ITEM 2. PROPERTIES
Gas. PG&W's gas system consists of approximately 2,159 miles of distribution lines, nine city gate and 67 major regulating stations and miscellaneous related and additional property. PG&W believes that its gas utility properties are adequately maintained and in good operating condition in all material respects. Continued expenditures will, however, be required with regard to PG&W's on-going valve maintenance program. See "Business-Gas Business-Valve Maintenance."
Most of PG&W's gas utility properties are subject to mortgage liens securing certain funded debt. These properties are subject to a first mortgage lien pursuant to the Indenture of Mortgage and Deed of Trust dated as of March 15, 1946, as supplemented by twenty-eight supplemental indentures (collectively, the "Indenture") from PG&W to Morgan Guaranty Trust Company of New York, as Trustee, and a second mortgage lien pursuant to a Subordinate Open End Mortgage, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, dated as of September 10, 1991 (the "Intercreditor Mortgage"), from PG&W to Swiss Bank Corporation, New York Branch ("SBC"), as Collateral Agent, which secures PG&W's obligations under the Letter of Credit Agreement dated as of December 1, 1987, as amended, between PG&W and SBC.
Water. PG&W's water system consists principally of 43 active and standby reservoirs and stream intakes, ten water treatment plants, various distribution system storage tanks, approximately 1,675 miles of aqueducts and pipelines, and miscellaneous related and additional property. In addition, PG&W owns approximately 53,000 acres of land situated in northeastern Pennsylvania, approximately 70% of which is used in connection with its water utility operations.
From time to time, PG&W engages in the sale of non-watershed land and other physical property. Proposed legislation in Pennsylvania, if enacted, would require water utilities to obtain the PPUC's prior approval for the transfer of any watershed land (as defined) and would require the PPUC to credit to ratepayers 50% of the net proceeds (as defined) of any sale, lease or other transfer of such land permitted by the PPUC. PG&W currently anticipates that it will realize average gross profits of approximately $600,000 per year through 1996 from sales of non-watershed land and other physical property. Sales on non-watershed lands and other physical property would not be subject to the proposed legislation; however, there can be no assurance that the proceeds ultimately received will inure exclusively to the benefits of PEI's shareholders.
In PG&W's opinion, its water utility properties are adequately maintained and in good operating condition in all material respects. Continued capital expenditures will nonetheless be required for PG&W's on-going program of water main replacement and rehabilitation and other improvements to ensure the integrity of PG&W's distribution system. See "Business-Water Business-Main Replacement and Rehabilitation Program and Other Distribution System Improvements."
Most of PG&W's water utility properties are subject to mortgage liens securing certain funded debt. These water utility properties are subject to a first mortgage lien pursuant to the Indenture. Additionally, certain of these properties are subject to a second mortgage lien (the "PENNVEST Mortgage") pursuant to a loan agreement, dated October 16, 1987, between PG&W and the Pennsylvania Water Facilities Loan Board and pursuant to loan agreements, dated March 3, 1989, December 3, 1992, and April 5, 1993, between PG&W and the
Pennsylvania Infrastructure Investment Authority, which were primarily used to finance the construction of certain water facilities. These properties are also subject to a second or third mortgage lien (depending on whether they are subject to the PENNVEST Mortgage) pursuant to the Intercreditor Mortgage.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Construction Litigation
On April 22, 1992, a complaint was filed in the Court of Common Pleas of Lackawanna County, Pennsylvania, by the Quandel Group Inc. ("Quandel") against PG&W in connection with the construction of PG&W's Brownell Water Treatment Plant. In its complaint, Quandel, the general contractor for the project, made various allegations and sought approximately $1.3 million in damages, plus interest. PG&W answered the complaint and also filed a counterclaim against Quandel seeking approximately $1.6 million in damages and expenses for failure of Quandel to complete construction of the Brownell Water Treatment Plant in a timely and proper manner. Also, PG&W joined Gannett-Fleming Water Resources Engineers, Inc. (Gannett-Fleming), the designer of the project, as an additional defendant in this action. On January 25, 1994, Quandel and PG&W reached an agreement settling Quandel's claim against PG&W and PG&W's counterclaim against Quandel on terms that had no material impact on PG&W's results of operations or financial position. Additionally, as part of this settlement, Quandel agreed to indemnify PG&W for any liability arising out of Quandel's claim against Gannett-Fleming in this action, which is still pending, or otherwise relating to the construction of the Brownell Water Treatment Plant.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1993, there were no matters submitted to a vote of security holders of the registrant through the solicitation of proxies or otherwise.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Registrant's common stock is owned entirely by PEI and is not traded.
The dividends per share of common stock paid by PG&W during the years ended December 31, 1992 and 1993, were as follows: [CAPTION] 1992 1993 [S] [C] [C] First quarter $ .705 $ .7100 Second quarter .670 .7100 Third quarter .705 .7100 Fourth quarter .460 .6925 Total $ 2.540 $2.8225
Information relating to restriction on the payment of dividends by PG&W is set forth in Note 7 to the Financial Statements in Item 8 of this Form 10-K.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table expresses certain items in PG&W's Statements of Income contained in Item 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of PG&W and the report of independent public accountants thereon are presented on pages 42 through 71 of this Form 10-K.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pennsylvania Gas and Water Company:
We have audited the accompanying balance sheets and statements of capitalization of Pennsylvania Gas and Water Company (the "Company") (a Pennsylvania corporation and a wholly-owned subsidiary of Pennsylvania Enterprises, Inc.) as of December 31, 1993 and 1992, and the related statements of income, common shareholder's investment, and cash flows for each of the three years in the period ended December 31, 1993. 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 Pennsylvania Gas and Water Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 9, effective January 1, 1993, the Company changed its method of accounting for income taxes and postretirement benefits other than pensions pursuant to standards promulgated by the Financial Accounting Standards Board.
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 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 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.
ARTHUR ANDERSEN & CO.
New York, N.Y. March 4, 1994
PENNSYLVANIA GAS AND WATER COMPANY
STATEMENTS OF INCOME
PENNSYLVANIA GAS AND WATER COMPANY
BALANCE SHEETS
PENNSYLVANIA GAS AND WATER COMPANY
BALANCE SHEETS
PENNSYLVANIA GAS AND WATER COMPANY
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of the financial statements.
PENNSYLVANIA GAS AND WATER COMPANY
STATEMENTS OF CAPITALIZATION
PENNSYLVANIA GAS AND WATER COMPANY
STATEMENTS OF COMMON SHAREHOLDER'S INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
PENNSYLVANIA GAS AND WATER COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pennsylvania Gas and Water Company ("PG&W"), a wholly-owned subsidiary of Pennsylvania Enterprises, Inc. ("PEI"), is a regulated public utility subject to the jurisdiction of the Pennsylvania Public Utility Commission ("PPUC") for rate and accounting purposes. PG&W has five wholly-owned subsidiaries: Penn Gas Development Co. and four small water companies, which have not been consolidated since they are insignificant. The equity method is used to account for PG&W's investment in these subsidiaries.
Utility Plant and Depreciation. Utility plant is stated at cost, which represents the original cost of construction, including payroll, administrative and general costs, an allowance for funds used during construction, and the plant acquisition adjustments. The plant acquisition adjustments represent the difference between the cost to PG&W of plant acquired as a system and the cost of such plant when first devoted to public service, and are primarily attributable to land, water rights and goodwill. Except for approximately $340,000 recorded in 1993 with respect to water plant, the plant acquisition adjustments relate to acquisitions made prior to October 31, 1970, and thus are not required to be amortized for financial reporting purposes since PG&W believes there has been no diminution in their value. Also, such plant acquisition adjustments are not being amortized, consistent with PPUC Orders. The plant acquisition adjustments of approximately $340,000 recorded in 1993 will be amortized over a ten-year period commencing on January 1, 1994, in accordance with the PPUC's December 15, 1993, Order regarding the increase in water rates for customers in the Spring Brook Water Rate Area served by the Ceasetown and Watres Water Treatment Plants.
The allowance for funds used during construction ("AFUDC") is defined as the net cost during the period of construction of borrowed funds used and a reasonable rate upon other funds when so used. Such allowance is charged to utility plant and reported as either other income, net (with respect to the cost of equity funds) or as a reduction of interest expense (with respect to the cost of borrowed funds) in the accompanying statements of income. AFUDC varies according to changes in the level of construction work in progress and in the sources and costs of capital. The weighted average rate for such allowance was approximately 9% in 1991, 7% in 1992 and 8% in 1993.
PG&W provides for depreciation on a straight-line basis for gas plant and all common plant. As of December 31, 1993, depreciation was provided on a straight-line basis for approximately 61% of the water plant and on a 4% compound interest method for the remainder of the water plant. Exclusive of transportation and work equipment, the annual provision for depreciation, as related to the average depreciable original cost of utility plant, resulted in the following percentages: [CAPTION] 1991 1992 1993 [S] [C] [C] [C] Gas 2.33% 2.51% 2.49% Water 1.42 1.57 1.71 Common 7.22 6.76 8.06
The increase in the annual rate of depreciation relative to water plant in both 1992 and 1993 reflects a change from the 4% compound interest method to the straight-line method of depreciation with respect to certain of that plant, as ordered by the PPUC. Such change in method of depreciation is generally being made as PG&W is allowed to initially increase its rates for customers receiving filtered water service.
Under the terms of the settlement discussed in Note 2 relative to the water rate increase approved by the PPUC on December 15, 1993, for customers in the Spring Brook Water Rate Area served by the Ceasetown and Watres Water Treatment Plants, PG&W will begin depreciating all water facilities located in the areas served by those plants on a straight-line basis effective January 1, 1994. This change is expected to increase the annual provision for depreciation by approximately $1.5 million and to increase the overall annual rate of depreciation with respect to water plant to approximately 2.21%.
When depreciable property is retired, the original cost of such property is removed from the utility plant accounts and is charged, together with the cost of removal less salvage, to accumulated depreciation. No gain or loss is recognized in connection with retirements of depreciable property, other than in the case of significant involuntary conversions or extraordinary retirements.
Revenues and Cost of Gas. PG&W bills its customers based on estimated or actual meter readings on a cycle basis. Gas customers and certain water customers, primarily large users, are billed monthly on a cycle that extends throughout the month. Other water customers are billed bi-monthly or quarterly on cycles that extend over the respective periods. The estimated unbilled amounts from the most recent meter reading dates through the end of the period being reported on are recorded as accrued revenues.
PG&W generally passes on to its customers increases or decreases in gas costs from those reflected in its tariff charges. In accordance with this procedure, PG&W defers any current under or over-recoveries of gas costs and collects or refunds such amounts in subsequent periods.
In accordance with an Order adopted by the PPUC on May 31, 1990, PG&W is recovering 90% of its total take-or-pay liabilities through the billing of a surcharge to customers generally over a four-year period beginning June 1, 1990. This surcharge is reflected as operating revenue and is offset by a corresponding charge to the cost of gas. The take-or-pay liabilities billed to PG&W, which will be recovered in future periods by means of such surcharge, are included in deferred cost of gas and supplier refunds, net. The cost of gas also includes that portion (i.e., 10%) of PG&W's take-or-pay liabilities which it has agreed to absorb in accordance with the PPUC's Order of May 31, 1990.
Deferred Charges. PG&W generally accounts for and reports its costs in accordance with the economic effect of rate actions by the PPUC. To this extent, certain costs are recorded as deferred charges pending their recovery in rates. Such deferred charges include, among other amounts, deferred treatment plant costs and carrying charges as discussed in Note 2, certain pre-operating costs relative to PG&W's water treatment plants, costs associated with the Early Retirement Plan as discussed in Note 9, and certain preliminary survey and investigation costs. These amounts either relate to previously-issued orders of the PPUC or are of a nature which, in the opinion of PG&W, will be recoverable in future rates, based on past actions of the PPUC or other relevant factors.
PG&W records, as deferred charges, the direct financing costs incurred in connection with the issuance of long-term debt and redeemable preferred stock and equitably amortizes such amounts over the life of such securities.
Cash and Cash Equivalents. For the purposes of the statements of cash flows, PG&W considers all highly liquid debt instruments purchased, which generally have a maturity of three months or less, to be cash equivalents. Such instruments are carried at cost, which approximates market value.
Income Taxes. The provision for income taxes consists of the following components: [CAPTION] 1991 1992 1993 (Thousands of Dollars) [S] [C] [C] [C] Included in operating expenses: Currently payable - Federal $ 2,328 $ 4,664 $ 5,644 State 570 1,888 1,917 Total currently payable 2,898 6,552 7,561 Deferred, net - Federal 2,454 2,512 2,535 State 263 (503) (851) Total deferred, net 2,717 2,009 1,684 Amortization of investment tax credits (256) (256) (256)
Total included in operating expenses 5,359 8,305 8,989
Included in other income, net: Currently payable - Federal 104 (29) (44) State (24) (26) (28) Total currently payable 80 (55) (72) Deferred, net - Federal (31) 39 (6) State 7 - - Total deferred, net (24) 39 (6)
Total included in other income, net 56 (16) (78)
Total provision for income taxes $ 5,415 $ 8,289 $ 8,911
Deferred income taxes result from timing differences in the recognition of revenues and expenses for tax and accounting purposes and, with respect to elements of operating income, are recorded consistent with the treatment allowed by the PPUC for ratemaking purposes. The source of these timing differences and the tax effect of each is as follows: [CAPTION] 1991 1992 1993 (Thousands of Dollars) [S] [C] [C] [C] Excess of tax depreciation over depreciation for accounting purposes $ 2,441 $ 2,502 $ 3,214 Deferred treatment plant costs, net 982 585 1,458 Take-or-pay costs, net (222) (446) (1,126) Other, net (508) (593) (1,868) Total deferred taxes, net $ 2,693 $ 2,048 $ 1,678
Included in: Operating expenses $ 2,717 $ 2,009 $ 1,684 Other income, net (24) 39 (6) Total deferred taxes, net $ 2,693 $ 2,048 $ 1,678
The total provision for income taxes shown in the accompanying statements of income differs from the amount which would be computed by applying the statutory federal income tax rate to income before income taxes. The following table summarizes the major reasons for this difference: [CAPTION] 1991 1992 1993 (Thousands of Dollars) [S] [C] [C] [C] Income before income taxes $16,545 $21,245 $25,212 Tax expense at statutory federal income tax rate $ 5,625 $ 7,223 $ 8,824 Increases (reductions) in taxes resulting from - State income taxes, net of federal income tax benefit 795 1,161 935 Allowance for equity funds used during construction and equity component of deferred treatment plant carrying charges - - (545) Amortization of investment tax credits (256) (256) (256) Other, net (749) 161 (47)
Total provision for income taxes $ 5,415 $ 8,289 $ 8,911
Effective January 1, 1993, PG&W adopted the provisions of Financial Accounting Standards Board ("FASB") Statement 109, "Accounting for Income Taxes," which superseded previously issued income tax accounting standards. The adoption of FASB Statement 109 did not have a significant effect on PG&W's results of operations. In accordance with the provisions of FASB Statement 109, PG&W recorded as of January 1, 1993, an additional deferred tax liability and an asset, representing the probable future rate recovery of the previously unrecorded deferred taxes, primarily relating to certain temporary differences in the basis of utility plant which had not previously been recorded because of the regulatory rate practices of the PPUC. As of December 31, 1993, a total of $87.0 million in deferred income taxes, relating primarily to temporary differences involving utility plant and consisting of deferred tax liabilities of $95.6 million and deferred tax assets of $8.6 million, were so reflected in these financial statements in accordance with the requirements of FASB Statement 109.
(2) RATE MATTERS
Gas Utility Operations
Annual Gas Cost Adjustment. Pursuant to the provisions of the Pennsylvania Public Utility Code, which require that the tariffs of gas distribution companies, such as PG&W, be adjusted on an annual basis to reflect changes in their purchased gas costs, the PPUC ordered PG&W to make the following changes during 1991, 1992 and 1993 to the gas costs contained in its gas tariff rates: [CAPTION] Change in Calculated Effective Rate per MCF Increase (Decrease) Date From To in Annual Revenue [S] [C] [C] [C] December 1, 1991 $3.20 $2.46 $(20,800,000) December 1, 1992 2.46 2.79 9,500,000 December 1, 1993 2.79 3.74 28,800,000
The annual changes in gas rates on account of purchased gas costs have no effect on PG&W's earnings since the change in revenue is offset by a corresponding change in the cost of gas.
Recovery of Take-or-Pay Costs. On April 27, 1990, PG&W filed an application with the PPUC seeking approval to recover 90% ($13.9 million based on then current estimates) of its total take-or-pay liabilities, and $250,000 of related carrying costs, through billings to customers generally over a four-year period beginning June 1, 1990. The PPUC approved this application, effective June 1, 1990. In connection with this approval, PG&W agreed to absorb a portion of its take-or-pay liabilities. The amount to be so absorbed by PG&W is currently estimated to be $1.8 million, substantially all of which had been charged to expense as of December 31, 1993. As of December 31, 1993, PG&W had billed $14.8 million of take-or-pay costs to its customers and had deferred $1.1 million of such costs, including related carrying charges, for future billing to customers.
Under terms of the PPUC's Order in respect of take-or-pay obligations, the surcharge by which PG&W bills its customers for take-or-pay costs is to be adjusted annually as of June 1 to reflect changes in PG&W's total estimated liability for take-or-pay costs (which is currently projected to be as much as $18.1 million) and the portion of such costs remaining to be recovered from its customers. In accordance therewith, the PPUC approved an adjustment in PG&W's take-or-pay surcharge effective June 1, 1993, based on the estimated $3.5 million of take-or-pay costs that remained to be collected from its customers as of such date.
Water Rate Filings
Scranton Area Water Rate Increases. March, 1991, Increase. On June 8, 1990, PG&W filed an application with the PPUC seeking a water rate increase, designed to produce $25.5 million in additional annual revenue. This rate increase request involved the approximately 54,700 customers at such date who would be furnished water from the one previously existing and the four new water treatment plants in the Scranton Water Rate Area. In December, 1990, PG&W and certain parties filing objections to the rate increase request reached a settlement that provided for an approximate 110% rate increase designed to produce $15.0 million of additional annual revenue to be phased-in over a two- year period under the terms of a qualified phase-in plan, pursuant to FASB Statement 92 entitled "Regulated Enterprises-Accounting for Phase-in Plans." The settlement provided that $10.2 million of the increased revenue (an
approximate 75% increase in rates) was to be realized through an immediate rate increase and that the remaining $4.8 million of the increased revenue (an additional 35% increase in rates) was to be realized through another rate increase one year later (at the beginning of year two of the phase-in period). The settlement also specified that the $4.8 million in revenue that would be deferred during the first year of the phase-in period was to be collected from customers in the form of a surcharge in years two through ten of the phase-in period. By Order adopted March 22, 1991, the PPUC approved the settlement and permitted PG&W a water rate increase estimated to produce additional annual revenue of $15.0 million, effective March 23, 1991.
In accordance with the accounting requirements for a qualified phase-in plan as prescribed by FASB Statement 92, PG&W recorded a $1.2 million nonrecurring charge to earnings as of December 31, 1990, representing the estimated net present value of carrying charges on the $4.8 million of revenue to be deferred in the first year of the phase-in period. This charge was required because the terms of the settlement did not provide for the billing of any carrying charges on such deferred revenue. Additionally, in accordance with the provisions of FASB Statement 92, PG&W commenced recording the entire $15.0 million increase in annual revenue allowed by the PPUC as additional revenue beginning March 23, 1991. However, pursuant to the terms of the settlement, PG&W deferred the billing of $4.7 million of the increased revenue recorded during the first year of the phase-in period (i.e., the period March 23, 1991, through March 22, 1992). The amount so deferred was $100,000 less than the $4.8 million originally estimated because of slightly lower than anticipated consumption. Effective March 23, 1992, PG&W began to bill the $4.7 million that had been so deferred by means of the surcharge that will be in effect in years two through ten of the phase-in period, and as of December 31, 1993, $871,000 had been so billed to its Scranton Water Rate Area customers.
June, 1993, Increase. On September 25, 1992, PG&W filed an application with the PPUC seeking a water rate increase, designed to produce $9.9 million in additional annual revenue, to be effective November 24, 1992. This rate increase request involved the approximately 56,000 customers in PG&W's Scranton Water Rate Area at such date. On November 13, 1992, the PPUC suspended this rate increase for seven months (until June 24, 1993) in order to investigate the reasonableness of the proposed rates. By Order entered June 23, 1993, the PPUC rejected the proposed rate increase in its entirety "due to inadequate service" (i.e., water quality). However, by the same Order, the PPUC granted PG&W the alternative of a rate increase designed to produce an additional $5.0 million in annual revenue, provided that PG&W dedicate the entire increase to augment the improvements to its water distribution system until "...the demonstration by [PG&W] to [the PPUC] that it is providing adequate service." PG&W accepted this alternative and placed such $5.0 million rate increase into effect as of June 23, 1993.
On August 19, 1993, the PPUC approved a settlement agreement resolving certain disputed issues relating to its June 23, 1993, Order. This settlement agreement provided, among other things, for (i) modification by the PPUC of its June 23, 1993, Order to reduce the amount of the revenue increase that it ordered be dedicated to distribution system improvements by the related income taxes and other expenses and the $319,000 additional expense for retiree health care and life insurance benefits that the PPUC allowed PG&W in its revenues (which resulted in the requirement for an additional annual expenditure for distribution system improvements by PG&W of $2.5 million), (ii) the agreement by PG&W to spend a total of $4.9 million annually (an additional $2.5 million over its actual average annual expenditure of $2.4 million during the three-year period ended June 30, 1993) for distribution system improvements in the Scranton
Water Rate Area until the PPUC is satisfied that PG&W is providing adequate service, (iii) the modification by the PPUC of its June 23, 1993, Order to restore the Hollister Reservoir to PG&W's rate base, and (iv) the withdrawal by PG&W and the Office of Consumer Advocate (the "OCA") of their appeals to the Commonwealth Court of Pennsylvania regarding the PPUC's June 23, 1993, Order.
Spring Brook Water Rate Increases. Nesbitt Service Area. On April 30, 1991, PG&W filed an application with the PPUC seeking a water rate increase, designed to produce $2.6 million in additional annual revenue. This rate increase request involved the approximately 14,300 customers in the Spring Brook Water Rate Area at such date who were served exclusively by the Nesbitt Water Treatment Plant. PG&W and certain parties filing objections to the rate increase request reached a settlement that provided for a $1.9 million increase in annual revenue which the PPUC approved effective January 30, 1992. However, on February 27, 1992, the PPUC granted a petition of the OCA, a complainant in the rate proceeding and a signatory to the settlement, for reconsideration and clarification of the PPUC Order which approved the settlement. As a result, the $1.9 million rate increase remains subject to further PPUC and possible appellate review. Although it cannot be certain, PG&W believes that the $1.9 million increase will not be rescinded in whole or in part or affected in any other way as a result of the OCA's petition and as of March 23, 1994, no further action had been taken by the PPUC with respect to the OCA's petition.
Crystal Lake Service Area. On June 30, 1992, PG&W filed an application with the PPUC seeking a water rate increase, designed to produce $4.4 million in additional annual revenue, to be effective August 29, 1992. This rate increase request involved the approximately 5,000 customers in the Spring Brook Water Rate Area served exclusively by the Crystal Lake Water Treatment Plant, which became fully operational in August, 1992. On December 15, 1992, PG&W and certain parties filing objections to the rate increase request reached a settlement providing for an approximate 130% rate increase designed to produce $2.0 million of additional annual revenue to be phased-in over a two-year period under the terms of a qualified phase-in plan, pursuant to FASB Statement 92. The settlement further provided that $1.1 million of the increased revenue (an approximate 72% increase in rates) was to be realized through an immediate rate increase and that the remaining $900,000 in increased revenue (an additional 58% increase in rates) was to be realized through another rate increase one year later (i.e., at the beginning of year two of the phase-in period). The settlement also specified that the $900,000 in revenue that would be deferred during the first year of the phase-in period, as well as an approximate $243,000 in carrying charges, was to be collected from customers in the form of a surcharge in years three through five of the phase-in period. By Order adopted February 25, 1993, the PPUC approved the settlement effective March 9, 1993. In accordance with the provisions of FASB Statement 92, PG&W commenced recording the entire $2.0 million increase in annual revenue allowed by the PPUC as additional revenue beginning March 9, 1993, along with the related carrying charges on revenue deferred in accordance with the phase-in plan.
Ceasetown and Watres Service Areas. On April 29, 1993, PG&W filed an application with the PPUC seeking a water rate increase, designed to produce $19.5 million in additional annual revenue, to be effective June 28, 1993. This rate increase request involved approximately 59,300 customers in PG&W's Spring Brook Water Rate Area, principally those customers (i) served by the Ceasetown Water Treatment Plant which was placed in service on March 31, 1993, (ii) served by the Watres Water Treatment Plant which was placed in service on September 30, 1993, (iii) served jointly by the Ceasetown and Watres Water Treatment Plants, and (iv) who are served exclusively by the Nesbitt Water Treatment Plant. On
June 3, 1993, the PPUC suspended this rate increase for seven months (until January 28, 1994) by operation of law in order to institute an investigation into the reasonableness of the proposed rates. On September 23, 1993, PG&W and certain parties filing objections to the rate increase request reached a settlement providing for an overall 119% rate increase involving approximately 44,900 customers, principally those served either exclusively or jointly by the Ceasetown and Watres Water Treatment Plants, designed to produce $11.9 million of additional annual revenue to be phased-in over a two-year period under the terms of a qualified phase-in plan, pursuant to FASB Statement 92, "Regulated Enterprises-Accounting for Phase-In Plans." Under the terms of the settlement, except for approximately 200 customers who were previously served jointly by the Hillside and Nesbitt Water Treatment Plants, none of the approximately 14,600 customers now served exclusively by the Nesbitt Water Treatment Plant would receive an increase. The settlement further provided that $6.4 million of the increased revenue (an approximate 65% increase in rates) was to be realized through an immediate rate increase and that the remaining $5.5 million of the increased revenue (an additional 54% increase in rates) was to be realized through a further rate increase one year later (i.e., at the beginning of year two of the phase-in period). The settlement also specified that the $5.5 million in revenue to be deferred during the first year of the phase-in period, as well as an approximate $1.3 million in related carrying charges, is to be collected from customers in the form of a surcharge in years three through five of the phase-in period. By Order adopted December 15, 1993, the PPUC approved the settlement effective December 16, 1993. In accordance with the provisions of FASB 92, PG&W commenced recording the entire $11.9 million increase in annual revenue allowed by the PPUC as additional revenue beginning December 16, 1993, along with the related carrying charges on revenue deferred in accordance with the phase-in plan.
Deferred Treatment Plant Costs and Carrying Charges. Pursuant to an Order of the PPUC entered September 5, 1990, PG&W deferred all operating expenses, including depreciation and property taxes, and the carrying charges (equivalent to the AFUDC) relative to the four new Scranton Area water treatment plants and related facilities from the dates of commercial operation of the plants until March 23, 1991, the effective date of the Scranton Area water rate increase approved by the PPUC on March 22, 1991. By its Order entered June 23, 1993, relative to the Scranton Water Rate Area, the PPUC granted PG&W's request to recover the $5.1 million of costs deferred relative to the Scranton Area water treatment plants and related facilities over a ten-year period beginning June 23, 1993.
Similarly, as permitted by an Order of the PPUC entered September 24, 1992, PG&W has deferred all operating expenses, including depreciation and property taxes, and the carrying charges relative to the Crystal Lake Water Treatment Plant and related facilities from August 3, 1992 (the date of commercial operation of that plant), until March 9, 1993, the effective date of the water rate increase approved by the PPUC on February 25, 1993, for customers in PG&W's Spring Brook Water Rate Area served exclusively by the Crystal Lake Water Treatment Plant. Additionally, in accordance with an Order of the PPUC entered July 28, 1993, PG&W deferred all expenses and the carrying charges relative to the Ceasetown and Watres Water Treatment Plants and related facilities, until December 16, 1993, the effective date of the water rate increase for customers served by the Ceasetown and Watres Water Treatment Plants approved by the PPUC on December 15, 1993.
As of December 31, 1993, a total of $4.6 million of costs, consisting of $424,000 of operating expenses and $745,000 of carrying charges relative to the Crystal Lake Water Treatment Plant and related facilities, and $1.7 million of
operating expenses and $1.7 million of carrying charges relative to the Ceasetown and Watres Water Treatment Plants and related facilities, had been so deferred pursuant to the respective PPUC Orders permitting the deferral of such costs.
As contemplated by the PPUC's Orders of September 24, 1992, and July 28, 1993, PG&W will seek recovery of the costs relative to the Crystal Lake, Ceasetown and Watres Water Treatment Plants that have been deferred pursuant to such Orders in its next rate increase request relative to the Spring Brook Water Rate Area. Although it cannot be certain, PG&W believes that the recovery of such costs will be allowed by the PPUC in future rate increases, particularly in view of the PPUC's action allowing the recovery of the costs deferred with respect to the Scranton Area water treatment plants and related facilities.
(3) OTHER INCOME, NET
Other income, net was comprised of the following elements: [CAPTION] 1991 1992 1993 (Thousands of Dollars) [S] [C] [C] [C] Equity component of deferred treatment plant carrying charges $ - $ - $ 821 Allowance for equity funds used during construction - - 734 Gain on sale of non-watershed land and other property, net of related income taxes 182 102 20 Interest income on repurchase agreements, net of related income taxes 254 2 16 Interest on note to affiliate 437 133 - Net interest expense on proceeds remaining in construction fund - (23) (785) Premium on retirement/defeasance of debt - (127) (81) Other 261 (57) (165) Total $ 1,134 $ 30 $ 560
(4) COMMON STOCK
Since January 1, 1991, PG&W has issued the following amounts of common stock to PEI, its parent company, in addition to shares issued in connection with PEI's Dividend Reinvestment and Stock Purchase Plan: [CAPTION] Purchase Price Date Purchased Number of Shares Per Share* Aggregate [S] [C] [C] [C] March 23, 1992 171,779 $ 40.75 $ 7.0 million June 19, 1992 137,143 $ 40.25 $ 5.5 October 27, 1993 834,000 $ 38.25 $31.9 Total 1,142,922 $44.4 million
* Approximately equal to the book value of PG&W's common stock at the date of issuance.
The proceeds from the shares issued on June 19, 1992, and October 27, 1993, were used to repay bank borrowings which had been incurred primarily to finance construction expenditures. The shares issued on March 23, 1992, represented capitalization of the $7.0 million contribution made by PEI to PG&W on January 30, 1992, which had been temporarily treated as an intercompany advance pending
approval by the PPUC of the issuance of shares of common stock relative to such contribution. Upon its receipt, the $7.0 million contribution was also utilized to repay bank borrowings incurred primarily to finance construction expenditures. These issuances of common stock by PG&W and the related reductions in its bank borrowings acted to improve PG&W's debt/equity ratio, as well as its interest and fixed charge coverages.
(5) PREFERRED STOCK
Preferred Stock of PG&W Subject to Mandatory Redemption
On September 16, 1988, PG&W issued 250,000 shares of its 9.50% 1988 series cumulative preferred stock, $100 par value. On December 23, 1993, PG&W redeemed 100,000 shares of the 9.50% 1988 series cumulative preferred stock at a price of $103.5625 per share (plus accrued dividends to the redemption date), which included a voluntary redemption premium of $3.5625 per share ($356,250 in the aggregate). The remaining 150,000 shares of the 9.50% 1988 series cumulative preferred stock, which are currently outstanding, are subject to mandatory redemption on December 15, 1997, at a price of $100 per share, plus unpaid dividends accrued on such shares.
On December 16, 1988, PG&W issued 150,000 shares of its 8.90% cumulative preferred stock, $100 par value. The 8.90% cumulative preferred stock is subject to mandatory redemption of 18,750 shares on each of December 15, 1997, March 15, 1998, June 15, 1998, and September 15, 1998, and 75,000 shares on December 15, 1998, in each instance, at a price of $100 per share, plus unpaid dividends accrued on such shares.
The holders of the 5.75% cumulative preferred stock have a noncumulative right each year to tender to PG&W and to require it to purchase at a per share price not exceeding $100, up to (a) that number of shares of the 5.75% cumulative preferred stock which can be acquired for an aggregate purchase price of $80,000 less (b) the number of such shares which PG&W may already have purchased during the year at a per share price of not more than $100. Eight hundred such shares were acquired and cancelled by PG&W in each of the three years in the period ended December 31, 1993, for an aggregate purchase price in each year of $80,000.
As of December 31, 1993, the aggregate annual maturities and sinking fund requirements of PG&W's cumulative preferred stock subject to mandatory redemption for each of the next five years ending December 31, were as follows: [CAPTION] Year Amount [S] [C] 1994 $ 80,000 1995 $ 80,000 1996 $ 80,000 1997 $16,955,000 (a) 1998 $13,205,000 (b)
(a) Includes the entire $15.0 million principal amount of the 9.50% 1988 series cumulative preferred stock currently outstanding and $1,875,000 of the 8.90% cumulative preferred stock, both of which are subject to redemption on December 15, 1997.
(b) Includes the entire $13,125,000 principal amount of the 8.90% cumulative preferred stock that is subject to redemption during 1998.
At PG&W's option, the following series of cumulative preferred stock subject to mandatory redemption may currently be redeemed at the prices indicated: [CAPTION] Current Redemption Price Series Per Share Aggregate [S] [C] [C] 5.75% $ 102.00 $ 1,958,400 8.90% $ 103.96 $15,594,000 9.50% 1988 Series $ 103.56 $15,534,375
Preferred Stock of PG&W Not Subject to Mandatory Redemption
On August 18, 1992, PG&W issued 250,000 shares of its 9% cumulative preferred stock, par value $100 per share, for aggregate net proceeds of approximately $23.6 million. The 9% cumulative preferred stock is not redeemable by PG&W prior to September 15, 1997. Thereafter, it is redeemable at the option of PG&W, in whole or in part, upon not less than 30 days' notice, at $100 per share plus accrued dividends to the date of redemption and at a premium of $8 per share if redeemed from September 15, 1997, to September 14, 1998, and a premium of $4 per share if redeemed from September 15, 1998, to September 14, 1999.
At PG&W's option, the 4.10% cumulative preferred stock may currently be redeemed at a redemption price of $105.50 per share or for an aggregate redemption price of $10,550,000.
Dividend Information
The dividends on the preferred stock of PG&W in each of the three years in the period ended December 31, 1993, were as follows: [CAPTION] Series 1991 1992 1993 (Thousands of Dollars) [S] [C] [C] [C] 4.10% $ 405 $ 409 $ 410 5.75% 121 117 113 8.90% 1,335 1,335 1,335 9.00% - 829 2,250 9.50% 1988 series 2,375 2,375 2,354
Total $4,236 $5,065 $6,462
Dividends on all series of PG&W's preferred stock are cumulative, and if dividends in an amount equivalent to four full quarterly dividends on all shares of preferred stock then outstanding are in default and until all such dividends have been paid, the holders of the preferred stock, voting separately as one class, shall be entitled to elect a majority of the Board of Directors of PG&W. Additionally, PG&W may not declare dividends on its common stock if any dividends on shares of preferred stock then outstanding are in default.
(6) LONG-TERM DEBT
Long-term debt consisted of the following components at December 31, 1992 and 1993:
8%, 1987 Series B Note. On December 23, 1987, the Luzerne County Industrial Development Authority (the "Authority") issued $30.0 million of its 8% Exempt Facilities Revenue Bonds, 1987 Series B (Pennsylvania Gas and Water Company Project) (the "1987 Series B Bonds") and in connection therewith, PG&W issued a promissory note in the principal amount of $30.0 million (its 8%, 1987 Series B Note) to PNC Bank (formerly Northeastern Bank of Pennsylvania), as trustee (the "IDA Trustee") for the 1987 Series B Bonds, as security for the 1987 Series B Bonds. The 1987 Series B Bonds mature on December 1, 2017; bear interest at an initial annual rate of 8% through November 30, 1994; are secured by a letter of credit issued by Swiss Bank Corporation, New York Branch expiring on December 20, 1994, for which the annual fee is $279,000; and on December 1, 1994, will be redeemed or, at the option of PG&W, purchased by PG&W for remarketing as of that date. Under the terms of the 1987 Series B Note, PG&W agreed to pay the debt service requirements on the 1987 Series B Bonds.
7.20% Series First Mortgage Bonds. On September 15, 1992, the Authority issued $50.0 million of its Exempt Facilities Revenue Refunding Bonds, 1992 Series A (Pennsylvania Gas and Water Company Project) (the "1992 Series A Bonds") and, in connection therewith, PG&W issued $50.0 million of its 7.20% First Mortgage Bonds to the IDA Trustee for the 1992 Series A Bonds, as security for the 1992 Series A Bonds. The proceeds from the issuance of the 1992 Series A Bonds, along with additional funds provided by PG&W, were deposited with the IDA Trustee for the Authority's $50.0 million of 8-1/2% Exempt Facilities Revenue Bonds, 1987 Series A (Pennsylvania Gas and Water Company Project) (the "1987 Series A Bonds") on September 15, 1992, for use in redeeming the 1987 Series A Bonds on October 1, 1992. The deposit of such funds acted to discharge all of PG&W's obligations with respect to its 8-1/2%, 1987 Series A Note in the principal amount of $50.0 million which had been issued to the IDA Trustee in connection with the 1987 Series A Bonds and which was subject to repayment on October 1, 1992. Under the terms of the 7.20% First Mortgage Bonds, PG&W will make payments to the IDA Trustee in amounts sufficient and at the times necessary to pay the debt service requirements on the 1992 Series A Bonds.
8.375% Series First Mortgage Bonds. On December 14, 1992, PG&W issued $30.0 million of its 8.375% Series First Mortgage Bonds due 2002. The proceeds from the issuance of these bonds were used to repay approximately $28.7 million of bank borrowings, thereby providing PG&W with additional borrowing capacity for future capital expenditures and other working capital needs.
7.125% Series First Mortgage Bonds. On December 22, 1992, the Authority issued $30.0 million of its Exempt Facilities Revenue Bonds, 1992 Series B (Pennsylvania Gas and Water Company Project) (the "1992 Series B Bonds") and, in connection therewith, PG&W issued $30.0 million of its 7.125% Series First Mortgage Bonds to the IDA Trustee for the 1992 Series B Bonds, as security for the 1992 Series B Bonds. The proceeds from the issuance of the 1992 Series B Bonds were deposited in a construction fund held by the IDA Trustee for the 1992 Series B Bonds, pending their utilization to finance the construction of various additions and improvements to PG&W's water facilities for which construction commenced subsequent to September 23, 1992. As of December 31, 1993, $12.9 million was so held by the IDA Trustee and was available to finance the future construction of qualified water facilities for PG&W. Under the terms of the 7.125% Series First Mortgage Bonds, PG&W will make payments to the IDA Trustee in amounts sufficient and at the times necessary to pay the debt service requirements on the 1992 Series B Bonds.
10% and 9-1/4% Series First Mortgage Bonds. On May 1, 1993, PG&W redeemed the $5,700,000 of its 10% Series First Mortgage Bonds due 1995 and the $3,750,000 of its 9-1/4% Series First Mortgage Bonds due 1996 then outstanding, utilizing funds from bank borrowings. The 10% Series First Mortgage Bonds were redeemed at a price of 100.42% of principal (plus accrued interest to the redemption date), which included a voluntary redemption premium aggregating $23,940. The 9-1/4% Series First Mortgage Bonds were redeemed at a price of 100.98% of principal (plus accrued interest to the redemption date), which included a voluntary redemption premium aggregating $36,750.
6.05% Series First Mortgage Bonds. On December 21, 1993, the Authority issued $19.0 million of its Exempt Facilities Revenue Refunding Bonds, 1993 Series A (Pennsylvania Gas and Water Company Project) (the "1993 Series A Bonds") and, in connection therewith, PG&W issued $19.0 million of its 6.05% Series First Mortgage Bonds to the IDA Trustee for the 1993 Series A Bonds, as security for the 1993 Series A Bonds. PG&W will make payments to the IDA Trustee pursuant to the 6.05% Series First Mortgage Bonds in amounts sufficient and at the times necessary to pay the debt service requirements on the 1993
Series A Bonds. The proceeds from the issuance of the 1993 Series A Bonds, along with additional funds provided by PG&W, were deposited with the IDA Trustee for the Authority's $19.0 million of 7% Exempt Facilities Revenue Bonds, 1989 Series A (Pennsylvania Gas and Water Company Project) (the "1989 Series A Bonds") on December 21, 1993, for use in redeeming the 1989 Series A Bonds on January 1, 1994. The deposit of such funds acted to discharge all of PG&W's obligations with respect to its 7%, 1989 Series A Note in the principal amount of $19.0 million which had been issued to the IDA Trustee in connection with the 1989 Series A Bonds and which was subject to repayment on January 1, 1994.
As of December 31, 1993, the aggregate annual maturities and sinking fund requirements of long-term debt for each of the next five years ending December 31, were: [CAPTION] Year Amount [S] [C] 1994 $38,584,000 (a) 1995 $47,730,000 (b) 1996 $50,758,000 (c) 1997 $ 3,694,000 1998 $ 611,000
(a) Includes the 8%, 1987 Series B Note in the principal amount of $30.0 million due 2017, but subject to repayment or refinancing on December 1, 1994. Such amount also includes the aggregate principal amount of approximately $7.0 million relative to six water facility loans of PG&W having a weighted annual interest rate of 9.33% which were voluntarily repaid by PG&W on January 31, 1994, with bank borrowings.
(b) Includes $47.0 million of bank borrowings outstanding as of December 31, 1993.
(c) Includes the 9.57% Series First Mortgage Bonds in the principal amount of $50.0 million due 1996.
Most of PG&W's properties are subject to mortgage liens securing certain funded debt. Additionally, PG&W's gross revenues and receipts, accounts receivable and certain of its other rights and interests are subject to liens securing various water facility loans from agencies established by the Commonwealth of Pennsylvania for the purpose of providing financial assistance to public water supply and sewage systems in the state. These liens are limited to the amount of the related loans outstanding, which aggregated $19.3 million as of December 31, 1993, and $12.1 million as of March 23, 1994, subsequent to the prepayment of certain of such loans.
(7) DIVIDEND RESTRICTIONS
Several of PG&W's debt instruments contain restrictions on the payment by PG&W of dividends to PEI. Under the most restrictive of these provisions, which is contained in the letter of credit agreement relating to the 1987 Series B Bonds issued by the Luzerne County Industrial Development Authority with respect to which PG&W has issued its 1987 Series B Note in the principal amount of $30.0 million, PG&W may not pay dividends to PEI of more than $12.5 million in 1994 and thereafter. In addition, provisions of such agreement and also PG&W's revolving bank credit agreement (the "Credit Agreement" as defined in Note 8 to these financial statements) prohibit PG&W from paying any dividends to PEI in the event of any default under those agreements. These restrictions are not expected to prohibit PG&W from paying a sufficient amount of dividends to PEI to permit PEI to pay its current $2.20 per share annual dividend on its common stock.
In addition, the preferred stock provisions of PG&W's Restated Articles of Incorporation and the indenture of mortgage under which PG&W has issued first mortgage bonds provide for certain dividend restrictions.
(8) BANK NOTES PAYABLE
On April 25, 1991, PG&W entered into an agreement with the various banks with which it had previously arranged lines of credit. The purpose of the agreement was to consolidate PG&W's existing bank lines of credit to provide for uniform terms relative to its bank borrowings and to extend the due dates of such borrowings. As such, the agreement superseded PG&W's individual bank lines of credit. The aggregate amount available to PG&W in 1992 under this agreement was $45.0 million. On March 1, 1993, PG&W elected to reduce the amount so available to $35.0 million in order to reduce the commitment fee that would otherwise be payable and since no more than $35.0 million would be required by PG&W under the agreement prior to its expiration on April 30, 1993. The interest rate on borrowings under the agreement was prime. The agreement also required the payment of a commitment fee of 1/2 of 1% per annum on the average daily amount of the unused portion of the available funds. The commitment fees paid with respect to this agreement totaled $60,000 in 1991, $152,000 in 1992 and $43,000 in 1993.
On April 19, 1993, PG&W entered into a revolving bank credit agreement (the "Credit Agreement") with a group of six banks under the terms of which $60.0 million is available for borrowing by PG&W. The Credit Agreement terminates on April 30, 1995, at which time any borrowings outstanding thereunder are due and payable. The interest rate on borrowings under the Credit Agreement is generally less than prime. The Credit Agreement also requires the payment of a commitment fee of 3/8 of 1% per annum on the average daily amount of the unused portion of the available funds. As of March 23, 1994, $41.0 million of borrowings were outstanding under the Credit Agreement. PG&W also has three short-term bank lines of credit with an aggregate borrowing capacity of $7.0 million which provide for borrowings at interest rates generally less than prime and mature on April 30, 1994. As of March 23, 1994, PG&W had no borrowings outstanding under the short-term bank lines of credit. The commitment fees paid with respect to these agreements totaled $70,000 in 1993.
Because of limitations imposed by the terms of PG&W's preferred stock, PG&W is prohibited, without the consent of the holders of a majority of the outstanding shares of its preferred stock, from issuing more than $12.0 million of unsecured debt due on demand or within one year from issuance. PG&W had $5.7 million of unsecured debt due on demand or within one year from issuance outstanding as of December 31, 1993, which included a $3.7 million demand loan from PEI.
Information relating to PG&W's bank lines of credit and borrowings under those lines of credit is set forth below:
(9) POSTRETIREMENT BENEFITS
Substantially all employees of PG&W are covered by PEI's trusteed, noncontributory, defined benefit pension plan. Pension benefits are based on years of service and average final salary. PG&W's funding policy is to contribute an amount necessary to provide for benefits based on service to date, as well as for benefits expected to be earned in the future by current participants. To the extent that the present value of these obligations is fully covered by assets in the trust, a contribution may not be made for a particular year. Net pension costs, including amounts capitalized, were $243,000, $333,000 and $443,000 in 1991, 1992 and 1993, respectively.
The following items were the components of the net pension cost for the years 1991, 1992 and 1993: [CAPTION] 1991 1992 1993 (Thousands of Dollars) [S] [C] [C] [C] Present value of benefits earned during the year $ 637 $ 789 $ 854 Interest cost on projected benefit obligations 2,120 2,262 2,402 Return on plan assets (3,824) (2,646) (3,127) Net amortization and deferral 1,310 (72) 314
Net pension cost $ 243 $ 333 $ 443
The discount rate used to determine the actuarial present value of the projected benefit obligations, the expected long-term rate of return on plan assets and the projected increase in future compensation levels assumed in determining the net pension cost for each of the years 1991, 1992 and 1993, were as follows: [CAPTION] [S] [C] Discount rate 8% Expected long-term rate of return on plan assets 9% Projected increase in future compensation levels 5-1/2%
The funded status of the plan as of December 31, 1992 and 1993, was as follows: [CAPTION] 1992 1993 (Thousands of Dollars) [S] [C] [C] Actuarial present value of the projected benefit obligations: Accumulated benefit obligations Vested $ 21,813 $ 24,265 Nonvested 139 125 Total 21,952 24,390 Provision for future salary increases 7,746 9,769 Projected benefit obligations 29,698 34,159 Market value of plan assets, primarily invested in equities and bonds 30,963 32,471 Plan assets in excess of (less than) projected benefit obligations 1,265 (1,688) Unrecognized net transition asset as of January 1, 1986, being amortized over 20 years (2,988) (2,758) Unrecognized prior service costs 2,412 2,279 Unrecognized net (gain) loss (704) 1,710
Accrued pension cost at year-end $ (15) $ (457)
In March, 1991, as part of a cost reduction program, PG&W offered an Early Retirement Plan ("ERP") to its employees who would be 60 years of age or older and have a minimum of five years of service as of April 30, 1991. Of the 79 eligible employees, 73 elected to accept this offer and retired in 1991. In accordance with FASB Statement 88 "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," PG&W recorded, as of April 30, 1991, an additional pension liability of $2.0 million, reflecting the increased costs associated with the ERP. This liability, which was included in "Other deferred credits" as of December 31, 1992 and 1993, partially offsets an asset included in "Other deferred charges," representing the probable future rate recovery of such liability. As a result, the provisions of FASB Statement 88 did not have a significant effect on PG&W's results of operations for 1991. During 1992, PG&W began amortizing the portion of the deferred charges relative to its gas operations over a 20-year period and will begin amortizing the portion relating to its water operations as such amounts are approved in rates. In addition, the deferred liability is being amortized as an offset against pension expense over a 20 year amortization period approximating the effect of including the additional pension costs related to the ERP in the present value of benefits earned during the year.
In addition to pension benefits, PG&W provides certain health care and life insurance benefits for retired employees. Substantially all of PG&W's employees may become eligible for those benefits if they reach retirement age while working for PG&W. Prior to January 1, 1993, the cost of retiree health care and life insurance, which totaled $800,000 in 1991 and $870,000 in 1992, was expensed as the premiums were paid under insurance contracts.
Effective January 1, 1993, PG&W adopted the provisions of FASB Statement 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The provisions of FASB Statement 106 require that PG&W record the cost of retiree health care and life insurance benefits as a liability over the employees' active service periods instead of on a benefits-paid basis as was PG&W's prior practice.
The following items were the components of the net cost of postretirement benefits other than pensions for the year 1993: [CAPTION] (Thousands of Dollars)
[S] [C] Present value of benefits earned during the year $ 226 Interest cost on accumulated benefit obligation 967 Return on plan assets (a) -0- Amortization of transition obligation over 20 years 617
Net cost of postretirement benefits other than pensions 1,810 Less disbursements for benefits (983)
Increase in liability for postretirement benefits other than pensions $ 827
Reconciliations of the accumulated benefit obligation to the accrued liability for postretirement benefits other than pensions as of January 1, 1993, and December 31, 1993, follow: [CAPTION] January 1, December 31, 1993 1993 (Thousands of Dollars) [S] [C] [C] Accumulated benefit obligation: Retirees $ 9,878 $ 10,149 Fully eligible active employees 1,649 1,735 Other active employees 815 1,222 12,342 13,106 Plan assets at fair value (a) -0- -0- Accumulated benefit obligation in excess of plan assets 12,342 13,106 Unrecognized transition obligation (12,342) (11,725) Unrecognized net loss -0- (554)
Accrued liability for postretirement benefits other than pensions $ -0- $ 827
For purposes of calculating the costs to be accrued by PG&W under FASB Statement 106, an 8% discount rate and a 5.5% projected annual increase in future compensation levels were assumed. It was also assumed that the per capita cost of covered health care benefits would increase at an annual rate of 12% in 1993 and that this rate would decrease gradually to 5.5% for the year 2003 and remain at that level thereafter. The health care cost trend rate assumption had a significant effect on the amounts accrued. To illustrate, increasing the assumed health care cost trend rate by 1 percentage point in each year would increase the transition obligation as of January 1, 1993, by approximately $723,000 and the aggregate of the service and interest cost components of the net cost of postretirement benefits other than pensions for the year 1993 by approximately $60,000.
(a) As of December 31, 1993, PG&W had segregated funds totaling $182,000, pending the establishment of a qualified trust fund for a portion of its liability for postretirement benefits other than pensions, as discussed in the paragraph immediately above.
The additional costs accrued pursuant to FASB Statement 106 are allocated between PG&W's gas utility and water utility operations. By Order entered June 23, 1993, relative to the rate increase request that PG&W had filed on September 25, 1992, with respect to the Scranton Water Rate Area, the PPUC allowed PG&W to recover in revenues the additional costs ($319,000 for the year 1993, based on then current estimates) that were required to be accrued pursuant to FASB Statement 106 and which were allocable to the Scranton Water Rate Area. Similarly, by Order entered December 15, 1993, relative to the rate increase request that PG&W had filed on April 29, 1993, relative to the Spring Brook Water Rate Area, the PPUC allowed PG&W to recover in revenues the additional costs ($322,000 for the year 1993 based on then current estimates) that were required to be accrued pursuant to FASB Statement 106 and which were allocable to the Spring Brook Water Rate Area. Since PG&W did not seek an increase in its base gas rates during 1993, the $407,000 ($232,000 net of related income taxes) of additional cost incurred with regard to its gas utility operations as a result of the adoption of the provisions of FASB Statement 106 was expensed.
(10) CONSTRUCTION EXPENDITURES
PG&W estimates the cost of its 1994 construction program will be $46.8 million. Construction of water facilities, estimated to cost $29.8 million, will be financed with the $12.9 million of proceeds from the issuance of the 1993 Series A Bonds held by the IDA Trustee as of December 31, 1993, for the benefit of PG&W, internally generated funds and borrowings under PG&W's revolving bank credit facilities, pending the periodic issuance of stock and long-term debt. Construction of gas facilities, estimated to cost $17.0 million, will be financed with internally generated funds and borrowings under PG&W's revolving bank credit facilities, pending the periodic issuance of stock and long-term debt.
(11) COMMITMENTS AND CONTINGENCIES
Valve Maintenance
On November 16, 1993, the PPUC staff issued an Emergency Order, subsequently ratified by the PPUC (the "Emergency Order"), requiring PG&W by January 31, 1994, to survey its gas distribution system to verify the location and spacing of its gas shut off valves, to add or repair valves where needed and to establish programs for the inspection and maintenance of all such valves and the verification of all gas service line information. The Emergency Order was issued following the occurrence of two gas incidents (one concerning an explosion and the other a fire) in PG&W's service area in June and October, 1993, respectively, involving nearby gas shut off valves that had been paved over by third parties and could not be readily located due to alleged inaccurate service line records. The Emergency Order also cited four additional incidents occurring since January 31, 1991, in which shut off valves had been paved over or records were inaccurate. In connection with these incidents, the PPUC has alleged that PG&W has violated certain federal and state regulations related to gas pipeline valves. The PPUC has the authority to assess fines for such violations. The PPUC ordered PG&W to develop a plan, including a timetable, by December 30, 1993, for compliance with the terms of the Emergency Order. PG&W met the December 30, 1993, deadline for submission of this plan. However, PG&W included in such plan, a timetable, which, in effect, requested an extension of the January 31, 1994, deadline contained in the Emergency Order, which PG&W viewed as unrealistic. On February 2, 1994, the PPUC staff notified PG&W that it considers the plan submitted by PG&W "only a general plan of action to address the problem with valving in [PG&W's] system" and that the plan "is lacking in detail and more information is needed." As a result, the PPUC staff
indicated that it intends to initiate an informal investigation of the matter, including PG&W's responsibility for the incidents referred to in the Emergency Order. Although it is not presently possible to determine what action the PPUC will ultimately take with respect to possible violations of law and the matters raised by the Emergency Order, PG&W does not believe that compliance with, or any liability that might result from such violations or the Emergency Order will have a material adverse effect on its financial position or results of operations.
Environmental Matters
PG&W, like many gas distribution companies, once utilized manufactured gas plants in connection with providing gas service to its customers. None of these plants has been in operation since 1960, and several of the plant sites are no longer owned by PG&W. Pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), PG&W filed notices with the United States Environmental Protection Agency (the "EPA") with respect to the former plant sites. None of the sites is or was formerly on the proposed or final National Priorities List. The EPA has conducted site inspections and made preliminary assessments of each site and has concluded that no further remedial action is planned. While this conclusion does not constitute a legal prohibition against further regulatory action under CERCLA or other applicable federal or state law, PG&W does not believe that additional costs, if any, related to these manufactured gas plant sites would be material to its financial position or results of operations since environmental remediation costs generally are recoverable through rates over a period of time.
On February 4, 1994, PG&W was requested by the Pennsylvania Department of Environmental Resources to perform an evaluation to determine if a pipeline owned by PG&W was the source of certain soil contamination discovered by the Pennsylvania Department of Transportation in late 1993 in an area adjacent to that pipeline at a road crossing in Jackson Township, Northumberland County, Pennsylvania. This pipeline was purchased by Scranton-Spring Brook Water Service Company ("Scranton-Spring Brook"), a predecessor of PG&W, in 1956, but was never operated by Scranton-Spring Brook or PG&W in the area in question. At this time, pending further environmental analysis and evaluation, neither the source nor the extent of the contamination is known. However, if the source of the contamination is determined to be PG&W's pipeline, PG&W would be required to perform such remediation work as is necessary and to dispose of the contaminated soil. While it cannot be certain, PG&W does not presently believe that any liability it might have with respect to such contamination would have a material adverse effect on either its financial position or results of operations. Further, if PG&W were determined to be the responsible party with respect to the subject contamination, it would seek to recover any liability it were to so incur from the former owner and operator of the pipeline and/or its successors. Additionally, to the extent it could not recover its costs from such parties, PG&W could seek authority of the PPUC to recover those costs in the rates charged to its natural gas customers.
(12) INDUSTRY SEGMENTS
Financial information with respect to PG&W's industry segments for the years ended December 31, 1991, 1992 and 1993 is included in Item 1 of this Form 10-K. Such industry segment information is incorporated herein as part of these Financial Statements.
(13) QUARTERLY FINANCIAL DATA (UNAUDITED) [CAPTION] QUARTER ENDED March 31, June 30, September 30, December 31, 1992 1992 1992 1992 (Thousands of Dollars, Except Per Share Amounts) [S] [C] [C] [C] [C] Operating revenues $ 70,673 $ 34,000 $ 25,440 $ 61,765 Operating income 12,620 6,270 4,160 10,863 Earnings (loss) applicable to common stock 5,763 (44) (2,704) 4,876 Earnings (loss) per share of common stock (a) 1.55 (.01) (.67) 1.21 [CAPTION] QUARTER ENDED March 31, June 30, September 30, December 31, 1993 1993 1993 1993 (Thousands of Dollars, Except Per Share Amounts) [S] [C] [C] [C] [C] Operating revenues $ 78,318 $ 37,251 $ 27,959 $ 63,160 Operating income 13,315 5,672 4,762 12,407 Earnings (loss) applicable to common stock 6,827 (1,037) (1,506) 5,555 Earnings (loss) per share of common stock (a) 1.70 (.26) (.37) 1.20
(a) The total of the earnings per share for the quarters does not equal the earnings per share for the year, as shown elsewhere in Item 8 of this Form 10-K, as a result of PG&W's issuance of additional shares of common stock at various dates during the year.
Because of the seasonal nature of PG&W's gas heating business, there are substantial variations in operations reported on a quarterly basis.
(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
o Restricted funds held by trustee. The fair value of the restricted funds held by trustee has been based on the current market values of the financial instruments in which such funds have been invested.
o Long-term debt. The fair value of PG&W's long-term debt has been estimated based on the current quoted market price for the portion of such debt which is publicly traded and, with respect to the portion of such debt which is not publicly traded, on the estimated borrowing rates at December 31, 1993, for long-term debt of comparable credit quality with similar terms and maturities.
o Preferred stock subject to mandatory redemption. The fair value of PG&W's preferred stock subject to mandatory redemption has been estimated based on the market value as of December 31, 1993, for preferred stock of comparable credit quality with similar terms and maturities.
The carrying amounts and estimated fair values of PG&W's financial instruments at December 31, 1992 and 1993, were as follows: [CAPTION] 1992 1993 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value (Thousands of Dollars) [S] [C] [C] [C] [C] Restricted funds held by trustee $ 28,020 $ 28,016 $ 12,853 $ 12,857 Long-term debt (including current portion) 284,882 291,704 306,843 327,436 Preferred stock subject to mandatory redemption (including current portion) 42,000 43,929 31,920 33,087
PG&W believes that the regulatory treatment of any excess or deficiency of fair value relative to the carrying amounts of these items, if such items were settled at amounts approximating those above, would dictate that these amounts be used to increase or reduce its rates over a prescribed amortization period. Accordingly, any settlement would not result in a material impact on PG&W's financial position or the results of operations of either PEI or PG&W.
ITEM 9.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements The following financial statements, notes to financial statements and report of independent public accountants for PG&W are presented in Item 8 of this Form 10-K. Page Report of Independent Public Accountants . . . . . . . . . . . . 42
Statements of Income for each of the three years in the period ended December 31, 1993 . . . . . . . . . . . . . . . . 43
Balance Sheets as of December 31, 1992 and 1993. . . . . . . . . 44
Statements of Cash Flows for each of the three years in the period ended December 31, 1993 . . . . . . . . . . . . . . . . 46
Statements of Capitalization as of December 31, 1992 and 1993. . 47
Statements of Common Shareholder's Investment for each of the three years in the period ended December 31, 1993. . . . . 48
Notes to Financial Statements. . . . . . . . . . . . . . . . . . 49
2. Financial Statement Schedules The following financial statement schedules for PG&W are filed as a part of this Form 10-K. Schedules not included have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Schedule Number Page V Property, Plant and Equipment for the three-year period ended December 31, 1993. . . . . . . . . . . . . . . . . 75
VI Accumulated Depreciation of Property, Plant and Equipment for the three-year period ended December 31, 1993. . . . 76
VIII Valuation and Qualifying Accounts for the three-year period ended December 31, 1993 . . . . . . . . . . . . . 77
X Supplementary Income Statement Information for the three-year period ended December 31, 1993. . . . . . . . 78
3. Exhibits See "Index to Exhibits" located on page 80 for a listing of all exhibits filed herein or incorporated by reference to a previously filed registration statement or report with the Securities and Exchange Commission.
Schedule V
Schedule VI
Schedule VIII
PENNSYLVANIA GAS AND WATER COMPANY
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1993
[CAPTION]
Year ended December 31, 1991 1992 1993 (Thousands of Dollars) [S] [C] [C] [C] Taxes other than income taxes were as follows: State gross receipts tax $ 5,993 $ 6,715 $ 7,212 State capital stock tax 1,773 1,936 1,961 Payroll taxes 2,224 2,276 2,444 Real estate and personal property taxes 2,777 2,951 3,717 Other taxes 710 772 888
$13,477 $14,650 $16,222
Charged to: Other taxes $12,814 $14,730 $16,019 Other accounts 663 (80) 203
$13,477 $14,650 $16,222
NOTE: The amounts of maintenance and repairs, depreciation and income taxes, which are charged to accounts other than those set forth in the statements of income, are not significant. PG&W did not incur any significant costs for royalties, rents, advertising or research and development during the three- year period ended December 31, 1993.
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. [CAPTION] PENNSYLVANIA GAS AND WATER COMPANY (Registrant) [S] [C] [C] Date: March 23, 1994 By: /s/ Dean T. Casaday Dean T. Casaday President and Chief Executive Officer (Principal Executive Officer)
Date: March 23, 1994 By: /s/ John F. Kell, Jr. John F. Kell, Jr. Vice President, Finance (Principal Financial Officer and Principal Accounting Officer)
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. [CAPTION] Signature Capacity Date [S] [C] [C] /s/ Kenneth L. Pollock Chairman of the Board of March 23, 1994 Kenneth L. Pollock Directors
/s/ William D. Davis Vice Chairman of the Board March 23, 1994 William D. Davis of Directors
/s/ Dean T. Casaday Director, President and March 23, 1994 Dean T. Casaday Chief Executive Officer
/s/ Robert J. Keating Director March 23, 1994 Robert J. Keating
/s/ John D. McCarthy Director March 23, 1994 John D. McCarthy
/s/ Kenneth M. Pollock Director March 23, 1994 /s/ Kenneth M. Pollock
/s/ James A. Ross Director March 23, 1994 James A. Ross
/s/ Ronald W. Simms Director March 23, 1994 Ronald W. Simms
INDEX TO EXHIBITS Exhibit Number
(3) Articles of Incorporation and By Laws:
3-1 Restated Articles of Incorporation of PG&W, as amended -- filed as Exhibit 3-1 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-3490.
3-2 By-Laws of PG&W, as amended and restated on October 17, 1991 -- filed as Exhibit 3-2 to PG&W's Annual Report on Form 10-K for 1991, File No. 1-3490.
(4) Instruments Defining the Rights of Security Holders, Including Debentures:
4-1 Indenture of Mortgage and Deed of Trust, dated as of March 15, 1946, between Scranton-Spring Brook Water Service Company (now PG&W) and Guaranty Trust Company, as Trustee (now Morgan Guaranty Trust Company of New York) -- filed as Exhibit 2(c) to PG&W's Bond Form S- 7, Registration No. 2-55419.
4-2 Fourth Supplemental Indenture, dated as of March 15, 1952 -- filed as Exhibit 2(d) to PG&W's Bond Form S-7, Registration No. 2-55419.
4-3 Ninth Supplemental Indenture, dated as of March 15, 1957 -- filed as Exhibit 2(e) to PG&W's Bond Form S-7, Registration No. 2-55419.
4-4 Tenth Supplemental Indenture, dated as of September 1, 1958 -- filed as Exhibit 2(f) to PG&W's Bond Form S-7, Registration No. 2-55419.
4-5 Twelfth Supplemental Indenture, dated as of July 15, 1960 -- filed as Exhibit 2(g) to PG&W's Bond Form S-7, Registration No. 2-55419.
4-6 Fourteenth Supplemental Indenture, dated as of December 15, 1961 -- filed as Exhibit 2(h) to PG&W's Bond Form S-7, Registration No. 2- 55419.
4-7 Fifteenth Supplemental Indenture, dated as of December 15, 1963 -- filed as Exhibit 2(i) to PG&W's Bond Form S-7, Registration No. 2- 55419.
4-8 Sixteenth Supplemental Indenture, dated as of June 15, 1966 -- filed as Exhibit 2(j) to PG&W's Bond Form S-7, Registration No. 2-55419.
4-9 Seventeenth Supplemental Indenture, dated as of October 15, 1967 -- filed as Exhibit 2(k) to PG&W's Bond Form S-7, Registration No. 2- 55419.
4-10 Eighteenth Supplemental Indenture, dated as of May 1, 1970 -- filed as Exhibit 2(1) to PG&W's Bond Form S-7, Registration No. 2-55419.
4-11 Nineteenth Supplemental Indenture, dated as of June 1, 1972 -- filed as Exhibit 2(m) to PG&W's Bond Form S-7, Registration No. 2-55419.
Exhibit Number
4-12 Twentieth Supplemental Indenture, dated as of March 1, 1976 -- filed as Exhibit 2(n) to PG&W's Bond Form S-7, Registration No. 2-55419.
4-13 Twenty-first Supplemental Indenture, dated as of December 1, 1976 -- filed as Exhibit 4-16 to PG&W's Annual Report on Form 10-K for 1982, File No. 1-3490.
4-14 Twenty-second Supplemental Indenture, dated as of August 15, 1989 -- filed as Exhibit 4-22 to PG&W's Annual Report on Form 10-K for 1989, File No. 0-7812.
4-15 Twenty-third Supplemental Indenture, dated as of August 15, 1989 -- filed as Exhibit 4-23 to PG&W's Annual Report on Form 10-K for 1989, File No. 0-7812.
4-16 Twenty-fourth Supplemental Indenture, dated as of September 1, 1991, from PG&W to Morgan Guaranty Trust Company of New York, as Trustee -- filed as Exhibit 4-3 to PEI's Common Stock Form S-2, Registration No. 33-43382.
4-17 Twenty-fifth Supplemental Indenture, dated as of September 1, 1992, from PG&W to Morgan Guaranty Trust Company of New York, as Trustee -- filed as Exhibit 4-1 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-3490.
4-18 Twenty-sixth Supplemental Indenture, dated as of December 1, 1992, from PG&W to Morgan Guaranty Trust Company of New York, as Trustee -- filed as Exhibit 4-20 to PG&W's Bond Form S-2, Registration No. 33-54278.
4-19 Twenty-seventh Supplemental Indenture, dated as of December 1, 1992, from PG&W to Morgan Guaranty Trust Company -- filed as Exhibit 4-19 to PG&W's Annual Report on Form 10-K for 1992, File No. 0-7812.
4-20 Twenty-eighth Supplemental Indenture, dated as of December 1, 1993, from PG&W to Morgan Guaranty Trust Company of New York, as Trustee -- filed herewith.
NOTE: The First, Second, Third, Fifth, Sixth, Seventh, Eighth, Eleventh and Thirteenth Supplemental Indentures merely convey additional properties to the Trustee.
4-21 Statement Affecting Class or Series of Shares with respect to 9.50% 1988 Series Cumulative Preferred Stock of PG&W -- filed as Exhibit 4-18 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, File No. 1-3490.
4-22 Statement Affecting Class or Series of Shares with respect to 8.90% Cumulative Preferred Stock of PG&W -- filed as Exhibit 4-20 to PG&W's Annual Report on Form 10-K for 1988, File No. 1-3490.
Exhibit Number
(10) Material Contracts:
10-1 Service Agreement for storage service under Rate Schedule LGA, dated August 6, 1974, between PG&W and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-3 to PG&W's Annual Report on Form 10-K for 1984, File No. 1-3490.
10-2 Service Agreement for transportation service under Rate Schedule FT, dated February 1, 1992, by and between PG&W and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-4 to PG&W's Annual Report on Form 10-K for 1991, File No. 1-3490.
10-3 Service Agreement for storage service under Rate Schedule SS-2, dated April 1, 1990, between PG&W and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-8 to PEI's Common Stock Form S-2, Registration No. 33-43382.
10-4 Service Agreement for sales service under Rate Schedule FS, dated August 1, 1991, between PG&W and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-6 to PG&W's Annual Report on Form 10-K for 1991, File No. 1-3490.
10-5 Service Agreement for transportation service under Rate Schedule FT, dated August 1, 1991, between PG&W and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-10 to PEI's Common Stock Form S-2, Registration No. 33-43382.
10-6 Service Agreement for transportation service under Rate Schedule IT, dated January 31, 1992, between PG&W and Transcontinental Gas Pipe Line Corporation -- filed as Exhibit 10-8 to PG&W's Annual Report on Form 10-K for 1991, File No. 1-3490.
10-7 Service Agreement for storage service under Rate Schedule LSS, dated October 1, 1993, by and between PG&W and Transcontinental Gas Pipe Line Corporation -- filed herewith.
10-8 Service Agreement for storage service under Rate Schedule GSS, dated October 1, 1993, by and between PG&W and Transcontinental Gas Pipeline Corporation Company -- filed herewith.
10-9 Service Agreement for transportation service under Rate Schedule FTS, dated November 1, 1993, by and between PG&W and Columbia Gas Transmission Corporation -- filed herewith.
10-10 Service Agreement for transportation service under Rate Schedule SST, dated November 1, 1993, by and between PG&W and Columbia Gas Transmission Corporation -- filed herewith.
10-11 Service Agreement for storage service under Rate Schedule FSS, dated November 1, 1993, by and between PG&W and Columbia Gas Transmission Corporation -- filed herewith.
10-12 Service Agreement for transportation service under Rate Schedule FTS-1, dated November 1, 1993, by and between PG&W and Columbia Gulf Transmission Company -- filed herewith.
Exhibit Number
10-13 Service Agreement for transportation service under Rate Schedule ITS-1, dated November 1, 1993, by and between PG&W and Columbia Gulf Transmission Company -- filed herewith.
10-14 Service Agreement for transportation service under Rate Schedule ITS, dated November 1, 1993, by and between PG&W and Columbia Gas Transmission Corporation -- filed herewith.
10-15 Service Agreement (Contract No. 946) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG&W and Tennessee Gas Pipeline Company -- filed as Exhibit 10-1 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-16 Service Agreement (Service Package No. 171) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG&W and Tennessee Gas Pipeline Company -- filed as Exhibit 10-2 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-17 Service Agreement (Service Package No. 187) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG&W and Tennessee Gas Pipeline Company -- filed as Exhibit 10-3 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-18 Service Agreement (Service Package No. 190) for transportation service under Rate Schedule FT-A, dated September 1, 1993, by and between PG&W and Tennessee Gas Pipeline -- filed as Exhibit 10-4 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-19 Service Agreement (Contract No. 2289) for storage service under Rate Schedule FS dated September 1, 1993, by and between PG&W and Tennessee Gas Pipeline -- filed as Exhibit 10-5 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-3490.
10-20 Joint Venture Agreement, dated May 1, 1975, between Robert Mosbacher and Transco Exploration Company, et. al., and Exhibit "B," Ratification thereof by PG&W, dated July 11, 1975 -- filed as Exhibit 5(1) to PG&W's Bond Form S-7, Registration No. 2-55419.
10-21 Project Facilities Agreement, dated December 1, 1987, between Luzerne County Industrial Development Authority and PG&W -- filed as Exhibit 10-19 to PG&W's Annual Report on Form 10-K for 1987, File No. 1-3490.
10-22 Remarketing Agreement, dated December 1, 1987, among PG&W, Butcher & Singer Inc. and Dean Witter Reynolds Inc. -- filed as Exhibit 10-21 to PG&W's Annual Report on Form 10-K for 1987, File No. 1-3490.
Exhibit Number
10-23 8% Bond Purchase Agreement, dated December 15, 1987, among Luzerne County Industrial Development Authority, PG&W, Butcher & Singer Inc. and Dean Witter Reynolds Inc. -- filed as Exhibit 10-22 to PG&W's Annual Report on Form 10-K for 1987, File No. 1-3490.
10-24 Bond Purchase Agreement, dated September 1, 1989, relating to PG&W's First Mortgage Bonds 9.23% Series due 1999 and First Mortgage Bonds 9.34% Series due 2019 among Allstate Life Insurance Company, Allstate Life Insurance Company of New York and PG&W -- filed as Exhibit 10-33 to PG&W's Annual Report on Form 10-K for 1989, File No. 1-3490.
10-25 Form of Bond Purchase Agreement, dated as of September 1, 1991, re: $50.0 million of 9.57% First Mortgage Bonds, due September 1, 1996, entered into between PG&W and each of the following parties: Pacific Mutual Life Insurance Company, Principal Mutual Life Insurance Company, Great West Life & Annuity Insurance Company, The Life Insurance Company of Virginia, Lutheran Brotherhood, Transamerica Life Insurance and Annuity Company and The Franklin Life Insurance Company -- filed as Exhibit 10-7 to PEI's Common Stock Form S-2, Registration No. 33-43382.
10-26 Amended and Restated Project Facilities Agreement dated as of September 1, 1992, between PG&W and the Luzerne County Industrial Development Authority -- filed as Exhibit 10-1 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-3490.
10-27 7.20% Bond Purchase Agreement, dated September 2, 1992, among the Luzerne County Industrial Development Authority, PG&W and Butcher & Singer, a division of Wheat First Securities Inc., as representative on behalf of itself and Legg Mason Wood Walker Incorporated -- filed as Exhibit 10-2 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992, File No. 1-3490.
10-28 Project Facilities Agreement, dated December 1, 1992, between Luzerne County Industrial Development Authority and PG&W -- filed as Exhibit 10-29 to PG&W's Annual Report on Form 10-K for 1992, File No. 1-3490.
10-29 7.125% Bond Purchase Agreement, dated December 10, 1992, among the Luzerne County Industrial Development Authority, PG&W and Butcher & Singer, a division of Wheat First Securities Inc., as representative on behalf of itself and Legg Mason Wood Walker Incorporated -- filed as Exhibit 10-30 to PG&W's Annual Report on Form 10-K for 1992, File No. 1-3490.
10-30 Second Amended and Restated Project Facilities Agreement dated as of December 1, 1993, between PG&W and the Luzerne County Industrial Development Authority -- filed herewith.
Exhibit Number
10-31 6.05% Bond Purchase Agreement, dated December 2, 1993, among the Luzerne County Industrial Development Authority, PG&W and Butcher & Singer, a division of Wheat First Securities, Inc., as representative on behalf of itself and Legg Mason Wood Walker Incorporated -- filed herewith.
10-32 Letter of Credit Agreement, dated December 1, 1987, between PG&W and Swiss Bank Corporation, New York Branch -- filed as Exhibit 10-20 to PG&W's Annual Report on Form 10-K for 1987, File No. 1-3490.
10-33 Amendment No. 1, dated as of September 10, 1991, to December 1987 Reimbursement Agreement between PG&W and Swiss Bank Corporation, New York Branch -- filed as Exhibit 10-6 to PEI's Common Stock Form S-2, Registration No. 33-43382.
10-34 Amendment No. 2, dated as of December 13, 1991 to December 1987 Reimbursement Agreement between PG&W and Swiss Bank Corporation, New York Branch -- filed as Exhibit 10-15 to PEI's Common Stock Form S- 2, Registration No. 33-43382.
10-35 Amendment No. 3, dated as of May 11, 1992, to December 1987 Reimbursement Agreement between PG&W and Swiss Bank Corporation, New York Branch -- filed as Exhibit 10-2 to PG&W's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, File No. 1-3490.
10-36 Subordinate Open End Mortgage, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, dated as of September 10, 1991, made by PG&W, as Mortgagor, to Swiss Bank Corporation, as Collateral Agent and Mortgagee -- filed as Exhibit 10-1 to PEI's Common Stock Form S-2, Registration No. 33- 43382.
10-37 Collateral Agency and Intercreditor Agreement, dated as of September 10, 1991, among Manufacturers Hanover Trust Company (now Chemical Bank), as Bank Agency, Swiss Bank Corporation, New York Branch, First Eastern Bank, N.A., Hanover Bank, Meridian Bank, Northeastern Bank of Pennsylvania (now PNC Bank, Northeast PA), Philadelphia National Bank (now CoreStates Bank, N.A.), United Penn Bank (now Mellon Bank, N.A.), National Australia Bank, Limited, New York Branch, Swiss Bank Corporation, New York Branch, as Collateral Agent and PG&W -- filed as Exhibit 10-2 to PEI's Common Stock Form S-2, Registration No. 33-43382.
10-38 Credit Agreement, dated as of April 19, 1993, by and among PG&W, the Banks parties thereto and PNC Bank, Northeast PA, as agent, and CoreStates Bank, N.A. and NBD Bank, N.A. as Co-Agents -- filed as Exhibit 10-1 to PG&W's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993.
10-39 9.50% Cumulative Preferred Stock Purchase Agreement, dated December 11, 1987, between PG&W and the purchasers named therein -- filed as Exhibit 10-23 to PG&W's Annual Report on Form 10-K for 1987, File No. 1-3490.
Exhibit Number
10-40 Recapitalization Agreement, dated September 16, 1988, between PG&W and the original purchasers of PG&W's 9.50% Cumulative Preferred Stock, pursuant to which shares of the 9.50% Cumulative Preferred Stock were exchanged for shares of PG&W's 9.50% 1988 Series Cumulative Preferred Stock -- filed as Exhibit 10-24 to PG&W's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, File No. 1-3490.
10-41 Form of Change in Control Agreement between PEI and certain of its Officers -- filed as Exhibit 10-34 to PG&W's Annual Report on Form 10-K for 1989, File No. 1-3490.
10-42 Agreement, dated as of March 15, 1991, by and between PEI, PG&W and Robert L. Jones -- filed as Exhibit 10-38 to PG&W's Annual Report on Form 10-K for 1990, File No. 1-3490.
10-43 Employment Agreement, dated August 30, 1991, between PEI and Dean T. Casaday -- filed as Exhibit 10-16 to PEI's Common Stock Form S-2, Registration No. 33-43382.
10-44 Supplemental Retirement Agreement, dated as of December 23, 1991, between PEI and Dean T. Casaday -- filed as Exhibit 10-17 to PEI's Common Stock Form S-2, Registration No. 33-43382.
10-45 Pennsylvania Enterprises, Inc. 1992 Stock Option Plan, effective June 3, 1992 -- filed as Exhibit A to PEI's 1993 definitive Proxy Statement, File No. 0-7812.
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.
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.