ITEM 1. BUSINESS
THE COMPANY
On March 1, 1988, after obtaining shareowner and all the necessary regulatory approvals, Wisconsin Power and Light Company (the "Company" or "WPL") effected a corporate restructuring which included the formation of a holding company, WPL Holdings, Inc. WPL Holdings, Inc. is the parent company of WPL and its utility subsidiaries and of Heartland Development Corporation, the parent corporation for nonregulated businesses.
WPL, incorporated in Wisconsin on February 21, 1917 as the Eastern Wisconsin Electric Company, is a public utility predominately engaged in the transmission and distribution of electric energy and the generation and bulk purchase of electric energy for sale. It also transports, distributes and sells natural gas purchased from gas suppliers. Nearly all of WPL's customers are located in south and central Wisconsin. WPL operates in municipalities pursuant to permits of indefinite duration which are regulated by Wisconsin law. WPL does not derive a material portion of its revenues from any one customer.
WPL owns all of the outstanding capital stock of South Beloit Water, Gas and Electric Company ("South Beloit"), a public utility supplying electric, gas and water service, principally in Winnebago County, Illinois, which was incorporated on July 23, 1908.
WPL also owns varying interests in several other subsidiaries and investments which are not material to WPL's operations.
Regulation
WPL is subject to regulation by the Public Service Commission of Wisconsin ("PSCW") as to retail utility rates and service, accounts, issuance and use of proceeds of securities, certain additions and extensions to facilities, and in other respects. South Beloit is subject to regulation by the Illinois Commerce Commission ("ICC") for similar items. The Federal Energy Regulatory Commission ("FERC") has jurisdiction under the Federal Power Act over certain of the electric utility facilities and operations, wholesale rates and accounting practices of WPL and in certain other respects. Certain of WPL's natural gas facilities and operations are subject to the jurisdiction of the FERC under the Natural Gas Act. The Company is presently exempt from all provisions of the Public Utility Holding Company Act of 1935, except provisions relating to the acquisition of securities of other public utility companies.
The PSCW has recently opened a formal docket initiating and inquiry into the future structure of the electric utility industry in Wisconsin. The goals of Wisconsin utility regulation and the principles to be used in choosing among alternative proposals have been identified. WPL has submitted its preferred structure which, in summary form, calls for open access to transmission and distribution systems and a competitive power generation market place. It is not possible at this time to predict the outcome of these proceedings.
With respect to environmental matters, the United States Environmental Protection Agency administers certain federal statutes with administrative responsibility with respect to others being delegated to the Wisconsin Department of Natural Resources ("DNR"). In addition, the DNR has jurisdiction over air and water quality standards associated with fossil fuel fired electric generation and the level and flow of water, safety and other matters pertaining to hydroelectric generation.
WPL is subject to the jurisdiction of the Nuclear Regulatory Commission ("NRC") with respect to the Kewaunee Nuclear Power Plant ("Kewaunee") and to the jurisdiction of the United States Department of Energy ("DOE") with respect to the disposal of nuclear fuel and other radioactive wastes from Kewaunee.
Employees
At year-end 1994, WPL employed 2,391 persons, of whom 1,924 were considered electric utility employees, 334 were considered gas utility employees and 133 were considered other utility employees. WPL has a three-year contract with members of the International Brotherhood of Electrical Workers, Local 965, that is in effect until June 1, 1996. The contract covers 1,647 of WPL's employees.
ELECTRIC OPERATIONS:
General
WPL provides electricity in a service territory of approximately 16,000 square miles in 35 counties in southern and central Wisconsin and four counties in northern Illinois. As of December 31, 1994, WPL provided retail electric service to approximately 371,000 customers in 663 cities, villages and towns, and wholesale service to 27 municipal utilities, one privately owned utility, three rural electric cooperatives and to the Wisconsin Public Power, Inc. system, which provides retail service to nine communities.
WPL owns 20,969 miles of electric transmission and distribution lines and 362 substations located adjacent to the communities served.
WPL's electric sales are seasonal to some extent with the yearly peak normally occurring in the summer months. WPL also experiences a smaller winter peak in December or January.
Fuel
In 1994, approximately 80 percent of WPL's net kilowatthour generation of electricity was fueled by coal and 17 percent by nuclear fuel (provided by WPL's 41 percent ownership interest in Kewaunee). The remaining electricity generated was produced by hydroelectric, oil-fired and natural gas generation.
Coal
WPL anticipates that its average fuel costs will likely increase in the future, due to cost escalation provisions in existing coal and transportation contracts.
The estimated coal requirements of WPL's generating units (including jointly-owned facilities) for the years 1995 through 2014 total about 167 million tons. Present coal supply contracts and transportation contracts (excluding extension options) cover approximately 14 percent and 21 percent, respectively, of this estimated requirement. WPL will seek renewals of existing contracts or additional sources of supply and negotiate new or additional transportation contracts to satisfy these requirements and to comply with environmental regulations.
Nuclear
Kewaunee is jointly-owned by WPL (41%), Wisconsin Public Service Corporation (41.2%) and Madison Gas & Electric Company (17.8%). Wisconsin Public Service Corporation (WPSC) is the operating partner. The plant began commercial operation in 1974.
WPSC, the plant operator, is a member of the INPO, an organization of nuclear utilities which promotes excellence in all aspects of nuclear plant operations. INPO manages the accreditation process for industry training programs, which includes periodic accreditation of those training programs by an independent organization, the NNAB. All ten accredited training programs at Kewaunee are currently in good standing with the NNAB.
The supply of nuclear fuel for the Kewaunee plant involves the mining and milling of uranium ore to uranium concentrates, the conversion of uranium concentrates to uranium hexafluoride, enrichment of the uranium hexafluoride and fabrication of the enriched uranium into usable fuel assemblies. After a region (approximately one-third of the nuclear fuel assemblies in the reactor) of spent fuel is removed from the reactor, it is placed in temporary storage for cooling in a spent fuel pool at the plant site. Permanent storage is addressed below. Presently, there are no operating facilities in the United States reprocessing commercial nuclear fuel. A discussion of the nuclear fuel supply for Kewaunee, which requires approximately 250,000 pounds of uranium concentrates per year follows:
(a) Requirements for uranium are met through spot market purchases of uranium. In general, a four-year supply of uranium is maintained.
(b) Uranium hexafluoride, from inventory and from spot market purchases, was used to satisfy converted material requirements in 1994. Conversion services relating to uranium hexafluoride will be purchased on the spot market in the future.
(c) In 1994, enriched uranium was procured from COGEMA, Inc. pursuant to a contract last amended in 1993. Enrichment services were purchased from the DOE, under the terms of the utility services contract. This contract is in effect for the life of Kewaunee. The partnership is committed to take 70 percent of its annual requirements in 1995, and in alternate years thereafter, from the DOE.
(d) Fuel fabrication requirements through June 15, 1995 are covered by contract. This contract contains an option to allow extension of the contract through 1998. WPSC is negotiating a contract for fuel fabrication extending through 2001.
(e) Beyond the stated periods for Kewaunee, additional contracts for uranium concentrates, conversion to uranium hexafluoride, fabrication and spent fuel storage will have to be procured. The prices for the foregoing are expected to increase.
The National Energy Policy Act of 1992 provides that both the Federal government and the nuclear utilities fund the decontamination and decommissioning of the three federal gaseous diffusion plants in the United States. This will require the owners of Kewaunee to pay approximately $15 million in current dollars over a period of 15 years. WPL's share amounts to an annual payment of approximately $410,000.
The steam generator tubes at the Kewaunee plant are susceptible to corrosion characteristics, a condition that has been experienced throughout the nuclear industry. Annual inspections are performed to identify degraded tubes. Degraded tubes are either repaired by sleeving or are removed from service plugging. The steam generators were designed with approximately 15 percent heat transfer margin, meaning that full power should be sustainable with the equivalent of 15 percent of the steam generator tubes plugged. Tube plugging and the build-up of deposits on the tubes affect the heat-transfer capability of the steam generators to the point where eventually full power operation is not possible and there is a gradual decrease in the capacity of the plant. As a result of this process, Kewaunee's capacity could be reduced by as much as 20% by the year 2013 when the current operating license expires. Currently, the equivalent of approximately 12 percent of the tubes in the steam generator are plugged. WPL and the joint-owners recently completed studies evaluating the economics of replacing the two steam generators at Kewaunee. The studies resulted in the conclusion that the most prudent course of action is to continue operation of the existing steam generators. WPL and the other joint-owners continue to evaluate appropriate strategies, including replacement, as well as continued operation of the steam generator without replacement. WPL and the joint- owners also continue to fund the development of welded repair technology for steam generator tubes. The plant is expected to be operated until at least 2013. WPL and the joint-owners are also continuing to evaluate and implement initiatives to improve the performance of Kewaunee which already performs at above average levels for the industry. These initiatives include conversion from a 12-month to an 18-month fuel cycle and numerous other cost reduction measures. These initiatives have resulted in reductions in Kewaunee operating and maintenance costs since 1991.
Physical decommissioning is expected to occur during the period 2014 to 2021 with additional expenditures being incurred during the period 2022 to 2050 related to the storage of spent nuclear fuel at the site. Wisconsin utilities operating nuclear generating plants are required by the PSCW to establish external trust funds to provide for the decommissioning of such plants. The market value of the investments in the funds established by WPL at December 31, 1994 totaled $51.8 million. Additionally, in July 1994, the PSCW issued a generic order covering utilities that have nuclear generation. This order standardizes the escalation assumptions to be used in determining nuclear decommissioning liabilities.
WPL's share of the decommissioning costs is estimated to be $159 million (in 1994 dollars, assuming the plant is operating through 2013) based on a 1992 study, using the immediate dismantlement method of decommissioning. The undiscounted amount of decommissioning costs estimated to be expended between the years 2014 and 2050 is $1,016 million. After-tax earnings on the tax-qualified and nontax-qualified decommissioning funds are assumed to be 6.1% and 5.1%, respectively. The future escalation rate is assumed to be 6.5%.
Pursuant to the Nuclear Waste Policy Act of 1982, the DOE has entered into a contract with WPL to accept, transport and dispose of spent nuclear fuel beginning no later than January 31, 1998. It is likely that the DOE will delay the acceptance of spent nuclear fuel beyond 1998. A fee to offset the costs of the DOE's disposal for all spent fuel used since April 7, 1983 has been assessed by the DOE at one mill per net kilowatthour of electricity generated and sold by the Kewaunee nuclear power plant. An additional one-time fee was paid for the disposal of spent nuclear fuel used to generate electricity prior to April 7, 1983.
Spent fuel is currently stored at Kewaunee. The existing capacity of the spent fuel storage facility will enable storage of the projected quantities of spent fuel through April 2001. WPL is currently evaluating options for the storage of additional quantities beyond 2001. Several technologies are available. An investment of approximately $2.5 million in the early 2000's could provide additional storage sufficient to meet spent fuel storage needs until the expiration of the current operating license.
The Low-Level Radioactive Waste Policy Act of 1980 as amended in 1985 provides that states may enter into compacts to provide for regional low-level waste disposal facilities. Wisconsin is a member of the Midwest Interstate Low-Level Radioactive Waste Compact. The state of Ohio has been selected as the host state for the Midwest Compact and is proceeding with the preliminary phases of site selection. In June of 1994, the Branwell, South Carolina disposal facility, which had been accepting Kewaunee low level radioactive waste materials, discontinued taking waste materials from outside its region. WPL expects to have sufficient storage space of its own to satisfy low level radioactive waste disposal needs until the Ohio facility accepts low level radioactive waste materials.
Recovery of Electric Fuel Costs
In 1994 WPL did not automatically pass changes in electric fuel costs through to its Wisconsin retail electric customers. Instead, rates were based on estimated per unit fuel costs established during rate proceedings and were not subject to change by fuel cost fluctuations unless actual costs were outside specified limits. If actual fuel costs had varied from the estimated costs by more than +10 percent in a month or by more than +3 percent for the test year to date, rates could have been adjusted based on the results of a special fuel cost hearing. During 1994, fuel costs remained within the aforementioned parameters. See Note 1F in Notes to Consolidated Financial Statements included as part of Item 8 hereto.
WPL's wholesale rates and South Beloit's retail rates contain fuel adjustment clauses pursuant to which rates are adjusted monthly to reflect changes in the costs of fuel.
GAS OPERATIONS:
General
As of December 31, 1994, WPL provided retail natural gas service to approximately 141,000 customers in 239 cities, villages and towns in 22 counties in southern and central Wisconsin and one county in northern Illinois.
WPL's gas sales follow a seasonal pattern. There is an annual base load of gas used for heating, cooking, water heating and other purposes, with a large peak occurring during the heating season.
In 1994, WPL continued to purchase significant volumes of lower cost gas directly from producers and marketers and transported those volumes over its two major pipeline supplier's systems. This replaced higher cost gas historically purchased directly from the major pipeline systems.
Gas Supplies
During 1993, both of the interstate pipelines which serve WPL, ANR Pipeline and Northern Natural Pipeline, completed their transition to providing unbundled services as mandated by the FERC in its Order 636. As a result, WPL now contracts with these two parties for various unbundled services such as firm and interruptible transportation, firm and interruptible storage service and "no-notice" service. WPL and its gas customers have benefited from enhanced access to competitively priced gas supplies, and from more flexible transportation services. As part of this restructuring, pipelines have sought and received authorization to recover from their customers certain transition costs associated with restructuring. WPL is passing these costs along to its retail gas customers pursuant to provisions of its retail gas tariffs.
The gas industry, in general, was put to a severe test during the first quarter of 1994 in the wake of the coldest weather on record. On January 18, 1994, the temperature averaged -17F in Madison, Wisconsin and did not rise above -7F. WPL set a record peak day load of 251,194 MMBTU. Overall throughput for January was 23% above forecast. Through effective use of transportation, supply, and storage contracts and by invoking tariff language allowing interruption and constraint of gas supplies to WPL's large industrial and commercial customers, WPL was able to maintain gas flows within the parameters imposed by its pipeline contracts. By doing so, WPL avoided substantial penalty exposure from the pipeline companies for unauthorized use of gas. WPL's large industrial and commercial customers served under interruptible rates moved to alternate fuel supplies during the periods of interruption and constraint. These customers pay a discounted rate year round in exchange for WPL's right to interrupt service to their facilities.
WPL's portfolio of natural gas contracts over the last several years is as follows:
As the natural gas market continues to evolve, WPL continuously evaluates products and services provided by pipelines and gas suppliers to meet the changing needs of its firm and interruptible gas customers.
Environmental Matters
WPL cannot precisely forecast the effect of future environmental regulations by Federal, state and local authorities upon its generating, transmission and other facilities, or its operations, but has taken steps to anticipate the future while meeting the requirements of current environmental regulations. The Clean Air Act Amendments of 1977 and subsequent amendments to the Clean Air Act, as well as the new laws affecting the handling and disposal of solid and hazardous wastes along with clean air legislation passed in 1990 by Congress, could affect the siting, construction and operating costs of both present and future generating units.
Under the Federal Clean Water Act, National Pollutant Discharge Elimination System permits for generating station discharge into water ways are required to be obtained from the DNR to which the permit program has been delegated. These permits must be periodically renewed. WPL has obtained such permits for all of its generating stations or has filed timely applications for renewals of such permits.
Air quality regulations promulgated by the DNR in accordance with Federal standards impose statewide restrictions on the emission of particulates, sulfur dioxide, nitrogen oxides and other air pollutants and require permits from the DNR for the operation of emission sources. WPL currently has the necessary permits to operate its fossil-fueled generating facilities. With the passage of the new Federal Clean Air Act Amendments, the state is required to include these provisions into their permit requirements. WPL has submitted timely Title V permit applications in compliance with schedules set forth by the regulators. The operating permits, when issued, will consolidate all existing air permit conditions and regulatory requirements into one permit for each facility. Permits may be issued in late 1995 and 1996. Until such time, the facilities will continue to operate under their existing permit conditions.
Pursuant to Section 144.386(2) of the Wisconsin Statutes, WPL has submitted data and plans for 1995 sulfur dioxide emissions compliance. Actual 1994 emissions were reported to the DNR. WPL is currently in compliance with the state requirement. WPL will make any necessary operational changes in fuel types and power plant dispatch to comply with the system emissions limit of 1.2 pounds SO2 per million BTU.
WPL's compliance strategy for Wisconsin's sulfur dioxide law (discussed above) and the Federal Clean Air Act Amendments required plant upgrades at its generating facilities. The majority of these projects were completed in 1993. WPL has installed continuous emission monitoring systems at all of its coal fired boilers in compliance with federal requirements. Monitoring for sulfur dioxide was also required by Title IV of the Federal Clean Air Act at WPL's South Fond du Lac Combustion Turbine Site. These requirements were also met. Additional monitoring systems for nitrogen oxides will be required by January 1, 1996 at the combustion turbine site. WPL will install these monitors in 1995. No significant investments are anticipated at this time to meet the requirements of the Federal Clean Air Act Amendments.
Pursuant to Section 311(j)(5) of the Clean Water Act, WPL has submitted Facility Response Plans for the Rock River generating station and the South Fond du Lac combustion turbine site. The plans address pollution prevention and spill response activities for those facilities with capacity to store in excess of one million gallons of oil.
WPL maintains licenses for all of its ash disposal facilities and regularly reports to the DNR groundwater data and quantities of ash landfilled or reused. The landfills are operated according to a plan of operation approved by the DNR.
WPL's accumulated pollution abatement expenditures through December 31, 1994, totalled approximately $133 million. The major expenditures consist of about $60 million for the installation of electrostatic precipitators for the purpose of reducing particulate emissions from WPL's coal-fired generating stations and approximately $73 million for other pollution abatement equipment at the Columbia, Edge- water, Kewaunee, Nelson Dewey, Rock River and Blackhawk plants. Expenditures during 1994 totalled approximately $5.0 million. Estimated future pollution abatement expenditures total $1.5 million through 1996. WPL's estimated pollution abatement expenditures are subject to continuing review and are revised from time to time due to escalation of construction costs, changes in construction plans and changes in environmental regulations.
See "Electric Operations - Fuel" for information concerning the disposal of spent nuclear fuel and high level nuclear waste.
Manufactured Gas Plant Sites
Historically, WPL has owned 11 properties that have been associated with the production of manufactured gas. Currently, WPL owns five of these sites, three are owned by municipalities, and the remaining three are owned by private companies. In 1989, WPL initiated investigation of these manufactured gas plant sites. The DNR has been involved in reviewing investigation plans and has received ongoing reports regarding these investigations.
In 1992, and into the beginning of 1993, WPL continued its investigations and studies. WPL confirmed that there was no contamination at two of the sites and received a close out letter from the DNR related to one of those sites and requested a close out letter for the other site. Additionally, the investigation of historical records at a third site indicated a minimal likelihood of any significant environmental impacts. In February 1993, WPL completed cost estimates for the environmental remediation of the eight remaining sites. The results of this analysis indicate that during the next 34 years, WPL will expend approximately $81 million for feasibility studies, data collection, soil remediation activities, groundwater research and groundwater remediation activities, including construction of slurry containment walls and the installation of groundwater pump and treatment facilities. This estimate was based on various assumptions, and is subject to continuous review and revision by management.
The cost estimate set forth above assumes 4 percent average inflation over a 34 year period. The cost estimate also contemplates that primarily groundwater pump and treatment activities will take place after 1998 through and including 2027. During this time, WPL estimates that it will incur average annual costs of $2.0 million to complete the planned groundwater remediation activities.
With respect to rate recovery of these costs, the PSCW has approved a five year amortization of the unamortized balance of environmental costs expended to date.
In addition, WPL is pursuing insurance recovery for the costs of remediating these sites and is investigating to determine whether there are other parties who may be responsible for some of the clean-up costs.
Through 1994, management has continued its oversight of the issues related to the above manufactured gas plant sites without significant revision to the above estimates and assumptions.
Based on the present regulatory record at the PSCW, management believes that future costs of remediating these manufactured gas plant sites will be recovered in rates.
ITEM 2.
ITEM 2. PROPERTIES
The following table gives information with respect to electric generating facilities of WPL (including WPL's portion of those facilities jointly-owned).
The maximum net hourly peak load on WPL's electric system was 2,002,000 kw and occurred on June 16, 1994. At the time of such peak load, 2,386,000 kw were produced by generating facilities operated by WPL (including other company shared jointly-owned facilities). WPL delivered 934,000 kw of power and received 540,000 kw of power from external sources. During the year ended December 31, 1994, about 84.4 percent of WPL's total kilowatthour requirements were generated by company-owned and jointly-owned facilities and the remaining 15.6 percent was purchased. Substantially all of WPL's facilities are subject to the lien of its first mortgage bond indenture.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the company or any of its subsidiaries is a party or to which any of their property is subject.
ENVIRONMENTAL MATTERS
The information required by Item 3 is included in this Form 10-K in Note 11c to Notes to Consolidated Financial Statements, which information is incorporated herein by reference.
RATE MATTERS
The information required by Item 3 is included in Items 6 & 7 of this Form 10-K within the Management's Discussion and Analysis of Financial Condition and Results of Operations narrative under the caption "Rates and Regulatory Matters."
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Erroll B. Davis, Jr, 50, was elected President and Chief Executive Officer, effective August 1, 1988 and has been a board member since April 1984. He had been Executive Vice President since May 1984, Vice President - Finance and Public Affairs since November 1982 and Vice President - Finance since August 1978. Mr. Davis was elected President of WPL Holdings, Inc. on January 17, 1990 and Chief Executive Officer of WPL Holdings, Inc. effective July 1, 1990. He has served as a director of WPL Holdings, Inc. since March 1988.
Edward M. Gleason, 54, was elected Vice President, Treasurer and Corporate Secretary of WPL Holdings, Inc. effective October 3, 1993. He previously served as Vice President-Finance and Treasurer of WPL since May 1986. Mr. Gleason functions as the principal financial officer of WPL Holdings, Inc.
A.J. (Nino) Amato, 43, was appointed Senior Vice President effective October 3, 1993. He previously served as Vice President - Marketing and Strategic Planning since December 1992, Vice president - Marketing and Communications since January 1989 and Director of Electric Marketing and Customer Service since October 1988. He had been President of Forward Wisconsin, Inc. from 1987 to 1988.
Norman E. Boys, 50, was elected Vice President of Power Production effective January 1, 1989. He previously served as the Director of Power Production since October 1987 and Generating Station Manager at the Edgewater Generating Station since August 1984.
William D. Harvey, 45, was appointed Senior Vice President effective October 3, 1993. He previously served as Vice President-Natural Gas and General Counsel since August 1992, Vice President-General Counsel since October 1, 1990 and Vice President-Associate General Counsel since July 1986. Prior to joining the Company, he was a member of the law firm of Wheeler, Van Sickle, Anderson, Norman and Harvey.
Eliot G. Protsch, 41, was appointed Senior Vice President effective October 3, 1993. He previously served as Vice President- Customer Services and Sales since August 1992, Vice President and General Manager-Energy Services since January 1989 and District Manager, Dane County, since October 1986.
Daniel A. Doyle, 36, was appointed Vice President - Finance, Controller and Treasurer effective December 25, 1994. He previously served as Controller and Treasurer of WPL since October 3, 1993. Prior to joining the Company, he was Controller of Central Vermont Public Service Corporation since December 1988.
David E. Ellestad, 54, was appointed Vice President-Electrical Engineering and Operations on August 1, 1992. He previously served as Vice President-Engineering and Operations since 1988; Vice President of Electrical Engineering and Procurement since January 1, 1986; Director of Electrical Engineering & Procurement since May 1985 and Director of Electrical Engineering since November 1979.
Thomas J. Handziak, 31, was elected Assistant Controller on September 20, 1993. Prior to joining the Company, he was employed by Arthur Andersen & Co. as an Audit Staff Assistant, Audit Senior and Audit Manager with primary responsibilities of auditing and providing financial consulting services to large publicly held corporations.
Thomas L. Hanson, 41, was elected Assistant Treasurer on May 17, 1989. He had been Financial Relations Supervisor in the Treasury Department since October 1987.
Steven F. Price, 42, was appointed Assistant Corporate Secretary on April 15, 1992. He had been Cash Management Supervisor since December 1987. He was also appointed Assistant Corporate Secretary and Assistant Treasurer of WPL Holdings, Inc. on April 15, 1992.
Joseph Shefchek, 38, was elected Assistant Vice President of Environmental Affairs and Research effective December 25, 1994. He previously served as Director of Environmental Affairs and Research since June 1991. Before joining the Company, he held various environmental engineering positions in private industry and government.
Barbara Swan, 43, was elected Vice President-General Counsel effective December 25, 1994. She previously served as General Counsel since 1993 and Associate General Counsel from 1987 to 1993.
Pamela J. Wegner, 47, was elected Vice President-Information Services and Administration on October 13, 1994. Prior to joining the Company, she was the Administrator of the Division of Finance and Program Management in the Wisconsin Department of Administration since 1987. She served as Administrator of the Division of Administrative Services in the Wisconsin Department of Revenue from 1983 to 1987.
Kim K. Zuhlke, 41, was elected Vice President - Customer Services and Sales effective October 3, 1993. He previously served as Director of Marketing and Sales Services since 1991, Director of Market Research, Planning and Development since February 1990, Director of Customer Services since 1988 and District Manager at Beaver Dam since April 1984.
NOTE: All ages are as of December 31, 1994. None of the executive officers listed above is related to any director of the Board or nominee for director of the Company.
Executive officers of the Company have no definite terms of office and serve at the pleasure of the Board of Directors.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Effective with the formation of the holding company, all $5 par value common stock of the Company was converted into common stock of WPL Holdings, Inc. WPL Holdings is now the sole common shareowner of the Company.
The Company's dividend payment for administrative allowance and other costs throughout 1994 and 1993 totalled $0 and $1,000,000, respectively, regular cash dividends paid per share of common stock during 1994 and 1993 to WPL Holdings, Inc. were .96 cents and .95 cents, respectively, for each quarter.
ITEM 6
ITEM 6 AND 7. SELECTED FINANCIAL DATA AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
OVERVIEW
Net income of Wisconsin Power and Light Company ("WPL" or the "Company") increased to $68.2 million in 1994 compared with $60.2 million in 1993. Net income for 1994 was significantly affected by two non-recurring items. These items were the reversal of a coal contract penalty in the 1st quarter and costs associated with early retirement and severance programs which primarily occurred in the 4th quarter. Both of these items are discussed in the "Other Events" section of Management's Discussion and Analysis. The following breakout presents the recurring aspects of 1994's operations.
1994 1993 (in millions) Net Income, as reported $68.2 $60.2 Less: Increase in Net Income from reversal of coal contract penalty (5.3) ( - ) Add: Decrease in Net Income from costs associated with early retirement and severance programs 8.2 1.1 ----- ----- Net Income before the above non-recurring items $71.9 $61.3 ===== =====
The increase in the "Net income before the above non-recurring items" primarily reflects an increase in operating earnings.
WPL's electric margin increased during 1994 compared to 1993. The primary factor was a 3.8 percent retail rate increase effective October 1, 1993. Strong economic conditions in the industrial and commercial customer classes contributed higher sales and customer growth. A colder than normal January and a very warm mid-September offset relatively mild summer conditions in July and August making 1994 a relatively average year in terms of impacts on sales volumes. Electric production fuel costs were reasonably stable for 1994. The volume of purchased power increased as a result of WPL's efforts to conserve coal inventories during a rail strike in the 3rd quarter of 1994. See "Other Events" for details.
Gas margin increased in 1994 from 1993 primarily based on two factors: 1) a 1.4 percent retail rate increase effective October 1, 1993 and, 2) an increase in customers in the higher rate firm service which improved the sales mix. The overall cost of purchased gas declined reflecting WPL's effective use of opportunities on the gas spot market.
Other Operation
Other operation expense increased due to the early retirement and severance programs discussed in the "Other Events" section.
Maintenance
Maintenance expense decreased between years due to variation in the timing and extent of maintenance on its generating facilities between years. Secondarily, a severe storm in the summer of 1993 increased 1993's maintenance expense related to service restoration.
Depreciation and Amortization
Depreciation expense increased, principally reflecting increased property additions and increased decommissioning costs.
Other Income and (Deductions)
Other income increased resulting from the reversal of a coal contract penalty discussed later in the "Other Events" section.
Income Taxes
Income taxes increased between years primarily due to higher taxable income.
1993 COMPARED WITH 1992
OVERVIEW
Net income of the Company increased to $60.2 million in 1993 compared with $55.4 million in 1992. The principle factors leading to increased earnings included warmer summer weather and lower electric fuel costs per kWh which yielded higher electric margins. These increases were somewhat offset by increased depreciation expense resulting from additional investment in utility plant and property additions, a change in the mix of gas sales from higher margin sales to lower margin sales, the increase in the Federal corporate tax rate from 34 percent to 35 percent and a one- time 4-cent-per-share charge associated with a voluntary separation program for the executive management group.
Electric margin in dollars increased during 1993 compared with 1992 due to increased demand for electricity brought on by warmer summer weather. Residential customers, being the most weather sensitive, experienced the most significant increases. Wisconsin's strong economy kept the commercial and industrial classes growing steadily. These increases were coupled with declining electric production fuel costs per kWh. The decrease in electric production fuel cost per kWh was due to WPL's aggressive pursuit of additional spot coal purchase opportunities as its longer term contracts began to expire. Additionally, a highly competitive rail transportation environment significantly reduced the cost of transporting the coal. Also, lower cost purchased power became available due to excess capacity in the bulk power market.
Gas revenues for 1992 were affected by the recognition of a $4.9 million before-tax refund to its natural gas customers resulting from an adjustment in the calculation of the purchased gas adjustment clause. Without the impact of this revenue adjustment, comparative gas margins would have declined for 1993 compared with 1992.
The overall increases in gas revenues and purchased gas costs between years resulted primarily from increased volumes procured on behalf of transportation customers. This had the impact of decreasing margins as a percentage of total revenues. A change in the mix of gas sales from higher margin residential sales to lower margin sales also moved margins downward. Offsetting this decline, Wisconsin's strong economy enabled growth in the Commercial and Industrial classes, and there was also some overall increase in the demand for natural gas due to colder weather.
Other Operation Expense
An increase in other operation expense resulted from higher WPL employee benefit expense (see Notes to Consolidated Financial Statements, Note 7). These increases were offset somewhat by decreases in conservation program expenditures and decreases in fees associated with the sale of accounts receivable due to a decline in interest rates. Additionally, cost management efforts have helped control annual inflationary pressures on general and administrative costs.
Depreciation and Amortization
Depreciation and amortization expense increased, principally reflecting increased property additions and the commencement of deferred charge amortizations approved in WPL's rate orders received in December 1992 and October 1993. The most significant amortizations include the amortization related to an acquisition adjustment which resulted from the purchase of transmission facilities and the amortization of costs incurred related to the remediation of former manufactured gas plant sites (see Notes to the Consolidated Financial Statements, Note 11).
Allowance for Funds Used During Construction ("AFUDC")
Total AFUDC increased in 1993 compared with 1992, reflecting the greater amounts of construction work in progress including the costs associated with WPL's construction of two 86-megawatt combustion-turbine generators.
LIQUIDITY AND CAPITAL RESOURCES
Rates and Regulatory Matters
On December 9, 1994, the Public Service Commission of Wisconsin (PSCW) issued rate order UR-109, effective for a two-year period beginning January 1, 1995. The order included the following decisions on WPL's retail rate application as filed on February 4, 1994: 1) electric revenues will be decreased by approximately $12.3 million (2.8 percent) annually, 2) natural gas revenues will be increased by approximately $.7 million (.5 percent) annually, 3) return on common equity will be 11.5 percent versus WPL's previously allowed return on equity of 11.6 percent.
Further, the PSCW approved certain incentive programs described below:
1. The electric fuel adjustment mechanism was eliminated. In its absence, WPL will benefit from reductions in fuel cost. Conversely, WPL will be exposed to increases in fuel costs.
2. The automatic purchased gas adjustment clause was also eliminated. In the future, the fluctuations in the commodity cost of gas above or below a prescribed commodity price index will serve to increase or decrease WPL's margin on gas sales. Fixed demand costs are excluded from the incentive program. Both benefits and exposures are subject to ratepayer sharing provisions, which are capped at $1.1 million.
3. In order to promote air quality and reliability, there are SO2 emissions and service reliability incentive clauses. Positive incentive available under these clauses is $1.5 million for the SO2 emissions and $.5 million for the service reliability. WPL's earnings are also negatively exposed for equal amounts. Since WPL is allowed to collect all revenues under these programs in advance, up to $4.0 million annually of pre-tax revenue may be collected subject to refund upon final determination of performance under this program.
Industry Outlook
The PSCW has recently opened a formal docket initiating an inquiry into the future structure of the electric utility industry in Wisconsin. The goals of Wisconsin utility regulation and the principles to be used in choosing among alternative proposals have been identified. WPL has submitted its preferred structure which, in summary form, calls for open access to transmission and distribution systems and a competitive power generation market place. It is not possible at this time to predict the outcome of these proceedings.
Financing and Capital Structure
The level of short-term borrowings fluctuates based on seasonal corporate needs, the timing of long-term financing and capital market conditions. WPL generally issues short-term debt to provide interim financing of construction and capital expenditures in excess of available internally generated funds. WPL periodically reduces its outstanding short-term debt through the issuance of long-term debt and through equity contributions from its parent, WPL Holdings, Inc. To maintain flexibility in its capital structure and to take advantage of favorable short-term rates WPL also uses proceeds from the sales of accounts receivable and unbilled revenues to finance a portion of its long-term cash needs. The Company also anticipates that short-term debt funds will continue to be available at reasonable costs due to strong ratings by independent utility analysts and rating services. Commercial paper has been rated A-1+ by Standard & Poor's Corp. and P-1 by Moody's Investors Service.
Bank lines of credit of $70 million at December 31, 1994 are available to support these borrowings.
The Company's capitalization at December 31, 1994, including the current maturities of long-term debt, variable rate demand bonds and short-term debt, consisted of 52 percent common equity, 6 percent preferred stock and 42 percent long-term debt. The common equity to total capitalization ratio at December 31, 1994 increased to 52 percent from 51 percent at December 31, 1993.
The retail rate order effective January 1, 1995, requires WPL to maintain a utility common equity level of 51.93 percent of total utility capitalization during the two-year test year ending December 31, 1996. In addition, the PSCW ordered that it must approve the payment of dividends by WPL that are in excess of the level forecasted for 1995 ($58.1 million), if such dividends would reduce WPL's average common equity ratio below 51.93 percent.
Capital Requirements
WPL is a capital-intensive business and requires large investments in long-lived assets. Therefore, the Company's most significant capital requirements relate to construction expenditures. Estimated capital requirements for the next five years are as follows:
Included in the construction expenditure estimates, in addition to the recurring additions and improvements to the distribution and transmission systems, are the following: 1) expenditures for managing and controlling electric line losses and for the electric delivery system that will reduce electric line losses and enhance WPL's interconnection capability with other utilities; 2) expenditures related to environmental compliance issues including the installation of additional emissions monitoring equipment and coal handling equipment; 3) expenditures associated with the construction of an 86-megawatt combustion-turbine generator expected to become operational in 1996.
The Company's capital requirements may also be impacted by decisions relating to the Kewaunee Nuclear Power Plant ("Kewaunee"). The steam generator tubes at Kewaunee are susceptible to corrosion characteristics, a condition that has been experienced throughout the nuclear industry. Annual inspections are performed to identify degraded tubes. Degraded tubes are either repaired by sleeving or are removed from service plugging. The steam generators were designed with an approximately 15 percent heat transfer margin, meaning that full power should be sustainable with the equivalent of 15 percent of the steam generator tubes plugged. Tube plugging and the build-up of deposits on the tubes affect the heat-transfer capability of the steam generators to the point where eventually full-power operation is not possible and there is a gradual decrease in the capacity of the plant. The plant's capacity could be reduced by as much as 20% by the year 2013 when the current operating license expires. Currently, the equivalent of approximately 12 percent of the tubes in the steam generators are plugged. WPL and the joint-owners recently completed studies evaluating the economics of replacing the two steam generators at Kewaunee. The studies resulted in the conclusion that the most prudent course of action is to continue operation of the existing steam generators. WPL and the other joint-owners continue to evaluate appropriate strategies, including replacement, as well as continued operation of the steam generators without replacement. WPL and the joint-owners also continue to fund the development of welded repair technology for steam generator tubes. The plant is expected to be operated until at least 2013. WPL and the joint-owners are also continuing to evaluate and implement initiatives to improve the performance of Kewaunee, which already performs at above average levels for the industry. These initiatives include conversion from a 12-month to an 18-month fuel cycle and numerous other cost reduction measures. These initiatives have resulted in reductions in Kewaunee operating and maintenance costs since 1991.
Capital Resources
One of the Company's objectives is to finance construction expenditures through internally generated funds supplemented, when required, by outside financing. With this objective in place, the Company has financed an average of 79 percent of its construction expenditures during the last five years from internal sources. However, during the next five years, the Company expects this percentage to be reduced primarily due to the continuation of major construction expenditures and the maturity of $64 million of WPL first mortgage bonds. External financing sources such as the issuance of long-term debt, short-term borrowings and equity contributions from its parent, WPL Holdings, Inc. will be used by the Company to finance the remaining construction expenditure requirements for this period. Expectations are that $65 million of long-term debt will be issued over the next three years.
INFLATION
Under current rate-making methodologies prescribed by the various commissions that regulate WPL, projected or forecasted operating costs, including the impacts of inflation, are incorporated into WPL revenue requirements. Accordingly, the impacts of inflation on WPL are currently mitigated. Although rates will be held flat until at least 1997, management expects that any impact of inflation will be mitigated by customer growth and productivity improvements. Inflationary impacts on the non-regulated businesses are not anticipated to be material to the Company.
OTHER EVENTS
Coal Contract Penalty
In November 1989, the PSCW concluded that WPL did not properly administer a coal contract, resulting in an assessment to compensate ratepayers for excess fuel costs having been incurred. As a result, WPL recorded a reserve in 1989 that had an after-tax affect of reducing 1989 net income by $4.9 million. The PSCW decision was found to represent unlawful retroactive rate-making by both the Dane County Circuit Court and the Wisconsin Court of Appeals. The case was then appealed to the Wisconsin Supreme Court.
In January, 1994, the Wisconsin Supreme Court affirmed the decisions of the Dane County Circuit Court and Wisconsin Court of Appeals. In management's opinion, all avenues for appeal have been exhausted. As a result, WPL reversed the entire reserve and was also allowed to collect interest on amounts of the penalty previously refunded to ratepayers. The reversal of the reserve plus interest had an after-tax affect of increasing net income in 1994 by $5.3 million.
Early Retirement and Severance Programs
Given the expectation of increasing competition, WPL has continued to reengineer its processes to implement cost efficiencies in its operations. In connection with these efforts, WPL offered voluntary early retirement programs and voluntary severance programs to affected employees in 1994 and 1993. These programs primarily closed late in the fourth quarter of 1994 and 1993.
For 1994, in terms of cost, the early retirement programs totalled $9.8 million and the severance programs totalled $3.9 million for a grand total of $13.7 million. For 1993, program costs totalled $1.8 million.
Coal Transporter's Strike
One of WPL's major coal transporters experienced a labor strike during the third quarter of 1994. During the term of the strike (55 days), WPL's ability to receive coal from its suppliers was impaired, which required WPL to use some of its existing coal reserves and to purchase additional power. On August 29, 1994, President Clinton, acting under the Railway Labor Act, forced a temporary end (the "cooling off period") to the strike by ordering the railroad union employees back to work and establishing a three member Presidential Emergency Board to draft a recommended settlement. Railroad management and the United Transportation Union have subsequently settled on a contract. As of December 31, 1994, the existing and anticipated financial impact on WPL's operating results was not material.
Environmental
WPL cannot precisely forecast the effect of future environmental regulations by federal, state and local authorities upon its generating, transmission and other facilities, or its operations, but has taken steps to anticipate the future while meeting the requirements of current environmental regulations. The Clean Air Act Amendments of 1977 and subsequent amendments to the Clean Air Act, as well as the new laws affecting the handling and disposal of solid and hazardous wastes along with the clean air legislation passed in 1990 by Congress, could affect the siting, construction and operating costs of both present and future generating units.
Under the Federal Clean Water Act, National Pollutant Discharge Elimination System permits for generating station discharge into water ways are required to be obtained from the Wisconsin Department of Natural Resources (DNR). WPL has obtained such permits for all of its generating stations or has filed timely applications for renewals.
Air quality regulations promulgated by the DNR in accordance with federal standards impose statewide restrictions on the emission of particulates, sulfur dioxide, nitrogen oxides and other air pollutants and require permits from the DNR for the operation of emission sources. WPL currently has the necessary permits to operate its fossil-fueled generating facilities. However, beginning in 1994, new permits were required for all major facilities in Wisconsin. WPL's Columbia Generating facility submitted a permit application on May 1, 1994. The remaining facilities will be addressed in early 1995.
WPL's compliance strategy for Wisconsin's 1993 sulfur dioxide law and the Federal Clean Air Act Amendments required plant upgrades at its generating facilities. The majority of these projects were completed in 1993 and 1994. WPL has installed continuous emissions monitoring systems at all of its coal fired boilers. No additional costs for compliance with these acid-rain-prevention requirements are anticipated at this time.
Also see Note 11c in the Notes to the Consolidated Financial Statements for a discussion of WPL's manufactured gas plant sites.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements of capitalization of Wisconsin Power and Light Company (a Wisconsin corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, common shareowners' investment and cash flows for each of the three years in the period ended December 31, 1994. 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 Wisconsin Power and Light Company and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin, February 1, 1995
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands except as otherwise indicated)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND
REPORTING POLICIES:
a. Business and Consolidation:
Wisconsin Power and Light Company ("WPL" or the "Company") is a wholly- owned subsidiary of WPL Holdings, Inc. ("WPLH").
WPL is a public utility predominantly engaged in the transmission and distribution of electric energy and the generation and bulk purchase of electric energy for sale. WPL also transports, distributes and sells natural gas purchased from gas suppliers. Nearly all of WPL's retail customers are located in south and central Wisconsin. WPL's principal consolidated subsidiary is South Beloit Water, Gas and Electric Company. Certain amounts from prior years have been reclassified to conform with the current year presentation.
b. Regulation:
WPL's financial records are maintained in accordance with the uniform system of accounts prescribed by its regulators. The Public Service Commission of Wisconsin ("PSCW") and the Illinois Commerce Commission have jurisdiction over retail rates, which represent approximately 83 percent of electric revenues plus all gas revenues. The Federal Energy Regulatory Commission ("FERC") has jurisdiction over wholesale electric rates representing the balance of electric revenues. Statement of Financial Accounting Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of Regulation" provides that rate-regulated public utilities such as WPL record certain costs and credits allowed in the ratemaking process in different periods than for unregulated entities. These are deferred as regulatory assets or regulatory liabilities and are recognized in the Consolidated Statements of Income at the time they are reflected in rates.
c. Utility Plant and Other Property and Equipment:
Utility plant and other property and equipment are recorded at original cost and cost, respectively. Utility plant costs include financing costs that are capitalized through the PSCW-approved allowance for funds used during construction ("AFUDC"). The AFUDC capitalization rates approximate WPL's cost of capital. These capitalized costs are recovered in rates as the cost of the utility plant is depreciated.
Normal repairs, maintenance and minor items of utility plant and other property and equipment are expensed. Ordinary utility plant retirements, including removal costs less salvage value, are charged to accumulated depreciation upon removal from utility plant accounts, and no gain or loss is recognized. Upon retirement or sale of other property and equipment, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in other income and deductions.
d. Nuclear Fuel:
Nuclear fuel is recorded at its original cost and is amortized to expense based upon the quantity of heat produced for the generation of electricity. This accumulated amortization assumes spent nuclear fuel will have no residual value. Estimated future disposal costs of such fuel are expensed based on kilowatthours generated.
e. Revenue:
WPL accrues utility revenues for services provided but not yet billed.
f. Electric Production Fuels and Purchased Gas:
(1) Electric Production Fuels:
Through 1994, the PSCW retail electric rates provided a range from which actual fuel costs could vary in relation to costs forecasted and used in rates. If actual fuel costs fell outside this range, a hearing could be held to determine if a rate change was necessary, and a rate increase or decrease could result.
Beginning with WPL's latest rate order UR-109, effective January 1, 1995, the automatic fuel adjustment clause was eliminated. In its absence, WPL will benefit from reductions in fuel cost. Conversely, WPL will be exposed to increases in fuel costs.
An automatic fuel adjustment clause for the FERC wholesale portion of WPL's electric business operates to increase or decrease monthly rates based on changes in fuel costs.
(2) Purchased Gas:
Through 1994, WPL's base gas cost recovery rates permitted the recovery of or refund to all customers for any increases or decreases in the cost of gas purchased from WPL's suppliers through a monthly purchased gas adjustment clause.
Beginning with UR-109, the monthly purchased gas adjustment clause was also eliminated. In the future, the fluctuations in the commodity cost of gas above or below a prescribed commodity price index will serve to increase or decrease WPL's margin on gas sales. Fixed demand costs are excluded from the incentive program. Both benefits and exposures are subject to ratepayer sharing provisions, which are capped at $1.1 million.
g. Cash and Equivalents:
The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of these items.
h. Income Taxes:
Under the terms of an agreement with WPLH, the Company calculates its federal tax provisions and makes payments to WPLH as if it were a separate taxable entity. Beginning in 1993, WPL fully provides deferred income taxes in accordance with SFAS No.109, "Accounting for Income Taxes," to reflect tax effects of reporting book and tax items in different periods.
NOTE 2. PROPERTY:
a. Jointly-Owned Utility Plants:
WPL participates with other Wisconsin utilities in the construction and operation of several jointly-owned utility generating plants. The chart below represents WPL's proportionate share of such plants as reflected in the Consolidated Balance Sheets at December 31, 1994 and 1993
Each of the respective joint owners finances its portion of construction costs. WPL's share of operation and maintenance expenses is included in the Consolidated Statements of Income.
b. Capital Expenditures:
The Company's capital expenditures for 1995 are estimated to total $128.6 million. Substantial commitments have been incurred for such expenditures.
NOTE 3. DEPRECIATION:
The Company uses the straight-line method of depreciation. For utility plant, straight-line depreciation is computed on the average balance of depreciable property at individual straight-line PSCW approved rates that consider the estimated useful life and removal cost or salvage value as follows:
Electric Gas Water Common 1994 3.2% 3.7% 2.5% 7.2% 1993 3.2% 3.7% 2.5% 7.3% 1992 3.2% 3.7% 2.6% 7.1%
NOTE 4. NUCLEAR OPERATIONS:
Depreciation expense related to the Kewaunee Nuclear Power Plant ("Kewaunee") includes a provision to accrue for the cost of decommissioning over the life of the plant, which totalled $13.4 million, $6.1 million and $3.9 million in 1994, 1993 and 1992, respectively. Wisconsin utilities with ownership of nuclear generating plants are required by the PSCW to establish and make annual contributions to external trust funds to provide for plant decommissioning. Additionally, in July 1994, the PSCW issued a generic order covering utilities that have nuclear generation. This order standardizes the escalation assumptions to be used in determining nuclear decommissioning liabilities.
WPL's share of the decommissioning costs is estimated to be $159 million (in 1994 dollars, assuming the plant is operating through 2013) based on a 1992 study, using the immediate dismantlement method of decommissioning. The undiscounted amount of decommissioning costs estimated to be expended between the years 2014 and 2050 is $1.016 billion. After-tax earnings on the tax-qualified and nontax-qualified decommissioning funds are assumed to be 6.1 percent and 5.1 percent, respectively. The future escalation rate is assumed to be 6.5 percent.
Decommissioning costs and a charge to offset earnings on the external trusts are recorded as portions of depreciation expense and accumulated provision for depreciation on the Statements of Consolidated Income and the Consolidated Balance Sheets, respectively. As of December 31, 1994, the total decommissioning costs included in the accumulated provision for depreciation were approximately $62.8 million.
WPL has established external trusts to hold decommissioning funds, and the PSCW has approved WPL's funding plan which provides for annual contributions of current accruals over the remaining service lives of the nuclear plants. The earnings on the external trusts accumulate in the fund balance and in the accumulated provision for depreciation. Such earnings on the external trust funds, which have been offset by a charge to depreciation expense on the Statements of Consolidated Income, were $2.7, $1.1 and $1.2 for the years ended December 31, 1994, 1993 and 1992, respectively.
Under the Nuclear Waste Policy Act of 1982, the U.S. Department of Energy ("DOE") is responsible for the ultimate storage and disposal of spent nuclear fuel removed from nuclear reactors. Interim storage space for spent nuclear fuel is currently provided at the Kewaunee Nuclear Power Plant. Currently there is on-site storage capacity for spent fuel through the year 1999. Nuclear fuel, net, at December 31, consists of:
1994 1993 Original cost of nuclear fuel $155,190 $147,325 Less--Accumulated amortization 135,794 129,325 -------- -------- Nuclear fuel, net $ 19,396 $ 18,000 ======== ========
The Price Anderson Act provides for the payment of funds for public liability claims arising from a nuclear incident. Accordingly, in the event of a nuclear incident, WPL, as a 41-percent owner of the Kewaunee Nuclear Power Plant, is subject to an overall assessment of approximately $32.5 million per incident for its ownership share of this reactor, not to exceed $4.1 million payable in any given year.
Through its membership in Nuclear Electric Insurance Limited, WPL has obtained property damage and decontamination insurance totalling $1.5 billion for loss from damage at the Kewaunee Nuclear Power Plant. In addition, WPL maintains outage and replacement power insurance coverage totalling $101.4 million in the event an outage exceeds 21 weeks.
NOTE 5. NET ACCOUNTS RECEIVABLE:
WPL has a contract with a financial organization to sell, with limited recourse, certain accounts receivable and unbilled revenues. These receivables include customer receivables resulting from sales to other public utilities as well as from billings to the co-owners of the jointly- owned electric generating plants that WPL operates. The contract allows WPL to sell up to $150 million of receivables at any time. Expenses related to the sale of receivables are paid to the financial organization under this contract and include, along with various other fees, a monthly discount charge on the outstanding balance of receivables sold that approximated a 4.86 percent annual rate during 1994. These costs are recovered in retail utility rates as an operating expense. All billing and collection functions remain the responsibility of WPL. The contract expires August 19, 1995, unless extended by mutual agreement.
As of December 31, 1994 and 1993, proceeds from the sale of accounts receivable totalled $76.5 million and $74 million, respectively. During 1994, WPL sold an average of $82.3 million of accounts receivable per month, compared with $75.9 million in 1993.
As a result of its diversified customer base and WPL's sale of receivables, the Company does not have any significant concentrations of credit risk in the December 31, 1994, net accounts receivable balance.
NOTE 6. REGULATORY ASSETS AND REGULATORY LIABILITIES:
Certain costs and credits are deferred and amortized in accordance with authorized or expected rate-making treatment. As of December 31, 1994 and 1993, regulatory created assets include the following:
1994 1993 Environmental remediation costs $ 82,179 $ 82,380 Tax related (see Note 8) 43,736 47,787 Jurisdictional plant differences 7,173 6,533 Decontamination and decommissioning costs of federal enrichment facilities 7,100 6,181 Other 4,288 5,924 -------- -------- $144,476 $148,805 ======== ========
As of December 31, 1994 and 1993, regulatory created liabilities included $6,738 and $6,618, respectively, for amounts due to customers related to the sale of air emissions credits.
NOTE 7. EMPLOYEE BENEFIT PLANS:
a. Pension Plans:
WPL has non-contributory, defined benefit retirement plans covering substantially all employees. The benefits are based upon years of service and levels of compensation. WPL's funding policy is to contribute at least the statutory minimum to a trust.
The projected unit credit actuarial cost method was used to compute net pension costs and the accumulated and projected benefit obligations. The discount rate used in determining those benefit obligations was 8.25, 7.25 and 8.00 percent for 1994, 1993 and 1992, respectively. The long-term rate of return on assets used in determining those benefit obligations 9.00, 9.75, and 10.00 percent for 1994, 1993, and 1992, respectively.
The following table sets forth the funded status of the WPL plans and amounts recognized in the Company's Consolidated Balance Sheets at December 31, 1994 and 1993:
1994 1993 Accumulated benefit obligation-- Vested benefits $(134,829) $(135,303) Non-vested benefits (3,295) (2,962) --------- ---------- $(138,124) $(138,265) --------- ---------- Projected benefit obligation $(154,283) $(164,271) Plan assets at fair value, primarily common stocks and fixed income securities 178,095 183,881 --------- ---------- Plan assets in excess of projected benefit obligation 23,812 19,610 Unrecognized net transition asset (19,376) (21,823) Unrecognized prior service cost 5,679 7,691 Unrecognized net loss 14,737 20,650 --------- ---------- Pre-paid pension costs, included in deferred charges and other $ 24,852 $ 26,128 ========= ==========
The net pension (benefit) recognized in the Consolidated Statements of Income for 1994, 1993 and 1992 included the following components:
1994 1993 1992 Service cost $ 5,123 $ 4,263 $ 3,912 Interest cost on projected benefit obligation 12,051 11,614 10,615 Actual return on assets 1,016 (24,759) (12,143) Amortization and deferral (17,795) 8,430 (5,317) -------- -------- -------- Net pension (benefit) $ 395 $ (452) $ (2,933) ======== ======== ========
b. Postretirement Health Care and Life Insurance:
Effective January 1, 1993, the Company prospectively adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS No. 106 establishes standards of financial accounting and reporting for the company's postretirement health care and life insurance benefits. SFAS No. 106 requires the accrual of the expected cost of such benefits during the employees' years of service based on actuarial methodologies that closely parallel pension accounting requirements. WPL has elected delayed recognition of the transition obligation and is amortizing the discounted present value of the transition obligation to expense over 20 years. The cost of providing postretirement benefits, including the transition obligation, is being recovered in retail rates under current regulatory practices.
The following table sets forth the plans' funded status:
1994 1993 Accumulated postretirement benefit obligation-- Retirees $(29,273) $(27,358) Fully eligible active plan participants (5,998) (5,429) Other active plan participants (7,675) (9,980) -------- -------- Accumulated benefit obligation (42,946) (42,767) Plan assets at fair value 9,767 7,073 -------- -------- Accumulated benefit obligation in excess of plan assets $(33,179) $(35,694) Unrecognized transition obligation 26,474 29,638 Unrecognized loss (2,570) 2,025 -------- -------- Accrued postretirement benefits liability $ (9,275) $ (4,031) ======== ========
For 1994 and 1993, the annual net postretirement benefits costs recognized in the Consolidated Statements of Income consist of the following components:
1994 1993 Service cost $ 1,739 $ 1,463 Interest cost on projected benefit obligation 3,135 3,151 Actual return on plan assets (253) (696) Amortization of transition obligation 1,527 1,560 Amortization and deferral (381) (27) ------- ------- Net postretirement benefits cost $ 5,767 $ 5,451 ======= =======
The postretirement benefits cost components for 1994 were calculated assuming health care cost trend rates ranging from 11.5 percent for 1994 and decreasing to 5 percent by the year 2002. The health care cost trend rate considers estimates of health care inflation, changes in utilization or delivery, technological advances, and changes in the health status of the plan participants. Increasing the health care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1994 by $2.5 million and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for the year by $.4 million.
The assumed discount rate used in determining the accumulated postretirement obligation was 8.25 and 7.25 percent in 1994 and 1993, respectively. The long-term rate of return on assets was 9.00 and 9.50 percent in 1994 and 1993, respectively. Plan assets are primarily invested in common stock, bonds and fixed income securities. The Company's funding policy is to contribute the tax-advantaged maximum to a trust.
The costs for the postretirement health care and life insurance benefits, based on an actuarial determination were $1.3 million in 1992.
c. Other Postemployment Benefits:
In November 1992, the Financial Accounting Standards Board issued No. 112, "Employers' Accounting for Postemployment Benefits". SFAS No. 112, which was effective January 1, 1994, establishes standards of financial accounting and reporting for the estimated cost of benefits provided by an employer to former or inactive employees after employment but before retirement. The effect of adopting SFAS No. 112 was not material.
NOTE 8. INCOME TAXES:
The following table reconciles the statutory federal income tax rate to the effective income tax rate:
1994 1993 1992 Statutory federal income tax rate 35.0% 35.0% 34.0% State income taxes, net of federal benefit 5.6 6.1 6.0 Investment tax credits restored (1.7) (2.0) (2.4) Amortization of excess deferred taxes (1.5) (1.5) (1.6) Other differences, net 1.1 (1.9) (2.0) ---- ---- ---- Effective income tax rate 38.5% 35.7% 34.0% ==== ==== ====
In 1992, deferred taxes arising from utility plant timing differences, the qualified nuclear decommissioning trust contribution, employee benefits and other totalled $4,104, $709, $2,081, and ($755), respectively.
The temporary differences that resulted in accumulated deferred income tax (assets) and liabilities as of December 31 are as follows:
1994 1993 Accelerated depreciation and other plant related $186,565 $171,993 Excess deferred taxes 21,215 22,744 Unamortized investment tax credits (21,784) (22,812) Allowance for equity funds used during construction 14,384 13,518 Regulatory liability 17,553 19,179 Other 4,440 6,140 -------- -------- $222,373 $210,762 ======== ========
Changes in WPL's deferred income taxes arising from the adoption of SFAS No. 109 represent amounts recoverable or refundable through future rates and have been recorded as net regulatory assets totalling approximately $26 million and $29 million in 1994 and 1993, respectively, on the Consolidated Balance Sheets. These net regulatory assets are being recovered in rates over the estimated remaining useful lives of the assets to which they pertain.
NOTE 9. SHORT-TERM DEBT AND LINES OF CREDIT:
The Company maintains bank lines of credit, most of which are at the bank prime rates, to obtain short-term borrowing flexibility, including pledging lines of credit as security for any commercial paper outstanding. Amounts available under these lines of credit totalled $70 million as of December 31, 1994. Information regarding short-term debt and lines of credit is as follows:
1994 1993 1992 As of end of year-- Commercial paper outstanding $50,500 $49,000 $26,000 Notes payable outstanding $ -- $10,000 $25,000 Discount rates on commercial paper 5.64%-6.12% 3.24%-3.40% 3.15%-3.90% Interest rates on notes payable -- % 3.34% 3.46%-3.62%
For the year ended-- Maximum month-end amount of short-term debt $50,500 $59,000 $51,000 Average amount of short-term debt (based on daily outstanding balances) $25,374 $30,423 $22,160 Average interest rate on short-term debt 5.89% 3.29% 3.63%
NOTE 10. CAPITALIZATION:
a. Common Shareowners' Investment:
A retail rate order effective January 1, 1995, requires WPL to maintain a utility common equity level of 51.93 percent of total utility capitalization during the test year January 1, 1995 to December 31, 1996. In addition, the PSCW ordered that it must approve the payment of dividends by WPL to WPLH that are in excess of the level forecasted in the rate order ($58.1 million), if such dividends would reduce WPL's average common equity ratio below 51.93 percent.
b. Preferred Stock:
On October 27, 1993, WPL issued two new series of preferred stock through two separate public offerings. The 6.2 percent Series is non-redeemable for ten years and the 6.5 percent Series is non-redeemable for five years. The proceeds from the sale were used to retire 150,000 shares of 7.56 percent Series and 149,865 shares of 8.48 percent Series preferred stock.
c. Long-term Debt:
Substantially all of WPL's utility plant is secured by its first mortgage bonds. Current maturities of long-term debt are as follows: $0 in 1995 and 1996, $55 million in 1997, $8.9 million in 1998 and $0 in 1999.
The Company has $130 million of notional principal under interest rate swap contracts. The fair value of these contracts was not material as of December 31, 1994.
The fair value of the Company's long-term debt based on quoted market prices for similar issues at December 31, 1994 and 1993 was $386,520 and $428,841, respectively.
NOTE 11. COMMITMENTS AND CONTINGENCIES:
a. Coal Contract Commitments:
To ensure an adequate supply of coal, WPL has entered into certain long-term coal contracts. These contracts include a demand or take-or-pay clause under which payments are required if contracted quantities are not purchased. Purchase obligations on these coal and related rail contracts total approximately $149 million through December 31, 2003. WPL's management believes it will meet minimum coal and rail purchase obligations under the contracts. Minimum purchase obligations on these contracts over the next five years are estimated to be $25 million in 1995 and $26 million in 1996, 1997, 1998 and 1999.
b. Purchased Power and Gas:
Under firm purchase power and gas contracts, WPL is obligated as follows (dollars in millions):
Purchased Power Purchased Gas ------------------- -------------------------- Purchase Purchase Decatherms Obligation MW's Obligation (in millions)
1995 $ 8.3 1,920 $ 67 89 1996 8.1 1,830 67 90 1997 10.9 1,944 55 78 1998 15.6 2,505 45 66 1999 18.8 2,910 41 53 Thereafter 106.5 12,720 77 101 ----- ------ ---- --- $ 168.2 23,829 $352 477 ====== ====== ==== ===
c. Manufactured Gas Plant Sites:
Historically, WPL has owned 11 properties that have been associated with the production of manufactured gas. Currently, WPL owns five of these sites, three are owned by municipalities, and the remaining three are owned by private companies. In 1989, WPL initiated investigation of these manufactured gas plant sites. The Wisconsin Department of Natural Resources ("DNR") has been involved in reviewing investigation plans and has received ongoing reports regarding these investigations.
In 1992, and into the beginning of 1993, WPL continued its investigations and studies. WPL confirmed that there was no contamination at two of the sites. WPL received a close-out letter from the DNR related to one of those sites and requested a close-out letter for the other site. Additionally, the investigation of historical records at a third site indicated a minimal likelihood of any significant environmental impacts. In February 1993, WPL completed cost estimates for the environmental remediation of the eight remaining sites. The results of this analysis indicate that during the next 35 years, WPL will expend approximately $81 million for feasibility studies, data collection, soil remediation activities, groundwater research and groundwater remediation activities, including construction of slurry containment walls and the installation of groundwater pump and treatment facilities. This estimate was based on various assumptions, and is subject to continuous review and revision by management.
The cost estimate set forth above assumes 4 percent average inflation over a 35 year period. The cost estimate also contemplates that primarily groundwater pump and treatment activities will take place after 1998 through and including 2027. During this time, WPL estimates that it will incur average annual costs of $2.0 million to complete the planned groundwater remediation activities.
With respect to rate recovery of these costs, the PSCW has approved a five year amortization of the unamortized balance of environmental costs expended to date.
In addition, WPL is pursuing insurance recovery for the costs of remediating these sites and is investigating to determine whether there are other parties who may be responsible for some of the clean-up costs.
Through 1994, management has continued its oversight of the issues related to the above manufactured gas plant sites without significant revision to the above estimates and assumptions.
Based on the present regulatory record at the PSCW, management believes that future costs of remediating these manufactured gas plant sites will be recovered in rates.
NOTE 12. SEGMENT INFORMATION:
The following table sets forth certain information relating to the Company's consolidated operations:
Year Ended December 31, 1994 1993 1992 Operation information: Customer revenues-- Electric $ 531,747 $ 503,187 $ 477,735 Gas 137,575 137,270 119,362 Water 4,133 3,927 3,722 ---------- ---------- ---------- Total operating revenues $ 673,455 $ 644,384 $ 600,819 ========== ========== ==========
Operating income (loss)-- Electric $ 121,136 $ 118,785 $ 109,459 Gas 13,334 10,431 8,724 Water 1,134 990 998 Income taxes, current and deferred (44,726) (35,667) (30,541) Other income and (deductions), net 10,735 789 2,650 Interest expense, net (30,119) (31,223) (32,071) Preferred dividends (3,310) (3,928) (3,811) ---------- ---------- ---------- Net income $ 68,184 $ 60,177 $ 55,408 ========== ========== ========== Investment information: Identifiable assets, including allocated common plant at December 31-- Electric $1,176,670 $1,170,010 $1,064,418 Gas 234,815 228,257 210,965 Water 18,791 17,703 14,464 Assets not allocated 154,848 134,687 123,803 ---------- ---------- ---------- Total assets $1,585,124 $1,550,657 $1,413,650 ========== ========== ========== Other information: Construction and nuclear fuel expenditures-- Electric $ 103,420 $ 139,805 $ 113,252 Gas 20,319 18,876 13,974 Water 2,149 1,908 1,538 ---------- ---------- ---------- Total construction and nuclear fuel expenditures $ 125,888 $ 160,589 $ 128,764 ========== ========== ==========
Provision for depreciation and amortization-- Electric $ 64,695 $ 53,398 $ 49,554 Gas 8,082 7,329 6,578 Water 417 470 284 ---------- ---------- ---------- Total provision for depreciation $ 73,194 $ 61,197 $ 56,416 ========== ========== ==========
NOTE 13. CONSOLIDATED QUARTERLY FINANCIAL DATA (Unaudited):
Seasonal factors significantly affect WPL and, therefore, the data presented below should not be expected to be comparable between quarters nor necessarily indicative of the results to be expected for an annual period.
The amounts below were not audited by independent public accountants, but reflect all adjustments necessary, in the opinion of the Company, for a fair presentation of the data.
Operating Operating Quarter Ended Revenues Income Net Income 1994: (in thousands)
March 31 $201,309 $31,684 $26,633 June 30 148,425 15,838 11,231 September 30 156,483 24,470 16,927 December 31 169,803 22,395 13,393
1993: March 31 $182,023 $26,405 $17,740 June 30 141,049 16,936 8,237 September 30 144,440 21,045 13,096 December 31 177,986 31,091 21,104
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 relating to directors and nominees for election as directors at the Company's 1995 Annual Meeting of Shareowners is incorporated herein by reference to the information under the caption "Election of Directors" in the Company's Proxy Statement for its 1995 Annual Meeting of Shareowners (the "1995 Proxy Statement"). The 1995 Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the Company's fiscal year. The information required by Item 10 relating to executive officers is set forth in Part I of this Annual Report on Form 10-K. The information required by Item 10 relating to delinquent filers is incorporated herein by reference to the information under the caption "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the 1995 Proxy Statement.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to the information under the captions "Compensation of Executive Officers" and "Compensation of Directors" (but not including the Report of the Compensation and Personnel Committee on Executive Compensation) in the 1995 Proxy Statement. The 1995 Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the Company's fiscal year.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference to the information under the caption "Ownership of Voting Securities" in the 1995 Proxy Statement. The 1995 Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the Company's fiscal year.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Consolidated Financial Statements
Included in Part II of this report:
Report of Independent Public Accountants
Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and 1992
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Capitalization, December 31, 1994 and 1993
Consolidated Statements of Common Shareowners' Investment
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules
For each of the years ended December 31, 1994, 1993 and 1992
Schedule II. Valuation and Qualifying Accounts and Reserves
All other schedules are omitted because they are not applicable or not required, or because that required information is shown either in the consolidated financial statements or in the notes thereto.
(a) (3) Exhibits
The following Exhibits are filed herewith or incorporated herein by reference. Documents indicated by an asterisk (*) are incorporated herein by reference.
3A* Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10Q for the quarter ended June 30, 1994)
3B By-Laws of the Company as revised to February 23, 1994
4A* Indenture of Mortgage or Deed of Trust dated August 1, 1941, between WPL and First Wisconsin Trust Company and George B. Luhman, as Trustees, incorporated by reference to Exhibit 7(a) in File No. 2-6409, and the indentures supplemental thereto dated, respectively, January 1, 1948, September 1, 1948, June 1, 1950, April 1, 1951, April 1, 1952, September 1, 1953, October 1, 1954, March 1, 1959, May 1, 1962, August 1, 1968, June 1, 1969, October 1, 1970, July 1, 1971, April 1, 1974, December 1, 1975, May 1, 1976, May 15, 1978, August 1, 1980, January 15, 1981, August 1, 1984, January 15, 1986, June 1, 1986, August 1, 1988, December 1, 1990, September 1, 1991, October 1, 1991, March 1, 1992, May 1, 1992, June 1, 1992 and July 1, 1992 (incorporated by reference to Second Amended Exhibit 7(b) in File No. 2-7361; Amended Exhibit 7(c) incorporated by reference to File No. 2-7628; Amended Exhibit 7.02 in File No. 2-8462; Amended Exhibit 7.02 in File No. 2-8882; Second Amendment Exhibit 4.03 in File No. 2-9526; Amended Exhibit 4.03 in File No. 2-10406; Amended Exhibit 2.02 in File No. 2-11130; Amended Exhibit 2.02 in File No. 2-14816; Amended Exhibit 2.02 in File No. 2-20372; Amended Exhibit 2.02 in File No. 2-29738; Amended Exhibit 2.02 in File No. 2-32947; Amended Exhibit 2.02 in File No. 2-38304; Amended Exhibit 2.02 in File No. 2-40802; Amended Exhibit 2.02 in File No. 2-50308; Exhibit 2.01(a) in File No. 2-57775; Amended Exhibit 2.02 in File No. 2-56036; Amended Exhibit 2.02 in File No. 2-61439; Exhibit 4.02 in File No. 2-70534; Amended Exhibit 4.03 File No. 2-70534; Exhibit 4.02 in File No. 33-2579; Amended Exhibit 4.03 in File No. 33-2579; Amended Exhibit 4.02 in File No. 33-4961; Exhibit 4B to WPL's Form 10-K for the year ended December 31, 1988, Exhibit 4.1 to WPL's Form 8-K dated December 10, 1990, Amended Exhibit 4.26 in File No. 33-45726, Amended Exhibit 4.27 in File No.33-45726, Exhibit 4.1 to WPL's Form 8-K dated March 9, 1992, Exhibit 4.1 to WPL's Form 8-K dated May 12, 1992, Exhibit 4.1 to WPL's Form 8-K dated June 29, 1992 and Exhibit 4.1 to WPL's Form 8-K dated July 20, 1992)
10A*# Executive Tenure Compensation Plan, as revised November 1992 (incorporated by reference to Exhibit 10A to the Company's Form 10-K for the year ended December 31, 1992)
10B*# Form of Supplemental Retirement Plan, as revised November 1992 (incorporated by reference to Exhibit 10B to the Company's Form 10-K for the year ended December 31, 1992)
10C*# Forms of Deferred Compensation Plans, as amended June, 1990 (incorporated by reference to Exhibit 10C to the Company's Form 10-K for the year ended December 31, 1990)
10C.1*# Officer's Deferred Compensation Plan II, as adopted September 1992 (incorporated by reference to Exhibit 10C.1 to the Company's Form 10-K for the year ended December 31, 1992)
10C.2*# Officer's Deferred Compensation Plan III, as adopted January 1993 (incorporated by reference to Exhibit 10C.2 to the Company's Form 10-K for the year ended December 31, 1992)
10D*# Pre-Retirement Survivor's Income Supplemental Plan, as revised November 1992 (incorporated by reference to Exhibit 10F to the Company's Form 10-K for the year ended December 31, 1992)
10E*# Wisconsin Power and Light Company Management Incentive Plan (incorporated by reference to Exhibit 10H to the Company's Form 10-K for the year ended December 31, 1992)
10F# Deferred Compensation Plan for Directors, as amended January 17, 1995
10G*# WPL Holdings, Inc. Long-Term Equity Incentive Plan (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994)
10H*# Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc., and E.B. Davis, Jr. (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994)
10I*# Form of Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc. and each of W.D. Harvey, E.G. Protsch and A.J. Amato (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994)
10J*# Form of Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc. and each of E.M. Gleason, B.J. Swan, D.A. Doyle, N.E. Boys, D.E. Ellestad, P.J. Wegner and K.K. Zuhlke (incorporated by reference to Exhibit 4.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994)
21 Subsidiaries of the company
99* 1995 Proxy Statement for the Annual Meeting of Shareowners to be held May 17, 1995 [The Proxy Statement for the 1995 Annual Meeting of Shareowners will be filed with the Securities and Exchange Commission under Regulation 14A within 120 days after the end of the Company's fiscal year; except to the extent incorporated by reference, the Proxy Statement for the 1995 Annual Meeting of Shareowners shall not be deemed to be filed with the Securities and Exchange Commission as part of this Annual Report on Form 10-K]
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company hereby agrees to furnish to the Securities and Exchange Commission, upon request, any instrument defining the rights of holders of unregistered long-term debt not filed as an exhibit to this Form 10-K. No such instrument authorizes securities in excess of 10 percent of the total assets of the Company.
# - A management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
None.
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 on the 22nd of February 1995.
WISCONSIN POWER AND LIGHT COMPANY
By:/s/ Erroll B. Davis, Jr. Erroll B. Davis, Jr. President and Chief Executive 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 indicated on the 22nd day of February 1995.
/s/ Erroll B. Davis, Jr. President, Chief Executive Officer Erroll B. Davis, Jr. and Director (principal executive officer)
/s/ Daniel A. Doyle Vice President-Finance, Controller Daniel A. Doyle and Treasurer (principal financial and accounting officer)
/s/ Les Aspin Director /s/ Milton E. Neshek Director Les Aspin Milton E. Neshek
/s/ L. David Carley Director /s/ Henry C. Prange Director L. David Carley Henry C. Prange
/s/ Rockne G. Flowers Director /s/ Judith D. Pyle Director Rockne G. Flowers Judith D. Pyle
/s/ Donald R. Haldeman Director /s/ Henry F. Scheig Director Donald R. Haldeman Henry F. Scheig
/s/ Katharine C. Lyall Director /s/ Carol T. Toussaint Director Katharine C. Lyall Carol T. Toussaint
/s/ Arnold M. Nemirow Director Arnold M. Nemirow
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To WISCONSIN POWER AND LIGHT COMPANY:
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in the 1994 Form 10-K of Wisconsin Power and Light Company and have issued our report thereon dated February 1, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. Supplemental Schedule II is 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 consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
Milwaukee, Wisconsin, ARTHUR ANDERSEN LLP February 1, 1995
WISCONSIN POWER AND LIGHT COMPANY INDEX TO FINANCIAL STATEMENT SCHEDULES FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
FINANCIAL STATEMENT SCHEDULES:
II. Valuation and Qualifying Accounts and Reserves
NOTE: All other schedules are omitted because they are not applicable or not required, or because that required information is shown either in the financial statements or in the notes thereto.
EXHIBIT INDEX
Exhibit No. Description
3B By-Laws of as revised to February 23, 1994
10F Deferred Compensation Plan for Directors, as amended January 17, 1995
21 Subsidiaries of the Company
27 Financial Data Schedule