate the alternatives for making Pennsylvania State implementation Plan (SIP) affecting additional arrangements to fulfill, together with the use of Penn Power's New Castle Plant. The sulfur dioxide (50,)

coal from the Quarto project, the long-term fuel require.

emission standard formerly in effect was shown to be more ments of the Bruce Mansfield Plant. These changes are part stringent than necessary to meet the Federal ambient air standards. This SIP revision enables the Plant to continue to of a fuel procurement strategy designed to reduce the weighted average pnce of coal used at the Bruce Mansfield burn the low sulfur coal it is now burning to meet the new Plant. The Company will continue to monitor the Quarto SO, emission standard. The SIP revision was effective on project and conduct such additional studies of the eco.

January 15,1982.

nomics of the project as are deemed warranted by circum-In a legal proceeding against Penn Power under the Clean stances. Any action by the Company affecting the Quarto A r Act, the Federal government is asking the court to project as a result of such studies will now have to take into assess civil penalties for alleged continuing violations of 50, account the possible impact of the Ohio Supreme Court de-emission regulations at Penn Power's New Castle Plant.

cision referred to in Note 2.

The Clean Air Act Amendments, which became effective in The current price of Ouarto coal to the Companies is based August 1977, permit the imposition of civil penalties of up on, among other things, the actual production costs plus to $25,000 per day of violation. Because Penn Power is in amortization of certain production expenses which were compliance with the revised emission standard (as detailed not included in the price of coal to the Companies during above), it is expected that this legal proceeding will be ter-l the development period, which ended on May 31,1980.

minated without the imposition of significant civil penalties The current price of Quarto coal exceeds the current gen.

or the necessity to shut down coal-fired capacity.

erally prevailing market price of coal. Both the PUCO and Final regulations implementing certain provisions of the the PPUC presently limit the recovery of the cost of Quart Clean Air Act Amendments of 1977 have now been prom-coal to the generally prevailing market price of comparable ulgated which provide for the imposition of noncompliance coal. Reference is made to Note i for a discussion of PUCO penalties based on any economic benefit realized by the and PPUC orders with respect to the cost of Quarto coal o erator of a pollution source as a result of failure to com-currently being recovered from customers. The Company ply with pollution control laws and regulations after believes that the present PUCO method for recovery of the January I,1981. The Companies have filed Petitions for costs of Ouarto coal including recovery of the deferred Review of these regulations. The Companies did not costs. may not be appropriate under the reduced mode of achieve compliance with all such regulations by January I, operation of the mines because this method is not con-1981 so that such penalties could be sought against them, sistent with the fuel procurement strategy for reducing the but the Companies cannot determine at this time whether overall cost of coal for the Bruce Mansfield Plant and may they will be or, if they are, the amount of economic benefit result in further accumulation of deferred costs. Despite the that could be established. If sought and imposed, such pen-delays in the final resolution of these matters by the PUCO alties could be significant. However, the EPA has acknowl-and PPUC, the Company has no reason to believe that edged in an earlier settlement of proceedings involving the their ultimate disposition by the PUCO and PPUC will have Ohio Plants that its policy is to assign a low enforcement a material ads erse effect upon the Company's consolidated priority to companies in compliance with outstanding con-financial condtion-sent orders such as embodied in those settlements.

Environmental Matters On December 19, 1980, the Commonwealth of Vanous Federal, state and local authorities regulate the Pennsylvania petitioned the EPA to make findings under Companies with regard to air and water quality and other Section 126 of the Clean Air Act. Section 126 provides a environmental matters. The Companies estimate that com-remedy for a downwind State that can show adverse im-pliance requires capital expenditures of approximately pact because air pollution regulations in an upwind State

$628.000.000 for projects remaining to be completed. Of cause nonattainment in the downwind State. Penn-this amount, approximately $ 193.000.000 was spent pnor sylvania's petition complains of excessive particulate and to 1982, and $435.000.000 is included in the above con-50, emissions from a number of sources in Ohio and West struction estimate for 1982 through 1986. Capital expen-Virginia, including potentially all of the Cornpanies' Ohio ditures for environmental improvements amounted to plants. The States of New York and Maine have filed similar 5119.353.000 in 1981. If Penn Power is required to install petitions. The Section 126 proceeding could ultimately re-off-stream cooling in connection with the operation of the sult in the revision of the particulate and 50, emission New Castle Plant. costs estimated between $13.800.000 limitations for these plants, to make them more stringent.

c and $31.500.000, depending on the required thermal The Company is unable to predict the outcome of this limitations. would be incurred. In addition. annual operat-proceeding.

37

Other Legal Actions and Complaints chased replacement power during the outage. The PPUC is In 1977, the Boroughs of Ellwood City and Grove City, currently investigating Penn Power's liability for the outage Pennsylvania filed a complaint against Penn Power, alleg-and whether refunds are due to Penn Power's customers ing that Penn Power, individually and in conspiracy with for purchased replacement power expenses incurred dur-the Company and other CAPCO companies, has violated ing the outage which were included in its energy clause. if Sections 4 and 16 of the Clayton Act by restraining and Penn Power is required at some future time to make such a monopolizing trade and commerce in alleged markets for refund, it is not expected that the amount would be mate-electric power. Damages of $7,000.000 (to be trebled) and rial to the Company's consolidated results of operations. In injunctions against the alleged unlawful acts are sought. In a separate investigation, the PPUC is considering whether 1979, the Court granted summaryjudgment in favor of additional construction costs which resulted from deferral Penn Power as to certain allegations of the complaint.

of construction projects should be excluded from rate base Management is unable to predict the ultimate outcome of in future rate proceedings.

this action.

The PPUC is investigating an outage of Beaver Valley Unit No. I which occurred during the period March-August 1979. The outage had been ordered by the Nuclear The Company purchased and subsequently retired Regulatory Commission to analyze possible seismic defi-

$65,821.000 principal amount of its outstanding first mort-ciencies of safety-related piping and pipe supports in the gage bonds during 1981. This resulted in a gain of Unit. The PPUC has ordered that the operating company of

$ 26.276.000, which is included as an extraordinary item, the Unit refund an as yet undetermined amount to that net of related income taxes of $12.234.000, on the 1981 company's customers based upon expenditures for pur-Statement of Consolidated income.

The following summarizes consolidated operating results for the four quarters of 1981 and 1980.

Three Months Ended March 31.

June 30.

september December March 3 f.

June 30.

september December 1981 1981 30.1981 31 198f 1980 1980 30 19H0 31 19F10 (in thousands. except per share amounts)

Operating Revenues.

5308.837 5293.500

$337,249 5340.063 5279.789 5252.808 5274.981 5273.291 Operating Expenses and Taxes 254.891 237.668 270.449 264.260 232.155 212.633 231.853 234,845 Operatmgincomelf).

53.946 55.832 66.800 75.803 47.634 40.175 43.128 38.446 Other income and Deductxxis.

27.994 29.212 35.860 37.736 23.023 23.147 25.189 25.477 Netinterest and Other Charges.

44.729 49 225 5I.049 55.160 28.732 32.272 36.307 33.758 income Before Extraordinary Item.

37.213 35.819 51.61I 58.379 41.925 31.050 32.010 30.165 Extraordinary ttem.

95!6 4 526 Retincome.

5 46.727 5 40.345 5 5161I 5 58.379 5 41.925 5 31.050 5 32.010 5 30.165 Net income for Common stock 5 38.354 5 32.042 5 43.369 5 50.I27 5 33.434 5 22.590 5 23.607 5 2I.772 Weighted Average Number of shares of Common stock Outstanding 68 844 69.585 70.410 75.881 64 227 66.897 67.462 68.I45 Earnings per share of Common stock:

Income Before Extraordinary item (after preferred and preference stock drvidend requirements)(r).

$.42 5.40

$.62 5.66 5.52 5.34 5.35 5.32 Extraordinary item.

I4 06 Netincome for Common stock.

5 56 5 46 5 62 5 66 5 52 5.34 5 35 5 32 (il Results for the three months ended December 31.1981 indude previously accrued PennsyNania Exose Tax on Gross Receipts a cred:t of approxtmatefy 57.012.000 (5.09 per share of com-(see Statements of Conschdated Taxes).

mon stock). net of income taxes, apphcable to the reversal of Statement of Finanaal Accounting Standards No. 33.

changes in pnces on property, plant and equipment. This "Finanaal Reporting and Changing Prices" (SFAS No. 33J.

data is presented in accorde.nce with SFAS No. 33, provides for the preparation of supplementary financialin-however, it is not intended as a substitute for earnings formation to disclose the estimated effects of inflation and reported on a historical cost basis.

38

l Adjusted for the Effects of Changing Prices For the Year Ended December 31,1981 (in Thousands)(Unaudited)

As Reported Adjusted for on the Pnmary Adjusted for Change in Consohdated General Specific Pnces Statements inflaton (Orrent Cost)

(Average 1981 Dollars)

Operating Revenues.

5I.279.649 5 f.279.649 5 f.279.649 Operating Expenses and Taxes:

Operation and maintenance.

762.307 762.307 762.307 Provison for depreciaron and amortizaton 99.825 200.527 225.247 Generaltaxes 84.316 84.316 84.316 income taaes.

80.820 80.820 80.820 Total operating expenses and taxes 1.027.268 f I27.970

f. I 52.690 j

Operating income.

252.381 151.679 126.959 Otherincome and Deductions 130.802 130.802 130.802 Netinterest and Other Charges.

200.163 200.163 200.163 Preferred and Preference stock Dividend Requirements.

33.170 33.170 33.170 income from Continuing Operatons (excluding reduction to net recoverable cost).

5 149.850 5 49.148(i) 5 24.428 increase in specific prKes (current cost) of property, plant and equipment held during the year (n).

5 562.450 Reduction to net recoverable cost.

5 (210.755)

(149.213 (599.272))

Effect of increase in the general pnce level on property, plant and equipment.

Excess of increase in the general pnce levet over sncrease en specific pnces of property. plant and equipment after reduction to net recoverable cost.

(186.035)

Advantage resulting from the decrease in purchasing power of net monetary habihties 215.268 215.268 Net.

5 4.513 5 29.233 M inouang tre reaxton to net recoverabic cost the occnne tioso from conmung operanons agusted for generai innanon would have teen strai 607. cool 14 At oeremte 3 t.198I proprny. plant and equpment net oraccumuuted depreceoon aquired for cnanges n specac pnces(current coso was s 7.475.533.000. wnse restorcal cost (ner recoveraber cost) was $1814 FI8 0tK)

Five-Year Comparison of Selected Supplementary Financial Data (Unaudited)

AQusted for the Effects of Changing Prices Year Ended December 31.

1981 1980 1979 1978 1977-OPERATING REVENUES (in Thousands)

As reported on the pomary consohdated statements.

51.279.649 5I.000.869 5 994.585 5 862.956 5 796.289 Adjusted to average 1981 dollars.

51.279.649 51.192.985 51.246.205 51,203.015 51.195.092 HISTORICAL COST INFORMATION ADJUSTED FOR GENERAL INFLATlON i

(in Average 1981 Dollars) income from continuing operatons (excluding reducten to net recoverable cost)(In thousands).

5 49,148 5 23.064 5 52.406 income from continuing operations per common share (excluding reducton to net recoverable cost) 5.69 5.35 5.90 CURRENT COST INFORMATION (in Average 1981 Dollars) income (loss) from continuing operatons (excluding reducten to net recoverable cost)(in thousands).

5 24.428 5 (13.602) 5 17.735 income (loss) from continuing operatons per common share (eucluding reduction to net recoverable cost) 5.34 5(.20)

$.30 Excess of increase in the general pnce level over increase in specif< pnces of property. plant and equipment after reduction to net recoverable cost (rn thousands),

5 (186.035) 5 (290.628) 5 (335.113)

OTHER INFORMATION Common stockholders equity at December 31 at net recoverable cost (in thouunds of Average 1981 Dollars) 51,190.I26 51.I19.597 51.15 f.69i Advantage resu! ting from the decrease en purchasing power of net monetary habilito(In thousands of Average 1981 Dollars).

5 215.268 5 279.494 5 309.809 Cash dividends declared per common share-As reported

$ 1.76 51.76 51.76 51.76 51.715 Adjusted to average 1981 dollars.

51.75 51.92 52 20 52.43 52.56 Market pr(e per common share at December 31-As reported

$ l l.625 511.875 513 375 514 875 519.50 l

Adjusred to aserage 1981 dollars

$ 11.25 512 52 515 85 519.98 528.54 Average consumer pnce index.

272.4 246 8 217.4 195 4 181.5 39

The Consumer Pnce index for All Urban Consumers (CPI-U) reserve balance for the respective year to determine the was used for converting actual dollars spent for property, composite current cost accumulated provision for plant and equipment into average 198I dollars. This adjust-deprecaton.

ment illustrates the estimated effect that inflation has had The total provision for income taxes has not been adjusted upon the Companies' pnncipal assets.

for general inflation or changing prices, in conformity with The Handy-Whitman Index of Public Utility Construction the reporting requirements of SFAS No. 33.

Costs for the North Central Division and the Bureau of The reduction to net recoverable cost anses because the Labor and Statistics engineering indices were used to current rate making policies to which the Companies are calculate the current cost of property. plant and equipment.

subject allow recovery through revenues of only the his-excluding land. These indices were app! ed to actual dollars torical cost of utility property. Dunng inflationary periods, spent on large construction projects according to the year however, the investment necessary to replace that prop-of expenditure. Current cost of all other construction proj-erty will be more than its original cost. In order to properly ects was based upon onginal cost in the year of its transfer reflect property, plant and equipment at its economic value to plant in service. The current cost of land is the same as to the Companies, the adjustment for reduction to net the computed amount adjusted for general inflation. The recoverable cost must be made due to the additional con-current cost adjustment reflects the approximate dollars straints present in the rate making process.

that would have to be spent today to acquire property.

Consolidated net monetary liabilities consist pnmanly of plant and equipment identical to assets currently owned.

long-term debt and preferred stock. During inflationary Depreciaton expense was determined using the same rates penods. net monetary liabilities will be repaid with dollars and methods under general inflation and changing pnces having less purchasing power than dollars had when the as the provision for depreciation reported on the primary liabilities were onginally incurred. Adjustment for the ad-consoldated financial statements. The accumulated provi-vantage resulting from the decrease in purchasing power sian for depreciation was estimated by using the Handy-of net monetary liabilities is necessary to adequately reflect Whitman index. A theoretical reserve balance was esti-these differences and serves to partialty offset the adverse mated for each class of property by year that the property inflationary effects of replacing the Companies' property, was placed in service. The index was then applied to each plant and equipment.

ARTHUR ANDERSEN & CO.

1345 Avenue of the Amencas New York. N.Y.10105 To the Stockholders and Board of Directors of Ohio Edison Company:

We have examined the consohdated balance sheets and covery of these costs from its retail customers in future rate statements of consoldated capitahzation of Ohio Edison Com-cases is uncertain at this time. In additon to the unamortized pany (an Oho corporation) and its subsdiary companies as of costs incurred by the Company. there are also asserted claims December 31.1981. and 1980. and the related statements of related to delays in, and the termination of the units, which consoldated income. retained earnings, capital stock and may result in the incurrence of additonal costs the amount of other pad-in capital, sources of funds for gross property adds-which cannot be determined at this time.

tions and taxes for each of the three years in the penod ended in our opinion, subject to the effect of such adjustments. If December 31.1981. Our examinations were made in accord-any, that might have been required had the outcome of the ance with generally accepted auditing standards and. accord-matters referred to in the preceding paragraph been known.

ingly, included such tests of the accounting records and such the finanaal statements referred to above present fairly the other auditing procedures as we consdered necessary in the finanaal positon of Ohio Edison Company and its subsdiary arcumstances.

companies as of December 31.1981, and 1980 and the re-As discussed more fully in Note 2 to the consoldated finanaal su!ts of their operations and the sources of funds for gross statements the Company has incurred constructon costs re-property additions for each of the three years in the perod lated to four nuclear units which were terminated in early ended December 31.1981 in conformity with generalty ac-1980 Pursuant to a Pubhc Utilities Commission of Ohio cepted accounting pnnopies apphed on a consistent basis.

(PUCO) order. the Company had been recovenng these costs from its customers over a ten-year penod. Dunng 198l the Ohc Supreme Court ruled in a case involving another Ohio g

utihty company that the PUCO had exceeded its authonty in v

anowing these costs as service relateo costs in that company's rate case How that deosion will affect the Company's re-February 12.1982.

40

Ohio Edison General Financiallnformation 1981 1980 1979 1978 1977 1976 1971 Total Operating Revenues (000)

$ 1,279,649 51.080.869 5 994.585 5 862.956 5 796.289 5 644.852 5 308.821 Operatingincome(000) 5 252,388 5 169.383 5 163.744 5 I23.945 5 146.508 5 122.217 5 68.130 Net income for Common Stock (000)

$ 163,892 5 101.403 5 105.120 5 61.259 5 87.863 5 82.777 5 45.778 Pato of Net income for Common Stock to Operating Revenues.

12.8 %

94%

10 6 %

7.1 %

l i.0%

I2.8%

148%

Times interest Earned Beforc income Tax 2.li x 2.05x 2.3 t x 1 67x 2.38x 2.22x 3 4ix Net Ut*ty Plant at December 31 (000).

53,867,757 53.435.267 53.012.197 52.717.820 52.403.810 52.115.798 51.047.217 Gross Property AMtons(000) 1 568,044 5 515.020 5 476.746 5 395.162 5 358.105 5 325.553 5 156.045 Capitaivaton at December 31:(000)

Common 5tockholders' Equity.

$ 1,228,486 51.066.957 5 969.543 5 851. I t 9 5 866.725 5 634.707 5 350.12I Preferred Stock Not Subject to Mandatory Redempton.

304,798 307.472 307.472 307.472 262.472 262.472 83.803 Preferred Stock Subject to Mandatory Redempton 94,298 99,200 93.600 98.000 98.000 88.000 Preference Stock Subject to Mandatory Redemption.

56,843 57.250 57.250 Long Term Debt.

1,759,771 1.594.384 f.410.782 1.343.195 1.189.821 1.087.755 557.140 Total Capitaktaton.

53,444,196 53.125.263 52.838.647 52.599.786 52.417.018 52.072.934 5 991.064 Capitahzaton Ratos at December 31:

Common 5tockholders' Equity.

35.7 %

34 2 %

34 2 %

32.7 %

35.9 %

30 6 %

35 3 %

Preferred Stock Not Subject to Mandatory Redemption.

8.8 98 10 8 11.8 10 9 12.7 85 Preferred Stock Subject to Mandatory Redempton.

2.7 32 3.3 38 40 42 Preference Stock Subject to Mandatory Redempton.

1.7 f.8 20 Long Term Debt S t.l SI O 49.7 51.7 49 2 52.5 56 2 Total Capitahzaton.

100.0 %

100 0 %

100 0 %

100 0 %

100 0 %

100 0 %

100 0 %

Long Term Obhgatons at December 31 (000).

5447,484 5265.000 Cost of Preferred &

Preference Stock Outstanding at December 31 8.37 %

8.38 %

8.36 %

7.99 %

7 85 %

7.84 %

4.94 %

Cost of Long Term Debt Outstand ng at December 31 9.99 %

916%

8.13%

7 71 %

745%

7 47 %

5.71 %

Common Stock Data Earnings per Average Cnmmon 5 hare 52.30

$ 1.52 5180 51.19 51.97 52.14 S t.78 Return on Average Common Equity.

14.6 %

97%

11 2 %

7.1 %

!!.7%

13.9 %

13 2 %

Davdends Paid Per Sture.

$ 1.76 51.76

$1.76 51.76

$ 1.715 51.67 51.54 Common Stock Divdend Payout Ratio.

77 %

Il6%

98 %

I48 %

87%

78 %

87%

Common Stock Divdend YK4d at December 31 15.1 %

148%

132%

11 8 %

90%

81%

63%

PrKe/ Earnings Ratio at December 3 I.

5.1 78 7.4 I? 5 99 98 13 8 Shares of Common Stock Outstarong at December 3 I (000).

78,676 68.526 59.622 52.120 51.207 39.856 25.695 Bocc Va!ue per Common Sha e at December 31 515.65 5IS 57 516 26 516 33 516 93 5IS 93 513 63 Market PrKe per Common Share at December 31

$ 15.625 511 875 513 375 514 875 519 50 520 875 524.50 Rato of Market Pr(e to Book Value per Share ar December 31 74 %

76 %

82 %

91 %

115 %

131 %

180 %

41

1981 1980 1979 1978 1977 1976 1971 Revenue From Electnc Sales (000)

Restdential.

5 442,267 5 398.832 5360.273 5314.867 5284.512 5232.433 S i l4.081 Commercsal.

308,599 268.788 240.458 205.901 191,381 155.572 79.858 indu,tnal.

381,162 330.717 315.185 258.767 236.434 195.311 92.692 Other 53.993 50.420 42.607 46.471 31.744 31.013 13.053 Sut> total.

I,186,021 1.048.757 958.523 826.006 744.071 614.329 299.684 Sales to Utilities.

73,966 12.381 10.185 9.346 7.825 6.749 2.281 Total.

51.259,987 51.061.!38 5968.708 5835.352 5751.896 5621.078 5301.965 Revenue From Electnc Sales- %:

Resdential.

35.1 %

37.6 %

37.2 %

37.7%

37.8 %

37.4 %

37.8 %

Commercal.

24.5 25.3 24.8 24 6 25.5 25.1 26.4 Industnal.

30.2 31.2 32.5 31.0 31.5 31 4 30.7 Other 4.3 4.7 4.4 56 42 5.0 4.3 Sut> total.

94.1 98 8 98.9 98.9 99.0 98.9 99 2 Sales to Utilities 5.9 1.2 I.!

I.1 1.0 f.I 08 Total 100.0 %

100.0 %

100 0 %

100 0 %

100 0 %

100 0 %

100 0 %

00lowatt-Hour Sales:

(Millions)

Resdential.

6,747 6.801 6.650 6.501 6.334 6.024 4.656 Commeraal.

4,917 4.812 4.693 4.470 4.549 4.358 3.421 Industnal.

9,352 8.909 9.830 9.600 9.671 9.262 8.548 Other 1,181 1.370 1.346 f.309 1.253 f.171 933 SutHotal.

22,197 21.892 22.519 21.880 21.807 20.815 17.558 Sales to utilities 2,465 502 441 429 422 387 260 Total.

24,662 22.394 22.960 22.309 22.229 21.202 17.818 Customers Served at December 31:

Residential.

872,303 867.447 861.196 848.268 836.500 824.851 743.532 Commeraal.

89,231 88.505 87.425 86.410 85.002 85.512 77.955 Industnal.

1,068 I.059 I.161 1.160 1.147 f.il f I.094 Other 711 704 693 689 682 681 554 Total.

963,313 957.715 950.475 936.527 923.331 9i2.155 823.135 Average Annual Resdential KWH Usage 7,760 7.870 7.780 7.724 7.637 7.361 6.345 Average Residential Pnce Per KWH 6.564 5 864 5.42(

4 84(

4 49(

3 864 2.454 Cost of Coal per Milhon BTU.

51.81 51.50 51.26 51.16 5 96 5.93 5 29 Generating Capability at December 31. (Megawatts)

Coal 4,907 4.899 4.861 4.861 4.861 4.481 3.793 Oil 354 364 423 423 423 423 6

Nuclear.

425 425 425 420 420 190 Total.

5,686

'i.688 5.709 5.704 5.704 5.094 3.799 Sources of Electnc Generation:

Coal 89.9 %

98 7 %

93 9 %

90.4 %

90 0 %

96.3 %

100 0 %

Oil.

0.2 0.6 2.0 3.5 2.6 25 Nuclear 9.9 0.7 4.1 6I 74 12 Total 100.0 %

100 0 %

100.0 %

100 0 %

100 0 %

100 0 %

100 0 %

Peak load-Megawatts.

4,148 4.210 4.105 4.038 4.134 3.817 3.307 Number of Employees at December 31.

7,669 7.503 7.157 6.765 6 609 6.24I 5.892 42

I i

Stockholder information Stock Transfer and Registration a pnce equal to 95 percent of market value. Stockholders partopating in the Plan Agents may buy additonal shares at a pnce equal information and assistance pertaining to to 97 percent of market value through the transfer or registraton of all classes of optonal cash payments of up to $40.000 Company stock can be obtained by con-per year.

tacting one of the following Transfer The Plan is being amended so that.

Agents or Registrar of Oho Edison commencing in earfy 1982, preferred an,I Company:

preference stockholders will be ehgble tc p rtopate. The purchase pnce of common Transfer Clerk stock purchased with reinvested preferred i

Ohio Edison Company or preference stock divdends will be equal 76 South Main Street to 100 percent of market value.

Akron. OH 44308 An added benefit of the Plan may be Continental 5tock Transfer &

available from 1982 through 1985. The Trust Company Economic Recovery Tax Act of 1981 pro-i 19 Rector Street vdes that partopants of quahfied duderd i

New York. NY 10006 reinvestment plans such as that offered by Ohio Edison. may elect to exclude up to BancOhio Natonal Bank

$750 a year (51.500 on ajoint return) o' One Cascade Plaza divdends that are reinvested. The Com-Akron. OH 44308 pany antopates that a substantial portoq of common stock drvdends pad in 1982 Stock Listing will be a return of capital and thus non-taxable wholly apart from the provisions of At the end of 1981, the Company had the Act. If any part of a dudend is deter 78.675.703 shares of common stock mined to be a return of capital partop t ts outstanding. owned by 182.778 holders of should consult their own tax advisers or, the extent to which the electon to exclude T

Company's common stock is hsted 5

on the New York and Mdwest Stock 4'

in a o to & MneM of tax dehal, Exchanges arx1 traded on other registered I sain requimments am md wim mpect exchanges urxler the ticker symbol OEC.

to Wng penods fm W CompanA Newspaper stock hstings generally use the common stock the proceeds of a sale of symbol Ohio Ed.

stock purchased under the Plan may be ehgble fm long-term capital gain treatment.

Annual Meeting of Stockholders Stock purchased with reinvested dividends The 1982 Annual Meeting of Stock-will have a zero tax basis to stockholders.

hoklers will be held on Thursday, Apol 29.

Additional nformation about the Plan at I:30 p m. at Oho Edison's General and a Prospectus can be obtarned by Office in Akron. Ohio. Stockholders unable wnting to Stockholder Services or by calhng or choosing not to attend the meeting can 1 216-384-5513.

vote on the items of business presented at the meeting by filhng out and returning the Dividend Incorne Taxability proxy card that is mailed to each stock-Common stock divdend payments dur-hokler approximatefy 30 days pror to the ing 1981 are 100 percent a return of capital meeting date.

and. therefore, nontaxable for federal income tax purposes. Preference stock Dividend Reinvestment and Stock divdends for 1981 are si percent return of Purchase Plan capital and nontaxable for that porton.

The Oho Edison Dwderx1 Reinvestment Preferred stock divdend payments dunng arx15tock Purchase Plan raised 535.9 1981 are 100 percent taxable.

millon of new capitalin 1981. up 21 These percentages are subject to final percent over 1980.

determinaton by the internal Revenue A total of 37.278 partopants, or 20 Service. Stockholders will be notified j

percent of Edison's common stockhokjers promptry if the determinaton results in a of record, had been enrolled in the Plan by significant change.

l the end of the year. By reinvesting their Availability of Form 10-K dudends totakng s22.8 millon and mak.

ing optional cash payments of 513.1 A copy of Ohio Edison's 1981 Annua mrilon, participants purchased 3.122.631 Report to the Secunties and Excharx}e additonal shares of common stock in 1981. Commisson. Form IO K. will be provded Stockhokiers may invest a!! or part of without charge to stockhoklers upon their quarterly duderv1s automatically in request. If you wouk1 hke to receive a copy additonal shares of common stock. The of this re[x)rt. please wnte to Gregory F.

purctuse pnce of common stock purchased LaFlame. Secretary. Ohio Edison Company, with reinvested common stock drvdends is 76 South Main Street. Akron. Oho 44308.

43

BUIR RATE U.S. POSTAGE PAID G TheEnergyMakers AKRON, CHIO OHIOEDISON 76 south Main street eermit no. ss r Akron, Ohio 44308 1981 Annual Report