Item 1. Business
(a) General Development of Business
Iowa-Illinois Gas and Electric Company (the Company) was incorporated under the laws of the State of Illinois in 1940 and is engaged in the business of generating, transmitting, distributing and selling electric energy and distributing, selling and transporting natural gas in the States of Illinois and Iowa. Through a wholly owned subsidiary, InterCoast Energy Company, the Company engages in non-regulated energy-related businesses. The Company's principal executive offices are located at 206 East Second Street, Davenport, Iowa 52801 (telephone: 319-326-7111).
(b) Financial Information About Industry Segments
Financial information on the Company's segments of business is included under the Note "Segment Information" on pages 40 and 41 of the Company's Annual Report to Shareholders for 1993 which pages are incorporated herein by reference. This information is also included in Exhibit 13.A.4 to this Form 10-K.
(c) Narrative Description of Business
General
The Company distributes electric energy in the Quad-Cities (Davenport and Bettendorf, Iowa and Rock Island, Moline and East Moline, Illinois), Iowa City and Fort Dodge, Iowa and in a number of adjacent communities and areas.
The Company distributes natural gas in the Quad-Cities, Iowa City, Cedar Rapids, Fort Dodge and Ottumwa, Iowa and in a number of adjacent communities and areas.
Electric or gas service is provided in 22 incorporated communities in Illinois and 48 incorporated communities in Iowa. Franchises have been obtained from 69 communities. The length of term of the franchises is typically 25 years, with various expiration dates. Electric and gas franchises for Rock Island, Illinois expired on February 28, 1992. Electric and gas service continues to be provided to Rock Island while negotiations on a new franchise proceed. This condition is not material in the opinion of management.
The population of the Company's electric service territory is approximately 425,000 and the population of its gas service territory is approximately 600,000. As of December 31, 1993, the Company had 200,097 retail electric customers and 240,839 gas customers.
The Company has a residential, agricultural and diversified commercial and industrial customer group, in which no single industry or customer accounted for more than 8.6% (primary metal industry) of the Company's total 1993 electric operating revenues or 4.5% (real estate) of its total 1993 gas operating revenues. Among the primary industries served by the Company are those which are concerned with the manufacturing, processing and fabrication of primary metals, real estate, food products, farm and other non-electrical machinery, cement and gypsum products.
For the year ended December 31, 1993, the Company derived approximately 62.1% of its gross operating revenues from its electric business and 37.9% from its gas business. For 1992 and 1991, the corresponding percentages were 62.8% electric and 37.2% gas, and 64.7% electric and 35.3% gas, respectively.
Historical electric sales (kwh) by customer class as a percent of total electric sales and retail electric sales data (kwh) by jurisdiction as a percent of total retail electric sales are shown below: Total Electric Sales By Customer Class 1993 1992 1991
Residential 19.9% 19.4% 19.9% Small Commercial and Industrial 21.5 21.5 20.4 Large Commercial and Industrial 31.9 34.9 31.0 Public Street Lighting 0.3 0.5 0.4 Public Authorities 1.6 1.6 1.5 Sales for Resale 24.8 22.1 26.8
Total 100.0% 100.0% 100.0%
Retail Electric Sales By Jurisdiction 1993 1992 1991
Iowa 67.0% 65.4% 64.5% Illinois 33.0 34.6 35.5
Total 100.0% 100.0% 100.0%
Historical gas sales (ccf), including transportation, by customer class and by jurisdiction as a percent of total gas sales are shown below:
By Customer Class 1993 1992 1991
Residential 36.5% 36.6% 37.8% Commercial 20.7 20.8 21.6 Industrial 5.3 6.5 7.3 Processing & Boiler Fuel 0.2 0.6 2.0 Transportation 37.3 35.5 31.3
Total 100.0% 100.0% 100.0%
By Jurisdiction 1993 1992 1991
Iowa 80.1% 79.4% 78.5% Illinois 19.9 20.6 21.5
Total 100.0% 100.0% 100.0%
There are seasonal variations in the Company's electric and gas businesses, which are principally related to the use of energy for air conditioning and heating. In 1993, 40.6% of the Company's electric revenues were reported in the months of June, July, August and September, reflecting the use of electricity for cooling, and 56.2% of the Company's gas revenues were reported in the months of January, February, March and December, reflecting the use of gas for heating.
At December 31, 1993, the Company had 1,423 employees, of which 1,364 were employed in utility operations and 59 were employed by InterCoast Energy Company.
Rate Matters
Under Illinois law, new rates may be put into effect by the Company 45 days after filing with the Illinois Commerce Commission (ICC), or on such earlier date as the ICC may approve, subject to the power of the ICC to suspend the proposed new rates for a period not to exceed eleven months after filing, pending a hearing.
Under Iowa law, temporary collection of higher rates can begin (subject to refund) 90 days after filing with the Iowa Utilities Board (IUB) for that portion of such higher rates approved by the IUB based on prior ratemaking principles and a rate of return on common equity previously approved. If the IUB has not issued a final order within ten months after the filing date, the temporary rates cease to be subject to refund and any balance of the requested rate increase may then be collected subject to refund. Exceptions to the ten month limitation are provided for extensions due to a utility's lack of due diligence in the rate proceeding, judicial appeals and situations involving new generating units being placed in service.
Pursuant to a 1983 Order of the ICC, the Company established an adjustment clause which gave ratemaking recognition to the depreciation charges and equity return requirements applicable to the portion of the Company's Louisa Generating Station investment which is allocable to Illinois. From October 1983 through June 1987, the Clause deferred the inclusion in rates of portions of both the depreciation and equity return related to the Louisa Station. From July 1, 1987 through June 30, 1993, the deferred balances were recovered in rates at a levelized annual revenue amount of approximately $6.6 million. The Clause, which provided a current cash return on the deferred balances, expired on June 30, 1993 with the recovery of all deferred amounts.
On September 1, 1992, the Company filed revised electric and gas rates with the ICC to increase annual electric and gas revenues by approximately $14 million (12%) and $3 million (5.9%), respectively. On July 28, 1993, electric and gas increases of $9.6 million (8.6%) and $2 million (3.7%), respectively, became effective following ICC approval. On January 15, 1994, additional electric and gas increases of $230,000 (0.2%) and $49,000 (0.1%), respectively, related to the increase in the federal corporate income tax rate became effective following ICC approval on rehearing. The ICC also approved electric and gas riders which permit the Company to recover costs of litigation, investigation and remediation relating to former manufactured gas plant sites.
On May 3, 1993, the Company filed revised electric rates with the IUB designed to increase annual electric revenues by approximately $13.5 million (7.5%) and to provide for any increase in the federal corporate income tax rate ultimately enacted. A temporary annual rate increase of $6.8 million (3.8%) became effective July 26, 1993. In 1993, approximately $3.1 million was billed, subject to refund, pursuant to such temporary rates. On February 25, 1994, the IUB issued an order approving rates at the $6.8 million level.
The Company completed its take-or-pay obligation with Natural Gas Pipeline Company of America (NGPL) in 1992. A final reconciliation payment was made in 1993. Both the ICC and IUB authorized the Company to include such costs in customer billings. The orders of the ICC and IUB have been affirmed by the courts and are final.
In April 1992, the Federal Energy Regulatory Commission (FERC) issued Order No. 636, directing a restructuring by interstate pipeline companies for their natural gas sales and transportation services. The FERC Order contemplated that transitional gas supply realignment costs relating to this restructuring may be billed by interstate pipelines to their customers. The amount of transition costs which the FERC may ultimately authorize the pipelines to bill the Company is estimated to be $35 to $50 million. The Company expects to be allowed to include provisions for such costs in its customer billings.
The Company has established an external trust for the investment of funds collected for nuclear decommissioning. Electric tariffs for 1994 include provisions for annual decommissioning costs of approximately $9.1 million. In Illinois, nuclear decommissioning costs are included in customer billings through a mechanism which permits annual adjustments. In Iowa, such costs are reflected in base rates.
The Company's Iowa electric tariffs contain a Uniform Electric Energy Adjustment Clause under which the Company's billings reflect changes in the cost of all fuels used for electric generation, including nuclear fuel disposition costs, as well as the net effect of energy transactions (other than capacity) with other utilities. Changes in the cost of gas to the Company are reflected in its Iowa gas rates through the Uniform Purchased Gas Adjustment Clause.
Under Illinois electric tariffs, the Company's Fuel Cost Adjustment Clause reflects changes in the cost of all fuels used for electric generation, including allowable fuel transportation costs, nuclear fuel disposition costs and the effects of energy transactions (other than capacity) with other utilities. However, margins on interchange sales to other utilities are not included in the Clause. Changes in the cost of gas to the Company are reflected in its Illinois gas rates through the Illinois Uniform Purchased Gas Adjustment Clause.
Electric Operations
The Company's accredited 1993 summer net generating capacity was 1,429,480 kilowatts, consisting of (a) 384,750 kilowatts from the Company's 25% undivided interest in the Quad-Cities Nuclear Power Station (Quad-Cities Station), jointly owned with Commonwealth Edison Company (Edison), (b) 913,530 kilowatts from interests in wholly or jointly owned coal-fired units, (c) 128,000 kilowatts from wholly owned gas/oil fired units, and (d) 3,200 kilowatts from wholly owned hydro-electric units. The net generating capacity at any time may be less due to regulatory restrictions, fuel restrictions and generating units being temporarily out of service for inspection, maintenance, refueling or modifications.
On August 26, 1993, the Company established its record one- hour peak electric demand of 1,084,965 kilowatts. Forecasts for future peak load growth are reviewed annually. The Company currently forecasts average peak load growth of 1.2% annually for the next ten years.
The Company, along with two other Iowa investor-owned utilities, is a partner in ENEREX, which arranges for the most economical generating capacity to be used to meet the energy requirements of customers of these utility companies, regardless of which utility owns the generation facilities. ENEREX partners realize a savings for their customers through higher utilization of the lowest cost plants. The other partners in ENEREX are IES Utilities, Inc. and Midwest Power Systems Inc.
The Company is one of over 40 members of the Mid-Continent Area Power Pool (MAPP), which includes investor-owned utility companies, rural cooperatives, municipal utilities and other power suppliers in the North Central region of the United States and in two Canadian provinces. The objective of MAPP is to coordinate planning and operation of generation and interconnecting transmission facilities to provide reliable and economic electric service to members' customers. Customers served by MAPP members may, therefore, benefit from regional high voltage interconnections which are capable of transferring large blocks of energy between systems. Also, high voltage interconnections permit companies to buy and sell power according to differing peak demands.
Fuel Supply for Electric Operations
The Company's sources of fuel from electric generation have been as follows for the periods shown:
Year Ended December 31, Fuel Source 1993 1992 1991 Coal 63.18% 63.95% 63.48% Nuclear 36.52 35.56 36.09 Gas 0.28 0.45 0.41 Oil 0.02 0.04 0.02
In 1994 the Company projects its electric generation requirements will be met as follows: coal - 63%, nuclear - 37%.
The average costs of fuels (including transportation and handling costs) in cents per million BTU's consumed have been as follows for the periods shown:
Year Ended December 31, Fuel Source 1993 1992 1991 Nuclear 47.36 44.57 46.03 Coal 105.79 102.97 101.19 Gas 373.25 313.33 289.67 Oil 440.95 412.80 482.08 Total Weighted Average 86.62 83.93 83.11
The average cost of coal (including transportation and handling costs) per ton for the year 1993, 1992 and 1991 has been $18.22, $17.57 and $17.37, respectively.
The Company has been advised by Edison that a portion of its uranium concentrate requirements for the Quad-Cities Station through 1994 and a portion of its requirements for periods beyond 1994 can be met under existing firm commitments. Edison further advises that it has existing supplies or firm commitments to meet all of its converted uranium requirements through 1995. Edison also advises that all of the enrichment requirements have been contracted for through 1999. Commitments for fuel fabrication have been obtained at least through 2001. Edison does not anticipate that it will have any difficulty in contracting for uranium concentrates or for conversion, enrichment or fabrication of nuclear fuel needed for the Quad-Cities units.
In June 1985, the Company satisfied its financial obligation for Quad-Cities Station disposal costs for fuel burned prior to April 7, 1983 by making a lump sum payment of $24.8 million to the Department of Energy (DOE). The payment was made principally from funds previously collected from customers. Disposal costs for fuel burned after April 7, 1983 are paid quarterly. Such costs are included in the cost of fuel and recovered through fuel and energy adjustment clause billings. See Nuclear Regulation herein for further information concerning the disposal of spent nuclear fuel.
The Company believes its sources of coal for its fossil- fueled generating stations are and will be satisfactory. Renewal of expiring contracts and new agreements will be sought as required. The coal requirements for Riverside and Neal Unit 3 are being met primarily through spot purchases. Contracts for low-sulfur Wyoming coal have been executed for the Neal Unit 3, Council Bluffs, Ottumwa and Louisa units which will supply a portion of requirements through the years 1994, 1999, 2001 and 2003, respectively. Unit trains are being used for transporting coal for the Neal, Council Bluffs, Ottumwa and Louisa units. The Company has negotiated certain modifications to existing contracts to achieve flexibility in volumes to be delivered while also providing reasonable assurance of supply. In addition, the Company has used spot market purchases of coal to effectively manage inventory levels and take advantage of near term coal market opportunities. The Company is continuing to monitor existing contracts and coal supply requirements, balancing coal requirements with a combination of contract and spot purchases.
Gas Operations
During 1993, the Company purchased approximately 89% of the gas required to supply its customers from non-pipeline gas suppliers on a firm or interruptible basis and transported on a firm or interruptible basis through the NGPL, ANR Pipeline Company (ANR) and Northern Natural Gas (NNG) systems. The remainder was purchased from NGPL and NNG.
All gas supply purchased from NGPL and NNG is at rates approved by the FERC under the Natural Gas Act. Likewise, transportation rates negotiated with NGPL, ANR and NNG are subject to FERC approval. Non-pipeline supply prices are negotiated.
The use of firm and interruptible non-pipeline supply and associated pipeline transportation has resulted in substantially lower purchased gas costs than would have been incurred if all supply needs had been placed under contract with the interstate pipelines.
The Company withdrew approximately 97 percent of the gas in leased storage during the 1992-93 heating season. Storage gas was replaced during the summer. Storage was full for the 1993-94 heating season.
Beginning in December 1993, the Company has rebundled a portion of its firm pipeline transportation with firm supply from a third party supplier. This citygate service replaces bundled sales service previously purchased from one of the Company's pipeline suppliers.
The Company provides natural gas transportation service through its distribution system for end-use customers. Transportation of customer-owned gas was 37% of the total Company throughput during 1993.
For the 1993-94 heating season, the Company's peak-day supply delivery availability consists of gas available from NNG plus firm capacity on the NGPL, ANR and NNG systems for the transportation of firm non-pipeline gas. In addition, peak-day supply is available from gas previously purchased by the Company and held in leased pipeline storage. The Company leases storage from NGPL, ANR and NNG. Liquefied natural gas (LNG) stored in the Company's LNG facility is also available for peak-day use. Following are the current peak-day supply sources for the Company available for the 1993-94 heating season by volume and proportions:
Millions Percent of Cubic of Feet Total
Underground Storage 220.1 45.0 Firm Non-Pipeline Supply 131.2 26.8 Rebundled Service 96.9 19.8 LNG Facility 40.0 8.2 Pipeline Supply 1.3 0.2 489.5 100.0
Peak-day firm demand for the 1993-94 heating season was projected to be 467.5 million cubic feet for the Company. The actual highest demand for peak-day firm sales for the 1993-94 heating season for the Company was 443 million cubic feet on January 17, 1994. The weighted average temperature on that day was 13 degrees below zero.
On January 17, 1994, a new record was set for total Company gas throughput (sales and transportation) of 516 million cubic feet.
See Rate Matters for a discussion of certain transition costs.
Construction Program
The table below shows actual construction expenditures for 1993 and budgeted expenditures for 1994 and for the period 1995- 1998:
1993 1994 1995-98 Actual Budgeted Budgeted (Thousands of Dollars) Electric Production $ 22,852 $ 22,982 $ 56,898 Transmission 1,792 1,010 9,189 Distribution 12,542 12,837 44,586 Gas 11,107 11,458 51,219 General Plant 11,869 30,413 27,391 Subtotal 60,162 78,700 189,283 Nuclear Fuel 6,795 8,905 42,664 Total $ 66,957 $ 87,605 $231,947
The amounts shown above include allowance for funds used during construction but exclude capital leases. Of the $79.9 million of budgeted electric production expenditures for the 1994-1998 period, $47.1 million are for expenditures at the Quad- Cities Station. In addition to the amounts shown above, the Company also expects to contribute a total of $45.7 million to an external trust for nuclear decommissioning during the 1994-1998 period. The Company's above budgeted construction expenditures do not include any amounts which may be required to pay the Company's share of the cost of replacing certain piping at the Quad-Cities Station. See Nuclear Regulation.
General Regulation
The Company is a public utility under the laws of Illinois and is regulated by the ICC as to retail rates, services, accounts, issuance of securities, affiliate transactions, construction, acquisition and sale of utility property, acquisition and sale of securities and in other respects as provided by the laws of Illinois. The Company is also a public utility under the laws of Iowa and is regulated by the IUB as to retail rates, services, accounts, construction of utility property and in other respects as provided by the laws of Iowa.
The Company is subject to the jurisdiction of the FERC with respect to certain matters, including short-term borrowings, rates for transmission and sale of electric energy at wholesale, interconnection of electric transmission facilities, acquisition and sale of certain electric utility property, installation and replacement of certain gas utility property and accounting policies and practices.
Nuclear Regulation
The Company is subject to the jurisdiction of the Nuclear Regulatory Commission (NRC) with respect to its nuclear generating units. The NRC regulations control the granting of permits and licenses for the construction and operation of nuclear generating stations and subject such stations to continuing review and regulation. The NRC review and regulatory process covers, among other things, operations, maintenance, and environmental and radiological aspects of such stations. The NRC may modify, suspend or revoke licenses and impose civil penalties for failure to comply with the Atomic Energy Act, the regulations under such Act or the terms of such licenses. Attempts are made from time to time by various individuals or citizen groups to prohibit the development or use of nuclear power through initiation of proceedings before the NRC, other agencies or courts. Such proceedings frequently involve attacks on the validity of NRC rules which, if successful, could provide a basis for challenges to permits and licenses granted by the NRC in the past.
The Illinois Department of Nuclear Safety (IDNS) has jurisdiction over certain activities in Illinois relating to nuclear power and safety and radioactive materials. Effective June 1, 1987, the IDNS replaced the NRC as the regulator and licensor of certain source, by-product and special nuclear material in quantities not sufficient to form a critical mass, including such material contained in various measuring devices used at fossil-fuel power plants. The IDNS has promulgated regulations which are substantially similar to the corresponding federal regulations. The IDNS also has authority to license a low-level radioactive waste disposal facility and to regulate alternative methods for disposing of materials which contain only trace amounts of radioactivity.
Under the Nuclear Waste Policy Act of 1982 (NWPA), the DOE is responsible for the selection and development of repositories for, and the permanent disposal of, spent nuclear fuel and high- level radioactive wastes. Edison, as required by the NWPA, has signed a contract with the DOE to provide for the disposal of spent nuclear fuel and high-level radioactive waste beginning not later than January 1998. The DOE has stated, however, that the delivery schedule for spent nuclear fuel may be delayed, and Edison expects that it will be significantly delayed. The costs incurred by the DOE for disposal activities will be financed by fees charged to owners and generators thereof. The primary responsibility for the interim storage of spent nuclear fuel and high-level radioactive wastes will rest with the owners and generators thereof. Edison has informed the Company that there is on-site storage capability at the Quad-Cities Station sufficient to permit such interim storage at least through 2006. Meeting spent nuclear fuel storage requirements beyond such time could require a new and separate storage facility, the cost of which has not been determined at this time. Edison anticipates the possibility of serious difficulties in disposing of high- level radioactive waste.
The Company has been informed by Edison that it currently disposes of its low-level radioactive waste at a site in South Carolina. There are no other commercial operating sites in the United States for the disposal of low-level radioactive waste available to Edison. The federal Low-Level Radioactive Waste Policy Act of 1980 provides that states may enter into compacts to provide for regional disposal facilities for such waste, subject to approval by the U.S. Congress of each such compact. Under the 1985 amendments to that Act, a compact could restrict the use of a region's disposal facilities after January 1, 1993 to wastes generated within the region. South Carolina belongs to a regional compact. Beginning January 1993, South Carolina has granted Edison access to their waste disposal site for an 18- month period. Illinois has entered into a compact with the State of Kentucky which has been approved by Congress. The IDNS has estimated that a low-level radioactive waste disposal facility would be operational in Illinois by March 31, 1994 at the earliest. However, in 1992 an independent panel rejected the only site in Illinois then being considered for a low-level disposal facility. Illinois has since enacted legislation changing the procedures for siting a low-level waste disposal facility. Edison has temporary on-site storage capacity for a limited amount of low-level radioactive waste at the Quad-Cities Station and is planning such additional capacity pending development of disposal facilities by the State of Illinois. Edison anticipates the possibility of serious difficulties in disposing of low-level radioactive waste.
The continuing viability of commercial nuclear power is subject to resolution of the issues of spent nuclear fuel storage and disposal of radioactive waste.
In January 1994, the NRC noted adverse performance trends at Quad-Cities Station. As a consequence, the Company anticipates increased expenditures at Quad-Cities Station.
Federal regulations provide that any operating facility may be required to cease operation if the NRC determines there are deficiencies in state, local or utility emergency preparedness plans relating to such facility and the deficiencies are not corrected within four months of such determination. Under the regulations, the NRC may permit operation of facilities, even though the emergency preparedness plans are deficient, upon an examination of other factors, including whether the deficiencies are significant for the facility in question, whether adequate interim compensatory actions have been or will be taken promptly and whether other compelling reasons exist for operation consistent with public health and safety. Edison has advised the Company that emergency preparedness plans for the Quad-Cities Station have been approved by the NRC. Edison has also advised that state and local plans relating to the Quad-Cities Station have been approved by the Federal Emergency Management Agency. Edison continues to cooperate with the NRC and appropriate state and local agencies on emergency preparedness issues.
On June 27, 1988, the NRC adopted final regulations with respect to the decommissioning of nuclear power plants. Among other things the regulations address the planning and funding of the eventual decommissioning of nuclear power plants. In response to these regulations, the Company submitted a report to the NRC on July 20, 1990 indicating that it will provide "reasonable assurance" that funds will be available to pay the costs of decommissioning its nuclear power plants by making monthly deposits to an external trust fund.
Inter-granular stress corrosion was discovered in 1983 in certain stainless steel piping at the Quad-Cities Station. Remedial actions intended to avoid the need to replace such piping continue. Accordingly, the Company's budgeted construction expenditures do not include any amounts which may be required to pay the Company's share of the cost of replacing such piping. If Edison is required to replace all of such piping, the Company's share of the costs of such replacement would be approximately $55 million at current price levels. Replacement of such piping would result in an extended outage and require the purchase of replacement power.
The Company is a member of Nuclear Mutual Limited (NML), an industry mutual insurer established to provide property damage coverage for members' nuclear generating facilities. The Company would be subject to a maximum retrospective premium assessment of approximately $2.4 million based on its 25% share of the NML premium for Quad-Cities coverage in the event covered losses of NML members exceed the financial resources of the insurance company. A reserve has been established for this contingency. At December 31, 1993, NML had accumulated capital to a level which would assure that the Company would have no exposure to a retrospective premium assessment in the event of a single incident to a member's facility.
The Company is also a member of Nuclear Electric Insurance Limited (NEIL), an industry mutual insurance company, and an insured of American Nuclear Insurers/Mutual Atomic Energy Liability Underwriters (ANI/MAELU). The related policy provisions provide that expenses for decontamination and the removal of debris shall be paid before any payment in respect of claims for property damage. A separate NEIL insurance policy covers the extra costs which would be incurred in obtaining replacement power during a prolonged covered outage of a member's nuclear plant. The Company is subject to retrospective premium assessments of up to $4 million and $685,000 for its 25% share of the premium under the NEIL portion of the excess property damage coverage and the replacement power coverage, respectively. At December 31, 1993, NEIL had accumulated capital to a level which would assure that the Company would have no exposure to a retrospective premium assessment in the event of a single incident to a member's facility.
A Master Worker Policy issued by ANI/MAELU provides coverage for worker tort claims filed for bodily injury caused by the nuclear energy hazard. The coverage applies to workers whose "nuclear related employment" began after January 1, 1988. Under this policy, the Company could be subject to a maximum retrospective premium assessment of $1.5 million.
Under the Price-Anderson federal legislation adopted in 1988, nuclear public liability coverage is supported by a mandatory industry-wide program under which owners of nuclear generating facilities could be assessed in the event of nuclear incidents. The Company would currently be subject to a maximum assessment of $39.6 million in the event of an incident, to be paid in increments of no more than $5 million per year per incident.
Environmental Regulation
The Company is subject to regulation regarding air, water, solid waste, hazardous and toxic materials and noise pollution by agencies of the federal government and of the States of Illinois and Iowa and may become subject to additional regulation as to these and other matters in the future. The Quad-Cities Station is subject to the jurisdiction of the NRC and IDNS as to atomic radiation.
State and federal environmental laws and regulations as adopted or now proposed have the effect of (i) increasing the lead time for the construction of new facilities, (ii) significantly increasing the total cost of new facilities, (iii) requiring modification of certain of the Company's existing facilities, (iv) increasing the risk of delay on construction projects, (v) increasing the Company's cost of waste disposal and (vi) possibly reducing the reliability of service provided by the Company and the amount of energy available from the Company's facilities. Any of such items could have a substantial impact on amounts required to be expended by the Company in the future.
Air Quality. Air quality regulations, promulgated by both the Iowa and Illinois pollution control boards in accordance with federal standards, impose restrictions on the emission of particulates, sulfur dioxide, nitrogen oxides and other air pollutants and require permits from the respective state environmental protection agency for the operation of emission sources. Permits authorizing operation of the Company's fossil- fueled generating facilities subject to this requirement have been obtained and, when such permits are to expire, the Company has, in a timely manner, filed applications for renewal.
Clean Air Act legislation was signed into law in November 1990 and U.S. Environmental Protection Agency rulemaking proceedings are underway. Under the acid deposition control section of this legislation, national utility emissions of sulfur dioxide will be reduced in phased increments by 10 million tons from 1980 levels by the year 2000 and permanently capped at that level. National nitrogen oxide emissions will also be reduced in phased increments by 2 million tons from 1980 levels by the year 2000. In addition, continuous emission monitoring systems will be required at all affected facilities. This legislation also requires the government to study what controls, if any, should be imposed on utilities to control air toxics. The impact, if any, of the air toxics study on the Company cannot be determined at this time.
The Company has four jointly and one wholly owned coal-fired generating stations, which represent approximately 65 percent of the Company's electric generating capability. Each of these facilities will be impacted to varying degrees by the legislation.
Only one unit at the wholly owned generating station, representing approximately 10 percent of the Company's electric generating capability, will be impacted by the emission reduction requirements effective in 1995. Beginning in 1995, this unit will be required to hold allowances, issued by the federal government, in order to emit sulfur dioxide. The compliance strategy for this unit includes modifications to allow for burning low sulfur coal, modifications for nitrogen oxide control and installation of a new emission monitoring system. The Company's remaining construction expenditures relative to this work are estimated to be $5.4 million, of which $4 million is budgeted for 1994 and $1.4 million is budgeted for 1995.
The four generating stations not affected until 2000 already burn low sulfur coal, so additional capital costs will not be incurred for sulfur dioxide emission reduction requirements. Beginning in 2000, these stations will be required to hold allowances, issued by the federal government, in order to emit sulfur dioxide. Installation of low nitrogen oxide burners is required at one of these facilities and existing emission monitoring systems at all four facilities will require upgrading. The Company's remaining construction cost of this work is estimated to be $2.1 million, of which $600,000 is budgeted for 1994 and $1.5 million for 1996.
It is anticipated that any costs incurred by the Company to comply with the Clean Air Act legislation would be included in the cost of service on which the Company's rates for utility service are based.
Water Quality. Under the Federal Water Pollution Control Act Amendments of 1972, as amended, the Company is required to obtain National Pollutant Discharge Elimination System (NPDES) permits to discharge effluents (including thermal discharges) from its properties into various waterways. All NPDES permits are subject to renewal after specified time periods not to exceed five years. The Company has obtained all necessary NPDES permits for its generating stations and, when such permits are expected to expire, the Company will file applications for renewal.
Hazardous Materials and Waste Management. The Company is investigating five properties currently owned by the Company which were, at one time, sites of gas manufacturing plants. The purpose of these investigations is to determine whether waste materials are present, whether such materials constitute an environmental or health risk, and whether the Company has any responsibility for remedial action. One site is located in Illinois and four sites are located in Iowa. With regard to the Illinois property, the Company has signed a working agreement with the Illinois Environmental Protection Agency to perform further investigation to determine whether waste materials are present and, if so, whether such materials constitute an environmental or health risk. At December 31, 1993, an estimated liability of $3.4 million has been recorded for litigation, investigation and remediation related to the Illinois site. A regulatory asset has been recorded reflecting anticipated cost recovery through rates in Illinois. With regard to the Iowa sites, no agreement or consent order has been negotiated to perform any site investigations or remediation. Approximately $160,000 and $170,000 has been budgeted in 1994 and 1995, respectively, for site studies. The Company has recorded a $4 million estimated liability for the Iowa sites. A regulatory asset has been recorded based on the current regulatory treatment of comparable costs in Iowa. The estimated recorded liabilities for these properties are based upon preliminary data. Thus, actual costs could vary significantly from the estimates. In addition, insurance recoveries for some or all of the costs may be possible, but the liabilities recorded have not been reduced by any estimate of such recoveries. Although the timing of incurred costs, recoveries and the inclusion of provision for such costs in rates may affect the results of operations in individual periods, management believes that the outcome of these issues will not have a material adverse effect on the Company's financial position or results of operations.
Pursuant to the Toxic Substances Control Act, a federal law administered by the Environmental Protection Agency, the Company developed a comprehensive program for the use, handling, control and disposal of all polychlorinated biphenyls (PCB's) contained in electrical equipment. The future use of equipment containing PCB's will be minimized. Capacitors, transformers and other miscellaneous equipment are being purchased with a non-PCB dielectric fluid. The Company's exposure to PCB liability has been reduced through the orderly replacement of a number of such electrical devices with similar non-PCB electrical devices.
An unresolved issue is whether exposure to electric and magnetic fields (EMFs) may result in adverse health effects. EMFs are produced by all devices carrying or using electricity, including transmission and distribution lines and home appliances. The Company cannot predict the effect on construction costs of electric utility facilities if EMF regulations were to be adopted. Although the company is not the subject of any suit involving EMFs, litigation has been filed in a number of jurisdictions against a variety of defendants alleging that EMFs had an adverse effect on health. If such litigation was successful, the impact on the Company and on the electric utility industry generally is not predictable, but could be significant.
InterCoast Energy Company
InterCoast Energy Company (InterCoast) is a wholly owned non-regulated subsidiary of the Company. InterCoast provides a vehicle for the separation of such non-regulated activities from the Company's regulated utility businesses. The non-regulated activities emphasize energy-related diversification, credit quality and liquidity.
InterCoast takes advantage of a core expertise in energy, participating in the energy industry through three major areas: oil and gas (Medallion Production Company), energy services (InterCoast Energy Services) and financial investments (InterCoast Capital Company).
Medallion Production Company (Medallion) is an independent oil and gas company based in Tulsa, Oklahoma. Medallion's oil and gas assets at December 31, 1993 and 1992 were $121 million and $60.3 million, respectively. In September 1993, Medallion acquired DKM Resources, Inc. The transaction totaled in excess of $50 million and more than doubled Medallion's oil and gas reserve base. Medallion's reserves totaled 27.6 million barrels of oil equivalent at December 31, 1993. Principal oil and gas production facilities are in Oklahoma, Texas, California and Louisiana.
InterCoast Energy Services (Energy Services) consolidates passive energy investment activities with actively managed energy operations through development efforts and acquisitions to provide a full spectrum of energy services. Energy Services' assets at December 31, 1993 and 1992 were $48.8 million and $46.8 million, respectively.
Energy Services has investments in a variety of non- regulated energy production technologies including wind, solar, hydroelectric, and natural gas and coal-fueled generation. Energy Services has an ownership interest in a 70 megawatt wind plant that operates in northern California and has ownership interests in four solar electric generating stations in southern California's Mojave Desert. In addition, Energy Services has an equity interest in a hydroelectric operating and development company located in Annapolis, Maryland and is a participant in a closed-end fund created to invest in independent power projects. Such projects include a wood-fired plant in Maine, hydroelectric plants in New York, wind-powered generation in California, a waste coal plant in Pennsylvania, gas-fired cogeneration plants in Nevada, California and New York and a coal-fired cogeneration plant in New York. Energy Services also has equity investments in two developing companies which produce products and services for the electric and gas utility industries.
InterCoast Power Marketing (IPM), a subsidiary of Energy Services, was established in October 1993. IPM has filed a petition with FERC seeking "marketer" status under the Federal Power Act. IPM, which acts as a broker for buyers and sellers of wholesale electric power nationwide, seeks marketer status to be able to directly buy and sell power. IPM will not market power from or to the Company's system.
Tenaska Marketing Ventures (TMV), a partnership with Tenaska, Inc., is located in Omaha, Nebraska. TMV provides a full range of natural gas related services to industrial and utility customers, with primary emphasis on owners of natural gas-fired electric generation.
WindRiver Power Company, a joint venture of Energy Services and KENETECH Windpower, was formed to develop, market and operate wind-powered electric generation in an exclusive nine-state midwestern region.
InterCoast Capital Company (InterCoast Capital), with custodial and operational management based in Wilmington, Delaware, manages InterCoast's financial investments. Such investments consist primarily of investment grade marketable securities. InterCoast Capital also has investments in aircraft leases, special purpose funds and real estate. InterCoast Capital's total financial investments at December 31, 1993 and 1992 were $332.1 million and $335 million, respectively.
InterCoast Capital's marketable securities portfolio, totaling $233.4 million and $234.8 million at December 31, 1993 and 1992, respectively, focuses on energy securities consisting primarily of preferred stocks issued by utility companies. All such preferred stocks have been issued by companies having investment grade senior debt ratings by Moody's or Standard & Poor's. In addition to the preferred stocks, InterCoast Capital has investments in an independently managed high-yield fund and in the common stock of a business engaged in the exploration, development, acquisition and production of oil and gas in off- shore Gulf of Mexico.
InterCoast Capital has equity participations in equipment leases for passenger and freight transport aircraft. Such investments totaled $56.6 million and $54.6 million at December 31, 1993 and 1992, respectively. InterCoast Capital also had invested $3.3 million and $4.2 million at December 31, 1993 and 1992, respectively, in safe harbor leases under the provisions of the Economic Recovery Tax Act of 1981, as amended. Such safe harbor lease transactions are considered leases for income tax purposes only.
InterCoast Capital has equity interests in special purpose funds that invest in venture capital and leveraged buyout opportunities totaling $36 million and $35.7 million at December 31, 1993 and 1992, respectively.
InterCoast Capital has interests in three real estate partnerships totaling $2.8 million and $2.7 million at December 31, 1993 and 1992, respectively.
Item 2.
Item 2. Properties
The Company's utility properties consist of physical assets necessary and appropriate to rendering electric and gas service in its service territories.
Electric property may be classified principally as distribution, transmission or generation.
Gas property consists principally of distribution plant, including feeder lines to communities served from natural gas pipelines owned by others.
The following table sets forth certain information with respect to the Company's accredited 1993 summer net generating capacity. All electric energy generated by the Company is 60- cycle alternating current, and the Company's generating units are steam turbine, combustion turbine, and hydro.
Year Nameplate Total Summer Placed Ratings of Nameplate Net In Generators Rating Capacity Station Service in KW In KW in KW Fuel
Quad-Cities 1972 207,079(1) 414,158(1) 384,750(1) Nuclear Nuclear 207,079(1) Power Station Cordova, Illinois
Neal Station, 1975 159,445(2) 159,445(2) 149,350(2) Coal Unit No. 3, Sergeant Bluff, Iowa
Council 1978 235,175(3) 235,175(3) 218,700(3) Coal Bluffs Station, Unit No. 3, Council Bluffs, Iowa
Ottumwa 1981 134,282(4) 134,282(4) 130,980(4) Coal Station, Chillicothe, Iowa
Louisa 1983 317,379(5) 317,379(5) 279,500(5) Coal Station, Fruitland, Iowa
Riverside 1949 5,000 141,000 135,000 Coal-Gas Station, 1961 136,000 Bettendorf, Iowa
Moline 1970 4 @ 18,000 72,000 64,000 Gas-Oil Station, 1941-42 4 @ 900 3,600 3,200 Hydro Moline, Illinois
Coralville 1970 4 @ 18,000 72,000 64,000 Gas-Oil Station, Coralville, Iowa
1,549,039 1,429,480
(1) Company's share (25%) of jointly owned station with Edison (operator of the station). Station has two units each having a generator nameplate rating of 828,315 KW (920,350 KVA at 0.90 power factor).
(2) Company's share (29%) of jointly owned unit with Midwest Power Systems Inc. (operator of the unit) and IES Utilities, Inc. Unit has a generator nameplate rating of 549,810 KW (610,900 KVA at 0.90 power factor).
(3) Company's share (32.4%) of jointly owned unit with Midwest Power Systems Inc. (operator of the unit), Cedar Falls Municipal Electric Utility, Central Iowa Power Cooperative, Corn Belt Power Cooperative, Inc., and Atlantic Municipal Utilities. Unit has a generator nameplate rating of 725,850 KW (806,500 KVA at 0.90 power factor).
(4) Company's share (18.5%) of jointly owned unit with IES Utilities, Inc. (operator of the unit) and Midwest Power Systems Inc. Unit has a generator nameplate rating of 725,850 KW (806,500 KVA at 0.90 power factor).
(5) Company's share (43%) of jointly owned station with Midwest Power Systems Inc., Central Iowa Power Cooperative, Interstate Power Company, the city of Geneseo, Illinois and the cities of Waverly, Harlan, Tipton and Eldridge, Iowa. Station has one unit with a generator nameplate rating of 738,090 KW (820,100 KVA at 0.90 power factor). The Company is the operator of this station.
The electric system of the Company at December 31, 1993 included 305 miles of 345-kV transmission lines, 381 miles of 161-kV lines and 281 miles of 69-kV lines. Distribution lines included 14,086 miles of overhead conductor and 1,457 miles of underground conductor at December 31, 1993.
The gas distribution facilities of the Company at December 31, 1993 included 4,223 miles of gas mains.
Substantially all of the fixed utility property and franchises of the Company, consisting principally of electric generating plants, electric transmission and distribution lines and systems, gas feeder and distribution lines and systems and buildings, are subject to the lien of the Company's Indenture of Mortgage and Deed of Trust dated as of March 1, 1947, as amended and supplemented, relating to its First Mortgage Bonds.
The Company's principal plants and properties, insofar as they constitute real estate, are owned in fee, except for minor encroachments and other inconsequential defects of title not interfering, in the opinion of counsel for the Company, with the Company's operations or use of its property. The Company's electric and gas distribution facilities and its electric transmission lines (which constitute a substantial portion of the Company's investment in physical property) are located over and under streets, alleys, highways and other public places or on property owned by others for which permits, grants, easements and licenses (deemed satisfactory but without examination of underlying land titles) have been obtained. Some of the Company's overhead lines and appurtenant equipment are attached to poles owned by others pursuant to contractual arrangements and certain transformer vaults and other property are located in buildings owned by others.
Item 3.
Item 3. Legal Proceedings
See Item 1. Business for discussion of rate and environmental matters.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of 1993.
Item 4a. Executive Officers of the Registrant
Age at Position Incumbent Dec. 31, 1993
Chairman and President S. J. Bright (a) 53 Senior Vice President W. T. Green (b) 61 Vice President T. L. Christensen (c) 60 Vice President-Finance and Chief Financial Officer L. E. Cooper (d) 50 Vice President B. E. Gale (e) 42 Vice President S. E. Hollonbeck (f) 43 Vice President D. J. Levy (g) 39 Vice President S. E. Shelton 46 Vice President R. W. Stepien (h) 47 Controller P. E. Burks (i) 58 Secretary and Treasurer K. M. Giger (j) 35 President and Chief Operating Officer, InterCoast Energy Company D. C. Heppermann (k) 50
All incumbents have held their respective positions for at least five years, except where noted. Officers are elected annually by the Board of Directors.
(a) Elected May 1, 1991. Prior to that time Mr. Bright was President and Chief Operating Officer (elected effective April 1, 1990) and Vice President-Finance and Chief Financial Officer (elected effective September 1, 1986).
(b) Mr. Green retired on January 31, 1994.
(c) Mr. Christensen retired on January 31, 1994.
(d) Elected effective October 9, 1991. Prior to that time Mr. Cooper was Vice President-Control, Atlantic City Electric Company.
(e) Elected effective January 23, 1992. Prior to that time Mr. Gale was General Counsel, Associate General Counsel, Assistant General Counsel and Attorney.
(f) Elected effective April 1, 1990. Prior to that time Mr. Hollonbeck was Manager, Gas Department and Manager, Gas Supply and System Design.
(g) Elected effective July 1, 1993. Prior to that time Mr. Levy was Director, Energy Services and Director, Marketing and Industrial Engineering.
(h) Elected effective August 15, 1990. Prior to that time Mr. Stepien was Manager for International Parts and Service After Market Sales of General Electric Company.
(i) Elected effective April 1, 1990. Prior to that time Mr. Burks was Director, Accounting.
(j) Elected effective January 23, 1992. Prior to that time Mr. Giger was Director, Corporate Tax (appointed January 16, 1990). Previous to that position Mr. Giger was a Senior Manager for Price Waterhouse.
(k) Elected effective June 1, 1990. Prior to that time Mr. Heppermann was Vice President and Treasurer of Pinnacle West Capital Corporation. Previous to that position, he was Vice President-Finance and Administration with Enron Corporation.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Incorporated by reference to the caption "Shareholders of Record (1993)" on page 43 and "Stock Listings" on page 45 of the Company's Annual Report to Shareholders for 1993. This information is also included in Exhibit 13.A.1 to this Form 10-K.
The quarterly high and low prices for the Company's Common Shares as reported on the New York Stock Exchange Composite Transactions Tape for the years 1993 and 1992 are as follows:
1993 High Low 1992 High Low
1st Quarter $22.88 $19.25 1st Quarter $26.25 $23.50 2nd Quarter 23.75 22.38 2nd Quarter 25.00 23.75 3rd Quarter 26.63 23.63 3rd Quarter 24.88 23.50 4th Quarter 26.38 22.63 4th Quarter 24.75 21.38
The $1.73 per Common Share annual dividend was paid quarterly in 1993 and 1992.
Item 6.
Item 6. Selected Financial Data
Incorporated by reference to the following captions for the years 1989-1993 on page 43 of the Company's Annual Report to Shareholders for 1993:
(1) Utility Revenues (2) Net Income (3) Net Income on Common Shares (4) Common Share Statistics-Earnings per Share (5) Total Assets (6) Capitalization (7) Common Share Statistics-Annual Dividend Rate at December 31
This information is also included in Exhibit 13.A.2 to this Form 10-K.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Incorporated by reference to pages 21-25 of the Company's Annual Report to Shareholders for 1993. This information is also included in Exhibit 13.A.3 to this Form 10-K.
Item 8.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to pages 26-42 of the Company's Annual Report to Shareholders for 1993. This information is also included in Exhibit 13.A.4 to this Form 10-K.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Information relating to directors is incorporated by reference to pages 2-5 of the Company's Proxy Statement dated March 16, 1994. Information relating to executive officers is set forth in Part I, Item 4a. of this Annual Report of Form 10-K.
Item 11.
Item 11. Executive Compensation
Incorporated by reference to: the third paragraph of page 5, page 6 -- "Executive Compensation" and pages 7-10 -- "Long- Term Incentive Plan (LTIP) Awards Table", "Pension Plan", "Supplemental Retirement Plan for Designated Officers" and "Severance Plan" of the Company's Proxy Statement dated March 16, 1994.
Item 12.
Item 12. Principal Holders of Voting Securities and Security Ownership of Management
Incorporated by reference to pages 2 and 5 of the Company's Proxy Statement dated March 16, 1994.
Item 13.
Item 13. Certain Relationships and Related Transactions
NONE
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
The following financial statements, incorporated herein by reference, are included in the Company's 1993 Annual Report to Shareholders:
Page No. in 1993 Annual Report to Share- holders
26 Consolidated statements of income for the three years ended December 31, 1993
27,28 Consolidated balance sheets and statements of capitalization as of December 31, 1993 and 1992
29,30 Consolidated statements of cash flows and retained earnings for the three years ended December 31,
31-41 Notes to consolidated financial statements
42 Independent Auditors' Report
(2) Financial statement schedules
The following schedules are included herein: Page No. of this Annual Report on Form 10-K
31 Independent Auditors' Report - 1993
32 Report of Independent Public Accountants - 1992
33 Report of Independent Public Accountants - 1992
34 I Marketable Securities - Other Investments at December 31, 1993.
35-37 V Utility plant at original cost including intangibles for the years ended December 31, 1993, 1992 and 1991.
38 VI Accumulated depreciation and amortization of utility plant, including intangibles, for the years ended December 31, 1993, 1992 and 1991.
39 VIII Valuation and qualifying accounts for the years ended December 31, 1993, 1992 and 1991.
40 X Supplementary income statement information for the three years ended December 31, 1993, 1992 and 1991.
41 XIII Other Investments, at December 31, 1993.
All other schedules have been omitted as not applicable or not required or because the information required to be shown therein is included in the financial statements or notes thereto.
(3) Exhibits
See Exhibit Index on pages 44 through 49.
(b) No reports on 8-K were filed in the fourth quarter.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of Iowa-Illinois Gas and Electric Company:
We have audited the consolidated financial statements of Iowa- Illinois Gas and Electric Company as of December 31, 1993 and for the year then ended, and have issued our report thereon dated January 26, 1994; such financial statements and report are included in your 1993 Annual Report to Shareholders and are incorporated herein by reference. Our audit also included the financial statement schedules of Iowa-Illinois Gas and Electric Company as of and for the year ended December 31, 1993, listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/Deloitte & Touche Deloitte & Touche
Davenport, Iowa January 26, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Iowa-Illinois Gas and Electric Company:
We have audited the consolidated balance sheet and statement of capitalization of Iowa-Illinois Gas and Electric Company (an Illinois corporation) and Subsidiary Company as of December 31, 1992, and the related consolidated statements of income, retained earnings and cash flows for each of the two years in the period ended December 31, 1992. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Iowa-Illinois Gas and Electric Company and Subsidiary Company as of December 31, 1992, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1992, in conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN & CO. ARTHUR ANDERSEN & CO.
Chicago, Illinois January 28, 1993
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Iowa-Illinois Gas and Electric Company:
We have audited in accordance with generally accepted auditing standards, the consolidated balance sheet and statement of capitalization of Iowa-Illinois Gas and Electric Company and Subsidiary Company as of December 31, 1992, and the related consolidated statements of income, retained earnings and cash flows for each of the two years in the period ended December 31, 1992, included in the Company's annual report to shareholders incorporated by reference in this form 10-K, and have issued our report thereon dated January 28, 1993.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in Item 14(a)(2) as of December 31, 1992, and for the two years then ended are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These financial statement schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ARTHUR ANDERSEN & CO. ARTHUR ANDERSEN & CO.
Chicago, Illinois January 28, 1993
SCHEDULE I
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
MARKETABLE SECURITIES - OTHER INVESTMENTS
December 31, 1993 (In Thousands)
Column A Column B Column C
Amount carried on Type of Investment (Denotes Senior Debt Rating of Issuer) Market Value Balance Sheet (Cost)
Sinking fund preferred stocks Preferred stocks (between A- and A) $ 14,751 $ 14,182
Preferred stocks (between BBB- and BBB+) 26,300 25,826
Total sinking fund preferred stocks 41,051 40,008
Adjustable rate preferred stocks 4,202 3,996
Common Stocks 7,675 3,154
Professionally managed preferred stock programs Sinking fund preferred stocks Preferred stocks (between A and AA+) 11,808 11,354
Preferred stocks (between A- and AA-) 35,168 33,567
Preferred stocks (between BBB and BBB+) 12,341 12,005
Perpetual preferred stocks Preferred stocks (between AA and AA+) 24,457 23,754
Preferred stocks (A) 33,287 32,425
Preferred stocks (between A- and AA-) 18,982 18,191
Preferred stocks (between BBB and BBB+) 17,323 16,952
Futures/options 2,688 9,053
Adjustable rate preferred stocks 10,613 9,933
Money market investments 7,097 7,097
Total preferred stock programs 173,764 174,331
Mutual funds 12,421 11,897
Total marketable securities $239,113 $233,386
Debt ratings on the preferred stocks are based on the Standard and Poor published senior debt ratings. /TABLE
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY SCHEDULE V UTILITY PLANT AT ORIGINAL COST INCLUDING INTANGIBLES Page 1 of 3 FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F
Transfers Retirements Reclassifications Balance Additions at at Original and Nuclear Fuel Balance Classification Dec. 31, 1992 Original Cost Cost Amortization Dec. 31, 1993
ELECTRIC PLANT Intangible plant $2,916,248 $1,849,438 $0 ($350,653) $4,415,033 Production plant 620,465,837 26,886,892 2,947,415 29,298 644,434,612 Transmission plant 146,001,264 9,120,576 1,360,929 291,024 154,051,935 Distribution plant 262,450,311 25,701,207 3,089,668 637,189 285,699,039 General plant 49,030,617 9,815,411 2,464,717 (262,150) 56,119,161 Plant held for future use 1,987,347 592 0 0 1,987,939 Completed construction not classified 152,423,973 (19,431,623) 0 0 132,992,350
Subtotal plant in service $1,235,275,597 $53,942,493 $9,862,729 $344,708 $1,279,700,069 Construction work in progress 29,882,363 (10,764,922) 0 0 19,117,441
Total electric plant $1,265,157,960 $43,177,571 $9,862,729 $344,708 $1,298,817,510
GAS PLANT Intangible plant $1,298,496 $1,529,099 $5,126 ($179,347) $2,643,122 Manufactured gas production plant 0 0 0 0 0 Natural gas storage plant 2,055,138 (9,762) 220,780 0 1,824,596 Distribution plant 195,862,464 13,010,949 2,436,630 61,400 206,498,183 General plant 29,371,408 5,824,540 2,544,390 (226,761) 32,424,797 Plant held for future use 0 0 0 0 0 Completed construction not classified 23,988,513 (4,423,987) 0 0 19,564,526 Gas leases 8,386,899 0 0 0 8,386,899
Subtotal plant in service $260,962,918 $15,930,839 $5,206,926 ($344,708) $271,342,123 Construction work in progress 2,658,776 1,014,656 0 0 3,673,432
Total gas plant $263,621,694 $16,945,495 $5,206,926 ($344,708) $275,015,555
NUCLEAR FUEL , NET $38,114,457 $6,794,284 $0 ($19,789,105) $25,119,636
TOTAL UTILITY PLANT, AT ORIGINAL COST $1,566,894,111 $66,917,350 $15,069,655 ($19,789,105) $1,598,952,701 INCLUDING INTANGIBLES
( ) Denotes negative figure
Net of transfers to plant-in-service.
Of this amount $7,989,105 represents amortization of nuclear fuel. /TABLE
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY SCHEDULE V UTILITY PLANT AT ORIGINAL COST INCLUDING INTANGIBLES Page 2 of 3 FOR THE YEAR ENDED DECEMBER 31, 1992
Column A Column B Column C Column D Column E Column F
Transfers Retirements Reclassifications Balance Additions at at Original and Nuclear Fuel Balance Classification Dec. 31, 1991 Original Cost Cost Amortization Dec. 31, 1992
ELECTRIC PLANT Intangible plant $1,926,133 $991,100 $0 ($985) $2,916,248 Production plant 617,462,336 3,808,724 841,678 36,455 620,465,837 Transmission plant 149,089,601 827,825 3,916,162 0 146,001,264 Distribution plant 255,091,214 10,883,624 3,634,170 109,643 262,450,311 General plant 46,836,890 4,140,292 2,123,099 176,534 49,030,617 Plant held for future use 2,092,985 0 0 (105,638) 1,987,347 Completed construction not classified 138,841,932 13,582,041 0 0 152,423,973
Subtotal plant in service $1,211,341,091 $34,233,606 $10,515,109 $216,009 $1,235,275,597 Construction work in progress 20,006,999 9,875,364 0 0 29,882,363
Total electric plant $1,231,348,090 $44,108,970 $10,515,109 $216,009 $1,265,157,960
GAS PLANT Intangible plant $1,028,978 $269,361 $828 $985 $1,298,496 Manufactured gas production plant 0 0 0 0 0 Natural gas storage plant 2,189,268 59,714 193,844 0 2,055,138 Distribution plant 185,620,377 11,858,709 1,616,622 0 195,862,464 General plant 27,899,506 3,600,517 1,911,620 (216,995) 29,371,408 Plant held for future use 0 0 0 0 0 Completed construction not classified 20,208,834 3,779,679 0 0 23,988,513 Gas leases 8,386,899 0 0 0 8,386,899
Subtotal plant in service $245,333,862 $19,567,980 $3,722,914 ($216,010) $260,962,918 Construction work in progress 1,506,055 1,152,721 0 0 2,658,776
Total gas plant $246,839,917 $20,720,701 $3,722,914 ($216,010) $263,621,694
NUCLEAR FUEL, NET $24,861,269 $21,112,676 $0 ($7,859,488) $38,114,457
TOTAL UTILITY PLANT, AT ORIGINAL COST $1,503,049,276 $85,942,347 $14,238,023 ($7,859,489) $1,566,894,111 INCLUDING INTANGIBLES
( ) Denotes negative figure
Net of transfers to plant-in-service.
Represents amortization of nuclear fuel.
/TABLE
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY SCHEDULE V UTILITY PLANT AT ORIGINAL COST INCLUDING INTANGIBLES Page 3 of 3 FOR THE YEAR ENDED DECEMBER 31, 1991
Column A Column B Column C Column D Column E Column F
Transfers Retirements Reclassifications Balance Additions at at Original and Nuclear Fuel Balance Classification Dec. 31, 1990 Original Cost Cost Amortization Dec. 31, 1991
ELECTRIC PLANT Intangible plant $1,420,908 $514,164 $8,608 ($331) $1,926,133 Production plant 614,105,105 4,254,208 936,977 40,000 617,462,336 Transmission plant 145,661,188 3,727,377 298,964 0 149,089,601 Distribution plant 245,946,002 11,091,025 1,945,813 0 255,091,214 General plant 48,810,136 3,043,276 5,901,407 884,885 46,836,890 Plant held for future use 2,079,300 13,685 0 0 2,092,985 Completed construction not classifie 115,944,841 22,897,091 0 0 138,841,932
Subtotal plant in service $1,173,967,480 $45,540,826 $9,091,769 $924,554 $1,211,341,091 Construction work in progress 24,415,554 (4,408,555) 0 0 20,006,999
Total electric plant $1,198,383,034 $41,132,271 $9,091,769 $924,554 $1,231,348,090
GAS PLANT Intangible plant $426,929 $610,669 $8,951 $331 $1,028,978 Manufactured gas production plant 0 0 0 0 0 Natural gas storage plant 2,366,024 0 176,756 0 2,189,268 Distribution plant 180,047,651 7,017,432 1,444,706 0 185,620,377 General plant 28,127,405 3,342,406 2,645,420 (924,885) 27,899,506 Plant held for future use 15,054 0 15,054 0 0 Completed construction not classifie 15,442,189 4,766,645 0 0 20,208,834 Gas leases 8,386,899 0 0 0 8,386,899
Subtotal plant in service $234,812,151 $15,737,152 $4,290,887 ($924,554) $245,333,862 Construction work in progress 2,885,135 (1,379,080) 0 0 1,506,055
Total gas plant $237,697,286 $14,358,072 $4,290,887 ($924,554) $246,839,917
NUCLEAR FUEL, NET $27,530,404 $6,162,571 $0 ($8,831,706) $24,861,269
TOTAL UTILITY PLANT, AT ORIGINAL COST $1,463,610,724 $61,652,914 $13,382,656 ($8,831,706) $1,503,049,276 INCLUDING INTANGIBLES
( ) Denotes negative figure
Net of transfers to plant-in-service.
Represents amortization of nuclear fuel.
/TABLE
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
ACCUMULATED DEPRECIATION AND AMORTIZATION OF UTILITY PLANT, INCLUDING INTANGIBLES SCHEDULE VI
Column A Column B Column C Column D Column E Column F
Retirements Other Removal Balance Additions Cost and Charged to Balance Beginning Charged to At Original Salvage Clearing Transfers and End Description of Period Expense Cost (Net) Accounts Reclassifications of Period
YEAR ENDED DECEMBER 31, 1993
Electric Plant$451,247,134 $42,434,588 ($9,903,767) ($4,301,836) $1,995,610 $1,705,508 $483,177,237 Gas Plant 117,856,373 8,267,962 (4,990,383) (950,654) 2,155,942 191,929 122,531,169
$569,103,507 $50,702,550 ($14,894,150) ($5,252,490) $4,151,552 $1,897,437 $605,708,406
YEAR ENDED DECEMBER 31, 1992
Electric Plant$422,229,994 $41,267,627 ($10,149,241) ($4,439,135) $1,875,826 $462,063 $451,247,134 Gas Plant 111,962,076 7,704,834 (3,065,145) (668,805) 1,808,191 115,222 117,856,373
$534,192,070 $48,972,461 ($13,214,386) ($5,107,940) $3,684,017 $577,285 $569,103,507
YEAR ENDED DECEMBER 31, 1991
Electric Plant$391,120,876 $39,593,000 ($8,705,501) ($2,180,464) $1,895,002 $507,081 $422,229,994 Gas Plant 108,259,227 7,205,583 (4,099,077) (102,873) 1,470,951 (771,735) 111,962,076
$499,380,103 $46,798,583 ($12,804,578) ($2,283,337) $3,365,953 ($264,654) $534,192,070
( ) Denotes negative figure.
/TABLE
SCHEDULE VIII
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
Balance Additions Balance Beginning Charged to End of Description of Period Income Deductions Period
YEAR ENDED DECEMBER 31, 1993
ACCUMULATED PROVISION DEDUCTED FROM APPLICABLE ASSETS: Uncollectible Accounts $1,171,314 $882,951 ($889,268) $1,164,997
ACCUMULATED PROVISIONS NOT DEDUCTED FROM ASSETS: Property Insurance 2,426,440 134,845 2,561,285 Injuries and Damages 741,663 591,998 (359,122) 974,539
YEAR ENDED DECEMBER 31, 1992
ACCUMULATED PROVISION DEDUCTED FROM APPLICABLE ASSETS: Uncollectible Accounts $1,149,069 $825,283 ($803,038) $1,171,314
ACCUMULATED PROVISIONS NOT DEDUCTED FROM ASSETS: Property Insurance 2,605,000 43,000 (221,560) 2,426,440 Injuries and Damages 795,943 671,860 (726,140) 741,663
YEAR ENDED DECEMBER 31, 1991
ACCUMULATED PROVISION DEDUCTED FROM APPLICABLE ASSETS: Uncollectible Accounts $1,099,930 $1,290,492 ($1,241,353) $1,149,069
ACCUMULATED PROVISIONS NOT DEDUCTED FROM ASSETS: Property Insurance 2,805,000 (200,000) 2,605,000 Injuries and Damages 1,105,681 480,112 (789,850) 795,943
/TABLE
SCHEDULE X
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
SUPPLEMENTARY INCOME STATEMENT INFORMATION
The amounts of maintenance and repairs, depreciation, taxes other than income taxes, royalties and advertising costs, other than those set forth in the Consolidated Statements of Income or mentioned below, are not significant.
Column B Column A Charged to Costs and Expenses Item Year Ended December 31,
1993 1992 1991
Real and personal property taxes $20,230,469 $21,744,317 $20,258,618
Illinois utility taxes 6,631,286 5,970,291 6,338,327
/TABLE
SCHEDULE XIII IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
OTHER INVESTMENTS
December 31, 1993 (In Thousands)
Column A Column B Column C
Original Cost of Each Amount Carried Type of Investment Investment on Balance Sheet
Oil and gas properties
Exploratory $ 29,251 $ 29,251 Developmental 18,768 18,768 Reserve Acquisition 98,737 98,737 Accumulated depreciation, depletion and amortization (25,804)
Total oil and gas properties 146,756 120,952
Energy projects 31,949 30,185
Synergics, Inc. 16,448 13,410
Equity investments in developing companies 4,019 4,019
Tenaska Marketing Ventures 1,747 1,163
Equipment leases Leveraged leases
Boeing 737-300 passenger aircraft leased to United Airlines (two aircraft) 15,878 23,082
Boeing 747-200F airfreighter leased to Federal Express Corporation 17,021 23,760
British Aerospace 146-200 aircraft leased to Jet Acceptance Corporation (two aircraft) 7,208 9,772
Safe harbor leases involving mass transit equipment 9,478 3,323
Total equipment leases 49,585 59,937
Special purpose funds 26,544 23,295
Collateralized bond obligations 8,160 12,726
Real estate 6,941 2,756
Total other investments $292,149 $268,443
Number of shares or units is not assignable to these investments. Market values are either not readily available or approximate the carrying amounts.
/TABLE
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
March 25, 1994 By /s/L. E. Cooper L. E. Cooper Vice President-Finance and CFO
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/S. J. Bright Chairman, President, Chief S. J. Bright Executive Officer and Director (Principal executive officer) March 25, 1994
/s/L. E. Cooper Vice President-Finance, Chief L. E. Cooper Financial Officer and Director (Principal financial officer) March 25, 1994
/s/P. E. Burks Controller March 25, 1994 P. E. Burks (Principal accounting officer)
/s/John W. Colloton Director March 25, 1994 John W. Colloton
/s/Frank S. Cottrell Director March 25, 1994 Frank S. Cottrell
/s/William C. Fletcher Director March 25, 1994 William C. Fletcher
/s/Mel Foster, Jr. Director March 25, 1994 Mel Foster, Jr.
Signature Title Date
/s/Nancy L. Seifert Director March 25, 1994 Nancy L. Seifert
/s/S. E. Shelton Director March 25, 1994 S. E. Shelton
/s/W. Scott Tinsman Director March 25, 1994 W. Scott Tinsman
/s/L. L. Woodruff Director March 25, 1994 Leonard L. Woodruff