ML17334A858
| ML17334A858 | |
| Person / Time | |
|---|---|
| Site: | Cook  |
| Issue date: | 12/31/1983 |
| From: | ALEXICH M P INDIANA MICHIGAN POWER CO. (FORMERLY INDIANA & MICHIG |
| To: | DENTON H R Office of Nuclear Reactor Regulation |
| References | |
| AEP:NRC:0909, AEP:NRC:909, NUDOCS 8501040266 | |
| Download: ML17334A858 (42) | |
Text
REGULATOINFORMATIONDISTRIBUTIONSTEM(RIDS)ACCESSIONNBR:8501040266DOC~DATE:83/12/31NOTARIZED:NODOCKETFACIL:50-315DonaldC,CookNuclearPowerPlant~Unit1~Indiana80500031550-316DonaldC,CookNuclearPowerPlant~Unit2~IndianaL05000316AUTH.NAMEAUTHORAFFILIATIONALEXICH,M,P,Indiana8MichiganE;lectricCo,RECIP~NAMERECIPIENTAFFILIATIONDENTON,H.R,~4OfficeofNuclearReactorRegulationrDirector
SUBJECT:
"AnnualRept'983."N/1984internalcashflowprojection8841221ltr.DISTRIBUTINCODE:M004LCOPIESRECEIVED!LTR-gENCLgSIZE:0TITLE:AnnualFinancialReportsNOTES:OL:10/25/74OL:12/23/720500031505000316RECIPIENTIDCODE/NAME.NRRORB1BCNIGGINGTONiDCOPIESLTTRENCL1~010RECIPIENTIOCODE/NAMENRRORB1LA01COPIESLTTRENCL11INTERN:EGEXTERNAL:LPDR.NTIS04030512,21'SPNRCPDR"0211-11TOTALNUMBEROFCOPIESREQUIRED:LTTR9ENCL"7 ilfMI6nIeh(1-~~IIfq,,IWhfWWWII-WM'lWW,(II'I,'(W~~MetWWWI'I'ghi"~I"~PPj<Me~MheeeeP1~eIII'QMI~<<iW ATTACHMENTlTOAEP:NRC:0909 I,Q INDIANA8MICHIGANELECTRICCOMPANYP.O.BOX16631COLUMBUS,OHIO43216December21,1984AEP:NRC:0909DonaldC.CookNuclearPlantUnitNos.1and2DocketNos.50-315and50-316LicenseNos.DPR-58andDPR-74FINANCIALINFORMATIONFORINDIANA&MICHIGANELECTRICCOMPANYMr.HaroldR.Denton,DirectorOfficeofNuclearReactorRegulationU.S.NuclearRegulatoryCommissionklashington,D.C.20555
DearMr.Denton:
Attachment1containsthreecopiesoftheIndiana&MichiganElectricCompany's(I&MECo)AnnualReportfor1983.Attachment2containsthreecopiesofI&MEGO'spro)ectedoashflowfor1984.Thesereportsaresubmittedpursuantto10CFR50.71(b)and10CFR140.21(e).ThisdocumenthasbeenpreparedfollowingCorporateprocedureswhichincorporateareasonablesetofcontrolstoensureitsaccuraoyandcompletenesspriortosignaturebytheundersigned.Verytrulyyours,~)ylMilton.Alexioh1II'icePresidentthAttachmentscc:JohnE.DolanM.G.Smith,Jr.-BridgmanG.BruchmannR.C.CallenG.CharnoffNRCResidentInspector<<Bridgmanper rU0 GANNUALREPORT1983AMERICANELECTRICPOWERSYSTEMS5010OOZSSS31aS1PDRADOCK05000315PDRy,b~"
ContentsBackgroundoftheCompanyDirectorsandOIIicersoftheCompanySelectedFinancialDataManagement'sDiscussionandAnalysisofResultsofOperationsandFinancialConditionConsolidatedStatementsofIncomeConsolidatedBalanceSheetsConsolidatedStatementsofSourcesandApplicationsofFundsConsolidatedStatementsofRetainedEarningsNotestoConsolidatedFinancialStatementsAuditors'pinionOperatingStatisticsPriceRangeofCumulativePreferredStock6-810-11121314-262728-2930 INDIANA&MICHIGANELECTRICCOMPANYOneSummitSquare,P.O.60,FortLVayne,Indiana46801BackgroundoftheCompanyINDIANA&,MIcHIGANELEGTRlcCoMPANY(theCompany),asubsidiaryofAmericanElectricPowerCompany,Inc.(AEP)isengagedinthegeneration,purchase,transmissionanddistributionofelectricpower.TheCompanywasorganizedunderthelawsofIndianaonFebruary21,1925,andisalsoauthorizedtotransactbusinessinMichiganandWestVirginia.ItsprincipalexecutiveofficesareinFortWayne,Indiana.TheCompanyhastwowhollyownedsubsidiaries;theyareBlackhawkCoalCompany,whichownscoalminesandrelatedminingassets,andPriceRiverCoalCompany,whichminescoalfromlandownedbyBlackhawkthatispurchasedlargelybytheCompany.TheCompanyservesapproximately446,000customersinnorthernandeasternIndianaandaportionofsouthwesternMichigan.Amongtheprincipalindustriesservedarestone,clay,glassandconcreteproducts,primarymetals,fabricatedmetalproducts,electricalandelectronicmachineryandtransportationequipment.Inaddition,theCompanysupplieswholesaleelectricpowertootherelectricutilities,municipalitiesandelectriccooperatives.TheCompany'sgeneratingplantsandimportantloadcentersareinterconnectedbyahigh-'oltagetransmissionnetwork.ThisnetworkinturnisinterconnectedeitherdirectlyorindirectlywiththefollowingotherAEPSystemcompaniestoformasingleintegratedpowersystem:Appa-lachianPowerCompany,ColumbusandSouthernOhioElectricCompany,KentuckyPowerCompany,KingsportPowerCompany,MichiganPowerCompany,OhioPowerCompanyandWheelingElectricCompany.TheCompanyisalsointerconnectedwiththefollowingotherutilities:CentralIllinoisPublicServiceCompany,TheCincinnatiGas0ElectricCompany,CommonwealthEdisonCompany,ConsumersPowerCompany,IllinoisPowerCompany,Indiana-KentuckyElec-tricCorporation(asubsidiaryofOhioValleyElectricCorporation),IndianapolisPowerALightCompany,NorthernIndianaPublicServiceCompanyandPublicServiceCompanyofIndiana,Inc.
DirectorsFRANKN.BIENW.A.BLAcKLAWRENCER.BRUNKE(a)P.F.CARL,JR.(b)RICHARDE.DISBROWJOHNE.DOLANWILLIAMN.D'ONOFRIO(C)M.R.HARRELL(a)G.E.LEMASTERS(b)GERALDP.MALONEYRICHARDC.MENGEJ.F.STARKBEVERLYI.STEARS(d)W.S.WHITE,JR.OfficersW.S.WHITE,JR.ChairmanoftheBoardandChiefExecutiveOfficerW.A.BLAcKPresidentandChiefOperatingOfficerJ.F.STARKSeniorVicePresidentMILTGNP.ALExlcH,Adm.USNRet.(e)VicePresidentFRANKN.BIENVicePresidentRICHARDE.DISBROWVicePresidentJOHNE.DOLANVicePresidentWILLIAMN.D'ONOFRIO(C)VicePresidentA.JOSEPHDOWDVicePresidentRICHARDF.HERINGVicePresidentROBERTS.HUNTER(0VicePresidentGERALDP.MALONEYVicePresidentRICHARDC.MENGEVicePresidentBEVERLYI.STEARS(d)VicePresidentPETERJ.DEMARIATreasurerJOHNR.BURTONSecretaryALLENH.STUHLMANNAssistantSecretaryandAssistantTreasurerJOHNF.DILORENZO,JR.AssistantSecretaryWILLIAMC.HARVEY(8)AssistantSecretaryCARLJ.MOOSAssistantSecretaryWILLIAME.OLSON(d)AssistantSecretaryWILLIAMJ.PROCHASKA(f)AssistantSecretaryJOHNB.SHINNOCK(C)AssistantSecretaryJOANST.JAMESAssistantSecretaryLEONARDV.ASSANTEAssistantTreasurerBRUCEM.BARBERAssistantTreasurerGERALDR.KNORRAssistantTreasurerTltcprincipaloccupationofeachoftheabovedirectorsandojficersofIndianackhfichignnElectricCompnny,withnineexceptioris,isasanemployeeofAmericanElectricPowerServiceCorporation.TheexceptionsnreIV.A.Blnck,P.F.Carl,Jr.,IVilliamIV.D'Onofrio,G.E.Lehfasters,RichardC.hfengc,CnrlJ.hfoos,J.F.Stark,BeverlyI.Stcars,andAllenIf.StuhhnannwhoseprincipaloccupationsnrcasofJiccrsoremployeesofIndiana&hficlriganElectricCompany.(a)ResignedApril26,1983(b)ElectedApril26,1983(c)ElectedJanuaryI,1984(d)ResignedJanuaryI,1984(e)ElectedJune1,1983(1)ResignedSeptemberI,1983(g)ElectedSeptember29,1983 INDIANA&MICHIGANELECTRICCOMPANYi~jANDSUBSIDIARIESSelectedFinancialDataYearEndedDecember31,198319821981(inthousands)19801979INCOMESTATEMENTSDATA:OPERATINGREYENUEs-ELEcrRIcTOTALOPERATINGEXPENSESOPERATINGINCOMETOTALOTHERINCOMEANDDEDUCTIONSINCOMEBEFOREINTERESTCHARGESNETINTERESTCHARGESCQNsoLIDATEDNETINcohIE-beforepreferredstockdividendrequirements..PREFERREDSTOCKDIVIDENDREQUIREMENTSEARNINGSAPPLICABLEToCOMMONSTOCK$868,980686,237$809,803634,858$812,149634,209$742,683577,502$683,013524,800182,743174,94553,62948,725177,94029,713165,18130,541158,21329,042236,37296,496223,670102,647207,653104,313195,72299,151187,25591,475139,87628,384$111,492121,023103,34096,57195,78028,62823,62423,24219,995$92,395$79,716$73,329$75,78519831982December31,1981(inthousands)19801979BALANCESHEETSDATA:ELECTRICUTILITYPLANTACCUhjULATEDPROVISIONSFORDEPRECIATION,DEPLETIONANDAMORTIZATIONNETELECTRICUTILITYPLANTTOTALASSETS2,905,9343,343,9632,855,3252,745,2883,135,8843,035,6142,555,6082,826,1722,182,2872,616,996$3,666,823$3,541,114$3,356,987$3,117,381$2,657,930760,889685,789611,699561,773475,643COMMONSTOCK,PREMIUMSONCAPITALSTOCKANDOTHERPAID-INCAPITALRETAINEDEARNINGSCUMULATIVEPREFERREDSTOCK:NOTSUBJECTTOMANDATORYREDEMPTIONSUBJEGTToMANDATQRYREDEhIPTIQN(a)LQNG-TERMDEBT(a)807,92595,616197,00099,4971,445,704777,78391,756197,000104,4471,397,475727,652100,170197,000105,5091,404,044.637,287114,495197,00068,3481,264,673587,193130,480197,00070,0001,124,255(a)Includingportionduewithinoneyear.
Management'sDiscussionandAnalysisofResultsofOperationsandFinancialCondition~,ThefollowingarethemoresignificantfactorsbearingonthefinancialconditionofIndiana&MichiganElec-tricCompanyanditssubsidiariesasreflectedintheconsolidatedresultsofoperations.Thisdiscussionre-ferstotheconsolidatedfinancialstatementsthatfol-low.OperatingRevenuesandExpensesConsolidatedoperatingrevenuesincreased7.3%in1983comparedtoadecreaseof0.3%in1982.Kilowatt-hourssoldincreased1.6%in1983comparedwithan8.3%decreasein1982.Theprimaryreasonfortheincreaseinoperatingrevenueswasthereceiptofadditionalratereliefcoupledwithanimprovementinkwhsalesduringthesecondhalfof1983.Theimprove-mentinenergysalesreflectsthehotsummerandcolderweatherinlatefallandearlywinteraswellasthegradualrecoveryoftheeconomyintheCompany'sservicearea.The1982decreaseinsalesofelectricenergyandoperatingrevenueswasattributabletothedepressedeconomicactivityandmildweatherexperi-encedthroughoutmost'oftheyearintheservicearea.Revenuesfromretailcustomers(residential,com-mercialandindustrial)wereup"10.6%in1983withacorrespondingincreaseinkwhsalesof2.7%whilein1982theserevenuesrose7.2%ona2.1%declineinkwhsales.Theincreaseinrevenueswasduetohigherrateswhichwentintoeffectduring1983.Theincreaseinkwhsalesincludesa6.5%increaseinsalestoindustrialcustomersasopposedtoan8.0%decreaselastyear,reflectingthechangesintheeconomyintheCompany'sservicearea.Wholesalerevenuesfor1983increasedby5.5%fol-lowinga9.6%decreasein1982.Kwhsalestowholesalecustomersincreased0.6%in1983comparedtoa13.7%decreaseintheprecedingyear.Theincreasedrevenues.weremainlytheresultofrateincreasesputintoeffectduring1983andasignificantreboundinenergysalestootherutilitiesduringthelasthalfoftheyear.There-boundinwholesalesalestomunicipalities,electriccooperativesandotherelectricutilitiesisexpectedtocontinueinto1984;however,muchwilldependupontheextentofimprovementsintheeconomyaswellasweatherpatterns.Purchasedandinterchangepowerexpenseincreased2.8%in1983and11.2%in1982.The1983increaselargelyreflectsincreasedpurchasesfromotherutilitiesanddecreasedinterchangetransactionstoobtainpowerfromotherAEPSystemcompanies.The1982increasewasmainlytheresultofanincreaseinpurchasesfromotherutilities.Normally,duringperiodsofpeakde-mandthatexceedtheavailablegeneratingcapacity,theCompanyisabletomeetitswholesalecustomers'e-quirementsbypurchasingpowerfromneighboringutilitiesforresaletoothersbecauseofAEP'spowerfulinterconnectionandtransmissioncapacity.Totaloperatingexpensesincreased8.1%in1983comparedtoa0.1%increasein1982.Theincreasein1983wasprimarilyduetoincreasesinFederalincometaxesandfuelexpenses.Federalincometaxesin-creased85.8%in1983duelargelytoanincreaseinpre-taxbookincome.Fuelexpensesincreased11.9%%uoin1983asaresultofincreasedgenerationlevelsandachangeinfuelmix.In1982fuelexpensesdecreased18.8%asaresultofdecreasedkwhsalesandachangeinfuelmix.Futurefuelexpenseswillbeaffectedbygen-erationlevels,contractualagreementsbetweenthecoalindustryandtheUnitedMineWorkersofAmericaandthepossibilityofyetmorestringentenvironmentalre-strictionsonburningcertaintypesofcoal.WhetherornotfutureincreasesinfuelcostswilladverselyaffectearningswilldependontheCompany'scontinuedabil-itytorecoversuchcostspromptlyinthefaceofeffortsbycertainconsumergroupsandotherstodelayorreducerateincreasesandtoeliminateorreducetheextentofcoverageoffuel-adjustmentclauses.ConstructionandFinancingProgramExpendituresfortheCompany'sconstructionpro-gramoverthethree-yearperiod1984-1986areesti-matedtobeapproximately$597million.Substantialadditionalexpendituresmayberequiredifexistinggeneratingplantsrequiremodificationoradditionalfacilitiestocomplywithfutureenvironmentalqualitystandards.See"EnvironmentalMatters"inNote9oftheNotestoConsolidatedFinancialStatementsforadditionalinformation.Inrecentyears,theconstruc-tionprogramhasbeenaffectedbysubstantialincreasesinconstructioncostsandtheexpenseofobtainingfinancingfortheprogramduetohighcostsofcapital.Theconstructionprogramisreviewedcontinuouslyandrevisedfromtimetotimeinresponsetorevisedprojectionsofloadgrowthandchangesinthecostandavailabilityofcapital.Inrecentyears,thesereviewshaveresultedinextendingconstructionschedulesofanumberofprojectswiththeobjectiveofreducingthelevelofannualconstructionexpenditures.However,deferralsofconstructionprojectsmayhaveanadverseeffectonthequalityoftheCompany'sservicetoitscustomersinthefuture,andanyresultingreductionsin INDIANAP.I~i.HIGANELECTRICCOMPANYANDSUBSIDIARIEScurrentconstructioncostswill,inthelongrun,beatleastpartiallyoffsetbygeneralinflationarytrendsaswellaspossiblecancellationcharges.Inaddition,whenthecompletiondateofaprojectunderconstructionissubstantiallydelayed,itbecomesmoreexpensive,bothbecauseoftheforegoingfactorsandbecausecertaincosts,principallyfinancingcosts,continuetoaccrueuntilthefacilityisplacedincommercialoperation.ItisestimatedthatalloftheCompany'sprojectedconstructionexpendituresfor1984-1986willbefi-nancedwithinternallygeneratedfunds.Ifanyaddi-tionalamountsareneededtheywillberaisedexter-nally,asinthepast,throughsalesofsecuritiesandinvestmentsintheCompany'scommonequitybyAEP.TheCompanyinitiallyfinancescurrentconstructionexpendituresinexcessofavailableinternallygeneratedfundsbyissuingunsecuredshort-termdebt(commer-cialpaperandbankloans)andthenperiodicallyreducesshort-termdebtwiththeproceedsofsalesoflong-termdebtsecuritiesandpreferredstockandwithinvest-mentsintheCompany'scommonequitybyAEP.Theamountsofshort-termdebtwhichtheCompanymayissuearelimitedbyregulatoryrestrictionsunderthePublicUtilityHoldingCompanyActof1935andbyrestrictionsinitscharterandincertaindebtinstru-ments.AtDecember31,1983,theCompanyhadre-ceivedauthorizationsfromtheSecuritiesandEx-changeCommissiontoissueatotalofapproximately$135millionofshort-termdebt.Note7oftheNotestoConsolidatedFinancialStatementscontainsinforma-tionontheCompany'sshort-termbanklinesofcredit.Banklinesofcreditmaybewithdrawnatanytimebythebanksextendingthem,andinmostcasesthebanksrequireeitherthemaintenanceofcompensatingdepositbalancesorthepaymentoffeesinlieuofdeposits.InorderfortheCompanytoissueadditionallong-termdebtandpreferredstock,itisnecessaryforittocomplywithearnings-coveragerequirementscon-tainedinitsmortgagebondanddebentureindenturesandcharter.Inordertoissueadditionallong-termdebt(excepttorefundmaturinglong-termdebt),theCom-panymusthavepre-taxearningsequaltoatleasttwicetheannualinterestchargesonlong-termdebt,givingeffecttotheissuanceofthenewdebt,foraperiodof12consecutivemonthswithinthe15monthsimmediatelyprecedingthedateofthenewissue.Toissueadditionalpreferredstock,theCompanymusthaveafter-taxgrossincomeatleastequaltooneandone-halftimesannualinterestchargesandpreferreddividends,givingeffecttotheissuanceofthenewpreferredstock,forthesameperiod.Theseprovisionsdonotpreventcertaintypesofpollution-controlrevenuebondfinancingsbypublicbodiesonbehalfoftheCompany,butthelevelsofcoverageunderthemmayaffectthecostandmarketa-bilityofsuchbonds.AtDecember31,1983,thecover-agesoftheCompanyundertheseprovisionswereatleast2.01forlong-termdebtand1.64forpreferredstock.Inviewoftheserestrictionsontheissuanceofaddi-tionaldebtsecuritiesandpreferredstock,theCompanybelievesthatitwillbepossibletomeetthecapitalrequirementsofitsconstructionprogramonlyiftheCompanyreceivesrateincreasesoverthenextseveralyearssufficienttomeettheearningslevelsrequiredtoissuethenecessaryamountsoflong-termdebtandpre-ferredstockandtoprovideanappropriatereturnonnewequityinvestment.SeeNote2oftheNotestoConsolidatedFinancialStatementsregardingarecentprehearingrateorderinwhichthePublicServiceCommissionofIndianafoundthatthesecondsteppor-tionofaproposedraterequestwasnotproperlypre-sented.ThesecondstepwastocoincidewiththeDe-cember1984commercialoperationdateoftheCom-pany'sRockportPlantUnit1.ThisfindingraisesaquestionastotheeffectontheCompany'snetincomeandfinancialconditionunlessotheralternativesunderconsiderationareimplemented.NetIncomeandDividendsConsolidatednetincomebeforepreferreddividendrequirementsincreasedin1983by15.6%andin1982by17.1%.Thesechangesinnetincomewereaccompaniedbyadecreaseinthetotalproportionofallowanceforfundsusedduringconstruction(AFUDC)reflectedinnetincome,85%in1983and92%in1982.AFUDCdoesnotrepresentcashincomeorareductioninactualinter-estexpense,butisanaccountingconventionpermittedbyregulatorysystemsofaccounts.AFUDCrepresentsthenet.costofborrowedfundsusedforconstructionandareasonablerateofreturnonotherfundswhensoused.Suchamountsarecapitalizedasacostofcon-structionprojectswithaconcurrentcredittotheIn-comeStatement.Theamountcapitalizedisaddedtothecostofconstructionprojectsandgenerallyincludedintheplantinvestmentbaseforsettingratesandrecov-eredthroughdepreciationchargesincludedinratesaftertheprojectisplacedincommercialoperation.IntheeventtheCompanymustmakerefundsorexperienceotheradverseeffectspursuanttotheout-comeoftheissuesrelatingtotheFederalEnergyReg-ulatoryCommissioninvestigationoftheAEPSystem's policieswithrespecttocoalpurchasingandpractices(see"Litigation"inNote9oftheNotestoConsoli-datedFinancialStatements),thiscouldrestricttheabil-ityoftheCompanytopaydividendsforaperiodoftimeonitsoutstandingCommonStocktoAEP.EffectsofInfiatlonInrecentyearsinflationhashadaneffectontheCompany'sconsolidatedrevenues,expensesandnetincomethatisnotreadilyevidentinconventionalfinan-cialstatements.Foradditionalinformationontheef-fectsofinflation,refertoNote12oftheNotestoCon-solidatedFinancialStatements,whichpresentsacon-solidatedstatementofincomefor1983,adjustedforeffectsofinflation,andacomparisonofselectedsup-plementarydataforafive-yearperiod,similarlyad-justed.
INDIANA&MiHIGANELECTRICCOMPANYANDSUBSIDIARIESConsolidatedStatementsofIncomeOPERATINGREVENUES-ELECTRICYearEndedDecember31,198119831982(inthousands)$868,980$809,803$812,149OPERATINGEXPENSES:Operation:FuelforElectricGenerationPurchasedandInterchangePower(net)Other'aintenanceDepreciation;DepletionandAmortizationTaxesOtherThanFederalIncomeTaxesFederalIncomeTaxesTotalOperatingExpensesOPERATINGINCOMEOTHERINCohIBANDDEDUCTIONS:AllowanceforOtherFundsUsedDuringConstruction......MiscellaneousNonoperatingIncomeLessDeductionsTotalOtherIncomeandDeductionsINCOMEBEFOREINTERESTCHARGES.INTERESTCHARGES:InterestonLong-termDebt.InterestonShort-termDebtMiscellaneousInterestChargesTotalInterestChargesAllowanceforBorrowedFundsUsedDuringConstruction(credit)NetInterestChargesCoNsoLIDATEDNETINcohIE-beforepreferredstockdividendrequirementsPREFERREDSTOCKDIVIDENDREQUIREhIENTSEARNINGSAPPLICABLEToCOMMONSTOCK159,998159,086122,12753,04983,96337,05370,961686,23718274360,588~6,95953,629236372144,4308,9981,714155,142~58,64696,496139,87628,384$111,492143,025154,683126,92256,43183,03132,56738,199634,858174,94557,889(9,164)48,725223,670142,8418,9744,258156,073(53,426)102,647121,02328,628$92,395176,074139,119101,79248,89581,45832,69854,173634,209177,94032,885(3,172)29,713207,653129,02318,0424,228151,293(46,980)104,313103,34023,624$79,716SeeiVotestoConsolidatedFinancialStatements.
ConsolidatedBalanceSheetsASSETSELECTRICUTILITYPLANT:Production.TransmissionDistribution.GeneralandMiscellaneous(includesminingplant)ConstructionWorkinProgress.TotalElectricUtilityPlantLessAccumulatedProvisionsforDepreciation,DepletionandAmortizationElectricUtilityPlantLessProvisionsDecember31,19831982(inthousands)760,8892,905,934685,7892,855,325$1,561,791$1,532,241443,280441,241316,324305,528195,444186,8901149,9841,075,2143,666,8233,541,114OTHERPROPERTYANDINVESTMENTS39,69128,319CURRENTASSETS:CashSpecial,DepositsandWorkingFundsAccountsReceivable:CustomersAssociatedCompaniesMiscellaneousAccumulatedProvisionforUncollectibleAccounts.MaterialsandSupplies(ataveragecostorless):Fuel.ConstructionandOperationMaterialsandSuppliesAccruedUtilityRevenuesPrepaymentsandOtherCurrentAssetsTotalCurrentAssets.7,2835,966113,6745,54939327(470)75,20318,13048,5505,967283,17910,0004,09856,7399,2144,148(414)72,81119,82121,8745,134203,425DEFERREDDEBITS:UnamortizedDebtExpensePropertyTaxesDeferredCollectionofFuelCostsDeferredStrikeCostsOtherWorkinProgressDeferredNuclearFuelDisposalCostsOtherDeferredDebitsTotalDeferredDebitsTotal.SeehlolestoConsolidate(!FinancialSiatemenrs.3,4152,0291,0353,25472,57532,851115,159$3,343,9633,5701,7402152,4133,96136,91648,815$3,135,88410 INDIANA&MICHIGANELECTRICCOMPANYANDSUBSIDIARIESCAPITALIZATIONANDLIABILITIESDecember31,19831982(inthousands)CAPITALIZATION:CommonStock-NoParValue:Authorized-2,500,000SharesOutstanding-1,400,000SharesPremiumsonCapitalStockOtherPaid-inCapital.RetainedEarningsTotalCommonShareowner'sEquity.........~.....CumulativePreferredStock:NotSubjecttoMandatoryRedemptionSubjecttoMandatoryRedemption(lesssinkingfundrequirementsduewithinoneyear).Long-termDebt(lessportionduewithinoneyear)TotalCapitalization(lessamountsduewithinoneyear).CURRENTLIABILITIES:CumulativePreferredStockSinkingFundRequirementsDueWithinOneYear.Long-termDebtDueWithinOneYear.Short-termDebt:NotesPayabletoBanksCommercialPaper.AccountsPayable:General.AssociatedCompaniesDividendsDeclared:CommonStock.CumulativePreferredStockCustomerDepositsTaxesAccruedInterestAccruedRevenueRefundsAccruedOtherCurrentLiabilitiesTotalCurrentLiabilities$56,584381750,96095,616903,541197,00099,3451,358,8302,55572615286,87439,95022550040,31855,40317,6166,9992,99014,96835,9989837,904361,770$56,584381720,81891,756869,539197,000104,0001,304,5052,475,04444792,97089,1503,00035,14712,5867,1402,83611,46435,12011,92125,895327,676CohthIITMBNTsANDCoNTINGENclEs(Note9)DEFERREDCREDITSANDOPERATINGRESERVES:DeferredIncomeTaxesDeferredInvestmentTaxCreditsOtherDeferredCreditsandOperatingReserves.........TotalDeferredCreditsandOperatingReservesTotal338,35032,28752,840423,477$3,343,963255,09835,87742,189333,164$3,135,884 ConsolidatedStatementsofSourcesandApplicationsofFunds0'~YearEndedDecember31,SoURcEsoFFUNDs:FundsfromOperations:ConsolidatedNetIncomePrincipalNon-fundCharges(Credits)toIncome:Depreciation,DepletionandAmortizationProvisionforDeferredIncomeTaxes(net)Deferred"InvestmentTaxCredits(net)AmortizationofDeferredStrikeCostsAmortizationofDeferredCollectionofFuelCostsAmortizationofDeferredNuclearFuelDisposalCostsAllowanceforOtherFundsUsedDuringConstructionOther(net)TotalFundsfromOperationsFundsfromContributionsandFinancings:ContributionsandFinancings:CapitalContributionsfromParentCompanyCumulativePreferredStockLong-termDebtShort-termDebt(net)TotalLessRetirementsofCumulativePreferredStockandLong-termDebtNetFundsfromContributionsandFinancingsSalesofProperty'.,'TotalSourcesofFundsAPPLICATIONSOFFUNDS:PlantandPropertyAdditions:GrossAdditionstoUtilityPlantGrossOtherAdditionsTotalGrossAdditions.AllowanceforOtherFundsUsedDuringConstructionNetPlantandPropertyAdditionsDividendsonCommonStockDividendsonCumulativePreferredStockDeferredStrikeCostsOtherChanges(net)IncreaseinWorkingCapital(a)TotalApplicationsofFunds(a)ExcludesCumulativePreferredStockSinkingFundRequirementsDueWithinOneYear,Long-termDebtDueWithinOneYearandShort-termDebtandisrepresentedbyincrease(decrease)asfollows:CashandCashItemsAccountsReceivableMaterialsandSuppliesAccruedUtilityRevenuesAccountsPayableDividendsDeclaredonCommonStockTaxesAccruedRevenueRefundsAccruedOther(net).SeeNotestoConsolidatedFinancialStatements.1983$139,87686,02584,296555561,3782153,092(607588)1,977261,82730,00069,239~29,70069,53998,290~28,75171,212$304,288$201,793428202,221~60,588141,633107,63228,3841790709,569$304,288$(849)52939370126,676(47,988)(17,616)(3,504)11,823~12,067895691982(inthousands)$121,02387,45922,53325,6381,378287(57,889)1,141201,57050,00099,16738,550187,717106,99780,72077,745$360,035$267,783326268,109(57,889)210,220100,80028,628(4,103)24,490$360,035$(11,962)(22,948)24,0411,880841,12418,47911,1742,618$24,4901981$103,34085,97836,0829,2473,195287(32,885)710205,95490,00038,734158,922~92,925194,73122,019172,71240,845$419,511$307,672578308,250(32,885)275,36592,62423,6246,9862,41518,497$419,511$11,7652,405(16,505)8,1986,93610,376(6,139)15,121~13,660$18,497 INDIANAd':CHIGANELECTRICCOMPANYANDSUBSIDIARIESConsolidatedStatementsofRetainedEarningsYearEndedDecember31,BalanceatBeginningofYearConsolidatedNetIncomeTotal$91,756139,87623163219831982(inthousands)$100,170121,023221,1931981$114,495103,340217,835Deductions:CashDividendsDeclared:CommonStockCumulativePreferredStock:4Ve%Series.4.56%Series.4.12%Series.7.08%Series7.76%Series8.68%Series.12%Series$2.15Series.$2.25Series.$2.75Series.$3.63SeriesTotalCashDividendsDeclaredCapitalStockExpenseTotalDeductionsBalanceatEndofYear107,632495273.1652,1242,7162,6042,8733,4403>6004,2865,808136,016136,016$95,616100,8004952731652,1242,7162,6043,0033,4403,6004,4005,808129,4289129,437$91,75692,6244952731652,1242,7162,6043,2263;4403,6004,400581116,2481,417117,665$100,170SeeNotestoConsolidatedFinaneia(Statements.
NotestoConsolidatedFinancialStatementsI.SignificantAccountingPolicies:ThecommonstockoftheCompanyiswhollyownedbyAmericanElectricPowerCompany,Inc.(AEP).TheaccountingandratesoftheCompanyaresubjectincertainrespectstotherequirementsofstateregula-torybodiesandincertainrespectstotherequirementsoftheFederalEnergyRegulatoryCommission(FERC).Theconsolidatedfinancialstatementsincludetheac-countsoftheCompanyandtwowhollyownedsub-sidiariesengagedincoalmining.Significantinter-companyitemshavebeeneliminatedin,consolidation.Theconsolidatedfinancialstatementshavebeenpre-paredonthebasisoftheaccountswhicharemaintainedforFERCpurposes.ElectricUtilityPlant;OtherPropertyandInvesttnents;Depreciation,DepletionandAtnortizationElectricutilityplantisstatedatoriginalcost.Gener-ally,theplantoftheCompanyissubjecttofirstmortgageliens.TheCompanycapitalizes,asaconstructioncost,anallowanceforfundsusedduringconstruction,anitemnotrepresentingcashincome,whichisdefinedintheapplicableregulatorysystemsofaccountsasthenetcostofborrowedfundsusedforconstructionpurposesandareasonablerateonotherfundswhensoused.ThecompositeratesusedbytheCompanywere12.5%in1983,12.75%in1982and12.0%in1981appliedonasemi-annualcompoundbasis.TheCompanyprovidesfordepreciationonastraight-linebasisovertheestimatedusefullivesoftheproperty.Thecurrentprovisionsaredeterminedlargelywiththeuseoffunctionalcompositeratesasfollows:FunctionalCompositeClassofAnnualPropertyRatesProduction:Steam-Nuclear.......................4.0%Steam-Fossil-fired'...3.7%Transmission2.1%Distribution3.7%General..........................2.8%Depreciation,depletionandamortizationofcoal-miningpropertyareprovidedinamountsestimatedtobesufficienttoamortizethecostsoftherelatedassets,lessanyestimatedsalvage(whichisnotsignificant),overtheirusefullivesandarecalculatedbyuseofthefollowingmethods:DescriptionMethodMiningStructuresandStraight-linemethod(originallivesEquipmentrangefrom3to31years)CoalInterestsandMineUnits-of-productionmethodDevelopmentCosts(basedonestimatedrecoverabletonnages;currentrateaverages$1.07perton)Substantiallyalloftheamountoftheprovisionsfordepreciation,depletionandamortizationofcoal-miningpropertyisclassifiedintheConsolidatedStatementsofIncomeasfuelforelectricgeneration.Operatingexpensesarechargedwiththecostsoflabor,materials,supervisionandothercostsincurredinmaintainingtheproperties.Propertyaccountsarechargedwithcostsofbettermentsandmajorreplace-mentsofpropertyandtheaccumulatedprovisionsfordepreciationarechargedwithretirements,togetherwithremovalcostslesssalvage.Otherpropertyandinvestmentsaregenerallystatedatcost.InconteTaxesDeferredFederalincometaxesareprovidedexceptwhereflow-throughaccountingforcertaintimingdif-ferencesisreflectedinrevenuelevels.TheCompanynormalizestheeffectoftaxreductionsresultingfrominvestmenttaxcreditsutilizedinconnec-tionwithcurrentFederalincometaxaccrualsconsis-tentwithrate-makingpolicies.TheCompany'sconsolidatedcoalsubsidiariesgen-erallyusetheflow-throughmethodofaccountingforinvestmenttaxcreditsandpracticedeferredtaxac-countingfortheeffectsofcertaintimingdifferences.PensionPlansThecompaniesparticipatewithothercompaniesintheAEPSysteminanon-contributorytrusteedplantoprovidepensionsforalltheiremployeeswhoarenotparticipantsinpensionplansoftheUnitedMineWork-ersofAmerica(UMWA),subjecttocertaineligibilityrequirements.PensioncostsfortheyearsendedDecember31,1983,1982and1981wereapproximately$3,162,000,$3,057,000and$3,201,000,respectively.Theamountscoverthecostsofcurrentlyaccruingbenefitsandamor-tizationof,andintereston,unfundedprior-servicecosts,whicharebeingamortizedover30years.Thecompaniesmakeannualcontributionstotheplanequaltotheamountsaccruedforpensionexpense.
INDIANA8CHIGANELECTRICCOMPANYANDSUBSIDIARIESAcomparisonoftheplan'saccumulatedbenefitsandnetassetsasofJanuary1,1983,thedateofthemostrecentactuarialstudy,ispresentedbelow:JanuaryI,19831982(inthousands)ActuarialpresentvalueofaccumulatedplanbenefitsVestedNonvested$51,088$46,6525,9134,830$57,001$51,482Netassetsavailableforbenefits......$88,400$76,659Theassumedrateofreturnusedbytheactuaryindeterminingtheactuarialpresentvalueofaccruedbenefitswas8%ateachvaluationdate.UnderacontractwiththeUMWA,asubsidiaryisrequiredtomakepaymentsintotwomulti-employerpensionplansbasedoncoalproductionandhoursworked.Thecostoftheplanswasapproximately$713,000in1983,$2,442,000in1982and$1,700,000in1981.AsofJune30,1983,theCompany'sactuaryesti-mates,basedoninformationthatisavailable,thatthesubsidiary'sshareoftheunfundedvestedliabilitiesoftheUMWApensionplansapproximates$5,380,000.OtherTheCompanyaccruesunbilledrevenuesforelectricservicerenderedsubsequenttothelastbillingcyclethroughmonth-end.BlackLungBenefitsThecoal-miningsubsidiariesareliableundertheFederalCoalMineHealthandSafetyActof1969(Act),asamended,topaycertainblacklungbenefitstoeligi-blepresentandformeremployees.Thesubsidiariesprovideself-insuranceaccrualssufficienttoamortizetheactuariallycomputedpresentandfutureliabilitiesforsuchbenefitsasalevelpercentageofpayoverthefutureworkinglifetimeoftheemployees,takingintoaccounttheremaininglifeofthemines.Suchprovisionswereapproximately$131,000,$530,000and$398,000in1983,1982and1981,respectively.ABlackLungBene-fitsTrustismaintainedundertheInternalRevenue~Code.AsofJanuary1,1983(thelatestvaluationdate),thecompanies'ctuaryestimatestheunfundedactuari-alvalueofmedicalandliabilitybenefitsundertheAct,aswellascomparablestatelegislation,wasapproxi-mately$876,000.Thecompaniesfundtheactuariallydeterminedliabilitiesatalevelwhichcurrentlyapprox-imatestherecordedexpenseprovisions.MiscellaneousnonoperatingincomefortheyearsendedDecember31,1983,1982and1981includesgainsamountingto$274;000,$496,000and$489,000,respec-tively,oncertainlong-termdebtreacquired.Debtdiscountorpremiumanddebtexpensesarebeingamortizedoverthelivesoftherelateddebtissuesandtheamortizationthereofisincludedwithinmiscel-laneousinterestcharges.2.OperatingRevenuesandOperatingExpenses:InFebruary1982,theCompanyfiledapetitionwiththePublicServiceCommissionofIndiana(PSCI)forarateincreaseof$52,145,000annually.InDecember1982,thePSCIissuedanordergrantingtheCompanyanincreaseof$23,800,000annually,aportionofwhichwascollectedsubjecttorefundpendingtheoutcomeofadditionalproceedingsrelatingtotherate-makingtreatmentoftheCompany'scoalsubsidiariesandWesterncoalproperties.InMarch1983;inasubdocketproceeding,thePSCIgrantedtheCompanyanaddi-tionalincreaseofapproximately$6,700,000annually,primarilycoveringaprovisionforfuturedecommis-sioningcostsoftheCompany'snuclearplant.InSep-tember1983,thePSCIissuedanorderregardingtheWesterncoalissue.ThisorderrequiredtheCompanytoreduceitsratesapproximately$3,000,000annuallyre-troactivetoDecember1982andasaresulttheCom-panyrefundedinNovember1983,approximately$2,300,000,includinginterest,toitsIndianaretailcus-tomers.InMay1982,theCompanyfiledwiththeFERCap-plicationsforauthoritytoincreaseitsratestoitswholesalecustomers.InJuly1982,theFERCau-thorizedtheincreasetotakeeffectintwosteps,subjecttorefund;thefirststeprepresentinganincreaseof$26,900,000becameeffectiveJuly29,1982,andthesecondstepincreaseof$28,900,000becameeffectiveonDecember28,1982.SettlementagreementswerereachedwiththewholesalecustomersandinMay1983,theFERCissuedafinalorderapprovingsettlementratesintheamountofapproximately$41,000,000onanannualbasis.InJuly1983,theCompanyfiledapetitionwiththePSCIrequestinga$160,000,000annualrateincreasetobeimplementedintwosteps.Thefirststep,represent-ingapproximately$44,300,000,wasrequestedtobeeffectiveassoonaspossible.InNovember1983,thePSCIgrantedpermissiontoincreaserates$28,500,000annually,effectiveNovember28,1983.Thesecondstep,representingapproximately$115,700,000,was.to NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Continued)coincidewiththedateofcommercialoperationoftheRockportPlantUnit1,presentlyscheduledtobeinDecember1984.InaprehearingorderdatedSeptember16,1983,thePSCIfoundthatthesecondstepportionoftheraterequestmaynotproperlybepresentedandreviewedaspartofthisapplicationsincetheproposedtestyearistooremotefromthein-servicedateoftheRockportUnit.InDecember1983,theCompanyfiledanapplicationwiththeMichiganPublicServiceCommission(MPSC)requestinganannualrateincreaseofapproximately$27,600,000.TheMPSChasscheduledaprehearingconferenceconcerningthisrateapplicationforMarch13,1984.Operatingrevenuesderivedfromacertainwholesalecustomerrepresentapproximately11%oftotaloperat-ingrevenuesfor1983,10%%uofor1982and9%%uofor1981.3.FederalIncomeTaxes:ThedetailsofFederalincometaxesasreportedareasfollows:YearEndedDecember31,198319821981(inthousands)$(16,503)29,06425,63838,199YearEndedDecember31,Charged(Credited)toOperatingExpenses:Current(net)$(14,004)S8,672Deferred(nct)79,40936,254DeferredInvestmentTaxCredits(net)5,5569,247Total...................................................................70,96154,173Charged(Credited)toOtherIncomeandDeductions:Current............................................................(11,112)(890)(1,988)Deferred(net)'...........................................4,887(6,531)(172)Total(6,225)(7,421)(2,160)TotalFederalIncomeTaxesasReportedS64,736$30,778$52,013Thefollowing'isareconciliationofthedifferencebetweentheamountofFederalincometaxescomputedbymultiplyingbookincomebeforeFederalincometaxesbythestatutorytaxrate,andtheamountofFederalincometaxesreportedintheConsolidatedStatementsofIncome.ConsolidatedNetIncomeBcforcPreferredStockDividendRequirementsFederalIncomeTaxesPre-taxBookIncomeFederalIncomeTaxesonPre-taxBookIncomeatStatutoryRate(46%)Increase(Decrease)inFederalIncomeTaxesResultingFromtheFollowingItemsonWhichDeferredTaxesAreNotProvided:ExcessofBookOverTaxDepreciationAllowanceforFundsUsedDuringConstructionandMiscellaneousItemsCapitalizedontheBooksbutDeductedforTaxPurposesMineDevelopmentCostsInvestmentTaxCreditsNotDeferredAmortizationofDeferredInvestmentTaxCreditsOther.TotalFederalIncomeTaxesasReportedEffectiveFederalIncomeTaxRate1983$139,87664,736$204,612$94,1221,185(32,019)1441,144(267)427S64,73631.6%1982(inthousands)$121,02330,778$151,801$69,8285,009(32,040)(4,771)(1,727)(931)(4,590)S30,77820.3%1981$103,34052,013$155,353S71,4621,107(19,658)311(1,799)(327)917S52,01333.5%
INDIANA&ICHIGANELECTRICCOMPANYANDSUBSIDIARIESThefollowingaretheprincipalcomponentsofFederalincometaxesasreported:YearEndedDecember31,'19831982(inthousands)1981$(4,008)(13,385)(17,393)*Current:FederalIncomeTaxes$(26,903)$11,598InvestmentTaxCredits1,787(4,914)TotalCurrentFederalIncomeTaxes(net)(25,116)6,684Deferred:Depreciation(liberalized,ADRandACRS)26,99312,44113,440AllowanceforBorrowedFundsUsedDuringConstructionandMiscellaneousItemsCapitalized.23,98620,41018,465DeferredFuelCosts8,470(1,158)1,927AdjustmentsforRevenueRefunds..2,4018,3043,134NuclearFuelLeaseAdjustments(2338)40331,258SpentNuclearFuelFee31,671BookProvisionforSubsidiaryMineStandbyCosts.6,900(6,900)Other.~~~~~~~.:~~..'(7,321)3144,317InvestmentTaxCreditsApplicabletoCertainDeferredIncomeTaxes(6,466)(14,911)(6,459)TotalDeferredFederalIncomeTaxes(net)84,29622,53336,082TotalDeferredInvestmentTaxCredits(net)5,55625,6389,247TotalFederalIncomeTaxesasReported564,736$30.778552,013'TheconsolidatedcurrentFederalincometaxesweresignificantlydecreasedin1982bythetaxlossofacoalminingsubsidiary,thetaxelfectofwhichwasnotreducedbyinvestmenttaxcredits.Inaddition,theCompanywasabletoutilizeinvestmenttaxcreditsinexcessofthestatutorylimitationasaresultofthelackofavailablecreditsofotherSystemcompanieswithtaxableincome.ThecompaniesjoininthefilingofaconsolidatedFederalincometaxreturnwiththeiraffiliatedcom-paniesintheAEPSystem.TheallocationoftheAEPSystem'sconsolidatedFederalincometaxtotheSys-temcompaniesisinaccordancewithSecuritiesandExchangeCommission(SEC)rulesunderthePublicUtilityHoldingCompanyActof1935.Theserulesper-mittheallocationofthebenefitofcurrenttaxlossestotheSystemcompaniesgivingrisetosuchlossesindeterminingtaxescurrentlypayable.ThetaxlossoftheSystemparentcompany,AmericanElectricPowerCompany,Inc.,isallocatedtoitssubsidiarieswithtax-ableincome.Withtheexceptionofthelossoftheparentcompany,themethodofallocationapproximatesaseparatereturnresultforeachcompanyintheconsoli-datedgroup.ConsolidatedinvestmenttaxcreditsutilizedaregenerallyallocatedtotheSystemcom-paniesgivingrisetothem.UnusedSysteminvestmenttaxcreditsatDecember31,1983,aggregatedapproximately$174,000,000.Withthefilingoftheconsolidated1982Federalin-cometaxreturn,theCompanyelectedtochangefromthedouble-decliningbalancemethodtothesum-of-the-yearsdigitsmethodofdepreciationforcertainclassesofproperties.TheSystemhasreachedasettlementwiththeInter-nalRevenueService(IRS)forthemajorityofissuesfromtheauditoftheconsolidatedFederalincometaxreturnsfortheyears1970-1976.Severalissuesregard-ingthe1974-1976returnsarenotcoveredbythesettle-mentagreementandaresubjecttofuturedisposition.Returnsfortheyears1977and1978havebeenreviewedbytheIRS,andadditionaltaxesfortheseyearshavebeenproposed,someofwhichtheSystemcompanieshaveprotested.Intheopinionofmanagement,thefinalresolutionofopenmatterswillnothaveamaterialeffectontheearningsoftheCompany.4.CommonStock,PremiumsonCapitalStockandOtherPaid-inCapital:TheCompanyreceivedfromitsparentcashcapitalcontributionsof$30,000,000in1983,$50,000,000in1982and$90,000,000in1981.In1983,1982and1981acredittootherpaid-incapitalof$142,000,$131,000and$365,000,respectively,representedtheexcessofparvalueovercostofcumulativepreferredstockreac-quiredbytheCompanytomeetsinkingfundrequire-ments.Therewerenootherchangesinanyoftheaforementionedaccountsin1983,1982or1981.5.RetainedEarnings:Variousrestrictionsontheuseofretainedearningsforcashdividendsoncommonstockandotherpur-posesarecontainedinorresultfromcovenantsinmortgageindentures,debentureandbankloanagree-ments,charterprovisions,andordersofregulatoryau-thorities.Approximately$45,900,000atDecember31,1983,wassorestricted.17 NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Continued)6.CumulativePreferredStock:December31,ParValueSharesOutstandingSeries1983(in1982thousands)AtDecember31,1983,authorizedsharesofcumulativepreferredstockwereasfollows:ParValueSharesAuthorized$1002,250,0002511,200,000ThecumulativepreferredstockiscallableattheoptionoftheCompanyatthepriceindicatedplusaccrueddividends.Theinvoluntaryliquidationpreferenceisparvalue.Unissuedsharesofthecumulativepreferredstockmayormaynotpossessmandatoryredemptioncharacteristicsuponissuance.TheCompanyreacquired126,200sharesofthe$2.75seriesin1983and17,940,10,620and28,395sharesofthe12%seriesin1983,1982and1981,respectively.TheCompanyissuedandsold1,600,000sharesofthe$3.63seriesin1981.A.CumulativePreferredStockNotSubjecttoMandatoryRedemption:AmountRedemptionRestrictedPriorto416%%uo4.56%%uo4.12%7.08%7.76%8.68%$2.15$2.25..$106.125102102.728104.68105.38105.2726.6126.69$1001001001001001002525120,00060,00040,000300,000350,000300,0001,600,0001,600,000$12,0006,0004,00030,00035,00030,00040,00040,000$197,000S12,0006,0004,00030,00035,00030,00040,00040,000$197,000CurrentCallPriceParValueSeries(a)8.CumulativePreferredStockSubjecttoMandatoryRedemption:RedemptionRestrictedPriortoSharesOutstandingAmountDecember31,19831982(inthousands)S24,44740,00040,000IN,447447$104,000$100252510/I/8411/I/8612%(b)...........$112226,525$22,652$2.75(c)...........27.751,473,80036,845$3.63(d)...........28.631,600,00040,00099,497LessSinkingFundRequirementsDueWithinOneYear152$99,345(a)Thesinkingfundprovisionsoftheseriessubjecttomandatoryredemptionaggregate$152,000in1984,$2,345,000in1985,$3,500,000in1986and$5,500,000in1987and1988.(b)Asinkingfundforthe12%seriesrequirestheCompanytoprovide,onorbeforeOctoberIofeachyear,forthcredemptionof15,000sharesofsuchseries.Thisprovisionmaybesatisfiedthroughsharespreviouslypurchasedorbyredemptionat$100ashare.TheCompanyhastheright,oneachsinkingfunddate,toredeemanadditional15,000shares.AtDecember31,1983,thcCompanyhadreacquired13,475sharesinanticipationoffuturesinkingfundrequirements.Unlessallsinkingfundprovisionshavebeenmet,nodistributionmaybemadeonthecommonstock.(c)Acumulativesinkingfundforthe$2.75seriesrequirestheCompanytoredeem80,000sharesoneachOctober1.TheCompanyhastheoptiontocreditsharespurchasedorotherwiseacquiredinlieuofredeemingsharesforthesinkingfundandhasthenoncumulativeoptiontodoublethcnumberofsharestoberedeemedinanyyear.AtDecember31,1983,theCompanyhadacquired126200sharesinanticipationoffuturesinkingfundrequirements.(d)Acumulativesinkingfundforthe$3.63seriesrequirestheCompanytoredeem80,000sharesoneachJanuaryIcommencingonJanuaryI,1987.TheCompanyhastheoptiontocreditsharespurchasedorotherwiseacquiredinlieuofredeemingsharesforthesinkingfundandhasthenoncumulativeoptiontodoublethenumberofsharestoberedeemedinanyyearonandafterJanuaryI,1987.18 INDIANA&MCHIGANELECTRICCOMPANYANDSUBSIDIARIESFirstMortgageBondsSinkingFundDebenturesInstallmentPurchaseContracts.OtherLong-termDebtLessPortionDueWithinOneYearTotal1983.1982(inthousands)$1,184,598$1,202,90420,16620,964159,209159,07381,73114,5341,445,7041,397,47586,87492,970$1,358,830$1,304,505Firstmortgagebondsoutstandingwereasfollows:December31.19831982(inthousands)%RateDue3N1983-SeptemberI111983-SeptemberI381984-OctoberI10761984-DecemberI(b).101985-MarchI(c)10V41987-JanuaryI137{i1987-FebruaryI37i61988-FebruaryI4N1988-NovemberI14N1989-MarchI11K1990-JuneI15K1991-NovemberI16161992-AprilI4)81993-AugustI71998-MayI8762000-AprilI9'003-JuneI(c)8N2003-DecemberI9'008-MarchI13N2013-AugustI(a)....UnamortizedDiscount(net).......$15,08254,7509,75080,00055,00022,97417,557120,00080,00040,000100,00042,90235,00050,000254,00040,000100,00070,000(2,417)$13,76260,00015,08256,93810,50080,00055,00022,97417,557120,000,80,00040,000100,00042,90235,00050,000265,50040,000100,000Q,311)LessPortionDucWithinOneYearTotal1,184,59882,0821,202,90488,200$1,102,516$1,114,704(a)IssuedbytheCompanyinAugust1983.(b)GuaranteedbyAmericanElectricPowerCompany,Inc.(c)Sinkingfundpaymentsarerequiredasfollows:10%seriesdue1985-$750,000annuallyonMarchl.9'%eriesdue2003-$11,500,000annuallyonJuneI,through1991and$13,500,000annuallyonJuneI,1992through2002withthenoncumulativeoptiontoredeemanadditionalamountineachofthespecifiedyearsfromaminimumof$100,000toamaximumequaltothescheduledrequirementforeachyear,butwithamaximumoptionalredemption,astoallyearsintheaggregate,of$75,000,000.Theindenturesrelatingtothefirstmortgagebondscontainimprovement,maintenanceandreplacementprovisionsrequiringthedepositofcashorbondswiththetrustee,orinlieuthereof,certificationofunfundedpropertyadditions.TheCompanyhaselectedtouseunfundedpropertyadditionstomeettheseprovisionsinthepast.7.Long-termDebt,LinesofCredit,andCompensatingBalances:Long-termdebtbymajorcategorywasoutstandingasfollows:December31,Sinkingfunddebenturesoutstandingwereasfollows:December31,19831982(inthousands)5Vs%%uoDue1986-JuneI7V<%Due1998-MayIUnamortizedPremiumLessPortionDueWithinOneYearTotal$10,02210,1232120,16622$20,144$10,10410,8293120,964$20,964Installmentpurchasecontracts-havebeenenteredintobytheCompanyinconnectionwiththeissuanceofpollutioncontrolrevenuebondsbygovqrnmentalauthoritiesasfollows:December31,19831982(inthousands)%RateDateCityofLawrenceburg,Indiana:8'006-JulyI72006-htayI6Vs2006-htayICityofRockport,Indiana:9Vs2005-JuneI9V42010-JuncICityofSullivan,Indiana:7N2004-MayI6Vs2006-MayI7'009-MayIUnamortizedDiscountTotal"$25,00040,MO12,000$25,00040,00012,0006,50033,5006,50033,500Otherlong-termdebtoutstandingconsistedof:December31,19831982(inthousands)NuclearFuelDisposalCosts(a)CoalReserveObligationsPayableinEqualAnnualInstallmentsThrough1985withInterestat8%NotesPayablcdue1983Through1985,6%%uo-7%%uoLessPortionDueWithinOneYearTotal(a)SeeNote9.$71,964$-9,47529281,7314,770$76,96114,21232214,5344,770$9,764i97,0007,00025,00025,00013,00013,000(2,791)(2,927)$159,209$159,073Underthetermsofcertaininstallmentpurchasecon-tracts,theCompanyisrequiredtopaypurchasepriceinstallmentsinamountssufficienttoenablethecitiestopayinterestonandtheprincipal(atstatedmaturitiesanduponmandatoryredemption)ofrelatedpollutioncontrolrevenuebondsissuedtofinancetheconstruc-tionofpollutioncontrolfacilitiesatcertaingeneratingplantsoftheCompany.
NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Continued)Long-termdebt,excludingpremiumordiscount,outstandingatDecember31,1983isdueasfollows:PrincipalAmount(inthousands)$86,87425,99621,000146,50052,0311,118,490$1,450,89119841985198619871988LaterYearsTotal8.SupplementaryIncomeStatementInformationandRelated-partyTransactions:ElectricoperatingrevenuesshownintheConsoli-datedStatementsofIncomeincludesalesofenergytoAEPSystemcompaniesofapproximately$25,000,000,$18,800,000and$19,100,000fortheyearsendedDe-cember31,1983,1982and1981,respectively.OperatingexpensesshownintheConsolidatedStatementsofIncomeincludecertainitemsnotshownseparately,asfollows:AtDecember31,1983and1982,theprincipalamountsofdebenturesreacquiredinanticipationofsinkingfundrequirementswere$2,055,000and.$2,067,000,respectively.TheCompanymaymakead-ditionaldebentureorfirstmortgagebondsinkingfundpaymentsofupto$12,250,000annually.TheCompanyhadunusedshort-termbanklinesofcreditofapproximately$383,000,000and$330,000,000atDecember31,1983and1982,respectively,underwhichnotescouldbeissuedwithnomaturitymorethan270days.The.availablelinesof,creditaresubjecttowithdrawalatthebanks'ption,and$343,000,000and$276,000,000atDecember31,1983and1982,respec-tively,ofsuchlinesaresharedwithotherAEPSystemcompanies.In-accordancewithinformalagreementswiththebanks,compensatingbalancedepositsofupto10%%uoorequivalentfeesarerequiredtomaintainthelinesofcreditandonanyamountsactuallyborrowed,gener-allyeitheradditionalcompensatingbalancedepositsofupto10%aremaintainedoradjustmentsininterestratesaremade.SubstantiallyallbankbalancesaremaintainedbytheCompanytocompensatethebanksforservicesandfortheCompany'sshareofbothusedandavailablelinesofcredit.PurchasedPower(a)InterchangePower(net):AEPSystemElectricUtilitiesOtherCompanies(b)TaxesOtherThanFederalIncomeTaxes:RealandPersonalPropertyTaxes.............~..StateGrossSales,ExciseandFranchiseTaxesandMiscellaneousStateandLocalTaxesStateIncomeTaxesSocialSecurityTaxesYearEndedDecember31,198319821981(inthousands)$82,245$40,817$38,557104,271116,666100,960(27,430)(2,800)(398)$159,086$154,683$139,119$22,062$19,485$18,95811,269(193)3,915$37,0538,5677083,807$32,5679,3991,0743,267$32,6984,434FuelforElectricGenerationincludeschargesrelatingtominingoperations,asfollows:Maintenance...........$765$3,424$3,778Depreciation,DepletionandAmortization.....1,8264,284TaxesOtherThanFederalIncomeTaxes........1,1842,1091,336(a)IncludespowerpurchasedfromOhioValleyElectricCorpora-tion(OVEC)ofapproximately$45,787,000in1983,$20,229,000in1982and$15,066,000in1981.(b)IncludesinterchangepowersoldtoOVECofapproximately$66,000in1983,$143,000in1982and$186,000in1981.Chargestooperatingexpensesforroyaltiesandforadvertisingarelessthan1%ofgrossrevenuesineachyear.Salesandpurchasesofenergyandinterchangepowertransactionsareregulatedbythevariouscommissionshavingjurisdiction.AmericanElectricPowerServiceCorporationpro-videscertainservicestotheCompanyandtheaffiliatedcompaniesintheAEPSystem.Thecostsoftheservicesaredeterminedbytheservicecompanyonadirectchargebasistotheextentpracticableandonreasonablebasesofprorationforindirectcosts.Thechargesforservicesaremadeonacostbasisandincludenocom-pensationfortheuseofequitycapital,allofwhichisfurnishedtotheservicecompanybyAEP.TheservicecompanyissubjecttotheregulationoftheSECunderthePublicUtilityHoldingCompanyActof1935.20 INDIANA&MICHIGANELECTRICCOMPANYtANDSUBSIDIARIES9.CommitmentsandContingencies:ConstructionTheconstructionbudgetofthecompaniesfortheyear1984isestimatedat$119,000,000and,inconnec-tiontherewith,commitmentshavebeenmade.AEPGeneratingCompany(AEGCo),asubsidiaryofAEP,organizedin1982,commencedinApril1982toacquirea35%interestintheCompany's2.6millionkilowattcapacityRockportPlantcurrentlyundercon-struction,onabuy-inbasis.ThetotalestimatedcostoftheRockportPlantis$2.14billion.ItwasanticipatedthatKentuckyPowerCompany(KEPCo),anoperatingsubsidiaryofAEP,wouldalsoacquirea15%interestintheRockportPlantonabuy-inbasis;however,inAu-gust1982theorderoftheKentuckyPublicServiceCommission(KPSC)approvingtheacquisitionwasre-mandedbacktoitforaspecificfindingoffactwithrespecttotheAEPSysteminterconnectionagreement.InMarch1983,theKPSCissuedanordergrantingKEPCo'srequesttopurchasea15%ownershipinterestintheCompany'sRockportPlant.Theorder,however,limitedtheamountultimatelyincludableinKEPCo'sratebaseto$312,000,000,thethenestimatedcostofKEPCo'sownershipinterest,regardlessofthefinalcostoftheRockportPlant.Basedoncertaindevelop-mentsinaKEPCoratecase,theKPSChasreopenedtheproceedingregardingtheapplicationofKEPCoforacertificateofconvenienceandnecessitytoacquirea15%undividedownershipinterestintheRockportPlant.PendingfurtherorderbytheKPSC,KEPCoceasedmakingexpendituresinconnectionwiththeconstructionoftheRockportPlantandAEGCoispro-vidingforallconstructionexpenditures.IntheeventthatKEPCoisultimatelydeniedauthoritybytheKPSCtoacquireits15%ownershipinterestoradecisionismadethatsuchacquisitionisimpracticalorunlikely,AEGComayacquirealloraportionofthisinterestifregulatoryapprovalisreceived.The1984estimateofconstructioncostsfortheCompanyreflectstheas-sumptionbyAEGCoandKEPCooftheresponsibilityofprovidingforadditionalconstructionexpenditureswithrespecttotheRockportPlant,toreducetheCom-pany'sownershipinterestinthePlantto50%bylate1984,theestimateddateofcommercialoperationofthefirstunitofthetwo-unitPlant.OhioValleyElectricCorporationAEPandColumbusandSouthernOhioElectricCompany(C&SOE)own42.1%ofOhioValleyElectricCorporation(OVEC),whichsuppliestheU.S.Depart-mentofEnergy(DOE)withthepowerrequirementsofitsgaseousdiffusionplantnearPortsmouth,Ohio.TheproceedsfromthesalesofpowerbyOVEC,aggregat-ing$279,000,000in1983,aredesignedtobesufficientforOVECtomeetitsoperatingexpensesandfixedcosts,andtoprovideforareturnonitsequitycapital.TheCompany,asasponsoringcompany,isentitledtoreceivefromOVEC,andisobligatedtopayfor,thepowernotrequiredbyDOEinproportiontoitspowerparticipationratio,whichwas31.3%inDecember1983.TheDOEpoweragreementterminatesin1992.~LitigationOnApril16,1982,anactionwascommencedby29plaintiffs,almostallofwhomarelandowners,intheU.S.DistrictCourtfortheSouthernDistrictofIndianaagainsttheArmyCorpsofEngineers,theCompany,AEP,fivesubsidiariesofAEPandtwoexecutiveof-ficersofcertainoftheseSystemcompanies,inconnec-tionwiththeRockportPlantandrelatedtransmissionlines.Thecomplaintcontainedthreecounts.ThefirstcountallegedthattheCorpsofEngineersimproperlyissuedpermitsfortheplantandtransmissionlinesbe-causeofdeficienciesinanenvironmentalimpactstate-ment.Thesecondcountallegedthatcorporateassetshadbeendissipatedbyconstructingtheplantandre-latedtransmissionlines.Thethirdcountallegedviola-tionsofrightstodueprocess,justcompensationandequalprotectionofthelawinconnectionwiththeuseofcondemnationproceedings,'andsoughtunspecifiedcompensatoryandexemplarydamagesfromthetwoSystemexecutiveofficersnamedasdefendantsandtheCompanyandanothersubsidiary,andinjunctivereliefertioiningtheinstitutionofanyfurthercondemnationproceedings.Thecourthasdismissedallthreecountsonmotionsbythedefendants;however,theplaintiffsmayappealthedecisions.In1978,severalretailcustomersoftheCompanycommencedanaction,individuallyandasrepresenta-tivesofanallegedclass,intheU.S.DistrictCourt,allegingthattheCompany'sleaseofelectricutilityas-setsfromtheCityofFortWayneisinviolationofFederalantitrustlaws.Thecomplaintseekstohavetheleasedeclarednullandvoid,asksthattheCompanyberestrainedfromchargingexcessivepricesforthepur-chaseofelectricpower,seekstrebledamagesinanunspecifiedamountinrespectofallegedlyexcessivechargestoresidentsoftheCityofFortWayneandseekstorestorethecontroloftheelectricutilityassetsinquestiontotheCityofFortWayne.InMay,JuneandJuly,1979thecourtgrantedinpartanddeniedinparttheCompany'smotiontodismissorforsummaryjudgment.Thecourtdismissedplaintiffsallegations21 NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Continued)concerningabuseofalegallyacquiredmonopolybutruledthatplaintiffscouldcontinuetoassertothertheoriesofviolationofFederalantitrustlawsandcer-tifiedaclassofresidentialcustomerswhomaymaintaintheaction.ThecasewastriedinMarch1982andisawaitingdecision.AsanoutgrowthofaFederalPowerCommissioninvestigationcommencedin1975concerning,amongotherthings,thereasonablenessandprudenceofthecoal-purchasingpoliciesandpracticesofcertainSys-temcompanies,FERC,onMarch18,1980,orderedanewinvestigationintotheSystem'sadministrationofcertainlong-termcoal-supplycontractswithunaf-filiatedsuppliers.Inaddition,onJune10,1981andJuly29,1981,FERCissuedorderswhichincludedtermina-tionofcertainotherportionsoftheoriginalinvestiga-tionsandorderedahearing,relatingtotheprocurementofWesterncoalfromminesoperatedbytheSysteminthelightofthepossibleavailabilityofcoalfromothersources.TheFERCstafffiledproposedtestimony,onMay2,1983,claimingthattheCompany(i)overstateditscostofcoalbyvirtueofitstreatmentoftaxbenefitsrelatedtocertainmine-developmentcosts,and(ii)paidexcessivepricesforcoalfromaffiliatedmines.TheFERCwitnessesallegethattherevenueeffectofthefirstactionisapproximately$11,000,000throughMay1982andthattheoverchargesoccasionedbythepur-portedlyexcessivepricestotalalmost$76,000,000asofDecember31,1981,exclusiveofinterestandcertainotheradjustments,andthatboththeseeffectsarecon-tinuing.TheCompanyestimatesthattheallegedover-charges,basedontheFERCwitnesses'heory,wouldaggregateapproximately$163,000,000fortheSystemcompanies,inclusiveofinterestandcertainotherad-justments,asofDecember31,1983,butexcludingpos-siblesubsequentadverseeffectswhichcouldbeas-sociatedwithaprospectivelimitationontheCom-pany'sabilitytorecoveraffiliatedcostsinrates.AFERCwitnessalsocontendsthattherefundobligationwhichheclaimsflowsfromsuchallegedoverchargesissharedbytheCompany,AppalachianPowerCompany,C8'cSOE,KEPCoandOhioPowerCompanyaspartiestoanAEPSysteminterconnectionagreement.TheCompanybelievesthatasmuchas78%ofarefundobligation,iffinallyorderedbyFERC,wouldbebornebytheCompany.Thiscaseisinthediscoveryphase.TheCompanyterminateditscontractwithTerreHauteIndustries,Inc.(THI)onthegroundsthatTHIwasnotmeetingtheschedulefortheconstructionofanelectro-staticprecipitatorattheBreedPlant.THIinsti-tutedasuitforbreachofcontractagainsttheCompanyinanIndianacircuitcourtclaimingdamagesinanun-specifiedamount.THIalsonamedtheAmericanElec-tricPowerServiceCorporationasadefendantandre-questeddamagesfromitforinterferencewithTHI'scontractwiththeCompanyandforlibel.TheCompanydeniedTHI'scomplaintandcounterclaimedfordam-agesintheamountof$6,801,000whichtheCompanyclaimsitsufferedasaresultofthedelayintheconstruc-tionwork.OnFebruary20,1981,theCompany'smo-tiontoaddaninsurancecompany-suretyasadefendanttotheCompany'scounterclaimwasgranted.Thein-surancecompany-suretywaslaterdismissed.TrialofthisactionwascompletedinDecember1982.InanorderdatedJanuary9,1984,thecourtawardedcom-pensatoryandpunitivedamagestoTHIintheamountsof$4,934,000and$12,000,000,respectively,exclusiveofinterest.Asaresultofthatjudgment,theCompanyhasrecordedaliability,includinginterest,ontheCon-solidatedBalanceSheetforthecompensatorydamagesand,theCompanyandtheServiceCorporationareappealingthecourtdecision.EnvironmentalMattersThecompaniesaresubjecttoregulationbyFederal,stateandlocalauthoritieswithregardtoair-andwater-qualitycontrolandotherenvironmentalmatters,andaresubjecttozoningandotherregulationbylocalauthorities.Althoughthecumulative,long-termeffectofchangingenvironmentalrequirementsuponthecompaniescannotbeestimatedatpresent,compliancewithsuchrequirementsmaymakeitnecessary,atcostswhichmaybesubstantial,toretrofitexistingfacilitieswithadditionalair-pollution-controlequipment;tocon-structcoolingtowersorsomeotherclosed-cyclecool-ingsystems;toundertakenewmeasuresinconnectionwiththestorage,transportationanddisposalofby-productsandwastes;tocurtailorceaseoperationsatexistingfacilitiesandtodelaythecommercialoperationof,ormakedesignchangeswithrespectto,facilitiesunder.construction.LegislativeproposalsarependingbeforetheCon-gresswhichexpresslyseektocontrolaciddepositionintheeasternportionoftheUnitedStates.Ifanyofthesebillsbecomelaw,stringentcontrolsupontheemissionofsulfurdioxidewouldberequiredatvariousexistingCompanygeneratingplants.Thesecontrolswoulden-tailverysubstantialcapitalandoperatingcostswhich,inturn,couldnecessitatesubstantialrateincreasesbytheCompany.Inaddition,anumberofstateshavecommencedproceedingsundertheCleanAirActseek-ingtocontroltheemissionofsulfurdioxideincertainmidwesternstates.22 INDIANA&MICHIGANELECTRICCOMPANYANDSUBSIDIARIESiVuclearInsuranceThePrice-AndersonActlimitsthepublicliabilityofalicenseeofanuclearplantto$580millionforasinglenuclearincident.TheCompanyhasinsurancecoveringitstwo-unitCookNuclearPlantinthemaximumavail-ableamountof$160million,andthebalanceof$420millioniscoveredbyamandatoryprogramofdeferredpremiumswhichwouldbeassessed,afteranuclearincident,againstallownersofnuclearreactors.Whenthe80thnuclearpowerreactorwentintooperationonNovember15,1982,theNuclearRegulatoryCommis-sion'sindemnityobligationwaseliminated.Now,aseachnewreactorislicensedtooperate,the$580millionlimitincreasesbyanother$5million.IntheeventofanuclearincidenttheCompanycouldbeass'essed$5millionperincidentforeachofitstwogeneratingunits(subjecttoamaximumof$10millionperreactorinanyyearintheeventofmorethanoneincident).TheCompanyalsohaspropertyinsurancefordam-agetotheCookPlantfacilitiesintheamountof$1.01billion.Theprimarylayerof$500millionisprovidedthroughnuclearinsurancepools.Theexcesscoverageabove$500millionisprovidedpartiallythroughinsur-ancepools($85million),withthemgorityprovidedbyNuclearElectricInsuranceLimited(NEIL),asde-scribedbelow.TheCompanyisamemberofNEILandhasobtainedinsuranceunderNEIL'stwoprograms.NEIL'sextra-expenseprogramprovidesinsurancetocoverextracostsofreplacementpowerresultingfromaprolongedaccidentaloutageofanuclearunit.TheCompany'spolicyinsuresagainstsuchincreasedcostsupto$2.5millionperweek(starting26weeksaftertheoutage)foroneyearand$1.25millionperweekforthesecondyear;or80%%uoofthoseamountsperunitifbothunitsaredownforthesamereason.TheCompanywouldbesubjecttoaretrospectivepremiumofupto$7,387,000forUnit1and$7,373,000forUnit2(fivetimesannualpremium)ifNEIL'slossesexceeditsaccumulatedfunds.Addition-ally,theCompanyhasalsojoinedNEIL'sexcessprop-ertyinsuranceprogramwhichpresentlyprovides$425millionincoverage.Themaximumassessmentunderthisprogramcouldbe$9,341,000(sevenandone-halftimestheannualpremiumona100%%uocoveragebasis).DisposalofSpentNuclearFuelandNuclearDeconunissioningTheNuclearWastePolicyActof1982establishesFederalresponsibilityforthepermanentdisposalofspentnuclearfuel.Disposalcostsarepaidbyfeesas-sessedagainstownersofnuclearplantsanddepositedintotheNuclearWasteFundcreatedbytheAct.ForthedisposalofnuclearfuelconsumedafterApril6,1983bytheCompany'sCookNuclearPlant,theCompanymustpaytothefundafeeofonemillperkilowatthour,whichtheCompanyiscurrentlyrecoveringfromits.customersInJune1983,theCompanyenteredintoacontractwithDOEforthedisposalofspentnuclearfuel.UndertermsofthecontracttheCompanymustpaytotheU.S.Treasuryafeeestimatedatapproxi-mately$71,964,000,exclusiveof'interest,forthedis-posalofnuclearfuelconsumedpriortoApril7,1983.ApprovalbyDOEofthecalculationofthefeeiscur-rentlypending.TheCompanyhasdeferredthe$71,964,000onitsbalancesheetpendingrecoverythroughtherate-makingprocess.TheCompanyhasreceivedregulatoryapprovalincertainofitsjurisdictionsfortherecoveryofaportionofthisamountandhasbeguntoreducetheamountdeferredasitisbeingrecovered.Withrespecttodecommissioning,thePublicServiceCommissionofIndianaheldinanorderdatedDe-cember22,1982that"areasonableestimateforthecostsofdecommissioningthe(CookPlant),whenmea-suredin1982dollars,shouldbesetat$155,000,000."Incertain'ofitsjurisdictions,theCompanyiscurrentlyrecovering,throughinclusioninitscurrentchargestocustomers,aportionofthefuturecostsassociatedwithdecommissioning.Fundsrecoveredthroughtherate-makingprocessfordisposalofspentnuclearfuelconsumedpriortoApril7,1983andfornucleardecommissioninggenerallyhavebeendepositedineitherexternaltrustfundsorinternalspecialfundsforthefuturepaymentofsuchcosts.TheCompanywillattempttoobtaininallitsjurisdictionsregulatoryapprovalfortherecoveryoftheremainderofsuchfuturecosts.10.Leases:-Thecompanies,aspartoftheiroperations,leaseproperty,plantandequipmentunderleasesranginginlengthfrom3to35years.Mostoftheleasesrequirethecompaniestopayrelatedpropertytaxes,maintenancecostsandothercostsofoperation.Thecompaniesex-pectthatinthenormalcourseofbusiness,leaseswillgenerallyberenewedorreplacedbyotherleases.Themajorityofthevariousrentalsareincludedinleaseshavingpurchaseoptionsorrenewaloptionsforsub-.stantiallyalloftheeconomiclivesoftheproperties.23 NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Continued)Rentalsareanalyzedasfollows:YearEndedDecember31,198319821981(inthousands)GrossRentalsLessRentalRecoveries(includingsubleaserentals)(a)NetRentals(b)...~.~~"~~~~~~$92,000$96,000$95,0003,000$89,0003,000$93,0003,000$92,000(a)Includesamountspaidfororreimbursedbyassociatedcompanies.(b)Classifiedas:OperatingExpensesClearingandMiscellaneousAccounts(portionsofwhicharechargedtoincome).....$82,000$88,000$87,0007,0005,0005,000$89,000$93,000$92,000Futureminimumleasepayments,byyearandintheaggregate,ofthecompanies'apitalleasesandnoncan-celableoperatingleasesconsistedofthefollowingatDecember31,1983:CapitalOperatingLeases(a)Leases(inthousands)19841985198619871988LaterYearsTotalFutureMinimumLeasePayments.$12,00010,0008,0007,0006,00057,000100,000$11,00012,00012,00012,00012,000179,000$238,000LessEstimatedInterestElementIncludedTherein(b)..............46,000EstimatedPresentValueofFutureMinimumLeasePayments.........$54,000(a)Excludesleasesofnuclearfuel,allofwhicharecapitalleases.Nuclearfuelrentalscomprisetheunamortizedbalanceofthelessor'scost(approximately$142,000,000atDecember31,1983),lesssalvagevalue,ifany,tobepaidinproportiontoheatproduced,andcarryingchargesonthelessor'sunrecoveredcost.Itiscontemplatedthatportionsofthepresentlyleasedmaterialwillbereplenishedbyaddi-tionalleasedmaterial.(b)Interestratesusedrangefrom7.1%to13.5%.Thefollowingisaproformaanalysisofpropertiesundercapitalleasesandrelatedobligationsassumingthatsuchleasesarecapitalized:December31,19831982(inthousands)28,00019,00012,00013,000357,00011.UnauditedQuarterlyFinancialInformation:Thefollowingconsolidatedquarterlyfinancialinfor-mationisunauditedbut,intheopinionoftheCompany,includesalladjustments(consistingofonlynormalre-curringaccruals)necessaryforafairpresentationoftheamountsshown:QuarterlyPeriodsEndedOperatingOperatingRevenuesIncome(inthousands)NetIncome'983-Mar.31June30Sept.30Dec.311982-Mar.31June30Sept.30Dec.31'Beforepreferred$197,685191,193235,221244,881$47,32343,19943,95948,262241,51352,967183,21243,628202,37235,882182,70642,468stockdividendrequirements.$32,33830,14238,95538,44138,91030,47225,33126,310NuclearFuel$285,000$253,000Coal.miningandCoal-transportationEquipmentOtherTransportationEquipmentRealEstateElectricDistributionSystemProperty...GrossPropertiesunderCapitalLeasesLessAccumulatedProvisionforAmortization...............162,000153,000NetPropertiesunderCapitalLeases....$195,000$167,000ObligationsunderCapitalLeasesiai....01960000776000(a)Includinganestimated$69,000,000and$60,000,000atDe-cember31,1983and1982,respectively,duewithinoneyear.Arecentaccountingstandardwillrequirethecom-paniestocapitalizeleasesbeginningin1984forallcap-italleasesenteredintoafterDecember31,1982andallearlierleasesbeginningin1987.ThiswillnothaveanyeffectontheConsolidatedStatementsofIncome.IncludedintheaboveanalysisoffutureminimumleasepaymentsandofpropertiesundercapitalleasesandrelatedobligationsarecertainleasesastowhichportionsoftherelatedrentalsarepaidfororreimbursedbyassociatedcompaniesintheAEPSystembasedontheirusageoftheleasedproperty.Thecompaniescan-notpredicttheextenttowhichorproportioninwhichtheassociatedcompanieswillutilizethepropertiesundersuchleasesinthefuture.12.UnauditedInformationOnInflationandChangingPrices:Thesupplementaryinformationinthestatementsbelowispresentedincompliancewiththerequirements24 INDIANA&MICHIGANEI.ECTRICCOMPANYANDSUBSIDIARIESsuchassetswereacquiredtothepresent,anddifferfromconstantdollaramountstotheextentthatspecifltcpriceshaverisenatadifferentratethanthegeneralinflationrateasmeasuredbytheCPI-U.Thecurrentcostofproperty,plantandequipmentrepresentstheapproximatecostofreplacingsuchresourcesandin-cludesutilityplantinservice,constructionworkinprogress,land,landrightsandotherpropertyandin-vestments.CurrentcostamountsweredeterminedprimarilybyapplyingappropriateindexesfromtheHandy-WhitmanIndexofPublicUtilityConstructionCosts.~AdjustedforChangesinSpeciTicPrices(currentcost)AdjustedforGeneralInflation(constantdollar)YearEndedDecember31,1983oftheFinancialAccountingStandardsBoard(FASB).Theinformationisintendedtodisclosetheeffectsofbothgeneralinflationandchangingprices;however,theamountsshouldbeconsideredapproximationsofsucheffectsratherthanprecisemeasuressinceanum-berofsubjectivejudgmentsandestimatingtechniqueswereemployedindevelopingtheinformation.Constantdollaramountsrepresenthistoricalcostsstatedintermsofdollarsofequalpurchasingpowerasmeasuredbytheaveragelevelofthe1983ConsumerPriceIndexforAllUrbanCustomers(CPI-U).Currentcostamountsreflectthechangesinspecificpricesofproperty,plantandequipmentfromthedateConsolidatedStatementofIncomeAdjustedforEffectsofChangingPricesAsStatedinthePrimaryFinancialStatementsOperatingRevenuesOperatingExpenses:Operation:FuelforElectricGeneration(a)PurchasedandInterchangePower(net)OtherMaintenanceDepreciation,DepletionandAmortization(a)TaxesOtherThanFederalIncomeTaxes.....FederalIncomeTaxes.TotalOperatingExpensesOperatingIncomeOtherIncomeandDeductions.NetInterestChargesPreferredStockDividendRequirementsEarningsApplicabletoCommonStock(b)$868,980159,998159,086122,12753,04983,96337,05370,961686,237182,74353,629(96,496)(28,384)$111,492(inthousands)$869,000161,000159,000122,00053,000188,00037,00071,000791,00078,00054,000(97,000)(28,000)$7,0008869,000161,000159,000122,00053,000194,00037,00071,000'797,00072,00054,000(97,000)(28,000)$1,000IncreaseinSpecificPrices(currentcost)ofProperty,PlantandEquipmentHeldDuringtheYear(c)..............ReductiontoNetRecoverableCost(d)EffectofIncreaseinGeneralPriceLevel.............;.......ExcessofIncreaseinSpeciTicPricesafterReductiontoNetRecoverableCostoverIncreaseinGeneralPriceLevelGainfromDeclineinPurchasingPowerofNetAmountsOwed(e).Net$249,000(24,000)(215,000)$(5,000)10,00068,00068,000$63,000$78,000(a)AsprescribedbytheFASB,theitemsintheConsolidatedStatementofIncomethaihaecbeenadjustedaredepredation,depledonandamortization(includingportionsclassifiedasfuelforelectricgenerationandotherincomeanddeductions).Depreciation,depletionandamortizationchargeswerecomputedbyapplyingcurrentaccrualratestothevariousplantaccounts(production,transmission,distribution,generalandmiscellaneous)afteradjustingsuchaccountsfortheeffectsofchangingprices.(b)Includingthereductiontonetrecoverablecost,theincome(loss)fromoperationsonaconstantdollarbasisandcurrentcostbasiswould.havebeen$2,000,000and$(23,000,000),respectively.(c)AtDecember31,1983,currentcostofproperty,plantandequipmentnetofaccumulateddepreciation,depletionandamortizationwas$5,803,000,000whilehistoricalcostornetcostrecoverablethroughdepreciation,depletionandamortizationwas$2,908,000,000.(d)Thereductiontonetrecoverablecostofproperty,plantandequipment(asexpressedintermsofinflation.adjustedcost)tohistoricalcostrecognizesthattherate-makingprocesslimitstheCompanytorecoveryofthehistoricalcostofthesubjectassets.(e)ToreflectproperlytheeconomicsofrateregulationintheConsolidatedStatementofIncomeAdjustedforEffectsofChangingPrices,thereductiontonetrecoverablecostshouldbeoffsetbythegainthatresultsfromthedeclineinpurchasingpowerofthenetamounts'owedbytheCompany.Duringaperiodofinflation,holdersofmonetaryassetssuchascashandreceivablessufferalossofgeneralpurchasingpowerwhileholdersofmonetaryliabilities,generallylong-termdebt,experienceagain(becausedebtwillberepaidindollarshavinglesspurchasingpower).TheCompany'sgainfromthedeclineinpurchasingpowerofitsnetamountsowedisprimarilyattributabletothesubstantialamountofdebtandcumulativepreferredstocksubjecttomandatoryredemptionwhichhasbeenusedtofinanceutilityplant.25 NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Concluded)Five-YearComparisonofSelectedSupplementaryDataAdjustedforEffectsofChangingPrices(dollaramountsareexpressedintermsofaverage1983dollars)YearEndedDecember31,1983198219811980(inthousands,exceptindexdata)1979$938,000$836,000$890,000$(10,000)$(21,000)$(5,000)$28,000$1,084,000$1,088,000$1,098,000$1,189,000$(9,000)$10,000$1,082,000$(127,000)$1,088,000$(326,000)$(262,000)$1,098,000$1,189,000$76,000289.2$220,000246.8OperatingRevenues$869,000$898,000HistoricalCostIttformationAt(t'itstedforGeneralIttflationIncome(Loss)fromOperations(excludingreductiontonetrecoverablecost)$7,000NetAssetsatYear-endatNetRecoverableCost....$1,082,000CarrentCostIttfonnationIncome(Loss)fromOperations(excludingreductiontonetrecoverablecost).............$1,000$(11,000)$(21,000)$8,000Excess(Deficit)ofIncreaseinSpecificPricesafterReductiontoNetRecoverableCostoverIncreaseinGeneralPriceLevel$(9,000)NetAssetsatYear-endatNetRecoverableCost....$1,084,000GeneralFinancialDataGainfromDeclineinPurchasingPowerofNetAmountsOwed$68,000$158,000$237,000AverageConsumerPriceIndex298.4272.1217.5GeneralinformationonhfiningOperationsProvenandProbableCoalReservesatEndofYear(thousandsoftons)(Note)414,207411,377412,546413,964415,023.TonsofCoalMined(thousands)..-.................3601,1687791,059669AverageMarketPrice(atcurrentcostperton)......$84.66$50.89$65.95$63.78$63.10Note:Proven'reserves-Theestimatedquantitiesofcommerciallyrecoverablereservesthat,onthebasisofgeological,geophysicaland'ngineeringdata,canbedemonstratedwithareasonablyhighdegreeofcertaintytoberecoverableinthefuturefromknown,mineraldepositsbyeitherprimaryorimprovedmethods.Probablerese'rves-Thcestimatedquantitiesofcommerciallyrecoverablereservesthatarelesswelldefinedthanprovenreservesandthatmaybeestimatedorindicatedtoexistonthebasisofgeological,geophysicalandengineeringdata.26 INDIANA&MHIGANELECTRICCOMPANYANDSUBSIDIARIESAuditors'pinionDsloitteHaskiss+sells155EastBroadStreetColumbus.Ohio43215(614)221~1000CableOEHANOSTotheShareownersandBoardofDirectorsofIndianaandMichiganElectricCompany:WehaveexaminedtheconsolidatedbalancesheetsofIndianaSMichiganElectricCompanyand'itssubsidiariesasofDecember31,1983and1982andtherelatedconsolidatedstatementsofincome,retainedearningsandsourcesandapplicationsoffundsforeachofthethreeyearsintheperiodendedDecember31,1983.Ourexaminationsweremadeinaccordancewithgenerallyacceptedauditingstandardsand,accordingly,includedsuchtestsoftheaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.Asdiscussedinthethirdparagraphunderthecaption"Litigation"inNote9ofNotestoConsolidatedFinancialStatements,theFederalEnergyRegulatoryCommissionstaffhasclaimedthattheCompanyhaspaidexcessiveprices,forcoalfromaffiliatedminesresultinginoverchargestocustomerswhichmayhavetoberefunded'heCompanyestimatesthattheallegedoverchargeswouldaggregateatleast$163,000,000,inclusiveofinterestandcertainotheradjustmentsatDecember31,1983.TheCompanycannotassesstheultimateoutcomeofthisproceeding,ifany,ontheCompany'sfinancialpositionorresultsofoperations.Inouropinion,subjecttotheeffectsontheconsolidatedfinancialstatementsofsuchadjustments,ifany,asmighthavebeenrequiredhadtheoutcomeoftheuncertaintyreferredtointheprecedingparagraphbeenknown,suchconsolidatedfinancialstatementspresentfairlythefinancialpositionoftheCompanyanditssubsidiariesatDecember31,1983and1982andtheresultsoftheiroperationsandtheirsourcesandapplicationsoffundsforeachofthethreeyearsintheperiodendedDecember31,1983,inconformitywithgenerallyacceptedaccountingprinciplesappliedonaconsistentbasis.February21,198427 OperatingStatistics19831982198119801979ELEGTRlcOPERATINGREYENUEs(inthousands):FromKilowatt-hourSales:Retail:Residential:WithoutElectricHeatingWithElectricHeatingTotalResidential...............CommercialIndustrialMiscellaneousTotalRetailWholesale(salesforresale)TotalfromKilowatt-hourSales..OtherOperatingRevenues..............TotalElectricOperatingRevenues.$125,79868,793$116,34059,826$144,37070,851$106,48854,277$102,54355,4582157221137,616154,7518,696194,591127,470137,1527,568176,166117,725134,5196,953158,001106,151127,8156,099160,765108,764116,1656,150398,066280,639516,284343,427391,844346,513435,363360,096466,781325,468859,7119269792,24917,554738,3574,326795,45916,690678,7054,308$868,980$809,803$812,149$742,683$683,013SQURcEsANDSALEsQFENERGY(inmillionsofkilowatt-hours):Sources:NetGenerated-Steam:FossilFuelNuclearFuelNetGenerated-Hydroelectric.SubtotalPurchased..NetInterchangeTotalSourcesLess:Losses,CompanyUse,Etc.NetSourcesSales:Retail:Residential:WithoutElectricHeatingWithElectricHeatingTotalResidential.........CommercialIndustrialMiscellaneousTotalRetailWholesale(salesforresale)TotalSales5,68412,3015518,0404,88157323,4941,44122,0532,5961,4584,0542,8073,94120411,00611,04722,0534,58712,3497717,0132,1543,77522,9421,24321,6992,4721,5404,0122,8033,70119710,71310,98621,6996,37313,1679819,6381,5703,70424,9121,23923,6732,4671,5133,9802,7484,02119910,94812,72523,6736,71913,1538519,9571,8833,66925,5091,42624,0832,4931,5494,0422,7163,93219510,88513,19824,0836,44311,6147918,1368115,38924,3361,38622,9502,3891,6194,0082,6294,38019411,21111,73922,95028 INDIANA&MICHIGANELECTRICCOMPANYtANDSUBSIDIARIESOPERATINGSTATISTICS(Concluded)19831982198119801979ANNUALCosTOFFUELCONsUMED(incents):(a)CentsperMillionBtu:CoalNuclearOverallCentsperKilowatt-hourGenerated:CoalNuclearOverall183.9754.3791.991.76.59.96189.59187.1349.5549.9084.8591.351.851.81.53.54.89.95164.4948.4484.951.59.52'.89151.9137.8276.251.52.41.81RESIDENTIALSERvlcE-AYERAGES:AnnualKwhUseperCustomer:TotalWithElectricHeatingAnnualElectricBill:TotalWithElectricHeatingPriceperKwh(incents):TotalWithElectricHeating-............10,18718,780$541$9125.314.8610,08419,99010,00819,866$489"$443$893$7854.854.434.473.9510,20620,58410,21021,611$406$402$721$7403.983.943.503.43NUMBERQFELEcTRIcCUSTQMERS:Year-End:Retail:Residential:WithoutElectricHeatingWithElectricHeatingTotalResidential...........CommercialIndustrialMiscellaneousTotalRetailWholesale(salesforresale)TotalElectricCustomers320,65578311398,96642,5523,2531,571446,342106446,448320,09777,335397,43242,2333,2491,458444,372105444,477321,85077,002398,85242,9572,8731,440446,122104446,226321,43275,618397,05042,7582,8021,424444,034105444,139319,47775,606395,08342,5632,7481,373441,767103441,870(a)Excludeseffectofdeferredcollectionoffuelcosts.29 PriceRangeofCumulativePreferredStockByQuarters(1983anti1982)1983-Quarters1982-QuartersCumulativePreferredStock1st2nd3rd4th1st2nd3rd4th($100ParValue)4Ve%SeriesDividendsPaidPerShareMarketPrice-$PerShare(MSE)-High-Low4.56%SeriesDividendsPaidPerShareMarketPrice-$PcrShare(OTC)Ask(high/low)Bid(high/low)4.12%SeriesDividendsPaidPerShareMarketPrice-$PerShare(OTC)Ask(high/low)Bid(high/low)7.08FoSeriesDividendsPaidPerShareMarketPrice-$PerShare(NYSE)-High-Low7.76%SeriesDividendsPaidPerShareMarketPrice-$PerShare(NYSE)-High-Low8.68%SeriesDividendsPaidPcr.ShareMarketPrice'$PerShare(NYSE)=High-Low12%SeriesDividendsPaidPerShare,MarketPrice-$PerShare(NYSE)-High-Low($25ParValue)$2.15SeriesDividendsPaidPerShareMarketPrice-$PerShare(NYSE)-High-Low$2.25SeriesDividendsPaidPerShareMarketPrice-$PcrShare(NYSE)-High-Low$2.75SeriesDividendsPaidPerShareMarketPrice-$PerShare(NYSE)-High-Low$3.63SeriesDividendsPaidPerShareMarketPrice-$PcrShare(NYSE)-High-Low30275929V430Ye29th55Vi30$1.14$1.14$1.14$1.14$1.14$1.14$1.14$1.14$1.03$1.03$1.03$1.03$1.03$1.03$1.03$1.03$1.77$1.77$1.77$1.77$1.77$1.77$1.77$1.775852th59~h54Ye5551th5649Ys46N42th474450445548$1.94$1.94$1.94$1.94$1.94$1.94$1.94$1.9462Y~5764%57th615661%5450Yi45Yi52,56th47Ve4861th52Y4$2.17$2.17$2.17$2.17$2.17$2.17$2.17$2.177063th73%65th70Fs65%7060Y45550N58th5259N57th6757Fa$3.00$3.00$3.00$3.00$3.00$3.00$3.00$3.00100hh94103th99103Y497101N96'1th77th86k79Yi9479Y~98th89$0.5375$0.5375$0.5375$0.5375$0.5375$0.5375$0.5375$0.537517Fe15N18'6'7th15N17'4N14h1515Fs13Ye13'3Y~17Ve15Ye$0.5625$0.5625$0.5625$0.5625$0.5625$0.5625$0.5625$0.562518Ve16th18Y416'815h14'5%1&%13th13th14V18Y4les$0.6875$0.6875$0.6875$0.6875$0.6875$0.6875$0.6875.$0.687523N21N2523Ve2423Ye242318V418%2017V18%16th2120$0.9075$0.9075$0.9075$0.9075$0.63$0.9075$0.9075$0.9075297'6N30Ye27N28N.2728N26K25%26N22N232%625th$1.03125$1.03125$1.03125$1.03125$1.03125$1.03125$1.03125.$1.03125MSE-MidwestStockExchangeOTC-Over-the-CounterNYSE-NewYorkStockExchangeNote-TheabovebidandaskedquotationsrepresentpricesbetweendealersanddoMarketquotationsprovidedbyNationalQuotationBureau,Inc.Dashindicatesquotationnotavailable.rnotrepresentactualtransactions.30 TheCompany'sAnnualReport(Form10-K)totheSecuritiesandExchangeCommissionwillbeavailableonoraboutMarch31,1984toshareownersuponwrittenrequestandatnocost.Pleaseaddresssuchrequeststo:Mr.T.P.BowmanAmericanElectricPowerServiceCorporation1RiversidePlazaColumbus,Ohio43215TransferAgentandRegistrarofCumulativePreferredStockMorganGuarantyTrustCompanyofNewYork30WestBroadway,NewYork,N.Y.10007 eSeasonHortsstrI~(IHSI.Joseph'~~~I,.SoresHeronwsos\waarscwscattorsOosOKokmocoofCrro~ct,>>agNICIGANIRRILNRI~NSa+In4wasosswsownssooswac>>wwyINRRANJockson0SPISeewsawosOOICcswwIrhksvil4wOsaloeaweewwFortW,QJINDIAALafayette~vncowswIs'kKokomoOY~~wpjaM~osonMoatponloartHonf>>dGlysOHI0~ooooooVnksnGtywaworwee>>rosslowsswc>>rwr'ndionopoilLynnwor<<wacreweesCsewnCaranrvrsnREEDas>>wowsower~swco0SLoIooo0~~aaRStmnSSO0'bTANNERSCREEKIIsocrew4~~eecseccern>>IIIraCincinnoti%%OJ5%%~iiti~LKENTUCKYINDIANA8MICHIGANELECTRICCOMPANYROCKPORTQssww.lrssootswsQsrwssaIsllsssoanwsPnroeIaaarsws~4ws~ssuon>>vsasletwwweeeswnIewwswSsswSnawCaa.~a>>4le0IIIOoaessesrearoetaletalteaoaassssaasoaaIuotaeatoalaolavsolooatoaumasanlaenltsal4oossmao4oao ATTACHMENT2TOAEP:NRC:0909 Iit.l(P'Ik 1984InternalCashFlowProjection-forDonaldC.CookNuclearPlant(Millions)Actual1983Projected1984NetincomeaftertaxesLessdividendspaidRetainedearnings139.9136.03.915514114Adjustments:DepreciationandamortizationDeferredincometaxesandinvestmenttaxcreditsAFUDC.*'.To&al'adjustmen<s..:.:::'6.089.8(119.2):...5616":.'8130(116)Internalcashflow.Averagequarterlycashflow60.515.111629Averagecashbalancesandshort-terminvestments13.540Total28.6690Ownershipinalloperatingnuclearunits:Unit.1andUnit,2-1005o"MaximumTotalContingentLiability-$20.0million(2units) tlr