-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VV4cCA42TS1znh6Iusjd292bRgXrQCSI7Iriq/YLaWvmf/9/YJ9V0BiN9DA6+dLL 9WaT1jA69muuaWkpRFl6Gg== 0000950131-96-001321.txt : 19960401 0000950131-96-001321.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950131-96-001321 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNICOM CORP CENTRAL INDEX KEY: 0000918040 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 363961038 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11375 FILM NUMBER: 96541005 BUSINESS ADDRESS: STREET 1: 10 SOUTH DEARBORN STREET 37TH FLOOR STREET 2: P O BOX 767 CITY: CHICAGO STATE: IL ZIP: 60690 BUSINESS PHONE: 3123943117 MAIL ADDRESS: STREET 1: P O BOX 767 CITY: CHICAGO STATE: IL ZIP: 60690 FORMER COMPANY: FORMER CONFORMED NAME: CECO HOLDING CO DATE OF NAME CHANGE: 19940125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMONWEALTH EDISON CO CENTRAL INDEX KEY: 0000022606 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 360938600 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01839 FILM NUMBER: 96541327 BUSINESS ADDRESS: STREET 1: ONE FIRST NATIONAL PLZ 37TH FL STREET 2: P O BOX 767 CITY: CHICAGO STATE: IL ZIP: 60690 BUSINESS PHONE: 3123944321 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. ----------- ----------------------------------- ------------------ 1-11375 UNICOM CORPORATION 36-3961038 (an Illinois corporation) 37th Floor, 10 South Dearborn Street Post Office Box A-3005 Chicago, Illinois 60690-3005 312/394-7399 1-1839 COMMONWEALTH EDISON COMPANY 36-0938600 (an Illinois corporation) 37th Floor, 10 South Dearborn Street Post Office Box 767 Chicago, Illinois 60690-0767 312/394-4321
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE - --------------------------- ON WHICH REGISTERED ------------------------- UNICOM CORPORATION Common Stock, without par value New York, Chicago and Pacific COMMONWEALTH EDISON COMPANY (Listed on inside cover) INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAVE BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X . No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMONWEALTH EDISON COMPANY Securities Registered Pursuant to Section 12(b) of the Act: TITLE OF NAME OF EACH EXCHANGE EACH CLASS ON WHICH REGISTERED - -------------------------- ------------------------ First Mortgage Bonds: 7 5/8% Series 25, due June 1, 2003 ) 8% Series 26, due October 15, 2003 } New York 8 1/8% Series 35, due January 15, 2007 ) Sinking Fund Debentures: 3%, due April 1, 1999 ) 2 7/8%, due April 1, 2001 } New York 7 5/8% Series 1, due February 15, 2003 ) 2 3/4%, due April 1, 1999 New York and Chicago Cumulative Preference Stock, without par value: $1.90; $2.00; $7.24; $8.40; $8.38; and $8.40 ) New York, Chicago and Series B ) Pacific $2.425 New York 8.48% ComEd-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust New York, Chicago and Pacific THE ESTIMATED AGGREGATE MARKET VALUE OF UNICOM CORPORATION'S 215,206,007 shares of outstanding Common Stock, without par value, was approximately $6,900,000,000 as of February 29, 1996. In excess of 99.91% of Unicom Corporation's voting stock was owned by non-affiliates as of that date. THE ESTIMATED AGGREGATE MARKET VALUE OF COMMONWEALTH EDISON COMPANY'S outstanding $1.425 Convertible Preferred Stock, Cumulative Preference Stock and Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust was approximately $1,000,000,000 as of February 29, 1996. Unicom Corporation held in excess of 99.99% of the 214,195,157 shares of outstanding Common Stock, $12.50 par value, of Commonwealth Edison Company as of that date. DOCUMENTS INCORPORATED BY REFERENCE: Portions of Unicom Corporation's Current Report on Form 8-K dated January 26, 1996 are incorporated by reference into Parts I, II and IV of the Unicom Corporation Annual Report on Form 10-K and portions of its definitive Proxy Statement to be filed prior to April 29, 1996 relating to its Annual Meeting of shareholders to be held on May 22, 1996 are incorporated by reference into Part III of the Unicom Corporation Annual Report on Form 10-K. Portions of Commonwealth Edison Company's Current Report on Form 8-K dated January 26, 1996 are incorporated by reference into Parts I, II and IV of the Commonwealth Edison Company Annual Report on Form 10-K and portions of its definitive Information Statement to be filed prior to April 29, 1996 relating to its Annual Meeting of shareholders to be held on May 22, 1996 are incorporated by reference into Part III of the Commonwealth Edison Company Annual Report on Form 10-K. Unicom Corporation's Current Report on Form 8-K/A-1 dated March 14, 1996, is incorporated by reference into Parts I and II of the Unicom Corporation Annual Report on Form 10-K. Commonwealth Edison Company's Current Report on Form 8-K/A-1 dated March 14, 1996, is incorporated by reference into Parts I and II of the Commonwealth Edison Company Annual Report on Form 10-K. UNICOM CORPORATION AND COMMONWEALTH EDISON COMPANY FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 This document contains the Annual Reports on Form 10-K for the fiscal year ended December 31, 1995 for each of Unicom Corporation and Commonwealth Edison Company. Information contained herein relating to an individual registrant is filed by such registrant on its own behalf. Accordingly, except for its subsidiaries, Commonwealth Edison Company makes no representation as to information relating to Unicom Corporation or to any other companies affiliated with Unicom Corporation. TABLE OF CONTENTS
PAGE ---- Definitions............................................................... 1 ANNUAL REPORT ON FORM 10-K FOR UNICOM CORPORATION: Part I Item 1. Business........................................................ 2 General............................................................... 2 Net Electric Generating Capability.................................... 3 Construction Program.................................................. 4 Rate Proceedings...................................................... 6 Fuel Supply........................................................... 7 Regulation............................................................ 8 Employees............................................................. 15 Interconnections...................................................... 15 Franchises............................................................ 16 Business and Competition.............................................. 16 Executive Officers of the Registrant.................................. 19 Operating Statistics.................................................. 20 Item 2. Properties...................................................... 21 Item 3. Legal Proceedings............................................... 22 Item 4. Submission of Matters to a Vote of Security Holders............. 22 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................................................ 23 Item 6. Selected Financial Data......................................... 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................... 24 Item 8. Financial Statements and Supplementary Data..................... 24 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................ 24 Part III Item 10. Directors and Executive Officers of the Registrant............. 25 Item 11. Executive Compensation......................................... 25 Item 12. Security Ownership of Certain Beneficial Owners and Manage- ment................................................................... 25 Item 13. Certain Relationships and Related Transactions................. 25
i UNICOM CORPORATION AND COMMONWEALTH EDISON COMPANY FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 TABLE OF CONTENTS (CONCLUDED)
PAGE ---- ANNUAL REPORT ON FORM 10-K FOR COMMONWEALTH EDISON COMPANY: Part I Item 1. Business........................................................ 26 Item 2. Properties...................................................... 27 Item 3. Legal Proceedings............................................... 27 Item 4. Submission of Matters to a Vote of Security Holders............. 27 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................................................ 27 Item 6. Selected Financial Data......................................... 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 28 Item 8. Financial Statements and Supplementary Data..................... 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................ 28 Part III Item 10. Directors and Executive Officers of the Registrant............. 28 Item 11. Executive Compensation......................................... 28 Item 12. Security Ownership of Certain Beneficial Owners and Management. 28 Item 13. Certain Relationships and Related Transactions................. 28 ANNUAL REPORTS ON FORM 10-K FOR UNICOM CORPORATION AND COMMONWEALTH EDISON COMPANY: Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................................................... 29 Report of Independent Public Accountants on Supplemental Schedule to Unicom Corporation..................................................... 37 Report of Independent Public Accountants on Supplemental Schedule to Commonwealth Edison Company............................................ 38 Schedule II--Valuation and Qualifying Accounts.......................... 39 Signature Page to Unicom Corporation Annual Report on Form 10-K......... 40 Signature Page to Commonwealth Edison Company Annual Report on Form 10-K.............................................................. 41
ii DEFINITIONS The following terms are used in this document with the following meanings:
TERM MEANING ----------------------- ------------------------------------------------------ AFUDC Allowance for funds used during construction CERCLA Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended CFC Chlorofluorocarbon Circuit Court Circuit Court of Cook County, Illinois Clean Air Amendments Clean Air Act Amendments of 1990 ComEd Commonwealth Edison Company Congress U.S. Congress Cotter Cotter Corporation, which is a wholly-owned subsidiary of ComEd. DOE U.S. Department of Energy EEOC Equal Employment Opportunity Commission EMFs Electric and magnetic fields FERC Federal Energy Regulatory Commission Fuel Matters Settlement A settlement relating to the ICC fuel reconciliation proceedings involving ComEd for the period from 1985 through 1988 and to future challenges by the settling parties to the prudence of ComEd's western coal costs for the period from 1989 through 1992. IBEW International Brotherhood of Electrical Workers (AFL- CIO) ICC Illinois Commerce Commission IDNS Illinois Department of Nuclear Safety Illinois EPA Illinois Environmental Protection Agency Indiana Company Commonwealth Edison Company of Indiana, Inc., which is a wholly-owned subsidiary of ComEd. IPCB Illinois Pollution Control Board MAIN Mid-America Interconnected Network MGP Manufactured gas plant NOPR Notice of Proposed Rulemaking issued by the FERC NPDES National Pollutant Discharge Elimination System NPL National Priorities List NRC Nuclear Regulatory Commission PCBs Polychlorinated biphenyls PRPs Potentially responsible parties under CERCLA Rate Matters Settlement A settlement concerning the proceedings relating to ComEd's 1985 and 1991 ICC rate orders (which orders related to, among other things, the recovery of costs associated with ComEd's four most recently completed nuclear generating units), the proceedings related to the reduction in the difference between ComEd's summer and non-summer residential rates that was effected in the summer of 1988, outstanding issues related to the appropriate interest rate and rate design to be applied to a refund made by ComEd during 1990 related to a 1988 ICC rate order, and matters related to a rider to ComEd's rates that it was required to file as a result of the change in the federal corporate income tax rate made by the Tax Reform Act of 1986. Rate Order ICC rate order issued on January 9, 1995, as subsequently modified Remand Order ICC rate order issued in January 1993, as subsequently modified SEC Securities and Exchange Commission Trust ComEd Financing I, which is a wholly-owned subsidiary trust of ComEd. Unicom Unicom Corporation Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned subsidiary of Unicom. Unicom Thermal Unicom Thermal Technologies Inc., which is a wholly- owned subsidiary of Unicom Enterprises. Units ComEd's nuclear generating units known as Byron Unit 2 and Braidwood Units 1 and 2 U.S. EPA U.S. Environmental Protection Agency Westinghouse Westinghouse Electric Corporation
1 ANNUAL REPORT ON FORM 10-K FOR UNICOM CORPORATION PART I ITEM 1. BUSINESS. GENERAL Unicom was organized in the state of Illinois on January 28, 1994. On September 1, 1994, a corporate restructuring took place in which Unicom became the parent holding company of ComEd and Unicom Enterprises, an unregulated subsidiary engaged, through a subsidiary, in energy service activities. The purpose of the restructuring was, in part, to permit Unicom Enterprises to engage in energy service activities without the prior approval of, or being regulated by, the ICC, in part to permit timely responses to competitive activities which could adversely affect ComEd's utility business and in part to permit Unicom to take advantage of unregulated business opportunities. Unicom's principal executive offices are located at 10 South Dearborn Street, Post Office Box A-3005, Chicago, Illinois 60690-3005, and its telephone number is 312/394-7399. ComEd continues to represent substantially all of the assets, revenues and net income of Unicom; and Unicom's resources and results of operations are largely dependent on, and reflect, those of ComEd. Unicom's unregulated subsidiaries are not expected to make material contributions to Unicom's revenues or results of operations in the near future. Consequently, the following discussion focuses on ComEd's utility operations although information is also provided about Unicom's unregulated operations. Utility Operations ComEd is engaged principally in the production, purchase, transmission, distribution and sale of electricity to a diverse base of residential, commercial and industrial customers. ComEd was organized in the state of Illinois on October 17, 1913 as a result of the merger of Cosmopolitan Electric Company into the original corporation named Commonwealth Edison Company. The latter had been incorporated on September 17, 1907. ComEd's electric service territory has an area of approximately 11,540 square miles and an estimated population of approximately eight million as of December 31, 1994 and 1995. It includes the city of Chicago, an area of about 225 square miles with an estimated population of approximately three million from which ComEd derived approximately one-third of its ultimate consumer revenues in 1995. ComEd had approximately 3.4 million electric customers at December 31, 1995. ComEd's principal executive offices are located at 10 South Dearborn Street, Post Office Box 767, Chicago, Illinois 60690-0767, and its telephone number is 312/394-4321. ComEd's financial condition will continue to depend on its ability to generate revenues to cover its costs and to maintain adequate debt and preferred and preference stock coverages and common stock equity earnings. ComEd has no significant revenues other than from the sale of electricity. In December 1995, ComEd announced a cap on base electric rates at current levels. Consequently, ComEd's financial condition will be affected by, and ComEd's management is addressing, actions to maintain and increase sales, to control operating and capital expenditures, and to anticipate competitive activities. See "Rate Proceedings" and "Business and Competition" below. During the past several years, ComEd has instituted cost reduction plans including various workforce reductions. Such efforts included an offer of voluntary early retirement which was made to ComEd and the Indiana Company management, non-union and union employees eligible to retire or who became eligible to retire after December 31, 1993 and before April 1, 1995. Such program resulted in a charge to income of approximately $20.5 million (after reflecting income tax effects), substantially all of which was recorded during 1994. ComEd is continuing to examine methods of 2 reducing the size of its workforce, including special severance offers. On October 30, 1995, ComEd declared an impasse in the collective bargaining agreement negotiations with its principal union and implemented virtually all of the terms of its last offered proposal prior to the impasse. Those terms include, among other things, a wage increase retroactive to April 1, 1995 and a voluntary separation offer for employees who accepted and left ComEd's employ by year-end 1995. The voluntary separation offer, combined with separation plans offered to selected groups of non-union employees, resulted in a charge to income of approximately $59 million (after reflecting income tax effects) or $0.27 per common share for the year 1995. This charge to income occurred primarily in the fourth quarter of 1995 when most of the acceptances of the offers occurred. ComEd expects to recover the costs of these plans within two years as a result of reduced personnel. On February 20, 1996, ComEd announced that it had reached agreement with Local 15 of the IBEW with respect to the terms of a new collective bargaining agreement. See "Employees" below and Notes 13, 14 and 15 of Notes to Financial Statements in Unicom's Current Report on Form 8-K dated January 26, 1996 and ComEd's Current Report on Form 8-K dated January 26, 1996 (the "January 26, 1996 Form 8-K Reports"). ComEd has also examined, and is continuing to examine, the possibility of disposing of one or more of its fossil generating stations to a third party or parties and entering into a long-term power purchase arrangement. In connection with such examination, ComEd has solicited and received binding proposals with respect to such a transaction involving its State Line and Kincaid generating stations; and it is negotiating with possible purchasers with respect to such transactions. As presently structured, such transactions would involve a sale of the generating station assets at a price approximating their book value and a fifteen-year power purchase arrangement. Any such transactions would be subject to the negotiation of definitive agreements and regulatory approvals and are not expected to have a material impact on ComEd's consolidated financial position or results of operations. See "Fuel Supply," "Regulation" and "Item 3. Legal Proceedings" herein for information concerning administrative and legal proceedings and certain other matters involving ComEd, the Indiana Company and Cotter. The outcome of certain of the proceedings or matters described or referred to therein, if not favorable to ComEd and the Indiana Company, could have a material adverse effect on the future business and operating results of Unicom, ComEd and the Indiana Company. Unregulated Operations Unicom Enterprises is engaged, through its subsidiaries, in energy service activities which are not subject to utility regulation by state or federal agencies. Its principal subsidiary, Unicom Thermal, currently provides district cooling services to office and other buildings from a central location in the city of Chicago. District cooling involves, in essence, the production of chilled water at a central location(s) and its circulation to customers' buildings through a closed circuit of supply and return piping. Such water is circulated through customers' premises primarily for air conditioning. This process is used in lieu of self-generated cooling. As a result of the Clean Air Amendments, the manufacture of CFCs has been curtailed, commencing in January 1996, thereby creating an excellent marketing opportunity for non-CFC based systems, such as Unicom Thermal's district cooling. Unicom Thermal and the city of Chicago have entered into a non-exclusive franchise agreement. Unicom Thermal's first plant began service in May 1995, and sufficient contracts have been secured to utilize the full capacity of the plant. In January 1996, Unicom Thermal Technologies Boston, Inc., a subsidiary of Unicom Thermal, became a minority participant with Boston Edison Technologies Group, Inc. in a venture to provide district cooling services to office and other buildings in the city of Boston. NET ELECTRIC GENERATING CAPABILITY ComEd and the Indiana Company consider their owned (non-summer) generating capability to be 22,522,000 kilowatts. After deducting summer limitations of 557,000 kilowatts, ComEd and the 3 Indiana Company consider their net summer generating capability to be 21,965,000 kilowatts. The net generating capability available for operation at any time may be less due to regulatory restrictions, fuel restrictions, efficiency of cooling facilities and generating units being temporarily out of service for inspection, maintenance, refueling, repairs or modifications required by regulatory authorities. See "Item 2. Properties." ComEd's highest peak load experienced to date occurred on August 14, 1995 and was 19,212,000 kilowatts; and the highest peak load experienced to date during a winter season occurred on January 18, 1994 and was 14,179,000 kilowatts. ComEd's kilowatthour sales and generation are generally higher (primarily during the summer periods but also during the winter periods) when temperature extremes create demand for either summer cooling or winter heating. CONSTRUCTION PROGRAM Utility Operations ComEd and its electric utility subsidiary, the Indiana Company, have a construction program for the three-year period 1996-98 which consists principally of improvements to ComEd's and the Indiana Company's existing nuclear and other electric production, transmission and distribution facilities. It does not include funds (other than for planning) to add new generating capacity to ComEd's system. The program, as currently approved by ComEd, calls for electric plant and equipment expenditures of approximately $2,784 million (excluding nuclear fuel expenditures of approximately $885 million). It is estimated that such construction expenditures, with cost escalation computed at 3.5% annually, will be as follows:
1996 1997 1998 TOTAL ---- ---- ---- ------ (MILLIONS OF DOLLARS) Production............................................ $451 $385 $426 $1,262 Transmission and Distribution......................... 392 405 410 1,207 General............................................... 110 110 95 315 ---- ---- ---- ------ Total................................................ $953 $900 $931 $2,784 ---- ---- ---- ------ ---- ---- ---- ------
Such construction program includes the replacement of the steam generators at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units, for service prior to year-end 1999 at a total estimated cost of approximately $470 million. Approximately $355 million of this estimated cost is included in the construction expenditures shown above. See "Regulation," subcaption "Nuclear" for additional information relating to the replacement of the steam generators. ComEd and the Indiana Company's construction expenditures during 1995 were approximately $899 million. ComEd's gross investment in nuclear generating capacity (excluding nuclear fuel) is approximately $14.2 billion at December 31, 1995, and ComEd expects that investment to be approximately $14.7 billion by the end of 1998 as a result of improvements. Gross additions to and retirements from utility property, excluding nuclear fuel, of ComEd and the Indiana Company for the five years ended December 31, 1995 were $4,419 million and $458 million, respectively. ComEd periodically reviews its projection of probable future demand for electricity in its service territory. It currently projects an average annual growth of 2% in annual peak load and 1.75% in annual output through 1999; thereafter, due in part to implementation of national energy efficiency standards, ComEd projects long-term average annual growth of 1.75% in annual peak load and 1.5% in annual output. ComEd's forecasts of peak load indicate a need for additional resources to meet demand, either through generating capacity or through equivalent purchased power or demand-side 4 management resources, in 1998 and each year thereafter through the year 2000. The projected resource needs reflect the current planning reserve margin recommendations of MAIN, the reliability council of which ComEd is a member. ComEd's forecasts indicate that the need for additional resources during this period would exist only during the summer months. ComEd does not expect to make expenditures for additional capacity to the extent the need for capacity can be met through cost-effective demand-side management resources, non-utility generation or other power purchases. Based on current market information, ComEd believes that adequate resources, including cost-effective demand-side management resources, non-utility generation resources and other-utility power purchases, could be obtained sufficient to meet forecasted requirements through the year 2000. If ComEd were to build additional capacity to meet its needs, it would need to make additional expenditures during the 1996-98 period. ComEd's construction program will be reviewed and modified as necessary to adapt to changing economic conditions, rate levels and other relevant factors including changing business and legal needs and requirements. ComEd cannot anticipate all such possible needs and requirements. While regulatory needs in particular are more likely, on balance, to require increases in construction expenditures than decreases, financial constraints may require compensating or greater reductions in other construction expenditures. See "Regulation" below for additional information. The 1996-98 construction program includes approximately $24 million for environmental control facilities, of which approximately $9 million, $6 million and $9 million is budgeted for 1996, 1997 and 1998, respectively. Expenditures on such facilities were $28 million, $24 million and $16 million during 1993, 1994 and 1995, respectively. Purchase commitments for ComEd and the Indiana Company, principally related to construction and nuclear fuel, approximated $1,137 million at December 31, 1995. In addition, ComEd has substantial commitments for the purchase of coal as indicated in the following table.
CONTRACT PERIOD COMMITMENT(1) -------- --------- ------------- Black Butte Coal Co..................................... 1996-2007 $1,011 Decker Coal Co. ........................................ 1996-2015 $ 713 Big Horn Coal Co. ...................................... 1998 $ 22 Other commitments....................................... 1996 $ 3
- -------- (1)Estimated costs in millions of dollars FOB mine. No estimate of future cost escalation has been made. For additional information concerning these coal contracts and ComEd's fuel supply, see "Fuel Supply" below and Notes 1 and 21 of Notes to Financial Statements in the January 26, 1996 Form 8-K Reports. ComEd has forecast that internal sources will provide more than three-fourths of the funds required for ComEd's construction program and other capital requirements, including nuclear fuel expenditures, contributions to nuclear decommissioning funds, sinking fund obligations and refinancing of scheduled debt maturities (the annual sinking fund requirements and scheduled maturities for ComEd preference stock and long-term debt are summarized in Notes 7 and 9, respectively, of Notes to Financial Statements in the January 26, 1996 Form 8-K Reports). The forecast assumes the rate levels reflected in the Rate Order (described below) remain in effect. See "Rate Proceedings" herein for additional information. See Note 1 of Notes to Financial Statements and "Results of Operations," subcaption "Other Items" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the January 26, 1996 Form 8-K Reports for information concerning AFUDC. 5 Unregulated Operations Unicom has approved capital expenditures for the years 1996-98 of approximately $100 million for Unicom Thermal, primarily representing the construction costs of its district cooling facilities in the city of Chicago. Construction of its first district cooling facility was completed in May 1995 and cost approximately $30 million. Unicom Thermal began construction on two additional cooling facilities in 1995. As of December 31, 1995, Unicom Thermal's purchase commitments, principally related to construction, were approximately $35 million. Unicom Thermal's construction expenditures during 1995 were approximately $31 million. Unicom expects to obtain funds to invest in its unregulated subsidiaries principally from dividends received on its ComEd common stock and from bank borrowings. While the amount of dividends on ComEd common stock is expected to be greater than the amount of dividends on Unicom common stock, the availability of such dividends is dependent on ComEd's financial performance and cash position. Other forms of financing by ComEd of Unicom or the unregulated subsidiaries, such as loans or additional equity investments (none of which is expected), would be subject to the prior approval of the ICC. Unicom Enterprises has a $200 million credit facility which will expire in 1998, of which $158 million was unused as of February 29, 1996. The credit facility can be used by Unicom Enterprises to finance investments in unregulated energy-related businesses and projects, including Unicom Thermal, and for general corporate purposes. The credit facility is guaranteed by Unicom and includes certain covenants with respect to Unicom's and Unicom Enterprises' operations. Interest rates for borrowings under the credit facility are set at the time of a borrowing and are based on either a prime interest rate or a floating rate bank index plus a spread which varies with the credit rating of ComEd's outstanding first mortgage bonds. See Note 10 of Notes to Financial Statements in Unicom's January 26, 1996 Form 8-K Report for additional information regarding certain covenants with respect to Unicom's and Unicom Enterprises' operations. The foregoing paragraphs in this "Construction Program" section include forward-looking statements with respect to the future levels of capital and operation and maintenance expenditures which are necessarily based upon assumptions regarding estimated costs and availability of materials and services as well as contingencies. Unforeseen events or conditions may require changes in the scope of work with consequent changes in the timing and level of the projected expenditures. In addition, changes in laws and regulations, or their interpretation and enforcement, can affect the scope of certain projects, the manner in which they are undertaken and the costs associated therewith. While ComEd gives consideration to such factors in developing its budgets, such consideration cannot predict the course of future events or anticipate the interaction of multiple factors beyond management's control upon project timing and cost. Consequently, actual results could differ materially from those described. RATE PROCEEDINGS ComEd's revenues, net income, cash flows and plant carrying costs have been affected directly by various rate-related proceedings. During 1993, ComEd was involved in a number of proceedings concerning its rates. The uncertainties associated with such proceedings and related issues, among other things, led to the Rate Matters Settlement and the Fuel Matters Settlement in late 1993 (which are discussed below). Settlements Relating to Certain Rate Matters Under the Rate Matters Settlement, effective as of November 4, 1993, ComEd reduced its rates by approximately $339 million annually and refunded approximately $1.26 billion (including revenue 6 taxes), plus interest at five percent on the unpaid balance, through temporarily reduced rates over a refund period which ended in November 1994 (followed by a reconciliation period of five months). ComEd had previously deferred the recognition of revenues during 1993 as a result of developments in the proceedings related to a 1991 ICC rate order, which resulted in a reduction to 1993 net income of approximately $160 million or $0.75 per common share. The recording of the effects of the Rate Matters Settlement in October 1993 reduced 1993 net income by approximately $292 million or $1.37 per common share, in addition to the approximately $160 million effect of the deferred recognition of revenues and after the partially offsetting effect of recording approximately $269 million or $1.26 per common share in deferred carrying charges, net of income taxes, authorized in the Remand Order. Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd paid approximately $108 million (including revenue taxes) to its customers through temporarily reduced collections under its fuel adjustment clause over a twelve-month period which ended in November 1994. The recording of the effects of the Fuel Matters Settlement in October 1993 reduced 1993 net income by approximately $62 million or $0.29 per common share. Other Rate Matters On January 9, 1995, the ICC issued its Rate Order in the proceedings relating to ComEd's February 1994 rate increase request. The Rate Order provides, among other things, for (i) an increase in ComEd's total revenues of approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an annual basis, including a $303.2 million increase in base rates, (ii) the collection of municipal franchise costs as an adder to base rates until May 1, 1995, when ComEd began collecting such costs prospectively on an individual municipality basis through a rider, and (iii) the use of a rider, with annual review proceedings, to pass on to ratepayers increases or decreases in estimated costs associated with the decommissioning of ComEd's nuclear generating units. See "Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements in the January 26, 1996 Form 8-K Reports for information related to the level of decommissioning cost collections allowed in the Rate Order and subsequent rider proceedings. The ICC also determined that the Units were 100% "used and useful" and that the previously determined reasonable costs of such Units, as depreciated, should be included in full in ComEd's rate base. The rates provided in the Rate Order became effective on January 14, 1995; however, they are being collected subject to refund as a result of subsequent judicial action. As of December 31, 1995, electric operating revenues of approximately $319 million (excluding revenue taxes) are subject to refund. Intervenors and ComEd have filed appeals of the Rate Order with the Illinois Appellate Court. See "Business and Competition" below for additional information regarding ComEd's announcement of certain customer initiatives in December 1995. FUEL SUPPLY The kilowatthour generation of ComEd and the Indiana Company for 1995 was provided from the following fuel sources: nuclear 73%, coal 24% and natural gas 3%. Nuclear Fuel ComEd has uranium concentrate inventory, supply contracts and subsidiary resources sufficient to meet all of its uranium concentrate requirements through 1997 and portions of its uranium concentrate requirements for periods beyond 1997. ComEd's contracted conversion services are sufficient to meet all of its uranium conversion requirements through 1998. All of ComEd's enrichment requirements have been contracted for through September 1999. Commitments for fuel fabrication have been obtained for ComEd's nuclear units at least through 1999. ComEd does not anticipate that it will have any difficulty in negotiating contracts for uranium concentrates, conversion, enrichment and fuel fabrication services for its remaining requirements. 7 See "Regulation," subcaption "Nuclear" herein for information concerning the disposal of radioactive waste. Coal ComEd burns low sulfur western coal at all its coal-fired stations. ComEd's present policy is to maintain a coal inventory of at least 30 days of high utilization. As of February 29, 1996, coal inventories approximated 37 days. The average cost per ton of coal consumed by ComEd and the Indiana Company for the years 1993, 1994 and 1995, including transportation charges, was $49.42, $39.50 and $41.72, respectively. Compared to other utilities, ComEd has relatively low average fuel costs as a result of its reliance predominantly on lower cost nuclear generation. ComEd's coal costs, however, are high compared to those of other utilities. ComEd's western coal contracts and its rail contracts for delivery of the western coal provide for the purchase of certain coal at prices substantially above currently prevailing market prices and ComEd has significant purchase commitments under its contracts. In addition, as of December 31, 1995, ComEd had unrecovered fuel costs in the form of coal reserves of approximately $448 million. In prior years, ComEd's commitments for the purchase of coal exceeded its requirements. Rather than take all the coal it was required to take, ComEd agreed to purchase the coal in place in the form of coal reserves. For additional information concerning ComEd's coal purchase commitments, see "Construction Program," subcaption "Utility Operations" above. For additional information regarding ComEd's fuel reconciliation proceedings and coal reserves, see "Fuel Adjustment Clause" below and Notes 1, 2 and 21 of Notes to Financial Statements in the January 26, 1996 Form 8-K Reports. Oil and Gas ComEd's fast-start peaking units use middle distillate oils. Approximately half of this capacity can also be fueled with natural gas. ComEd's 2,698,000 kilowatt Collins station is fueled with natural gas and residual oil. ComEd purchases oil and gas in the spot market as needed. The conversion of three of the five units at Collins station to dual fuel capability (residual oil and natural gas) was completed during 1994 and a fourth unit is currently being converted. ComEd has a contract for the delivery and storage of natural gas from gas pipelines to Collins station which expires in 2003. Fuel Adjustment Clause Through its fuel adjustment clause, ComEd recovers from its customers the cost of the fuel used to generate electricity and of purchased power as compared to fuel costs included in base rates. The amounts collected under the fuel adjustment clause are subject to review by the ICC, which, under the Illinois Public Utilities Act, is required to hold annual public hearings to reconcile the collected amounts with the actual cost of fuel and power prudently purchased. In the event that the collected amounts exceed such actual cost, then the ICC can order that the excess be refunded. For additional information concerning ComEd's fuel reconciliation proceedings and coal reserves, see Notes 1 and 2 of Notes to Financial Statements in the January 26, 1996 Form 8-K Reports. REGULATION ComEd and the Indiana Company are subject to state and federal regulation in the conduct of their respective businesses, including the operations of Cotter. Such regulation includes rates, securities issuance, nuclear operations, environmental and other matters. Particularly in the cases of nuclear operations and environmental matters, such regulation can and does affect operational and 8 capital expenditures. ComEd is subject to regulation by the ICC as to rates and charges, issuance of securities (other than debt securities maturing within twelve months), service and facilities, classification of accounts, transactions with affiliated interests as defined in the Illinois Public Utilities Act and other matters. In addition, the ICC in certain of its rate orders has exercised jurisdiction over ComEd's environmental control program. ComEd is subject to the jurisdiction of the FERC with respect to the issuance of debt securities maturing within twelve months. ComEd is also subject to the jurisdiction of the FERC and the DOE under the Federal Power Act with respect to certain other matters, including the sale for resale of electric energy and the transmission of electric energy in interstate commerce, and to the jurisdiction of the DOE with respect to the disposal of spent nuclear fuel and other radioactive wastes. Unicom is a public utility holding company as defined by the Public Utility Holding Company Act of 1935 because of its majority ownership of common stock of ComEd, and ComEd is a public utility holding company as defined in such Act because of its ownership of the Indiana Company. However, both Unicom and ComEd are exempt from most provisions of such Act. The Indiana Company, an "affiliated interest" of ComEd within the meaning of the Illinois Public Utilities Act, is subject to regulation by the Indiana Utility Regulatory Commission and to the jurisdiction of the FERC, the DOE and federal and state of Indiana pollution control and other agencies. Nuclear The IDNS has jurisdiction over certain activities in Illinois relating to nuclear power and safety, and radioactive materials. Effective June 1, 1987, the IDNS replaced the NRC as the regulator and licensor of certain source, by- product and special nuclear material in quantities not sufficient to form a critical mass, including such material contained in various measuring devices used at fossil-fuel power plants. The IDNS has promulgated regulations which are substantially similar to the corresponding federal regulations. The IDNS also has authority to license a low-level radioactive waste disposal facility and to regulate alternative methods for disposing of materials which contain only trace amounts of radioactivity. Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the selection and development of repositories for, and the disposal of, spent nuclear fuel and high-level radioactive waste. ComEd, as required by that Act, has signed a contract with the DOE to provide for the disposal of spent nuclear fuel and high-level radioactive waste from ComEd's nuclear generating stations beginning not later than January 1998; however, this delivery schedule is expected to be delayed significantly. It is not certain when the DOE will accept high-level radioactive waste from ComEd and other operators of nuclear power plants. Significant legislation, in both the House of Representatives and the Senate, would fundamentally change the nation's spent fuel management program by creating a federal interim storage facility which could begin accepting spent nuclear fuel as early as 1998. Delivery to the interim facility could be accomplished using existing technology. Extended delays in spent nuclear fuel acceptance by the DOE would lead to ComEd's consideration of costly storage alternatives. The contract with the DOE requires ComEd to pay the DOE a one-time fee applicable to nuclear generation through April 6, 1983 of approximately $277 million, with interest to date of payment, and a fee payable quarterly equal to one mill per kilowatthour of nuclear-generated and sold electricity after April 6, 1983. As provided for under the contract, ComEd has elected to pay the one-time fee, with interest, just prior to the first delivery of spent nuclear fuel to the DOE. The costs incurred by the DOE for disposal activities will be paid out of fees charged to owners and generators of spent nuclear fuel and high-level radioactive waste. ComEd has primary responsibility for the interim storage of its spent nuclear fuel. ComEd's capability to store spent fuel is more than adequate for some years to come. Dresden station has spent fuel capacity through the 9 year 2001, Zion station has capacity through 2005 and all of the other stations have capacity through at least 2009. In addition, ComEd is developing on site dry cask spent fuel storage for Dresden Unit 1 at a budgeted cost of $21 million. The Dresden Unit 1 facility will use existing technology procured to meet the federal requirements for both storage and transportation of spent nuclear fuel. Meeting other spent fuel storage requirements beyond the years stated above could require new and separate storage facilities. The costs for ComEd's other nuclear units have not been determined. The federal Low-Level Radioactive Waste Policy Act of 1980 provides that states may enter into compacts to provide for regional disposal facilities for low-level radioactive waste and restrict use of such facilities to waste generated within the region. Between July 1, 1994 and July 1, 1995, there were no commercial operating sites in the United States for the disposal of low- level radioactive waste available to ComEd. However, the Barnwell, South Carolina low-level radioactive waste site was reopened on July 1, 1995 and is available to ComEd. ComEd has entered into an agreement with the Barnwell site operator and began shipping waste to Barnwell on August 17, 1995. Illinois has entered into a compact with the state of Kentucky, which has been approved by Congress as required by the Waste Policy Act. Neither Illinois nor Kentucky currently has an operational site, and one is currently not expected to be operational until after the year 2000. ComEd has temporary on-site storage capacity at its nuclear generating stations for a limited amount of low-level radioactive waste. ComEd anticipates the possibility of continuing difficulties in disposing of low-level radioactive waste. Since the reopening and availability of the Barnwell site, ComEd continues to reevaluate its options. ComEd is subject to the jurisdiction of the NRC with respect to its nuclear generating stations. The NRC regulations control the granting of permits and licenses for the construction and operation of nuclear generating stations and subject such stations to continuing review and regulation. The NRC review and regulatory process covers, among other things, operations, maintenance, and environmental and radiological aspects of such stations. The NRC may modify, suspend or revoke licenses and impose civil penalties for failure to comply with the Atomic Energy Act, the regulations under such Act or the terms of such licenses. During 1991 and 1992, the NRC placed ComEd's Zion and Dresden stations, respectively, on its list of plants to be monitored closely. Although Zion station was removed from that list in February 1993, Dresden station remains on the list. In June 1995, the NRC reported that over the past year performance at Dresden was cyclical, that plant material condition needed to be improved at Dresden and that a more effective work management system was needed to deal with the corrective maintenance backlog. In January 1996, the NRC noted improvement but indicated that certain of the same concerns continue to exist. The NRC also stated that the effectiveness of the recent improvement efforts must be sustained. In January 1994, ComEd was notified by the NRC that ComEd's LaSalle County and Quad-Cities stations were placed on the list of plants with adverse performance trends. ComEd was informed that the NRC concerns about LaSalle County station included, among other matters, deficient radiation worker practices, and that concerns with Quad-Cities station included, among other matters, deficiencies in the condition of certain station equipment and the effectiveness of the operators of the units in identifying and responding to certain operational problems. In February and June 1995, the NRC concluded that LaSalle County and Quad-Cities, respectively, had arrested the adverse trends in most areas and "normal" designation has been reestablished. Because of the age of Zion, Dresden and Quad-Cities stations, ComEd anticipates continued expenditures in order to improve reliability and to meet NRC regulatory expectations. Beginning in late 1992, ComEd restructured its management of its nuclear operations division and since that time has committed additional resources to the stations' operations. In addition, generating station availability and performance during a year may be issues in fuel reconciliation proceedings in 10 assessing the prudence of fuel and power purchases during such year. Final ICC orders have been issued in fuel reconciliation proceedings for years prior to 1994; however, certain intervenors have appealed the ICC order in the 1989 fuel reconciliation proceedings on issues relating to nuclear station performance. In 1996, an intervenor filed testimony in the fuel reconciliation proceeding for 1994 seeking a refund of approximately $90 million relating to nuclear station performance. In accordance with a commitment to the NRC, ComEd examined its operating boiling water nuclear generating units in 1983 to determine the existence or extent of inter-granular stress corrosion in certain of the large diameter piping in those units. Inter-granular stress corrosion was discovered in the Dresden and Quad-Cities units. ComEd replaced the stainless steel piping susceptible to stress corrosion at Dresden Unit 3. ComEd believes the remedial actions taken to minimize the impact of stress corrosion cracking on BWR stainless steel reactor coolant piping have been successfully completed on Dresden Units 2 and 3, Quad-Cities Units 1 and 2 and LaSalle County Units 1 and 2. Future work on this piping will consist of routine inspections and repairs. As a result of ComEd's experience with the effects of inter-granular stress corrosion of stainless steel materials in BWRs, an inspection, repair and mitigation program of reactor vessel internals has been implemented. This effort is intended to prevent non-budgeted costs and refueling outage extensions resulting from unanticipated repairs occurring during a refueling outage. For 1996, current estimated expenditures for mitigation systems at Dresden, LaSalle County and Quad-Cities stations are $11.8 million, $6.5 million and $7.1 million, respectively. For 1997, estimated expenditures for installation of mitigation systems for LaSalle County and Quad-Cities stations are $1.6 million and $0.6 million, respectively. ComEd has studied the possibility of having to replace the steam generators at its Zion station. The initial studies were completed in 1991 and additional follow-up studies are continuing. Based on the most recent findings, it will not be necessary on a technical basis to replace the Zion steam generators until at least the year 2005; however, ComEd is continuing to monitor the extent of steam generator degradation and is continuing to study the timing and economics of replacement. ComEd has also studied the replacement of the steam generators at Byron Unit 1 and Braidwood Unit 1. The studies indicate that, from a technical standpoint, the steam generators should be replaced and, from an economic standpoint, the replacements should be performed at the earliest possible time. The steam generator replacements are currently planned to be completed prior to year-end 1999. The estimated replacement costs, including the costs of removal of the existing steam generators, are approximately $235 million for each unit. Approximately $355 million of expenditures is included in the current 1996-98 construction program, including an increase of approximately $65 million approved by ComEd's Board of Directors in March 1996 in order to accelerate the planned replacements. The Board also authorized an increase in certain nuclear operation and maintenance expenditures. See Unicom and ComEd's Current Report on Form 8-K/A-1 dated March 14, 1996 for additional information. ComEd estimates that it will expend approximately $15 billion, excluding any contingency allowance, for decommissioning costs primarily during the period from 2007 through 2032. Such costs, which are estimated to aggregate $3.7 billion in current-year (1996) dollars, are expected to be funded by external decommissioning trusts which ComEd established in compliance with Illinois law and into which ComEd has been making annual contributions. Future decommissioning cost estimates may be significantly affected by the adoption of or changes to NRC regulations as well as changes in the assumptions used in making such estimates. See Note 1 of Notes to Financial Statements under "Depreciation and Decommissioning" in the January 26, 1996 Form 8-K Reports for additional information regarding decommissioning costs. During the year 1995, civil penalties were imposed on ComEd by the NRC on four occasions for violations of NRC regulations in amounts aggregating $300,000. Since January 1, 1996, civil penalties were imposed on ComEd on two occasions for violations of NRC regulations in amounts aggregating $100,000. To ComEd's knowledge there are no current enforcement issues outstanding and under review by the NRC. 11 The uranium mining and milling operations of Cotter are subject to regulation by the state of Colorado and the NRC. Environmental ComEd and the Indiana Company are subject to regulation regarding environmental matters by the United States and by the states of Illinois, Indiana, Iowa and, in the case of Cotter, Colorado, and by local jurisdictions where ComEd and the Indiana Company operate their facilities. The IPCB has jurisdiction over environmental control in the state of Illinois, which includes authority to regulate air, water and noise emissions and solid waste disposal, together with the Illinois EPA, which enforces regulations of the IPCB and issues permits in connection with environmental control. The U.S. EPA administers certain federal statutes relating to such matters. The IPCB has published a proposed rule under which it would have the power to regulate radioactive air pollutants under the Illinois Environmental Protection Act and the Federal Clean Air Act Amendments of 1977. Air quality regulations, promulgated by the IPCB as well as the Indiana and Hammond Departments of Environmental Management in accordance with federal standards, impose restrictions on the emission of particulates, sulfur dioxide, nitrogen oxides and other air pollutants and require permits from the respective state and local environmental protection agencies for the operation of emission sources. Permits authorizing operation of ComEd's fossil-fueled generating facilities subject to this requirement have been obtained and, where such permits are due to expire, ComEd has, in a timely manner, filed applications for renewal or requested extensions of the existing permits. Under the Federal Clean Water Act, NPDES permits for discharges into waterways are required to be obtained from the U.S. EPA or from the state environmental agency to which the permit program has been delegated. Those permits must be renewed periodically. ComEd and the Indiana Company either have NPDES permits for all of their generating stations or have pending applications for such permits under the current delegation of the program to the Illinois EPA or the Indiana Department of Environmental Management. ComEd is also subject to the jurisdiction of certain pollution control agencies of the state of Iowa with respect to the discharge into the Mississippi River from the Quad- Cities station. In 1990, the Sierra Club filed suit in the U.S. District Court under Section 505 of the Federal Clean Water Act alleging violations of state of Illinois water quality standards with respect to thermal effluents at ComEd's Fisk, Crawford, Will County and Joliet generating stations. In 1991, the Sierra Club and ComEd reached a settlement of this suit which was also approved by the Court. Under the settlement, ComEd has agreed to perform an ecological study of the thermal effluents discharged from the generating stations. Ultimately, this study, which is scheduled to be completed in April 1996, may determine whether the installation of closed cycle cooling facilities or operational restrictions are necessary at one or more of these stations. The Great Lakes Critical Programs Act of 1990 requires that, following the issuance of guidance by the U.S. EPA, the states of Illinois and Indiana, among others, adopt water quality standards, policies and procedures to assure protection of the water quality of the Great Lakes. Water quality standards and procedures that the states would be required to adopt are to be based on the U.S. EPA's final guidance issued on March 13, 1995. ComEd is presently following state activities to promulgate rules implementing the final guidance, and assessing the extent to which such may impact certain ComEd facilities. Ultimately, the new rules may require that ComEd install additional pollution control equipment or restrict operations at its facilities that discharge, either directly or indirectly, into Lake Michigan. The Clean Air Amendments require reductions in sulfur dioxide emissions from ComEd's Kincaid station. The Clean Air Amendments also bar future utility sulfur dioxide emissions except to the 12 extent utilities hold allowances for their emissions. Allowances which authorize their holder to emit sulfur dioxide have been issued by the U.S. EPA based largely on historical levels of sulfur dioxide emissions. These allowances are transferable and marketable. ComEd's ability to increase generation in the future to meet expected increased demand for electricity will depend in part on the ability of ComEd and the Indiana Company to acquire additional allowances or to reduce emissions below otherwise allowable levels from their existing generating plants. In addition, the Clean Air Amendments require studies to determine what controls, if any, should be imposed on utilities to control air toxic emissions, including mercury. ComEd is currently burning low sulfur coal at Kincaid station to meet Clean Air Act Phase I requirements. ComEd will determine future compliance plans for Kincaid station as necessary. The Clean Air Amendments also require reductions in nitrogen oxide emissions from ComEd's and the Indiana Company's fossil fuel generating units. On January 26, 1996, the U.S. EPA issued a final rule exempting existing sources inside the Chicago ozone non-attainment area from further nitrogen oxide emission reductions; however, this exemption is limited pending further study of ozone transport. The Illinois EPA is also considering nitrogen oxide emission reductions at ComEd generating stations outside the Chicago ozone non- attainment area also due to ozone transport. Under the Acid Rain program, the U.S. EPA will prepare nitrogen oxide emission regulations that would apply to all of ComEd's boilers with a compliance date of January 1, 2000. These regulations were proposed on January 19, 1996 and include limits for cyclone and tangentially fired boilers. CERCLA provides for immediate response and removal actions coordinated by the U.S. EPA to releases of hazardous substances into the environment and authorizes the U.S. Government either to clean up sites at which hazardous substances have created actual or potential environmental hazards or to order persons responsible for the situation to do so. Under CERCLA, generators and transporters of hazardous substances, as well as past and present owners and operators of hazardous waste sites, are made strictly, jointly and severally liable for the cleanup costs of waste at sites, most of which are listed by the U.S. EPA on the NPL. These responsible parties can be ordered to perform a cleanup, can be sued for costs associated with a U.S. EPA directed cleanup, may voluntarily settle with the U.S. Government concerning their liability for cleanup costs, or may voluntarily begin a site investigation and site remediation prior to listing on the NPL under state oversight. Various states, including Illinois, have enacted statutes which contain provisions substantially similar to CERCLA. ComEd and its subsidiaries are or are likely to become parties to proceedings initiated by the U.S. EPA, state agencies and/or other responsible parties under CERCLA with respect to a number of sites, including MGP sites, or may voluntarily undertake to investigate and remediate sites for which they may be liable under CERCLA. MGPs manufactured gas in Illinois from approximately 1850 to 1950. ComEd generally did not operate MGPs as a corporate entity but did, however, acquire MGP sites as part of the absorption of smaller utilities. Approximately half of these sites were transferred to Northern Illinois Gas Company as part of a general conveyance in 1954. ComEd also acquired former MGP sites as vacant real estate on which ComEd facilities have been constructed. To date, ComEd has identified 44 former MGP sites for which it may be liable for remediation. ComEd presently estimates that its costs of former MGP site investigation and remediation will aggregate from $25 million to $150 million in current-year (1996) dollars. It is expected that the costs associated with investigation and remediation of former MGP sites will be incurred over a period of approximately 20 to 30 years. Because ComEd is not able to determine the most probable liability for such MGP costs, in accordance with accounting standards, a reserve of approximately $25 million was recorded as of December 31, 1995, which reflects the low end of the range of ComEd's estimate of the liability associated with former MGP sites. In addition, as of December 31, 1995, a reserve of $8 million was recorded representing ComEd's estimate of the liability associated with cleanup costs of remediation sites other than former MGP sites. Unicom and ComEd presently estimate that ComEd's costs of investigating and remediating 13 the former MGP and other remediation sites pursuant to CERCLA and state environmental laws will not have a material impact on the financial position or results of operations of Unicom or ComEd. These cost estimates are based on currently available information regarding the responsible parties likely to share in the costs of responding to site contamination, the extent of contamination at sites for which the investigation has not yet been completed and the cleanup levels to which sites are expected to have to be remediated. In 1991, the U.S. Government filed a complaint in U.S. District Court alleging that ComEd and four other defendants are PRPs for remediation costs associated with surface, soil and groundwater contamination alleged to have occurred from the disposal by other persons of hazardous wastes at a site located near ComEd's Byron station near Byron, Illinois. The U.S. Government alleges that a portion of the site is owned by ComEd. The U.S. Government is presently seeking reimbursement from the PRPs for past study and response costs associated with the site of approximately $7 million. ComEd is currently pursuing a negotiated settlement and is not actively pursuing cost recovery from other PRPs at this time. In 1992, the U.S. EPA notified ComEd and four other companies, including the site operator, that they were PRPs for the costs associated with the investigation and removal of contaminated soil at the Elgin Salvage and Supply site in Elgin, Illinois. In 1993, the U.S. EPA issued an order under Section 106 of CERCLA to ComEd and the other parties to investigate and remove the contamination from the site. ComEd sent substantial amounts of scrap cable and other scrap metal to the site. The site investigation and remediation was completed in March 1995 at a cost of approximately $9 million. The site operator claims to be unable to fund more than a small share of the removal costs. Consequently, the other parties have agreed to an interim allocation of the removal costs. The interim agreement allocates 55% of the removal costs to ComEd. ComEd and the other PRPs have filed a cost recovery action against the site operator and the site owners to require that they provide their share of the remediation costs. ComEd and the site owner are in litigation with several insurance companies for claims. Also, additional PRPs have responded to informational requests concerning their potential liability at the site. Their participation should reduce ComEd's percent allocation of such costs. Some of ComEd's electrical equipment containing PCBs was sent to scrap and salvage facilities and, as a result, ComEd may be liable for penalties and for the costs of cleanup of those facilities. In 1990, the IPCB replaced existing landfill regulations with new, more stringent design and performance standards. These regulations are expected to increase the cost to ComEd for disposal of coal combustion by-products at its Joliet station. At Joliet, an existing landfill utilized for disposal of coal ash may require the installation by 1997 of engineered retrofits designed to protect groundwater. ComEd has requested exemptions from certain of the new regulations from the IPCB. If its request is denied, then alternative landfill siting, commercial disposal, or retrofitting of the existing facility could result in significant increases in disposal expenditures. The outcome of many of the regulatory proceedings referred to above, if not favorable, could have a material adverse effect on Unicom and ComEd's future business and operating results. An unresolved issue is whether exposure to EMFs may result in adverse health effects or damage to the environment. EMFs are produced by virtually all devices carrying or utilizing electricity, including transmission and distribution lines as well as home appliances. If regulations are adopted related to EMFs, they could affect the construction and operation of electrical equipment, including transmission and distribution lines and the cost of such equipment. ComEd cannot predict the effect on the cost of such equipment or operations if new regulations related to EMFs are adopted. In the absence of such regulations, EMFs have nonetheless become an issue in siting facilities and in other land use contexts. Litigation has been filed in a variety of locations against a variety of defendants (including ComEd) alleging that the presence or use of electrical equipment 14 has had an adverse effect on the health of persons. If plaintiffs are successful in litigation of this type and it becomes widespread, the impact on ComEd and on the electric utility industry is not predictable, but could be severe. From time to time, Unicom and its subsidiaries are, or are claimed to be, in violation of or in default under orders, statutes, rules or regulations relating to environmental controls and other matters, compliance plans imposed upon or agreed to by them or permits issued by various state and federal agencies for the construction or operation of their facilities. Unicom and ComEd do not believe, so far as they now foresee, that such violations or defaults will have a material adverse effect on their future business and operating results, except for events otherwise described in this Annual Report on Form 10-K, which could have such an effect. EMPLOYEES The total number of employees of Unicom and its subsidiary companies was approximately 17,045 (of which approximately 17,025 employees were employed by ComEd and the Indiana Company) at December 31, 1995. Of that amount, approximately 9,323 employees of ComEd are represented by the IBEW, Local 15, and approximately 162 employees of the Indiana Company are represented by the United Steelworkers of America, Local 12502. Collective bargaining agreements with the unions expired on March 31, 1995. On October 30, 1995, ComEd declared an impasse in the collective bargaining agreement negotiations with Local 15 of the IBEW and implemented virtually all of the terms of its last offered proposal prior to the impasse. On February 20, 1996, ComEd announced that it had reached agreement with Local 15 of the IBEW with respect to the terms of a new collective bargaining agreement. Union members are scheduled to vote on ratification of the new agreement and ComEd will be notified of the results by April 10, 1996. Subject to ratification by the union membership, the new agreement provides, among other things, for a term expiring on September 30, 1997, a retroactive wage increase to April 1, 1995 (substantially all of which had been accrued on ComEd's books as of December 31, 1995), a further wage increase of approximately 2.7% effective on April 1, 1996 and a 1.5% wage increase effective on April 1, 1997. In addition, the agreement provides that union employees are eligible to receive 1995 and 1996 incentive payments dependent upon the achievement of certain corporate and individual goals and reflects the previously implemented voluntary separation offer that was made for employees who accepted and left ComEd's employ by year-end 1995. For the term of the agreement, a revision to the provision relative to contracting work was negotiated which will give ComEd the flexibility needed to maintain operations following the employee reduction resulting from the voluntary separation offer, as well as to smooth out the peaks and valleys in the labor requirements of the business. This flexibility will provide a stable work environment for ComEd's employees. For additional information regarding the effects of the previously implemented voluntary separation offer, see "General," subcaption "Utility Operations" above. The supplemental agreements covering life insurance, savings and investment plan, healthcare coverage for medical, dental and vision are effective through September 30, 1997. In March 1995, the supplemental agreement covering pension benefits was ratified with an expiration date of September 30, 1999. INTERCONNECTIONS ComEd has interconnections for the transmission of electricity with Central Illinois Light Company, Central Illinois Public Service Company, Illinois Power Company, Indiana Michigan Power Company (a subsidiary of American Electric Power Company), Interstate Power Company, MidAmerican Energy Company, Northern Indiana Public Service Company, Wisconsin Electric Power Company and Wisconsin Power and Light Company for the purpose of exchanging energy and for other forms of mutual assistance. 15 ComEd and 13 other Midwest power systems are regular members of MAIN (which also includes ten associate members and three affiliate members). The members have entered into an agreement to work together to ensure the reliability of electric power production and transmission throughout the area they serve. FRANCHISES ComEd's franchises are in general deemed adequate to permit it to engage in the business it now conducts. In the city of Chicago, ComEd operates under a nonexclusive electric franchise ordinance effective January 1, 1992, and continuing in force until December 31, 2020. ComEd derives approximately one-third of its ultimate consumer revenues from the city of Chicago. The electric business outside of the city of Chicago is conducted in municipalities under nonexclusive franchises and, where required, under certificates of convenience and necessity granted by the ICC. The following tabulation summarizes as of December 31, 1995 the expiration dates of the electric franchises held in 395 of the 396 municipalities outside of the city of Chicago capable of granting franchises and in which ComEd currently provides electric service.
ESTIMATED NUMBER OF AGGREGATE FRANCHISE EXPIRATION PERIODS MUNICIPALITIES POPULATION - ---------------------------- -------------- ---------- 1996-2006............................................. 4 108,000 2007-2017............................................. 11 97,000 2018-2028............................................. 3 4,000 2029-2039............................................. 1 * 2040 and subsequent years............................. 373 4,013,000 No stated time limit.................................. 3 61,000
- -------- *Less than 1,000 people. BUSINESS AND COMPETITION The electric utility business has historically been characterized by retail service monopolies in state or locally franchised service territories. Investor-owned electric utilities have tended to be vertically integrated with all aspects of their business subject to pervasive regulation. Although customers have normally been free to supply their electric power needs through self-generation, they have not had a choice of electric suppliers and self- generation has not generally been economical. The market place in which electric utilities like ComEd operate has become more competitive as a result of technological and regulatory changes, and competition is expected to intensify. Self-generation can be economical for certain customers, depending on how and when they use electricity and other customer-specific considerations. A number of competitors are currently seeking to identify and do business with those customers. In addition, suppliers of other forms of energy are increasingly competing to supply energy needs which historically were supplied primarily or exclusively by electricity. Also, a number of electric utilities (including utilities bordering ComEd's service area) have announced plans to combine, or have combined, to achieve certain size and operating efficiencies in response to expected changes in the market place. Finally, both the state and federal regulatory framework under which ComEd and other electric utilities have operated are under review. In recent years, there has been increasing debate at the state and federal levels regarding the structure and regulation of the electric utility industry. In particular, these discussions have focused on whether certain aspects of the industry, such as generation, could be more efficiently provided under a more competitive scheme. 16 A central feature of the current debate over deregulation and changed regulation in the electric utility industry is the extent to which electric utilities will be permitted to recover so-called "stranded" or "strandable" costs incurred to fulfill their duty to serve all of the electricity needs within their service territories. These costs would be stranded to the extent that market-based rates would be insufficient to allow for full recovery of the investments. ComEd cannot estimate its strandable investment with any degree of accuracy at this time because of the number of variables involved. ComEd, however, is taking steps, such as aggressive cost-cutting measures and additional depreciation, to minimize its potential exposure. The regulatory and legislative initiatives that ComEd has proposed, described below, contemplate a full recovery of ComEd's costs to meet its duty to serve. The Energy Policy Act of 1992 has had a significant effect on companies engaged in the generation, transmission, distribution, purchase and sale of electricity. This Act, among other things, expands the authority of the FERC to order electric utilities to transmit or "wheel" wholesale power for others, and facilitates the creation of non-utility electric generating companies. In March 1995, the FERC issued a NOPR seeking comments on proposals intended to encourage a more competitive wholesale electric power market. The NOPR addresses both open access transmission and stranded cost issues. ComEd is unable to predict the structure and effect of any rule that the FERC may ultimately adopt based upon the NOPR. ComEd is facing increased competition from several non-utility businesses which seek to provide energy services to users of electricity, especially larger customers such as industrial, commercial and wholesale customers. Such suppliers include independent power producers and unregulated energy services companies. In this regard, natural gas utilities operating in ComEd's service area have established subsidiary ventures to provide heating, ventilating and air conditioning services, attempting to attract ComEd's customers. Also, several utilities in the United States have established unregulated energy services subsidiaries which pursue business opportunities outside of the utilities' regular service areas. In addition, cogeneration and energy services companies have begun soliciting ComEd's customers to provide alternatives to using ComEd's electricity. ComEd has pursued a number of strategies to retain its customers. In October 1993, ComEd obtained authority to negotiate special discount contract rates with new or existing industrial customers for up to a total of 400 megawatts of added load, where the customers would not have chosen service from ComEd for the increased load in the absence of discount rates. In June 1994, ComEd obtained authority, subsequently overturned by the courts, to negotiate special discount contract rates with up to 25 of its largest customers, where such contracts would be necessary to retain the customers' existing load on ComEd's system. In the wake of the Illinois Appellate Court decision holding that the confidential nature of such contracts violated applicable state law, ComEd sought and obtained ICC approval for the eleven contracts that had been negotiated. The Illinois Supreme Court recently denied ComEd's petition for leave to appeal the Appellate Court's decision. ComEd continues to use ICC-approved special contracts, where necessary, to prevent uneconomic by-pass of its system. Legislation has been passed in Illinois to review the need for changes in the regulatory framework under which Illinois electric utilities operate. The Joint Committee on Electric Utility Regulatory Reform was created pursuant to House/Senate Joint Resolution 21 to develop any legislative reform proposals it finds necessary. A final legislative proposal is to be delivered by November 8, 1996. ComEd is participating as a member of the Technical Assistance Group. A bill allowing utilities to submit plans for experimental alternative regulation, such as price caps or incentive regulation, has been signed by the Governor of Illinois. On December 11, 1995, ComEd announced a series of customer initiatives as part of its larger ongoing effort to address the need to give all customer classes the opportunity to benefit from increased competition in the electric utility business, while retaining the benefits (such as reliability) of current regulation and ensuring utilities' cost recovery for commitments made under the obligation to serve customers. The initiatives include 17 (i) a five-year cap on base electric rates at current levels, (ii) certain energy monitoring and management programs designed to monitor and control energy usage, particularly during certain peak periods, (iii) single statement, or unified, billing for certain multi-site customers, (iv) certain incentives for manufacturing customers looking to expand operations or to locate in northern Illinois and (v) market pricing options for up to ten percent of certain large industrial customers' existing electric energy requirements and all of their incremental requirements. ComEd anticipates the initiatives will be fully implemented in 1997 and will reduce its revenues by approximately $42 million annually (including the effects of previously implemented initiatives and before income tax effects) primarily through changes in energy utilization and increase its costs by at least $30 million annually (before income tax effects) through the increase of depreciation charges on its nuclear generating units. In March 1996, ComEd filed a request for ICC approval of the additional depreciation initiative. ComEd also continues to consider the possibility of additional depreciation options. Management expects the financial impact of these initiatives will be substantially offset by ComEd's cost reduction efforts and expected growth in its business. Under ComEd's initiatives, the five-year base rate cap at current levels became effective in December 1995 and will extend until January 1, 2001. The rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost recovery provisions. ComEd's fuel cost variances will continue to be collected through its fuel adjustment clause, and such collections will continue to be subject to annual reconciliation proceedings before the ICC. Nuclear decommissioning cost variances will continue to be collected under a rider that was approved in the Rate Order, and such rider is intended to allow annual adjustments in decommissioning cost recoveries from ratepayers as changes in cost estimates occur. See "Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements in the January 26, 1996 Form 8-K Reports for additional information regarding the decommissioning costs rider. On December 13, 1995, ComEd announced a proposal to amend certain provisions of the Illinois Public Utilities Act. The proposal would, among other things, allow Illinois utilities to launch five-year experimental "direct access" programs, whereby certain customers would have the opportunity to obtain some of their electric energy requirements from their chosen supplier. If the proposal is adopted as legislation, such "direct access" programs could begin as early as 1998; and under the legislation, ComEd announced it would offer such a program for new or expanded load of three megawatts or greater in its northern Illinois service territory. Under ComEd's proposal, if such "direct access" proves workable, and if the ICC finds it to be in the public interest, the ICC could order it as an option for all electricity consumers in Illinois starting in 2003. Other Illinois utilities have also initiated both legislative and regulatory proposals. Both Illinois Power Company and Central Illinois Light Company have filed proposed retail wheeling experiments with the ICC. These experiments were approved on March 13, 1996. As structured, they are limited in scope, size and duration. See "Regulation" and "Regulatory Assets and Liabilities" in Note 1 of Notes to Financial Statements in the January 26, 1996 Form 8-K Reports. 18 EXECUTIVE OFFICERS OF THE REGISTRANT
EFFECTIVE DATE OF ELECTION NAME AGE POSITION TO PRESENT POSITION -------- --- --------------------- -------------------------- James J. O'Connor 59 Chairman and Chief Executive Officer January 28, 1994 Leo F. Mullin 53 Vice Chairman December 1, 1995 Samuel K. Skinner 57 President January 28, 1994 Donald A. Petkus 54 Senior Vice President July 11, 1995 John C. Bukovski 53 Vice President January 28, 1994 John T. Costello 47 Vice President January 24, 1996 Roger F. Kovack 47 Comptroller January 28, 1994 Dennis F. O'Brien 50 Treasurer January 28, 1994 David A. Scholz 54 Secretary January 28, 1994
The present term of office of each of the above executive officers extends to the first meeting of Unicom's Board of Directors after the next annual election of Directors scheduled to be held on May 22, 1996. Except for Mr. Mullin and Mr. Skinner, each of the above executive officers has been employed by ComEd for more than five years and, except for Mr. Mullin, Mr. Petkus and Mr. Costello, by Unicom since January 28, 1994, in executive or management positions. The business experience of the officers and the prior positions they have held with ComEd or other companies since January 1, 1991 until their election to the offices indicated above are described below. Mr. Mullin served as President and Chief Operating Officer of First Chicago Corporation from November 1993 to July 1995, as Chairman, President and Chief Executive Officer of American National Bank and Trust Company of Chicago from April 1991 to November 1993, and as Executive Vice President of First Chicago Corporation prior to April 1991. Mr. Skinner was General Chairman of the Republican National Committee from August 1992 to January 1993, Chief of Staff to the President of the United States from December 1991 to August 1992, and Secretary of the United States Department of Transportation prior to December 1991. Mr. Petkus was (and continues to be) a Senior Vice President of ComEd since June 1992, and previously served as Vice President of ComEd. Mr. Petkus was also elected President of Unicom Thermal effective July 17, 1995. Mr. Costello was ComEd's Manager of Corporate Relations from July 1995 to January 24, 1996, and prior to that was its Manager of Public Affairs. The following Unicom officers have held and continue to hold the following positions at ComEd for at least five years: Mr. O'Connor is Chairman and Chief Executive Officer; Mr. Bukovski is Vice President; Mr. Kovack is Comptroller; Mr. O'Brien is Treasurer; and Mr. Scholz is Secretary. There are no family relationships among the executive officers, directors and nominees for director of Unicom. 19 OPERATING STATISTICS
YEAR ENDED DECEMBER 31 ---------------------------------- 1995 1994 1993 ---------- ---------- ---------- Operating Revenues (thousands of dol- lars)(1): Residential............................... $2,621,038 $2,273,763 $2,341,155 Small commercial and industrial........... 2,073,998 1,917,084 1,962,662 Large commercial and industrial........... 1,425,784 1,381,251 1,437,680 Public authorities........................ 487,142 452,512 474,034 Electric railroads........................ 26,894 26,179 27,593 Provisions for revenue refunds--ultimate consumers................................ -- (15,909) (1,281,788) Sales for resale (net of provisions for revenue refunds)......................... 207,256 187,147 237,573 Other revenues............................ 67,933 55,494 61,531 ---------- ---------- ---------- Total.................................. $6,910,045 $6,277,521 $5,260,440 ---------- ---------- ---------- ---------- ---------- ---------- Sales (millions of kilowatthours): Residential............................... 23,303 21,376 20,818 Small commercial and industrial........... 25,313 24,320 23,463 Large commercial and industrial........... 23,777 23,450 22,917 Public authorities........................ 7,158 6,885 6,741 Electric railroads........................ 390 397 405 Sales for resale.......................... 11,412 8,743 13,417 ---------- ---------- ---------- Total.................................. 91,353 85,171 87,761 ---------- ---------- ---------- ---------- ---------- ---------- Sources of Electric Energy (millions of kilowatthours): Generation-- Nuclear.................................. 70,261 63,795 70,403 Fossil................................... 26,231 26,361 23,839 Fast-start peaking units................. 116 87 24 ---------- ---------- ---------- Net generation......................... 96,608 90,243 94,266 Purchased power........................... 2,475 2,071 644 Company use and losses.................... (7,730) (7,143) (7,149) ---------- ---------- ---------- Total.................................. 91,353 85,171 87,761 ---------- ---------- ---------- ---------- ---------- ---------- Cost of Fuel Consumed (per million Btu): Nuclear................................... $0.52 $0.53 $0.52 Coal...................................... $2.43 $2.31 $2.89 Oil....................................... $3.06 $2.89 $3.03 Natural gas............................... $1.85 $2.27 $2.70 Average all fuels......................... $1.05 $1.08 $1.15 Peak Load (kilowatts)...................... 19,212,000 17,928,000 17,771,000 Number of Customers (at end of year): Residential............................... 3,079,381 3,047,354 3,009,508 Small commercial and industrial........... 288,848 286,793 283,764 Large commercial and industrial........... 1,539 1,528 1,503 Public authorities........................ 12,039 12,059 12,023 Electric railroads and resale............. 26 20 19 ---------- ---------- ---------- Total.................................. 3,381,833 3,347,754 3,306,817 ---------- ---------- ---------- ---------- ---------- ---------- Average Annual Revenue Per Residential Cus- tomer (excluding light bulb service)...... $852.18 $748.10 $779.54 Average Use Per Residential Customer (kilowatthours)........................... 7,598 7,056 6,954 Average Revenue Per Kilowatthour(2): Residential (excluding light bulb serv- ice)..................................... 11.22c 10.60c 11.21c Small commercial and industrial........... 8.19c 7.88c 8.36c Large commercial and industrial........... 6.00c 5.89c 6.27c
- -------- (1) See "Rate Proceedings" above. (2) Average revenue per kilowatthour after reflecting provisions for revenue refunds and after reflecting revenue refunds and related interest credited to customers in 1994 and 1993, respectively, were as follows:
1994 1993 -------------------------------- -------------------------------- AFTER DEDUCTIONS FOR AFTER DEDUCTIONS FOR -------------------------------- -------------------------------- PROVISIONS FOR REVENUE PROVISIONS FOR REVENUE REVENUE REFUNDS REFUNDS CREDITED REVENUE REFUNDS REFUNDS CREDITED --------------- ---------------- --------------- ---------------- Residential 10.57c 8.22c 8.61c 10.78c Small commercial and industrial 7.86c 6.43c 6.80c 8.16c Large commercial and industrial 5.88c 4.76c 5.07c 6.10c
20 ITEM 2. PROPERTIES. ComEd's electric properties are located in Illinois and the Indiana Company's electric facilities are located in Indiana. In management's opinion, ComEd and the Indiana Company's operating properties are adequately maintained and are substantially in good operating condition. The electric generating, transmission, distribution and general facilities of ComEd and the Indiana Company represent approximately 68%, 9%, 20% and 3%, respectively, of their gross investment in electric plant and equipment in service. The electric generating stations, substations and a portion of the transmission rights of way of ComEd and the Indiana Company are owned in fee. A significant portion of the electric transmission and distribution facilities is located over or under highways, streets, other public places or property owned by others, for which permits, grants, easements or licenses (deemed satisfactory by ComEd, but without examination of underlying land titles) have been obtained. The principal plants and properties of ComEd are subject to the lien of ComEd's Mortgage dated July 1, 1923, as amended and supplemented, under which ComEd's first mortgage bonds are issued. The net generating capability of ComEd and the Indiana Company is derived from the following electric generating facilities:
NET GENERATING CAPABILITY STATION LOCATION (KILOWATTS) ------- ---------------- -------------- Nuclear-- Zion Zion 2,080,000 Dresden Near Morris 1,588,000 Quad-Cities Near Cordova 1,183,000(1) LaSalle County Near Seneca 2,156,000 Byron Near Byron 2,240,000 Braidwood Near Braidwood 2,240,000 Fossil-- Collins Near Morris 2,698,000 Powerton Near Pekin 1,400,000 Joliet 6 Near Joliet 302,000 Joliet 7 & 8 Near Joliet 1,025,000 Kincaid Near Taylorville 1,108,000 Will County Near Lockport 1,092,000 Waukegan Waukegan 725,000 Crawford Chicago 542,000 State Line Hammond, Indiana 490,000 Fisk Chicago 321,000 Fast-Start Peaking Units(2) Various 1,332,000 ---------- Net non-summer generating capability 22,522,000 Deduct--Summer limitations 557,000 ---------- Net summer generating capability 21,965,000 ---------- ----------
- -------- (1) Excludes the 25% undivided interest of MidAmerican Energy Company (formerly Iowa-Illinois Gas and Electric Company) in the Quad-Cities station. (2) Generating units normally designed for use only during the maximum load period of a designated time interval. Such units are capable of starting and coming on-line quickly. Major electric transmission lines owned and in service are as follows:
VOLTAGE CIRCUIT (VOLTS) MILES ------- ------- 765,000........................................................... 90 345,000........................................................... 2,513 138,000........................................................... 2,709
ComEd's electric distribution system includes 37,790 pole line miles of overhead lines and 31,750 cable miles of underground lines. A total of approximately 1,318,020 poles are included in ComEd's distribution system, of which about 589,530 poles are owned jointly with telephone companies. 21 ITEM 3. LEGAL PROCEEDINGS. During 1989 and 1991, actions were brought in federal and state courts in Colorado against ComEd and Cotter seeking unspecified damages and injunctive relief based on allegations that Cotter has permitted radioactive and other hazardous material to be released from its mill into areas owned or occupied by the plaintiffs resulting in property damage and potential adverse health effects. In February 1994, a federal jury returned nominal dollar verdicts on eight bellwether plaintiffs' claims in these cases, which verdicts were upheld on appeal. The remaining claims in the 1989 actions are the subject of a settlement agreement entered into by counsel for the plaintiffs and Cotter. If the settlement agreement is implemented, the 1989 actions will be dismissed. Although the remaining cases will necessarily involve the resolution of numerous contested issues of fact and law, Unicom and ComEd's determination is that these actions will not have a material impact on their financial position or results of operations. In 1990, ComEd filed a complaint in the Circuit Court against Westinghouse and certain of its employees. The complaint alleges that the defendants knowingly concealed information regarding the durability of the metal used in the steam generators (a major component of the nuclear steam supply systems) at ComEd's Zion, Byron and Braidwood stations. The complaint further alleges that the defects in the steam generators will prevent the plants from maintaining their full power output through their forty-year design life without costly remanufacture or replacement of the steam generators. Damages, including punitive damages, in an unspecified amount are claimed. Westinghouse has filed a counterclaim against ComEd which seeks recovery of Westinghouse's costs of defense and damages of approximately $13 million. Shareholder derivative lawsuits were filed in 1992 and 1993 in the Circuit Court against current and former directors of ComEd alleging that they breached their fiduciary duty and duty of care to ComEd in connection with the management of the activities associated with the construction of ComEd's four most recently completed nuclear generating units. The lawsuits sought restitution to ComEd by the defendants for unquantified and undefined losses and costs alleged to have been incurred by ComEd. Both lawsuits were dismissed by the Circuit Court and that dismissal was affirmed by the Illinois Appellate Court. The Illinois Supreme Court declined to review that decision. A number of complaints have been filed by former employees with the EEOC, and several lawsuits have been filed by former employees in the U.S. District Court, alleging that the employees' terminations (which occurred as part of ComEd's management workforce reductions that were implemented in 1992) involved discrimination on the basis of age, race, sex, national origin and/or disabilities, in violation of applicable law. The complainants in these various cases are seeking, among other things, awards of back pay and lost benefits, reinstatement, pecuniary damages, and costs and attorneys' fees. Most of these claims were resolved by settlement in 1995. ComEd does not view the remaining cases as having a material impact on its financial position or results of operations. In July 1995, the Chicago area experienced several consecutive days of unusually high temperatures coupled with high humidity. Between July 12 and 14, 1995, ComEd experienced record demand for electricity. On July 14, 1995, a fire in a substation caused a power outage to approximately 40,000 customers. Other equipment failures in the same general area caused certain of these customers to be without power for up to 48 hours. In the wake of these power outages, three class action lawsuits were filed against ComEd seeking recovery of damages for property losses allegedly suffered. One suit seeks at least $10 million in damages; the others seek unspecified damages. One individual suit was also filed seeking damages less than $100,000 for property losses. See "Item 1. Business," subcaptions "Rate Proceedings," "Fuel Supply--Fuel Adjustment Clause" and "Regulation" above for information concerning other legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 22 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. ComEd's securities and other securities guaranteed by ComEd are currently rated by three principal securities rating agencies as follows:
STANDARD DUFF & MOODY'S & POOR'S PHELPS ------- -------- ------ First mortgage and secured pollution control bonds.. Baa2 BBB BBB Publicly-held debentures and unsecured pollution control obligations................................ Baa3 BBB- BBB- Convertible preferred stock......................... baa3 BBB- BBB- Preference stock.................................... baa3 BBB- BBB- ComEd-obligated mandatorily redeemable preferred se- curities of the Trust.............................. baa3 BBB- BBB- Commercial paper.................................... P-2 A-2 D-2
As of March 1996, Standard & Poor's rating outlook on ComEd remained stable. As of October 1995, Moody's rating outlook on ComEd also remained stable. In August 1995, Duff & Phelps upgraded its rating of ComEd's preferred and preference stock from BB+ to BBB- and reaffirmed that its rating outlook on ComEd remained stable. The above ratings reflect only the views of such rating agencies and each rating should be evaluated independently of any other rating. Generally, rating agencies base their ratings on information furnished to them by the issuing company and on investigations, studies and assumptions by the rating agencies. There is no assurance that any particular rating will continue for any given period of time or that it will not be changed or withdrawn entirely if in the judgment of the rating agency circumstances so warrant. Such ratings are not a recommendation to buy, sell or hold securities. The following is a brief summary of the meanings of the above ratings and the relative rank of the above ratings within each rating agency's classification system. Moody's top four long-term debt ratings (Aaa, Aa, A and Baa) are generally considered "investment grade." Obligations rated Baa are considered as medium grade obligations, neither highly protected nor poorly secured. Such obligations lack outstanding investment characteristics and in fact have speculative characteristics. (A numerical modifier in Moody's system shows relative standing within the principal rating category, with 1 indicating the high end of that category, 2 the mid-range and 3 the low end.) Standard & Poor's top four bond ratings (AAA, AA, A and BBB) are generally considered to describe obligations in which investment characteristics predominate. Obligations rated BBB are regarded as having an adequate capacity to pay interest and repay principal. Such obligations normally exhibit adequate protection parameters, but adverse economic conditions or changing circumstances are more likely to lead to weakened capacity to pay. (A plus or minus sign in Standard & Poor's system shows relative standing within the major rating categories.) Both Moody's and Standard & Poor's preferred stock ratings represent relative security of dividends. Moody's top four preferred stock ratings (aaa, aa, a and baa) are generally considered "investment grade." Moody's baa rating describes a medium grade preferred stock, neither highly protected nor poorly secured. Standard & Poor's top four preferred stock ratings (AAA, AA, A and BBB) are generally considered "investment grade." Standard & Poor's BBB rating applies to medium grade preferred stock which is below A ("sound") and above BB ("lower grade"). Duff & Phelps' credit rating scale has 17 alphabetical categories, of which ratings AAA through BBB (with AAA being the highest rating) represent investment grade securities. Ratings of BBB+, 23 BBB and BBB- represent the lowest category of "investment grade" rating. This category describes securities with below average protection factors but which are considered sufficient for institutional investment. Considerable variability in risk occurs during economic cycles. Ratings of BB+, BB and BB- describe below investment grade securities which are deemed likely to meet obligations when due. Present or prospective financial protection factors of these securities fluctuate according to industry conditions or company fortunes. Moody's P-2 rating of commercial paper is the second highest of three possible ratings; P-2 describes a strong capacity for repayment of short-term promissory obligations. Standard & Poor's rates commercial paper in four basic categories with A-2 being the second highest category. Duff & Phelps rates commercial paper in three basic categories, with D-2 indicating the middle category. Further explanations of the significance of ratings may be obtained from the rating agencies. Additional information required by Item 5 is incorporated herein by reference to the "Price Range and Cash Dividends Paid Per Share of Common Stock" on page 3 of Unicom's January 26, 1996 Form 8-K Report. ITEM 6. SELECTED FINANCIAL DATA. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by Items 6, 7 and 8 is incorporated herein by reference to the "Summary of Selected Consolidated Financial Data" on page 3, "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 4 through 15, and the audited consolidated financial statements and notes thereto on pages 16 through 44 of Unicom's January 26, 1996 Form 8-K Report and to Unicom's Form 8-K/A-1 Current Report dated March 14, 1996. Reference is also made to "Item 1. Business," subcaptions "Construction Program," "Regulation" and "Business and Competition" for additional information. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 24 PART III 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 Unicom's Annual Meeting of shareholders to be held on May 22, 1996 is incorporated herein by reference to the information under the heading "Security Ownership of Certain Beneficial Owners and Management" in Unicom's definitive Proxy Statement (1996 Proxy Statement) to be filed with the SEC prior to April 29, 1996 pursuant to Regulation 14A under the Securities Exchange Act of 1934. The information required by Item 10 relating to executive officers is set forth in Part I of Unicom's Annual Report on Form 10- K under "Item 1. Business," subcaption "Executive Officers of the Registrant" and under the heading "Security Ownership of Certain Beneficial Owners and Management" of Unicom's 1996 Proxy Statement, which are incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by Item 11 is incorporated herein by reference to the information labelled "Compensation of Directors" and the paragraphs under the heading "Executive Compensation" (other than the paragraphs under the heading "Corporate Governance and Compensation Committee Report on Executive Compensation") of Unicom's 1996 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by Item 12 is incorporated herein by reference to the stock ownership information under the heading "Security Ownership of Certain Beneficial Owners and Management" in Unicom's 1996 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. 25 ANNUAL REPORT ON FORM 10-K FOR COMMONWEALTH EDISON COMPANY PART I ITEM 1. BUSINESS. See Unicom's "Item 1. Business" (other than the paragraphs under the headings "General--Unregulated Operations," "Construction Program--Unregulated Operations" and "Executive Officers of the Registrant"), which is incorporated herein by this reference. EXECUTIVE OFFICERS OF THE REGISTRANT
EFFECTIVE DATE OF ELECTION NAME AGE POSITION TO PRESENT POSITION ------------------ --- ------------------------ -------------------------- James J. O'Connor 59 Chairman and Chief Executive Officer March 1, 1980 Leo F. Mullin 53 Vice Chairman December 1, 1995 Samuel K. Skinner 57 President February 1, 1993 Thomas J. Maiman 57 Senior Vice President June 10, 1992 Robert J. Manning 53 Senior Vice President June 10, 1992 Donald A. Petkus 54 Senior Vice President June 10, 1992 Cordell Reed 58 Senior Vice President June 5, 1987 Michael J. Wallace 48 Senior Vice President December 9, 1993 John C. Bukovski 53 Vice President February 1, 1989 John T. Costello 47 Vice President January 24, 1996 Louis O. DelGeorge 48 Vice President April 22, 1992 William H. Downey 51 Vice President June 10, 1992 William H. Dunbar, 55 May 10, 1994 Jr. Vice President J. Stanley Graves 59 Vice President June 5, 1987 Harold W. Keiser 52 Vice President December 18, 1995 Emerson W. Lacey 54 Vice President November 17, 1992 Paul D. McCoy 45 Vice President June 10, 1992 Robert A. Paul 52 Vice President January 24, 1994 J. Stephen Perry 57 Vice President April 28, 1994 James A. Small 52 Vice President July 6, 1993 Pamela B. Strobel 43 Vice President and General Counsel June 1, 1993 Roger F. Kovack 47 Comptroller February 1, 1989 Dennis F. O'Brien 50 Treasurer February 1, 1989 David A. Scholz 54 Secretary February 1, 1989
The present term of office of each of the above executive officers extends to the first meeting of ComEd's Board of Directors after the next annual election of Directors scheduled to be held on May 22, 1996. Each of the above executive officers (except for Messrs. Mullin, Skinner, Keiser, Paul, Perry and Small and Ms. Strobel) has been employed by ComEd for more than five years in executive or 26 management positions. Messrs. Mullin, Skinner, Keiser, Paul, Perry and Small and Ms. Strobel have been employed by ComEd for less than five years. Their business experience from January 1, 1991 until their election to the offices indicated is as follows: Mr. Mullin served as President and Chief Operating Officer of First Chicago Corporation from November 1993 to July 1995, as Chairman, President and Chief Executive Officer of American National Bank and Trust Company of Chicago from April 1991 to November 1993, and prior to that as Executive Vice President of First Chicago Corporation; Mr. Skinner was General Chairman of the Republican National Committee from August 1992 to January 1993, Chief of Staff to the President of the United States from December 1991 to August 1992, and Secretary of the United States Department of Transportation prior to December 1991; Mr. Keiser was employed at Entergy Operations, Inc., as Executive Vice President and Chief Operating Officer from 1993 to 1995 and, prior to that, as Senior Vice President of Pennsylvania Power & Light Company; Mr. Paul was employed by Digital Equipment Corporation in the following capacities: from 1992 to January 1994 as Corporate Purchasing Manager and, prior to that, as Corporate Technology and Business Acquisition Manager; Mr. Perry was employed at Illinois Power Company in the following capacities: from 1992 to April 1994 as Senior Vice President and, prior to that, as Vice President of Nuclear Operations; Mr. Small was General Manager of Fuel Services at Georgia Power Company; Ms. Strobel was a partner in the law firm of Sidley & Austin. Prior to election to the positions shown above, the following officers held other positions at ComEd: Messrs. Maiman, Manning, Petkus and Wallace were Vice Presidents; Mr. Costello was Manager of Public Affairs prior to July 1995 and Manager of Corporate Relations thereafter; Mr. DelGeorge was Assistant Vice President; Mr. Downey was Manager of Marketing and Customer Services; Mr. Dunbar was Division Vice President--Chicago North prior to December 1992 and Manager of Quality thereafter; Mr. Lacey was Fossil Engineering and Construction Manager; and Mr. McCoy was Operating Manager prior to September 1991 and Manager of Transmission and Distribution Operations thereafter. There are no family relationships among the executive officers, directors and nominees for director of ComEd. ITEM 2. PROPERTIES. See Unicom's "Item 2. Properties," which is incorporated herein by this reference. ITEM 3. LEGAL PROCEEDINGS. See Unicom's "Item 3. Legal Proceedings," which is incorporated herein by this reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. See Unicom's "Item 5. Market for Registrant's Common Equity and Related Stockholder Matters" (other than the last paragraph thereof), which is incorporated herein by reference. Additional information required by Item 5 is incorporated herein by reference to the "Price Range and Cash Dividends Paid Per Share of Common Stock" on page 3 of ComEd's January 26, 1996 Form 8-K Report. 27 ITEM 6. SELECTED FINANCIAL DATA. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by Items 6, 7 and 8 is incorporated herein by reference to the "Summary of Selected Consolidated Financial Data" on page 3, "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 4 through 14, and the audited consolidated financial statements and notes thereto on pages 15 through 41 of ComEd's January 26, 1996 Form 8-K Report and to ComEd's Form 8-K/A-1 Current Report dated March 14, 1996. Reference is also made to "Item 1. Business," subcaptions "Construction Program," "Regulation" and "Business and Competition" for additional information. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III 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 ComEd's Annual Meeting of shareholders to be held on May 22, 1996 is incorporated herein by reference to information under the heading "Security Ownership of Certain Beneficial Owners and Management" in ComEd's definitive Information Statement (1996 Information Statement) to be filed with the SEC prior to April 29, 1996 pursuant to Regulation 14C under the Securities Exchange Act of 1934. The information required by Item 10 relating to executive officers is set forth in Part I of ComEd's Annual Report on Form 10-K under "Item 1. Business," subcaption "Executive Officers of the Registrant" and under the heading "Security Ownership of Certain Beneficial Owners and Management" in ComEd's 1996 Information Statement, which are incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by Item 11 is incorporated herein by reference to the paragraph labelled "Compensation of Directors" and the paragraphs under the heading "Executive Compensation" (other than the paragraphs under the heading "Corporate Governance and Compensation Committee Report on Executive Compensation") of ComEd's 1996 Information Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by Item 12 is incorporated herein by reference to the stock ownership information under the heading "Security Ownership of Certain Beneficial Owners and Management" of ComEd's 1996 Information Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. 28 ANNUAL REPORTS ON FORM 10-K FOR UNICOM CORPORATION AND COMMONWEALTH EDISON COMPANY PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (A)FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS:
PAGE OF JANUARY 26, 1996 FORM 8- K REPORT ------------ UNICOM COMED ------ ----- The following financial statements are incorporated into the Unicom Annual Report on Form 10-K by reference to the indi- cated page or pages of Unicom's January 26, 1996 Form 8-K Report, and into the ComEd Annual Report on Form 10-K by reference to the indicated page or pages of ComEd's January 26, 1996 Form 8-K Report: Report of Independent Public Accountants.................... 16 15 Statements of Consolidated Income for the years 1995, 1994 and 1993................................................... 17 16 Consolidated Balance Sheets--December 31, 1995 and 1994..... 18-19 17-18 Statements of Consolidated Capitalization--December 31, 1995 and 1994................................................... 20 19 Statements of Consolidated Retained Earnings for the years 1995, 1994 and 1993........................................ 21 20 Statements of Consolidated Premium on Common Stock and Other Paid-In Capital for the years 1995, 1994 and 1993 ......... NA 20 Statements of Consolidated Cash Flows for the years 1995, 1994 and 1993.............................................. 22 21 Notes to Financial Statements............................... 23-44 22-41
ANNUAL REPORT ON PAGE OF FORM 10-K THIS ------------ DOCUMENT UNICOM COMED -------- ------ ----- The following supplemental schedules are included in the indicated Annual Report on Form 10-K: Report of Independent Public Accountants on Supplemental Schedule.............................. 37 x Report of Independent Public Accountants on Supplemental Schedule.............................. 38 x Schedule II--Valuation and Qualifying Accounts for each of the three years in the period ended December 31, 1995........................ 39 x x
The following schedules are omitted as not applicable or not required under rules of Regulation S-X: I, III, IV and V. 29 The individual financial statements and schedules of ComEd's nonconsolidated wholly-owned subsidiaries have been omitted from Unicom's and ComEd's Annual Report on Form 10-K because the investments are not material in relation to ComEd's financial position or results of operations. As of December 31, 1995, the assets of the nonconsolidated subsidiaries in the aggregate approximated 1% of ComEd's consolidated assets and for the year 1995 annual revenues of the nonconsolidated subsidiaries in the aggregate were less than 1% of ComEd's consolidated annual revenues. The following exhibits are filed with the indicated Annual Report on Form 10-K or incorporated therein by reference. Documents indicated by an asterisk (*) are incorporated by reference to the File No. indicated. Documents indicated by a plus sign (+) identify management contracts or compensatory plans or arrangements.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ------------------------------------------------- ------ ----- *(3)-1 Articles of Incorporation of Unicom effective January 28, 1994. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Exhibit (3)-1). x *(3)-2 Restated Articles of Incorporation of ComEd ef- fective February 20, 1985, including Statements of Resolution Establishing Series, relating to the establishment of three new series of ComEd preference stock known as the "$9.00 Cumulative Preference Stock," the "$6.875 Cumulative Pref- erence Stock" and the "$2.425 Cumulative Prefer- ence Stock." (File No. 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (3)-2). x (3)-3 By-Laws of Unicom Corporation, effective January 28, 1994 as amended through December 13, 1995. x (3)-4 By-Laws of Commonwealth Edison Company, effective September 2, 1988 as amended through December 13, 1995. x *(4)-1 Mortgage of ComEd to Illinois Merchants Trust Company, Trustee (Continental Illinois National Bank and Trust Company of Chicago, successor Trustee), dated July 1, 1923, Supplemental In- denture thereto dated August 1, 1944, and amend- ments and supplements thereto dated, respective- ly, August 1, 1946, April 1, 1953, April 1, 1966, November 1, 1966, December 1, 1966, March 31, 1967, April 1, 1967, February 1, 1968, July 1, 1968, October 1, 1968, February 28, 1969, May 29, 1970, January 1, 1971, June 1, 1971, May 31, 1972, June 1, 1973, June 15, 1973, October 15, 1973, May 31, 1974, July 1, 1974, June 13, 1975, May 28, 1976, January 15, 1977, June 1, 1977 and June 3, 1977 (File No. 2-60201, Form S-7, Ex- hibit 2-1). x *(4)-2 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, December 1, 1977, May 17, 1978, August 31, 1978, June 18, 1979, June 20, 1980, April 16, 1981, April 30, 1982, April 15, 1983, April 13, 1984, March 1, 1985 and April 15, 1985 (File No. 2-99665, Form S-3, Ex- hibit (4)-3). x *(4)-3 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, April 15, 1986 and May 1, 1986 (File No. 33-6879, Form S-3, Exhibit (4)-9). x
30
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ------------------------------------------------- ------ ----- *(4)-4 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 12, 1987 (File No. 33-13193, Form S-3, Exhibit (4)-6). x *(4)-5 Supplemental Indenture to Mortgage dated July 1, 1923 dated June 30, 1989 (File No. 33-32929, Form S-3, Exhibit (4)-11). x *(4)-6 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, February 15, 1990 and June 15, 1990 (File No. 33-38232, Form S-3, Ex- hibits (4)-11 and (4)-12). x *(4)-7 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, June 1, 1991, October 1, 1991 and October 15, 1991 (File No. 33-44018, Form S-3, Exhibits (4)-12, (4)-13 and (4)-14). x *(4)-8 Supplemental Indenture to Mortgage dated July 1, 1923 dated February 1, 1992 (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-18). x *(4)-9 Supplemental Indenture to Mortgage dated July 1, 1923 dated May 15, 1992 (File No. 33-48542, Form S-3, Exhibit (4)-14). x *(4)-10 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, July 15, 1992, Septem- ber 15, 1992 and October 1, 1992 (File No. 33- 53766, Form S-3, Exhibits (4)-13, (4)-14 and (4)-15). x *(4)-11 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, February 1, 1993 and March 1, 1993 (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibits (4)- 14 and (4)-15). x *(4)-12 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, April 1, 1993 and April 15, 1993 (File No. 33-64028, Form S-3, Ex- hibits (4)-12 and (4)-13). x *(4)-13 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, June 15, 1993 and July 1, 1993 (File No. 1-1839, Form 8-K dated May 21, 1993, Exhibits (4)-1 and (4)-2). x *(4)-14 Supplemental Indenture to Mortgage dated July 1, 1923 dated July 15, 1993 (File No. 1-1839, Form 10-Q for the quarter ended June 30, 1993, Ex- hibit (4)-1). x *(4)-15 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 15, 1994 (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (4)-15). x *(4)-16 Supplemental Indenture to Mortgage dated July 1, 1923 dated December 1, 1994 (File No. 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (4)-16). x *(4)-17 Indentures of ComEd to The First National Bank of Chicago, Trustee (Harris Trust and Savings Bank, successor Trustee), dated April 1, 1949, October 1, 1949, October 1, 1950, October 1, 1954, Janu- ary 1, 1958, January 1, 1959 and December 1, 1961 (File No. 1-1839, Form 10-K for the year ended December 31, 1982, Exhibit (4)-20). x
31
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ------------------------------------------------- ------ ----- *(4)-18 Indenture of ComEd dated February 15, 1973 to The First National Bank of Chicago, Trustee (LaSalle National Bank, successor Trustee), and Supple- mental Indenture thereto dated July 13, 1973 (File No. 2-66100, Form S-16, Exhibit (b)-2). x *(4)-19 Indenture dated as of September 1, 1987 between ComEd and Citibank, N.A., Trustee relating to Notes (File No. 33-20619, Form S-3, Exhibit (4)- 13). x *(4)-20 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated September 15, 1987 (File No. 33-20619, Form S-3, Exhibit (4)-14). x *(4)-21 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated May 18, 1988 (File No. 33- 23036, Form S-3, Exhibit (4)-14). x *(4)-22 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated July 14, 1989 (File No. 33- 32929, Form S-3, Exhibit (4)-16). x *(4)-23 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated April 1, 1991 (File No. 33- 44018, Form S-3, Exhibit (4)-21). x *(4)-24 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated April 15, 1992 (File No. 33- 48542, Form S-3, Exhibit (4)-22). x *(4)-25 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated July 15, 1992 (File No. 33- 53766, Form S-3, Exhibit (4)-24). x *(4)-26 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated October 15, 1993 (File No. 1- 1839, Form 10-Q for the quarter ended September 30, 1993, Exhibit (4)-1). x *(4)-27 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated April 1, 1994 (File No. 1- 1839, Form 10-Q for the quarter ended March 31, 1994, Exhibit (4)-1). x (4)-28 Instrument of Resignation, Appointment and Ac- ceptance dated January 31, 1996, under the pro- visions of the Mortgage dated July 1, 1923, and Indentures Supplemental thereto. x (4)-29 Instrument dated as of January 31, 1996, for trustee under the Mortgage dated July 1, 1923 and Indentures Supplemental thereto. x *(4)-30 Credit Agreement dated as of October 1, 1991, among Commonwealth Edison Company, as borrower, the Banks named therein and the other Lenders from time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-27). x
32
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ------------------------------------------------- ------ ----- *(4)-31 Credit Agreement dated as of October 1, 1991, among Commonwealth Edison Company, as borrower, the Banks named therein and the other Lenders from time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-28). x *(4)-32 Letter Agreement dated as of October 4, 1993, among Commonwealth Edison Company and certain of the Banks party to the Credit Agreement dated as of October 1, 1991 (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (4)-28). x *(4)-33 Term Loan Agreement dated as of January 7, 1992, between Commonwealth Edison Company, as borrow- er, and The First National Bank of Chicago, in- dividually and as agent (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Ex- hibit (4)-28). x *(4)-34 First Amendment to Term Loan Agreement dated as of January 9, 1995, by and among Commonwealth Edison Company, The First National Bank of Chi- cago, individually and as agent, and the banks party thereto (File No. 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (4)- 32). x *(4)-35 Term Loan Agreement dated as of January 15, 1992, between Commonwealth Edison Company, as borrow- er, and Westpac Banking Corporation, Chicago Branch, individually and as agent (File No. 1- 1839, Form 10-K for the year ended December 31, 1992, Exhibit (4)-29). x *(4)-36 Term Loan Agreement dated as of January 16, 1992, between Commonwealth Edison Company, as borrow- er, and The Bank of New York, individually and as agent (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (4)-29). x *(4)-37 Credit Agreement dated as of November 22, 1994, among Unicom Enterprises Inc., the Banks Named Therein and Citibank, N.A. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Exhibit (4)-35). x *(4)-38 Guaranty dated November 22, 1994, by Unicom Cor- poration in favor of the Lenders and LC Banks parties to the aforementioned Credit Agreement with Unicom Enterprises Inc. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Exhibit (4)-36). x *(4)-39 Guaranty dated November 22, 1994, by Unicom Cor- poration in favor of Citibank, N.A. (File No. 1- 11375, Form 10-K for the year ended December 31, 1994, Exhibit (4)-37). x *(10)-1 Nuclear Fuel Lease Agreement dated as of November 23, 1993, between CommEd Fuel Company, Inc., as Lessor, and Commonwealth Edison Company, as Les- see (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (10)-1). x
33
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ------------------------------------------------- ------ ----- +*(10)-2 Unicom Corporation Long-Term Incentive Plan (File No. 1-1839, ComEd Proxy Statement dated March 26, 1993, Exhibit A). x +*(10)-3 Amendment to Unicom Corporation Long-Term Incen- tive Plan, effective September 1, 1994 (File No. 33-56991, Form S-8, Exhibit (4)-4). x +*(10)-4 1994 Long-Term Performance Unit Award for Execu- tive and Group Level Employes Payable in 1996 under the 1993 Long-Term Incentive Plan (File No. 1-1839, Form 10-K/A-1 for the year ended De- cember 31, 1993, Exhibit (10)-4). x x +*(10)-5 1994 Long-Term Performance Unit Award for Execu- tive and Group Level Employes Payable in 1997 under the 1993 Long-Term Incentive Plan (File No. 1-1839, Form 10-K/A-1 for the year ended De- cember 31, 1993, Exhibit (10)-5). x x + (10)-6 1995 Long-Term Performance Unit Award for Execu- tive and Group Level Employees Payable in 1998 under the Unicom Corporation Long-Term Incentive Plan, as amended. x x +*(10)-7 1995 Variable Compensation Award for Management Employees under the Unicom Corporation Long-Term Incentive Plan (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (10)-7). x x +*(10)-8 1995 Award to Mr. O'Connor and Mr. Skinner under the Unicom Corporation Long-Term Incentive Plan (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (10)-8). x x + (10)-9 1996 Long-Term Performance Unit Award for Execu- tive and Group Level Employees Payable in 1999 under the Unicom Corporation Long-Term Incentive Plan. x x + (10)-10 1996 Variable Compensation Award for Management Employees under the Unicom Corporation Long-Term Incentive Plan. x x + (10)-11 1996 Award to Mr. O'Connor, Mr. Mullin and Mr. Skinner under the Unicom Corporation Long-Term Incentive Plan. x x + (10)-12 Unicom Corporation Deferred Compensation Unit Plan, as amended. x x +*(10)-13 Deferred Compensation Plan (included in Article Five of Exhibit (3)-2 above). x +*(10)-14 Management Incentive Compensation Plan, effective January 1, 1989 (File No. 1-1839, Form 10-K for the year ended December 31, 1988, Exhibit (10)- 4). x +*(10)-15 Amendments to Management Incentive Compensation Plan, dated December 14, 1989 and March 21, 1990 (File No. 1-1839, Form 10-K for the year ended December 31, 1989, Exhibit (10)-5). x
34
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ------------------------------------------------- ------ ----- +*(10)-16 Amendment to Management Incentive Compensation Plan, dated March 21, 1991 (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (10)-6). x + (10)-17 Retirement Plan for Directors, effective Septem- ber 1, 1994, as amended through May 24, 1995. x + (10)-18 Retirement Plan for Directors, effective January 1, 1987, as amended through May 24, 1995. x + (10)-19 Unicom Corporation Outside Director Stock Award Plan as amended. x +*(10)-20 Executive Group Life Insurance Plan (File No. 1- 1839, Form 10-K for the year ended December 31, 1980, Exhibit (10)-3). x +*(10)-21 Amendment to the Executive Group Life Insurance Plan (File No. 1-1839, Form 10-K for the year ended December 31, 1981, Exhibit (10)-4). x +*(10)-22 Amendment to the Executive Group Life Insurance Plan dated December 12, 1986 (File No. 1-1839, Form 10-K for the year ended December 31, 1986, Exhibit (10)-6). x +*(10)-23 Amendment of Executive Group Life Insurance Plan to implement program of "split dollar life in- surance" dated December 13, 1990 (File No. 1- 1839, Form 10-K for the year ended December 31, 1990, Exhibit (10)-10). x +*(10)-24 Commonwealth Edison Company Supplemental Manage- ment Retirement Plan (File No. 1-1839, Form 10-K for the year ended December 31, 1985, Exhibit (10)-6). x +*(10)-25 Amendment of Executive Group Life Insurance Plan to stabilize the death benefit applicable to participants dated July 22, 1992 (File No. 1- 1839, Form 10-K for the year ended December 31, 1992, Exhibit (10)-13). x +*(10)-26 Letter Agreement dated December 16, 1992 between Commonwealth Edison Company and Samuel K. Skinner (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (10)-14). x + (10)-27 Amendment dated May 31, 1995 to Letter Agreement dated December 16, 1992 between Commonwealth Ed- ison Company and Samuel K. Skinner. x + (10)-28 Letter Agreement dated November 14, 1995 between Commonwealth Edison Company and Leo F. Mullin. x +*(10)-29 Commonwealth Edison Company Excess Benefit Sav- ings Plan (File No. 1-1839, Form 10-Q for the quarter ended June 30, 1994, Exhibit (10)-2). x + (10)-30 Amendment No. 1 to Commonwealth Edison Company Excess Benefit Savings Plan dated May 24, 1995. x + (10)-31 Unicom Corporation Stock Bonus Deferral Plan. x x
35
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ------------------------------------------------- ------ ----- (12) Statement re computation of ratios of earnings to fixed charges and ratios of earnings to fixed charges and preferred and preference stock divi- dend requirements for ComEd. x (21)-1 Subsidiaries of Unicom Corporation. x (21)-2 Subsidiaries of Commonwealth Edison Company. x (23)-1 Consent of experts for Unicom Corporation. x (23)-2 Consent of experts for Commonwealth Edison Compa- ny. x (24)-1 Powers of attorney of Directors whose names are signed to the Unicom Corporation Annual Report on Form 10-K pursuant to such powers. x (24)-2 Powers of attorney of Directors whose names are signed to the Commonwealth Edison Company Annual Report on Form 10-K pursuant to such powers. x (99)-1 Unicom Corporation's Current Report on Form 8-K dated January 26, 1996. x (99)-2 Commonwealth Edison Company's Current Report on Form 8-K dated January 26, 1996. x
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Unicom and ComEd hereby agree to furnish to the SEC, upon request, any instrument defining the rights of holders of long-term debt of ComEd not filed as an exhibit herein. No such instrument authorizes securities in excess of 10% of the total assets of ComEd. (B) REPORTS ON FORM 8-K: A Current Report on Form 8-K dated December 11, 1995 was filed by Unicom and ComEd to describe ComEd's announcement of a series of customer initiatives. A Current Report on Form 8-K dated December 13, 1995 was filed by Unicom and ComEd to describe ComEd's announcement of a proposal to amend certain provisions of the Illinois Public Utilities Act. 36 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE To Unicom Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Unicom Corporation and subsidiary companies incorporated by reference in this Annual Report on Form 10-K, and have issued our report thereon dated January 26, 1996. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed on page 29, Item 14.(a), is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic 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 financial statements taken as a whole. Arthur Andersen LLP Chicago, Illinois January 26, 1996 37 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE To Commonwealth Edison Company: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Commonwealth Edison Company and subsidiary companies incorporated by reference in this Annual Report on Form 10-K, and have issued our report thereon dated January 26, 1996. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed on page 29, Item 14.(a), is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic 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 financial statements taken as a whole. Arthur Andersen LLP Chicago, Illinois January 26, 1996 38 SCHEDULE II UNICOM CORPORATION AND SUBSIDIARY COMPANIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (THOUSANDS OF DOLLARS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------- --------- ------------------ ---------- -------- ADDITIONS ------------------ BALANCE CHARGED AT TO COSTS CHARGED BALANCE BEGINNING AND TO OTHER AT END DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR - ---------------------------- --------- -------- -------- ---------- -------- FOR THE YEAR ENDED DECEMBER 31, 1993 - ---------------------------- Reserve Deducted From Assets in Consolidated Balance Sheet: Provision for uncollectible accounts (a).............. $12,976 $(2,066) $ -- $ -- $10,910 ======= ======= ====== ======== ======= Other Reserves: Estimated liabilities asso- ciated with remediation costs and former manufac- tured gas plant sites..... $24,522 $ 6,020 $ -- $ (1,020)(b) $29,522 ======= ======= ====== ======== ======= Accumulated provision for injuries and damages...... $64,512 $13,963 $7,795 $(29,536)(c) $56,734 ======= ======= ====== ======== ======= FOR THE YEAR ENDED DECEMBER 31, 1994 - ---------------------------- Reserve Deducted From Assets in Consolidated Balance Sheet: Provision for uncollectible accounts (a).............. $10,910 $ (190) $ -- $ -- $10,720 ======= ======= ====== ======== ======= Other Reserves: Estimated liabilities asso- ciated with remediation costs and former manufac- tured gas plant sites..... $29,522 $ 5,039 $ -- $ (2,039)(b) $32,522 ======= ======= ====== ======== ======= Accumulated provision for injuries and damages...... $56,734 $20,270 $7,802 $(29,494)(c) $55,312 ======= ======= ====== ======== ======= FOR THE YEAR ENDED DECEMBER 31, 1995 - ---------------------------- Reserve Deducted From Assets in Consolidated Balance Sheet: Provision for uncollectible accounts (a).............. $10,720 $ 1,108 $ -- $ -- $11,828 ======= ======= ====== ======== ======= Other Reserves: Estimated liabilities asso- ciated with remediation costs and former manufac- tured gas plant sites..... $32,522 $ 2,271 $ -- $ (2,271)(b) $32,522 ======= ======= ====== ======== ======= Accumulated provision for injuries and damages...... $55,312 $21,135 $4,671 $(23,142)(c) $57,976 ======= ======= ====== ======== =======
Notes: (a) Bad debt losses, net of recoveries, and provisions for uncollectible accounts were charged to operating expense and amounted to $28,867,000, $25,287,000 and $26,278,000 in 1993, 1994 and 1995, respectively. (b) Expenditures for site investigation and cleanup costs. (c) Payments of claims and related costs. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 39 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, IN THE CITY OF CHICAGO AND STATE OF ILLINOIS ON THE 28TH DAY OF MARCH 1996. UNICOM CORPORATION By James J. O'Connor ----------------------------- James J. O'Connor, Chairman 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 28TH DAY OF MARCH 1996. SIGNATURE TITLE - ---------------------------- --------------------- James J. O'Connor Chairman and Chief - ---------------------------- Executive Officer and James J. O'Connor Director (principal executive officer) John C. Bukovski - ---------------------------- Vice President (principal John C. Bukovski financial officer) Roger F. Kovack Comptroller (principal - ---------------------------- accounting officer) Roger F. Kovack Jean Allard Director Edward A. Brennan* Director James W. Compton* Director Sue L. Gin* Director Donald P. Jacobs Director Edgar D. Jannotta* Director George E. Johnson* Director Edward A. Mason* Director Leo F. Mullin* Vice Chairman and Director Frank A. Olson Director Samuel K. Skinner* President and Director David A. Scholz *By ---------------------------- David A. Scholz, Attorney-in- fact [Signature page to Unicom Corporation Annual Report on Form 10-K] 40 UNICOM CORPORATION COMMONWEALTH EDISON COMPANY FILE NO.'S 1-11375 AND 1-1839 EXHIBIT INDEX The following exhibits are filed with the indicated Annual Report on Form 10- K or incorporated therein by reference. Documents indicated by an asterisk (*) are incorporated by reference to the File No. indicated. Documents indicated by a plus sign (+) identify management contracts or compensatory plans or arrangements.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ----------------------------------------------------- ------ ----- *(3)-1 Articles of Incorporation of Unicom effective January 28, 1994. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Exhibit (3)-1). x *(3)-2 Restated Articles of Incorporation of ComEd effective February 20, 1985, including Statements of Resolu- tion Establishing Series, relating to the establish- ment of three new series of ComEd preference stock known as the "$9.00 Cumulative Preference Stock," the "$6.875 Cumulative Preference Stock" and the "$2.425 Cumulative Preference Stock." (File No. 1- 1839, Form 10-K for the year ended December 31, 1994, Exhibit (3)-2). x (3)-3 By-Laws of Unicom Corporation, effective January 28, 1994 as amended through December 13, 1995. x (3)-4 By-Laws of Commonwealth Edison Company, effective September 2, 1988 as amended through December 13, 1995. x *(4)-1 Mortgage of ComEd to Illinois Merchants Trust Compa- ny, Trustee (Continental Illinois National Bank and Trust Company of Chicago, successor Trustee), dated July 1, 1923, Supplemental Indenture thereto dated August 1, 1944, and amendments and supplements thereto dated, respectively, August 1, 1946, April 1, 1953, April 1, 1966, November 1, 1966, December 1, 1966, March 31, 1967, April 1, 1967, February 1, 1968, July 1, 1968, October 1, 1968, February 28, 1969, May 29, 1970, January 1, 1971, June 1, 1971, May 31, 1972, June 1, 1973, June 15, 1973, October 15, 1973, May 31, 1974, July 1, 1974, June 13, 1975, May 28, 1976, January 15, 1977, June 1, 1977 and June 3, 1977 (File No. 2-60201, Form S-7, Exhibit 2- 1). x *(4)-2 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, December 1, 1977, May 17, 1978, August 31, 1978, June 18, 1979, June 20, 1980, April 16, 1981, April 30, 1982, April 15, 1983, April 13, 1984, March 1, 1985 and April 15, 1985 (File No. 2-99665, Form S-3, Exhibit (4)-3). x *(4)-3 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, April 15, 1986 and May 1, 1986 (File No. 33-6879, Form S-3, Exhibit (4)-9). x *(4)-4 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 12, 1987 (File No. 33-13193, Form S-3, Exhibit (4)-6). x
1
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ----------------------------------------------------- ------ ----- *(4)-5 Supplemental Indenture to Mortgage dated July 1, 1923 dated June 30, 1989 (File No. 33-32929, Form S-3, Exhibit (4)-11). x *(4)-6 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, February 15, 1990 and June 15, 1990 (File No. 33-38232, Form S-3, Exhibits (4)- 11 and (4)-12). x *(4)-7 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, June 1, 1991, October 1, 1991 and October 15, 1991 (File No. 33-44018, Form S-3, Exhibits (4)-12, (4)-13 and (4)-14). x *(4)-8 Supplemental Indenture to Mortgage dated July 1, 1923 dated February 1, 1992 (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)- 18). x *(4)-9 Supplemental Indenture to Mortgage dated July 1, 1923 dated May 15, 1992 (File No. 33-48542, Form S-3, Ex- hibit (4)-14). x *(4)-10 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, July 15, 1992, September 15, 1992 and October 1, 1992 (File No. 33-53766, Form S-3, Exhibits (4)-13, (4)-14 and (4)-15). x *(4)-11 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, February 1, 1993 and March 1, 1993 (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibits (4)-14 and (4)- 15). x *(4)-12 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, April 1, 1993 and April 15, 1993 (File No. 33-64028, Form S-3, Exhibits (4)- 12 and (4)-13). x *(4)-13 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, June 15, 1993 and July 1, 1993 (File No. 1-1839, Form 8-K dated May 21, 1993, Exhibits (4)-1 and (4)-2). x *(4)-14 Supplemental Indenture to Mortgage dated July 1, 1923 dated July 15, 1993 (File No. 1-1839, Form 10-Q for the quarter ended June 30, 1993, Exhibit (4)-1). x *(4)-15 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 15, 1994 (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (4)- 15). x *(4)-16 Supplemental Indenture to Mortgage dated July 1, 1923 dated December 1, 1994 (File No. 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (4)- 16). x *(4)-17 Indentures of ComEd to The First National Bank of Chicago, Trustee (Harris Trust and Savings Bank, successor Trustee), dated April 1, 1949, October 1, 1949, October 1, 1950, October 1, 1954, January 1, 1958, January 1, 1959 and December 1, 1961 (File No. 1-1839, Form 10-K for the year ended December 31, 1982, Exhibit (4)-20). x *(4)-18 Indenture of ComEd dated February 15, 1973 to The First National Bank of Chicago, Trustee (LaSalle Na- tional Bank, successor Trustee), and Supplemental Indenture thereto dated July 13, 1973 (File No. 2- 66100, Form S-16, Exhibit (b)-2). x
2
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ----------------------------------------------------- ------ ----- *(4)-19 Indenture dated as of September 1, 1987 between ComEd and Citibank, N.A., Trustee relating to Notes (File No. 33-20619, Form S-3, Exhibit (4)-13). x *(4)-20 Supplemental Indenture to Indenture dated September 1, 1987 dated September 15, 1987 (File No. 33-20619, Form S-3, Exhibit (4)-14). x *(4)-21 Supplemental Indenture to Indenture dated September 1, 1987 dated May 18, 1988 (File No. 33-23036, Form S-3, Exhibit (4)-14). x *(4)-22 Supplemental Indenture to Indenture dated September 1, 1987 dated July 14, 1989 (File No. 33-32929, Form S-3, Exhibit (4)-16). x *(4)-23 Supplemental Indenture to Indenture dated September 1, 1987 dated April 1, 1991 (File No. 33-44018, Form S-3, Exhibit (4)-21). x *(4)-24 Supplemental Indenture to Indenture dated September 1, 1987 dated April 15, 1992 (File No. 33-48542, Form S-3, Exhibit (4)-22). x *(4)-25 Supplemental Indenture to Indenture dated September 1, 1987 dated July 15, 1992 (File No. 33-53766, Form S-3, Exhibit (4)-24). x *(4)-26 Supplemental Indenture to Indenture dated September 1, 1987 dated October 15, 1993 (File No. 1-1839, Form 10-Q for the quarter ended September 30, 1993, Exhibit (4)-1). x *(4)-27 Supplemental Indenture to Indenture dated September 1, 1987 dated April 1, 1994 (File No. 1-1839, Form 10-Q for the quarter ended March 31, 1994, Exhibit (4)-1). x (4)-28 Instrument of Resignation, Appointment and Acceptance dated January 31, 1996, under the provisions of the Mortgage dated July 1, 1923, and Indentures Supple- mental thereto. x (4)-29 Instrument dated as of January 31, 1996, for trustee under the Mortgage dated July 1, 1923 and Indentures Supplemental thereto. x *(4)-30 Credit Agreement dated as of October 1, 1991, among Commonwealth Edison Company, as borrower, the Banks named therein and the other Lenders from time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-27). x *(4)-31 Credit Agreement dated as of October 1, 1991, among Commonwealth Edison Company, as borrower, the Banks named therein and the other Lenders from time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-28). x *(4)-32 Letter Agreement dated as of October 4, 1993, among Commonwealth Edison Company and certain of the Banks party to the Credit Agreement dated as of October 1, 1991 (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (4)-28). x
3
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ----------------------------------------------------- ------ ----- *(4)-33 Term Loan Agreement dated as of January 7, 1992, be- tween Commonwealth Edison Company, as borrower, and The First National Bank of Chicago, individually and as agent (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (4)-28). x *(4)-34 First Amendment to Term Loan Agreement dated as of January 9, 1995, by and among Commonwealth Edison Company, The First National Bank of Chicago, indi- vidually and as agent, and the banks party thereto (File No. 1-1839, Form 10-K for the year ended De- cember 31, 1994, Exhibit (4)-32). x *(4)-35 Term Loan Agreement dated as of January 15, 1992, be- tween Commonwealth Edison Company, as borrower, and Westpac Banking Corporation, Chicago Branch, indi- vidually and as agent (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (4)- 29). x *(4)-36 Term Loan Agreement dated as of January 16, 1992, be- tween Commonwealth Edison Company, as borrower, and The Bank of New York, individually and as agent (File No. 1-1839, Form 10-K for the year ended De- cember 31, 1992, Exhibit (4)-29). x *(4)-37 Credit Agreement dated as of November 22, 1994, among Unicom Enterprises Inc., the Banks Named Therein and Citibank, N.A. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Exhibit (4)-35). x *(4)-38 Guaranty dated November 22, 1994, by Unicom Corpora- tion in favor of the Lenders and LC Banks parties to the aforementioned Credit Agreement with Unicom En- terprises Inc. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Exhibit (4)-36). x *(4)-39 Guaranty dated November 22, 1994, by Unicom Corpora- tion in favor of Citibank, N.A. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Ex- hibit (4)-37). x *(10)-1 Nuclear Fuel Lease Agreement dated as of November 23, 1993, between CommEd Fuel Company, Inc., as Lessor, and Commonwealth Edison Company, as Lessee (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (10)-1). x +*(10)-2 Unicom Corporation Long-Term Incentive Plan (File No. 1-1839, ComEd Proxy Statement dated March 26, 1993, Exhibit A). x +*(10)-3 Amendment to Unicom Corporation Long-Term Incentive Plan, effective September 1, 1994 (File No. 33- 56991, Form S-8, Exhibit (4)-4). x +*(10)-4 1994 Long-Term Performance Unit Award for Executive and Group Level Employes Payable in 1996 under the 1993 Long-Term Incentive Plan (File No. 1-1839, Form 10-K/A-1 for the year ended December 31, 1993, Ex- hibit (10)-4). x x +*(10)-5 1994 Long-Term Performance Unit Award for Executive and Group Level Employes Payable in 1997 under the 1993 Long-Term Incentive Plan (File No. 1-1839, Form 10-K/A-1 for the year ended December 31, 1993, Ex- hibit (10)-5). x x
4
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ----------------------------------------------------- ------ ----- + (10)-6 1995 Long-Term Performance Unit Award for Executive and Group Level Employees Payable in 1998 under the Unicom Corporation Long-Term Incentive Plan, as amended. x x +*(10)-7 1995 Variable Compensation Award for Management Em- ployees under the Unicom Corporation Long-Term In- centive Plan (File Nos. 1-11375 and 1-1839, Form 10- K for the year ended December 31, 1994, Exhibit (10)-7). x x +*(10)-8 1995 Award to Mr. O'Connor and Mr. Skinner under the Unicom Corporation Long-Term Incentive Plan (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (10)-8). x x + (10)-9 1996 Long-Term Performance Unit Award for Executive and Group Level Employees Payable in 1999 under the Unicom Corporation Long-Term Incentive Plan. x x + (10)-10 1996 Variable Compensation Award for Management Em- ployees under the Unicom Corporation Long-Term In- centive Plan. x x + (10)-11 1996 Award to Mr. O'Connor, Mr. Mullin and Mr. Skin- ner under the Unicom Corporation Long-Term Incentive Plan. x x + (10)-12 Unicom Corporation Deferred Compensation Unit Plan, as amended. x x +*(10)-13 Deferred Compensation Plan (included in Article Five of Exhibit (3)-2 above). x +*(10)-14 Management Incentive Compensation Plan, effective January 1, 1989 (File No. 1-1839, Form 10-K for the year ended December 31, 1988, Exhibit (10)-4). x +*(10)-15 Amendments to Management Incentive Compensation Plan, dated December 14, 1989 and March 21, 1990 (File No. 1-1839, Form 10-K for the year ended December 31, 1989, Exhibit (10)-5). x +*(10)-16 Amendment to Management Incentive Compensation Plan, dated March 21, 1991 (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (10)-6). x + (10)-17 Retirement Plan for Directors, effective September 1, 1994, as amended through May 24, 1995. x + (10)-18 Retirement Plan for Directors, effective January 1, 1987, as amended through May 24, 1995. x + (10)-19 Unicom Corporation Outside Director Stock Award Plan as amended. x +*(10)-20 Executive Group Life Insurance Plan (File No. 1-1839, Form 10-K for the year ended December 31, 1980, Ex- hibit (10)-3). x +*(10)-21 Amendment to the Executive Group Life Insurance Plan (File No. 1-1839, Form 10-K for the year ended De- cember 31, 1981, Exhibit (10)-4). x +*(10)-22 Amendment to the Executive Group Life Insurance Plan dated December 12, 1986 (File No. 1-1839, Form 10-K for the year ended December 31, 1986, Exhibit (10)- 6). x
5
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- ----------------------------------------------------- ------ ----- +*(10)-23 Amendment of Executive Group Life Insurance Plan to implement program of "split dollar life insurance" dated December 13, 1990 (File No. 1-1839, Form 10-K for the year ended December 31, 1990, Exhibit (10)- 10). x +*(10)-24 Commonwealth Edison Company Supplemental Management Retirement Plan (File No. 1-1839, Form 10-K for the year ended December 31, 1985, Exhibit (10)-6). x +*(10)-25 Amendment of Executive Group Life Insurance Plan to stabilize the death benefit applicable to partici- pants dated July 22, 1992 (File No. 1-1839, Form 10- K for the year ended December 31, 1992, Exhibit (10)-13). x +*(10)-26 Letter Agreement dated December 16, 1992 between Com- monwealth Edison Company and Samuel K. Skinner (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (10)-14). x + (10)-27 Amendment dated May 31, 1995 to Letter Agreement dated December 16, 1992 between Commonwealth Edison Company and Samuel K. Skinner. x + (10)-28 Letter Agreement dated November 14, 1995 between Com- monwealth Edison Company and Leo F. Mullin. x +*(10)-29 Commonwealth Edison Company Excess Benefit Savings Plan (File No. 1-1839, Form 10-Q for the quarter ended June 30, 1994, Exhibit (10)-2). x + (10)-30 Amendment No. 1 to Commonwealth Edison Company Excess Benefit Savings Plan dated May 24, 1995. x + (10)-31 Unicom Corporation Stock Bonus Deferral Plan. x x (12) Statement re computation of ratios of earnings to fixed charges and ratios of earnings to fixed charges and preferred and preference stock dividend requirements for ComEd. x (21)-1 Subsidiaries of Unicom Corporation. x (21)-2 Subsidiaries of Commonwealth Edison Company. x (23)-1 Consent of experts for Unicom Corporation. x (23)-2 Consent of experts for Commonwealth Edison Company. x (24)-1 Powers of attorney of Directors whose names are signed to the Unicom Corporation Annual Report on Form 10-K pursuant to such powers. x (24)-2 Powers of attorney of Directors whose names are signed to the Commonwealth Edison Company Annual Re- port on Form 10-K pursuant to such powers. x (99)-1 Unicom Corporation's Current Report on Form 8-K dated January 26, 1996. x (99)-2 Commonwealth Edison Company's Current Report on Form 8-K dated January 26, 1996. x
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Unicom and ComEd hereby agree to furnish to the SEC, upon request, any instrument defining the rights of holders of long-term debt of ComEd not filed as an exhibit herein. No such instrument authorizes securities in excess of 10% of the total assets of ComEd. 6 EX-3.3 2 BY-LAWS OF UNICOM Exhibit (3)-3 Unicom Corporation Form 10-K File No. 1-11375 UNICOM CORPORATION BY-LAWS EFFECTIVE JANUARY 28, 1994 AS AMENDED THROUGH DECEMBER 13, 1995
CONTENTS Page Number ------ ARTICLE I. Stock............................................. 1 ARTICLE II. Meetings of Shareholders.......................... 3 ARTICLE III. Board of Directors................................ 6 ARTICLE IV. Committees of the Board of Directors.............. 8 ARTICLE V. Officers.......................................... 12 ARTICLE VI. Indemnification................................... 16 ARTICLE VII. Miscellaneous..................................... 18 ARTICLE VIII. Alteration, Amendment or Repeal of By-Laws........ 19
UNICOM CORPORATION BY-LAWS _____ ARTICLE I. STOCK. SECTION 1. Each holder of fully paid stock shall be entitled to a certificate or certificates of stock stating the number and class of shares, and the designation of the series, if any, which such certificate represents. All certificates of stock shall at the time of their issuance be signed either manually or by facsimile signature by the Chairman, the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates of stock shall be sealed with the seal of the Company or a facsimile of such seal, shall be countersigned either manually or by facsimile signature by a Transfer Agent and shall be authenticated by manual signature and registered by a Registrar. The Board of Directors shall appoint one or more Transfer Agents, none of whom shall be officers of the Company authorized to sign certificates of stock, and one or more Registrars, each of which Registrars shall be a bank or trust company. Certificates of stock shall not be valid until countersigned by a Transfer Agent and authenticated and registered by a Registrar in the manner provided by the Board of Directors. SECTION 2. Shares of stock shall be transferable only on the books of the Company and, except as hereinafter provided or as otherwise required by law, shall be transferred only upon proper endorsement and surrender of the certificates issued therefor. If an outstanding certificate of stock shall be lost, destroyed or stolen, the holder thereof may have a new certificate upon producing evidence satisfactory to the Board of Directors of such loss, destruction or theft, and upon furnishing to the Company, the Transfer Agents and the Registrars a bond of indemnity deemed sufficient by the Board of Directors against claims under the outstanding certificate. -1- SECTION 3. The certificates for each class or series of stock shall be numbered and issued in consecutive order and a record shall be kept of the name and address of the person to whom each certificate is issued, the number of shares represented by the certificate and the number and date of the certificate. All certificates exchanged or returned to the Company or the Transfer Agent for transfer shall be canceled and filed. SECTION 4. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty days and, for a meeting of shareholders, not less than ten days, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty days, immediately preceding such meeting. SECTION 5. If any subscription for stock in the Company or any installment of such subscription shall be unpaid when due, as the Board of Directors shall have determined the time for payment, and shall continue unpaid for twenty days after demand for the amount due, made either in person or by written notice duly mailed to the last address, as it appears on the records of the Company, of the subscriber or other person by whom the subscription or installment shall be payable, the stock or subscription upon which payment shall be so due shall, upon the expiration of said twenty days, become and be forfeited to the Company without further action, demand or notice, and such stock or subscription may be sold at public sale, subject to payment of the amount due and unpaid, plus all costs and expenses incurred by the Company in that connection, at a time and place to be stated in a written notice to be mailed to the recorded address of the delinquent subscriber or other person in default on the subscription at least ten days prior to the time fixed for such sale; provided, that the excess of proceeds of such sale realized over the amount due and unpaid on said stock or subscription shall be paid to the delinquent subscriber of other person in default on the subscription, or to his or her legal representative; and, provided further, that no forfeiture of stock, or of any amounts paid upon -2- a subscription therefor, shall be declared as against the estate of any decedent before distribution shall have been made of the estate. The foregoing provisions for the forfeiture and sale of stock or subscriptions shall not exclude any other remedy which may lawfully be enforceable at any time, by forfeiture of stock or of amounts theretofore paid or otherwise, against any person for nonpayment of a subscription or of any installment thereof. SECTION 6. Transfers of shares shall be made only on the books of the Company by the registered holder thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney or successor thereunto authorized by power of attorney or by documents duly executed and filed with the Secretary or Transfer Agent of the Company, and upon surrender for cancellation of the certificate for such shares. The person in whose name shares stand on the books of the Company shall be deemed the owner thereof for all purposes as regards the Company. SECTION 7. The Company shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Illinois. ARTICLE II. MEETINGS OF SHAREHOLDERS. SECTION 1. The regular annual meeting of the shareholders of the Company for the election of Directors and for the transaction of such other business as may come before the meeting shall be held on such day in April or May of each year as the Board of Directors may by resolution determine. Each such regular annual meeting and each special meeting of the shareholders shall be held at such place as may be fixed by the Board of Directors and at such hour as the Board of Directors shall order. -3- SECTION 2. Special meetings of the shareholders may be called by the Chairman, by the Board of Directors, by a majority of the Directors individually or by the holders of not less than one-fifth of the total outstanding shares of capital stock of the Company. SECTION 3. Written notice stating the place, day and hour of the meeting of the shareholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten nor more than sixty days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets not less than twenty nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman, the Secretary or the persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at the shareholder's address as it appears upon the records of the Company, with postage thereon prepaid. SECTION 4. At all meetings of the shareholders, a majority of the outstanding shares of stock, entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter, but the shareholders represented at any meeting, though less than a quorum, may adjourn the meeting to some other day or sine die. If a quorum is present, the affirmative vote of the majority of the shares of stock represented at the meeting and entitled to vote on a matter shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by law or the articles of incorporation. SECTION 5. At every meeting of the shareholders, each outstanding share of stock shall be entitled to one vote on each matter submitted for a vote. In all elections for Directors, every shareholder shall have the right to vote the number of shares owned by such shareholder for as many persons as there are Directors to be elected, or to cumulate such votes and give one candidate as many votes as shall equal the number of Directors to be elected multiplied by the number of such shares or to distribute such cumulative votes in any proportion among any number of candidates. A shareholder may vote either in person or by proxy. -4- A shareholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed. SECTION 6. Any meeting at which a quorum of shareholders is present, in person or by proxy, may adjourn from time to time without notice, other than announcement at such meeting, until its business is completed. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. SECTION 7. The Secretary of the Company shall make or cause to be made, within twenty days after the record date for a meeting of shareholders of the Company or ten days before such meeting, whichever is earlier, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for at least ten days prior to such meeting, shall be kept on file at the registered office of the Company and shall be subject to inspection by any shareholder, and to copying at such shareholder's expense, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. SECTION 8. The Chairman and the Secretary of the Company shall, when present, act as chairman and secretary, respectively, of each meeting of the shareholders. SECTION 9. At any meeting of shareholders, the chairman of the meeting may, or upon the request of any shareholder shall, appoint one or more persons as inspectors for such meeting, unless an inspector or inspectors shall have been previously appointed for such meeting by the Chairman. Such inspectors shall ascertain and report the number of shares of stock represented at the meeting, based upon their determination of the validity and effect of proxies, count all votes and report the results and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. -5- SECTION 10. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. ARTICLE III. BOARD OF DIRECTORS. SECTION 1. The business and affairs of the Company shall be managed by or under the direction of the Board of Directors. The number of Directors of the Company shall be not less than ten nor more than fifteen. The Directors shall be elected at each annual meeting of the shareholders, but if for any reason the election shall not be held at an annual meeting, it may be subsequently held at any special meeting of the shareholders called for that purpose after proper notice. The Directors so elected shall hold office until the next annual meeting and until their respective successors, willing to serve, shall have been elected and qualified. Directors need not be residents of the State of Illinois or shareholders of the Company. No person shall be eligible for nomination or renomination as a Director by the management of the Company who, prior to the date of election, shall have attained age seventy-two. No person who is an employe or a former employe of the Company or of a subsidiary of the Company shall be eligible for nomination or renomination as a Director by the management of the Company for a term commencing after such person ceases to be such an employe; provided, however, that any Director of the Company who was a Director of Commonwealth Edison Company, an Illinois corporation, in office on June 15, 1989 who is or has been such an employe may be renominated as a Director unless such person shall have attained age sixty-five on or before the date of election of Directors. SECTION 2. Any vacancy occurring in the Board of Directors, including a vacancy created by an increase in the number of directors, may be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose; provided, however, that any vacancy in the Board of Directors arising between meetings of shareholders by reason of an increase in the number of directors or otherwise may be filled by the vote of a majority of the directors then in office, although less than -6- a quorum. Any directors so elected shall serve until the next annual meeting of shareholders. SECTION 3. A meeting of the Board of Directors shall be held immediately, or as soon as practicable, after the annual election of Directors in each year, provided a quorum for such meeting can be obtained. Notice of every meeting of the Board, stating the time and place at which such meeting will be held, shall be given to each Director personally, by telephone or by other means of communication at least one day, or by depositing the same in the mails properly addressed at least two days before the day of such meeting. A meeting of the Board of Directors may be called at any time by the Chairman or by any two Directors and shall be held at such place as shall be specified in the notice for such meeting. SECTION 4. A majority of the number of Directors then in office, but not less than six, shall constitute a quorum for the transaction of business at any meeting of the Board, but a lesser number may adjourn the meeting from time to time until a quorum is obtained, or may adjourn sine die. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 5. Each member of the Board not receiving a salary from the Company or a subsidiary of the Company shall be paid such fees as the Board of Directors may from time to time, by resolution adopted by the affirmative vote of a majority of the Directors then in office, and irrespective of any personal interest of any of its members, determine. The Directors shall be paid their reasonable expenses, if any, of attendance at each meeting of the Board of Directors. Members of any committee of the Board of Directors may be allowed like fees and expenses for service on or attendance at meetings of such committee. No such payment shall preclude any Director from serving the Company in any other capacity and receiving compensation therefor. SECTION 6. A Director of the Company who is present at a meeting of the Board of Directors at which action is taken on any corporate matter shall be conclusively presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he shall file his or her written dissent to such action with the person acting as Secre- -7- tary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Company immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS SECTION 1. There shall be an Executive Committee of the Board consisting of six members. The Board of Directors shall, at its first meeting after the annual meeting of the shareholders in each year, elect a chairman and the four other members of the Executive Committee. The remaining Directors shall constitute alternates to serve temporarily, and as far as practicable in rotation (in such order as shall be established by the Board), in the place of any member who may be unable to serve. The Chairman or the Directors calling a meeting of the Executive Committee shall call upon alternates, in rotation, to serve as herein provided. When any alternate serves, the minutes of the meeting shall record the name of the member in whose place such alternate serves. The Directors elected as members of the Executive Committee shall serve as such for one year and until their respective successors, willing to serve, shall have been elected. The Executive Committee shall, when the Board is not in session, have and may exercise all of the authority of the Board of Directors, subject to the limitations set forth in Section 10 of this Article IV. Vacancies in the membership of the Executive Committee shall be filled by the Board of Directors. The Executive Committee shall keep minutes of the proceedings at its meetings. SECTION 2. There shall be an Audit Committee of the Board consisting of not less than three nor more than five members who are not employes of the Company. The Directors elected as members of the Audit Committee shall serve as such for three years and until their respective successors, willing to serve, shall have been elected, provided that, to the extent practicable, the members of the Audit Committee shall be elected for staggered terms. The Board of Directors shall, at its first meeting after the annual meeting of shareholders in each year, -8- elect the successors of the members whose terms shall then expire. The Board of Directors shall designate from time to time the member who is to serve as chairman of the Audit Committee. The Audit Committee shall meet with the Company's independent auditors at least once each year to review the Company's financial statements and the scope and results of such auditors' examinations, monitor the internal accounting controls and practices of the Company, review the annual report to shareholders and made recommendations as to its approval to the Board and recommend, subject to shareholder approval, the appointment of independent auditors, and shall report its findings at least once each year to the Board. The Audit Committee shall have such powers as it shall deem necessary for the performance of its duties. Vacancies in the membership of the Audit Committee shall be filled by the Board of Directors. The Audit Committee shall keep minutes of the proceedings at its meetings. SECTION 3. There shall be a Corporate Governance and Compensation Committee of the Board consisting of those Directors who are not employees or former employees of the Company. The Board of Directors shall, at its first meeting after the annual meeting of shareholders in each year, elect a chairman of the Corporate Governance and Compensation Committee. The Directors serving as members of the Committee shall serve for one year and until their respective successors, willing to serve, shall have been elected. The Corporate Governance and Compensation Committee shall (i) oversee corporate governance policies, practices and procedures of the Company and make such recommendations as it may deem appropriate to the Board; and (ii) oversee general compensation policy of the Company, and establish and administer compensation programs applicable to the principal officers of the Company, including but not necessarily limited to the establishment of base salaries and the administration of awards under the Unicom Corporation Deferred Compensation Unit Plan and the Unicom Corporation Long-Term Incentive Plan. The Committee shall have such power as it deems necessary for the performance of its duties. Vacancies in the membership of the Committee shall be filled by the Board of Directors. The Committee shall keep minutes of the proceedings at its meetings. SECTION 4. There shall be a Finance Committee of the Board consisting of not less than three nor more than five members. The Board of Directors shall, at its first meeting after the -9- annual meeting of shareholders in each year, elect a chairman and the other members of the Finance Committee. The Directors elected as members of the Finance Committee shall serve as such for one year and until their respective successors, willing to serve, shall have been elected. The Finance Committee shall review the scope and results of the Company's financing program and review the Company's financial statements, construction budgets and cash budgets as they relate to the Company's financing program, and shall report its findings at least once each year to the Board. The Finance Committee shall have such power as it shall deem necessary for the performance of its duties. Vacancies in the membership of the Finance Committee shall be filled by the Board of Directors. The Finance Committee shall keep minutes of the proceedings at its meetings. SECTION 5. There shall be a Nominating Committee of the Board consisting of not less than three nor more than five members, a majority of whom are not employes of the Company. The Board of Directors shall, at its first meeting after the annual meeting of shareholders in each year, elect a chairman and the other members of the Nominating Committee. The Directors elected as members of the Nominating Committee shall serve as such for one year and until their respective successors, willing to serve, shall have been elected. The Nominating Committee shall review the requirements for serving as Director, review potential candidates for Director, propose nominees for Director to the Board and recommend to the Board the successor to the Chairman when a vacancy occurs in that position. The Nominating Committee shall have such power as it shall deem necessary for the performance of its duties. Vacancies in the membership of the Nominating Committee shall be filled by the Board of Directors. The Nominating Committee shall keep minutes of the proceedings at its meetings. SECTION 6. The Board of Directors may from time to time create other committees, standing or special, appoint Directors to serve on such committees and confer such powers upon such committees and revoke such powers and terminate the existence of such committees, as the Board at its pleasure may determine, subject to the limitations set forth in Section 8.40(c) of the Illinois Business Corporation Act of 1983, as amended from time to time. -10- SECTION 7. Meetings of any committee of the Board may be called at any time by the Chairman, by any two Directors or by the chairman of the committee the meeting of which is being called and shall be held at such place as shall be designated in the notice of such meeting. Notice of each committee meeting stating the time and place at which such meeting will be held shall be given to each member of the committee personally, or by telegraph, or by depositing the same in the mails properly addressed, at least one day before the day of such meeting. A majority of the members of a committee shall constitute a quorum thereof but a lesser number may adjourn the meeting from time to time until a quorum is obtained, or may adjourn sine die. A majority vote of the members of a committee present at a meeting at which a quorum is present shall be necessary for committee action. SECTION 8. The Board of Directors may from time to time designate from among the Directors alternates to serve on one or more committees as occasion may require. Whenever a quorum cannot be secured for any meeting of any committee from among the regular members thereof and designated alternates, the member or members of such committee present at such meeting and not disqualified from voting thereat, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of such absent or disqualified member. SECTION 9. Every Director of the Company, or member of any committee designated by the Board of Directors pursuant to authority conferred by these By-Laws, shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any of the Company's officers or employees, or committees of the Board of Directors, or by any other person as to matters the Director or member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. SECTION 10. Unless otherwise limited by the Board of Directors and subject to the limitations set forth in the next sentence, each committee of the Board of Directors consisting of two or more Directors may exercise the authority of the Board. -11- Notwithstanding any other provision of the By-Laws, no committee of the Board of Directors shall: (1) authorize distributions; (2) approve or recommend to shareholders any act required by law to be approved by shareholders; (3) fill vacancies on the Board of Directors or on any of its committees; (4) elect or remove officers or fix the compensation of any member of the committee; (5) adopt, amend or repeal the By-Laws; (6) approve a plan of merger not requiring shareholder approval; (7) authorize or approve reacquisition of stock, except according to a general formula or method prescribed by the Board of Directors; (8) authorize or approve the issuance or sale, or contract for sale, of stock or determine the designation and relative rights, preferences, and limitations of a series of stock, except that a committee may fix the specific terms of the issuance or sale or contract for sale or the number of shares of stock to be allocated to particular employes under an employe benefit plan; or (9) amend, alter, repeal, or take action inconsistent with any resolution or action of the Board of Directors when the resolution or action of the Board of Directors provides by its terms that it shall not be amended, altered or repealed by action of a committee. ARTICLE V. OFFICERS. SECTION 1. There shall be elected by the Board of Directors, at its first meeting after the annual election of Directors in each year if practicable, the following principal officers of the Company, namely: a Chairman, a President, such number of Executive Vice Presidents, Senior Vice Presidents and Vice Presidents as the Board at the time may decide upon, a Secretary, a Treasurer and a Comptroller; and the Board may also provide for a Vice Chairman and such other officers, and prescribe for each of them such duties, as in its judgment may from time to time be desirable to conduct the affairs of the Company. No officer shall be elected for a term extending beyond the first day of the month following the month in which such officer attains the age of 65 years, on which date such officer shall be retired. The Chairman shall be a Director of the Company; any other officer above named may, but need not, be a Director of the Company. Any -12- two or more offices may be held by the same person. All officers shall hold their respective offices until the first meeting of the Board of Directors after the next succeeding annual election of Directors and until their successors, willing to serve, shall have been elected, but any officer may be removed from office by the Board of Directors whenever in its judgment the best interests of the Company will be served thereby. Such removal, however, shall be without prejudice to the contract rights, if any, of the person so removed. Election of an officer shall not of itself create contract rights. SECTION 2. The Chairman shall be the chief executive officer of the Company and shall have general authority over all the affairs of the Company, including the power to appoint and discharge any and all officers, agents and employes of the Company not elected or appointed directly by the Board of Directors. The Chairman shall, when present, preside at all meetings of the shareholders and of the Board of Directors. The Chairman shall have authority to call special meetings of the shareholders and meetings of the Board of Directors, and of any committee of the Board of Directors and, when neither the Board of Directors nor the Executive Committee is in session, to suspend the authority of any other officer or officers of the Company, subject, however, to the pleasure of the Board of Directors or of the Executive Committee at its next meeting. The Chairman, or such other officer as the Chairman may direct, shall be responsible for all internal audit functions, and the internal audit personnel shall report directly to the Chairman or to such other officer. SECTION 3. In the absence or disability of the Chairman, the powers and duties of the Chairman shall be performed by the President or, in the President's absence or disability, by such other principal officer as the Board of Directors or the Executive Committee may designate. SECTION 4. Except insofar as the Board of Directors, the Executive Committee or the Chairman shall have devolved responsibilities on the other principal officers, the President shall be responsible for the general management and direction of the affairs of the Company, subject to the control of the Board of Directors, the Executive Committee and the Chairman. The President shall have such other powers and duties as usually devolve -13- upon the President of a corporation and such further powers and duties as may be prescribed by the Board of Directors, the Executive Committee or the chairman. The President shall report to the Chairman. SECTION 5. The Executive Vice Presidents, the Senior Vice Presidents and the Vice Presidents shall have such powers and duties as may be prescribed for them, respectively, by the Board of Directors, the Executive committee or the Chairman. Each of such officers shall report to the Chairman or such other officer as the Chairman shall direct. SECTION 6. The Secretary shall attend all meetings of the shareholders, of the Board of Directors and of each committee of the Board of Directors, shall keep a true and faithful record thereof in proper books and shall have the custody and care of the corporate seal, records, minute books and stock books of the Company and of such other books and papers as in the practical business operations of the Company shall naturally belong in the office or custody of the Secretary or as shall be placed in the Secretary's custody by order of the Board of Directors or the Executive Committee. The Secretary shall keep or cause to be kept a suitable record of the addresses of shareholders and shall, except as may be otherwise required by statute or the by-laws, sign and issue all notices required for meetings of shareholders, of the Board of Directors and of the committees of the Board of Directors. Whenever requested by the requisite number of shareholders or Directors, the Secretary shall give notice, in the name of the shareholder or shareholders or Director or Directors making the request, of a meeting of the shareholders or of the Board of Directors or of a committee of the Board of Directors, as the case may be. The Secretary shall sign all papers to which the Secretary's signature may be necessary or appropriate, shall affix and attest the seal of the Company to all instruments requiring the seal, shall have the authority to certify the by-laws, resolutions of the shareholders and Board of Directors and committees of the Board of Directors and other documents of the Company as true and correct copies thereof and shall have such other powers and duties as are commonly incidental to the office of Secretary and as may be prescribed by the Board of Directors, the Executive Committee or the Chairman. The Secretary shall report to the Chairman or such other officer as the Chairman shall direct. -14- SECTION 7. The Treasurer shall have charge of and be responsible for the collection, receipt, custody and disbursement of the funds of the Company. The Treasurer shall deposit the Company's funds in its name in such banks, trust companies or safe deposit vaults as the Board of Directors may direct. Such funds shall be subject to withdrawal only upon checks or drafts signed or authenticated in such manner as may be designated from time to time by resolution of the Board of Directors or of the Executive Committee. The Treasurer shall have the custody of such books and papers as in the practical business operations of the Company shall naturally belong in the office or custody of the Treasurer or as shall be placed in the Treasurer's custody by order of the Board of Directors or the Executive Committee. The Treasurer shall have such other powers and duties as are commonly incidental to the office of Treasurer or as may be prescribed for the Treasurer by the Board of Directors, the Executive Committee or the Chairman. Securities owned by the Company shall be in the custody of the Treasurer or of such other officers, agents or depositaries as may be designated by the Board of Directors or the Executive Committee. The Treasurer may be required to give bond to the Company for the faithful discharge of the duties of the Treasurer in such form and in such amount and with such surety as shall be determined by the Board of Directors. The Treasurer shall report to the Chairman or such other officer as the Chairman shall direct. SECTION 8. The Comptroller shall be responsible for the executive direction of the accounting organization and shall have functional supervision over the records of all other departments pertaining to revenues, expenses, money, securities, properties, materials and supplies. The Comptroller shall prescribe the form of all vouchers, accounts and accounting procedures, and reports required by the various departments. The Comptroller shall be responsible for the preparation and interpretation of all accounting reports and financial statements as required and for the proper review and approval of all bills received for payment. No bill or voucher shall be so approved unless the charges covered by the bill or voucher shall have been previously approved through job order, requisition or otherwise by the head of the department in which it originated, or unless the Comptroller shall otherwise be satisfied of its propriety and correctness. The Comptroller shall have such other powers and duties as are -15- commonly incidental to the office of Comptroller or as may be prescribed for the Comptroller by the Board of Directors, the Executive Committee or the Chairman. The Comptroller may be required to give bond to the Company for the faithful discharge of the duties of the Comptroller in such form and in such amount and with such surety as shall be determined by the Board of Directors. The Comptroller shall report to the Chairman or such other officer as the Chairman shall direct. SECTION 9. Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers, when elected or appointed, shall respectively assist the Secretary, the Treasurer and the Comptroller in the performance of the respective duties assigned to such principal officers, and in assisting such principal officer, each of such assistant officers shall for such purpose have the powers of such principal officer. In case of the absence, disability, death, resignation or removal from office of any principal officer, such principal officer's duties shall, except as otherwise ordered by the Board of Directors or the Executive Committee, temporarily devolve upon such assistant officer as shall be designated by the Chairman. ARTICLE VI. INDEMNIFICATION. SECTION 1. (a) A Director of the Company shall not be personally liable to the Company or its shareholders for monetary damages for breach of fiduciary duty as a Director, except for liability (i) for any breach of the Director's duty of loyalty to the Company or its shareholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 8.65 of the Illinois Business Corporation Act of 1983, as amended, or (iv) for any transaction from which the Director derived an improper personal benefit. If the Illinois Business Corporation Act of 1983 is amended to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Company shall be eliminated or limited to the full extent permitted by the Illinois Business Corporation Act of 1983, as so amended. Any repeal or modification of this Section 1(a) by the shareholders of the Company shall not ad- -16- versely affect any right or protection of a Director of the Company existing at the time of such repeal or modification. (b) Each person who is or was or had agreed to become a Director or officer of the Company, and each person who is or was serving or who had agreed to serve at the request of the Board of Directors or an officer of the Company as an employe or agent of the Company or as a director, officer, employe, or agent, trustee or fiduciary of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the Company to the full extent permitted by the Illinois Business Corporation Act of 1983 or any other applicable laws as presently or hereafter in effect. Without limiting the generality of the foregoing, the Company may enter into one or more agreements with any person which provide for indemnification greater or different than that provided in this Section 1(b). Any repeal or modification of this Section 1(b) shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification. SECTION 2. The provisions of this Article shall be deemed to be a contract between the Company and each Director or officer who serves in any such capacity at any time while this Article is in effect, and any repeal or modification of this Article shall not affect any rights or obligations hereunder with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts. SECTION 3. The indemnification provided or permitted by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled by law or otherwise, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. SECTION 4. The Company may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Company, or who is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, against any liability asserted against such -17- person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the Company would have the power to indemnify such person against such liability under the laws of the State of Illinois. ARTICLE VII. MISCELLANEOUS. SECTION 1. No bills shall be paid by the Treasurer unless reviewed and approved by the Comptroller or by some other person or committee expressly authorized by the Board of Directors, the Executive Committee, the Chairman or the Comptroller to review and approve bills for payment. SECTION 2. All checks, drafts or other orders for payment of money issued in the name of the Company shall be signed by such officers, employees or agents of the Company as shall from time to time be designated by the Board of Directors, the Chairman, the chief financial officer of the Company or the Treasurer. SECTION 3. Any and all shares of stock of any corporation owned by the Company and any and all voting trust certificates owned by the Company calling for or representing shares of stock of any corporation may be voted at any meeting of the shareholders of such corporation or at any meeting of the holders of such certificates, as the case may be, by any one of the principal officers of the Company upon any question which may be presented at such meeting, and any such officer may, on behalf of the Company, waive any notice required to be given of the calling of such meeting and consent to the holding of any such meeting without notice. Any such principal officer other than the Secretary, acting together with the Secretary or an Assistant Secretary, shall have authority to give to any person a written proxy, in the name of the Company and under its corporate seal, to vote any or all shares of stock or any or all voting trust certificates owned by the Company upon any question that may be presented at any such meeting of shareholders or certificate holders, with full power to waive any notice of the calling of such meeting and consent to the holding of such meeting without notice. -18- SECTION 4. The fiscal year of the Company shall begin on the first day of January and end on the last day of December in each year. ARTICLE VIII. ALTERATION, AMENDMENT OF REPEAL OF BY-LAWS. These by-laws may be altered, amended or repealed by the shareholders or the Board of Directors. -19- EX-3.4 3 BY-LAWS OF COMED Exhibit (3)-4 Commonwealth Edison Company Form 10-K File No. 1-1839 COMMONWEALTH EDISON COMPANY BY-LAWS EFFECTIVE SEPTEMBER 2, 1988 AS AMENDED THROUGH DECEMBER 13, 1995 CONTENTS
PAGE NUMBER ------ ARTICLE I. STOCK..................................................... 1 ARTICLE II. MEETINGS OF STOCKHOLDERS.................................. 3 ARTICLE III. BOARD OF DIRECTORS........................................ 5 ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS...................... 6 ARTICLE V. OFFICERS.................................................. 10 ARTICLE VI. MISCELLANEOUS............................................. 14 ARTICLE VII. ALTERATION, AMENDMENT OR REPEAL OF BY-LAWS................ 15
COMMONWEALTH EDISON COMPANY BY-LAWS ------- ARTICLE I. STOCK. SECTION 1. Each holder of fully paid stock shall be entitled to a certificate or certificates of stock stating the number and class of shares, and the designation of the series, if any, which such certificate represents. All certificates of stock shall at the time of their issuance be signed either manually or by facsimile signature by the Chairman, the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates of stock shall be sealed with the seal of the Company or a facsimile of such seal, shall be countersigned either manually or by facsimile signature by a Transfer Agent and shall be authenticated by manual signature and registered by a Registrar. The Board of Directors shall appoint one or more Transfer Agents, none of whom shall be officers of the Company authorized to sign certificates of stock, and one or more Registrars, each of which Registrars shall be a bank or trust company. Certificates of stock shall not be valid until countersigned by a Transfer Agent and authenticated and registered by a Registrar in the manner provided by the Board of Directors. SECTION 2. Shares of stock shall be transferable only on the books of the Company and, except as hereinafter provided or as otherwise required by law, shall be transferred only upon proper endorsement and surrender of the certificates issued therefor. If an outstanding certificate of stock shall be lost, destroyed or stolen, the holder thereof may have a new certificate upon producing evidence satisfactory to the Board of Directors of such loss, destruction or theft, and upon furnishing to the Company, the Transfer Agents and the Registrars a bond of indemnity deemed sufficient by the Board of Directors against claims under the outstanding certificate. SECTION 3. The certificates for each class or series of stock shall be numbered and issued in consecutive order and a record shall be kept of the name and address of the person to whom each certificate is issued, the number of shares represented by the certificate and the number and date of the certificate. All certificates exchanged or returned to the Company for transfer shall be canceled and filed. -2- SECTION 4. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination for stockholders, such date in any case to be not more than sixty days and, for a meeting of stockholders, not less than ten days, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than twenty days, immediately preceding such meeting. SECTION 5. If any subscription for stock in the Company or any installment of such subscription shall be unpaid when due, as the Board of Directors shall have determined the time for payment, and shall continue unpaid for twenty days after demand for the amount due, made either in person or by written notice duly mailed to the last address, as it appears on the records of the Company, of the subscriber or other person by whom the subscription or installment shall be payable, the stock or subscription upon which payment shall be so due shall, upon the expiration of said twenty days, become and be forfeited to the Company without further action, demand or notice, and such stock or subscription may be sold at public sale, subject to payment of the amount due and unpaid, plus all costs and expenses incurred by the Company in that connection, at a time and place to be stated in a written notice to be mailed to the recorded address of the delinquent subscriber or other person in default on the subscription at least ten days prior to the time fixed for such sale; provided, that the excess of proceeds of such sale realized over the amount due and unpaid on said stock or subscription shall be paid to the delinquent subscriber or other person in default on the subscription, or to his or her legal representative; and, provided further, that no forfeiture of stock, or of any amounts paid upon a subscription therefor, shall be declared as against the estate of any decedent before distribution shall have been made of the estate. The foregoing provisions for the forfeiture and sale of stock or subscriptions shall not exclude any other remedy which may lawfully be enforceable at any time, by forfeiture of stock or of amounts theretofore paid or otherwise, against any person for nonpayment of a subscription or of any installment thereof. -3- ARTICLE II. MEETINGS OF STOCKHOLDERS. SECTION 1. The regular annual meeting of the stockholders of the Company for the election of Directors and for the transaction of such other business as may come before the meeting shall be held on such day in April or May of each year as the Board of Directors may by resolution determine. Each such regular annual meeting and each special meeting of the stockholders shall be held at such place as may be fixed by the Board of Directors and at such hour as the Board of Directors shall order. SECTION 2. Special meetings of the stockholders may be called by the Chairman, by the Board of Directors, by a majority of the Directors individually or by the holders of not less than one-fifth of the total outstanding shares of capital stock of the Company. SECTION 3. Written notice stating the place, day and hour of the meeting of the stockholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be delivered not less than ten nor more than sixty days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets not less than twenty nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman, the Secretary or the persons calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the stockholder at the stockholder's address as it appears upon the records of the Company, with postage thereon prepaid. SECTION 4. At all meetings of the stockholders, a majority of the outstanding shares of stock, entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter, but the stockholders represented at any meeting, though less than a quorum, may adjourn the meeting to some other day or sine die. If a quorum is present, the affirmative vote of the majority of the shares of stock represented at the meeting and entitled to vote on a matter shall be the act of the stockholders, unless the vote of a greater number or voting by classes is required by law or the articles of incorporation. -4- SECTION 5. At every meeting of the stockholders, each outstanding share of stock shall be entitled to one vote on each matter submitted for a vote. In all elections for Directors, every stockholder shall have the right to vote the number of shares owned by such stockholder for as many persons as there are Directors to be elected, or to cumulate such votes and give one candidate as many votes as shall equal the number of Directors to be elected multiplied by the number of such shares or to distribute such cumulative votes in any proportion among any number of candidates. A stockholder may vote either in person or by proxy. A stockholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed. SECTION 6. The Secretary of the Company shall make, within twenty days after the record date for a meeting of stockholders of the Company or ten days before such meeting, whichever is earlier, a complete list of the stockholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for at least ten days prior to such meeting, shall be kept on file at the registered office of the Company and shall be subject to inspection by any stockholder, and to copying at such stockholder's expense, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. SECTION 7. The Chairman and the Secretary of the Company shall, when present, act as chairman and secretary, respectively, of each meeting of the stockholders. SECTION 8. At any meeting of stockholders, the chairman of the meeting may, or upon the request of any stockholder shall, appoint one or more persons as inspectors for such meeting, unless an inspector or inspectors shall have been previously appointed for such meeting by the Chairman. Such inspectors shall ascertain and report the number of shares of stock represented at the meeting, based upon their determination of the validity and effect of proxies, count all votes and report the results and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the stockholders. -5- ARTICLE III. BOARD OF DIRECTORS. SECTION 1. The business and affairs of the Company shall be managed by or under the direction of the Board of Directors. The number of Directors of the Company shall be not less than ten nor more than fifteen. The Directors shall be elected at each annual meeting of the stockholders, but if for any reason the election shall not be held at an annual meeting, it may be subsequently held at any special meeting of the stockholders called for that purpose after proper notice. The Directors so elected shall hold office until the next annual meeting and until their respective successors, willing to serve, shall have been elected and qualified. Directors need not be residents of the State of Illinois or stockholders of the Company. No person shall be eligible for nomination or renomination as a Director by the management of the Company who, prior to the date of election, shall have attained age seventy-two. No person who is an employe or a former employe of the Company or of a subsidiary of the Company shall be eligible for nomination or renomination as a Director by the management of the Company for a term commencing after such person ceases to be such an employe; provided, however that any Director in office on June 15, 1989 who is or has been such an employe may be renominated as a Director unless such person shall have attained age sixty-five on or before the date of election of Directors. SECTION 2. A meeting of the Board of Directors shall be held immediately, or as soon as practicable, after the annual election of Directors in each year, provided a quorum for such meeting can be obtained. Notice of every meeting of the Board, stating the time and place at which such meeting will be held, shall be given to each Director personally, by telephone or by other means of communication at least one day, or by depositing the same in the mails properly addressed at least two days before the day of such meeting. A meeting of the Board of Directors may be called at any time by the Chairman or by any two Directors and shall be held at such place as shall be specified in the notice for such meeting. SECTION 3. A majority of the number of Directors then in office, but not less than six, shall constitute a quorum for the transaction of business at any meeting of the Board, but a lesser number may adjourn the meeting from time to time until a quorum is -6- obtained, or may adjourn sine die. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 4. Each member of the Board not receiving a salary from the Company or a subsidiary of the Company shall be paid such fees as the Board of Directors may from time to time, by resolution adopted by the affirmative vote of a majority of the Directors then in office, determine. ARTICLE IV. COMMITTEES OF THE BOARD OF DIRECTORS. SECTION 1. There shall be an Executive Committee of the Board consisting of six members. The Board of Directors shall, at its first meeting after the annual meeting of the stockholders in each year, elect a chairman and the four other members of the Executive Committee. The remaining Directors shall constitute alternates to serve temporarily, and as far as practicable in rotation (in such order as shall be established by the Board), in the place of any member who may be unable to serve. The Chairman or the Directors calling a meeting of the Executive Committee shall call upon alternates, in rotation, to serve as herein provided. When any alternate serves, the minutes of the meeting shall record the name of the member in whose place such alternate serves. The Directors elected as members of the Executive Committee shall serve as such for one year and until their respective successors, willing to serve, shall have been elected. The Executive Committee shall, when the Board is not in session, have and may exercise all of the authority of the Board of Directors, subject to the limitations set forth in Section 10 of this Article IV. Vacancies in the membership of the Executive Committee shall be filled by the Board of Directors. The Executive Committee shall keep minutes of the proceedings at its meetings. SECTION 2. There shall be an Audit Committee of the Board consisting of not less than three nor more than five members who are not employes of the Company. The Directors elected as members of the Audit Committee shall serve as such for three years and until their respective successors, willing to serve, shall have been elected, provided that, to the extent practicable, the members of the Audit Committee shall be elected for staggered terms. The Board of Directors shall, at its first meeting after the annual meeting of -7- stockholders in each year, elect the successors of the members whose terms shall then expire. The Board of Directors shall designate from time to time the member who is to serve as chairman of the Audit Committee. The Audit Committee shall meet with the Company's independent auditors at least once each year to review the Company's financial statements and the scope and results of such auditors' examinations, monitor the internal accounting controls and practices of the Company, review the annual report to stockholders and make recommendations as to its approval to the Board and recommend, subject to stockholder approval, the appointment of independent auditors, and shall report its findings at least once each year to the Board. The Audit Committee shall have such powers as it shall deem necessary for the performance of its duties. Vacancies in the membership of the Audit Committee shall be filled by the Board of Directors. The Audit Committee shall keep minutes of the proceedings at its meetings. SECTION 3. There shall be a Corporate Governance and Compensation Committee of the Board consisting of those Directors who are not employees or former employees of the Company. The Board of Directors shall, at its first meeting after the annual meeting of shareholders in each year, elect a chairman of the Corporate Governance and Compensation Committee. The Directors serving as members of the Committee shall serve for one year and until their respective successors, willing to serve, shall have been elected. The Corporate Governance and Compensation Committee shall (i) oversee corporate governance policies, practices and procedures of the Company and make such recommendations as it may deem appropriate to the Board; and (ii) oversee general compensation policy of the Company, and establish and administer compensation programs applicable to the principal officers of the Company, including but not necessarily limited to the establishment of base salaries and the administration of awards under the Commonwealth Edison Company Deferred Compensation Plan and any other Commonwealth Edison Company compensation plan. The Committee shall have such power as it deems necessary for the performance of its duties. Vacancies in the membership of the Committee shall be filled by the Board of Directors. The Committee shall keep minutes of the proceedings at its meetings. SECTION 4. There shall be a Finance Committee of the Board consisting of not less than three nor more than five members. The Board of Directors shall, at its first meeting after the annual meeting of stockholders in each year, elect a chairman and the other members of the Finance Committee. The Directors elected as members of the Finance Committee shall serve as such for one year and until their -8- respective successors, willing to serve, shall have been elected. The Finance Committee shall review the scope and results of the Company's financing program and review the Company's financial statements, construction budgets and cash budgets as they relate to the Company's financing program, and shall report its findings at least once each year to the Board. The Finance Committee shall have such power as it shall deem necessary for the performance of its duties. Vacancies in the membership of the Finance Committee shall be filled by the Board of Directors. The Finance Committee shall keep minutes of the proceedings at its meetings. SECTION 5. There shall be a Nominating Committee of the Board consisting of not less than three nor more than five members, a majority of whom are not employes of the Company. The Board of Directors shall, at its first meeting after the annual meeting of stockholders in each year, elect a chairman and the other members of the Nominating Committee. The Directors elected as members of the Nominating Committee shall serve as such for one year and until their respective successors, willing to serve, shall have been elected. The Nominating Committee shall review the requirements for serving as Director, review potential candidates for Director, propose nominees for Director to the Board and recommend to the Board the successor to the Chairman when a vacancy occurs in that position. The Nominating Committee shall have such power as it shall deem necessary for the performance of its duties. Vacancies in the membership of the Nominating Committee shall be filled by the Board of Directors. The Nominating Committee shall keep minutes of the proceedings at its meetings. SECTION 6. There shall be a Nuclear Operations Committee of the Board consisting of at least one but not more than five members. The Board of Directors shall, at it first meeting after the annual meeting of stockholders in each year, elect a chairman and the other members of the Nuclear Operations Committee. The Directors elected as members of the Nuclear Operations Committee shall serve as such for one year and until their respective successors, willing to serve, shall have been elected. The Nuclear Operations Committee shall review the Company's nuclear operations and the Company's strategic plans respecting nuclear operations, and shall report its findings at least once each year to the Board. The Nuclear Operations Committee shall have such power as it shall deem necessary for the performance of its duties. Vacancies in the membership of the Nuclear Operations Committee shall be filled by the Board of Directors. The Nuclear -9- Operations Committee shall keep minutes of the proceedings at its meetings. SECTION 7. There shall be a Regulatory and Environmental Affairs Committee of the Board consisting of not less than three nor more than five members. The Board of Directors shall, at its first meeting after the annual meeting of stockholders in each year, elect a chairman and the other members of the Regulatory and Environmental Affairs Committee. The Directors elected as members of the Regulatory and Environmental Affairs Committee shall serve as such for one year and until their respective successors, willing to serve, shall have been elected. The Regulatory and Environmental Affairs Committee shall review the Company's relationships with economic and environmental regulatory agencies that exercise significant regulatory jurisdiction over the Company, and shall review significant matters involving the Company before those agencies; it shall review the Company's policies and strategic plans respecting regulatory and environmental affairs; and it shall report its findings at least once each year to the Board. The Regulatory and Environmental Affairs Committee shall have such power as it shall deem necessary for the performance of its duties. Vacancies in the membership of the Regulatory and Environmental Affairs Committee shall be filled by the Board of Directors. The Regulatory and Environmental Affairs Committee shall keep minutes of the proceedings at its meetings. SECTION 8. The Board of Directors may from time to time create other committees, standing or special, appoint Directors to serve on such committees and confer such powers upon such committees and revoke such powers and terminate the existence of such committees, as the Board at its pleasure may determine, subject to the limitations set forth in Section 10 of this Article IV. SECTION 9. Meetings of any committee of the Board may be called at any time by the Chairman, by any two Directors or by the chairman of the committee the meeting of which is being called and shall be held at such place as shall be designated in the notice of such meeting. Notice of each committee meeting stating the time and place at which such meeting will be held shall be given to each member of the committee personally, or by telegraph, or by depositing the same in the mails properly addressed, at least one day before the day of such meeting. A majority of the members of a committee shall constitute a quorum thereof but a lesser number may adjourn the meeting from time to time until a quorum is obtained, or may adjourn sine die. A majority vote of the members of a committee present at a -10- meeting at which a quorum is present shall be necessary for committee action. SECTION 10. Unless otherwise limited by the Board of Directors and subject to the limitations set forth in the next sentence, each committee of the Board of Directors consisting of two or more Directors may exercise the authority of the Board. Notwithstanding any other provision of the by-laws, no committee of the Board of Directors shall: (1) authorize distributions; (2) approve or recommend to stockholders any act required by law to be approved by stockholders; (3) fill vacancies on the Board of Directors or on any of its committees; (4) elect or remove officers or fix the compensation of any member of the committee; (5) adopt, amend or repeal the by-laws; (6) approve a plan of merger not requiring stockholder approval; (7) authorize or approve reacquisition of stock, except according to a general formula or method prescribed by the Board of Directors; (8) authorize or approve the issuance or sale, or contract for sale, of stock or determine the designation and relative rights, preferences, and limitations of a series of stock, except that a committee may fix the specific terms of the issuance or sale or contract for sale or the number of shares of stock to be allocated to particular employes under an employe benefit plan; or (9) amend, alter, repeal, or take action inconsistent with any resolution or action of the Board of Directors when the resolution or action of the Board of Directors provides by its terms that it shall not be amended, altered or repealed by action of a committee. ARTICLE V. OFFICERS. SECTION 1. There shall be elected by the Board of Directors, at its first meeting after the annual election of Directors in each year if practicable, the following principal officers of the Company, namely: a Chairman, a President, such number of Executive Vice Presidents, Senior Vice Presidents and Vice Presidents as the Board at the time may decide upon, a Secretary, a Treasurer and a Comptroller; and the Board may also provide for a Vice Chairman and such other officers, and prescribe for each of them such duties, as in its judgment may from time to time be desirable to conduct the affairs of the Company. No officer shall be elected for a term extending beyond the first day of the month following the month in which such officer attains the age of 65 years, on which date such officer shall be retired. The Chairman shall be a Director of the Company; any other -11- officer above named may, but need not, be a Director of the Company. Any two or more offices may be held by the same person, except that one person may not at the same time hold the office of Chairman or President and the office of Secretary. All officers shall hold their respective offices until the first meeting of the Board of Directors after the next succeeding annual election of Directors and until their successors, willing to serve, shall have been elected, but any officer may be removed from office by the Board of Directors whenever in its judgment the best interests of the Company will be served thereby. Such removal, however, shall be without prejudice to the contract rights, if any, of the person so removed. Election of an officer shall not of itself create contract rights. SECTION 2. The Chairman shall be the chief executive officer of the Company and shall have general authority over all the affairs of the Company, including the power to appoint and discharge any and all officers, agents and employes of the Company not elected or appointed directly by the Board of Directors. The Chairman shall, when present, preside at all meetings of the stockholders and of the Board of Directors. The Chairman shall have authority to call special meetings of the stockholders and meetings of the Board of Directors, and of any committee of the Board of Directors and, when neither the Board of Directors nor the Executive Committee is in session, to suspend the authority of any other officer or officers of the Company, subject, however, to the pleasure of the Board of Directors or of the Executive Committee at its next meeting. The Chairman, or such other officer as the Chairman may direct, shall be responsible for all internal audit functions, and internal audit personnel shall report directly to the Chairman or to such other officer. SECTION 3. In the absence or disability of the Chairman, the powers and duties of the Chairman shall be performed by the President or, in the President's absence or disability, by such other principal officer as the Board of Directors or the Executive Committee may designate. SECTION 4. Except insofar as the Board of Directors, the Executive Committee or the Chairman shall have devolved responsibilities on the other principal officers, the President shall be responsible for the general management and direction of the affairs of the Company, subject to the control of the Board of Directors, the Executive Committee and the Chairman. The President shall have such other powers and duties as usually devolve upon the President of a corporation and such further powers and duties as may be prescribed by -12- the Board of Directors, the Executive Committee or the Chairman. The President shall report to the Chairman. SECTION 5. The Executive Vice Presidents, the Senior Vice Presidents and the Vice Presidents shall have such powers and duties as may be prescribed for them, respectively, by the Board of Directors, the Executive Committee or the Chairman. Each of such officers shall report to the Chairman or such other officer as the Chairman shall direct. SECTION 6. The Secretary shall attend all meetings of the stockholders, of the Board of Directors and of each committee of the Board of Directors, shall keep a true and faithful record thereof in proper books and shall have the custody and care of the corporate seal, records, minute books and stock books of the Company and of such other books and papers as in the practical business operations of the Company shall naturally belong in the office or custody of the Secretary or as shall be placed in the Secretary's custody by order of the Board of Directors or the Executive Committee. The Secretary shall keep a suitable record of the addresses of stockholders and shall, except as may be otherwise required by statute or the by-laws, sign and issue all notices required for meetings of stockholders, of the Board of Directors and of the committees of the Board of Directors. Whenever requested by the requisite number of stockholders or Directors, the Secretary shall give notice, in the name of the stockholder or stockholders or Director or Directors making the request, of a meeting of the stockholders or of the Board of Directors or of a committee of the Board of Directors, as the case may be. The Secretary shall sign all papers to which the Secretary's signature may be necessary or appropriate, shall affix and attest the seal of the Company to all instruments requiring the seal, shall have the authority to certify the by-laws, resolutions of the stockholders and Board of Directors and committees of the Board of Directors and other documents of the Company as true and correct copies thereof and shall have such other powers and duties as are commonly incidental to the office of Secretary and as may be prescribed by the Board of Directors, the Executive Committee or the Chairman. The Secretary shall report to the Chairman or such other officer as the Chairman shall direct. SECTION 7. The Treasurer shall have charge of and be responsible for the collection, receipt, custody and disbursement of the funds of the Company. The Treasurer shall deposit the Company's funds in its name in such banks, trust companies or safe deposit -13- vaults as the Board of Directors may direct. Such funds shall be subject to withdrawal only upon checks or drafts signed or authenticated in such manner as may be designated from time to time by resolution of the Board of Directors or of the Executive Committee. The Treasurer shall have the custody of such books and papers as in the practical business operations of the Company shall naturally belong in the office or custody of the Treasurer or as shall be placed in the Treasurer's custody by order of the Board of Directors or the Executive Committee. The Treasurer shall have such other powers and duties as are commonly incidental to the office of Treasurer or as may be prescribed for the Treasurer by the Board of Directors, the Executive Committee or the Chairman. Securities owned by the Company shall be in the custody of the Treasurer or of such other officers, agents or depositaries as may be designated by the Board of Directors or the Executive Committee. The Treasurer may be required to give bond to the Company for the faithful discharge of the duties of the Treasurer in such form and in such amount and with such surety as shall be determined by the Board of Directors. The Treasurer shall report to the Chairman or such other officer as the Chairman shall direct. SECTION 8. The Comptroller shall be responsible for the executive direction of the accounting organization and shall have functional supervision over the records of all other departments pertaining to revenues, expenses, money, securities, properties, materials and supplies. The Comptroller shall prescribe the form of all vouchers, accounts and accounting procedures, and reports required by the various departments. The Comptroller shall be responsible for the preparation and interpretation of all accounting reports and financial statements as required and for the proper review and approval of all bills received for payment. No bill or voucher shall be so approved unless the charges covered by the bill or voucher shall have been previously approved through job order, requisition or otherwise by the head of the department in which it originated, or unless the Comptroller shall otherwise be satisfied of its propriety and correctness. The Comptroller shall have such other powers and duties as are commonly incidental to the office of Comptroller or as may be prescribed for the Comptroller by the Board of Directors, the Executive Committee or the Chairman. The Comptroller may be required to give bond to the Company for the faithful discharge of the duties of the Comptroller in such form and in such amount and with such surety as shall be determined by the Board of Directors. The Comptroller shall report to the Chairman or such other officer as the Chairman shall direct. -14- SECTION 9. Assistant Secretaries, Assistant Treasurers and Assistant Comptrollers, when elected or appointed, shall respectively assist the Secretary, the Treasurer and the Comptroller in the performance of the respective duties assigned to such principal officers, and in assisting such principal officer, each of such assistant officers shall for such purpose have the powers of such principal officer. In case of the absence, disability, death, resignation or removal from office of any principal officer, such principal officer's duties shall, except as otherwise ordered by the Board of Directors or the Executive Committee, temporarily devolve upon such assistant officer as shall be designated by the Chairman. ARTICLE VI. MISCELLANEOUS. SECTION 1. No bills shall be paid by the Treasurer unless reviewed and approved by the Comptroller or by some other person or committee expressly authorized by the Board of Directors, the Executive Committee, the Chairman or the Comptroller to review and approve bills for payment. SECTION 2. Any and all shares of stock of any corporation owned by the Company and any and all voting trust certificates owned by the Company calling for or representing shares of stock of any corporation may be voted at any meeting of the stockholders of such corporation or at any meeting of the holders of such certificates, as the case may be, by any one of the principal officers of the Company upon any question which may be presented at such meeting, and any such officer may, on behalf of the Company, waive any notice required to be given of the calling of such meeting and consent to the holding of any such meeting without notice. Any such principal officer other than the Secretary, acting together with the Secretary or an Assistant Secretary, shall have authority to give to any person a written proxy, in the name of the Company and under its corporate seal, to vote any or all shares of stock or any or all voting trust certificates owned by the Company upon any question that may be presented at any such meeting of stockholders or certificate holders, with full power to waive any notice of the calling of such meeting and consent to the holding of such meeting without notice. SECTION 3. The fiscal year of the Company shall begin on the first day of January and end on the last day of December in each year. -15- SECTION 4. The Company shall indemnify the Directors, officers and employes of the Company, and shall have the power to indemnify other agents of the Company and any person acting or serving at the request of the Company as a director, officer, employe or agent of another corporation, partnership, joint venture, trust or other enterprise, in accordance with and to the extent permitted by Section 8.75 of The Business Corporation Act of 1983 of the State of Illinois, as from time to time amended and in effect. Such indemnification shall be available to any past, present or future Director, officer or employe of the Company, and may be available to any past, present or future agent of the Company and any past, present or future director, officer, employe or agent of such other corporation, partnership, joint venture, trust or other enterprise, and shall apply to actions, suits, proceedings or claims arising out of or based upon events occurring prior to, on or after the date of original adoption of this by-law. ARTICLE VII. ALTERATION, AMENDMENT OR REPEAL OF BY-LAWS. These by-laws may be altered, amended or repealed by the stockholders or the Board of Directors. EX-4.28 4 MORTGAGE INSTRUMENT ================================================================================ Exhibit (4)-28 Commonwealth Edison Company Form 10-K File No. 1-1839 INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE _______________________ DATED AS OF JANUARY 31, 1996 _______________________ EXECUTED BY BANK OF AMERICA ILLINOIS COMMONWEALTH EDISON COMPANY AND HARRIS TRUST AND SAVINGS BANK UNDER THE PROVISIONS OF THE MORTGAGE OF COMMONWEALTH EDISON COMPANY, DATED JULY 1, 1923, AND INDENTURES SUPPLEMENTAL THERETO REFLECTING THE RESIGNATION OF BANK OF AMERICA ILLINOIS AS TRUSTEE AND THE APPOINTMENT OF HARRIS TRUST AND SAVINGS BANK AS SUCCESSOR TRUSTEE ================================================================================ THIS INSTRUMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE (this "Instrument"), dated as of the 31st day of January, 1996, among BANK OF AMERICA ILLINOIS, a state banking corporation organized and existing under the laws of the State of Illinois (the "Resigning Trustee"), COMMONWEALTH EDISON COMPANY, a corporation organized and existing under the laws of the State of Illinois (the "Company"), and HARRIS TRUST AND SAVINGS BANK, a state banking corporation organized and existing under the laws of the State of Illinois (the "Successor Trustee"). W I T N E S S E T H: WHEREAS, the Resigning Trustee has previously indicated its intent to resign as trustee under the Mortgage dated July 1, 1923, as amended and supplemented by Supplemental Indenture dated August 1, 1944 and by subsequent supplemental indentures (the "Mortgage"); and the Company has caused notice thereof to be published as required by the provisions of Section 15.06 of the Mortgage and to be given to the holders of bonds outstanding under the Mortgage as required by the provisions of Section 15.10(c) of the Mortgage; and WHEREAS, pursuant to an order of its Board of Directors, the Company has determined to appoint the Successor Trustee to serve as successor trustee to the Resigning Trustee under the provisions of the Mortgage; and WHEREAS, by this Instrument, the Resigning Trustee desires to confirm its resignation as trustee, the Company desires to confirm its appointment of the Successor Trustee as trustee, and the Successor Trustee desires to confirm its acceptance of its appointment as trustee under the provisions of the Mortgage; NOW, THEREFORE, in consideration of the foregoing, the parties hereby agree and confirm as follows: 1. The Resigning Trustee hereby confirms its resignation as Trustee (as such term is used in the Mortgage) under the Mortgage. Such resignation shall be effective as provided in Section 4 of this Instrument. 2. The Company hereby confirms its appointment of the Successor Trustee to serve as Trustee under the Mortgage as successor to the Resigning Trustee. Such appointment shall be effective as provided in Section 4 of this Instrument. 3. The Successor Trustee hereby confirms its acceptance of its appointment as Trustee under the Mortgage and its acceptance of the estates, authority, -2- rights, trusts, powers, duties and obligations of the Resigning Trustee, as Trustee, under the Mortgage. Such acceptance shall be effective as provided in Section 4 of this Instrument. 4. The resignation referred to in Section 1, the appointment referred to in Section 2 and the acceptance referred to in Section 3 shall be effective as of the opening of business in Chicago, Illinois on the date hereof. -3- IN WITNESS WHEREOF, each of said parties has caused this Instrument to be executed in its name by as duly authorized representative, and its corporate seal to be hereunto affixed and attested by a duly authorized representative, as of the 31st day of January, 1996. BANK OF AMERICA ILLINOIS By: /s/ Ben Espinos Ben Espinos (CORPORATE SEAL) Senior Vice President ATTEST: /s/ Howard McCarty Howard McCarty Vice President COMMONWEALTH EDISON COMPANY By: /s/ John C. Bukovski John C. Bukovski (CORPORATE SEAL) Vice President ATTEST: /s/ John F. Hogan John F. Hogan Assistant Secretary HARRIS TRUST AND SAVINGS BANK By: /s/ Carolyn Potter Carolyn Potter (CORPORATE SEAL) Assistant Vice President ATTEST: /s/ J. Bartolini J. Bartolini Assistant Secretary STATE OF ILLINOIS ) ) SS. COUNTY OF COOK ) I, P. JOHNSON, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that Ben Espinos, a Senior Vice President of Bank of America Illinois, an Illinois state banking corporation, one of the parties described in and which executed the foregoing instrument, and Howard McCarty, a Vice President of said bank, who are both personally known to me to be the same persons whose names are subscribed to the foregoing instrument as such Senior Vice President and Vice President, respectively, and who are both personally known to me to be a Senior Vice President and a Vice President, respectively, of said bank, appeared before me this day in person and severally acknowledged that they signed, sealed, executed and delivered said instrument as their free and voluntary act as such Senior Vice President and Vice President, respectively, of said bank, and as the free and voluntary act of said bank, for the uses and purposes therein set forth. Given under my hand and notarial seal this 31st day of January, A.D. 1996. /s/ P. Johnson P. Johnson Notary Public (NOTARIAL SEAL) My Commission expires June 28, 1997. STATE OF ILLINOIS ) ) SS. COUNTY OF COOK ) I, MARY L. KWILOS, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that John C. Bukovski, a Vice President of Commonwealth Edison Company, a corporation organized and existing under the laws of the State of Illinois, one of the parties described in and which executed the foregoing instrument, and John F. Hogan, an Assistant Secretary of said corporation, who are both personally known to me to be the same persons whose names are subscribed to the foregoing instrument as such Vice President and Assistant Secretary, respectively, and who are both personally known to me to be a Vice President and an Assistant Secretary, respectively, of said corporation, appeared before me this day in person and severally acknowledged that they signed, sealed, executed and delivered said instrument as their free and voluntary act as such Vice President and Assistant Secretary, respectively, of said corporation, and as the free and voluntary act of said corporation, for the uses and purposes therein set forth. Given under my hand and notarial seal this 31st day of January, A.D. 1996. Mary L. Kwilos Notary Public (NOTARIAL SEAL) My Commission expires October 26, 1997. STATE OF ILLINOIS ) ) SS. COUNTY OF COOK ) I, MARIANNE CODY, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that Carolyn Potter, an Assistant Vice President of Harris Trust and Savings Bank, an Illinois state banking corporation, one of the parties described in and which executed the foregoing instrument, and J. Bartolini, an Assistant Secretary of said bank, who are both personally known to me to be the same persons whose names are subscribed to the foregoing instrument as such Assistant Vice President and Assistant Secretary, respectively, and who are both personally known to me to be an Assistant Vice President and an Assistant Secretary, respectively, of said bank, appeared before me this day in person and severally acknowledged that they signed, sealed, executed and delivered said instrument as their free and voluntary act as such Assistant Vice President and Assistant Secretary, respectively, of said bank, and as the free and voluntary act of said bank, for the uses and purposes therein set forth. Given under my hand and notarial seal this 31st day of January, A.D. 1996. MARIANNE CODY Notary Public (NOTARIAL SEAL) My Commission expires May 29, 1997. EX-4.29 5 MORTGAGE INSTRUMENT ================================================================================ Exhibit (4)-29 Commonwealth Edison Company Form 10-K File No. 1-1839 INSTRUMENT _______________________ DATED AS OF JANUARY 31, 1996 _______________________ EXECUTED BY HARRIS TRUST AND SAVINGS BANK TRUSTEE UNDER MORTGAGE OF COMMONWEALTH EDISON COMPANY, DATED JULY 1, 1923, AND INDENTURES SUPPLEMENTAL THERETO APPOINTING D. G. DONOVAN SUCCESSOR CO-TRUSTEE ================================================================================ THIS INSTRUMENT, dated as of the 31st day of January, 1996, witnesseth that HARRIS TRUST AND SAVINGS BANK (a state banking corporation organized and existing under the laws of the State of Illinois), successor to Bank of America Illinois (formerly Continental Bank, National Association) and Illinois Merchants Trust Company, as Trustee under the Mortgage of COMMONWEALTH EDISON COMPANY (a corporation organized and existing under the laws of the State of Illinois) dated July 1, 1923, as amended and supplemented by Supplemental Indenture dated August 1, 1944 and by subsequent supplemental indentures (the "Mortgage"), does hereby (i) confirm the removal of ROBERT J. DONAHUE as Co- Trustee under the Mortgage and (ii) pursuant to Section 15.06 of the Mortgage, confirm the appointment of D. G. DONOVAN of Chicago, Illinois, as successor Co- Trustee under the Mortgage. Such removal and appointment shall be effective on the date hereof. IN WITNESS WHEREOF, said Harris Trust and Savings Bank, as Trustee as aforesaid, has caused this instrument to be executed in its name by one of its Assistant Vice Presidents, and its corporate seal to be hereunto affixed and attested by one of its Trust Officers, as of the 31st day of January, 1996. HARRIS TRUST AND SAVINGS BANK By: /s/ Carolyn Potter Carolyn Potter Assistant Vice President (CORPORATE SEAL) ATTEST: /s/ J. Bartolini J. Bartolini Assistant Secretary -2- STATE OF ILLINOIS ) ) SS. COUNTY OF COOK ) I, T. MUZQUIZ, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that Carolyn Potter, an Assistant Vice President of Harris Trust and Savings Bank, an Illinois state banking corporation, one of the parties described in and which executed the foregoing instrument, and J. Bartolini, an Assistant Secretary of said bank, who are both personally known to me to be the same persons whose names are subscribed to the foregoing instrument as such Assistant Vice President and Assistant Secretary, respectively, and who are both personally known to me to be an Assistant Vice President and an Assistant Secretary, respectively, of said bank, appeared before me this day in person and severally acknowledged that they signed, sealed, executed and delivered said instrument as their free and voluntary act as such Assistant Vice President and Assistant Secretary, respectively, of said bank, and as the free and voluntary act of said bank, for the uses and purposes therein set forth. Given under my hand and notarial seal this 31st day of January, A.D. 1996. T. MUZQUIZ Notary Public (NOTARIAL SEAL) My Commission expires July 12, 1997. -3- EX-10.6 6 1995 LONG-TERM PERFORMANCE UNIT AWARD Exhibit (10)-6 Unicom Corporation Form 10-K File No. 1-11375 Commonwealth Edison Company Form 10-K File No. 1-1839 As Amended on March 14, 1996 UNICOM CORPORATION 1995 LONG-TERM PERFORMANCE UNIT AWARD FOR EXECUTIVE AND GROUP LEVEL EMPLOYEES PAYABLE IN 1998 UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN Unicom Corporation, an Illinois corporation (the "Company"), hereby grants to each employee described in Section 1 hereof as of January 1, 1995 (the "Grant Date"), in accordance with the provisions of the Unicom Corporation Long- Term Incentive Plan (the "Plan"), a performance unit award (each, an "Award") expressed as a number (the "Base Unit") of performance units, in the amount and upon and subject to the restrictions, terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Recipients of Awards. Recipients of Awards hereunder shall consist of the following employees (each, an "Existing Employee") of Commonwealth Edison Company ("ComEd") and of Commonwealth Edison Company of Indiana, Inc.: (i) each Group Level employee on the Grant Date, (ii) each Executive on the Grant Date and (iii) each Officer on the Grant Date, including, without limitation, the Chairman of ComEd, the President of ComEd and each Senior Vice President of ComEd; provided, however, that individuals who become Group Level employees, Executives or Officers after the Grant Date and during the Performance Period (as hereinafter defined) (each, a "New Employee") shall be eligible to receive an Award hereunder. The term "Employee" shall mean either an Existing Employee or a New Employee. 2. Base Unit. The Base Unit for each Award shall be a number (rounded to the nearest whole number) equal to (a) the product of multiplying (i) the Salary (as defined herein) of the Employee receiving such Award by (ii) the applicable percentage set forth below, divided by (b) the closing price of a share of Common Stock as reported in The Wall Street Journal as New York Stock Exchange Composite Transactions on December 30, 1994: Chairman: 50% President: 50% Senior Vice Presidents: 40% Officers, other than as listed above: 30% Executives, other than as listed above: 20% Group Level employees, other than as listed above: 20% For the purposes of calculating the Base Unit, an Existing Employee's Salary shall be such Existing Employee's monthly scheduled rate of pay as of the Grant Date multiplied by 12 together with the income from such Existing Employee's Deferred Compensation Units (whether such Units were granted by the Company or by ComEd), and a New Employee's Salary shall be such New Employee's monthly scheduled rate of pay as of the date such New Employee becomes a New Employee (the "Start Date") multiplied by 12 together with the income from such New Employee's Deferred Compensation Units (whether such Units were granted by the Company or by ComEd). 3. Performance Period. The Performance Period shall commence on January 1, 1995 and end on December 31, 1997. 4. Payment Amount/Stockholder Protection. The amount payable in connection with an Award (a "Payment Amount") shall be a dollar amount based on the Base Unit and on the Company's percentile rank, with the percentile rank corresponding to the highest performance in the performance group being 100 and the percentile rank corresponding to the lowest performance in the performance group being 1 (the "Company Rank"), in the Ranking (as hereinafter defined) for the Performance Period, and calculated as follows: Below Threshold Level. If the Company Rank is lower than the 25th percentile in the Ranking, then the Payment Amount shall be zero. Between Threshold Level and Target Level. If the Company Rank is no lower than the 25th percentile in the Ranking and no higher than the 49th percentile in the Ranking, then the Payment Amount shall be the Base Value multiplied by a fraction the numerator of which is the Company Rank multiplied by 2 and the denominator of which is 100. Between Target Level and Maximum Level. If the Company Rank is no lower than the 50th percentile in the Ranking and no higher than the 90th percentile in the Ranking, then the Payment Amount shall be the Base Value multiplied by a fraction the numerator of which is the Company Rank multiplied by 2.5 minus 25 and the denominator of which is 100. Above Maximum Level. If the Company Rank is above the 90th percentile in the Ranking, then the Payment Amount shall be the Base Value multiplied by 2. Notwithstanding the foregoing, if the Company fails to maintain regular quarterly cash dividends of at least $.40 per share of Common Stock during the Performance Period (adjusted for any stock-split, stock dividend or other similar event), then the Payment Amount shall be zero. For purposes of the foregoing, the term "Ranking" shall mean a ranking determined based upon the Cumulative Total Shareholder Return (as hereinafter defined) for such Performance Period on the Company's Common Stock as compared to the Cumulative Total -2- Shareholder Return for such Performance Period on the common stock of each corporation comprising the Dow Jones Utility Index (or any successor index); the term "Cumulative Total Shareholder Return" for a period shall mean the result obtained by dividing (i) the sum of (a) the cumulative amount of dividends on the common stock in question for such period, assuming reinvestment of said dividends in said common stock, and (b) the difference between the price per share of said common stock at the end and the beginning of such period, by (ii) the price per share of said common stock at the beginning of such period; and the term "Base Value" shall mean the result obtained by multiplying the Base Unit by the value of a share of Common Stock (as determined under Section 5 hereof). 5. Settlement of Awards. The Payment Amount shall become payable upon the completion of the Performance Period and shall be paid by the Company within 90 days after the completion of the Performance Period. The Payment Amount shall be paid 50% in cash and 50% in shares of Common Stock; provided, however, that shares that may become payable hereunder shall not be issued if the aggregate number of shares payable to an Employee does not exceed five (and, in such cases, cash shall be paid in an amount equal to the value of the shares that would have been issued but for this proviso). Fractional shares of Common Stock that may become payable hereunder shall be issued if the shares paid an Employee exceed five and are held in non-certificated, book-entry or electronic form; otherwise, any such fractional shares shall be paid in cash. For the purposes of determining the number of shares of Common Stock payable pursuant to this Section, a share of Common Stock shall be valued at the average of the closing prices of a share of Common Stock as reported in The Wall Street Journal as New York Stock Exchange Composite Transactions during the calendar quarter ending on the last day of the Performance Period (appropriately adjusted for any stock-split, stock dividend or other similar event). 6. Employment as an "Employee" for Less Than Full Performance Period. 6.1. Termination of Employment. If an Employee's employment with the Company is terminated prior to the completion of the Performance Period for any reason other than as provided in the immediately following sentence, then no amount shall be payable hereunder. If an Employee's employment with the Company is terminated prior to the completion of the Performance Period due to such Employee's (i) retirement under the pension plan of any of the Employers or (ii) death, then such Employee shall be entitled to an amount equal to the Payment Amount calculated in accordance with Section 4 hereof multiplied by a fraction the numerator of which is the number of days in the Performance Period that have elapsed between the commencement of the Performance Period (in the case of an Existing Employee), or the Start Date (in the case of a New Employee), and the date of such retirement or death (as the case may be) and the denominator of which is the number of days in the Performance Period. The Payment Amount for any New Employee whose employment is not terminated prior to the completion of the Performance Period shall be calculated in accordance with Section 4 hereof and be reduced by multiplying it by a fraction the numerator of which is the number of days in the Performance Period that have elapsed between such New Employee's Start Date and the end of the Performance Period and the denominator of which is the number of -3- days in the Performance Period. Any Payment Amount calculated in accordance with either of the two immediately preceding sentences shall be paid as provided in Section 5 hereof within 90 days after the completion of the Performance Period. 6.2. Promotions; Demotions. If an Employee is promoted or demoted during the Performance Period to a level that is included within the definition of Employee, then such person shall be entitled to an amount equal to a Payment Amount calculated in accordance with Section 4 hereof, but based upon the sum of the products of (i) the Base Unit applicable to each level held by such person during the Performance Period, multiplied by (ii) a fraction the numerator of which is the number of days such level was held and the denominator of which is the number of days in the Performance Period. If an Employee is demoted during the Performance Period to a level below that included within the definition of Employee, then such person shall be entitled to an amount equal to the Payment Amount calculated in accordance with Section 4 hereof multiplied by a fraction the numerator of which is the number of days in the Performance Period that such person was at a level included within the definition of Employee and the denominator of which is the number of days in the Performance Period. 6.3. Employment. As used in this Section 6, employment by the Company shall include employment by a corporation which is a "subsidiary corporation" of the Company, as such term is defined in section 424 (and any successor section) of the Internal Revenue Code of 1986, as amended, or any successor internal revenue law. 7. Rights as a Stockholder. No Employee shall have any rights as a stockholder of the Company with respect to any shares of Common Stock that may be payable hereunder unless and until such shares have been issued to such Employee or otherwise credited to an account for the benefit of such Employee. 8. Additional Terms and Conditions of Award. 8.1. Nontransferability of Award. In accordance with Section 13.5 of the Plan, no Award or other related benefit may, except as otherwise specifically provided by the Plan or by law, be transferable in any manner other than by will or the laws of descent and distribution, and any attempt to transfer any such Award or other benefit shall be void; provided, however, that the foregoing shall not restrict the ability of any Employee to transfer any cash or Common Stock received as part of the Payment Amount. In accordance with Section 13.5 of the Plan, Awards or other benefits payable under Awards shall not in any manner be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such Award or benefits, nor shall they be subject to attachment or legal process for or against such person. 8.2. Withholding Taxes. As a condition precedent to the delivery to the Employee of cash or Common Stock hereunder and in accordance with Section 13.4 of the Plan, the Company may deduct from any amount (including any Payment Amount) payable then or thereafter payable by the Company or any of its subsidiaries to the Employee, or may request the Employee to pay to the Company in cash, such amount as the Company or any of its subsidiaries -4- may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over with respect to the Award. 8.3. Compliance with Applicable Law. Each Award is subject to the condition that if the listing, registration or qualification of the shares of Common Stock subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting or delivery of such shares hereunder, such shares may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained. 8.4. Award Subject to the Plan. This Award is subject to the provisions of the Plan, and shall be interpreted in accordance therewith. -5- EX-10.9 7 1996 LONG-TERM PERFORMANCE UNIT AWARD Exhibit (10)-9 Unicom Corporation Form 10-K File No. 1-11375 Commonwealth Edison Company Form 10-K File No. 1-1839 UNICOM CORPORATION 1996 LONG-TERM PERFORMANCE UNIT AWARD FOR EXECUTIVE AND GROUP LEVEL EMPLOYEES PAYABLE IN 1999 UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN Unicom Corporation, an Illinois corporation (the "Company"), hereby grants to each employee described in Section 1 hereof as of January 1, 1996 (the "Grant Date"), in accordance with the provisions of the Unicom Corporation Long- Term Incentive Plan (the "Plan"), a performance unit award (each, an "Award") expressed as a number (the "Base Unit") of performance units, in the amount and upon and subject to the restrictions, terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Recipients of Awards. Recipients of Awards hereunder shall consist of the following employees (each, an "Existing Employee") of Commonwealth Edison Company ("ComEd") and of Commonwealth Edison Company of Indiana, Inc. ("ComEd/Indiana"): (i) each Group Level employee on the Grant Date, (ii) each Executive on the Grant Date and (iii) each Officer on the Grant Date, including, without limitation, the Chairman of ComEd, the Vice Chairman of ComEd, the President of ComEd and each Senior Vice President of ComEd; provided, however, that individuals who become Group Level employees, Executives or Officers after the Grant Date and during the Performance Period (as hereinafter defined) (each, a "New Employee") shall be eligible to receive an Award hereunder. The term "Employee" shall mean either an Existing Employee or a New Employee. 2. Base Unit. The Base Unit for each Award shall be a number (rounded to the nearest whole number) equal to (a) the product of multiplying (i) the Salary (as defined herein) of the Employee receiving such Award by (ii) the applicable percentage set forth below, divided by (b) the closing price of a share of Common Stock as reported in The Wall Street Journal as New York Stock Exchange Composite Transactions for December 29, 1995: Chairman: 50% Vice Chairman: 50% President: 50% Senior Vice Presidents: 40% Officers, other than as listed above: 30% Executives, other than as listed above: 20% Group Level employees, other than as listed above: 20% For the purposes of calculating the Base Unit, an Existing Employee's Salary shall be such Existing Employee's monthly scheduled rate of pay as of the Grant Date multiplied by 12 together with the income from such Existing Employee's Deferred Compensation Units (whether such Units were granted by the Company or by ComEd), and a New Employee's Salary shall be such New Employee's monthly scheduled rate of pay as of the date such New Employee becomes a New Employee (the "Start Date") multiplied by 12 together with the income from such New Employee's Deferred Compensation Units (whether such Units were granted by the Company or by ComEd). 3. Performance Period. The Performance Period shall commence on January 1, 1996 and end on December 31, 1998. 4. Payment Amount/Stockholder Protection. The amount payable in connection with an Award (a "Payment Amount") shall be a dollar amount based on the Base Unit and on the Company's percentile rank, with the percentile rank corresponding to the highest performance in the performance group being 100 and the percentile rank corresponding to the lowest performance in the performance group being 1 (the "Company Rank"), in the Ranking (as hereinafter defined) for the Performance Period, and calculated as follows: Below Threshold Level. If the Company Rank is lower than the 25th percentile in the Ranking, then the Payment Amount shall be zero. Between Threshold Level and Target Level. If the Company Rank is no lower than the 25th percentile in the Ranking and no higher than the 49th percentile in the Ranking, then the Payment Amount shall be the Base Value multiplied by a fraction the numerator of which is the Company Rank multiplied by 2 and the denominator of which is 100. Between Target Level and Maximum Level. If the Company Rank is no lower than the 50th percentile in the Ranking and no higher than the 90th percentile in the Ranking, then the Payment Amount shall be the Base Value multiplied by a fraction the numerator of which is the Company Rank multiplied by 2.5 minus 25 and the denominator of which is 100. Above Maximum Level. If the Company Rank is above the 90th percentile in the Ranking, then the Payment Amount shall be the Base Value multiplied by 2. Notwithstanding the foregoing, if the Company fails to maintain regular quarterly cash dividends of at least $.40 per share of Common Stock during the Performance Period (adjusted for any stock-split, stock dividend or other similar event), then the Payment Amount shall be zero. For purposes of the foregoing, the term "Ranking" shall mean a ranking determined based upon the Cumulative Total Shareholder Return (as hereinafter defined) for such Performance Period on the Company's Common Stock as compared to the Cumulative Total -2- Shareholder Return for such Performance Period on the common stock of each corporation comprising the Dow Jones Utility Index (or any successor index); the term "Cumulative Total Shareholder Return" for a period shall mean the result obtained by dividing (i) the sum of (a) the cumulative amount of dividends on the common stock in question for such period, assuming reinvestment of said dividends in said common stock, and (b) the difference between the price per share of said common stock at the end and the beginning of such period, by (ii) the price per share of said common stock at the beginning of such period; and the term "Base Value" shall mean the result obtained by multiplying the Base Unit by the value of a share of Common Stock (as determined under Section 5 hereof). 5. Settlement of Awards. The Payment Amount shall become payable upon the completion of the Performance Period and shall be paid by the Company within 90 days after the completion of the Performance Period. The Payment Amount shall be paid 50% in cash and 50% in shares of Common Stock; provided, however, that, if the Employee elects under the Unicom Corporation Stock Bonus Deferral Plan to defer more than 50% of the Payment Amount, the amount so deferred shall be paid in shares of Common Stock; and provided further, that shares that may become payable to an Employee hereunder shall not be issued if the aggregate number of shares payable to such Employee does not exceed five (and, in such case, cash shall be paid in an amount equal to the value of the shares that would have been issued but for this proviso). Fractional shares of Common Stock that may become payable to an Employee hereunder shall be issued if the shares issuable to such Employee exceed five and are held in non- certificated, book-entry or electronic form; otherwise, any such fractional shares shall be paid in cash. For the purposes of determining the number of shares of Common Stock payable pursuant to this Section, a share of Common Stock shall be valued at the average of the closing prices of a share of Common Stock as reported in The Wall Street Journal as New York Stock Exchange Composite Transactions during the calendar quarter ending on the last day of the Performance Period (appropriately adjusted for any stock-split, stock dividend or other similar event). 6. Employment as an "Employee" for Less Than Full Performance Period. 6.1. Termination of Employment. If an Employee's employment with the Company is terminated prior to the completion of the Performance Period for any reason other than as provided in the immediately following sentence, then no amount shall be payable hereunder. If an Employee's employment with the Company is terminated prior to the completion of the Performance Period due to such Employee's (i) termination as a result of the sale of ComEd/Indiana's State Line generating plant located in Hammond, Indiana, the sale of ComEd's Kincaid generating plant located in Kincaid, Illinois, or ComEd's decision to have a third party provide the services provided by the functional group that includes such Employee (in any such case, a "Permitted Termination"), (ii) retirement under the pension plan of any of the Employers or (iii) death, then such Employee shall be entitled to an amount equal to the Payment Amount calculated in accordance with Section 4 hereof multiplied by a fraction the numerator of which is the number of days in the Performance Period that have elapsed between the commencement of the Performance Period (in the case of an Existing Employee), or the Start -3- Date (in the case of a New Employee), and the date of such Permitted Termination, retirement or death (as the case may be) and the denominator of which is the number of days in the Performance Period. The Payment Amount for any New Employee whose employment is not terminated prior to the completion of the Performance Period shall be calculated in accordance with Section 4 hereof and be reduced by multiplying it by a fraction the numerator of which is the number of days in the Performance Period that have elapsed between such New Employee's Start Date and the end of the Performance Period and the denominator of which is the number of days in the Performance Period. Any Payment Amount calculated in accordance with either of the two immediately preceding sentences shall be paid as provided in Section 5 hereof within 90 days after the completion of the Performance Period. 6.2. Promotions; Demotions. If an Employee is promoted or demoted during the Performance Period to a level that is included within the definition of Employee, then such person shall be entitled to an amount equal to a Payment Amount calculated in accordance with Section 4 hereof, but based upon the sum of the products of (i) the Base Unit applicable to each level held by such person during the Performance Period, multiplied by (ii) a fraction the numerator of which is the number of days during the Performance Period that such level was held and the denominator of which is the number of days in the Performance Period. If an Employee is demoted during the Performance Period to a level below that included within the definition of Employee, then such person shall be entitled to an amount equal to the Payment Amount calculated in accordance with Section 4 hereof multiplied by a fraction the numerator of which is the number of days in the Performance Period that such person was at a level included within the definition of Employee and the denominator of which is the number of days in the Performance Period. 6.3. Employment. As used in this Section 6, employment by the Company shall include employment by a corporation which is a "subsidiary corporation" of the Company, as such term is defined in section 424 (and any successor section) of the Internal Revenue Code of 1986, as amended, or any successor internal revenue law. 7. Rights as a Stockholder. No Employee shall have any rights as a stockholder of the Company with respect to any shares of Common Stock that may be payable hereunder unless and until such shares have been issued to such Employee or otherwise credited to an account for the benefit of such Employee. -4- 8. Additional Terms and Conditions of Award. 8.1. Nontransferability of Award. In accordance with Section 13.5 of the Plan, no Award or other related benefit may, except as otherwise specifically provided by the Plan or by law, be transferable in any manner other than by will or the laws of descent and distribution, and any attempt to transfer any such Award or other benefit shall be void; provided, however, that the foregoing shall not restrict the ability of any Employee to transfer any cash or Common Stock received as part of the Payment Amount. In accordance with Section 13.5 of the Plan, Awards or other benefits payable under Awards shall not in any manner be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such Award or benefits, nor shall they be subject to attachment or legal process for or against such person. 8.2. Withholding Taxes. As a condition precedent to the delivery to the Employee of cash or Common Stock hereunder and in accordance with Section 13.4 of the Plan, the Company may deduct from any amount (including any Payment Amount) payable then or thereafter payable by the Company or any of its subsidiaries to the Employee, or may request the Employee to pay to the Company in cash, such amount as the Company or any of its subsidiaries may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over with respect to the Award. 8.3. Compliance with Applicable Law. Each Award is subject to the condition that if the listing, registration or qualification of the shares of Common Stock subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting or delivery of such shares hereunder, such shares may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained. 8.4. Award Subject to the Plan. This Award is subject to the provisions of the Plan, and shall be interpreted in accordance therewith. -5- EX-10.10 8 1996 VARIABLE COMPENSATION AWARD Exhibit (10)-10 Unicom Corporation Form 10-K File No. 1-11375 Commonwealth Edison Company Form 10-K File No. 1-1839 UNICOM CORPORATION 1996 VARIABLE COMPENSATION AWARD FOR MANAGEMENT EMPLOYEES UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN Unicom Corporation, an Illinois corporation (the "Company"), hereby grants to each employee described in Section 1 hereof (each, an "Employee"), as of January 1, 1996 (the "Grant Date"), in accordance with the provisions of the Unicom Corporation Long-Term Incentive Plan (the "Plan"), a performance unit award (each, an "Award"), expressed as a number of performance units, in the amount and upon and subject to the restrictions, terms and conditions set forth below and in Appendices A and B attached hereto. Capitalized terms not defined herein shall have the meanings specified in the Plan. 1. Recipients of Awards. Subject in all respects to the provisions hereof, recipients of Awards hereunder shall consist of each employee of Commonwealth Edison Company ("ComEd") (other than (i) the Chairman, the Vice Chairman and the President and (ii) temporary employees) and of Commonwealth Edison Company of Indiana, Inc. ("ComEd/Indiana," and, together with ComEd, the "Employers") who is on the management or executive payroll during calendar year 1996. 2. Base Unit. The Base Unit for each Award shall be the number which is equal to the number of dollars determined by multiplying the Base Pay (as defined herein) of the Employee receiving the Award by the conversion factor of 1.25% and rounding up to the nearest whole dollar. For purposes of calculating the Base Unit, "Base Pay" shall mean the sum of (i) the product of an Employee's monthly scheduled rate of pay, determined as of the close of the final pay period for calendar year 1996 (or such earlier pay period during 1996 in which the Employee's employment terminates), multiplied by 12, plus (ii) the income from such Employee's Deferred Compensation Units (whether such Units were granted by the Company or by ComEd) if such Employee is in the "Group" or "Executive" categories of employment. 3. Payment Amount. The total amount payable in connection with an Award (the "Payment Amount") may consist solely of a cash payment (the "Cash Payment Amount") or may consist of a Cash Payment Amount and a payment of Common Stock (the "Stock Payment Amount"), as determined below. Interpolation shall -1- be used in determining the number of performance units earned for goal achievement between the "Threshold" level and the "Distinguished" level. a. Cash Payment Amount. The Cash Payment Amount shall be the dollar amount computed by multiplying the Employee's Base Unit by the applicable performance unit set forth (i) in the cases of the "Rated" and "Group" categories of Employees, below under the column titled "Cash" that corresponds to such Employee's category of employment and the level of performance goals achieved as set forth in Appendix A attached hereto that are applicable to such Employee or (ii) in the case of the "Executive" category of Employees, in Appendix B under the column titled "Cash" that corresponds to (1) such Employee's name, if such Employee is named on Appendix B, or the line entry "Other Executive," if such Employee is not named on Appendix B, and (2) level of performance goals achieved as set forth in Appendix A attached hereto that are applicable to such Employee. b. Stock Payment Amount. The Stock Payment Amount shall be the dollar amount computed by multiplying the Employee's Base Unit by the applicable performance unit set forth (i) in the cases of the "Rated" and "Group" categories of Employees, below under the column titled "Stock" that corresponds to such Employee's category of employment and the level of performance goals achieved as set forth in Appendix A attached hereto that are applicable to such Employee, or (ii) in the case of the "Executive" category of Employees, in Appendix B under the column titled "Stock" that corresponds to (1) such Employee's name, if such Employee is named on Appendix B, or the line entry "Other Executive," if such Employee is not named on Appendix B, and (2) level of performance goals achieved as set forth in Appendix A attached hereto and that are applicable to such Employee.
PERFORMANCE UNITS ----------------- THRESHOLD TARGET DISTINGUISHED --------- ------ ------------- CATEGORY CASH STOCK CASH STOCK CASH STOCK RATED 2.4 0 6 0 8.4 1.2 GROUP 2.4 0 8 4 8 8
-2- 4. Reduction of Payment Amount in Certain Instances. In the event that: (a) an Employee (i) is first placed on the management or executive payroll after January 1, 1996, (ii) is on a leave of absence during 1996, (iii) retires under the pension plan of any one of the Employers during 1996, or (iv) dies during 1996, or (b) an Employee's employment with the Employers is terminated during 1996 as a result of (i) the sale of ComEd/Indiana's State Line generating plant located in Hammond, Indiana, (ii) the sale of ComEd's Kincaid generating plant located in Kincaid, Illinois, or (iii) ComEd's decision to have a third party provide the services provided by the functional group that includes such Employee, each of the Cash Payment Amount and the Stock Payment Amount will be a reduced amount equal to each of the amounts determined in Section 3 above multiplied by a fraction, the numerator of which is the number of days the Employee worked for one of the Employers during 1996 and the denominator of which is 366. In addition, in the event that an Employee is or becomes a participant in, or is eligible or becomes eligible to participate in, The ComEd Pension Fund Management Incentive Pay Plan or The ComEd Bulk Power Marketing Incentive Plan (such incentive plans are collectively referred to herein as the "Other Incentive Plans") during 1996, then each of the Cash Payment Amount and the Stock Payment Amount will be a reduced amount equal to each of the amounts determined in Section 3 above (subject to any adjustment required by the first sentence of this Section 4) multiplied by a fraction, the numerator of which is the number of days during which the Employee worked during 1996 and was not a participant in, or eligible to participate in, the Other Incentive Plans and the denominator of which is the number of days the Employee worked during 1996. Further, in the event that an Employee's hourly or salary compensation is paid or reimbursed by the Mid-America Interconnected Network ("MAIN") during 1996, then each of the Cash Payment Amount and the Stock Payment Amount will be a reduced amount equal to each of the amounts determined in Section 3 above (subject to any adjustment required by the first sentence of this Section 4) multiplied by a fraction, the numerator of which is the number of days during 1996 in respect of which such Employee's hourly or salary compensation was not paid or reimbursed by MAIN and the denominator of which is the number of days the Employee worked during 1996. For purposes of the preceding sentences, the number of days an Employee worked in 1996 shall include, solely in the cases of an Employee who retires under the pension plan of any one of the Employers or who dies, the full month in which the Employee retires or dies. For an Employee who is a part-time Employee described in clause (a) or (b) of the first sentence of this Section, the reduction provided in this Section shall be made after the reduction set forth in Section 5 is made. -3- 5. Reduction of Payment Amount for Part-Time Employees. For an Employee who is a part-time Employee, each of the Cash Payment Amount and the Stock Payment Amount will be a reduced amount equal to the amount determined above multiplied by a fraction, the numerator of which is the number of hours the Employee was scheduled to work during 1996 and the denominator of which is 2080 hours. 6. Transfer of Employee from One Business Unit to Another Business Unit. In the event that an Employee is transferred from one Business Unit (as hereinafter defined) to another Business Unit during 1996, each of the Cash Payment Amount and the Stock Payment Amount will be determined on a prorated basis from each Business Unit. For purposes of this Section, "Business Unit" means the following corporate functions of the Employers: (a) commercial, (b) financial, (c) human resources, (d) corporate relations, (e) corporate resources, (f) law, (g) fuel/diversity/ethics, (h) fossil energy production, (i) nuclear energy production and (j) quality improvement programs. 7. Stockholder Protection. Notwithstanding anything herein to the contrary, no amount shall be paid hereunder unless the following four conditions are satisfied: (a) The Company maintains regular quarterly cash dividends of at least $.40 per share of Common Stock during calendar year 1996 (adjusted for any stock-split, stock dividend or other similar event). (b) The aggregate amount actually incurred by the Employers for operations and maintenance expenditures for calendar year 1996 (calculated as provided in Section 12.5(b)) is less than $2,020 million. (c) The aggregate amount actually incurred by the Employers for capital expenditures for calendar year 1996 is less than $920 million (excluding (i) any capitalized charges associated with awards made or paid under the Plan, The ComEd Pension Fund Management Incentive Pay Plan, The ComEd Bulk Power Marketing Incentive Plan and any company-wide incentive pay plan or arrangement generally applicable to bargaining unit employees within ComEd and/or ComEd/Indiana, (ii) one half of any capitalized charges associated with any signing bonus and/or adders paid to members of Local 15 of the International Brotherhood of Electrical Workers in connection with the execution of their most recent collective bargaining agreement with ComEd, (iii) any capital expenditures associated with ComEd's accelerated nuclear expenditures (improvement program), and (iv) any additional capital expenditures due to the acceleration of ComEd's steam generator replacement program). -4- (d) The earnings per share of Common Stock of the Company (calculated as provided in Section 12.5(a)) are not less than $3.00. 8. Failure to Achieve "Meeting All Expectations" Rating. An Employee who fails to receive at least a "meeting all expectations" rating under the Performance Evaluation, Career Development and/or Succession Planning (or the equivalent thereof) with respect to performance in 1996 shall not receive any amount hereunder. 9. Settlement of Awards. The Payment Amount, if any, will be paid to an Employee as soon as practicable after the Company's audited financial results are available for calendar year 1996. The number of shares of Common Stock payable to an Employee with respect to an Award shall be computed by dividing the Stock Payment Amount by the value of one share of Common Stock; provided, however, that shares that may become payable to an Employee hereunder shall not be issued if the aggregate number of shares payable to such Employee does not exceed five (and, in such case, cash shall be paid in an amount equal to the value of the shares that would have been issued but for this proviso). Fractional shares of Common Stock that may become payable to an Employee hereunder shall be awarded if the shares awarded to such Employee exceed five and are held in non-certificated, book-entry or electronic form; otherwise, any such fractional shares shall be paid in cash. For purposes of this Section, the value of a share of Common Stock shall be the average of the closing prices of a share of Common Stock as reported in The Wall Street Journal as New York Stock Exchange Composite Transactions during the last calendar quarter of 1996 (appropriately adjusted for any stock-split, stock dividend or other similar event). 10. Termination of Employment. An Employee whose employment with the Employers is terminated prior to December 31, 1996 for any reason other as specified in clauses (a)(iii), (a)(iv), (b)(i), (b)(ii) or (b)(iii) of Section 4 shall not be entitled to any payment under the Plan. 11. Rights as a Stockholder. No Employee shall have any rights as a stockholder of the Company with respect to any shares of Common Stock that may be payable hereunder unless and until such shares shall have been issued to such Employee or otherwise credited to an account for the benefit of such Employee. -5- 12. Additional Terms and Conditions of Award. 12.1. Nontransferability of Award. In accordance with Section 13.5 of the Plan, no Award or other related benefit may, except as otherwise specifically provided by the Plan or by law, be transferable in any manner other than by will or the laws of descent and distribution, and any attempt to transfer any such Award or other benefit shall be void; provided, however, that the foregoing shall not restrict the ability of any Employee to transfer any cash or Common Stock received as part of the Payment Amount. In accordance with Section 13.5 of the Plan, Awards or other benefits payable under Awards shall not in any manner be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such Award or benefits, nor shall they be subject to attachment or legal process for or against such person. 12.2. Withholding Taxes. As a condition precedent to the delivery to the Employee of cash or Common Stock hereunder and in accordance with Section 13.4 of the Plan, the Company may deduct from any amount (including any Payment Amount) payable then or thereafter payable by the Company to the Employee, or may request the Employee to pay to the Company in cash, such amount as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over with respect to the Award. 12.3. Compliance with Applicable Law. Each Award is subject to the condition that if the listing, registration or qualification of the shares of Common Stock subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting or delivery of such shares hereunder, such shares may not be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained. 12.4. Award Subject to the Plan. This Award is subject to the provisions of the Plan, and shall be interpreted in accordance therewith. 12.5. Certain Computations. (a) For the purposes of Section 7(d) above and Appendix A hereto, "earnings per share" shall mean the earnings per share of Common Stock of the Company calculated without giving effect to (i) any charges associated with any early retirement program adopted by the Employers or any severance payments made by the Employers, (ii) any write-off (as opposed to depreciation charges) associated with any plant, property or equipment of the Employers, (iii) any accelerated depreciation on any nuclear generating stations under ComEd's "ENERGY Partnership Program," (iv) the effect of any unanticipated accounting reclassifications or adjustments -6- or inter-company cost allocation adjustments that may be required by the Federal Energy Regulatory Commission or the Illinois Commerce Commission ("ICC"), (v) any accounting effects resulting from any subsequent ICC or judicial proceeding relating to any order entered by the ICC in Docket No. 94-0065, (vi) any investment tax credit related to certain investments in nuclear fuel and other miscellaneous electric utility property permitted under the 1986 Tax Reform Act and not previously taken, (vii) any "finder's fee" or similar compensation paid in connection with the realization of the investment tax credit referred to in the preceding clause (vi), (viii) any gain, loss or other charges (including, without limitation, increases or decreases in related operations and maintenance expenditures) associated with the disposition of ComEd/Indiana's State Line generating plant, (ix) any gain, loss or other charges (including, without limitation, increases or decreases in related operations and maintenance expenditures) associated with the disposition of ComEd's Kincaid generating plant, (x) one half of any charges associated with any signing bonus and/or adders paid to members of Local 15 of the International Brotherhood of Electrical Workers in connection with the execution of their most recent collective bargaining agreement with ComEd, (xi) any expenditures associated with ComEd's accelerated nuclear expenditures (improvement program), and (xii) any charges associated with necessary increases in pension provisions for the Service Annuity Systems of the Employers which are determined after January 1, 1996; and shall be adjusted for any stock splits, stock dividends or other similar event. (b) For the purposes of Section 7(b) above and Appendix A hereto, the computation of "operations and maintenance expenditures" shall exclude (i) charges associated with any early retirement program adopted by the Employers or any severance payments made by the Employers, (ii) any charges associated with awards made or paid under the Plan, The ComEd Pension Fund Management Incentive Pay Plan, The ComEd Bulk Power Marketing Incentive Plan and any company-wide incentive pay plan or arrangement generally applicable to bargaining unit employees within ComEd and/or ComEd/Indiana, (iii) any write-off (as opposed to depreciation charges) included in operation and maintenance expenditures that relates to any plant, property or equipment of the Employers, (iv) the effect of any unanticipated accounting reclassifications or adjustments or inter- company cost allocation adjustments that may be required by the Federal Energy Regulatory Commission or the ICC, (v) any accounting effects resulting from any subsequent ICC or judicial proceeding relating to any order entered by the ICC in Docket No. 94-0065, (vi) any "finder's fee" or similar compensation paid in connection with the realization of the investment tax credit referred to Section 12.5(a)(vi) above, (vii) any gain, loss or other charges (including, without limitation, increases or decreases in related operations and maintenance expenditures) associated with the disposition of ComEd/Indiana's State Line generating plant, (viii) any gain, loss or other charges (including, without limitation, increases or decreases in related operations and maintenance expenditures) associated with the disposition of ComEd's Kincaid generating -7- plant, (ix) one half of any charges associated with any signing bonus and/or adders paid to members of Local 15 of the International Brotherhood of Electrical Workers in connection with the execution of their most recent collective bargaining agreement with ComEd, (x) any expenditures associated with ComEd's accelerated nuclear expenditures (improvement program), and (xi) any charges associated with necessary increases in pension provisions for the Service Annuity Systems of the Employers which are determined after January 1, 1996. -8- EX-10.11 9 1996 AWARD TO MR. O'CONNOR Exhibit (10)-11 Unicom Corporation Form 10-K File No 1-11375 Commonwealth Edison Company Form 10-K File No. 1-1839 1996 AWARD TO MR. O'CONNOR, MR. MULLIN AND MR. SKINNER UNDER THE UNICOM CORPORATION LONG-TERM INCENTIVE PLAN ----------------------------------------------------- Unicom Corporation, an Illinois corporation (the "Company"), hereby grants to James J. O'Connor, Leo F. Mullin and Samuel K. Skinner in accordance with the provisions of the Unicom Corporation Long-Term Incentive Plan (the "Plan"), a performance unit award (each, an "Award") in the amount and upon and subject to the restrictions, terms and conditions set forth below. Capitalized terms not defined herein shall have the meanings specified in the Plan. The following chart describes the requirements for each Award level and sets forth the percentage of Base Pay (as hereinafter defined) allocated to such level:
Level of Award - -------------- Cash Stock ---- ----- Threshold: If earnings per share on the Company's Common Stock are at least $3.24 per share* 25% 0% Target: If earnings per share on the Company's Common Stock are at least $3.31 per share* 30% 20% Distinguished Level: If earnings per share on the Company's Common Stock are at least $3.39 per share* 30% 70%
- --------------- * For the purposes of determining the Level of Award, the "earnings per share" amount shall be calculated without giving effect to (i) any charges associated with any early retirement program for employees of the Company or its subsidiaries or any severance payments made by the Company or its subsidiaries, (ii) any charges associated with necessary increases in pension provisions for the Service Annuity Systems of Commonwealth Edison Company ("ComEd") and Commonwealth Edison Company of Indiana, Inc. ("ComEd- Indiana") which are determined after January 1, 1996, (iii) any write-off (as opposed to depreciation charges) associated with any plant, property or equipment of the Company or its subsidiaries, (iv) the effect of any unanticipated accounting reclassifications or adjustments or inter-company cost allocation adjustments that may be required by the Federal Energy Regulatory Commission or the Illinois Commerce Commission ("ICC"), (v) any accounting effects resulting from any subsequent ICC or judicial proceeding relating to any order entered by the ICC in Docket No. 94-0065, (vi) any accelerated depreciation on any nuclear generating stations under ComEd's "ENERGY Partnership Program," (vii) any investment tax credit related to certain investments in nuclear fuel and other miscellaneous electric utility property permitted under the 1986 Tax Reform Act and not previously taken, (viii) any "finder's fee" or similar compensation paid in connection with the realization of the investment tax credit referred to in the preceding clause (vii), (ix) any gain, loss or other charges (including, without limitation, increases or decreases in related operations and maintenance expenditures) associated with the disposition of ComEd/Indiana's State Line generating plant, (x) any gain, loss or other charges (including, without limitation, increases or decreases in related operations and maintenance expenditures) associated with the disposition of ComEd's Kincaid generating plant, (xi) one half of any charges associated with any signing bonus and/or adders paid to members of Local 15 of the International Brotherhood of Electrical Workers in connection with the execution of their most recent collective bargaining agreement with ComEd, and (xii) any expenditures associated with ComEd's accelerated nuclear expenditures (improvement program); and shall be adjusted for any stock splits, stock dividends or other similar event. No award at any level shall be earned or payable if (i) the aggregate amount actually incurred by ComEd and ComEd-Indiana for operations and maintenance expenditures (excluding (1) any charges or effects associated with any of the items referred to in clauses (i) through (v), inclusive, and clauses (viii) through (xii), inclusive, of the first sentence of the asterisked footnote to the preceding table and (2) any charges associated with awards made or paid under the Plan, The ComEd Pension Fund Management Incentive Pay Plan, The ComEd Bulk Power Marketing Incentive Plan and any company-wide incentive pay plan or arrangement generally applicable to bargaining unit employees within ComEd and/or ComEd-Indiana) for the calendar year 1996 is not less than $2,020 million, (ii) the aggregate amount actually incurred by ComEd and ComEd-Indiana for capital expenditures for calendar year 1996 is not less than $920 million (excluding (1) any capitalized charges associated with awards made or paid under the Plan, The ComEd Pension Fund Management Incentive Pay Plan, The ComEd Bulk Power Marketing Incentive Plan and any company-wide incentive pay plan or arrangement generally applicable to bargaining unit employees within ComEd and/or ComEd-Indiana, (2) one half of any capitalized charges associated with any signing bonus and/or adders paid to members of Local 15 of the International Brotherhood of Electrical Workers in connection with the execution of their most recent collective bargaining agreement with ComEd, (3) any capital expenditures associated with ComEd's accelerated nuclear expenditures (improvement program), and (4) any additional capital expenditures due to the acceleration of ComEd's steam generator replacement program), or (iii) the Company fails to maintain its regular quarterly cash dividends on the outstanding Common Stock in an amount at least equal to $.40 per share (adjusted for any stock-split, stock dividend or other similar event) during the calendar year 1996. The value (the "Payment Amount") of an award is determined by multiplying the performance units (expressed as a percentage) at the achieved award level by Base Pay, and will result in a "Cash Payment Amount" (determined by reference to the "Cash" column) and a "Stock Payment Amount" (determined by reference to the "Stock" column); provided, however, that interpolation shall be used in determining the -2- amount of any award based on achievement between the "Threshold" level and the "Distinguished" level. "Base Pay" for Mr. O'Connor, Mr. Mullin and Mr. Skinner, as the case may be, shall be his monthly scheduled rate of pay from ComEd as of January 1, 1996, multiplied by 12 together with the 1996 income from his Deferred Compensation Units (whether received from the Company or ComEd). The Award is subject to the provisions of Sections 9 through 12.4 (inclusive) of the 1996 Variable Compensation Award for Management Employees (including employment requirements and timing of payments). -3- EX-10.12 10 UNICOM DEFERRED COMPENSATION UNIT PLAN Exhibit (10)-12 Unicom Corporation Form 10-K File No. 1-11375 Commonwealth Edison Company Form 10-K File No. 1-1839 UNICOM CORPORATION DEFERRED COMPENSATION UNIT PLAN (as amended through October 25, 1995) 1. Purposes. The purposes of the Unicom Corporation Deferred Compensation Unit Plan (the "Plan") are (i) to align the interests of the Company's stockholders and recipients of awards under the Plan by linking a portion of such recipients, compensation to the amount of cash dividends paid with respect to the Company's Common Stock and (ii) to assure continuity of efficient management, by providing for awards under the Plan, which may be wholly or partly in lieu of salary increases, to such persons. 2. Definitions. In addition to the other terms defined in this Plan, the following terms shall have the following meanings for purposes of this Plan: "Committee" means the Compensation Committee of the Board of Directors of the Company. "Common Stock" means the Common Stock, without par value, of the Company. "Company" means Unicom Corporation, an Illinois corporation. "Current Compensation Unit" means an award entitling the recipient to receive, following the award and during the continued employment of the recipient by the Company or its subsidiaries, an amount in cash equal to, and payable on the payment dates of, the cash dividends such recipient would have received if on the day of the award one share of Common Stock had been issued to such recipient; provided, however, that no amounts shall be payable under such award in respect of non-cash dividends paid on the Common Stock. "Retirement Compensation Unit" means an award under Section 4(c) or 4(f) of this Plan entitling the recipient to receive, following the award and continuing for the recipient's lifetime, an amount equal to, and payable on the payment dates of, the cash dividends such recipient would have received if on the day of the award one share of Common Stock had been issued to such recipient; provided, however: (a) no amount shall be payable under such award in respect of non-cash dividends paid on the Common Stock; (b) payments in respect of such Unit in any calendar year shall not in any event be (i) less than the average amount of the payments per Current Compensation Unit during the five calendar years preceding the termination of employment which gave rise to the award of such Retirement Compensation Unit (provided that for purposes of this provision, the payments per Current Compensation Unit in the calendar years prior to January 1, 1995 shall be deemed to be as follows: 1994--$1.60, 1993-- $1.60, 1992--$2.65, 1991--$3.00 and 1990-$3.00), or (ii) more than such average amount (or the amount of the payments per Current Compensation Unit in the calendar year preceding such termination, if greater), increased at the compound annual rate of two percent to the end of the calendar year of payment, provided that the foregoing clause (i) and (ii) limits shall not apply to any such Units issued pursuant to Section 4(f) of this Plan and, instead, any such Units shall have the limits, if any, applicable to the corresponding retirement compensation units for which they are exchanged or such other limits, if any, as may be established by the Committee; and (c) upon the death of a recipient of a Unit, leaving a spouse surviving, payments on account of such Unit shall continue to be made to the spouse for the spouse's lifetime, but only if (i) such Unit had originated from the deceased's employment by the Company or its subsidiaries and (ii) the surviving spouse was married to such recipient when his or her period of service with the Company and all of its subsidiaries terminated. -2- "Units" means Current Compensation Units and Retirement Compensation Units. 3. Eligible Participants. Participants in the Plan shall consist of such key executive and managerial employees of the Company and its subsidiaries as the Committee in its sole discretion may select from time to time consistent with the next sentence of this Section 3. The number of active officers and employees to whom Current Compensation Units may be so awarded in any one calendar year shall be limited to such number fixed by the Committee annually, but shall be so limited that the Plan shall remain primarily for the purpose of providing deferred compensation for a select group of management employees within the meaning of the Employee Retirement Income Security Act of 1974, as amended. 4. Awards. (a) Subject to Section 4(b), the Committee shall, from time to time, award Current Compensation Units, which may be wholly or partly in lieu of salary increases, to eligible participants. Such awards shall be evidenced by a written notification to the recipient, which shall indicate the number of Current Compensation Units so awarded. (b) The total number of Current Compensation Units awarded in any calendar year shall be limited so that the compensation payable thereon would not exceed one-tenth of one percent of "consolidated net income on the Common Stock of the Company" (as hereinafter defined) for the preceding calendar year. To compute this limitation, the "compensation payable thereon" shall be deemed to be the amount which would have been paid in the preceding calendar year either (a) on an equivalent number of units awarded on the record date for the first cash dividend on the Common Stock paid in that year, or (b) at a rate per unit equal to five percent of the book value per share of the Common Stock at the end of that year, whichever results in the lower number of available units. No Current Compensation Units shall be awarded in any calendar year if total payments during the preceding calendar year on outstanding Units had reduced consolidated net income on the Common Stock of the Company for such year by as much as two percent. As herein used, the term "consolidated net income on the Common Stock of the Company" shall mean, for any calendar -3- year, such net income (after all Federal income and excess profits tax provisions) of the Company and its consolidated subsidiaries, or of the Company alone if there are no consolidated subsidiaries, as shown in the Annual Report to the Stockholders of the Company for such year. (c) Upon the termination of the employment by the Company and its subsidiaries of a recipient of Current Compensation Units, such recipient's Current Compensation Units shall automatically be converted into an equivalent number of Retirement Compensation Units; provided, however, if such termination of employment is due to the resignation of such recipient, then (i) such recipient's Current Compensation Units, and any payments in respect thereof, shall terminate immediately, and (ii) no Retirement Compensation Units shall be awarded pursuant to this Section 4(c). For purposes of the foregoing proviso, a termination of employment resulting from a recipient's acceptance of a voluntary separation offer made by the Company or its subsidiaries shall not be deemed a resignation. (d) If any recipient of Units should at any time engage in a competitive business activity, such recipient's Units, and any payments in respect thereof, shall terminate immediately. (e) The number of outstanding Units shall be adjusted by the Committee to reflect stock dividends, stock splits or other changes in the Company's Common Stock. (f) Notwithstanding the limitation contained in Section 4(b), the Committee may, from time to time and in such manner and on such terms as it shall consider to be appropriate, award Current Compensation Units and Retirement Compensation Units under this Plan in exchange for outstanding current compensation units and retirement compensation units, respectively, under the Commonwealth Edison Company Deferred Compensation Plan. Any Units so issued shall not reduce the number of Current Compensation Units otherwise issuable under Section 4(b). 5. Administration. The Plan shall be administered and interpreted by the Committee. The Committee shall have the authority to adopt, alter and repeal such administrative rules, -4- guidelines and practices governing the Plan and perform all acts, including the delegation of its administrative responsibilities, as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of the Plan and any award issued under the Plan (and any notices relating thereto) and to otherwise supervise the administration of the Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any notice of an award in the manner and to the extent it shall deem necessary to carry the Plan into effect. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Committee (or any of its members) arising out of or in connection with the Plan shall be within its absolute discretion and shall be final, binding and conclusive on the Company and all employees and participants and their respective beneficiaries, heirs, executors, administrators, successors and assigns. Neither the Committee nor any member thereof shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan in good faith, and the members of the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorney's fees) arising therefrom to the full extent permitted by law and under any directors, and officers' liability insurance that may be in effect from time to time. In addition, no member of the Board and no employee of the Company shall be liable for any act or failure to act hereunder, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or, except in circumstances involving a member's or employee's bad faith, gross negligence or fraud, for any act or failure to act by the member or employee. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Committee without a meeting, shall be the acts of the Committee. 6. Amendment and Termination. The Board of Directors of the Company shall have the right to modify or discontinue the Plan at any time, and to establish a trust fund -5- to ensure the payment of benefits hereunder, provided that the rights of persons entitled to payments on account of Units previously awarded shall in nowise be thereby impaired. 7. Miscellany. (a) Unless the Board of Directors takes necessary action pursuant to Section 6 hereof, this Plan is intended to be unfunded. With respect to any payments as to which a participant has a fixed and vested interest but which are not yet made to a participant by the Company, nothing contained herein shall give any such participant any rights that are greater than those of a general creditor of the Company. (b) Neither this Plan nor the grant of any award hereunder shall give any participant or other employee any right with respect to continuance of employment by the Company or any of its subsidiaries, nor shall they be a limitation in any way on the right of the Company or any subsidiary by which an employee is employed to terminate his or her employment at any time. (c) This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Illinois (without regard to applicable Illinois principles of conflict of laws). -6- EX-10.17 11 RETIREMENT PLAN FOR DIRECTORS Exhibit (10)-17 Unicom Corporation Form 10-K File No. 1-11375 UNICOM CORPORATION RETIREMENT PLAN FOR DIRECTORS I. Purpose The Unicom Corporation Retirement Plan for Directors is hereby established by Unicom Corporation (the "Company") to provide benefits for eligible members of the Company's Board of Directors as hereinafter set forth. II. Definitions The following words and phrases shall have the meanings set forth below unless a different meaning is required by the context: (a) Board: The Board of Directors of the Company. (b) Company: Unicom Corporation, a corporation organized and existing under the laws of the State of Illinois, or its successor or successors. (c) ComEd Plan: The Commonwealth Edison Company Retirement Plan for Directors, as it may be amended from time to time. (d) ComEd Service: A Director's service as a member of the Board of Directors of Commonwealth Edison Company. (e) Concurrent Service: A Director's concurrent service on the Board and as a member of the Board of Directors of Commonwealth Edison Company. (f) Director: Any member of the Board on or after September 1, 1994 who is an outside director and who is not and never has been an officer or employee of the Company or any of its subsidiaries. (g) Eligible Director: A Director who meets the eligibility requirements for retirement benefits set forth in Article III. (h) Eligible Service: A Director's (1) Unicom Service for any period after September 1, 1994, plus (2) ComEd Service, if any, for any period prior to September 1, 1994, provided, however, that any period of Concurrent Service shall be counted -2- only once (and not double-counted as a period of Unicom Service and ComEd Service) in determining Eligible Service. (i) Plan: The Unicom Corporation Retirement Plan for Directors, as it may be amended from time to time. (j) Retainer: The annual cash retainer established for members of the Board for their service as such prior to any reduction or offset therefrom as a result of ComEd Service. (k) Termination Date: The date on which an Eligible Director is no longer a Director or a director of Commonwealth Edison Company. (l) Unicom Service: A Director's service on the Board. III. Eligibility for Retirement Benefits Eligibility for retirement benefits under the Plan shall be limited to each Director who has attained at least age 65 and who thereafter, for reasons other than death, terminates Unicom Service while in good standing, provided that such Director shall have completed at least five full years of -3- Eligible Service or at least three full years of Eligible Service if such Director's Eligible Service commenced after attaining age 65. IV. Amount of Retirement Benefit Each Eligible Director shall be entitled to an annual retirement benefit, for the period provided in Article V, which shall be an amount equal to the product of (a) the Retainer as in effect when such Eligible Director's benefit payments commence, adjusted from time to time for any changes thereafter in the Retainer multiplied by (b) a fraction, the numerator of which shall be the number of years of Unicom Service and the denominator of which shall be the number of years of Eligible Service; provided, however, that in computing Unicom Service, there shall be excluded one-half of the years of Concurrent Service; and provided further, that in computing the number of years of Unicom Service, Eligible Service and Concurrent Service for the purpose of this Article IV, fractional years will be -4- rounded up to the next higher whole year. Such benefit shall be paid as hereinafter provided. V. Payment of Retirement Benefits Retirement benefit payments shall commence to be paid to an Eligible Director on the last day of the calendar quarter next following the Eligible Director's Termination Date. Subsequent benefit payments shall be made on the last day of each calendar quarter thereafter and shall be paid for a period equal to the Eligible Director's years of Eligible Service. For the purpose of determining the payment period, fractional years of Eligible Service will be rounded up to the next higher whole year. Each installment of retirement benefit payments shall be equal to one-fourth of the amount determined as provided in Article IV hereof. In the event of the Eligible Director's death after his or her Termination Date but before commencement of payments hereunder or before the Eligible Director has received all payments to which the Eligible Director is entitled hereunder, -5- the benefit payments to which the Eligible Director would have been entitled had the Eligible Director lived shall be paid in the same amount to the Eligible Director's surviving spouse, if any, using the same payment schedule and amount as would have applied if the Eligible Director had lived. If there is no surviving spouse at the death of the Eligible Director or if a surviving spouse dies before receiving any or all payments to which entitled under the Plan, the Eligible Director's benefits under the Plan shall terminate. VI. Pre-Retirement Death Benefits (a) If the Eligible Service of a Director who is eligible to retire as an Eligible Director is terminated due to death, such Director's surviving spouse, if any, shall receive the benefit to which the surviving spouse would have been entitled had the Director retired and his Termination Date occurred on the day prior to his or her death. (b) If the Eligible Service of a Director is terminated due to death prior to attaining age 65 but after -6- attaining age 62 and completing at least five full years of Eligible Service, such Director's surviving spouse, if any, shall receive the benefit to which the surviving spouse would have been entitled had such Director attained age 65 and terminated Eligible Service on the day prior to his or her death, except that (i) the amount of each installment of such benefit shall be equal to one-fourth of the amount determined as provided in Article IV hereof and (ii) the benefit shall be paid for a period equal to the Director's years of Eligible Service at the Director's date of death. (c) Payments of any benefits under subparagraphs (a) or (b) shall commence on the last day of the calendar quarter in which occurs the Director's date of death. If the Director under subparagraphs (a) or (b) leaves no surviving spouse, or if a surviving spouse dies before receiving any or all payments to which entitled under the Plan, the Director's benefits under the Plan shall terminate. -7- VII. Disability Benefits If the Eligible Service of a Director is terminated due to disability prior to attaining age 65 but after attaining age 62, such Director shall be entitled to payment of benefits, if any, under this Plan on the same basis as he or she would have been if he or she had attained age 65 prior to such termination. For purposes of this Article VII, disability shall mean a disability that prevents the Director from performing any and every duty of a member of the Board. The determination of the Compensation Committee of the Board as to whether a Director is terminated due to disability shall be final and conclusive. VIII. Financing of Benefits The Plan shall be a noncontributory, nonqualified and unfunded plan. Benefit payments under the Plan shall represent an unsecured general obligation of the Company and shall be paid by the Company from its general assets. No special fund or trust -8- shall be created, nor shall any notes or securities be issued with respect to any benefits under the Plan. IX. Forfeiture of Benefits As long as a former Director is receiving or is entitled to receive benefits under the Plan, such former Director will not directly or indirectly enter into or in any manner take part in any business or other endeavor, either as an employee, agent, independent contractor, owner or otherwise, which in any manner competes or conflicts with the business of the Company or is detrimental to the best interests of the Company, unless the Company gives its prior written consent thereto. The failure of a former Director to comply with the provisions of this Article shall result in the forfeiture of all further payments which otherwise would become due and payable under the Plan to the former Director or to his or her surviving spouse. Before any such forfeiture, the Company shall mail notice to the former Director that consideration is being given to forfeiture pursuant to this Article. On written request of the former Director -9- within sixty days following the mailing by the Company of the notice, the Compensation Committee of the Board shall afford the former Director an opportunity, at any mutually convenient time within that sixty-day period, to demonstrate to the Compensation Committee that forfeiture of payments would not be justified. X. Facility of Payment Whenever a person entitled to receive any payment under the Plan is a person under legal disability or a person not adjudicated incompetent but who, by reason of illness or mental or physical disability, is in the opinion of the Compensation Committee of the Board unable properly to manage his or her affairs, then such payments shall be paid in such of the following ways as the Compensation Committee deems best: (A) to such person directly; (b) to the legally appointed guardian or conservator of such person; (c) to some relative or friend of such person for his or her benefit; or (d) for the benefit of such person in such manner as the Compensation Committee considers advisable. Any payment made in accordance with the -10- provisions of this Article shall be a complete discharge of any liability for the making of such payment under the Plan, and the distributee's receipt shall be a sufficient discharge to the Company. XI. Administration The Plan shall be administered by the Compensation Committee of the Board, which shall have full and final authority to interpret the provisions of the Plan and to make determinations regarding the administration of the Plan. All decisions and determinations by the Compensation Committee shall be final and binding upon all parties. XII. Miscellaneous The Plan shall not affect in any way the rights of a Director under any deferred compensation agreement between the Director and the Company or any of its subsidiaries. -11- The Plan may not be cancelled by the Company upon any merger or consolidation with or acquisition of the Company by any other entity, but shall be binding upon and inure to the benefit of the successors and assigns of the Company and the heirs, executors, administrators and assigns of each Director. No person shall have any right to commute, encumber, pledge or dispose of any right to receive payments hereunder, nor shall such payments be subject to seizure, attachment or garnishment for the payments of any debts, judgments, alimony or separate maintenance obligations or be transferable by operation of law in the event of bankruptcy, insolvency or otherwise, all payments and rights hereunder being expressly declared to be nonassignable and nontransferable. The Plan may be amended from time to time or terminated by the Board at any time, but no amendment or termination may adversely affect the rights of any person then receiving benefits under the Plan or who is entitled to receive benefits under the Plan on account of a Director's prior termination of Unicom Service. -12- This Plan shall be governed by the law of the State of Illinois. -13- EX-10.18 12 RETIREMENT PLAN FOR DIRECTORS Exhibit (10)-18 Commonwealth Edison Company Form 10-K File No. 1-1839 COMMONWEALTH EDISON COMPANY RETIREMENT PLAN FOR DIRECTORS I. Purpose ----------- The Commonwealth Edison Company Retirement Plan for Directors is hereby established by Commonwealth Edison Company ("Company") to provide benefits for eligible members of the Company's Board of Directors as hereinafter set forth. II. Definitions ---------------- The following words and phrases shall have the meanings set forth below unless a different meaning is required by the context: (a) Board: The Board of Directors of the Company. (b) ComEd Service: A Director's service on the Board. (c) Company: Commonwealth Edison Company, a corporation organized and existing under the laws of the State of Illinois, or its successor or successors. (d) Concurrent Service: A Director's concurrent service on the Board and as a member of the Board of Directors of Unicom Corporation. (e) Director: Any member of the Board on or after January 1, 1987 who is an outside director and who never has been an officer or employee of the Company or any of its subsidiaries. (f) Eligible Director: A Director who meets the eligibility requirements for retirement benefits set forth in Article III. (g) Eligible Service: A Director's (1) ComEd Service for any period, plus (2) Unicom Service, if any, for any period after September 1, 1994, provided, however, that any period of Concurrent Service shall be counted only once (and not double-counted as a period of ComEd Service and Unicom Service) in determining Eligible Service. (h) Plan: The Commonwealth Edison Company Retirement Plan for Directors, as it may be amended from time to time. (i) Retainer: The annual cash retainer established for members of the Board for their service as such prior to any reduction or offset therefrom as a result of Unicom Service. -2- (j) Termination Date: The date on which an Eligible Director is no longer a Director or a director of Unicom Corporation. (k) Unicom Plan: The Unicom Corporation Retirement Plan for Directors, as it may be amended from time to time. (l) Unicom Service: A Director's service as a member of the Board of Directors of Unicom Corporation. III. Eligibility For Retirement Benefits ----------------------------------------- Eligibility for retirement benefits under the Plan shall be limited to each Director who has attained at least age 65 and who thereafter, for reasons other than death, terminates ComEd Service while in good standing, provided that such Director shall have completed at least five full years of Eligible Service or at least three full years of Eligible Service if such Director's Eligible Service commenced after attaining age 65. IV. Amount of Retirement Benefit --------------------------------- Each Eligible Director shall be entitled to an annual retirement benefit, for the period provided in Article V, which -3- shall be an amount equal to the product of (a) the Retainer as in effect when such Eligible Director's benefit payments commence, adjusted from time to time for any changes thereafter in the Retainer, multiplied by (b) a fraction, the numerator of which shall be the number of years of ComEd Service and the denominator of which shall be the number of years of Eligible Service; provided, however, that in computing ComEd Service, there shall be excluded one-half of the years of Concurrent Service; and provided further, that in computing the number of years of ComEd Service, Eligible Service and Concurrent Service for the purpose of this Article IV, fractional years will be rounded up to the next higher whole year. Such benefit shall be paid as hereinafter provided. V. Payment of Retirement Benefits ---------------------------------- Retirement benefit payments shall commence to be paid to an Eligible Director on the last day of the calendar quarter next following the Eligible Director's Termination Date. Subsequent benefit payments shall be made on the last day of each calendar quarter thereafter and shall be paid for a period equal to the Eligible Director's years of Eligible Service. For the -4- purpose of determining the payment period, fractional years of Eligible Service will be rounded up to the next higher whole year. Each installment of retirement benefit payments shall be equal to one-fourth of the amount determined as provided in Article IV hereof. In the event of the Eligible Director's death after his or her Termination Date but before commencement of payments hereunder or before the Eligible Director has received all payments to which the Eligible Director is entitled hereunder, the benefit payments to which the Eligible Director would have been entitled had the Eligible Director lived shall be paid in the same amount to the Eligible Director's surviving spouse, if any, using the same payment schedule and amount as would have applied if the Eligible Director had lived. If there is no surviving spouse at the death of the Eligible Director or if a surviving spouse dies before receiving any or all payments to which entitled under the Plan, the Eligible Director's benefits under the Plan shall terminate. -5- VI. Pre-Retirement Death Benefits ---------------------------------- (a) If the Eligible Service of a Director who is eligible to retire as an Eligible Director is terminated due to death, such Director's surviving spouse, if any, shall receive the benefit to which the surviving spouse would have been entitled had the Director retired and his Termination Date occurred on the day prior to his or her death. (b) If the Eligible Service of a Director is terminated due to death prior to attaining age 65 but after attaining age 62 and completing at least five full years of Eligible Service, such Director's surviving spouse, if any, shall receive the benefit to which the surviving spouse would have been entitled had such Director attained age 65 and terminated Eligible Service on the day prior to his or her death, except that (i) the amount of each installment of such benefit shall be equal to one-fourth of the amount determined as provided in Article IV hereof and (ii) the benefit shall be paid for a period equal to the Director's years of Eligible Service at the Director's date of death. -6- (c) Payments of any benefits under subparagraphs (a) or (b) shall commence on the last day of the calendar quarter in which occurs the Director's date of death. If the Director under subparagraphs (a) or (b) leaves no surviving spouse, or if a surviving spouse dies before receiving any or all payments to which entitled under the Plan, the Director's benefits under the Plan shall terminate. VII. Disability Benefits ------------------------- If the Eligible Service of a Director is terminated due to disability prior to attaining age 65 but after attaining age 62, such Director shall be entitled to payment of benefits, if any, under this Plan on the same basis as he or she would have been if he or she had attained age 65 prior to such termination. For purposes of this Article VII, disability shall mean a disability that prevents the Director from performing any and every duty of a member of the Board. The determination of the Compensation Committee of the Board as to whether a Director is terminated due to disability shall be final and conclusive. -7- VIII. Financing of Benefits ---------------------------- The Plan shall be a noncontributory, nonqualified and unfunded plan. Benefit payments under the Plan shall represent an unsecured general obligation of the Company and shall be paid by the Company from its general assets. No special fund or trust shall be created, nor shall any notes or securities be issued with respect to any benefits under the Plan. IX. Forfeiture of Benefits --------------------------- As long as a former Director is receiving or is entitled to receive benefits under the Plan, such former Director will not directly or indirectly enter into or in any manner take part in any business or other endeavor, either as an employe, agent, independent contractor, owner or otherwise, which in any manner competes or conflicts with the business of the Company or is detrimental to the best interests of the Company, unless the Company gives its prior written consent thereto. The failure of a former Director to comply with the provisions of this Article shall result in the forfeiture of all further payments which otherwise would become due and payable under the Plan to the -8- former Director or to his or her surviving spouse. Before any such forfeiture, the Company shall mail notice to the former Director that consideration is being given to forfeiture pursuant to this Article. On written request of the former Director within sixty days following the mailing by the Company of the notice, the Compensation Committee of the Board shall afford the former Director an opportunity, at any mutually convenient time within that sixty-day period, to demonstrate to the Compensation Committee that forfeiture of payments would not be justified. X. Facility of Payment ----------------------- Whenever a person entitled to receive any payment under the Plan is a person under legal disability or a person not adjudicated incompetent but who, by reason of illness or mental or physical disability, is in the opinion of the Compensation Committee of the Board unable properly to manage his or her affairs, then such payments shall be paid in such of the following ways as the Compensation Committee deems best: (a) to such person directly; (b) to the legally appointed guardian or conservator of such person; (c) to some relative or friend of such person for his or her benefit; or (d) for the benefit of -9- such person in such manner as the Compensation Committee considers advisable. Any payment made in accordance with the provisions of this Article shall be a complete discharge of any liability for the making of such payment under the Plan, and the distributee's receipt shall be a sufficient discharge of the Company. XI. Administration ------------------- The Plan shall be administered by the Compensation Committee of the Board, which shall have full and final authority to interpret the provisions of the Plan and to make determinations regarding the administration of the Plan. All decisions and determinations by the Compensation Committee shall be final and binding upon all parties. XII. Miscellaneous ------------------- The Plan shall not affect in any way the rights of a Director under any deferred compensation agreement between the Director and the Company. -10- The Plan may not be cancelled by the Company upon any merger or consolidation with or acquisition of the Company by any other entity, but shall be binding upon and inure to the benefit of the successors and assigns of the Company and the heirs, executors, administrators and assigns of each Director. No person shall have any right to commute, incumber, pledge or dispose of any right to receive payments hereunder, nor shall such payments be subject to seizure, attachment or garnishment for the payments of any debts, judgments, alimony or separate maintenance obligations or be transferable by operation of law in the event of bankruptcy, insolvency or otherwise, all payments and rights hereunder being expressly declared to be nonassignable and nontransferable. The Plan may be amended from time to time or terminated by the Board at any time, but no amendment or termination may adversely affect the rights of any person then receiving benefits under the Plan or who is entitled to receive benefits under the Plan on account of a Director's prior termination of Eligible Service. This Plan shall be governed by the law of the State of Illinois. -11- EX-10.19 13 UNICOM OUTSIDE DIRECTOR STOCK AWARD PLAN Exhibit (10)-19 Unicom Corporation Form 10-K File No. 1-11375 UNICOM CORPORATION ------------------ OUTSIDE DIRECTOR STOCK AWARD PLAN --------------------------------- 1. Purpose: Unicom Corporation (the "Company") wishes to establish an Outside Director Stock Award Plan (the "Plan"). The purpose of the Plan is to increase the proprietary interest of directors who are not employees of the Company or any of its subsidiaries ("Outside Directors") through the grant of shares of Common Stock, without par value ("Common Stock"), of the Company. 2. Administration: The Board of Directors of the Company (the "Board") shall administer and interpret the provisions of this Plan. All determinations of the Board with respect to the Plan shall be final and binding upon all persons. 3. Grants: As of the beginning of the month immediately following each Annual Meeting of Shareholders of the Company, beginning with the meeting to be held in 1995 (each a "Grant Date"), each Outside Director then in office shall be granted 300 shares of Common Stock. In the case of an Outside Director who is elected or appointed as a Director of the Company other than at the Annual Meeting of Shareholders in any year, such Outside Director shall be granted 300 shares of Common Stock promptly following such election or appointment. 4. Terms and Conditions: (a) Shares of Common Stock to be granted pursuant to the Plan will be purchased on behalf of the recipient in the open market in accordance with applicable rules and regulations. (b) No shares of Common Stock received under the Plan may be sold, assigned, transferred or otherwise disposed of for at least six months after the applicable Grant Date, except in the event of death or disability of the Outside Director. -2- (c) A grant of Common Stock hereunder shall be disclosed in the Company's proxy statement for the year in which the grant was made; and the Outside Director, as of the Grant Date of such Common Stock, shall become the record holder of such Common Stock and shall immediately become entitled to all the rights and privileges accorded such Common Stock. In addition, such Common Stock shall be shown on the appropriate form for reporting beneficial ownership of securities pursuant to Section 16 of the Securities Exchange Act of 1934, as amended. (d) The value of any Common Stock granted to an Outside Director under this Plan is not intended to be taken into account, and consequently shall be excluded, in determining the amount of any retirement benefit otherwise payable to such Outside Director under any of the Company's retirement plans, including the Commonwealth Edison Company Retirement Plan for Directors and any similar plan hereafter adopted for the Directors of the Company. The acceptance by an Outside Director of any grant of Common Stock under this Plan shall constitute such Outside Director's agreement to, and confirmation of, such exclusion. (e) The Board shall appropriately adjust the number of shares for which grants may be made under this Plan in the event of any reorganization, recapitalization, stock split, reverse stock split, stock dividend, exchange or combination of shares, merger, consolidation, rights offering, or other relevant changes in capitalization. 5. Regulatory Compliance: The delivery of any shares under this Plan may be postponed by the Company for such period as may be required to comply with Federal or state securities laws, national securities exchange requirements or any other law or regulation applicable to the delivery of such shares. The Company shall not be obligated to deliver any shares under this Plan if such delivery shall constitute a violation of any provision of any law or any regulation of any governmental authority or any national securities exchange. In addition, the shares, when delivered, may be subject to conditions, including transfer restrictions, if such conditions are required to comply with applicable securities law. -3- 6. No Right to Continue as Outside Director: Nothing contained in this Plan shall be construed as conferring upon an Outside Director any right to continue to be associated with the Company as an Outside Director or in any other capacity. 7. Amendment or Discontinuance: The Board may amend, rescind or terminate this Plan as shall in its judgment be advisable. 8. Taxes: The Company shall not be required to, and shall not, withhold or otherwise pay on behalf of any Outside Director any Federal, state, local or other taxes arising in connection with a grant of Common Stock under this Plan. The payment of any such taxes shall be the sole responsibility of each Outside Director. 9. Governing Law: This Plan and all determinations made and actions taken pursuant hereto shall be governed by the internal laws of the State of Illinois, except as Federal law may apply. EX-10.27 14 MR. SKINNER EMPLOYMENT AGREEMENT LTR Commonwealth Edison Company Exhibit (10)-27 One First National Plaza Commonwealth Edison Company P.O. Box 767 Form 10-K File No. 1-1839 Chicago, IL 60690-0767 May 31, 1995 [ComEd logo] Mr. Samuel K. Skinner President Commonwealth Edison Company P. O. Box 767 Chicago, Illinois 60690-0767 Dear Sam: The purpose of this letter is to confirm our agreement with respect to your employment as President of Commonwealth Edison Company and Unicom Corporation. We have agreed that the calculation of the "SERP benefit" as set forth in paragraph number one of the letter agreement between Commonwealth Edison and you dated December 16, 1992, will be modified to refer to the "highest annual earnings" instead of "highest annual base pay." For this purpose, "highest annual earnings" means the highest base pay rate and any incentive pay that would be taken into account under the Commonwealth Edison Company Service Annuity System for the applicable period. All other terms of the December 16, 1992 letter agreement remain unaffected by this change. If the above is consistent with the agreements reached in our discussion, please countersign in the space provided below. Sincerely, James J. O'Connor James J. O'Connor Chairman and Chief Executive Office Samuel K. Skinner Samuel K. Skinner President EX-10.28 15 MR. MULLIN EMPLOYMENT AGREEMENT LTR Commonwealth Edison Company Exhibit (10)-28 One First National Plaza Commonwealth Edison Company P.O. Box 767 Form 10-K File No. 1-1839 Chicago, IL 60690-0767 [ComEd logo] November 14, 1995 Mr. Leo F. Mullin 548 Maple Street Winnetka, Illinois 60093 Dear Mr. Mullin: Let me try to summarize the following points related to the agreement we reached with respect to your employment as Vice Chairman of Unicom Corporation and its subsidiary, Commonwealth Edison (collectively the "Company"). 1. It is anticipated that you will be elected (i) as Vice Chairman effective upon commencement of your employment, and (ii) as a director of the Company at our Board meeting on December 13, 1995 or sooner by special meeting of the Board. Reporting to me, your initial duties and responsibilities will include strategic planning, financial and our unregulated businesses. 2. You will be placed on our payroll effective December 1, 1995, at a base salary of $577,000 per year. You will receive an employment commencement payment in the amount of $275,000 (less withholding and applicable employment taxes) on your first day of full-time employment with the Company. You will also be entitled for 1996 and subsequent years to annual bonuses to be structured and earned on the same basis as any annual bonus payable to the Chairman of the Board or the President of the Company, or both, as determined by the Board of Directors. For calendar year 1996, you will receive a guaranteed bonus under the preceding sentence of not less than 50% of the foregoing base salary. 3. In 1996, you will receive the following performance units based on the following percentages of your Base Pay as defined under our 1993 Long-Term Incentive Plan (the "Incentive Plan"): a one-year unit based on 25% of your Base Pay; a two-year unit based on 25% of your Base Pay; and a three-year unit based on 50% of your Base Pay. Thereafter, you will be awarded three- year performance units annually based on at least 50% of your Base Pay. Mr. Leo F. Mullin November 14, 1995 Page 2 4. As we have discussed, it is anticipated that an additional long-term incentive program will be implemented by our Compensation Committee early in 1996. You will be eligible to receive an award under that program. As we also discussed, it is my intention to recommend to the Compensation Committee that you be granted an award of dividend-paying stock options in 1996, 1997 and 1998. 5. You will receive vacation and other benefits normally provided to senior executives of the Company. 6. Your retirement benefit will equal the annual retirement benefit that would have been payable under the Company's Service Annuity System Plan (including payments under the unfunded equalization benefit plan) as now in effect for employees who retire at age 60 computed on the assumptions that (i) you have 20 years of service on your date of employment and accrue one additional year of service for each year of employment and (ii) your compensation is the average of your four (4) highest consecutive annual earnings years (base pay and incentive compensation earned), determined as if you had been eligible to receive benefits under such Plan. 7. In order to provide this total benefit, you will receive a supplemental executive retirement payment ("SERP") determined as follows: A. Benefit payments under Service Annuity System Plan (including payment under the unfunded equalization benefit plan) to the extent you are eligible therefor; B. Social Security Supplemental paid by the Company until age 65; C. SERP (the difference between the amount in 6 above and the sum of 7.A and 7.B). 8. The SERP will be payable on termination of employment, provided that no SERP or Service Annuity System benefits will be available prior to completion of five (5) years of employment with the Company (except as otherwise provided in 11 below) and none will be paid during any period in which you are employed at the Company or receiving severance payments. Mr. Leo F. Mullin November 14, 1995 Page 3 9. You will have the option to receive the SERP as a regular annuity or as a martial annuity with surviving spouse benefit. Appropriate adjustments will be made in computing annual SERP benefit if the marital option is elected. In the event of your death during employment, your spouse will be immediately entitled to the surviving spouse benefit. 10. In the event (A) the Company terminates your employment for reasons other than death, fraud or willful misconduct, or (B) you elect to terminate your employment because the Company (i) materially reduces your status or responsibilities in the Company without your consent, such as by appointing you to a lesser office, having you report to anyone other than the Chairman of the Board or the Board and its committees or reducing your responsibilities from those set forth in 1 above, (ii) reduces or fails to pay the salary, bonus and other payments provided for in 2 above or (iii) fails to award or, to the extent earned, to pay, the bonus and incentive compensation provided for in 3 and 4 above, you will be entitled to a severance payment equal to two years of your then current base salary and of your most recent annual bonus to be paid out in equal bi-weekly installments over a three-year period. All other health and life insurance benefits will continue during the three-year period of the payments. If full-time employment is obtained during the post-employment period, the Company will pay you a lump sum payment equal to one-half (50%) of the remaining payments within 30 days of receiving notice of such employment, whereupon any further severance payments will cease. Health and life insurance benefits will continue during any customary waiting period under such new employer's plans (including any period for preexisting conditions), but in no event longer than three years after the date of termination. 11. You will be entitled to receive SERP benefits before you have five (5) years of employment with the Company if either the Company terminates your employment for reasons other than death, fraud, or willful misconduct, or you terminate your employment for one of the reasons described in 10 above. No SERP or Service Annuity System Benefits, however, will be paid to you during any time you are receiving severance payments. You will also receive a pro rata annual bonus at target level for the year of termination of employment for one of the reasons entitling you to a severance payment in 10 above, to be paid at the time annual bonuses are paid, and your entitlement to the incentive compensation described in 3 and 4 above shall be determined as provided in the applicable plan or award agreement. Mr. Leo F. Mullin November 14, 1995 Page 4 12. All provisions of the SERP must remain unfunded to insure that no tax is due because of constructive receipt. Future payments are unsecured in regards to payment and you would not receive benefits if the Company us unable to make payment. If the above is consistent with the agreements reached in our discussion, please countersign in the space provided below. We very much look forward to you being a part of the Unicom and Commonwealth Edison team. Sincerely, James J. O'Connor James J. O'Connor Chairman ACCEPTED and AGREED this 14 day of November, 1995. - -- -------- Leo F. Mullin - ------------- EX-10.30 16 COMM ED EXCESS BENEFIT SAVINGS PLAN Exhibit (10)-30 Commonwealth Edison Company Form 10-K File No. 1-1839 AMENDMENT NO. 1 TO COMMONWEALTH EDISON EXCESS BENEFIT SAVINGS PLAN --------------------------- WHEREAS, Commonwealth Edison Company, an Illinois corporation (the "Company"), has heretofore adopted and maintains a non-qualified deferred compensation plan intended to provide benefits that would have been provided under the Commonwealth Edison Employee Savings and Investment Plan (the "ESIP") but for certain limits imposed by the Internal Revenue Code, designated the Commonwealth Edison Excess Benefit Savings Plan (the "Plan"); WHEREAS, the ESIP was amended and restated, effective January 1, 1995; and WHEREAS, the Company desires to amend the Plan to reflect certain changes in the ESIP definitions made by such amendment and restatement and to provide additional deferrals equal to the amount that would have been credited to a Participant's Before-Tax Contributions Accounts pursuant to Section 8.1(f) the ESIP on account of dividends distributed to such Participant but for the Dollar Limit or the Before-Tax Contribution Limit. NOW, THEREFORE, pursuant to the power of amendment contained in Section 8 of the Plan, the Plan is hereby amended, effective as of January 1, 1995, as follows: 1. All references in the Plan to the term "Compensation Conversion Account" shall be amended to the term "Before-Tax Contributions Account." 2. Sections 2(a), (b), (c) and (d) are amended to read as follows: (a) The third sentence of subdivision (10) of Article 2 of the ESIP, relating to the Compensation Limit; (b) Section 4.2 of the ESIP, relating to the dollar limit; (c) Section 4.4 of the ESIP, relating to the Before-Tax Contribution Limit and the Matching Contribution Limit; and (d) Section 7.4 relating to the Section 415 limit. -2- 3. Section 2 is further amended by substituting "Section 4.1" for "Section 4.2" in each place where the latter term appears therein. 4. Section 2 is further amended by adding the following new sentence after the second sentence thereof: Each such election shall be deemed to authorize the Participant's compensation by an amount equal to the amount that would have been credited to the Participant's Before-Tax Contributions Account pursuant to the deemed election contained in the fourth sentence of Section 3.2 of the ESIP (providing for additional Before-Tax Contributions equal to dividends distributed to the Participant pursuant to Section 8.1(f) of the ESIP) but for the provisions described in clauses (a), (b), (c) and (d) of the preceding sentence. 5. Section 3 is amended by substituting "Section 7.3(a)" for "Section 4.3" each time the latter term appears therein. 6. Section 7 is amended by substituting "Section 8.5" for "Section 7.6" appearing in the last sentence thereof. 7. Section 10 is amended by substituting "Article II" for "Article IX" appearing therein. -3- 8. Section 14 is amended by substituting the terms "Sections 11.4 and 11.5" and "Section 14.7" for the terms "Section 10.5" and "Section 10.6," respectively, appearing therein. IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officers on this 24th day of May, 1995. COMMONWEALTH EDISON COMPANY By: James J. O'Connor ------------------------------------- Title: Chairman ---------------------------------- ATTEST: David A. Scholz - -------------------------------------- Title: Secretary ------------------------------- -4- EX-10.31 17 UNICOM STOCK BONUS DEFERRAL PLAN Exhibit (10)-31 Unicom Corporation Form 10-K File No. 1-11375 Commonwealth Edison Company Form 10-K File No. 1-1839 UNICOM CORPORATION STOCK BONUS DEFERRAL PLAN 1. Purpose. The purpose of this Unicom Corporation Stock Bonus Deferral Plan (the "Plan") is to provide to certain key employees of Unicom Corporation ("Unicom") and participating affiliates the opportunity to defer the receipt of all the stock portion of their annual awards, all or any portion of their long- term awards, or both, if any, payable pursuant to the Unicom Corporation Long- Term Incentive Plan (the "Incentive Plan"). 2. Eligibility. Any employee of Unicom or its affiliates who on the applicable election due date described in Section 3(b) is a participant in the Incentive Plan and who is one of the following: (A) an officer of Unicom or any affiliate (including, but not limited to, Commonwealth Edison Company), (B) included on the "Executive" payroll of his or her employer or (C) classified as management personnel in job grade 12 or above shall be eligible to participate in this Plan. For purposes of the preceding sentence, the classification of an employee shall be based upon classifications used by Unicom or Commonwealth Edison Company, or if a participant's employer maintains a system of pay classification different from that described above, a classification determined by such employer and Unicom to be comparable to the above-described eligible classifications. 3. Participants; Deferral Elections. (a) Participants. Any eligible employee may become a participant in this Plan by making an election pursuant to Section 3(b). (b) Timing of Elections. On or before the election due date set forth below, while this Plan is in effect, a participant may elect (i) to defer the receipt of all or a portion of the stock portion of any incentive award and (ii) to defer all or a portion of the cash portion of any Long-Term Performance Unit Award for Executive and Group Level Employees (the "Long-Term Performance Unit Award"), provided, however, that if any cash portion is so deferred, such election shall be treated as a request to convert such portion into shares of the common stock of Unicom ("Unicom Stock") (determined as provided in the Long-Term Performance Unit Award for the stock portion of the payment amount) and such shares shall be deliverable in lieu of any such cash upon the expiration of any such deferral election (as such election may be extended as hereinafter provided). For purposes of this Plan, the term "stock portion" means the portion of an incentive award that, pursuant to the terms of the Incentive Plan or such award, is payable in shares of Unicom Stock. Any such election shall become irrevocable on December 31 of the calendar year in which made. The election due date shall be (i) for all awards payable in 1996, December 31, 1995, (ii) for Long-Term Performance Unit Awards payable in subsequent years, March 31 of the preceding year, (iii) for annual awards payable in subsequent years, September 30 of the preceding year and (iv) for an individual who first becomes an eligible employee after an applicable election due date, the 30th day after the date of eligibility. (c) Effect of Elections. Subject to Sections 3(d) and (e), an election made pursuant to Section 3(b) shall provide that the stock portion of the incentive award subject to such election shall not be paid to the participant at the time provided pursuant to the Incentive Plan or such award, as the case may be, but shall instead be paid to the participant on the third anniversary of the date on which such payment would have been made but for such deferral election. (d) Subsequent payment elections. Notwithstanding the foregoing, at any time prior to the calendar year in which the stock portion of an award is otherwise payable pursuant to a deferral election made under Section 3(b) or a subsequent payment election pursuant to this Section 3(d), a participant may elect to defer further all or a portion of the payment of such award until the third anniversary of the date on which such stock portion would have been payable but for the participant's election under Section 3(b) or the participant's last election under this Section 3(d), as the case may be. -2- (e) Termination of Employment Election. Notwithstanding the provisions of Sections 3(b), (c) and (d), a participant may at any time elect to have any or all the stock portions subject to deferral pursuant to Sections 3(c) or (d) paid as soon as is practicable following the participant's termination of employment with Unicom and its affiliates, provided, however, that an election pursuant to this Section 3(e) shall not be effective unless made prior to the calendar year in which the participant's termination of employment occurs. 4. Deferred Stock Accounts. Unicom (or in the case of a Participant employed by an affiliate of Unicom, such affiliate) shall establish on its books an account (a "Deferred Stock Account") on behalf of each participant who has made a deferral election pursuant to Section 3(b). Each Deferred Stock Account shall be credited with the number of shares of Unicom Stock subject to each such deferral election made by such participant. Each such account shall also be credited with an amount ("dividend equivalents") equal to the dividends declared, from time to time, on a number of shares of Unicom Stock equal to the number of shares credited to such Deferred Stock Account. Unless the participant has elected, in the time and manner set forth in Section 5 below to receive current payment in respect of such dividend equivalents, such dividend equivalents shall be credited to the participant's Deferred Stock Account as a number of additional shares of Unicom Stock determined by dividing the aggregate amount of such dividends by the closing per share price of Unicom Stock, as reported on the New York Stock Exchange, on the date such dividend equivalents are to be credited to the participant's Deferred Stock Account. Deferred Stock Accounts shall be for bookkeeping purposes only, and neither Unicom nor any of its affiliates shall be obligated to set aside or segregate any actual shares of Unicom Stock or any other assets in respect of such accounts. 5. Election to Receive Current Payment of Dividend Equivalents. Not later than December 31 of a calendar year, each participant may elect to receive from Unicom (or in the case of a participant employed by an affiliate of Unicom, such affiliate) current payment of an amount equal to the dividend equivalents allocable to the Participant's Deferred Stock Account during all subsequent calendar years. Any such election may be revoked at -3- any time, but such revocation shall not be effective until the calendar year following the year in which such revocation is made. 6. Distribution. Distribution shall be made at such time as specified in the participant's election pursuant to Section 3 in the form of whole shares of Unicom Stock and cash in lieu of any fractional share (determined by reference to the closing price per share of Union Stock, as reported on the New York Stock Exchange on the business day immediately preceding the date of distribution). 7. Beneficiaries. If a participant shall die while any shares of Unicom Stock remains credited to the Deferred Stock Account established on his or her behalf pursuant to Section 4, such amount shall be distributed as provided in Section 6 to the beneficiary or beneficiaries as the participant may, from time to time, designate in writing delivered to the Committee (as defined in Section 10 below). A participant may revoke or change his or her beneficiary designation at any time in writing delivered to the Committee. If a participant does not designate a beneficiary under this Plan, or if no designated beneficiary survives the Participant, the balance of the Participant's Deferred Stock Account shall be distributed to the person or persons entitled to his account under Section 7.6 of the Commonwealth Edison Savings and Investment Plan (or who would be so entitled if there were then an account on behalf of the participant under such plan). 8. Amendment and Termination. This Plan may be amended or terminated at any time by the Board of Directors of Unicom (or a duly authorized committee thereof), except that no such amendment or termination shall reduce or otherwise adversely affect the rights of participants in respect of amounts credited to their Deferred Stock Accounts as of the date of such amendment or termination. 9. Application of ERISA. (a) Plan Not Funded. This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and -4- Department of Labor Regulation (S) 2520.104-23. This Plan shall not be a funded plan, and neither Unicom Corporation nor any of its affiliates shall be under any obligation to set aside any funds for the purpose of making payments under this Plan. Any payments hereunder shall be made out of the general assets of Unicom and its affiliates. (b) Trust. Unicom shall establish a trust subject to sections 671, et. seq., of the Internal Revenue Code of 1986, as amended, to hold and administer shares of Unicom Stock or other assets for the purposes of satisfying the obligations of Unicom and its affiliates under this Plan. Neither the establishment of, or the contribution of Unicom Stock or other assets to, any such trust shall relieve Unicom or its affiliates hereunder, but such liabilities shall be reduced to the extent of any assets paid by such trust to a participant. 10. Administration. The Corporate Governance and Compensation Committee of the Board of Directors of Unicom shall be charged with the administration of this Plan and shall have the same powers and duties, and shall be subject to the same limitations, as are described in the Incentive Plan. 11. Nonassignment of Benefits. It shall be a condition of the payment of benefits under this Plan that neither such benefits nor any portion thereof shall be assigned, alienated or transferred to any person voluntarily or by operation of any law, including any assignment, division or awarding of property under state domestic relations law (including community property law). If any person shall endeavor or purport to make any such assignment, alienation or transfer, the amount otherwise provided hereunder which is the subject of such assignment, alienation or transfer shall cease to be payable to any person. 12. No Guaranty of Employment. Nothing contained in this Plan shall be construed as a contract of employment between any employer and any employee or as conferring a right on any employee to be continued in the employment of any employer. 13. Adoption By Affiliates. Any corporation which is affiliated with Unicom may, with the consent of Unicom, adopt -5- this Plan in respect of its eligible employees by delivery to Unicom of a resolution of its board of directors or duly authorized committee to such effect, which resolution shall specify the first calendar year for which this Plan shall be effective in respect of the eligible employees of such affiliate. 14. Miscellaneous. (a) FICA Taxes. For each calendar year in which a participant's compensation is reduced by reason of elections made under this Plan, such participant's employer shall withhold from the participant's compensation the taxes imposed upon the participant pursuant to section 3121 of the Code in respect of the amount by which the participant's compensation is so reduced and the related amount credited to his or her Deferred Stock. (b) Successors and Assigns. The provisions of this Plan shall bind and inure to the benefit of each employer and its successors and assigns, as well as each Participant and his or her beneficiaries and successors. IN WITNESS WHEREOF, Unicom Corporation has caused this instrument to be executed in its name and its corporate seal to be hereunder affixed on this 15th day of December, 1995. UNICOM CORPORATION By: John C. Bukovski ----------------------------- Title: Vice President --------------------------- ATTEST: David A. Scholz ------------------------------- Title: Secretary ------------------------ -6- EX-12 18 COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES Exhibit (12) Commonwealth Edison Company Form 10-K File No. 1-1839 Commonwealth Edison Company and Subsidiary Companies Consolidated ----------------------------------------------------------------- Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges and Preferred and Preference Stock Dividend Requirements ---------------------------------------------------- (Thousands of Dollars)
Twelve Months Ended -------------------------- Line December 31, December 31, No. 1994 1995 - ---- ------------ ------------ 1 Net income before extraordinary item $ 423,946 $ 737,176 ---------- ---------- 2 Net provisions for income taxes and investment tax credits deferred 3 charged to- 4 Operations $ 300,764 $ 503,519 5 Other income (23,062) (7,685) ---------- ---------- 6 $ 277,702 $ 495,834 ---------- ---------- 7 Fixed charges- 8 Interest on debt $ 621,909 $ 589,217 9 Estimated interest component of nuclear fuel and 10 other lease payments, rentals and other interest 64,885 73,003 11 Amortization of debt discount, premium and expense 22,804 22,738 12 Preferred securities dividend requirements of subsidiary trust - 4,428 ---------- ---------- 13 $ 709,598 $ 689,386 ---------- ---------- 14 Preferred and preference stock dividend requirements- 15 Provisions for preferred and preference stock dividends $ 64,927 $ 69,961 16 Taxes on income required to meet provisions for 17 preferred and preference stock dividends 42,854 45,945 ---------- ---------- 18 $ 107,781 $ 115,906 ---------- ---------- 19 Fixed charges and preferred and preference stock 20 dividend requirements $ 817,379 $ 805,292 ---------- ---------- 21 Earned for fixed charges and preferred and preference stock 22 dividend requirements $1,411,246 $1,922,396 ---------- ---------- 23 Ratios of earnings to fixed charges (line 22 divided by line 13) 1.99 2.79 ==== ==== 24 Ratios of earnings to fixed charges and preferred and preference 25 stock dividend requirements (line 22 divided by line 20) 1.73 2.39 ==== ====
EX-21.1 19 SUBSIDIARIES OF UNICOM Exhibit (21)-1 Unicom Corporation Form 10-K File No. 1-11375 Unicom Corporation Subsidiaries of the Company --------------------------- State or Jurisdiction in Which Name Incorporated - -------------------------------------------------- ------------ Commonwealth Edison Company* Illinois Commonwealth Edison Company of Indiana, Inc.* Indiana ComEd Financing I* Delaware Commonwealth Research Corporation Illinois Concomber, Ltd. Bermuda Cotter Corporation New Mexico Edison Development Company Delaware Edison Development Canada Inc. Canada Unicom Enterprises Inc.* Illinois Unicom Thermal Technologies Inc.* Illinois Unicom Thermal Technologies Boston Inc.* Delaware Unicom Technology Development Inc.* Illinois Unicom Resources Inc.* Illinois *Included in the consolidated financial statements. EX-21.2 20 SUBSIDIARIES OF COMMONWEALTH EDISON Exhibit (21)-2 Commonwealth Edison Company Form 10-K File No. 1-1839 Commonwealth Edison Company Subsidiaries of the Company --------------------------- State or Jurisdiction in Which Name Incorporated - --------------------------------------------- ------------ Commonwealth Edison Company of Indiana, Inc.* Indiana ComEd Financing I* Delaware Edison Development Company Delaware Cotter Corporation New Mexico Commonwealth Research Corporation Illinois Concomber, Ltd. Bermuda Edison Development Canada Inc. Canada * Included in the consolidated financial statements. EX-23.1 21 CONSENT OF EXPERTS FOR UNICOM Exhibit (23)-1 Unicom Corporation Form 10-K File No. 1-11375 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our report dated January 26, 1996 on Unicom Corporation and subsidiary companies' consolidated financial statements as of and for the year ended December 31, 1995 (Report), included in Unicom Corporation's Current Report on Form 8-K dated January 26, 1996, to the inclusion in this Form 10-K of our report dated January 26, 1996, on the supplemental schedule of Unicom Corporation as of and for the year ended December 31, 1995, and to the incorporation of such reports into Unicom Corporation's previously filed prospectuses dated March 18, 1994, constituting part of Form S-4 Registration Statement File No. 33-52109, as amended (relating to Common Stock of Unicom Corporation), as further amended by Post-Effective Amendment No. 1 on Form S-8 (relating to Commonwealth Edison Company's Employee Savings and Investment Plan) and Post-Effective Amendment No. 2 on Form S-8 (relating to Unicom Corporation's Employee Stock Purchase Plan), Form S-8 Registration Statement File No. 33-56991 (relating to Unicom Corporation's Long- Term Incentive Plan) and Form S-4 Registration Statement File No. 333-01003 (relating to the common stock of Unicom Corporation). We also consent to the application of our Report, incorporated by reference in this Form 10-K, to Commonwealth Edison Company and subsidiary companies' ratios of earnings to fixed charges and the ratios of earnings to fixed charges and preferred and preference stock dividend requirements for each of the years ended December 31, 1995, 1994 and 1993 appearing in Exhibit 99 of Unicom Corporation's Current Report on Form 8-K dated January 26, 1996. ARTHUR ANDERSEN LLP Chicago, Illinois March 28, 1996 EX-23.2 22 CONSENT OF EXPERTS FOR COMMONWEALTH EDISON Exhibit (23)-2 Commonwealth Edison Company Form 10-K File No. 1-1839 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our report dated January 26, 1996, on Commonwealth Edison Company and subsidiary companies' consolidated financial statements as of and for the year ended December 31, 1995 (Report), included in Commonwealth Edison Company's Current Report on Form 8-K dated January 26, 1996, to the inclusion in this Form 10-K of our report dated January 26, 1996, on the supplemental schedule of Commonwealth Edison Company as of and for the year ended December 31, 1995, and to the incorporation of such reports into Commonwealth Edison Company's previously filed prospectuses as follows: (1) prospectus dated August 21, 1986, constituting part of Form S-3 Registration Statement File No. 33-6879, as amended (relating to the Company's Debt Securities and Common Stock); (2) prospectus dated January 7, 1994, constituting part of Form S-3 Registration Statement File No. 33-51379 (relating to the Company's Debt Securities and Cumulative Preference Stock); and (3) prospectus dated September 19, 1995, constituting part of Amendment No. 1 to Form S-3 Registration Statement File No. 33-61343, as amended (relating to Company- Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust). We also consent to the application of our Report, incorporated by reference in this Form 10-K, to the ratios of earnings to fixed charges and the ratios of earnings to fixed charges and preferred and preference stock dividend requirements for each of the years ended December 31, 1995, 1994 and 1993 appearing in Exhibit 99 of Unicom Corporation's Current Report on Form 8-K dated January 26, 1996. ARTHUR ANDERSEN LLP Chicago, Illinois March 28, 1996 EX-24.1 23 UNICOM CORP. POWERS OF ATTORNEY Exhibit(24)-1 Unicom Corporation Form 10-K File No. 1-11375 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Unicom Corporation, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Edward A. Brennan ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that EDWARD A. BRENNAN, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder -------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Unicom Corporation, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. James W. Compton ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that JAMES W. COMPTON, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder ------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Unicom Corporation, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, her true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Sue L. Gin ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that SUE L. GIN, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that she signed and delivered said instrument as her free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder ------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Unicom Corporation, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Edgar D. Jannotta ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that EDGAR D. JANNOTTA, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Unicom Corporation, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. George E. Johnson ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that GEORGE E. JOHNSON, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder -------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Unicom Corporation, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Edward A. Mason ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that EDWARD A. MASON, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder -------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director and Officer of Unicom Corporation, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR and DAVID A. SCHOLZ and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director and Officer, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Leo F. Mullin ------------------------------- STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that LEO F. MULLIN, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director and Officer of Unicom Corporation, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR and DAVID A. SCHOLZ and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director and Officer, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Samuel K. Skinner ------------------------------- STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that SAMUEL K. SKINNER, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder -------------------------- Notary Public [Notary Public Seal] EX-24.2 24 COMMONWEALTH EDISON POWERS OF ATTORNEY Exhibit (24)-2 Commonwealth Edison Company Form 10-K File No. 1-1839 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Commonwealth Edison Company, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Edward A. Brennan ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that EDWARD A. BRENNAN, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Commonwealth Edison Company, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. James W. Compton ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that JAMES W. COMPTON, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Commonwealth Edison Company, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, her true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Sue L. Gin ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that SUE L. GIN, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that she signed and delivered said instrument as her free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Commonwealth Edison Company, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Edgar D. Jannotta ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that EDGAR D. JANNOTTA, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Commonwealth Edison Company, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. George E. Johnson ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that GEORGE E. JOHNSON, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder ---------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director of Commonwealth Edison Company, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR, SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Edward A. Mason ------------------------------ STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that EDWARD A. MASON, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director and Officer of Commonwealth Edison Company, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR and DAVID A. SCHOLZ and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director and Officer, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Leo F. Mullin ------------------------------- STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that LEO F. MULLIN, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director and Officer of Commonwealth Edison Company, an Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR and DAVID A. SCHOLZ and each of them, his true and lawful attorneys and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director and Officer, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, to be filed with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; hereby granting to such attorneys and agents, and each of them, full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them, may do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of March, 1996. Samuel K. Skinner ------------------------------- STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) I, Mary T. Snyder, a Notary Public in and for said County, in the State aforesaid, DO HEREBY CERTIFY that SAMUEL K. SKINNER, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered said instrument as his free and voluntary act, for the uses and purposes therein set forth. GIVEN under my hand and notarial seal this 14th day of March, 1996. Mary T. Snyder --------------------------- Notary Public [Notary Public Seal] EX-99.1 25 UNICOM FORM 8-K Exhibit (99)-1 Unicom Corporation Form 10-K File No. 1-11375 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 26, 1996 Unicom Corporation (Exact name of registrant as specified in its charter) Illinois 1-11375 36-3961038 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 37th Floor, 10 South Dearborn Street, Post Office Box A-3005, Chicago, Illinois 60690-3005 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 394-7399 The purpose of this Current Report is to file certain financial information regarding the Registrant (Unicom Corporation) and its subsidiaries. Such financial information is set forth in the exhibits to this Current Report. Item 5. Other Events - ------- ------------ Exhibits -------- (23) Consent of Independent Public Accountants (27) Financial Data Schedule of Unicom Corporation (99) Unicom Corporation and Subsidiary Companies - Certain Financial Information as of and for the Year Ended December 31, 1995: --Summary of Selected Consolidated Financial Data --Price Range and Cash Dividends Paid Per Share of Common Stock --1995 Consolidated Revenues and Sales --Management's Discussion and Analysis of Financial Condition and Results of Operations --Report of Independent Public Accountants --Statements of Consolidated Income --Consolidated Balance Sheets --Statements of Consolidated Capitalization --Statements of Consolidated Retained Earnings --Statements of Consolidated Cash Flows --Notes to Financial Statements -2- SIGNATURE Pursuant to the requirements 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. UNICOM CORPORATION (Registrant) By: David A. Scholz ----------------------- David A. Scholz Secretary Date: February 9, 1996 -3- EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ---------------------- (23) Consent of Independent Public Accountants (27) Financial Data Schedule of Unicom Corporation* (99) Unicom Corporation and Subsidiary Companies - Certain Financial Information as of and for the Year Ended December 31, 1995: --Summary of Selected Consolidated Financial Data --Price Range and Cash Dividends Paid Per Share of Common Stock --1995 Consolidated Revenues and Sales --Management's Discussion and Analysis of Financial Condition and Results of Operations --Report of Independent Public Accountants --Statements of Consolidated Income --Consolidated Balance Sheets --Statements of Consolidated Capitalization --Statements of Consolidated Retained Earnings --Statements of Consolidated Cash Flows --Notes to Financial Statements *Previously filed and incorporated by reference to Unicom Corporation's Form 8-K Current Report dated January 26, 1996. Exhibit (23) Unicom Corporation Form 8-K File No. 1-11375 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference of our report dated January 26, 1996 on Unicom Corporation and subsidiary companies' consolidated financial statements as of and for the year ended December 31, 1995, included as an Exhibit to this Form 8-K Current Report of Unicom Corporation dated January 26, 1996, into Unicom Corporation's previously filed prospectuses dated March 18, 1994, constituting part of Form S-4 Registration Statement File No. 33-52109, as amended (relating to Common Stock of Unicom Corporation), as further amended by Post-Effective Amendment No. 1 on Form S-8 (relating to Commonwealth Edison Company's Employee Savings and Investment Plan) and Post-Effective Amendment No. 2 on Form S-8 (relating to Unicom Corporation's Employee Stock Purchase Plan), and Form S-8 Registration Statement File No. 33-56991 (relating to Unicom Corporation's Long-Term Incentive Plan). We also consent to the application of our report to Commonwealth Edison Company and subsidiary companies' ratios of earnings to fixed charges and the ratios of earnings to fixed charges and preferred and preference stock dividend requirements for each of the twelve months ended December 31, 1995, 1994 and 1993 appearing in Exhibit 99 of this Form 8-K. ARTHUR ANDERSEN LLP Chicago, Illinois January 26, 1996 Exhibit (99) Unicom Corporation Form 8-K File No. 1-11375 UNICOM CORPORATION AND SUBSIDIARY COMPANIES INDEX
PAGE ----- Definitions.............................................................. 2 Summary of Selected Consolidated Financial Data.......................... 3 Price Range and Cash Dividends Paid Per Share of Common Stock............ 3 1995 Consolidated Revenues and Sales..................................... 3 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 4-15 Report of Independent Public Accountants................................. 16 Consolidated Financial Statements-- Statements of Consolidated Income for the years 1995, 1994 and 1993.... 17 Consolidated Balance Sheets--December 31, 1995 and 1994................ 18-19 Statements of Consolidated Capitalization--December 31, 1995 and 1994.. 20 Statements of Consolidated Retained Earnings for the years 1995, 1994 and 1993.............................................................. 21 Statements of Consolidated Cash Flows for the years 1995, 1994 and 1993.................................................................. 22 Notes to Financial Statements.......................................... 23-44
1 DEFINITIONS The following terms are used in this document with the following meanings:
TERM MEANING - ----------------------- ------------------------------------------------------------------ AFUDC Allowance for funds used during construction AMT Alternative minimum tax CERCLA Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended CFC Chlorofluorocarbon Circuit Court Circuit Court of Cook County, Illinois Clean Air Amendments Clean Air Act Amendments of 1990 ComEd Commonwealth Edison Company Cotter Cotter Corporation, which is a wholly-owned subsidiary of ComEd. DOE U.S. Department of Energy FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission Fuel Matters Settlement A settlement relating to the ICC fuel reconciliation proceedings involving ComEd for the period from 1985 through 1988 and to future challenges by the settling parties to the prudence of ComEd's western coal costs for the period from 1989 through 1992. ICC Illinois Commerce Commission Indiana Company Commonwealth Edison Company of Indiana, Inc., which is a wholly- owned subsidiary of ComEd. MAIN Mid-America Interconnected Network MGP Manufactured gas plant NEIL Nuclear Electric Insurance Limited NML Nuclear Mutual Limited NOPR Notice of Proposed Rulemaking issued by the FERC NRC Nuclear Regulatory Commission Rate Matters Settlement A settlement concerning the proceedings relating to ComEd's 1985 and 1991 ICC rate orders (which orders related to, among other things, the recovery of costs associated with ComEd's four most recently completed nuclear generating units), the proceedings related to the reduction in the difference between ComEd's summer and non-summer residential rates that was effected in the summer of 1988, outstanding issues related to the appropriate interest rate and rate design to be applied to a refund made by ComEd during 1990 related to a 1988 ICC rate order, and matters related to a rider to ComEd's rates that it was required to file as a result of the change in the federal corporate income tax rate made by the Tax Reform Act of 1986. Rate Order ICC rate order issued on January 9, 1995, as subsequently modified Remand Order ICC rate order issued in January 1993, as subsequently modified SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards Trust ComEd Financing I, which is a wholly-owned subsidiary trust of ComEd. Unicom Unicom Corporation Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned subsidiary of Unicom. Unicom Thermal Unicom Thermal Technologies Inc., which is a wholly-owned subsidiary of Unicom Enterprises. Units ComEd's nuclear generating units known as Byron Unit 2 and Braidwood Units 1 and 2 U.S. EPA U.S. Environmental Protection Agency
2 UNICOM CORPORATION AND SUBSIDIARY COMPANIES SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- (MILLIONS OF DOLLARS EXCEPT PER SHARE DATA) Operating revenues............... $ 6,910 $ 6,278 $ 5,260 $ 6,026 $ 6,276 Net income....................... $ 640(1) $ 355 $ 46(2) $ 443 $ 17 Earnings per common share........ $ 2.98(1) $ 1.66 $ 0.22(2) $ 2.08 $ 0.08 Cash dividends declared per com- mon share....................... $ 1.60 $ 1.60 $ 1.60 $ 2.30 $ 3.00 Total assets (at end of year).... $23,247 $23,121 $24,383 $20,993 $17,365 Long-term obligations at end of year excluding current portion: Long-term debt, preference stock and preferred securities sub- ject to mandatory redemption requirements................... $ 7,011 $ 7,745 $ 7,861 $ 7,913 $ 7,081 Accrued spent nuclear fuel dis- posal fee and related interest. $ 624 $ 590 $ 567 $ 549 $ 530 Capital lease obligations....... $ 376 $ 433 $ 323 $ 347 $ 396 Other long-term obligations..... $ 1,826 $ 1,754 $ 1,718 $ 666 $ 341
- -------- (1) Net income in 1995 includes an extraordinary loss related to the early redemption of long-term debt of $20 million or $0.09 per common share. (2) Net income in 1993 includes the cumulative effect of change in accounting for income taxes of $10 million or $0.05 per common share. PRICE RANGE* AND CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK
1995 (BY QUARTERS) 1994 (BY QUARTERS) --------------------------- --------------------------- FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST ------ ------ ------ ------ ------ ------ ------ ------ Price range: High.................. 33 7/8 30 1/2 27 3/4 26 1/8 24 3/4 24 7/8 26 28 3/4 Low................... 30 1/4 26 1/4 23 5/8 23 1/4 20 5/8 21 1/4 22 25 1/8 Cash dividends paid.... 40c 40c 40c 40c 40c 40c 40c 40c
* As reported as NYSE Composite Transactions for Unicom on and after September 1, 1994 and for ComEd prior to that date. - -------- Unicom's common stock is traded on the New York, Chicago and Pacific stock exchanges, with the ticker symbol UCM. At December 31, 1995, there were approximately 171,000 holders of record of Unicom's common stock. 1995 CONSOLIDATED REVENUES AND SALES
OPERATING KILOWATTHOUR INCREASE/ INCREASE/ REVENUES INCREASE SALES (DECREASE) (DECREASE) (THOUSANDS) OVER 1994 (MILLIONS) OVER 1994 CUSTOMERS OVER 1994 ----------- --------- ------------ ---------- --------- ---------- Residential............. $2,621,038 15.3% 23,303 9.0 % 3,079,381 1.1 % Small commercial and industrial............. 2,073,998 8.2% 25,313 4.1 % 288,848 0.7 % Large commercial and industrial............. 1,425,784 3.2% 23,777 1.4 % 1,539 0.7 % Public authorities...... 487,142 7.7% 7,158 4.0 % 12,039 (0.2)% Electric railroads...... 26,894 2.7% 390 (2.0)% 2 -- ---------- ------ --------- Ultimate consumers...... $6,634,856 9.7% 79,941 4.6 % 3,381,809 1.0 % Sales for resale........ 207,256 11,412 24 Other revenues.......... 67,933 -- -- ---------- ------ --------- Total.................. $6,910,045 10.1% 91,353 7.3 % 3,381,833 1.0 % ========== ====== =========
3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On September 1, 1994, a corporate restructuring took place in which Unicom became the parent holding company of ComEd and Unicom Enterprises, an unregulated subsidiary engaged, through a subsidiary, in energy service activities. The purpose of the restructuring was, in part, to permit Unicom Enterprises to engage in energy service activities without the prior approval of, or being regulated by, the ICC, in part to permit timely responses to competitive activities which could adversely affect ComEd's utility business and in part to permit Unicom to take advantage of unregulated business opportunities. ComEd continues to represent substantially all of the assets, revenues and net income of Unicom; and Unicom's resources and results of operations are largely dependent on, and reflect, those of ComEd. Unicom's unregulated subsidiaries are not expected to make material contributions to Unicom's revenues or results of operations in the near future. Consequently, the following discussion focuses on ComEd's utility operations although information is also provided about Unicom's unregulated operations. LIQUIDITY AND CAPITAL RESOURCES UTILITY OPERATIONS Capital Budgets. ComEd and its electric utility subsidiary, the Indiana Company, have a construction program for the three-year period 1996-98 which consists principally of improvements to ComEd's and the Indiana Company's existing nuclear and other electric production, transmission and distribution facilities. It does not include funds (other than for planning) to add new generating capacity to ComEd's system. The program, as approved by Unicom and ComEd in December 1995, calls for electric plant and equipment expenditures of approximately $2,695 million (excluding nuclear fuel expenditures of approximately $885 million). It is estimated that such construction expenditures, with cost escalation computed at 3.5% annually, will be as follows:
1996 1997 1998 TOTAL ---- ---- ---- ------ (MILLIONS OF DOLLARS) Production............................................ $405 $390 $380 $1,175 Transmission and Distribution......................... 390 405 410 1,205 General............................................... 110 110 95 315 ---- ---- ---- ------ Total.............................................. $905 $905 $885 $2,695 ==== ==== ==== ======
The construction program includes the replacement of the steam generators at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units, for service in the years 1998 and 1999, respectively, at a total estimated cost of approximately $470 million. Approximately $290 million of this estimated cost is included in the construction expenditures shown above. ComEd is studying the possibility of accelerating the replacement of the steam generators which could increase the construction expenditures shown above. ComEd's forecasts of peak load indicate a need for additional resources to meet demand, either through generating capacity or through equivalent purchased power or demand-side management resources, in 1998 and each year thereafter through the year 2000. The projected resource needs reflect the current planning reserve margin recommendations of MAIN, the reliability council of which ComEd is a member. ComEd's forecasts indicate that the need for additional resources during this period would exist only during the summer months. ComEd does not expect to make expenditures for additional capacity to the extent the need for capacity can be met through cost-effective demand-side management resources, non-utility generation or other power purchases. Based on current market information, ComEd believes that adequate resources, including cost-effective demand-side management resources, non-utility generation resources and other-utility power purchases, could be obtained sufficient to meet forecasted requirements through the year 2000. 4 ComEd's construction program will be reviewed and modified as necessary to adapt to changing economic conditions, rate levels and other relevant factors including changing business and legal needs and requirements. ComEd cannot anticipate all such possible needs and requirements. While regulatory needs in particular are more likely, on balance, to require increases in construction expenditures than decreases, financial constraints may require compensating or greater reductions in other construction expenditures. See "Regulation" below for additional information. Purchase commitments for ComEd and the Indiana Company, principally related to construction and nuclear fuel, approximated $1,137 million at December 31, 1995. In addition, ComEd has substantial commitments for the purchase of coal as indicated in the following table.
CONTRACT PERIOD COMMITMENT (1) -------------- --------- -------------- Black Butte Coal Co................................ 1996-2007 $1,011 Decker Coal Co..................................... 1996-2015 $ 713 Big Horn Coal Co................................... 1998 $ 22 Other commitments.................................. 1996 $ 3
-------- (1) Estimated costs in millions of dollars FOB mine. No estimate of future cost escalation has been made. For additional information concerning these coal contracts and ComEd's fuel supply, see "Results of Operations" below and Notes 1 and 21 of Notes to Financial Statements. Capital Resources. ComEd has forecast that internal sources will provide more than three-fourths of the funds required for ComEd's construction program and other capital requirements, including nuclear fuel expenditures, contributions to nuclear decommissioning funds, sinking fund obligations and refinancing of scheduled debt maturities (the annual sinking fund requirements and scheduled maturities for ComEd preference stock and long-term debt are summarized in Notes 7 and 9, respectively, of Notes to Financial Statements). The forecast assumes the rate levels reflected in the Rate Order remain in effect. The type and amount of external financing will depend on financial market conditions and the needs and capital structure of ComEd at the time of such financing. A portion of ComEd's financing is expected to be provided through the continued sale and leaseback of nuclear fuel through ComEd's existing nuclear fuel lease facility. See Note 18 of Notes to Financial Statements for more information concerning ComEd's nuclear fuel lease facility. ComEd has approximately $915 million of unused bank lines of credit at December 31, 1995 which may be borrowed at various interest rates and which may be secured or unsecured. The interest rate is set at the time of a borrowing and is based on several floating rate bank indices plus a spread which is dependent upon ComEd's credit ratings or on a prime interest rate. Collateral, if required for the borrowings, would consist of first mortgage bonds issued under and in accordance with the provisions of ComEd's mortgage. See Note 10 of Notes to Financial Statements for information concerning lines of credit. See the Statements of Consolidated Cash Flows for the construction expenditures and cash flow from operating activities for the years 1995, 1994 and 1993. During 1995, Unicom issued 424,480 shares of common stock for approximately $11 million under its employee stock plans. The Trust also issued $200 million of ComEd-obligated mandatorily redeemable preferred securities, the proceeds of which were used to purchase ComEd's subordinated deferrable interest notes due September 30, 2035. The proceeds of such notes were used by ComEd to refund short-term debt incurred to meet current maturities of ComEd debt. ComEd sold and leased back approximately $193 million of nuclear fuel through its existing nuclear fuel lease facility. As of January 26, 1996, ComEd has an effective "shelf" registration statement with the SEC for the future sale of up to an additional $805 million of debt securities and cumulative preference stock for general corporate purposes of ComEd, including the discharge or refund of other outstanding securities. Financial Condition. ComEd's financial condition will continue to depend on its ability to generate revenues to cover its costs and to maintain adequate debt and preferred and preference stock coverages and common stock equity earnings. ComEd has no significant revenues other than from the sale of 5 electricity. In December 1995, ComEd announced a cap on base electric rates at current levels. Consequently, ComEd's financial condition will be affected by, and ComEd's management is addressing, actions to maintain and increase sales, to control operating and capital expenditures, and to anticipate competitive activities. See "Business and Competition" and "Regulation" below. During the past several years, ComEd has instituted cost reduction plans including various workforce reductions. Such efforts included an offer of voluntary early retirement which was made to ComEd and the Indiana Company management, non-union and union employees eligible to retire or who became eligible to retire after December 31, 1993 and before April 1, 1995. Such program resulted in a charge to income of approximately $20.5 million (after reflecting income tax effects), substantially all of which was recorded during 1994. ComEd is continuing to examine methods of reducing the size of its workforce, including special severance offers. On October 30, 1995, ComEd declared an impasse in the collective bargaining agreement negotiations with its principal union and has implemented virtually all of the terms of its last offered proposal prior to the impasse. Those terms include, among other things, a wage increase retroactive to April 1, 1995 and a voluntary separation offer for employees who accepted and left ComEd's employ by year-end 1995. The union has filed an unfair labor practice charge with respect to ComEd's action with the National Labor Relations Board. The voluntary separation offer, combined with separation plans offered to selected groups of non-union employees, resulted in a charge to income of approximately $59 million (after reflecting income tax effects) or $0.27 per common share for the year 1995. This charge to income occurred primarily in the fourth quarter of 1995 when most of the acceptances of the offers occurred. ComEd expects to recover the costs of these plans within two years as a result of reduced personnel. ComEd has also examined, and is continuing to examine, the possibility of disposing of one or more of its fossil generating stations to a third party or parties and entering into a long-term power purchase arrangement. In connection with such examination, ComEd has solicited and received binding proposals with respect to such a transaction involving its State Line and Kincaid generating stations; and it is negotiating with possible purchasers with respect to such transactions. As presently structured, such transactions would involve a sale of the generating station assets at a price approximating their book value and a fifteen-year power purchase arrangement. Any such transactions would be subject to the negotiation of definitive agreements and regulatory approvals and are not expected to have a material impact on ComEd's consolidated financial position or results of operations. ComEd's securities and other securities guaranteed by ComEd are currently rated by three principal securities rating agencies as follows:
STANDARD DUFF & MOODY'S & POOR'S PHELPS ------- -------- ------ First mortgage and secured pollution control bonds............................................ Baa2 BBB BBB Publicly-held debentures and unsecured pollution control obligations.............................. Baa3 BBB- BBB- Convertible preferred stock....................... baa3 BBB- BBB- Preference stock.................................. baa3 BBB- BBB- ComEd-obligated mandatorily redeemable preferred securities of the Trust.......................... baa3 BBB- BBB- Commercial paper.................................. P-2 A-2 D-2
As of January 1996, Standard & Poor's rating outlook on ComEd remained stable. As of October 1995, Moody's rating outlook on ComEd also remained stable. In August 1995, Duff & Phelps upgraded its rating of ComEd's preferred and preference stock from BB+ to BBB- and reaffirmed that its rating outlook on ComEd remained stable. Business and Competition. The electric utility business has historically been characterized by retail service monopolies in state or locally franchised service territories. Investor-owned electric utilities have tended to be vertically integrated with all aspects of their business subject to pervasive regulation. Although customers have normally been free to supply their electric power needs through self-generation, they have not had a choice of electric suppliers and self-generation has not generally been economical. 6 The market place in which electric utilities like ComEd operate has become more competitive as a result of technological and regulatory changes, and many observers believe competition will intensify. Self-generation can be economical for certain customers, depending on how and when they use electricity and other customer-specific considerations. A number of competitors are currently seeking to identify and do business with those customers. In addition, suppliers of other forms of energy are increasingly competing to supply energy needs which historically were supplied primarily or exclusively by electricity. Also, a number of electric utilities (including utilities bordering ComEd's service area) have announced plans to combine, or have combined, to achieve certain size and operating efficiencies in response to expected changes in the market place. Finally, both the state and federal regulatory framework under which ComEd and other electric utilities have operated are under review. In recent years, there has been increasing debate at the state and federal levels regarding the structure and regulation of the electric utility industry. In particular, these discussions have focused on whether certain aspects of the industry, such as generation, could be more efficiently provided under a more competitive scheme. A central feature of the current debate over deregulation and changed regulation in the electric utility industry is the extent to which electric utilities will be permitted to recover so-called "stranded" or "strandable" costs incurred to fulfill their duty to serve all of the electricity needs within their service territories. These costs would be stranded to the extent that market-based rates would be insufficient to allow for full recovery of the investments. ComEd cannot estimate its strandable investment with any degree of accuracy at this time because of the number of variables involved. ComEd, however, is taking steps, such as aggressive cost-cutting measures and accelerated depreciation, to minimize its potential exposure. The regulatory and legislative initiatives that ComEd has proposed, described below, contemplate a full recovery of ComEd's costs to meet its duty to serve. The Energy Policy Act of 1992 has had a significant effect on companies engaged in the generation, transmission, distribution, purchase and sale of electricity. This Act, among other things, expands the authority of the FERC to order electric utilities to transmit or "wheel" wholesale power for others, and facilitates the creation of non-utility electric generating companies. In March 1995, the FERC issued a NOPR seeking comments on proposals intended to encourage a more competitive wholesale electric power market. The NOPR addresses both open access transmission and stranded cost issues. ComEd is unable to predict the structure and effect of any rule that the FERC may ultimately adopt based upon the NOPR. ComEd is facing increased competition from several non-utility businesses which seek to provide energy services to users of electricity, especially larger customers such as industrial, commercial and wholesale customers. Such suppliers include independent power producers and unregulated energy services companies. In this regard, natural gas utilities operating in ComEd's service area have established subsidiary ventures to provide heating, ventilating and air conditioning services, attempting to attract ComEd's customers. Also, several utilities in the United States have established unregulated energy services subsidiaries which pursue business opportunities outside of the utilities' regular service areas. In addition, cogeneration and energy services companies have begun soliciting ComEd's customers to provide alternatives to using ComEd's electricity. In October 1993, the ICC granted ComEd the authority to negotiate special discount contract rates with new or existing industrial customers for up to a total of 400 megawatts of added load, where the customers would not have chosen service from ComEd for the increased load in the absence of the discount rates. In addition, in June 1994, the ICC granted ComEd the authority to negotiate special discount contract rates with up to 25 of its largest existing customers, where such contracts would be necessary to retain the customers' existing load on ComEd's system. The Illinois Appellate Court reversed the latter ICC decision, ruling that state law prohibited the confidential aspects of the contracts. ComEd has petitioned the Illinois Supreme Court to review the reversal. ComEd has also sought and received ICC approval for the eleven contracts at special discount rates which it negotiated prior to the Illinois Appellate Court's decision. 7 In 1994, the ICC formed a task force for the purpose of conducting a broad- based and open examination of the expanding presence of market components within the electric utility industry. Participants from more than 40 organizations, including representatives from the electric utility industry (including ComEd), met to examine three broad issues: effects of regulation, competition and future regulatory and legislative changes. In May 1995, the task force issued its report sharing the views of the participants on the issues. Legislation has been passed in Illinois to review the need for changes in the regulatory framework under which Illinois electric utilities operate. The Joint Committee on Electric Utility Regulatory Reform was created pursuant to House/Senate Joint Resolution 21 to develop any legislative reform proposals it finds necessary. A final legislative proposal is to be delivered by November 8, 1996. ComEd is participating as a member of the Technical Advisory Group. A bill allowing utilities to submit plans for alternative regulation, such as price caps or incentive regulation, has been signed by the Governor of Illinois. On December 11, 1995, ComEd announced a series of customer initiatives as part of its larger ongoing effort to address the need to give all customer classes the opportunity to benefit from increased competition in the electric utility business, while retaining the benefits (such as reliability) of current regulation and ensuring utilities' cost recovery for commitments made under the obligation to serve customers. The initiatives include (i) a five-year cap on base electric rates at current levels, (ii) certain energy monitoring and management programs designed to monitor and control energy usage, particularly during certain peak periods, (iii) single statement, or unified, billing for certain multi-site customers, (iv) certain incentives for manufacturing customers looking to expand operations or to locate in northern Illinois and (v) market pricing options for up to ten percent of certain large industrial customers' existing electric energy requirements and all of their incremental requirements. ComEd anticipates the initiatives will be fully implemented in 1997 and will reduce its revenues by approximately $42 million annually (including the effects of previously implemented initiatives and before income tax effects) primarily through changes in energy utilization and increase its costs by at least $30 million annually (before income tax effects) through the acceleration of depreciation charges on its nuclear generating units. ComEd expects to file a request for ICC approval of the accelerated depreciation initiatives in the near future. Management expects the financial impact of these initiatives will be substantially offset by ComEd's cost reduction efforts and expected growth in its business. ComEd also continues to consider the possibility of additional accelerated depreciation options. Under ComEd's initiatives, the five-year base rate cap at current levels became effective in December 1995 and will extend until January 1, 2001. The rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost recovery provisions. ComEd's fuel cost variances will continue to be collected through its fuel adjustment clause, and such collections will continue to be subject to annual reconciliation proceedings before the ICC. Nuclear decommissioning cost variances will continue to be collected under a rider that was approved in the Rate Order, and such rider is intended to allow annual adjustments in decommissioning cost recoveries from ratepayers as changes in cost estimates occur. See "Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements for additional information regarding the decommissioning costs rider. On December 13, 1995, ComEd announced a proposal to amend certain provisions of the Illinois Public Utilities Act. The proposal would, among other things, allow Illinois utilities to launch five-year experimental "direct access" programs, whereby certain customers would have the opportunity to obtain some of their electric energy requirements from their chosen supplier. If the proposal is adopted as legislation, such "direct access" programs could begin as early as 1998; and under the legislation, ComEd announced it would offer such a program for new or expanded load of three megawatts or greater in its northern Illinois service territory. Under ComEd's proposal, if such "direct access" proves workable, and the ICC finds it to be in the public interest, the ICC could order it as an option for all electricity consumers in Illinois starting in 2003. Other Illinois utilities have also initiated both legislative and regulatory proposals. Both Illinois Power Company and Central Illinois Light Company have filed 8 proposed retail wheeling experiments with the ICC. These experiments are currently the subject of hearings. ComEd cannot predict whether, or in what form, these proposals may be approved. See "Regulation" and "Regulatory Assets and Liabilities" in Note 1 of Notes to Financial Statements. Capital Structure. The ratio of ComEd's long-term debt to total capitalization has decreased to 49.3% at December 31, 1995 from 54.6% at December 31, 1994. This decrease is related primarily to the retirement and early redemption of long-term debt. UNREGULATED OPERATIONS Unicom Enterprises is engaged, through a subsidiary, in energy service activities which are not subject to utility regulation by state or federal agencies. The subsidiary, Unicom Thermal, currently provides district cooling services to office and other buildings from a central location in the city of Chicago. District cooling involves, in essence, the production of chilled water at a central location(s) and its circulation to and from such location(s) to customers' buildings through a closed circuit of piping. Such water is circulated through customers' premises for air conditioning. This process is used in lieu of self-generated cooling utilizing CFC refrigerants. As a result of the Clean Air Amendments, the manufacture and use of CFCs will be curtailed, commencing in 1996, thereby creating an excellent marketing opportunity for non-CFC based systems, such as district cooling. Unicom Thermal and the city of Chicago have entered into a non-exclusive franchise agreement. Unicom Thermal's first plant began service in May 1995, and sufficient contracts have been secured to utilize the full capacity of the plant. As of January 10, 1996, Unicom Thermal Technologies Boston, a subsidiary of Unicom Thermal, has entered into a limited liability corporation as a minority member with Boston Edison Technologies Group to provide district cooling services to office and other buildings in the city of Boston. Capital Budgets. Unicom Thermal has forecasted capital expenditures for the years 1996-98 of approximately $100 million, primarily representing the construction costs of its district cooling facilities in the city of Chicago. Construction of its first district cooling facility was completed in May 1995 and cost approximately $30 million. Unicom Thermal began construction on two additional cooling facilities in 1995. As of December 31, 1995, Unicom Thermal's purchase commitments, principally related to construction, were approximately $21 million. Capital Resources. Unicom expects to obtain funds to invest in its unregulated subsidiaries principally from dividends received on its ComEd common stock and from bank borrowings. While the amount of dividends on ComEd common stock is expected to be greater than the amount of dividends on Unicom common stock, the availability of such dividends is dependent on ComEd's financial performance and cash position. Other forms of financing by ComEd of Unicom or the unregulated subsidiaries, such as loans or additional equity investments (none of which is expected), would be subject to the prior approval of the ICC. Unicom Enterprises has a $200 million credit facility which will expire in 1998 of which $158 million was unused as of December 31, 1995. The credit facility can be used by Unicom Enterprises to finance investments in unregulated energy-related businesses and projects, including Unicom Thermal, and for general corporate purposes. The credit facility is guaranteed by Unicom and includes certain covenants with respect to Unicom's and Unicom Enterprises' operations. Interest rates for borrowings under the credit facility are set at the time of a borrowing and are based on either a prime interest rate or a floating rate bank index plus a spread which varies with the credit rating of ComEd's outstanding first mortgage bonds. See Note 10 of Notes to Financial Statements for additional information regarding certain covenants with respect to Unicom's and Unicom Enterprises' operations. REGULATION ComEd and the Indiana Company are subject to state and federal regulation in the conduct of their respective businesses, including the operations of Cotter. Such regulation includes rates, securities 9 issuance, nuclear operations, environmental and other matters. Particularly in the cases of nuclear operations and environmental matters, such regulation can and does affect operational and capital expenditures. Rate Proceedings. ComEd's revenues, net income, cash flows and plant carrying costs have been affected directly by various rate-related proceedings. During 1993, ComEd was involved in a number of proceedings concerning its rates. The uncertainties associated with such proceedings and related issues, among other things, led to the Rate Matters Settlement and the Fuel Matters Settlement in late 1993 (see Note 2 of Notes to Financial Statements). The effects of such settlements during 1993 and 1994 are discussed below under "Results of Operations." On January 9, 1995, the ICC issued its Rate Order in the proceedings relating to ComEd's February 1994 rate increase request. The Rate Order provides, among other things, for (i) an increase in ComEd's total revenues of approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an annual basis, including a $303.2 million increase in base rates, (ii) the collection of municipal franchise costs as an adder to base rates until May 1, 1995, when ComEd began collecting such costs prospectively on an individual municipality basis through a rider, and (iii) the use of a rider, with annual review proceedings, to pass on to ratepayers increases or decreases in estimated costs associated with the decommissioning of ComEd's nuclear generating units. See "Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements for information related to the level of decommissioning cost collections allowed in the Rate Order and subsequent rider proceedings. The ICC also determined that the Units were 100% "used and useful" and that the previously determined reasonable costs of such Units, as depreciated, should be included in full in ComEd's rate base. The rates provided in the Rate Order became effective on January 14, 1995; however, they are being collected subject to refund as a result of subsequent judicial action. As of December 31, 1995, electric operating revenues of approximately $319 million (excluding revenue taxes) are subject to refund. Intervenors and ComEd have filed appeals of the Rate Order with the Illinois Appellate Court. Nuclear Matters. During the past several years, the NRC has placed two of ComEd's nuclear generating stations, Zion station and Dresden station, on its list of plants to be monitored closely. Although Zion station (which was placed on the list in early 1991) was removed from that list in February 1993, Dresden station (which was placed on the list in early 1992) remains on the list. In June 1995, the NRC reported that over the past year performance at Dresden was cyclical; that plant material condition needed to be improved at Dresden and that a more effective work management system was needed to deal with the corrective maintenance backlog. In January 1996, the NRC noted improvement but indicated that certain of the same concerns continue to exist. The NRC also stated that the effectiveness of the recent improvement efforts must be sustained. In January 1994, ComEd was notified by the NRC that ComEd's LaSalle County and Quad-Cities stations were placed on the list of plants with adverse performance trends. ComEd was informed that the NRC concerns about LaSalle County station included, among other matters, deficient radiation worker practices, and that concerns with Quad-Cities station included, among other matters, deficiencies in the condition of certain station equipment and the effectiveness of the operators of the units in identifying and responding to certain operational problems. In February and June 1995, the NRC concluded that LaSalle County and Quad-Cities, respectively, had arrested the adverse trends in most areas and "normal" designation has been reestablished. Because of the age of Zion, Dresden and Quad-Cities stations, ComEd anticipates continued expenditures in order to improve reliability and to meet NRC regulatory expectations. Beginning in late 1992, ComEd restructured its management of its nuclear operations division and since that time has committed additional resources to the stations' operations. In addition, generating station availability and performance during a year may be issues in fuel reconciliation proceedings in assessing the prudence of fuel and power purchases during such year. Final ICC orders have been issued in fuel reconciliation 10 proceedings for years prior to 1994; however, certain intervenors have appealed the ICC order in the 1989 fuel reconciliation proceedings on issues relating to nuclear station performance. ComEd estimates that it will expend approximately $15 billion, excluding any contingency allowance, for decommissioning costs primarily during the period from 2007 through 2032. Such costs, which are estimated to aggregate $3.7 billion in current-year (1996) dollars, are expected to be funded by external decommissioning trusts which ComEd established in compliance with Illinois law and into which ComEd has been making annual contributions. Future decommissioning cost estimates may be significantly affected by the adoption of or changes to NRC regulations as well as changes in the assumptions used in making such estimates. See Note 1 of Notes to Financial Statements under "Depreciation and Decommissioning" for additional information regarding decommissioning costs. Environmental Matters. ComEd is involved in administrative and legal proceedings concerning air quality, water quality and other matters. The outcome of these proceedings may require increases in future construction expenditures and operating expenses and changes in operating procedures. See Note 21 of Notes to Financial Statements for information regarding certain effects of CERCLA on ComEd. RESULTS OF OPERATIONS Unicom's earnings per common share were $2.98 in 1995, $1.66 in 1994 and $0.22 in 1993. Substantially all of the results of operations for Unicom are the results of operations for ComEd. The results of Unicom's unregulated subsidiaries are not material to the results of Unicom and subsidiary companies as a whole. As such, the following section discusses the results of operations for ComEd alone. Net Income. The 1995 results reflect higher revenues primarily as a result of higher kilowatthour sales and the higher rate levels which became effective in January 1995 under the Rate Order. The higher kilowatthour sales reflect the unusually hot summer weather in 1995. The 1995 results were also affected by higher operation and maintenance expenses, which reflect an after-tax charge of $59 million or $0.27 per common share for a voluntary separation offer for union employees who accepted and left ComEd's employ by year-end 1995 combined with separation plans offered to selected groups of non-union employees. ComEd also recorded an after-tax charge of $20 million or $0.09 per common share related to the early redemption of $645 million of long-term debt. The 1994 results reflect higher revenues as a result of the favorable comparison to 1993 in which the effects of the Rate Matters Settlement and the Fuel Matters Settlement were recorded. The 1994 results also reflect ComEd's increased kilowatthour sales to ultimate consumers. The effects of these items were partially offset by higher operation and maintenance expenses, which include an after-tax charge of $20 million or $0.09 per common share for additional pension costs related to an early retirement offer made to certain employees during 1994. ComEd also recorded a reduction in the carrying value of its investments in uranium-related properties in 1994, which reduced net income by $34 million or $0.16 per common share. The 1993 results were significantly affected by the recording of the effects of the Rate Matters Settlement and the Fuel Matters Settlement, which reduced 1993 net income by approximately $354 million or $1.66 per common share, in addition to the effect of the deferred recognition of revenues which ComEd had recorded during 1993 (approximately $160 million or $0.75 per common share), and after the partially offsetting effect of recording approximately $269 million or $1.26 per common share in deferred carrying charges, net of income taxes, as authorized in the Remand Order. The 1993 earnings also reflect a one- time favorable cumulative effect of $10 million or $0.05 per common share as a result 11 of the adoption of SFAS No. 109, Accounting for Income Taxes. The effect of the non-recurring items was partially offset by a higher level of kilowatthour sales and lower operation and maintenance expenses. Excluding non-recurring items, earnings in 1993 would have been $1.83 per common share. Kilowatthour Sales. Kilowatthour sales to ultimate consumers increased 4.6% in 1995, 2.8% in 1994 and 4.6% in 1993 as a result of increased sales to all classes of customers, except railroads, which decreased during each year, reflecting progressively warmer summers (particularly in 1995) and, in 1994, colder winter weather than in 1993. The service territory economy also improved during 1994, which contributed to the increase in kilowatthour sales. Kilowatthour sales including sales for resale increased 7.3% in 1995, decreased 3.0% in 1994 and increased 16.0% in 1993. Operating Revenues. ComEd's operating revenues increased $632 million in 1995 principally reflecting the higher kilowatthour sales described above and higher rate levels under the Rate Order. Operating revenues increased $1,017 million in 1994 principally reflecting the favorable comparison to 1993 in which the effects of the Rate Matters Settlement and the Fuel Matters Settlement were recorded and the increased level of kilowatthour sales to ultimate consumers described above. The increase was partially offset by a decrease in energy costs recovered under the fuel adjustment clause in ComEd's rates. Operating revenues decreased $766 million in 1993 principally reflecting the recording of the effects of the Rate Matters Settlement and the Fuel Matters Settlement, which reduced 1993 operating revenues by $1,282 million. This reduction was partially offset by a higher level of kilowatthour sales and an increase in energy costs recovered under the fuel adjustment clause in ComEd's rates. See "Net Income" above and Note 2 of Notes to Financial Statements for additional information. Fuel Costs. Changes in fuel expense for 1995, 1994 and 1993 primarily resulted from changes in the average cost of fuel consumed, changes in the mix of fuel sources of electric energy generated and changes in net generation of electric energy. Fuel mix is determined primarily by system load, the costs of fuel consumed and the availability of nuclear generating units. The cost of fuel consumed, net generation of electric energy and fuel sources of kilowatthour generation were as follows:
1995 1994 1993 ------ ------ ------ Cost of fuel consumed (per million Btu): Nuclear........................................... $0.52 $0.53 $0.52 Coal.............................................. $2.43 $2.31 $2.89 Oil............................................... $3.06 $2.89 $3.03 Natural gas....................................... $1.85 $2.27 $2.70 Average all fuels................................. $1.05 $1.08 $1.15 Net generation of electric energy (millions of kilo- watthours)......................................... 96,608 90,243 94,266 Fuel sources of kilowatthour generation: Nuclear........................................... 73% 71% 75% Coal.............................................. 24 25 23 Oil............................................... -- 1 1 Natural gas....................................... 3 3 1 ------ ------ ------ 100% 100% 100% ====== ====== ======
Under the Energy Policy Act of 1992, investor-owned electric utilities that have purchased enrichment services from the DOE are being assessed amounts to fund a portion of the cost for the decontamination and decommissioning of uranium enrichment facilities owned and previously operated by the DOE. ComEd's portion of such assessments is estimated to be approximately $15 million per year (to be adjusted annually for inflation) to 2007. The Act provides that such assessments are to be treated as a cost of fuel. See Note 1 of Notes to Financial Statements under "Deferred Unrecovered Energy Costs" for information related to the accounting for such costs. 12 Fuel Supply. Compared to other utilities, ComEd has relatively low average fuel costs as a result of its reliance predominantly on lower cost nuclear generation. ComEd's coal costs, however, are high compared to those of other utilities. ComEd's western coal contracts and its rail contracts for delivery of the western coal provide for the purchase of certain coal at prices substantially above currently prevailing market prices and ComEd has significant purchase commitments under its contracts. In addition, as of December 31, 1995, ComEd had unrecovered fuel costs in the form of coal reserves of approximately $448 million. In prior years, ComEd's commitments for the purchase of coal exceeded its requirements. Rather than take all the coal it was required to take, ComEd agreed to purchase the coal in place in the form of coal reserves. For additional information concerning ComEd's coal purchase commitments, fuel reconciliation proceedings and coal reserves, see "Liquidity and Capital Resources" above and Notes 1, 2 and 21 of Notes to Financial Statements. Purchased Power. Amounts of purchased power are primarily affected by system load, the availability of ComEd and the Indiana Company's generating units and the availability and cost of power from other utilities. The number and average cost of kilowatthours purchased were as follows:
1995 1994 1993 ----- ----- ---- Kilowatthours (millions)................................. 2,475 2,071 644 Cost per kilowatthour.................................... 2.60c 2.86c 1.91c
Deferred Under or Overrecovered Energy Costs--Net. Fuel expenses for the years 1995, 1994 and 1993 include the net change in under or overrecovered allowable energy costs under ComEd's fuel adjustment clause. See "Fuel Costs" and "Fuel Supply" above and Note 1 of Notes to Financial Statements under "Deferred Unrecovered Energy Costs." Operation and Maintenance Expenses. ComEd's operation and maintenance expenses increased 4% during 1995, increased 2% during 1994 and decreased 4% during 1993. The increase in 1995 primarily reflects increased expenses for costs related to voluntary employee separation plans, nuclear and fossil generating stations, customer-related activities and incentive compensation programs, partially offset by lower expenses associated with transmission and distribution facilities, certain administrative and general costs and pensions and other employee benefits, including postretirement health care benefits. The increase in 1994 primarily reflects increased expenses associated with pensions and other employee benefits, incentive compensation programs, nuclear and fossil generating stations, and certain administrative and general costs, partially offset by lower expenses associated with transmission and distribution facilities. The decrease in 1993 primarily reflects decreased expenses associated with nuclear and fossil generating stations, pension benefits and customer-related activities, a decrease in the number of employees and lower research costs, partially offset by higher costs of postretirement health care benefits and the cost related to the 1993 special incentive plan for employees. Wage increases, the effects of which are reflected in the increases and decreases discussed below, have increased operation and maintenance expenses during 1995 and 1994. Wages in 1993 were not increased over 1992 levels. Operation and maintenance expenses in 1995 and 1994 include approximately $16 million and $20 million, respectively, for wage increases. The effects of inflation have increased operation and maintenance expenses during the years and are also reflected in the increases and decreases discussed below. Operation and maintenance expenses for pensions and other employee benefits, including postretirement health care benefits, decreased $40 million in 1995, increased $30 million in 1994 and decreased $2 million in 1993. The 1995 decrease reflects a decrease of $40 million in the provision for postretirement health care costs, partially offset by a $25 million increase for the portion of the costs of the voluntary employee separation plans related to postretirement health care benefits and an increase of $9 million for certain other employee benefits. The 1994 increase includes a $34 million increase in 13 pension costs related to an early retirement program offered in 1994. See "Liquidity and Capital Resources," subcaption "Financial Condition," for additional information regarding the employee separation plans offered in 1995 and the 1994 early retirement program. The 1993 decrease reflects a decrease in pension benefits of $16 million which was partially offset by an increase in postretirement health care benefits of $14 million. The increase in postretirement health care benefits in 1993 reflects $17 million as a result of adopting SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. Operation and maintenance expenses in 1995 also reflect $72 million for the portion of the costs of the voluntary employee separation plans not related to the postretirement health care benefits described above. See "Liquidity and Capital Resources," subcaption "Financial Condition," above for information regarding the employee separation plans offered in 1995. Operation and maintenance expenses associated with the nuclear generating stations tend to be affected by the number of outages (both scheduled and non- scheduled) of the units, during which a greater number of activities related to inspection, maintenance and improvement are scheduled and carried out. Such expenses increased $32 million in 1995, increased $9 million in 1994 and decreased $74 million in 1993. The increase in 1995 is primarily due to increased expenses related to the plant improvement efforts at Dresden and Zion stations. The increase in 1994 is due to activities undertaken during increased scheduled and non-scheduled outages. The decrease in 1993 includes the effects of ComEd's cost reduction efforts, including re-engineering and process improvements, eliminating unnecessary work and increasing the efficiency at which the remaining work was performed. Future operation and maintenance expenses associated with nuclear generating stations may be significantly affected by regulatory, operational and other requirements. See "Nuclear Matters" under "Regulation" above. Operation and maintenance expenses associated with the fossil generating stations also tend to be affected by the number of outages in the same manner as nuclear generating stations. Such expenses increased $8 million in 1995, increased $4 million in 1994 and decreased $13 million in 1993. The increase in 1995 reflects the cost for the increase in scope of scheduled overhauls partially offset by the net effect of a reduction of personnel. The increase in 1994 reflects, in part, activities undertaken during a greater number of scheduled overhauls. The decrease in 1993 includes the effects of ComEd's cost reduction efforts. Research costs also decreased $10 million in 1993 due to the cost reduction efforts. Operation and maintenance expenses associated with ComEd's transmission and distribution system decreased $3 million and $18 million in 1995 and 1994, respectively. The decreases in 1995 and 1994 reflect the effects of ComEd's cost containment efforts. Costs of customer-related activities, including customer assistance and energy sales services, increased $10 million in 1995 and decreased $13 million in 1993. Operation and maintenance expenses reflect $65 million, $50 million and $36 million for employee incentive compensation plan costs related to the achievement of certain financial performance, cost containment and operating performance goals in 1995, 1994 and 1993, respectively. Certain administrative and general costs decreased $16 million in 1995 and increased $12 million in 1994. The decrease in 1995 was due to a variety of reasons including a decrease in expenses related to insurance, injuries and damages and the provision for vacation pay liability. The increase in 1994 is primarily due to increased provisions for injuries and damages and obsolete materials. Depreciation. Depreciation expense increased in 1995, 1994 and 1993 as a result of additions to plant in service. See "Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements for additional information. ComEd also intends to seek authorization from the ICC to accelerate the depreciation charges on its nuclear generating units. See "Business and Competition" under "Liquidity and Capital Resources." 14 Interest on Debt. Changes in interest on long-term debt and notes payable for the years 1995, 1994 and 1993 were due to changes in average interest rates and in the amounts of long-term debt and notes payable outstanding. Changes in interest on ComEd's long-term debt also reflected new issues of debt, the retirement and early redemption of debt, and the retirement and redemption of issues which were refinanced at generally lower rates of interest. The average amounts of ComEd's long-term debt and notes payable outstanding and average interest rates thereon were as follows:
1995 1994 1993 ------ ------ ------ Long-term debt outstanding: Average amount (millions).......................... $7,528 $7,934 $8,105 Average interest rate.............................. 7.78% 7.83% 8.03% Notes payable outstanding: Average amount (millions).......................... $ 51 $ 9 $ 6 Average interest rate.............................. 6.40% 6.48% 5.83%
Deferred Carrying Charges. In the Remand Order, the ICC provided that, for ratemaking purposes, deferred carrying charges on the reasonable and "used and useful" plant costs of the Units for the period April 1, 1989 until approximately March 20, 1991, the date under the Remand Order that the Units were reflected in rates, could be deferred and amortized. Approximately $438 million of such costs was capitalized as a regulatory asset in October 1993 and resulted in an increase to net income for the year 1993 of approximately $269 million or $1.26 per common share. Amortization of deferred carrying charges was $13 million in 1995 and 1994 and was $2 million in 1993. Decommissioning. The staff of the SEC has questioned certain of the current accounting practices of the electric utility industry, including ComEd, regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements of electric utilities. In response to these questions, the FASB is reviewing the accounting for nuclear decommissioning costs. If current electric utility industry accounting practices for such decommissioning costs are changed, annual provisions for decommissioning could increase and the estimated cost for decommissioning could be recorded as a liability rather than as accumulated depreciation. Unicom does not believe that such changes, if required, would have an adverse effect on results of operations due to ComEd's current and future ability to recover decommissioning costs through rates. Investments in Uranium-Related Properties. In May 1994, ComEd recorded a reduction in the carrying value of its investments in uranium-related properties after completing a review of various alternatives and reassessing the long-term recoverability of those investments. The effects of the reduction reduced 1994 net income by $34 million or $0.16 per common share. Other Items. The amounts of AFUDC reflect changes in the average levels of investment subject to AFUDC and changes in the average annual capitalization rates as discussed in Note 1 of Notes to Financial Statements. AFUDC does not contribute to the current cash flow of Unicom or ComEd. ComEd's ratios of earnings to fixed charges for the years 1995, 1994 and 1993 were 2.79, 1.99 and 1.19, respectively. ComEd's ratios of earnings to fixed charges and preferred and preference stock dividend requirements for the years 1995, 1994 and 1993 were 2.39, 1.73 and 1.03, respectively. Business corporations in general have been adversely affected by inflation because amounts retained after the payment of all costs have been inadequate to replace, at increased costs, the productive assets consumed. Electric utilities in particular have been especially affected as a result of their capital intensive nature and regulation which limits capital recovery and prescribes installation or modification of facilities to comply with increasingly stringent safety and environmental requirements. Because the regulatory process limits the amount of depreciation expense included in ComEd's revenue allowance to the original cost of utility plant investment, the resulting cash flows are inadequate to provide for replacement of that investment in future years or preserve the purchasing power of common equity capital previously invested. 15 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Unicom Corporation: We have audited the accompanying consolidated balance sheets and statements of consolidated capitalization of Unicom Corporation (an Illinois corporation) and subsidiary companies as of December 31, 1995 and 1994, and the related statements of consolidated income, retained earnings and cash flows for each of the three years in the period ended December 31, 1995. 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 Unicom Corporation and subsidiary companies as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP Chicago, Illinois January 26, 1996 16 UNICOM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED INCOME The following Statements of Consolidated Income for the years 1995, 1994 and 1993 reflect the results of past operations and are not intended as any representation as to results of operations for any future period. Future operations will necessarily be affected by various and diverse factors and developments, including changes in electric rates, population, business activity, competition, taxes, environmental control, energy use, fuel supply, cost of labor, fuel and purchased power and other matters, the nature and effect of which cannot now be determined.
1995 1994 1993 ---------- ---------- ----------- (THOUSANDS EXCEPT PER SHARE DATA) Operating Revenues: Operating revenues...................... $6,910,045 $6,293,430 $ 6,547,205 Provisions for revenue refunds.......... -- (15,909) (1,286,765) ---------- ---------- ----------- $6,910,045 $6,277,521 $ 5,260,440 ---------- ---------- ----------- Operating Expenses and Taxes: Fuel.................................... $1,087,109 $1,051,793 $ 1,169,178 Purchased power......................... 64,378 59,123 12,303 Operation and maintenance............... 2,175,439 2,094,655 2,039,403 Depreciation............................ 898,035 887,466 862,766 Recovery of regulatory assets........... 15,272 15,453 5,235 Taxes (except income)................... 833,356 787,796 701,913 Income taxes............................ 526,567 326,744 95,251 Investment tax credits deferred--net.... (28,710) (28,757) (29,424) ---------- ---------- ----------- $5,571,446 $5,194,273 $ 4,856,625 ---------- ---------- ----------- Operating Income.......................... $1,338,599 $1,083,248 $ 403,815 ---------- ---------- ----------- Other Income and (Deductions): Interest on long-term debt.............. $ (587,438) $ (621,225) $ (651,181) Interest on notes payable............... (3,280) (557) (334) Allowance for funds used during construction-- Borrowed funds........................ 11,137 18,912 16,930 Equity funds.......................... 13,129 22,628 20,618 Income taxes applicable to nonoperating activities............................. 5,085 27,074 30,705 Deferred carrying charges............... -- -- 438,183 Interest and other costs for 1993 Settlements............................ (61) (21,464) (98,674) Provision for dividends on-- Preferred and preference stocks of ComEd................................ (69,961) (64,927) (66,052) ComEd-obligated mandatorily redeemable preferred securities of subsidiary trust................................ (4,428) -- -- Miscellaneous--net...................... (43,249) (88,755) (57,360) ---------- ---------- ----------- $ (679,066) $ (728,314) $ (367,165) ---------- ---------- ----------- Net Income Before Extraordinary Item and Cumulative Effect of Change in Accounting for Income Taxes......................... $ 659,533 $ 354,934 $ 36,650 Extraordinary Loss Related to Early Redemption of Long-Term Debt, Less Applicable Income Taxes.................. (20,022) -- -- Cumulative Effect of Change in Accounting for Income Taxes......................... -- -- 9,738 ---------- ---------- ----------- Net Income................................ $ 639,511 $ 354,934 $ 46,388 ========== ========== =========== Average Number of Common Shares Outstanding.............................. 214,691 214,031 213,508 Earnings Per Common Share Before Extraordinary Item and Cumulative Effect of Change in Accounting for Income Taxes. $ 3.07 $ 1.66 $ 0.17 Extraordinary Loss Related to Early Redemption of Long-Term Debt, Less Applicable Income Taxes.................. (0.09) -- -- Cumulative Effect of Change in Accounting for Income Taxes......................... -- -- 0.05 ---------- ---------- ----------- Earnings Per Common Share................. $ 2.98 $ 1.66 $ 0.22 ========== ========== =========== Cash Dividends Declared Per Common Share.. $ 1.60 $ 1.60 $ 1.60
The accompanying Notes to Financial Statements are an integral part of the above statements. 17 UNICOM CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ------------------------ ASSETS 1995 1994 ------ ----------- ----------- (THOUSANDS OF DOLLARS) Utility Plant: Plant and equipment, at original cost (includes construction work in progress of $1,105 million and $1,043 million, respectively)................. $27,052,778 $26,257,665 Less--Accumulated provision for depreciation....... 10,565,093 9,623,756 ----------- ----------- $16,487,685 $16,633,909 Nuclear fuel, at amortized cost.................... 734,667 689,424 ----------- ----------- $17,222,352 $17,323,333 ----------- ----------- Investments and Other Property: Nuclear decommissioning funds...................... $ 1,237,527 $ 880,944 Subsidiary companies............................... 113,657 118,051 Other, at cost..................................... 96,937 41,292 ----------- ----------- $ 1,448,121 $ 1,040,287 ----------- ----------- Current Assets: Cash............................................... $ 3,575 $ 1,927 Temporary cash investments......................... 47,801 75,008 Other cash investments............................. -- 19,588 Special deposits................................... 3,546 29,603 Receivables-- Customers........................................ 580,254 463,386 Taxes............................................ 82,319 36,083 Other............................................ 83,151 67,389 Provisions for uncollectible accounts............ (11,828) (10,720) Coal and fuel oil, at average cost................. 129,176 108,872 Materials and supplies, at average cost............ 333,539 384,612 Deferred unrecovered energy costs.................. 46,028 48,697 Deferred income taxes related to current assets and liabilities-- Loss carryforward................................ -- 10,090 Other............................................ 107,991 110,267 Prepayments and other.............................. 45,272 57,050 ----------- ----------- $ 1,450,824 $ 1,401,852 ----------- ----------- Deferred Charges and Other Noncurrent Assets: Regulatory assets.................................. $ 2,467,386 $ 2,604,270 Unrecovered energy costs........................... 588,152 643,438 Other.............................................. 70,153 108,308 ----------- ----------- $ 3,125,691 $ 3,356,016 ----------- ----------- $23,246,988 $23,121,488 =========== ===========
The accompanying Notes to Financial Statements are an integral part of the above statements. 18 UNICOM CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ----------------------- CAPITALIZATION AND LIABILITIES 1995 1994 ------------------------------ ----------- ----------- (THOUSANDS OF DOLLARS) Capitalization (see accompanying statements): Common stock equity.................................. $ 5,769,637 $ 5,448,127 Preferred and preference stocks of ComEd-- Without mandatory redemption requirements.......... 508,034 508,147 Subject to mandatory redemption requirements....... 261,475 292,163 ComEd-obligated mandatorily redeemable preferred securities of subsidiary trust*..................... 200,000 -- Long-term debt....................................... 6,549,335 7,453,206 ----------- ----------- $13,288,481 $13,701,643 ----------- ----------- Current Liabilities: Notes payable-- Commercial paper................................... $ 261,000 $ -- Bank loans......................................... 7,150 7,150 Current portion of long-term debt, redeemable preference stock and capitalized lease obligations of subsidiary companies............................ 434,563 560,545 Accounts payable..................................... 606,806 351,081 Accrued interest..................................... 171,488 182,622 Accrued taxes........................................ 215,966 206,973 Dividends payable.................................... 102,497 102,647 Customer deposits.................................... 44,521 44,514 Other................................................ 93,841 85,845 ----------- ----------- $ 1,937,832 $ 1,541,377 ----------- ----------- Deferred Credits and Other Noncurrent Liabilities: Deferred income taxes................................ $ 4,506,043 $ 4,383,347 Accumulated deferred investment tax credits.......... 689,041 717,752 Accrued spent nuclear fuel disposal fee and related interest............................................ 624,191 589,757 Obligations under capital leases of subsidiary companies........................................... 375,524 433,184 Regulatory liabilities............................... 601,002 699,426 Other................................................ 1,224,874 1,055,002 ----------- ----------- $ 8,020,675 $ 7,878,468 ----------- ----------- Commitments and Contingent Liabilities (Note 21) $23,246,988 $23,121,488 =========== ===========
*As described in Note 8 of Notes to Financial Statements, the sole asset of ComEd Financing I, a subsidiary trust of ComEd, is $206.2 million principal amount of ComEd's 8.48% subordinated deferrable interest notes due September 30, 2035. The accompanying Notes to Financial Statements are an integral part of the above statements. 19 UNICOM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED CAPITALIZATION
DECEMBER 31 ------------------------ 1995 1994 ----------- ----------- (THOUSANDS OF DOLLARS) Common Stock Equity: Common stock, without par value-- Outstanding--214,947,629 shares and 214,340,067 shares, respectively............................ $ 4,916,438 $ 4,890,931 Preference stock expense of ComEd................. (3,694) (3,775) Retained earnings................................. 856,893 560,971 ----------- ----------- $ 5,769,637 $ 5,448,127 ----------- ----------- Preferred and Preference Stocks of ComEd-- Without Mandatory Redemption Requirements: Preference stock, cumulative, without par value-- Outstanding--13,499,549 shares................. $ 504,957 $ 504,957 $1.425 convertible preferred stock, cumulative, without par value-- Outstanding--96,753 shares and 100,323 shares, respectively.................................. 3,077 3,190 Prior preferred stock, cumulative, $100 par value per share-- No shares outstanding.......................... -- -- ----------- ----------- $ 508,034 $ 508,147 ----------- ----------- Subject to Mandatory Redemption Requirements: Preference stock, cumulative, without par value-- Outstanding--2,934,990 shares and 3,113,205 shares, respectively.......................... $ 292,163 $ 309,964 Current redemption requirements for preference stock included in current liabilities......................... (30,688) (17,801) ----------- ----------- $ 261,475 $ 292,163 ----------- ----------- ComEd-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust: Outstanding--8,000,000 and none, respectively..... $ 200,000 $ -- ----------- ----------- Long-Term Debt: First mortgage bonds: Maturing 1995 through 2000--5 1/4% to 9 3/8%.... $ 1,170,000 $ 1,273,000 Maturing 2001 through 2010--5.30% to 8 3/8%..... 1,465,400 1,765,500 Maturing 2011 through 2020--5.85% to 9 7/8%..... 1,266,000 1,591,000 Maturing 2021 through 2023--7 3/4% to 9 1/8%.... 1,385,000 1,385,000 ----------- ----------- $ 5,286,400 $ 6,014,500 Sinking fund debentures, due 1999 through 2011-- 2 3/4% to 7 5/8%................................. 110,505 112,593 Pollution control obligations, due 2004 through 2014--4.434% to 9 1/8%........................... 317,200 337,200 Other long-term debt.............................. 1,126,318 1,451,449 Current maturities of long-term debt included in current liabilities.............................. (235,992) (395,554) Unamortized net debt discount and premium......... (55,096) (66,982) ----------- ----------- $ 6,549,335 $ 7,453,206 ----------- ----------- $13,288,481 $13,701,643 =========== ===========
The accompanying Notes to Financial Statements are an integral part of the above statements. 20 UNICOM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
1995 1994 1993 ---------- -------- -------- (THOUSANDS OF DOLLARS) Balance at Beginning of Year...................... $ 560,971 $549,152 $847,186 Add--Net income................................... 639,511 354,934 46,388 ---------- -------- -------- $1,200,482 $904,086 $893,574 ---------- -------- -------- Deduct-- Cash dividends declared on common stock....... $ 343,619 $342,561 $341,683 Other capital stock transactions--net......... (30) 554 2,739 ---------- -------- -------- $ 343,589 $343,115 $344,422 ---------- -------- -------- Balance at End of Year............................ $ 856,893 $560,971 $549,152 ========== ======== ========
The accompanying Notes to Financial Statements are an integral part of the above statements. 21 UNICOM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED CASH FLOWS
1995 1994 1993 ----------- ----------- ----------- (THOUSANDS OF DOLLARS) Cash Flow From Operating Activities: Net income............................. $ 639,511 $ 354,934 $ 46,388 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........ 949,413 929,365 911,139 Deferred income taxes and investment tax credits--net.................... 156,938 126,281 84,500 Extraordinary loss related to early redemption of long-term debt........ 33,158 -- -- Cumulative effect of change in accounting for income taxes......... -- -- (9,738) Equity component of allowance for funds used during construction...... (13,129) (22,628) (20,618) Provisions for revenue refunds and related interest.................... (231) 37,548 1,354,197 Revenue refunds and related interest. 15,135 (1,221,650) (190,723) Recovery/(deferral) of regulatory assets/deferred carrying charges-- net................................. 15,272 15,453 (432,948) Provisions/(payments) for liability for early retirement and separation costs--net.......................... 60,713 33,580 (1,816) Net effect on cash flows of changes in: Receivables........................ (177,758) 114,215 (157,405) Coal and fuel oil.................. (20,304) 2,880 215,382 Materials and supplies............. 51,073 18,102 1,834 Accounts payable adjusted for nuclear fuel lease principal payments and early retirement and separation costs--net............. 458,410 116,688 278,946 Accrued interest and taxes......... (2,141) 70,408 (39,234) Other changes in certain current assets and liabilities............ 26,545 (55,843) (6,637) Other--net........................... 139,830 134,515 109,361 ----------- ----------- ----------- $ 2,332,435 $ 653,848 $ 2,142,628 ----------- ----------- ----------- Cash Flow From Investing Activities: Construction expenditures.............. $ (927,327) $ (739,679) $ (842,591) Nuclear fuel expenditures.............. (289,118) (257,264) (261,370) Equity component of allowance for funds used during construction........ 13,129 22,628 20,618 Contributions to nuclear decommissioning funds................. (132,653) (132,550) (132,550) Investment in subsidiary companies..... (8) (49) -- Other investments and special deposits.............................. (1,612) 621,987 (619,349) ----------- ----------- ----------- $(1,337,589) $ (484,927) $(1,835,242) ----------- ----------- ----------- Cash Flow From Financing Activities: Issuance of securities-- Long-term debt....................... $ 62,000 $ 546,289 $ 1,927,296 Preferred securities of subsidiary trust............................... 200,000 -- -- Capital stock........................ 25,411 81,037 80,585 Retirement and redemption of securities-- Long-term debt....................... (1,137,272) (703,930) (1,900,540) Capital stock........................ (17,822) (17,709) (93,081) Deposits and securities held for retirement and redemption of securities............................ 106 3,191 241,731 Premium paid on early redemption of long-term debt........................ (25,823) (4,564) (78,395) Cash dividends paid on common stock.... (343,375) (342,322) (341,505) Proceeds from sale/leaseback of nuclear fuel.......................... 193,215 306,649 204,254 Nuclear fuel lease principal payments.. (237,845) (209,689) (245,968) Increase in short-term borrowings...... 261,000 1,200 350 ----------- ----------- ----------- $(1,020,405) $ (339,848) $ (205,273) ----------- ----------- ----------- Increase (Decrease) in Cash and Temporary Cash Investments............. $ (25,559) $ (170,927) $ 102,113 Cash and Temporary Cash Investments at Beginning of Year...................... 76,935 247,862 145,749 ----------- ----------- ----------- Cash and Temporary Cash Investments at End of Year............................ $ 51,376 $ 76,935 $ 247,862 =========== =========== ===========
The accompanying Notes to Financial Statements are an integral part of the above statements. 22 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Corporate Structure and Basis of Presentation. Unicom was incorporated in January 1994 and became the parent corporation of ComEd and Unicom Enterprises in a corporate restructuring that became effective on September 1, 1994. Previously, Unicom Enterprises was a wholly-owned subsidiary of ComEd. The restructuring was accounted for by the pooling-of-interests method. Under this method, the assets, liabilities and ownership interests of each of the companies are combined at their existing recorded amounts as of the restructuring date, and the financial statements are presented herein as if the restructuring took place as of the earliest period shown. In the restructuring, each of the 214,185,572 outstanding shares of ComEd common stock, par value $12.50 per share, was converted into one fully paid and non-assessable share of Unicom common stock, without par value. The preferred and preference stocks, common stock purchase warrants, first mortgage bonds and other debt obligations of ComEd were unchanged in the restructuring and remain as ComEd's outstanding securities and obligations. ComEd, an electric utility, is the principal subsidiary of Unicom. Unicom Enterprises is an unregulated subsidiary of Unicom and is engaged, through a subsidiary, Unicom Thermal, in energy service activities. Unicom also has several other subsidiaries that have been formed to engage in unregulated activities. The consolidated financial statements include the accounts of Unicom, ComEd, the Indiana Company, ComEd Financing I and Unicom's unregulated subsidiaries. All significant intercompany transactions have been eliminated. ComEd's investments in other subsidiary companies, which are not material in relation to ComEd's financial position or results of operations, are accounted for in accordance with the equity method of accounting. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Regulation. ComEd is subject to regulation as to accounting and ratemaking policies and practices by the ICC and FERC. ComEd's accounting policies and the accompanying consolidated financial statements conform to generally accepted accounting principles applicable to rate-regulated enterprises and reflect the effects of the ratemaking process in accordance with SFAS No. 71, Accounting for the Effects of Certain Types of Regulation. Such effects concern mainly the time at which various items enter into the determination of net income in order to follow the principle of matching costs and revenues. 23 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED Regulatory Assets and Liabilities. Regulatory assets are incurred costs which have been deferred and are amortized for ratemaking and accounting purposes. Regulatory liabilities represent amounts to be settled with customers through future rates. Regulatory assets and liabilities reflected on the Consolidated Balance Sheets at December 31, 1995 and 1994 were as follows:
DECEMBER 31 --------------------- 1995 1994 ---------- ---------- (THOUSANDS OF DOLLARS) Regulatory assets: Deferred income taxes (1)............................... $1,689,832 $1,791,395 Deferred carrying charges (2)........................... 409,923 422,966 Nuclear decommissioning costs--Dresden Unit 1 (3)....... 138,058 141,405 Unamortized loss on reacquired debt (4)................. 160,440 176,128 Other................................................... 69,133 72,376 ---------- ---------- $2,467,386 $2,604,270 ========== ========== Regulatory liabilities: Deferred income taxes (1)............................... $ 601,002 $ 650,813 Other................................................... -- 48,613 ---------- ---------- $ 601,002 $ 699,426 ========== ==========
- -------- (1) Recorded in compliance with SFAS No. 109. (2) Amortized over the remaining lives of the Units. (3) Amortized over the remaining life of Dresden station. See "Depreciation and Decommissioning" below for additional information. (4) Amortized over the remaining lives of the long-term debt issued to finance the reacquisition. See "Loss on Reacquired Debt" below for additional information. For additional information related to deferred carrying charges, see "Deferred Carrying Charges" under the subcaption "Results of Operations" in "Management's Discussion and Analysis of Financial Condition and Results of Operations." See also "Deferred Unrecovered Energy Costs" below regarding the fuel adjustment clause, the DOE assessment and coal reserves. If a portion of ComEd's operations was no longer subject to the provisions of SFAS No. 71 as a result of a change in regulation or the effects of competition, ComEd would be required to write off the related regulatory assets and liabilities. In addition, ComEd would be required to determine any impairment to other assets and write down such assets to their fair value. SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which will be adopted on January 1, 1996, establishes accounting standards for the impairment of long-lived assets. The SFAS also requires that regulatory assets which are no longer probable of recovery through future revenue be charged to earnings. SFAS No. 121 is not expected to have an impact on ComEd's financial position or results of operations upon adoption. Customer Receivables and Revenues. ComEd is engaged principally in the production, purchase, transmission, distribution and sale of electricity to a diverse base of residential, commercial and industrial customers. ComEd's electric service territory has an area of approximately 11,540 square miles and an estimated population of approximately eight million as of December 31, 1995, 1994 and 1993. It includes the city of Chicago, an area of about 225 square miles with an estimated population of approximately three million from which ComEd derived approximately one-third of its ultimate consumer revenues in 1995. ComEd had approximately 3.4 million electric customers at December 31, 1995. Depreciation and Decommissioning. ComEd's depreciation is provided on the straight-line basis by amortizing the cost of depreciable plant and equipment over estimated composite service lives. Non-nuclear plant and equipment is depreciated at annual rates developed for each class of plant based on 24 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED their composite service lives. Provisions for depreciation were at average annual rates of 3.14%, 3.13% and 3.12% of average depreciable utility plant and equipment for the years 1995, 1994 and 1993, respectively. The annual rate for nuclear plant and equipment is 2.88%, which excludes separately collected decommissioning costs. See Note 3 for additional information concerning ComEd's announcement of customer initiatives which include the acceleration of depreciation charges on nuclear generating units. Nuclear plant decommissioning costs are accrued over the expected service lives of the related nuclear generating units. The accrual is based on an annual levelized cost of the unrecovered portion of estimated decommissioning costs which are escalated for expected inflation to the expected time of decommissioning and are net of expected earnings on the trust funds. See "Decommissioning" under "Management's Discussion and Analysis of Financial Condition and Results of Operations," subcaption "Results of Operations," for a discussion of questions raised by the staff of the SEC and a FASB review regarding the electric utility industry method of accounting for decommissioning costs. Dismantling is expected to occur relatively soon after the end of the useful life of each related generating station. The accrual for decommissioning is based on the prompt removal method authorized by NRC guidelines. ComEd's twelve operating units have estimated remaining service lives ranging from 10 to 32 years. ComEd's first nuclear unit, Dresden Unit 1, is retired and will be dismantled upon the retirement of the remaining units at that station, which is consistent with the regulatory treatment for the related decommissioning costs. Based on ComEd's most recent study, decommissioning costs, including the cost of decontamination and dismantling, are estimated to aggregate $3.7 billion in current-year (1996) dollars excluding a contingency allowance. ComEd estimates that it will expend approximately $15 billion, excluding any contingency allowance, for decommissioning costs primarily during the period from 2007 through 2032. Such costs are expected to be funded by the external decommissioning trusts which ComEd established in compliance with Illinois law and into which ComEd has been making annual contributions. Future decommissioning cost estimates may be significantly affected by the adoption of or changes to NRC regulations as well as changes in the assumptions used in making such estimates. On January 9, 1995, the ICC issued its Rate Order in the proceedings relating to ComEd's February 1994 rate increase request. In the Rate Order, the ICC determined that ComEd's annual nuclear plant decommissioning cost collections from its ratepayers should be reduced from the $127 million previously authorized in the 1991 ICC rate order to $112.7 million. The $112.7 million annual collection amount primarily resulted from the ICC's decision to exclude from ComEd's costs subject to collection a contingency allowance. Contingency allowances used in decommissioning cost estimates provide for currently unspecifiable costs that are likely to occur after decommissioning begins and generally range from 20% to 25% of the currently specifiable costs. However, the Rate Order established a rider which will allow annual adjustments to decommissioning cost collections outside of the context of a traditional rate proceeding. Such rider is intended to allow adjustments in decommissioning cost recoveries from ratepayers as changes in cost estimates occur. On February 28, 1995, ComEd submitted its initial rider filing to the ICC to increase its annual collections to $113.5 million, primarily reflecting additional expenditures at Dresden Unit 1, its retired nuclear unit. The ICC approved the rider filing on April 19, 1995. As a result of the decommissioning rider filing, beginning May 2, 1995, the effective date of the order related to the rider filing, ComEd began collecting and accruing $113.5 million annually for decommissioning costs. The assumptions used to calculate the $113.5 million decommissioning cost accrual include: the decommissioning cost estimate of $3.7 billion in current-year (1996) dollars, after-tax earnings on the tax-qualified and nontax-qualified decommissioning funds of 7.30% and 6.26%, 25 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED respectively, as well as an escalation rate for future decommissioning costs of 5.3%. The annual accrual of $113.5 million provided over the lives of the nuclear plants, coupled with the expected fund earnings and amounts previously recovered in rates, is expected to aggregate approximately $15 billion. For the twelve operating nuclear units, decommissioning costs 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, 1995, the total decommissioning costs included in the accumulated provision for depreciation were $1,301 million. For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated liability at December 31, 1995 in current-year (1996) dollars of $257 million was recorded on the Consolidated Balance Sheets as a noncurrent liability and the unrecovered portion of the liability of approximately $138 million was recorded as a regulatory asset. Under Illinois law, decommissioning cost collections are required to be deposited into external trusts; and, consequently, such collections do not add to the cash flows available for general corporate purposes. The ICC has approved ComEd's funding plan which provides for annual contributions of current accruals and ratable contributions of past accruals over the remaining service lives of the nuclear plants. At December 31, 1995, the past accruals that are required to be contributed to the external trusts aggregate $182 million. The fair value of funds accumulated in the external trusts at December 31, 1995 was approximately $1,238 million which includes pre-tax unrealized appreciation of $165 million. The earnings on the external trusts accumulate in the fund balance and in the accumulated provision for depreciation. Amortization of Nuclear Fuel. The cost of nuclear fuel is amortized to fuel expense based on the quantity of heat produced using the unit of production method. As authorized by the ICC, provisions for spent nuclear fuel disposal costs have been recorded at a level required to recover the fee payable on current nuclear-generated and sold electricity and the current interest accrual on the one-time fee payable to the DOE for nuclear generation prior to April 7, 1983. The one-time fee and interest thereon have been recovered and the current fee and current interest on the one-time fee are currently being recovered through the fuel adjustment clause. See Note 11 for further information concerning the disposal of spent nuclear fuel, the one-time fee and the current interest accrual on the one-time fee. Nuclear fuel expenses, including leased fuel costs and provisions for spent nuclear fuel disposal costs, for the years 1995, 1994 and 1993 were $390.7 million, $358.0 million and $385.9 million, respectively. Income Taxes. Deferred income taxes are provided for income and expense items recognized for financial accounting purposes in periods that differ from those for income tax purposes. Income taxes deferred in prior years are charged or credited to income as the book/tax timing differences reverse. Prior years' deferred investment tax credits are amortized through credits to income generally over the lives of the related property. Income tax credits resulting from interest charges applicable to nonoperating activities, principally construction, are classified as other income. AFUDC. In accordance with the uniform systems of accounts prescribed by regulatory authorities, ComEd capitalizes AFUDC, compounded semiannually, which represents the estimated cost of funds used to finance its construction program. The equity component of AFUDC is recorded on an after-tax basis and the borrowed funds component of AFUDC is recorded on a pre-tax basis. The average annual capitalization rates for the years 1995, 1994 and 1993 were 9.52%, 9.85% and 10.05%, respectively. AFUDC does not contribute to the current cash flow of Unicom or ComEd. Interest. Total interest costs incurred on debt, leases and other obligations for the years 1995, 1994 and 1993 were $695.8 million, $729.8 million and $778.7 million, respectively. 26 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED Debt Discount, Premium and Expense. Discount, premium and expense on long- term debt of subsidiary companies are being amortized over the lives of the respective issues. Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss from ComEd's reacquisition in connection with refinancing of first mortgage bonds, sinking fund debentures and pollution control obligations prior to their scheduled maturity dates is deferred and amortized over the lives of the long- term debt issued to finance the reacquisition. Deferred Unrecovered Energy Costs. The fuel adjustment clause adopted by the ICC provides for the recovery of changes in fossil and nuclear fuel costs and the energy portion of purchased power costs as compared to the fuel and purchased energy costs included in ComEd's base rates. As authorized by the ICC, ComEd has recorded under or overrecoveries of allowable fuel and energy costs which, under the clause, are recoverable or refundable in subsequent months. Deferred unrecovered energy costs also include amounts to be recovered through the fuel adjustment clause for assessments by the DOE to fund a portion of the cost for the decontamination and decommissioning of uranium enrichment facilities owned and previously operated by the DOE. As of December 31, 1995 and 1994, an asset related to the assessments of approximately $179 million and $191 million, respectively, was recorded, of which the current portion of approximately $15 million was included in current assets on the Consolidated Balance Sheets. As of December 31, 1995 and 1994, a corresponding liability of approximately $152 million and $165 million, respectively, was recorded in other noncurrent liabilities and approximately $15 million was recorded in other current liabilities. At December 31, 1995 and 1994, ComEd had unrecovered fuel costs in the form of coal reserves of approximately $448 million and $498 million, respectively. In prior years, ComEd's commitments for the purchase of coal exceeded its requirements. Rather than take all the coal it was required to take, ComEd agreed to purchase the coal in place in the form of coal reserves. ComEd has been allowed to recover from its customers the costs of the coal reserves through its fuel adjustment clause as the coal is used for the generation of electricity; however, ComEd is not earning a return on the expenditures for coal reserves. Such fuel costs expected to be recovered within one year amounting to approximately $24 million and $31 million at December 31, 1995 and 1994, respectively, have been included on the Consolidated Balance Sheets in current assets as deferred unrecovered energy costs. ComEd expects to fully recover the costs of the coal reserves by the year 2007. See Note 21 for additional information concerning ComEd's coal commitments. Reclassifications. Certain prior year amounts have been reclassified to conform with current period presentation. These reclassifications had no effect on net income. Statements of Consolidated Cash Flows. For purposes of the Statements of Consolidated Cash Flows, temporary cash investments, generally investments maturing within three months at the time of purchase, are considered to be cash equivalents. Supplemental cash flow information for the years 1995, 1994 and 1993 was as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Supplemental Cash Flow Information: Cash paid during the year for: Interest (net of amount capitalized)........... $604,932 $645,658 $677,682 Income taxes (net of refunds).................. $367,708 $ (4,923) $103,014 Supplemental Schedule of Non-Cash Investing and Financing Activities: Capital lease obligations incurred by subsidiary companies....................................... $198,577 $309,716 $215,751
27 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (2) SETTLEMENTS RELATING TO CERTAIN RATE MATTERS Under the Rate Matters Settlement, effective as of November 4, 1993, ComEd reduced its rates by approximately $339 million annually and refunded approximately $1.26 billion (including revenue taxes), plus interest at five percent on the unpaid balance, through temporarily reduced rates over a refund period which ended in November 1994 (followed by a reconciliation period of five months). ComEd had previously deferred the recognition of revenues during 1993 as a result of developments in the proceedings related to a 1991 ICC rate order, which resulted in a reduction to 1993 net income of approximately $160 million or $0.75 per common share. The recording of the effects of the Rate Matters Settlement in October 1993 reduced 1993 net income by approximately $292 million or $1.37 per common share, in addition to the approximately $160 million effect of the deferred recognition of revenues and after the partially offsetting effect of recording approximately $269 million or $1.26 per common share in deferred carrying charges, net of income taxes, authorized in the Remand Order. Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd paid approximately $108 million (including revenue taxes) to its customers through temporarily reduced collections under its fuel adjustment clause over a twelve-month period which ended in November 1994. The recording of the effects of the Fuel Matters Settlement in October 1993 reduced 1993 net income by approximately $62 million or $0.29 per common share. (3) OTHER RATE MATTERS On January 9, 1995, the ICC issued its Rate Order in the proceedings relating to ComEd's February 1994 rate increase request. The Rate Order provides, among other things, for (i) an increase in ComEd's total revenues of approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an annual basis, including a $303.2 million increase in base rates, (ii) the collection of municipal franchise costs as an adder to base rates until May 1, 1995, when ComEd began collecting such costs prospectively on an individual municipality basis through a rider, and (iii) the use of a rider, with annual review proceedings, to pass on to ratepayers increases or decreases in estimated costs associated with the decommissioning of ComEd's nuclear generating units. See Note 1 under "Depreciation and Decommissioning" for information related to the level of decommissioning cost collections allowed in the Rate Order and subsequent rider proceedings. The ICC also determined that the Units were 100% "used and useful" and that the previously determined reasonable costs of such Units, as depreciated, should be included in full in ComEd's rate base. The rates provided in the Rate Order became effective on January 14, 1995; however, they are being collected subject to refund as a result of subsequent judicial action. As of December 31, 1995, electric operating revenues of approximately $319 million (excluding revenue taxes) are subject to refund. Intervenors and ComEd have filed appeals of the Rate Order with the Illinois Appellate Court. On December 11, 1995, ComEd announced a series of customer initiatives as part of its larger ongoing effort to address the need to give all customer classes the opportunity to benefit from increased competition in the electric utility business, while retaining the benefits (such as reliability) of current regulation and ensuring utilities' cost recovery for commitments made under the obligation to serve customers. The initiatives include a five-year cap on base electric rates at current levels and various customer service and incentive pricing programs designed to allow customers more choice and control over the services they seek and the prices they pay. These initiatives are in addition to previously implemented special discount contract rate programs for new or existing industrial customers. ComEd anticipates the initiatives will be fully implemented in 1997 and will reduce its revenues by approximately $42 million annually (including the effects of previously implemented initiatives and before income tax 28 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED effects) primarily through changes in energy utilization and increase its costs by at least $30 million annually (before income tax effects) through the acceleration of depreciation charges on its nuclear generating units. ComEd expects to file a request for ICC approval of the accelerated depreciation initiatives in the near future. Management expects the financial impact of these initiatives will be substantially offset by ComEd's cost reduction efforts and expected growth in its business. ComEd also continues to consider the possibility of additional accelerated depreciation options. Under ComEd's initiatives, the five-year base rate cap at current levels became effective in December 1995 and will extend until January 1, 2001. The rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost recovery provisions. ComEd's fuel cost variances will continue to be collected through its fuel adjustment clause, and such collections will continue to be subject to annual reconciliation proceedings before the ICC. Likewise, nuclear decommissioning costs will continue to be collected as described in Note 1 under "Depreciation and Decommissioning." (4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK At December 31, 1995, Unicom's authorized shares consisted of 400,000,000 shares of common stock. The authorized shares of ComEd preferred and preference stocks at December 31, 1995 were: preference stock--23,244,990 shares; $1.425 convertible preferred stock--96,753 shares; and prior preferred stock--850,000 shares. The preference and prior preferred stocks are issuable in series and may be issued with or without mandatory redemption requirements. Holders of outstanding Unicom shares are entitled to one vote for each share held on each matter submitted to a vote of such shareholders; and holders of outstanding ComEd shares are entitled to one vote for each share held on each matter submitted to a vote of such shareholders. All such shares have the right to cumulate votes in elections for the directors of the corporation which issued the shares. (5) COMMON STOCK At December 31, 1995, shares of Unicom common stock were reserved for the following purposes: Long-Term Incentive Plan........................................ 3,816,918 Employee Stock Purchase Plan.................................... 900,083 Employee Savings and Investment Plan............................ 273,003 Exchange for ComEd common stock not held by Unicom.............. 135,646 --------- 5,125,650 =========
Common stock for the years 1995, 1994 and 1993 was issued as follows:
1995 1994 1993 ------- ------- ------- Shares of Common Stock Issued: Long-Term Incentive Plan............................. 183,082 -- -- Employee Stock Purchase Plan......................... 217,080 305,205 268,594 Employee Savings and Investment Plan................. 207,400 85,400 153,400 Conversion of $1.425 convertible preferred stock..... -- 185,041 22,375 Conversion of warrants............................... -- 13,274 1,374 ------- ------- ------- 607,562 588,920 445,743 ======= ======= ======= (THOUSANDS OF DOLLARS) Amount of Common Stock Issued.......................... $15,446 $14,781 $12,211 ======= ======= =======
At December 31, 1995 and 1994, 82,742 and 83,751 ComEd common stock purchase warrants, respectively, were outstanding. The warrants entitle the holders to convert such warrants into common stock of ComEd at a conversion rate of one share of common stock for three warrants. 29 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (6) COMED PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION REQUIREMENTS No shares of ComEd preferred or preference stocks without mandatory redemption requirements were issued or redeemed during 1995 or 1993. During 1994, 3,000,000 shares of ComEd preference stock without mandatory redemption requirements were issued and no shares of ComEd preferred or preference stocks without mandatory redemption requirements were redeemed. The series of ComEd preference stock without mandatory redemption requirements outstanding at December 31, 1995 are summarized as follows:
INVOLUNTARY SHARES AGGREGATE REDEMPTION LIQUIDATION SERIES OUTSTANDING STATED VALUE PRICE(1) PRICE(1) ------ ----------- ------------ ---------- ----------- (THOUSANDS OF DOLLARS) $1.90 4,249,549 $106,239 $ 25.25 $25.00 $2.00 2,000,000 51,560 $ 26.04 $25.00 $1.96 2,000,000 52,440 $ 27.11 $25.00 $7.24 750,000 74,340 $101.00 $99.12 $8.40 750,000 74,175 $101.00 $98.90 $8.38 750,000 73,566 $100.16 $98.09 $2.425 3,000,000 72,637 $ 25.00 $25.00 ---------- -------- 13,499,549 $504,957 ========== ========
-------- (1) Per share plus accrued and unpaid dividends, if any. The outstanding shares of ComEd's $1.425 convertible preferred stock are convertible at the option of the holders thereof, at any time, into common stock of ComEd at the rate of 1.02 shares of common stock for each share of convertible preferred stock, subject to future adjustment. The convertible preferred stock may be redeemed by ComEd at $42 per share, plus accrued and unpaid dividends, if any. The involuntary liquidation price of the $1.425 convertible preferred stock is $31.80 per share, plus accrued and unpaid dividends, if any. (7) COMED PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS During 1995 and 1994, no shares of ComEd preference stock subject to mandatory redemption requirements were issued. During 1993, 700,000 shares of ComEd preference stock subject to mandatory redemption requirements were issued. The series of ComEd preference stock subject to mandatory redemption requirements outstanding at December 31, 1995 are summarized as follows:
SHARES AGGREGATE SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(1) - -------------- ----------- ------------ -------------------------------------------------- (THOUSANDS OF DOLLARS) $8.20 249,990 $ 24,999 $103 through October 31, 1997; and $101 thereafter $8.40 Series B 360,000 35,758 $101 $8.85 300,000 30,000 $103 through July 31, 1998; and $101 thereafter $9.25 675,000 67,500 $103 through July 31, 1999; and $101 thereafter $9.00 650,000 64,431 Non-callable $6.875 700,000 69,475 Non-callable --------- -------- 2,934,990 $292,163 ========= ========
- -------- (1) Per share plus accrued and unpaid dividends, if any. 30 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED The annual sinking fund requirements and sinking fund and involuntary liquidation prices per share of the outstanding series of ComEd preference stock subject to mandatory redemption requirements are summarized as follows:
SINKING ANNUAL SINKING FUND FUND INVOLUNTARY SERIES REQUIREMENT PRICE(1) LIQUIDATION PRICE(1) -------------- ------------------- ------- ------------------- $8.20 35,715 shares $100 $100.00 $8.40 Series B 30,000 shares(2) $100 $ 99.326 $8.85 37,500 shares $100 $100.00 $9.25 75,000 shares $100 $100.00 $9.00 130,000 shares(2) $100 $ 99.125 $6.875 (3) $100 $ 99.25
-------- (1) Per share plus accrued and unpaid dividends, if any. (2) ComEd has a non-cumulative option to increase the annual sinking fund payment on each sinking fund redemption date to retire an additional number of shares, not in excess of the sinking fund requirement, at the applicable redemption price. (3) All shares are required to be redeemed on May 1, 2000. Annual remaining sinking fund requirements through 2000 on ComEd preference stock outstanding at December 31, 1995 will aggregate $30,822,000 in each of 1996, 1997, 1998 and 1999, and $100,822,000 in 2000. During 1995, 1994 and 1993, 178,215 shares, 177,085 shares and 1,835,155 shares, respectively, of ComEd preference stock subject to mandatory redemption requirements were reacquired to meet sinking fund requirements. Sinking fund requirements due within one year are included in current liabilities. On June 28, 1993, ComEd redeemed the remaining 170,810 shares of its $2.875 Series of preference stock and all 1,050,000 shares of its $2.375 Series of preference stock, both at the optional redemption price of $25.25 per share, plus accrued and unpaid dividends. On November 1, 1993, ComEd redeemed the remaining 75,000 shares of its $11.70 Series of preference stock (150,000 shares had been redeemed on August 1, 1993 at the optional redemption price of $105 per share, plus accrued and unpaid dividends). Of the remaining 75,000 shares, 37,500 shares were redeemed to meet the November 1, 1993 mandatory sinking fund requirement and 37,500 shares were redeemed as a permitted optional sinking fund payment, both at the sinking fund redemption price of $100 per share, plus accrued and unpaid dividends. On November 1, 1993, ComEd redeemed all 210,000 shares of its $9.30 Series of preference stock, of which 70,000 shares were redeemed at the optional redemption price of $101.03 per share, plus accrued and unpaid dividends, 70,000 shares were redeemed to meet the November 1, 1993 mandatory sinking fund requirement and 70,000 shares were redeemed as a permitted optional sinking fund payment, the latter two at the sinking fund redemption price of $100 per share, plus accrued and unpaid dividends. (8) COMED-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF COMED FINANCING I In September 1995, ComEd Financing I (Trust), a wholly-owned subsidiary trust of ComEd, issued 8,000,000 of its 8.48% ComEd-obligated mandatorily redeemable preferred securities. The sole asset of the Trust is $206.2 million principal amount of ComEd's 8.48% subordinated deferrable interest notes due September 30, 2035. There is a full and unconditional guarantee by ComEd of the Trust's obligations 31 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED under the securities issued by the Trust. However, ComEd's obligations are subordinate and junior in right of payment to certain other indebtedness of ComEd. ComEd has the right to defer payments of interest on the subordinated deferrable interest notes by extending the interest payment period, at any time, for up to 20 consecutive quarters. If interest payments on the subordinated deferrable interest notes are so deferred, distributions on the preferred securities will also be deferred. During any deferral, distributions will continue to accrue with interest thereon. In addition, during any such deferral, ComEd may not declare or pay any dividend or other distribution on, or redeem or purchase, any of its capital stock. The subordinated deferrable interest notes are redeemable by ComEd (in whole or in part) from time to time, on or after September 30, 2000, or at any time in the event of certain income tax circumstances. If the subordinated deferrable interest notes are redeemed, the Trust must redeem preferred securities having an aggregate liquidation amount equal to the aggregate principal amount of the subordinated deferrable interest notes so redeemed. In the event of the dissolution, winding up or termination of the Trust, the holders of the preferred securities will be entitled to receive, for each preferred security, a liquidation amount of $25 plus accrued and unpaid distributions thereon (including interest thereon) to the date of payment, unless in connection with the dissolution, the subordinated deferrable interest notes are distributed to the holders of the preferred securities. (9) LONG-TERM DEBT Sinking fund requirements and scheduled maturities remaining through 2000 for ComEd's first mortgage bonds, sinking fund debentures and other long-term debt outstanding at December 31, 1995, after deducting sinking fund debentures reacquired for satisfaction of future sinking fund requirements, are summarized as follows: 1996--$234,893,000; 1997--$689,168,000; 1998--$350,017,000; 1999-- $152,445,000; and 2000--$464,446,000. Scheduled payments through 2000 for Unicom's loans payable are as follows: 1996--$1,099,000; 1997--$1,972,000; 1998--$2,465,000; 1999--$2,575,000; and 2000--$2,656,000. Unicom Enterprises' note payable to bank of $42,000,000 will mature in 1998. 32 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED At December 31, 1995, ComEd's outstanding first mortgage bonds maturing through 2000 were as follows:
PRINCIPAL AMOUNT SERIES ---------------------- (THOUSANDS OF DOLLARS) 5 1/4% due April 1, 1996........................... $ 50,000 5 3/4% due November 1, 1996........................ 50,000 5 3/4% due December 1, 1996........................ 50,000 7% due February 1, 1997............................ 150,000 5 3/8% due April 1, 1997........................... 50,000 6 1/4% due October 1, 1997......................... 60,000 6 1/4% due February 1, 1998........................ 50,000 6% due March 15, 1998.............................. 130,000 6 3/4% due July 1, 1998............................ 50,000 6 3/8% due October 1, 1998......................... 75,000 9 3/8% due February 15, 2000....................... 125,000 6 1/2% due April 15, 2000.......................... 230,000 6 3/8% due July 15, 2000........................... 100,000 ---------- $1,170,000 ==========
Other long-term debt outstanding at December 31, 1995 is summarized as follows:
PRINCIPAL DEBT SECURITY AMOUNT INTEREST RATE -------------------------------- ---------- ------------------------------------------------------- (THOUSANDS OF DOLLARS) Unicom-- Loans Payable: Loan due January 1, 2003 $ 10,000 Interest rate of 8.31% Loan due January 1, 2004 10,000 Interest rate of 8.44% ---------- $ 20,000 ---------- ComEd-- Notes: Medium Term Notes, Series 1N due various dates through April 1, 1998 $ 50,500 Interest rates ranging from 9.40% to 9.65% Medium Term Note, Series 2N due July 1, 1996 10,000 Interest rate of 9.85% Medium Term Notes, Series 3N due various dates through October 15, 2004 322,250 Interest rates ranging from 8.92% to 9.20% Medium Term Notes, Series 4N due various dates through May 15, 1997 46,000 Interest rates ranging from 8.11% to 8.875% Notes due February 15, 1997 150,000 Interest rate of 7.00% Notes due July 15, 1997 100,000 Interest rate of 6.50% Notes due October 15, 2005 235,000 Interest rate of 6.40% ---------- $ 913,750 ---------- Long-Term Note Payable to Bank: Note due June 1, 1997 $ 150,000 Prevailing interest rate of 6.375% at December 31, 1995 ---------- Purchase Contract Obligations: Woodstock due January 2, 1997 $ 95 Interest rate of 4.50% Hinsdale due April 30, 2005 473 Interest rate of 3.00% ---------- $ 568 ---------- Total ComEd $1,064,318 ---------- Unicom Enterprises-- Note Payable to Bank: Note due November 22, 1998 $ 42,000 Prevailing interest rate of 6.831% at December 31, 1995 ---------- Total Unicom $1,126,318 ==========
Long-term debt maturing within one year has been included in current liabilities. 33 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED ComEd's outstanding first mortgage bonds are secured by a lien on substantially all property and franchises, other than expressly excepted property, owned by ComEd. ComEd recorded an extraordinary loss of $33 million in the fourth quarter of 1995 related to the early redemption of $645 million of long-term debt which reduced net income by $20 million (after reflecting income tax effects of $13 million) or $0.09 per common share. (10) LINES OF CREDIT ComEd had total bank lines of credit of approximately $922 million and unused bank lines of credit of approximately $915 million at December 31, 1995. Of that amount, $915 million (of which $175 million expires on September 30, 1996, $72 million expires in equal quarterly installments commencing on December 31, 1996 and ending on September 30, 1998 and $668 million expires in equal quarterly installments commencing on December 31, 1997 and ending on September 30, 1999) may be borrowed on secured or unsecured notes of ComEd at various interest rates. The interest rate is set at the time of a borrowing and is based on several floating rate bank indices plus a spread which is dependent upon ComEd's credit ratings, or on a prime interest rate. Amounts under the remaining lines of credit may be borrowed at prevailing prime interest rates on unsecured notes of ComEd. Collateral, if required for the borrowings, would consist of first mortgage bonds issued under and in accordance with the provisions of ComEd's mortgage. ComEd is obligated to pay commitment fees with respect to $915 million of such lines of credit. Unicom Enterprises has a $200 million credit facility which will expire in 1998 of which $158 million was unused as of December 31, 1995. The credit facility can be used by Unicom Enterprises to finance investments in unregulated energy-related businesses and projects, including Unicom Thermal, and for general corporate purposes. The credit facility is guaranteed by Unicom and includes certain covenants with respect to Unicom's and Unicom Enterprises' operations. Such covenants include, among other things, (i) a requirement that Unicom and its consolidated subsidiaries maintain a tangible net worth at least $10 million over that of ComEd and its consolidated subsidiaries, (ii) a requirement that Unicom's consolidated debt to consolidated capitalization not exceed 0.65 to 1, (iii) restrictions on the indebtedness for borrowed money that Unicom (excluding ComEd) and Unicom Enterprises may incur, and (iv) a requirement that Unicom own 100% of the outstanding stock of Unicom Enterprises and at least 80% of the outstanding stock of ComEd; and provide that Unicom may not declare or pay dividends during the continuance of an event of default. Interest rates for borrowings under the credit facility are set at the time of a borrowing and are based on either a prime interest rate or a floating rate bank index plus a spread which varies with the credit rating of ComEd's outstanding first mortgage bonds. (11) DISPOSAL OF SPENT NUCLEAR FUEL Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the selection and development of repositories for, and the disposal of, spent nuclear fuel and high-level radioactive waste. ComEd, as required by that Act, has signed a contract with the DOE to provide for the disposal of spent nuclear fuel and high-level radioactive waste from ComEd's nuclear generating stations beginning not later than January 1998; however, this delivery schedule is expected to be delayed significantly. The contract with the DOE requires ComEd to pay the DOE a one-time fee applicable to nuclear generation through April 6, 1983 of approximately $277 million, with interest to date of payment, and a fee payable quarterly equal to one mill per kilowatthour of nuclear-generated and sold electricity after April 6, 1983. As provided for under the contract, ComEd has elected to pay the one-time fee, with interest, just prior to the first delivery of spent nuclear fuel to the DOE. The liability for the one-time fee and the related interest is reflected in the Consolidated Balance Sheets. 34 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (12) FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of financial instruments either held or issued and outstanding. The disclosure of such information does not purport to be a market valuation of Unicom and subsidiary companies as a whole. The impact of any realized or unrealized gains or losses related to such financial instruments on the financial position or results of operations of Unicom and subsidiary companies is primarily dependent on the treatment authorized under future ComEd ratemaking proceedings. Investments. Securities included in the nuclear decommissioning funds have been classified and accounted for as "available for sale" securities. The estimated fair value of the nuclear decommissioning funds, as determined by the trustee and based on published market data, as of December 31, 1995 and 1994 was as follows:
DECEMBER 31, 1995 DECEMBER 31, 1994 -------------------------------- -------------------------------- UNREALIZED UNREALIZED GAINS COST BASIS GAINS FAIR VALUE COST BASIS (LOSSES) FAIR VALUE ---------- ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS) Short-term investments.. $ 40,575 $ 283 $ 40,858 $ 65,203 $ 106 $ 65,309 U.S. Government and Agency issues.......... 156,745 17,636 174,381 94,450 (562) 93,888 Municipal bonds......... 496,707 34,970 531,677 478,074 (7,301) 470,773 Common stock............ 348,866 107,280 456,146 220,395 9,069 229,464 Other................... 29,757 4,708 34,465 18,788 2,722 21,510 ---------- -------- ---------- -------- ------- -------- $1,072,650 $164,877 $1,237,527 $876,910 $ 4,034 $880,944 ========== ======== ========== ======== ======= ========
At December 31, 1995, the debt securities held by the nuclear decommissioning funds had the following maturities:
COST BASIS FAIR VALUE ---------- ---------- (THOUSANDS OF DOLLARS) Within 1 year....................................... $ 40,575 $ 40,858 1 through 5 years................................... 73,996 76,978 5 through 10 years.................................. 229,132 247,521 Over 10 years....................................... 366,667 398,510
The net earnings of the nuclear decommissioning funds, which are recorded as increases to the accumulated provision for depreciation (only the realized portion prior to January 1, 1994), for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 ----------- --------- --------- (THOUSANDS OF DOLLARS) Gross proceeds from sales of securities..... $ 2,598,889 $ 811,368 $ 388,684 Less cost based on specific identification.. (2,581,714) (811,997) (377,734) ----------- --------- --------- Realized gains (losses) on sales of securi- ties....................................... $ 17,175 $ (629) $ 10,950 Other realized fund earnings net of ex- penses..................................... 46,294 38,148 29,878 ----------- --------- --------- Total realized net earnings of the funds.... $ 63,469 $ 37,519 $ 40,828 Unrealized gains (losses)................... 160,843 (57,948) 30,969 ----------- --------- --------- Total net earnings (losses) of the funds... $ 224,312 $ (20,429) $ 71,797 =========== ========= =========
Current Assets. Cash, temporary cash investments and other cash investments, which include U.S. Government Obligations and other short-term marketable securities, and special deposits, which primarily includes cash deposited for the redemption, refund or discharge of debt securities, are stated at cost, which approximates their fair value because of the short maturity of these instruments. The securities included in these categories have been classified as "available for sale" securities. 35 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED Capitalization. The estimated fair values of ComEd preferred and preference stocks, ComEd-obligated mandatorily redeemable preferred securities of the Trust and long-term debt were obtained from an independent consultant. The estimated fair values, which include the current portions of redeemable preference stock and long-term debt but exclude accrued interest and dividends, as of December 31, 1995 and 1994 were as follows:
DECEMBER 31, 1995 DECEMBER 31, 1994 -------------------------------- --------------------------------- CARRYING UNREALIZED CARRYING UNREALIZED VALUE LOSSES FAIR VALUE VALUE (GAINS) FAIR VALUE ---------- ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS) ComEd preferred and preference stocks.... $ 800,197 $ 14,769 $ 814,966 $ 818,111 $ (64,443) $ 753,668 ComEd-obligated mandatorily redeemable preferred securities of the Trust................ $ 200,000 $ 6,000 $ 206,000 $ -- $ -- $ -- Long-term debt of subsidiary companies. $6,572,853 $470,175 $7,043,028 $7,448,236 $(450,429) $6,997,807
Long-term notes payable, which are not included in the above table, amounted to $212 million and $400 million at December 31, 1995 and 1994, respectively. Such notes, for which interest is paid at fixed and prevailing rates, are included in the consolidated financial statements at cost, which approximates their fair value. Current Liabilities. The carrying value of notes payable, which consists of commercial paper and bank loans maturing within one year, approximates the fair value because of the short maturity of these instruments. See "Capitalization" above for a discussion of the fair value of the current portion of long-term debt and redeemable preference stock. Other Noncurrent Liabilities. The carrying value of accrued spent nuclear fuel disposal fee and related interest represents the settlement value as of December 31, 1995 and 1994; therefore, the carrying value is equal to the fair value. (13) PENSION BENEFITS ComEd and the Indiana Company have non-contributory defined benefit pension plans which cover all regular employees. Benefits under these plans reflect each employee's compensation, years of service and age at retirement. During 1995, these plans were amended to more closely base retirement benefits on final pay. Funding is based upon actuarially determined contributions that take into account the amount deductible for income tax purposes and the minimum contribution required under the Employee Retirement Income Security Act of 1974, as amended. Actuarial valuations were determined as of January 1, 1995 and 1994. During 1994, the companies implemented an early retirement program for employees eligible to retire or who would become eligible to retire after December 31, 1993 and before April 1, 1995. A total of 679 employees accepted the program, resulting in the recognition of approximately $34 million of additional pension cost and an additional increase to the projected benefit obligation of that $34 million and $41 million of unrecognized net loss. The charge to income was approximately $20.5 million after reflecting income tax effects as a result of the program. 36 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED The funded status of these plans at December 31, 1995 and 1994 was as follows:
DECEMBER 31 ------------------------ 1995 1994 ----------- ----------- (THOUSANDS OF DOLLARS) Actuarial present value of accumulated pension plan benefits: Vested benefit obligation......................... $(2,839,000) $(2,105,000) Nonvested benefit obligation...................... (251,000) (359,000) ----------- ----------- Accumulated benefit obligation.................... $(3,090,000) $(2,464,000) Effect of projected future compensation levels.... (304,000) (485,000) ----------- ----------- Projected benefit obligation...................... $(3,394,000) $(2,949,000) Fair value of plan assets, invested primarily in U.S. Government, government-sponsored corporation and agency securities, fixed income funds, regis- tered investment companies, equity index funds and other equity funds ................................ 3,060,000 2,547,000 ----------- ----------- Plan assets less than projected benefit obligation.. $ (334,000) $ (402,000) Unrecognized prior service cost..................... (73,000) 22,000 Unrecognized transition asset....................... (142,000) (155,000) Unrecognized net loss............................... 204,000 239,000 ----------- ----------- Accrued pension liability......................... $ (345,000) $ (296,000) =========== ===========
The assumed discount rates were 7.5% and 8.0% at December 31, 1995 and 1994, respectively, and the assumed annual rate of increase in future compensation levels was 4.0%. These rates were used in determining the projected benefit obligations, the accumulated benefit obligations and the vested benefit obligations. Pension costs were determined under the rules prescribed by SFAS No. 87, including the use of the projected unit credit actuarial cost method and the following actuarial assumptions for the years 1995, 1994 and 1993:
1995 1994 1993 ----- ----- ----- Annual discount rate.......................................... 8.00% 7.50% 7.50% Annual rate of increase in future compensation levels......... 4.00% 4.00% 4.00% Annual long-term rate of return on plan assets................ 9.75% 9.50% 9.50%
The components of pension costs, portions of which were recorded as components of construction costs, for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 --------- --------- --------- (THOUSANDS OF DOLLARS) Service cost................................. $ 87,000 $ 97,000 $ 96,000 Interest cost on projected benefit obligation.................................. 225,000 213,000 204,000 Actual loss (return) on plan assets.......... (681,000) 37,000 (310,000) Early retirement program cost................ -- 34,000 -- Net amortization and deferral................ 418,000 (302,000) 61,000 --------- --------- --------- $ 49,000 $ 79,000 $ 51,000 ========= ========= =========
In addition, an employee savings and investment plan is available to certain eligible employees of ComEd, Cotter, Unicom Thermal and the Indiana Company. During the fourth quarter of 1995, the employee savings and investment plan was amended for employees of ComEd, Cotter, Unicom Thermal and the management employees of the Indiana Company. Each participating employee affected by the amendments may contribute up to 20% of such employee's base pay and the participating companies match such contribution equal to 100% of up to the first 2% of contributed base salary, 70% of the second 3% of contributed base salary and 25% of the last 1% of contributed base salary. During 1995, 1994 and 1993, the participating companies contributed $24,661,000, $22,756,000 and $21,948,000, respectively. 37 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (14) POSTRETIREMENT HEALTH CARE BENEFITS ComEd and the Indiana Company provide certain postretirement health care benefits for retirees and their dependents and for the surviving dependents of eligible employees and retirees. The employees become eligible for postretirement health care benefits when they reach age 55 with 10 years of service. The liability for postretirement health care benefits is funded through trust funds based upon actuarially determined contributions that take into account the amount deductible for income tax purposes. The postretirement health care plan for ComEd and the Indiana Company was amended, effective April 1, 1995. Prior to that date, the postretirement health care plan was fully funded by the companies. With respect to employees who retire on or after April 1, 1995, the plan is contributory, funded jointly by the companies and the participating employees. Actuarial valuations were determined as of January 1, 1995 and 1994. Postretirement health care costs in 1995 included $25 million related to a voluntary separation offer for union employees who accepted and left ComEd's employ by year-end 1995 combined with separation plans offered to selected groups of non-union employees. The funded status of the plan at December 31, 1995 and 1994 was as follows:
DECEMBER 31 ---------------------- 1995 1994 --------- ----------- (THOUSANDS OF DOLLARS) Actuarial present value of accumulated postretirement health care obligation: Retirees.............................................. $(457,000) $ (467,000) Active fully eligible participants.................... (25,000) (34,000) Other participants.................................... (418,000) (581,000) --------- ----------- Accumulated benefit obligation........................ $(900,000) $(1,082,000) Fair value of plan assets, invested primarily in S&P 500 common stocks and U.S. Government, government agency, municipal and listed corporate ob- ligations............................................. 603,000 503,000 --------- ----------- Plan assets less than accumulated postretirement health care obligation....................................... $(297,000) $ (579,000) Unrecognized transition obligation..................... 374,000 531,000 Unrecognized net gain.................................. (285,000) (70,000) --------- ----------- Accrued liability for postretirement health care....... $(208,000) $ (118,000) ========= ===========
Different health care cost trends are used for pre-Medicare and post-Medicare expenses. Pre-Medicare trend rates were 14% for 1994 and 13.5% for the first three months of 1995, grading down in 0.5% annual increments to 5%. Post- Medicare trend rates were 11.5% for 1994 and 11% for the first three months of 1995, grading down in 0.5% annual increments to 5%. For the last nine months of 1995, pre-Medicare trend rates were 10%, grading down in 0.5% annual increments to 5%. Post-Medicare trend rates were 8% for the last nine months of 1995, grading down in 0.5% annual increments to 5%. The effect of a 1% increase in the assumed health care cost trend rates for each future year would increase the accumulated postretirement health care obligation at January 1, 1995 by approximately $161 million and increase the aggregate of the service and interest cost components of plan costs by approximately $20 million for the year 1995. The assumed discount rates were 7.5% and 8.0% at December 31, 1995 and 1994, respectively. The annual long-term rate of return on plan assets was 9.32% and 9.04% for the years 1995 and 1994, respectively, after including income tax effects. 38 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED The components of postretirement health care costs, portions of which were recorded as components of construction costs, for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Service cost............................... $ 31,000 $ 47,000 $ 45,000 Interest cost on accumulated benefit obli- gation.................................... 69,000 81,000 74,000 Actual loss (return) on plan assets........ (137,000) 9,000 (41,000) Amortization of transition obligation...... 23,000 29,000 29,000 Severance plan cost........................ 25,000 -- -- Other...................................... 83,000 (49,000) 9,000 -------- -------- -------- $ 94,000 $117,000 $116,000 ======== ======== ========
(15) SEPARATION PLAN COSTS Operation and maintenance expenses included $97 million for the year 1995 related to a voluntary separation offer for union employees who accepted and left ComEd's employ by year-end 1995 combined with separation plans offered to selected groups of non-union employees. These employee separation plans reduced net income by $59 million or $0.27 per common share for the year 1995. (16) INCOME TAXES The components of the net deferred income tax liability at December 31, 1995 and 1994 were as follows:
DECEMBER 31 ---------------------- 1995 1994 ---------- ---------- (THOUSANDS OF DOLLARS) Deferred income tax liabilities: Accelerated cost recovery and liberalized deprecia- tion, net of removal costs........................... $3,379,987 $3,266,930 Overheads capitalized................................. 252,910 266,159 Repair allowance...................................... 219,585 210,655 Regulatory assets recoverable through future rates.... 1,689,832 1,791,395 Deferred income tax assets: Postretirement benefits............................... (235,360) (177,991) Unbilled revenues..................................... (116,274) (90,396) Loss carryforward..................................... -- (10,090) Alternative minimum tax............................... (145,019) (283,331) Unamortized investment tax credits to be settled through future rates................................. (452,210) (471,058) Other regulatory liabilities to be settled through fu- ture rates........................................... (148,792) (179,755) Other--net............................................ (46,607) (59,528) ---------- ---------- Net deferred income tax liability...................... $4,398,052 $4,262,990 ========== ==========
The $135 million increase in the net deferred income tax liability from December 31, 1994 to December 31, 1995 is comprised of $187 million of deferred income tax expense and a $52 million decrease in regulatory assets net of regulatory liabilities pertaining to income taxes for the year. The amount of regulatory assets included in deferred income tax liabilities primarily relates to the equity component of AFUDC which is recorded on an after-tax basis, the borrowed funds component of AFUDC which was previously recorded net of tax and other temporary differences for which the related tax effects were not previously recorded. The amount of other regulatory liabilities included in deferred income tax assets primarily relates to deferred income taxes provided at rates in excess of the current statutory rate. 39 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED The components of net income tax expense charged to continuing operations for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Operating income: Current income taxes........................... $339,920 $158,342 $(27,553) Deferred income taxes.......................... 186,647 168,402 122,804 Investment tax credits deferred--net........... (28,710) (28,757) (29,424) Other (income) and deductions................... (7,685) (22,498) (31,076) -------- -------- -------- Net income taxes charged to continuing operations..................................... $490,172 $275,489 $ 34,751 ======== ======== ========
Provisions for current and deferred federal and state income taxes and amortization of investment tax credits resulted in the following effective income tax rates for the years 1995, 1994 and 1993:
1995 1994 1993 ---------- -------- -------- (THOUSANDS OF DOLLARS) Net income before extraordinary item and cumulative effect of change in accounting for income taxes.................................. $ 659,533 $354,934 $ 36,650 Net income taxes charged to continuing operations.................................... 490,172 275,489 34,751 Provision for dividends on ComEd preferred and preference stocks............................. 69,961 64,927 66,052 ---------- -------- -------- Pre-tax income before provision for dividends.. $1,219,666 $695,350 $137,453 ========== ======== ======== Effective income tax rate...................... 40.2% 39.6% 25.3% ========== ======== ========
The principal differences between net income taxes charged to continuing operations and the amounts computed at the federal statutory rate of 35% for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Federal income taxes computed at statutory rate.. $426,883 $243,373 $ 48,109 Equity component of AFUDC which was excluded from taxable income.................................. (4,595) (7,920) (7,216) Amortization of investment tax credits........... (28,710) (28,810) (29,421) State income taxes, net of federal income taxes.. 65,972 40,140 13,138 Differences between book and tax accounting, primarily property-related deductions........... 27,534 26,505 2,063 Other--net....................................... 3,088 2,201 8,078 -------- -------- -------- Net income taxes charged to continuing operations...................................... $490,172 $275,489 $ 34,751 ======== ======== ========
Current federal income tax liabilities which were recorded prior to 1995 included excess amounts of AMT over the regular federal income tax, which amounts were also recorded as decreases to deferred federal income taxes. The excess amounts of AMT were carried forward and a portion was applied as a credit against the 1995 regular federal income tax liability. The excess amounts of AMT can be carried forward indefinitely as a credit against future years' regular federal income tax liabilities. 40 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (17) TAXES, EXCEPT INCOME TAXES Provisions for taxes, except income taxes, for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Illinois public utility revenue............... $229,546 $211,263 $199,498 Illinois invested capital..................... 106,830 109,373 111,126 Municipal utility gross receipts.............. 167,758 145,011 107,232 Real estate................................... 176,454 180,221 162,560 Municipal compensation........................ 78,602 72,647 56,878 Other--net.................................... 74,166 69,281 64,619 -------- -------- -------- $833,356 $787,796 $701,913 ======== ======== ========
(18) LEASE OBLIGATIONS OF SUBSIDIARY COMPANIES Under its nuclear fuel lease arrangement, ComEd may sell and lease back nuclear fuel from a lessor who may borrow an aggregate of $700 million, consisting of $300 million of commercial paper or bank borrowings and $400 million of intermediate term notes, to finance the transactions. With respect to the commercial paper/bank borrowing portion, $20 million will expire on November 23, 1996, $10 million will expire on November 23, 1997 and $270 million will expire on November 23, 1998. ComEd has asked for an extension of the expiration dates. At December 31, 1995, ComEd's obligation to the lessor for leased nuclear fuel amounted to approximately $577 million. ComEd has agreed to make lease payments which cover the amortization of the nuclear fuel used in ComEd's reactors plus the lessor's related financing costs. ComEd has an obligation for spent nuclear fuel disposal costs of leased nuclear fuel. Future minimum rental payments, net of executory costs, at December 31, 1995 for capital leases are estimated to aggregate $659 million, including $231 million in 1996, $171 million in 1997, $112 million in 1998, $68 million in 1999, $37 million in 2000 and $40 million in 2001-2043. The estimated interest component of such rental payments aggregates $84 million. The estimated portions of obligations due within one year under capital leases are included in current liabilities and approximated $168 million and $147 million at December 31, 1995 and 1994, respectively. Future minimum rental payments at December 31, 1995 for operating leases are estimated to aggregate $157 million, including $9 million in 1996, $10 million in 1997, $10 million in 1998, $10 million in 1999, $9 million in 2000 and $109 million in 2001-2024. (19) INVESTMENTS IN URANIUM-RELATED PROPERTIES In May 1994, ComEd recorded a reduction in the carrying value of its investments in uranium-related properties after completing a review of various alternatives and reassessing the long-term recoverability of those investments. The effects of the reduction reduced 1994 net income by $34 million or $0.16 per common share. 41 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (20) JOINT PLANT OWNERSHIP ComEd has a 75% undivided ownership interest in the Quad-Cities nuclear generating station. Further, ComEd is responsible for 75% of all costs which are charged to appropriate investment, operation or maintenance accounts and provides its own financing. At December 31, 1995, for its share of ownership in the station, ComEd had an investment of $558 million in production and transmission plant in service (before reduction of $185 million for the related accumulated provision for depreciation) and $75 million in construction work in progress. (21) COMMITMENTS AND CONTINGENT LIABILITIES Purchase commitments, principally related to construction and nuclear fuel, approximated $1,158 million at December 31, 1995, comprised of approximately $1,137 million for ComEd and the Indiana Company and approximately $21 million for Unicom Thermal. In addition, ComEd has substantial commitments for the purchase of coal. ComEd's coal costs are high compared to those of other utilities. ComEd's western coal contracts and its rail contracts for delivery of the western coal provide for the purchase of certain coal at prices substantially above currently prevailing market prices. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," subcaption "Liquidity and Capital Resources," for additional information regarding ComEd's purchase commitments. ComEd is a member of NML, established to provide insurance coverage against property damage to members' nuclear generating facilities. The members are subject to a retrospective premium adjustment in the event losses exceed accumulated reserve funds. Capital has been accumulated in the reserve funds of NML to the extent that ComEd would not be liable for a retrospective premium adjustment in the event of a single incident. However, ComEd could be subject to a maximum assessment of approximately $57 million in any policy year, in the event losses exceed accumulated reserve funds. ComEd also is a member of NEIL, which provides insurance coverage against the cost of replacement power obtained during certain prolonged accidental outages of nuclear generating units and coverage for property losses in excess of $500 million occurring at nuclear stations. All companies insured with NEIL are subject to retrospective premium adjustments if losses exceed accumulated reserve funds. Capital has been accumulated in the reserve funds of NEIL to the extent that ComEd would not be liable for a retrospective premium adjustment in the event of a single incident under the replacement power coverage and the property damage coverage. However, ComEd could be subject to maximum assessments, in any policy year, of approximately $27 million and $108 million in the event losses exceed accumulated reserve funds under the replacement power and property damage coverages, respectively. Under certain circumstances, member companies are eligible to continue to receive distributions from accumulated reserve funds, if declared by NML or NEIL, after insurance coverage has terminated on a nuclear generating station. ComEd expects that any such post-coverage distributions would begin about the time a station is decommissioned and continue for an undetermined period. ComEd's twelve operating nuclear units have estimated remaining service lives ranging from 10 to 32 years. Considering the circumstances related to the declaration of such distributions and the extended period over which such distributions may be declared, ComEd does not expect that any such distributions would have a material impact on its financial position or results of operations. The NRC's indemnity for public liability coverage under the Price-Anderson Act is supported by a mandatory industry-wide program under which owners of nuclear generating facilities could be assessed in the event of nuclear incidents. Based on the number of nuclear reactors with operating licenses, ComEd 42 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED would currently be subject to a maximum assessment of $991 million in the event of an incident, limited to a maximum of $125 million in any calendar year. In addition, ComEd participates in the American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters Master Worker Program which provides coverage for worker tort claims filed for bodily injury caused by the nuclear energy hazard. The coverage applies to workers whose "nuclear related employment" began after January 1, 1988. ComEd would currently be subject to a maximum assessment of approximately $36 million in the event losses exceed accumulated reserve funds. Shareholder derivative lawsuits were filed in 1992 and 1993 in the Circuit Court against current and former directors of ComEd alleging that they breached their fiduciary duty and duty of care to ComEd in connection with the management of the activities associated with the construction of ComEd's four most recently completed nuclear generating units. The lawsuits sought restitution to ComEd by the defendants for unquantified and undefined losses and costs alleged to have been incurred by ComEd. Both lawsuits were dismissed by the Circuit Court and that dismissal was affirmed by the Illinois Appellate Court. One of the plaintiffs has filed a petition for leave to appeal in the Illinois Supreme Court. During 1989 and 1991, actions were brought in federal and state courts in Colorado against ComEd and Cotter seeking unspecified damages and injunctive relief based on allegations that Cotter has permitted radioactive and other hazardous material to be released from its mill into areas owned or occupied by the plaintiffs resulting in property damage and potential adverse health effects. In February 1994, a federal jury returned nominal dollar verdicts on eight bellwether plaintiffs' claims in these cases. Plaintiffs have appealed those judgments. Although the remaining cases will necessarily involve the resolution of numerous contested issues of fact and law, Unicom's determination is that these actions will not have a material impact on its financial position or results of operations. ComEd is involved in administrative and legal proceedings concerning air quality, water quality and other matters. The outcome of these proceedings may require increases in future construction expenditures and operating expenses and changes in operating procedures. ComEd and its subsidiaries are or are likely to become parties to proceedings initiated by the U.S. EPA, state agencies and/or other responsible parties under CERCLA with respect to a number of sites, including MGP sites, or may voluntarily undertake to investigate and remediate sites for which they may be liable under CERCLA. ComEd generally did not operate MGPs as a corporate entity but did, however, acquire MGP sites as part of the absorption of smaller utilities and as vacant real estate on which ComEd facilities have been constructed. To date, ComEd has identified 44 former MGP sites for which it may be liable for remediation. ComEd presently estimates that its costs of former MGP site investigation and remediation will aggregate from $25 million to $150 million in current-year (1996) dollars. It is expected that the costs associated with investigation and remediation of former MGP sites will be incurred over a period of approximately 20 to 30 years. Because ComEd is not able to determine the most probable liability for such MGP costs, in accordance with accounting standards, a reserve of approximately $25 million was recorded as of December 31, 1995 and 1994, which reflects the low end of the range of ComEd's estimate of the liability associated with former MGP sites. In addition, as of December 31, 1995 and 1994, a reserve of $8 million was recorded representing ComEd's estimate of the liability associated with cleanup costs of remediation sites other than former MGP sites. Unicom presently estimates that ComEd's costs of investigating and remediating the former MGP and other remediation sites pursuant to CERCLA and state environmental laws will not have a material impact on Unicom's financial position or results of operations. These cost estimates are based on currently available information regarding the responsible 43 UNICOM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONCLUDED parties likely to share in the costs of responding to site contamination, the extent of contamination at sites for which the investigation has not yet been completed and the cleanup levels to which sites are expected to have to be remediated. (22) QUARTERLY FINANCIAL INFORMATION
AVERAGE EARNINGS NUMBER OF (LOSS) NET COMMON PER OPERATING OPERATING INCOME SHARES COMMON THREE MONTHS ENDED REVENUES INCOME (LOSS) OUTSTANDING SHARE - ------------------ ---------- --------- -------- ----------- -------- (THOUSANDS EXCEPT PER SHARE DATA) March 31, 1994.............. $1,524,750 $213,014 $ 36,020 213,780 $ 0.17 June 30, 1994............... $1,432,166 $184,918 $(23,339) 213,923 $(0.11) September 30, 1994.......... $1,855,276 $438,994 $263,661 214,138 $ 1.23 December 31, 1994........... $1,465,329 $246,322 $ 78,592 214,283 $ 0.37 March 31, 1995.............. $1,578,136 $260,526 $ 88,601 214,429 $ 0.41 June 30, 1995............... $1,559,521 $276,673 $108,866 214,677 $ 0.51 September 30, 1995.......... $2,190,862 $582,006 $407,433 214,769 $ 1.90 December 31, 1995........... $1,581,526 $219,394 $ 34,611 214,889 $ 0.16
44 Unicom Corporation One First National Plaza P.O. Box A-3005 Chicago, Illinois 60690-3005 [Unicom Logo] February 9, 1996 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Unicom Corporation Commission File No. 1-11375 Ladies and Gentlemen: Submitted for filing under the Securities Exchange Act of 1934, as amended, is one copy of a Form 8-K Current Report relating to Unicom Corporation. As stated in the Form 8-K Current Report, its purpose is to file certain financial information regarding Unicom Corporation and its subsidiaries as of and for the year ended December 31, 1995. Sincerely, UNICOM CORPORATION By: David A. Scholz ---------------------------------- David A. Scholz Secretary Enclosures EX-99.2 26 COM ED FORM 8-K Exhibit (99)-2 Commonwealth Edison Company Form 10-K File No. 1-1839 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 26, 1996 Commonwealth Edison Company (Exact name of registrant as specified in its charter) Illinois 1-1839 36-0938600 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 37th Floor, 10 South Dearborn Street, Post Office Box 767, Chicago, Illinois 60690-0767 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 394-4321 The purpose of this Current Report is to file certain financial information regarding the Registrant (Commonwealth Edison Company) and its subsidiaries. Such financial information is set forth in the exhibits to this Current Report. Item 5. Other Events - ------- ------------ Exhibits -------- (23) Consent of Independent Public Accountants (27) Financial Data Schedule of Commonwealth Edison Company (99) Commonwealth Edison Company and Subsidiary Companies - Certain Financial Information as of and for the Year Ended December 31, 1995: --Summary of Selected Consolidated Financial Data --Price Range and Cash Dividends Paid Per Share of Common Stock --1995 Consolidated Revenues and Sales --Management's Discussion and Analysis of Financial Condition and Results of Operations --Report of Independent Public Accountants --Statements of Consolidated Income --Consolidated Balance Sheets --Statements of Consolidated Capitalization --Statements of Consolidated Retained Earnings --Statements of Consolidated Premium on Common Stock and Other Paid-In Capital --Statements of Consolidated Cash Flows --Notes to Financial Statements -2- SIGNATURE Pursuant to the requirements 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. Commonwealth Edison Company (Registrant) David A. Scholz By: ______________________ David A. Scholz Secretary Date: February 9, 1996 -3- EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ---------------------- (23) Consent of Independent Public Accountants (27) Financial Data Schedule of Commonwealth Edison Company* (99) Commonwealth Edison Company and Subsidiary Companies - Certain Financial Information as of and for the Year Ended December 31, 1995: --Summary of Selected Consolidated Financial Data --Price Range and Cash Dividends Paid Per Share of Common Stock --1995 Consolidated Revenues and Sales --Management's Discussion and Analysis of Financial Condition and Results of Operations --Report of Independent Public Accountants --Statements of Consolidated Income --Consolidated Balance Sheets --Statements of Consolidated Capitalization --Statements of Consolidated Retained Earnings --Statements of Consolidated Premium on Common Stock and Other Paid-In Capital --Statements of Consolidated Cash Flows --Notes to Financial Statements *Previously filed and incorporated by reference to Commonwealth Edison Company's Form 8-K Current Report dated January 26, 1996. Exhibit (23) Commonwealth Edison Company Form 8-K File No. 1-1839 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference of our report dated January 26, 1996, on Commonwealth Edison Company and subsidiary companies' consolidated financial statements as of and for the year ended December 31, 1995, included as an Exhibit to this Form 8-K Current Report of Commonwealth Edison Company dated January 26, 1996, into Commonwealth Edison Company's previously filed prospectuses as follows: (1) prospectus dated August 21, 1986, constituting part of Form S-3 Registration Statement File No. 33-6879, as amended (relating to the Company's Debt Securities and Common Stock); (2) prospectus dated January 7, 1994, constituting part of Form S-3 Registration Statement File No. 33-51379 (relating to the Company's Debt Securities and Cumulative Preference Stock); and (3) prospectus dated September 19, 1995, constituting part of Amendment No. 1 to Form S-3 Registration Statement File No. 33-61343, as amended (relating to Company- Obligated Mandatorily Redeemable Preferred Securities of ComEd Financing I). We also consent to the application of our report to the ratios of earnings to fixed charges and the ratios of earnings to fixed charges and preferred and preference stock dividend requirements for each of the twelve months ended December 31, 1995, 1994 and 1993 appearing in Exhibit 99 of this Form 8-K. ARTHUR ANDERSEN LLP Chicago, Illinois January 26, 1996 Exhibit (99) Commonwealth Edison Company Form 8-K File No. 1-1839 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES INDEX
PAGE ----- Definitions.............................................................. 2 Summary of Selected Consolidated Financial Data.......................... 3 Price Range and Cash Dividends Paid Per Share of Common Stock............ 3 1995 Consolidated Revenues and Sales..................................... 3 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 4-14 Report of Independent Public Accountants................................. 15 Consolidated Financial Statements-- Statements of Consolidated Income for the years 1995, 1994 and 1993.... 16 Consolidated Balance Sheets--December 31, 1995 and 1994................ 17-18 Statements of Consolidated Capitalization--December 31, 1995 and 1994.. 19 Statements of Consolidated Retained Earnings for the years 1995, 1994 and 1993.............................................................. 20 Statements of Consolidated Premium on Common Stock and Other Paid-In Capital for the years 1995, 1994 and 1993............................. 20 Statements of Consolidated Cash Flows for the years 1995, 1994 and 1993.................................................................. 21 Notes to Financial Statements.......................................... 22-41
1 DEFINITIONS The following terms are used in this document with the following meanings:
TERM MEANING - ----------------------- ------------------------------------------------------------------ AFUDC Allowance for funds used during construction AMT Alternative minimum tax CERCLA Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended Circuit Court Circuit Court of Cook County, Illinois ComEd Commonwealth Edison Company Cotter Cotter Corporation, which is a wholly-owned subsidiary of ComEd. DOE U.S. Department of Energy FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission Fuel Matters Settlement A settlement relating to the ICC fuel reconciliation proceedings involving ComEd for the period from 1985 through 1988 and to future challenges by the settling parties to the prudence of ComEd's western coal costs for the period from 1989 through 1992. ICC Illinois Commerce Commission Indiana Company Commonwealth Edison Company of Indiana, Inc., which is a wholly- owned subsidiary of ComEd. MAIN Mid-America Interconnected Network MGP Manufactured gas plant NEIL Nuclear Electric Insurance Limited NML Nuclear Mutual Limited NOPR Notice of Proposed Rulemaking issued by the FERC NRC Nuclear Regulatory Commission Rate Matters Settlement A settlement concerning the proceedings relating to ComEd's 1985 and 1991 ICC rate orders (which orders related to, among other things, the recovery of costs associated with ComEd's four most recently completed nuclear generating units), the proceedings related to the reduction in the difference between ComEd's summer and non-summer residential rates that was effected in the summer of 1988, outstanding issues related to the appropriate interest rate and rate design to be applied to a refund made by ComEd during 1990 related to a 1988 ICC rate order, and matters related to a rider to ComEd's rates that it was required to file as a result of the change in the federal corporate income tax rate made by the Tax Reform Act of 1986. Rate Order ICC rate order issued on January 9, 1995, as subsequently modified Remand Order ICC rate order issued in January 1993, as subsequently modified SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards Trust ComEd Financing I, which is a wholly-owned subsidiary trust of ComEd. Unicom Unicom Corporation Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned subsidiary of Unicom. Units ComEd's nuclear generating units known as Byron Unit 2 and Braidwood Units 1 and 2 U.S. EPA U.S. Environmental Protection Agency
2 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- (MILLIONS OF DOLLARS EXCEPT PER SHARE DATA) Electric operating revenues... $ 6,910 $ 6,278 $ 5,260 $ 6,026 $ 6,276 Net income.................... $ 717(1) $ 424 $ 112(3) $ 514 $ 95 Earnings per common share..... $ 3.02(1) $ 1.68 $ 0.22(3) $ 2.08 $ 0.08 Cash dividends declared per common share................. $ 1.60 $ 1.60(2) $ 1.60 $ 2.30 $ 3.00 Total assets (at end of year). $23,119 $23,076 $24,380 $20,993 $17,365 Long-term obligations at end of year excluding current portion: Long-term debt, preference stock and preferred securities subject to mandatory redemption requirements................ $ 6,950 $ 7,745 $ 7,861 $ 7,913 $ 7,081 Accrued spent nuclear fuel disposal fee and related interest.................... $ 624 $ 590 $ 567 $ 549 $ 530 Capital lease obligations.... $ 374 $ 431 $ 321 $ 347 $ 396 Other long-term obligations.. $ 1,819 $ 1,754 $ 1,718 $ 666 $ 341
- -------- (1) Includes an extraordinary loss related to the early redemption of long-term debt of $20 million or $0.09 per common share. (2) Excludes a special dividend (consisting of $40 million cash and the common stock of Unicom Enterprises Inc.) effected on September 1, 1994 in connection with the holding company corporate restructuring. (3) Includes the cumulative effect of change in accounting for income taxes of $10 million or $0.05 per common share. PRICE RANGE* AND CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK
1995 (BY QUARTERS) 1994 (BY QUARTERS) ------------------------- --------------------------- FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST ------ ----- ------ ----- ------ ----- ------ ------ Price range: High.................... -- -- -- -- -- -- 26 28 3/4 Low..................... -- -- -- -- -- -- 22 25 1/8 Cash dividends paid...... 40c 40c 40c 40c 40c 40c** 40c 40c
* As reported as NYSE Composite Transactions. **Excludes a special dividend (consisting of $40 million cash and the common stock of Unicom Enterprises Inc.) effected on September 1, 1994 in connection with the holding company corporate restructuring. - -------- Prior to the corporate restructuring on September 1, 1994, ComEd's common stock was traded on the New York, Chicago and Pacific stock exchanges, with the ticker symbol CWE. See Note 1 of Notes to Financial Statements for additional information. 1995 CONSOLIDATED REVENUES AND SALES
ELECTRIC OPERATING INCREASE KILOWATTHOUR INCREASE/ INCREASE/ REVENUES OVER SALES (DECREASE) (DECREASE) (THOUSANDS) 1994 (MILLIONS) OVER 1994 CUSTOMERS OVER 1994 ----------- -------- ------------ ---------- --------- ---------- Residential............. $2,621,038 15.3% 23,303 9.0 % 3,079,381 1.1 % Small commercial and industrial............. 2,073,998 8.2% 25,313 4.1 % 288,848 0.7 % Large commercial and industrial............. 1,425,784 3.2% 23,777 1.4 % 1,539 0.7 % Public authorities...... 487,142 7.7% 7,158 4.0 % 12,039 (0.2)% Electric railroads...... 26,894 2.7% 390 (2.0)% 2 -- ---------- ------ --------- Ultimate consumers...... $6,634,856 9.7% 79,941 4.6 % 3,381,809 1.0 % Sales for resale........ 207,256 11,412 24 Other revenues.......... 67,674 -- -- ---------- ------ --------- Total.................. $6,909,786 10.1% 91,353 7.3 % 3,381,833 1.0 % ========== ====== =========
3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On September 1, 1994, a corporate restructuring took place in which Unicom became the parent holding company of ComEd and Unicom Enterprises, an unregulated subsidiary engaged, through a subsidiary, in energy service activities. The purpose of the restructuring was, in part, to permit Unicom Enterprises to engage in energy service activities without the prior approval of, or being regulated by, the ICC, in part to permit timely responses to competitive activities which could adversely affect ComEd's utility business and in part to permit Unicom to take advantage of unregulated business opportunities. LIQUIDITY AND CAPITAL RESOURCES Capital Budgets. ComEd and its electric utility subsidiary, the Indiana Company, have a construction program for the three-year period 1996-98 which consists principally of improvements to ComEd's and the Indiana Company's existing nuclear and other electric production, transmission and distribution facilities. It does not include funds (other than for planning) to add new generating capacity to ComEd's system. The program, as approved by Unicom and ComEd in December 1995, calls for electric plant and equipment expenditures of approximately $2,695 million (excluding nuclear fuel expenditures of approximately $885 million). It is estimated that such construction expenditures, with cost escalation computed at 3.5% annually, will be as follows:
1996 1997 1998 TOTAL ---- ---- ---- ------ (MILLIONS OF DOLLARS) Production............................................ $405 $390 $380 $1,175 Transmission and Distribution......................... 390 405 410 1,205 General............................................... 110 110 95 315 ---- ---- ---- ------ Total.............................................. $905 $905 $885 $2,695 ==== ==== ==== ======
The construction program includes the replacement of the steam generators at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units, for service in the years 1998 and 1999, respectively, at a total estimated cost of approximately $470 million. Approximately $290 million of this estimated cost is included in the construction expenditures shown above. ComEd is studying the possibility of accelerating the replacement of the steam generators which could increase the construction expenditures shown above. ComEd's forecasts of peak load indicate a need for additional resources to meet demand, either through generating capacity or through equivalent purchased power or demand-side management resources, in 1998 and each year thereafter through the year 2000. The projected resource needs reflect the current planning reserve margin recommendations of MAIN, the reliability council of which ComEd is a member. ComEd's forecasts indicate that the need for additional resources during this period would exist only during the summer months. ComEd does not expect to make expenditures for additional capacity to the extent the need for capacity can be met through cost-effective demand-side management resources, non-utility generation or other power purchases. Based on current market information, ComEd believes that adequate resources, including cost-effective demand-side management resources, non-utility generation resources and other-utility power purchases, could be obtained sufficient to meet forecasted requirements through the year 2000. ComEd's construction program will be reviewed and modified as necessary to adapt to changing economic conditions, rate levels and other relevant factors including changing business and legal needs and requirements. ComEd cannot anticipate all such possible needs and requirements. While regulatory needs in particular are more likely, on balance, to require increases in construction expenditures than decreases, financial constraints may require compensating or greater reductions in other construction expenditures. See "Regulation" below for additional information. 4 Purchase commitments for ComEd and the Indiana Company, principally related to construction and nuclear fuel, approximated $1,137 million at December 31, 1995. In addition, ComEd has substantial commitments for the purchase of coal as indicated in the following table.
CONTRACT PERIOD COMMITMENT (1) -------------- --------- -------------- Black Butte Coal Co................................ 1996-2007 $1,011 Decker Coal Co..................................... 1996-2015 $ 713 Big Horn Coal Co................................... 1998 $ 22 Other commitments.................................. 1996 $ 3
-------- (1) Estimated costs in millions of dollars FOB mine. No estimate of future cost escalation has been made. For additional information concerning these coal contracts and ComEd's fuel supply, see "Results of Operations" below and Notes 1 and 21 of Notes to Financial Statements. Capital Resources. ComEd has forecast that internal sources will provide more than three-fourths of the funds required for ComEd's construction program and other capital requirements, including nuclear fuel expenditures, contributions to nuclear decommissioning funds, sinking fund obligations and refinancing of scheduled debt maturities (the annual sinking fund requirements and scheduled maturities for preference stock and long-term debt are summarized in Notes 7 and 9, respectively, of Notes to Financial Statements). The forecast assumes the rate levels reflected in the Rate Order remain in effect. The type and amount of external financing will depend on financial market conditions and the needs and capital structure of ComEd at the time of such financing. A portion of ComEd's financing is expected to be provided through the continued sale and leaseback of nuclear fuel through ComEd's existing nuclear fuel lease facility. See Note 18 of Notes to Financial Statements for more information concerning ComEd's nuclear fuel lease facility. ComEd has approximately $915 million of unused bank lines of credit at December 31, 1995 which may be borrowed at various interest rates and which may be secured or unsecured. The interest rate is set at the time of a borrowing and is based on several floating rate bank indices plus a spread which is dependent upon ComEd's credit ratings or on a prime interest rate. Collateral, if required for the borrowings, would consist of first mortgage bonds issued under and in accordance with the provisions of ComEd's mortgage. See Note 10 of Notes to Financial Statements for information concerning lines of credit. See the Statements of Consolidated Cash Flows for the construction expenditures and cash flow from operating activities for the years 1995, 1994 and 1993. During 1995, ComEd sold and leased back approximately $193 million of nuclear fuel through its existing nuclear fuel lease facility. The Trust also issued $200 million of company-obligated mandatorily redeemable preferred securities, the proceeds of which were used to purchase ComEd's subordinated deferrable interest notes due September 30, 2035. The proceeds of such notes were used by ComEd to refund short-term debt incurred to meet current maturities of ComEd debt. As of January 26, 1996, ComEd has an effective "shelf" registration statement with the SEC for the future sale of up to an additional $805 million of debt securities and cumulative preference stock for general corporate purposes of ComEd, including the discharge or refund of other outstanding securities. Financial Condition. ComEd's financial condition will continue to depend on its ability to generate revenues to cover its costs and to maintain adequate debt and preferred and preference stock coverages and common stock equity earnings. ComEd has no significant revenues other than from the sale of electricity. In December 1995, ComEd announced a cap on base electric rates at current levels. Consequently, ComEd's financial condition will be affected by, and ComEd's management is addressing, actions to maintain and increase sales, to control operating and capital expenditures, and to anticipate competitive activities. See "Business and Competition" and "Regulation" below. During the past several years, ComEd has instituted cost reduction plans including various workforce reductions. Such efforts included an offer of voluntary early retirement which was made to ComEd and the Indiana Company management, non-union and union employees eligible to retire or who 5 became eligible to retire after December 31, 1993 and before April 1, 1995. Such program resulted in a charge to income of approximately $20.5 million (after reflecting income tax effects), substantially all of which was recorded during 1994. ComEd is continuing to examine methods of reducing the size of its workforce, including special severance offers. On October 30, 1995, ComEd declared an impasse in the collective bargaining agreement negotiations with its principal union and has implemented virtually all of the terms of its last offered proposal prior to the impasse. Those terms include, among other things, a wage increase retroactive to April 1, 1995 and a voluntary separation offer for employees who accepted and left ComEd's employ by year-end 1995. The union has filed an unfair labor practice charge with respect to ComEd's action with the National Labor Relations Board. The voluntary separation offer, combined with separation plans offered to selected groups of non-union employees, resulted in a charge to income of approximately $59 million (after reflecting income tax effects) or $0.27 per common share for the year 1995. This charge to income occurred primarily in the fourth quarter of 1995 when most of the acceptances of the offers occurred. ComEd expects to recover the costs of these plans within two years as a result of reduced personnel. ComEd has also examined, and is continuing to examine, the possibility of disposing of one or more of its fossil generating stations to a third party or parties and entering into a long-term power purchase arrangement. In connection with such examination, ComEd has solicited and received binding proposals with respect to such a transaction involving its State Line and Kincaid generating stations; and it is negotiating with possible purchasers with respect to such transactions. As presently structured, such transactions would involve a sale of the generating station assets at a price approximating their book value and a fifteen-year power purchase arrangement. Any such transactions would be subject to the negotiation of definitive agreements and regulatory approvals and are not expected to have a material impact on ComEd's consolidated financial position or results of operations. ComEd's securities and other securities guaranteed by ComEd are currently rated by three principal securities rating agencies as follows:
STANDARD DUFF & MOODY'S & POOR'S PHELPS ------- -------- ------ First mortgage and secured pollution control bonds........................................... Baa2 BBB BBB Publicly-held debentures and unsecured pollution control obligations............................. Baa3 BBB- BBB- Convertible preferred stock...................... baa3 BBB- BBB- Preference stock................................. baa3 BBB- BBB- Company-obligated mandatorily redeemable pre- ferred securities of the Trust.................. baa3 BBB- BBB- Commercial paper................................. P-2 A-2 D-2
As of January 1996, Standard & Poor's rating outlook on ComEd remained stable. As of October 1995, Moody's rating outlook on ComEd also remained stable. In August 1995, Duff & Phelps upgraded its rating of ComEd's preferred and preference stock from BB+ to BBB- and reaffirmed that its rating outlook on ComEd remained stable. Business and Competition. The electric utility business has historically been characterized by retail service monopolies in state or locally franchised service territories. Investor-owned electric utilities have tended to be vertically integrated with all aspects of their business subject to pervasive regulation. Although customers have normally been free to supply their electric power needs through self-generation, they have not had a choice of electric suppliers and self-generation has not generally been economical. The market place in which electric utilities like ComEd operate has become more competitive as a result of technological and regulatory changes, and many observers believe competition will intensify. Self-generation can be economical for certain customers, depending on how and when they use electricity and other customer-specific considerations. A number of competitors are currently seeking to identify and do business with those customers. In addition, suppliers of other forms of energy are increasingly competing to supply energy needs which historically were supplied primarily or exclusively by electricity. Also, a number of electric utilities (including utilities bordering ComEd's service area) have 6 announced plans to combine, or have combined, to achieve certain size and operating efficiencies in response to expected changes in the market place. Finally, both the state and federal regulatory framework under which ComEd and other electric utilities have operated are under review. In recent years, there has been increasing debate at the state and federal levels regarding the structure and regulation of the electric utility industry. In particular, these discussions have focused on whether certain aspects of the industry, such as generation, could be more efficiently provided under a more competitive scheme. A central feature of the current debate over deregulation and changed regulation in the electric utility industry is the extent to which electric utilities will be permitted to recover so-called "stranded" or "strandable" costs incurred to fulfill their duty to serve all of the electricity needs within their service territories. These costs would be stranded to the extent that market-based rates would be insufficient to allow for full recovery of the investments. ComEd cannot estimate its strandable investment with any degree of accuracy at this time because of the number of variables involved. ComEd, however, is taking steps, such as aggressive cost-cutting measures and accelerated depreciation, to minimize its potential exposure. The regulatory and legislative initiatives that ComEd has proposed, described below, contemplate a full recovery of ComEd's costs to meet its duty to serve. The Energy Policy Act of 1992 has had a significant effect on companies engaged in the generation, transmission, distribution, purchase and sale of electricity. This Act, among other things, expands the authority of the FERC to order electric utilities to transmit or "wheel" wholesale power for others, and facilitates the creation of non-utility electric generating companies. In March 1995, the FERC issued a NOPR seeking comments on proposals intended to encourage a more competitive wholesale electric power market. The NOPR addresses both open access transmission and stranded cost issues. ComEd is unable to predict the structure and effect of any rule that the FERC may ultimately adopt based upon the NOPR. ComEd is facing increased competition from several non-utility businesses which seek to provide energy services to users of electricity, especially larger customers such as industrial, commercial and wholesale customers. Such suppliers include independent power producers and unregulated energy services companies. In this regard, natural gas utilities operating in ComEd's service area have established subsidiary ventures to provide heating, ventilating and air conditioning services, attempting to attract ComEd's customers. Also, several utilities in the United States have established unregulated energy services subsidiaries which pursue business opportunities outside of the utilities' regular service areas. In addition, cogeneration and energy services companies have begun soliciting ComEd's customers to provide alternatives to using ComEd's electricity. In October 1993, the ICC granted ComEd the authority to negotiate special discount contract rates with new or existing industrial customers for up to a total of 400 megawatts of added load, where the customers would not have chosen service from ComEd for the increased load in the absence of the discount rates. In addition, in June 1994, the ICC granted ComEd the authority to negotiate special discount contract rates with up to 25 of its largest existing customers, where such contracts would be necessary to retain the customers' existing load on ComEd's system. The Illinois Appellate Court reversed the latter ICC decision, ruling that state law prohibited the confidential aspects of the contracts. ComEd has petitioned the Illinois Supreme Court to review the reversal. ComEd has also sought and received ICC approval for the eleven contracts at special discount rates which it negotiated prior to the Illinois Appellate Court's decision. In 1994, the ICC formed a task force for the purpose of conducting a broad- based and open examination of the expanding presence of market components within the electric utility industry. Participants from more than 40 organizations, including representatives from the electric utility industry (including ComEd), met to examine three broad issues: effects of regulation, competition and future regulatory and legislative changes. In May 1995, the task force issued its report sharing the views of the participants on the issues. 7 Legislation has been passed in Illinois to review the need for changes in the regulatory framework under which Illinois electric utilities operate. The Joint Committee on Electric Utility Regulatory Reform was created pursuant to House/Senate Joint Resolution 21 to develop any legislative reform proposals it finds necessary. A final legislative proposal is to be delivered by November 8, 1996. ComEd is participating as a member of the Technical Advisory Group. A bill allowing utilities to submit plans for alternative regulation, such as price caps or incentive regulation, has been signed by the Governor of Illinois. On December 11, 1995, ComEd announced a series of customer initiatives as part of its larger ongoing effort to address the need to give all customer classes the opportunity to benefit from increased competition in the electric utility business, while retaining the benefits (such as reliability) of current regulation and ensuring utilities' cost recovery for commitments made under the obligation to serve customers. The initiatives include (i) a five-year cap on base electric rates at current levels, (ii) certain energy monitoring and management programs designed to monitor and control energy usage, particularly during certain peak periods, (iii) single statement, or unified, billing for certain multi-site customers, (iv) certain incentives for manufacturing customers looking to expand operations or to locate in northern Illinois and (v) market pricing options for up to ten percent of certain large industrial customers' existing electric energy requirements and all of their incremental requirements. ComEd anticipates the initiatives will be fully implemented in 1997 and will reduce its revenues by approximately $42 million annually (including the effects of previously implemented initiatives and before income tax effects) primarily through changes in energy utilization and increase its costs by at least $30 million annually (before income tax effects) through the acceleration of depreciation charges on its nuclear generating units. ComEd expects to file a request for ICC approval of the accelerated depreciation initiatives in the near future. Management expects the financial impact of these initiatives will be substantially offset by ComEd's cost reduction efforts and expected growth in its business. ComEd also continues to consider the possibility of additional accelerated depreciation options. Under ComEd's initiatives, the five-year base rate cap at current levels became effective in December 1995 and will extend until January 1, 2001. The rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost recovery provisions. ComEd's fuel cost variances will continue to be collected through its fuel adjustment clause, and such collections will continue to be subject to annual reconciliation proceedings before the ICC. Nuclear decommissioning cost variances will continue to be collected under a rider that was approved in the Rate Order, and such rider is intended to allow annual adjustments in decommissioning cost recoveries from ratepayers as changes in cost estimates occur. See "Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements for additional information regarding the decommissioning costs rider. On December 13, 1995, ComEd announced a proposal to amend certain provisions of the Illinois Public Utilities Act. The proposal would, among other things, allow Illinois utilities to launch five-year experimental "direct access" programs, whereby certain customers would have the opportunity to obtain some of their electric energy requirements from their chosen supplier. If the proposal is adopted as legislation, such "direct access" programs could begin as early as 1998; and under the legislation, ComEd announced it would offer such a program for new or expanded load of three megawatts or greater in its northern Illinois service territory. Under ComEd's proposal, if such "direct access" proves workable, and the ICC finds it to be in the public interest, the ICC could order it as an option for all electricity consumers in Illinois starting in 2003. Other Illinois utilities have also initiated both legislative and regulatory proposals. Both Illinois Power Company and Central Illinois Light Company have filed proposed retail wheeling experiments with the ICC. These experiments are currently the subject of hearings. ComEd cannot predict whether, or in what form, these proposals may be approved. See "Regulation" and "Regulatory Assets and Liabilities" in Note 1 of Notes to Financial Statements. Capital Structure. The ratio of long-term debt to total capitalization has decreased to 49.3% at December 31, 1995 from 54.6% at December 31, 1994. This decrease is related primarily to the retirement and early redemption of long- term debt. 8 REGULATION ComEd and the Indiana Company are subject to state and federal regulation in the conduct of their respective businesses, including the operations of Cotter. Such regulation includes rates, securities issuance, nuclear operations, environmental and other matters. Particularly in the cases of nuclear operations and environmental matters, such regulation can and does affect operational and capital expenditures. Rate Proceedings. ComEd's revenues, net income, cash flows and plant carrying costs have been affected directly by various rate-related proceedings. During 1993, ComEd was involved in a number of proceedings concerning its rates. The uncertainties associated with such proceedings and related issues, among other things, led to the Rate Matters Settlement and the Fuel Matters Settlement in late 1993 (see Note 2 of Notes to Financial Statements). The effects of such settlements during 1993 and 1994 are discussed below under "Results of Operations." On January 9, 1995, the ICC issued its Rate Order in the proceedings relating to ComEd's February 1994 rate increase request. The Rate Order provides, among other things, for (i) an increase in ComEd's total revenues of approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an annual basis, including a $303.2 million increase in base rates, (ii) the collection of municipal franchise costs as an adder to base rates until May 1, 1995, when ComEd began collecting such costs prospectively on an individual municipality basis through a rider, and (iii) the use of a rider, with annual review proceedings, to pass on to ratepayers increases or decreases in estimated costs associated with the decommissioning of ComEd's nuclear generating units. See "Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements for information related to the level of decommissioning cost collections allowed in the Rate Order and subsequent rider proceedings. The ICC also determined that the Units were 100% "used and useful" and that the previously determined reasonable costs of such Units, as depreciated, should be included in full in ComEd's rate base. The rates provided in the Rate Order became effective on January 14, 1995; however, they are being collected subject to refund as a result of subsequent judicial action. As of December 31, 1995, electric operating revenues of approximately $319 million (excluding revenue taxes) are subject to refund. Intervenors and ComEd have filed appeals of the Rate Order with the Illinois Appellate Court. Nuclear Matters. During the past several years, the NRC has placed two of ComEd's nuclear generating stations, Zion station and Dresden station, on its list of plants to be monitored closely. Although Zion station (which was placed on the list in early 1991) was removed from that list in February 1993, Dresden station (which was placed on the list in early 1992) remains on the list. In June 1995, the NRC reported that over the past year performance at Dresden was cyclical; that plant material condition needed to be improved at Dresden and that a more effective work management system was needed to deal with the corrective maintenance backlog. In January 1996, the NRC noted improvement but indicated that certain of the same concerns continue to exist. The NRC also stated that the effectiveness of the recent improvement efforts must be sustained. In January 1994, ComEd was notified by the NRC that ComEd's LaSalle County and Quad-Cities stations were placed on the list of plants with adverse performance trends. ComEd was informed that the NRC concerns about LaSalle County station included, among other matters, deficient radiation worker practices, and that concerns with Quad-Cities station included, among other matters, deficiencies in the condition of certain station equipment and the effectiveness of the operators of the units in identifying and responding to certain operational problems. In February and June 1995, the NRC concluded that LaSalle County and Quad-Cities, respectively, had arrested the adverse trends in most areas and "normal" designation has been reestablished. Because of the age of Zion, Dresden and Quad-Cities stations, ComEd anticipates continued expenditures in order to improve reliability and to meet NRC regulatory expectations. Beginning in late 1992, ComEd restructured its management of its nuclear operations division and since that time has committed additional resources to the stations' operations. In addition, generating station availability and 9 performance during a year may be issues in fuel reconciliation proceedings in assessing the prudence of fuel and power purchases during such year. Final ICC orders have been issued in fuel reconciliation proceedings for years prior to 1994; however, certain intervenors have appealed the ICC order in the 1989 fuel reconciliation proceedings on issues relating to nuclear station performance. ComEd estimates that it will expend approximately $15 billion, excluding any contingency allowance, for decommissioning costs primarily during the period from 2007 through 2032. Such costs, which are estimated to aggregate $3.7 billion in current-year (1996) dollars, are expected to be funded by external decommissioning trusts which ComEd established in compliance with Illinois law and into which ComEd has been making annual contributions. Future decommissioning cost estimates may be significantly affected by the adoption of or changes to NRC regulations as well as changes in the assumptions used in making such estimates. See Note 1 of Notes to Financial Statements under "Depreciation and Decommissioning" for additional information regarding decommissioning costs. Environmental Matters. ComEd is involved in administrative and legal proceedings concerning air quality, water quality and other matters. The outcome of these proceedings may require increases in future construction expenditures and operating expenses and changes in operating procedures. See Note 21 of Notes to Financial Statements for information regarding certain effects of CERCLA on ComEd. RESULTS OF OPERATIONS Net Income on Common Stock. The 1995 results reflect higher revenues primarily as a result of higher kilowatthour sales and the higher rate levels which became effective in January 1995 under the Rate Order. The higher kilowatthour sales reflect the unusually hot summer weather in 1995. The 1995 results were also affected by higher operation and maintenance expenses, which reflect an after-tax charge of $59 million or $0.27 per common share for a voluntary separation offer for union employees who accepted and left ComEd's employ by year-end 1995 combined with separation plans offered to selected groups of non-union employees. ComEd also recorded an after-tax charge of $20 million or $0.09 per common share related to the early redemption of $645 million of long-term debt. The 1994 results reflect higher revenues as a result of the favorable comparison to 1993 in which the effects of the Rate Matters Settlement and the Fuel Matters Settlement were recorded. The 1994 results also reflect ComEd's increased kilowatthour sales to ultimate consumers. The effects of these items were partially offset by higher operation and maintenance expenses, which include an after-tax charge of $20 million or $0.09 per common share for additional pension costs related to an early retirement offer made to certain employees during 1994. ComEd also recorded a reduction in the carrying value of its investments in uranium-related properties in 1994, which reduced net income by $34 million or $0.16 per common share. The 1993 results were significantly affected by the recording of the effects of the Rate Matters Settlement and the Fuel Matters Settlement, which reduced 1993 net income by approximately $354 million or $1.66 per common share, in addition to the effect of the deferred recognition of revenues which ComEd had recorded during 1993 (approximately $160 million or $0.75 per common share), and after the partially offsetting effect of recording approximately $269 million or $1.26 per common share in deferred carrying charges, net of income taxes, as authorized in the Remand Order. The 1993 earnings also reflect a one- time favorable cumulative effect of $10 million or $0.05 per common share as a result of the adoption of SFAS No. 109, Accounting for Income Taxes. The effect of the non-recurring items was partially offset by a higher level of kilowatthour sales and lower operation and maintenance expenses. Excluding non- recurring items, earnings in 1993 would have been $1.83 per common share. Kilowatthour Sales. Kilowatthour sales to ultimate consumers increased 4.6% in 1995, 2.8% in 1994 and 4.6% in 1993 as a result of increased sales to all classes of customers, except railroads, which decreased during each year, reflecting progressively warmer summers (particularly in 1995) and, in 10 1994, colder winter weather than in 1993. The service territory economy also improved during 1994, which contributed to the increase in kilowatthour sales. Kilowatthour sales including sales for resale increased 7.3% in 1995, decreased 3.0% in 1994 and increased 16.0% in 1993. Electric Operating Revenues. Operating revenues increased $632 million in 1995 principally reflecting the higher kilowatthour sales described above and higher rate levels under the Rate Order. Operating revenues increased $1,017 million in 1994 principally reflecting the favorable comparison to 1993 in which the effects of the Rate Matters Settlement and the Fuel Matters Settlement were recorded and the increased level of kilowatthour sales to ultimate consumers described above. The increase was partially offset by a decrease in energy costs recovered under the fuel adjustment clause in ComEd's rates. Operating revenues decreased $766 million in 1993 principally reflecting the recording of the effects of the Rate Matters Settlement and the Fuel Matters Settlement, which reduced 1993 operating revenues by $1,282 million. This reduction was partially offset by a higher level of kilowatthour sales and an increase in energy costs recovered under the fuel adjustment clause in ComEd's rates. See "Net Income on Common Stock" above and Note 2 of Notes to Financial Statements for additional information. Fuel Costs. Changes in fuel expense for 1995, 1994 and 1993 primarily resulted from changes in the average cost of fuel consumed, changes in the mix of fuel sources of electric energy generated and changes in net generation of electric energy. Fuel mix is determined primarily by system load, the costs of fuel consumed and the availability of nuclear generating units. The cost of fuel consumed, net generation of electric energy and fuel sources of kilowatthour generation were as follows:
1995 1994 1993 ------ ------ ------ Cost of fuel consumed (per million Btu): Nuclear........................................... $0.52 $0.53 $0.52 Coal.............................................. $2.43 $2.31 $2.89 Oil............................................... $3.06 $2.89 $3.03 Natural gas....................................... $1.85 $2.27 $2.70 Average all fuels................................. $1.05 $1.08 $1.15 Net generation of electric energy (millions of kilowatthours).................................... 96,608 90,243 94,266 Fuel sources of kilowatthour generation: Nuclear........................................... 73% 71% 75% Coal.............................................. 24 25 23 Oil............................................... -- 1 1 Natural gas....................................... 3 3 1 ------ ------ ------ 100% 100% 100% ====== ====== ======
Under the Energy Policy Act of 1992, investor-owned electric utilities that have purchased enrichment services from the DOE are being assessed amounts to fund a portion of the cost for the decontamination and decommissioning of uranium enrichment facilities owned and previously operated by the DOE. ComEd's portion of such assessments is estimated to be approximately $15 million per year (to be adjusted annually for inflation) to 2007. The Act provides that such assessments are to be treated as a cost of fuel. See Note 1 of Notes to Financial Statements under "Deferred Unrecovered Energy Costs" for information related to the accounting for such costs. Fuel Supply. Compared to other utilities, ComEd has relatively low average fuel costs as a result of its reliance predominantly on lower cost nuclear generation. ComEd's coal costs, however, are high compared to those of other utilities. ComEd's western coal contracts and its rail contracts for delivery of the western coal provide for the purchase of certain coal at prices substantially above currently prevailing market prices and ComEd has significant purchase commitments under its contracts. In addition, as of December 31, 1995, ComEd had unrecovered fuel costs in the form of coal reserves of approximately $448 million. In prior years, ComEd's commitments for the purchase of coal exceeded its requirements. 11 Rather than take all the coal it was required to take, ComEd agreed to purchase the coal in place in the form of coal reserves. For additional information concerning ComEd's coal purchase commitments, fuel reconciliation proceedings and coal reserves, see "Liquidity and Capital Resources" above and Notes 1, 2 and 21 of Notes to Financial Statements. Purchased Power. Amounts of purchased power are primarily affected by system load, the availability of ComEd and the Indiana Company's generating units and the availability and cost of power from other utilities. The number and average cost of kilowatthours purchased were as follows:
1995 1994 1993 ----- ----- ---- Kilowatthours (millions)................................. 2,475 2,071 644 Cost per kilowatthour.................................... 2.60c 2.86c 1.91c
Deferred Under or Overrecovered Energy Costs--Net. Operating expenses for the years 1995, 1994 and 1993 reflect the net change in under or overrecovered allowable energy costs under ComEd's fuel adjustment clause. See "Fuel Costs" and "Fuel Supply" above and Note 1 of Notes to Financial Statements under "Deferred Unrecovered Energy Costs." Operation and Maintenance Expenses. Operation and maintenance expenses increased 4% during 1995, increased 2% during 1994 and decreased 4% during 1993. The increase in 1995 primarily reflects increased expenses for costs related to voluntary employee separation plans, nuclear and fossil generating stations, customer-related activities and incentive compensation programs, partially offset by lower expenses associated with transmission and distribution facilities, certain administrative and general costs and pensions and other employee benefits, including postretirement health care benefits. The increase in 1994 primarily reflects increased expenses associated with pensions and other employee benefits, incentive compensation programs, nuclear and fossil generating stations, and certain administrative and general costs, partially offset by lower expenses associated with transmission and distribution facilities. The decrease in 1993 primarily reflects decreased expenses associated with nuclear and fossil generating stations, pension benefits and customer-related activities, a decrease in the number of employees and lower research costs, partially offset by higher costs of postretirement health care benefits and the cost related to the 1993 special incentive plan for employees. Wage increases, the effects of which are reflected in the increases and decreases discussed below, have increased operation and maintenance expenses during 1995 and 1994. Wages in 1993 were not increased over 1992 levels. Operation and maintenance expenses in 1995 and 1994 include approximately $16 million and $20 million, respectively, for wage increases. The effects of inflation have increased operation and maintenance expenses during the years and are also reflected in the increases and decreases discussed below. Operation and maintenance expenses for pensions and other employee benefits, including postretirement health care benefits, decreased $40 million in 1995, increased $30 million in 1994 and decreased $2 million in 1993. The 1995 decrease reflects a decrease of $40 million in the provision for postretirement health care costs, partially offset by a $25 million increase for the portion of the costs of the voluntary employee separation plans related to postretirement health care benefits and an increase of $9 million for certain other employee benefits. The 1994 increase includes a $34 million increase in pension costs related to an early retirement program offered in 1994. See "Liquidity and Capital Resources," subcaption "Financial Condition," for additional information regarding the employee separation plans offered in 1995 and the 1994 early retirement program. The 1993 decrease reflects a decrease in pension benefits of $16 million which was partially offset by an increase in postretirement health care benefits of $14 million. The increase in postretirement health care benefits in 1993 reflects $17 million as a result of adopting SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. 12 Operation and maintenance expenses in 1995 also reflect $72 million for the portion of the costs of the voluntary employee separation plans not related to the postretirement health care benefits described above. See "Liquidity and Capital Resources," subcaption "Financial Condition," above for information regarding the employee separation plans offered in 1995. Operation and maintenance expenses associated with the nuclear generating stations tend to be affected by the number of outages (both scheduled and non- scheduled) of the units, during which a greater number of activities related to inspection, maintenance and improvement are scheduled and carried out. Such expenses increased $32 million in 1995, increased $9 million in 1994 and decreased $74 million in 1993. The increase in 1995 is primarily due to increased expenses related to the plant improvement efforts at Dresden and Zion stations. The increase in 1994 is due to activities undertaken during increased scheduled and non-scheduled outages. The decrease in 1993 includes the effects of ComEd's cost reduction efforts, including re-engineering and process improvements, eliminating unnecessary work and increasing the efficiency at which the remaining work was performed. Future operation and maintenance expenses associated with nuclear generating stations may be significantly affected by regulatory, operational and other requirements. See "Nuclear Matters" under "Regulation" above. Operation and maintenance expenses associated with the fossil generating stations also tend to be affected by the number of outages in the same manner as nuclear generating stations. Such expenses increased $8 million in 1995, increased $4 million in 1994 and decreased $13 million in 1993. The increase in 1995 reflects the costs for the increase in scope of scheduled overhauls partially offset by the net effect of a reduction of personnel. The increase in 1994 reflects, in part, activities undertaken during a greater number of scheduled overhauls. The decrease in 1993 includes the effects of ComEd's cost reduction efforts. Research costs also decreased $10 million in 1993 due to the cost reduction efforts. Operation and maintenance expenses associated with ComEd's transmission and distribution system decreased $3 million and $18 million in 1995 and 1994, respectively. The decreases in 1995 and 1994 reflect the effects of cost containment efforts. Costs of customer-related activities, including customer assistance and energy sales services, increased $10 million in 1995 and decreased $13 million in 1993. Operation and maintenance expenses reflect $65 million, $50 million and $36 million for employee incentive compensation plan costs related to the achievement of certain financial performance, cost containment and operating performance goals in 1995, 1994 and 1993, respectively. Certain administrative and general costs decreased $16 million in 1995 and increased $12 million in 1994. The decrease in 1995 was due to a variety of reasons including a decrease in expenses related to insurance, injuries and damages and the provision for vacation pay liability. The increase in 1994 was primarily due to increased provisions for injuries and damages and obsolete materials. Depreciation. Depreciation expense increased in 1995, 1994 and 1993 as a result of additions to plant in service. See "Depreciation and Decommissioning" in Note 1 of Notes to Financial Statements for additional information. ComEd also intends to seek authorization from the ICC to accelerate the depreciation charges on its nuclear generating units. See "Business and Competition" under "Liquidity and Capital Resources." Interest on Debt. Changes in interest on long-term debt and notes payable for the years 1995, 1994 and 1993 were due to changes in average interest rates and in the amounts of long-term debt and notes payable outstanding. Changes in interest on long-term debt also reflected new issues of debt, the retirement and early redemption of debt, and the retirement and redemption of issues which were 13 refinanced at generally lower rates of interest. The average amounts of long- term debt and notes payable outstanding and average interest rates thereon were as follows:
1995 1994 1993 ------ ------ ------ Long-term debt outstanding: Average amount (millions).......................... $7,528 $7,934 $8,105 Average interest rate.............................. 7.78% 7.83% 8.03% Notes payable outstanding: Average amount (millions).......................... $ 51 $ 9 $ 6 Average interest rate.............................. 6.40% 6.48% 5.83%
Deferred Carrying Charges. In the Remand Order, the ICC provided that, for ratemaking purposes, deferred carrying charges on the reasonable and "used and useful" plant costs of the Units for the period April 1, 1989 until approximately March 20, 1991, the date under the Remand Order that the Units were reflected in rates, could be deferred and amortized. Approximately $438 million of such costs was capitalized as a regulatory asset in October 1993 and resulted in an increase to net income for the year 1993 of approximately $269 million or $1.26 per common share. Amortization of deferred carrying charges was $13 million in 1995 and 1994 and was $2 million in 1993. Decommissioning. The staff of the SEC has questioned certain of the current accounting practices of the electric utility industry, including ComEd, regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements of electric utilities. In response to these questions, the FASB is reviewing the accounting for nuclear decommissioning costs. If current electric utility industry accounting practices for such decommissioning costs are changed, annual provisions for decommissioning could increase and the estimated cost for decommissioning could be recorded as a liability rather than as accumulated depreciation. ComEd does not believe that such changes, if required, would have an adverse effect on results of operations due to its current and future ability to recover decommissioning costs through rates. Investments in Uranium-Related Properties. In May 1994, ComEd recorded a reduction in the carrying value of its investments in uranium-related properties after completing a review of various alternatives and reassessing the long-term recoverability of those investments. The effects of the reduction reduced 1994 net income by $34 million or $0.16 per common share. Other Items. The amounts of AFUDC reflect changes in the average levels of investment subject to AFUDC and changes in the average annual capitalization rates as discussed in Note 1 of Notes to Financial Statements. AFUDC does not contribute to the current cash flow of ComEd. The ratios of earnings to fixed charges for the years 1995, 1994 and 1993 were 2.79, 1.99 and 1.19, respectively. The ratios of earnings to fixed charges and preferred and preference stock dividend requirements for the years 1995, 1994 and 1993 were 2.39, 1.73 and 1.03, respectively. Business corporations in general have been adversely affected by inflation because amounts retained after the payment of all costs have been inadequate to replace, at increased costs, the productive assets consumed. Electric utilities in particular have been especially affected as a result of their capital intensive nature and regulation which limits capital recovery and prescribes installation or modification of facilities to comply with increasingly stringent safety and environmental requirements. Because the regulatory process limits the amount of depreciation expense included in ComEd's revenue allowance to the original cost of utility plant investment, the resulting cash flows are inadequate to provide for replacement of that investment in future years or preserve the purchasing power of common equity capital previously invested. 14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Commonwealth Edison Company: We have audited the accompanying consolidated balance sheets and statements of consolidated capitalization of Commonwealth Edison Company (an Illinois corporation) and subsidiary companies as of December 31, 1995 and 1994, and the related statements of consolidated income, retained earnings, premium on common stock and other paid-in capital and cash flows for each of the three years in the period ended December 31, 1995. 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 Commonwealth Edison Company and subsidiary companies as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP Chicago, Illinois January 26, 1996 15 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED INCOME The following Statements of Consolidated Income for the years 1995, 1994 and 1993 reflect the results of past operations and are not intended as any representation as to results of operations for any future period. Future operations will necessarily be affected by various and diverse factors and developments, including changes in electric rates, population, business activity, competition, taxes, environmental control, energy use, fuel supply, cost of labor, fuel and purchased power and other matters, the nature and effect of which cannot now be determined.
1995 1994 1993 ---------- ---------- ----------- (THOUSANDS EXCEPT PER SHARE DATA) Electric Operating Revenues: Operating revenues....................... $6,909,786 $6,293,430 $ 6,547,205 Provisions for revenue refunds........... -- (15,909) (1,286,765) ---------- ---------- ----------- $6,909,786 $6,277,521 $ 5,260,440 ---------- ---------- ----------- Electric Operating Expenses and Taxes: Fuel..................................... $1,089,841 $1,049,853 $ 1,170,935 Purchased power.......................... 64,378 59,123 12,303 Deferred (under)/overrecovered energy costs--net.............................. (2,732) 1,940 (1,757) Operation................................ 1,597,964 1,525,258 1,455,986 Maintenance.............................. 566,749 561,320 581,714 Depreciation............................. 897,305 887,432 862,766 Recovery of regulatory assets............ 15,272 15,453 5,235 Taxes (except income).................... 832,026 787,796 701,913 Income taxes-- Current--Federal....................... 257,083 158,301 (19,930) --State................................ 87,138 1,913 (7,623) Deferred--Federal--net................. 172,403 104,290 88,631 --State--net........................... 15,605 65,017 34,752 Investment tax credits deferred--net..... (28,710) (28,757) (29,424) ---------- ---------- ----------- $5,564,322 $5,188,939 $ 4,855,501 ---------- ---------- ----------- Electric Operating Income................. $1,345,464 $1,088,582 $ 404,939 ---------- ---------- ----------- Other Income and (Deductions): Interest on long-term debt............... $ (585,806) $ (621,225) $ (651,181) Interest on notes payable................ (3,280) (557) (334) Allowance for funds used during construction-- Borrowed funds......................... 11,137 18,912 16,930 Equity funds........................... 13,129 22,628 20,618 Income taxes applicable to nonoperating activities.............................. 5,085 27,074 30,705 Deferred carrying charges................ -- -- 438,183 Interest and other costs for 1993 Settlements............................. (61) (21,464) (98,674) Provision for dividends on company- obligated mandatorily redeemable preferred securities of subsidiary trust................................... (4,428) -- -- Miscellaneous--net....................... (44,064) (90,004) (58,484) ---------- ---------- ----------- $ (608,288) $ (664,636) $ (302,237) ---------- ---------- ----------- Net Income Before Extraordinary Item and Cumulative Effect of Change in Accounting for Income Taxes......................... $ 737,176 $ 423,946 $ 102,702 Extraordinary Loss Related to Early Redemption of Long-Term Debt, Less Applicable Income Taxes.................. (20,022) -- -- Cumulative Effect of Change in Accounting for Income Taxes......................... -- -- 9,738 ---------- ---------- ----------- Net Income................................ $ 717,154 $ 423,946 $ 112,440 Provision for Dividends on Preferred and Preference Stocks........................ 69,961 64,927 66,052 ---------- ---------- ----------- Net Income on Common Stock................ $ 647,193 $ 359,019 $ 46,388 ========== ========== =========== Average Number of Common Shares Outstanding.............................. 214,193 214,008 213,508 Earnings Per Common Share Before Extraordinary Item and Cumulative Effect of Change in Accounting for Income Taxes. $ 3.11 $ 1.68 $ 0.17 Extraordinary Loss Related to Early Redemption of Long-Term Debt, Less Applicable Income Taxes.................. (0.09) -- -- Cumulative Effect of Change in Accounting for Income Taxes......................... -- -- 0.05 ---------- ---------- ----------- Earnings Per Common Share................. $ 3.02 $ 1.68 $ 0.22 ========== ========== ===========
The accompanying Notes to Financial Statements are an integral part of the above statements. 16 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ------------------------ ASSETS 1995 1994 ------ ----------- ----------- (THOUSANDS OF DOLLARS) Utility Plant: Plant and equipment, at original cost (includes construction work in progress of $1,105 million and $1,043 million, respectively)................. $27,052,778 $26,257,665 Less--Accumulated provision for depreciation....... 10,565,093 9,623,756 ----------- ----------- $16,487,685 $16,633,909 Nuclear fuel, at amortized cost.................... 734,667 689,424 ----------- ----------- $17,222,352 $17,323,333 ----------- ----------- Investments: Nuclear decommissioning funds...................... $ 1,237,527 $ 880,944 Subsidiary companies............................... 113,657 118,051 Other investments, at cost......................... 20,478 18,613 ----------- ----------- $ 1,371,662 $ 1,017,608 ----------- ----------- Current Assets: Cash............................................... $ 972 $ 84 Temporary cash investments......................... 14,138 53,566 Other cash investments............................. -- 19,588 Special deposits................................... 3,546 29,603 Receivables-- Customers........................................ 579,861 463,385 Taxes............................................ 75,536 36,083 Other............................................ 82,824 68,434 Provisions for uncollectible accounts............ (11,828) (10,720) Coal and fuel oil, at average cost................. 129,176 108,872 Materials and supplies, at average cost............ 333,539 384,612 Deferred unrecovered energy costs.................. 46,028 48,697 Deferred income taxes related to current assets and liabilities-- Loss carryforward................................ -- 10,090 Other............................................ 107,931 110,267 Prepayments and other.............................. 44,661 56,449 ----------- ----------- $ 1,406,384 $ 1,379,010 ----------- ----------- Deferred Charges and Other Noncurrent Assets: Regulatory assets.................................. $ 2,467,386 $ 2,604,270 Unrecovered energy costs........................... 588,152 643,438 Other.............................................. 63,124 108,308 ----------- ----------- $ 3,118,662 $ 3,356,016 ----------- ----------- $23,119,060 $23,075,967 =========== ===========
The accompanying Notes to Financial Statements are an integral part of the above statements. 17 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ----------------------- CAPITALIZATION AND LIABILITIES 1995 1994 ------------------------------ ----------- ----------- (THOUSANDS OF DOLLARS) Capitalization (see accompanying statements): Common stock equity.................................. $ 5,706,130 $ 5,401,423 Preferred and preference stocks without mandatory redemption requirements............................. 508,034 508,147 Preference stock subject to mandatory redemption requirements........................................ 261,475 292,163 Company-obligated mandatorily redeemable preferred securities of subsidiary trust*..................... 200,000 -- Long-term debt....................................... 6,488,434 7,453,206 ----------- ----------- $13,164,073 $13,654,939 ----------- ----------- Current Liabilities: Notes payable-- Commercial paper.................................... $ 261,000 $ -- Bank loans.......................................... 7,150 7,150 Current portion of long-term debt, redeemable preference stock and capitalized lease obligations.. 433,299 560,335 Accounts payable..................................... 614,283 351,370 Accrued interest..................................... 170,284 182,745 Accrued taxes........................................ 215,965 209,269 Dividends payable.................................... 102,192 102,585 Customer deposits.................................... 44,521 44,514 Other................................................ 93,841 85,845 ----------- ----------- $ 1,942,535 $ 1,543,813 ----------- ----------- Deferred Credits and Other Noncurrent Liabilities: Deferred income taxes................................ $ 4,506,704 $ 4,383,876 Accumulated deferred investment tax credits.......... 689,041 717,752 Accrued spent nuclear fuel disposal fee and related interest............................................ 624,191 589,757 Obligations under capital leases..................... 373,697 431,402 Regulatory liabilities............................... 601,002 699,426 Other................................................ 1,217,817 1,055,002 ----------- ----------- $ 8,012,452 $ 7,877,215 ----------- ----------- Commitments and Contingent Liabilities (Note 21) $23,119,060 $23,075,967 =========== ===========
*As described in Note 8 of Notes to Financial Statements, the sole asset of ComEd Financing I, a subsidiary trust of ComEd, is $206.2 million principal amount of ComEd's 8.48% subordinated deferrable interest notes due September 30, 2035. The accompanying Notes to Financial Statements are an integral part of the above statements. 18 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED CAPITALIZATION
DECEMBER 31 ------------------------ 1995 1994 ----------- ----------- (THOUSANDS OF DOLLARS) Common Stock Equity: Common stock, $12.50 par value per share-- Outstanding--214,194,950 shares and 214,191,021 shares, respectively............................. $ 2,677,437 $ 2,677,387 Premium on common stock and other paid-in capital.. 2,223,004 2,222,941 Capital stock and warrant expense.................. (16,159) (16,240) Retained earnings.................................. 821,848 517,335 ----------- ----------- $ 5,706,130 $ 5,401,423 ----------- ----------- Preferred and Preference Stocks Without Mandatory Redemption Requirements: Preference stock, cumulative, without par value-- Outstanding--13,499,549 shares.................... $ 504,957 $ 504,957 $1.425 convertible preferred stock, cumulative, without par value-- Outstanding--96,753 shares and 100,323 shares, respectively..................................... 3,077 3,190 Prior preferred stock, cumulative, $100 par value per share-- No shares outstanding............................. -- -- ----------- ----------- $ 508,034 $ 508,147 ----------- ----------- Preference Stock Subject to Mandatory Redemption Requirements: Preference stock, cumulative, without par value-- Outstanding--2,934,990 shares and 3,113,205 shares, respectively............................. $ 292,163 $ 309,964 Current redemption requirements for preference stock included in current liabilities............. (30,688) (17,801) ----------- ----------- $ 261,475 $ 292,163 ----------- ----------- Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust: Outstanding--8,000,000 and none, respectively...... $ 200,000 $ -- ----------- ----------- Long-Term Debt: First mortgage bonds: Maturing 1995 through 2000--5 1/4% to 9 3/8%..... $ 1,170,000 $ 1,273,000 Maturing 2001 through 2010--5.30% to 8 3/8%...... 1,465,400 1,765,500 Maturing 2011 through 2020--5.85% to 9 7/8%...... 1,266,000 1,591,000 Maturing 2021 through 2023--7 3/4% to 9 1/8%..... 1,385,000 1,385,000 ----------- ----------- $ 5,286,400 $ 6,014,500 Sinking fund debentures, due 1999 through 2011-- 2 3/4% to 7 5/8%.................................. 110,505 112,593 Pollution control obligations, due 2004 through 2014--4.434% to 9 1/8%............................ 317,200 337,200 Other long-term debt............................... 1,064,318 1,451,449 Current maturities of long-term debt included in current liabilities............................... (234,893) (395,554) Unamortized net debt discount and premium.......... (55,096) (66,982) ----------- ----------- $ 6,488,434 $ 7,453,206 ----------- ----------- $13,164,073 $13,654,939 =========== ===========
The accompanying Notes to Financial Statements are an integral part of the above statements. 19 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
1995 1994 1993 ---------- -------- -------- (THOUSANDS OF DOLLARS) Balance at Beginning of Year...................... $ 517,335 $549,152 $847,186 Add--Net income................................... 717,154 423,946 112,440 ---------- -------- -------- $1,234,489 $973,098 $959,626 ---------- -------- -------- Deduct-- Dividends declared on-- Common stock.................................. $ 342,710 $390,281 $341,683 Preferred and preference stocks............... 66,855 65,381 65,688 Other capital stock transactions--net........... 3,076 101 3,103 ---------- -------- -------- $ 412,641 $455,763 $410,474 ---------- -------- -------- Balance at End of Year............................ $ 821,848 $517,335 $549,152 ========== ======== ========
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED PREMIUM ON COMMON STOCK AND OTHER PAID-IN CAPITAL
1995 1994 1993 ---------- ---------- ---------- (THOUSANDS OF DOLLARS) Balance at Beginning of Year................... $2,222,941 $2,217,110 $2,210,524 Add--Premium on issuance of common stock....... 63 5,831 6,586 ---------- ---------- ---------- Balance at End of Year......................... $2,223,004 $2,222,941 $2,217,110 ========== ========== ==========
The accompanying Notes to Financial Statements are an integral part of the above statements. 20 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED CASH FLOWS
1995 1994 1993 ----------- ----------- ----------- (THOUSANDS OF DOLLARS) Cash Flow From Operating Activities: Net income............................. $ 717,154 $ 423,946 $ 112,440 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........ 948,683 929,325 911,136 Deferred income taxes and investment tax credits--net.................... 158,296 127,186 85,079 Extraordinary loss related to early redemption of long-term debt........ 33,158 -- -- Cumulative effect of change in accounting for income taxes......... -- -- (9,738) Equity component of allowance for funds used during construction...... (13,129) (22,628) (20,618) Provisions for revenue refunds and related interest.................... (231) 37,548 1,354,197 Revenue refunds and related interest. 15,135 (1,221,650) (190,723) Recovery/(deferral) of regulatory assets/deferred carrying charges-- net................................. 15,272 15,453 (432,948) Provisions/(payments) for liability for early retirement and separation costs--net.......................... 60,713 33,580 (1,816) Net effect on cash flows of changes in: Receivables........................ (169,211) 114,935 (159,169) Coal and fuel oil.................. (20,304) 2,880 215,382 Materials and supplies............. 51,073 18,102 1,834 Accounts payable adjusted for nuclear fuel lease principal payments and early retirement and separation costs--net............. 465,475 118,190 277,733 Accrued interest and taxes......... (5,765) 72,827 (39,234) Other changes in certain current assets and liabilities............ 26,555 (52,862) (6,637) Other--net........................... 141,411 124,241 108,924 ----------- ----------- ----------- $ 2,424,285 $ 721,073 $ 2,205,842 ----------- ----------- ----------- Cash Flow From Investing Activities: Construction expenditures.............. $ (899,366) $ (720,602) $ (841,525) Nuclear fuel expenditures.............. (289,118) (257,264) (261,370) Equity component of allowance for funds used during construction........ 13,129 22,628 20,618 Contributions to nuclear decommissioning funds................. (132,653) (132,550) (132,550) Investment in subsidiary companies..... (8) (49) -- Other investments and special deposits.............................. 19,588 621,987 (619,349) ----------- ----------- ----------- $(1,288,428) $ (465,850) $(1,834,176) ----------- ----------- ----------- Cash Flow From Financing Activities: Issuance of securities-- Long-term debt....................... $ -- $ 546,289 $ 1,927,296 Preferred securities of subsidiary trust............................... 200,000 -- -- Capital stock........................ 1 77,970 80,585 Retirement and redemption of securities-- Long-term debt....................... (1,137,272) (703,930) (1,900,540) Capital stock........................ (17,822) (17,709) (93,081) Deposits and securities held for retirement and redemption of securities............................ 106 3,191 241,731 Premium paid on early redemption of long-term debt........................ (25,823) (4,564) (78,395) Cash dividends paid on capital stock... (409,957) (446,342) (408,285) Proceeds from sale/leaseback of nuclear fuel.......................... 193,215 306,649 204,254 Nuclear fuel lease principal payments.. (237,845) (209,689) (245,968) Increase in short-term borrowings...... 261,000 1,200 350 ----------- ----------- ----------- $(1,174,397) $ (446,935) $ (272,053) ----------- ----------- ----------- Increase (Decrease) in Cash and Temporary Cash Investments............. $ (38,540) $ (191,712) $ 99,613 Cash and Temporary Cash Investments at Beginning of Year...................... 53,650 245,362 145,749 ----------- ----------- ----------- Cash and Temporary Cash Investments at End of Year............................ $ 15,110 $ 53,650 $ 245,362 =========== =========== ===========
The accompanying Notes to Financial Statements are an integral part of the above statements. 21 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Holding Company Restructuring. Effective September 1, 1994, Unicom became the parent corporation of ComEd and Unicom Enterprises in a corporate restructuring. Previously, Unicom Enterprises was a wholly-owned subsidiary of ComEd. The restructuring was accounted for by the pooling-of-interests method. In the restructuring, each of the 214,185,572 outstanding shares of ComEd common stock, par value $12.50 per share, was converted into one fully paid and non-assessable share of Unicom common stock, without par value. In addition, the outstanding shares of the common stock of CECo Merging Corporation (a wholly-owned subsidiary of ComEd created to effect the restructuring) were converted into the same number of shares of ComEd common stock, par value $12.50 per share, outstanding immediately prior to the restructuring. The preferred and preference stocks, common stock purchase warrants, first mortgage bonds and other debt obligations of ComEd were unchanged in the restructuring and remain as ComEd's outstanding securities and obligations. Principles of Consolidation. The consolidated financial statements include the accounts of ComEd, the Indiana Company and ComEd Financing I. All significant intercompany transactions have been eliminated. ComEd's investments in other subsidiary companies, which are not material in relation to ComEd's financial position and results of operations, are accounted for in accordance with the equity method of accounting. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Regulation. ComEd is subject to regulation as to accounting and ratemaking policies and practices by the ICC and FERC. ComEd's accounting policies and the accompanying consolidated financial statements conform to generally accepted accounting principles applicable to rate-regulated enterprises and reflect the effects of the ratemaking process in accordance with SFAS No. 71, Accounting for the Effects of Certain Types of Regulation. Such effects concern mainly the time at which various items enter into the determination of net income in order to follow the principle of matching costs and revenues. Regulatory Assets and Liabilities. Regulatory assets are incurred costs which have been deferred and are amortized for ratemaking and accounting purposes. Regulatory liabilities represent amounts to be settled with customers through future rates. Regulatory assets and liabilities reflected on the Consolidated Balance Sheets at December 31, 1995 and 1994 were as follows:
DECEMBER 31 --------------------- 1995 1994 ---------- ---------- (THOUSANDS OF DOLLARS) Regulatory assets: Deferred income taxes (1)............................... $1,689,832 $1,791,395 Deferred carrying charges (2)........................... 409,923 422,966 Nuclear decommissioning costs--Dresden Unit 1 (3)....... 138,058 141,405 Unamortized loss on reacquired debt (4)................. 160,440 176,128 Other................................................... 69,133 72,376 ---------- ---------- $2,467,386 $2,604,270 ========== ========== Regulatory liabilities: Deferred income taxes (1)............................... $ 601,002 $ 650,813 Other................................................... -- 48,613 ---------- ---------- $ 601,002 $ 699,426 ========== ==========
- -------- (1) Recorded in compliance with SFAS No. 109. (2) Amortized over the remaining lives of the Units. (3) Amortized over the remaining life of Dresden station. See "Depreciation and Decommissioning" below for additional information. (4) Amortized over the remaining lives of the long-term debt issued to finance the reacquisition. See "Loss on Reacquired Debt" below for additional information. 22 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED For additional information related to deferred carrying charges, see "Deferred Carrying Charges" under the subcaption "Results of Operations" in "Management's Discussion and Analysis of Financial Condition and Results of Operations." See also "Deferred Unrecovered Energy Costs" below regarding the fuel adjustment clause, the DOE assessment and coal reserves. If a portion of ComEd's operations was no longer subject to the provisions of SFAS No. 71 as a result of a change in regulation or the effects of competition, ComEd would be required to write off the related regulatory assets and liabilities. In addition, ComEd would be required to determine any impairment to other assets and write down such assets to their fair value. SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which will be adopted on January 1, 1996, establishes accounting standards for the impairment of long-lived assets. The SFAS also requires that regulatory assets which are no longer probable of recovery through future revenue be charged to earnings. SFAS No. 121 is not expected to have an impact on ComEd's financial position or results of operations upon adoption. Customer Receivables and Revenues. ComEd is engaged principally in the production, purchase, transmission, distribution and sale of electricity to a diverse base of residential, commercial and industrial customers. ComEd's electric service territory has an area of approximately 11,540 square miles and an estimated population of approximately eight million as of December 31, 1995, 1994 and 1993. It includes the city of Chicago, an area of about 225 square miles with an estimated population of approximately three million from which ComEd derived approximately one-third of its ultimate consumer revenues in 1995. ComEd had approximately 3.4 million electric customers at December 31, 1995. Depreciation and Decommissioning. Depreciation is provided on the straight- line basis by amortizing the cost of depreciable plant and equipment over estimated composite service lives. Non-nuclear plant and equipment is depreciated at annual rates developed for each class of plant based on their composite service lives. Provisions for depreciation were at average annual rates of 3.14%, 3.13% and 3.12% of average depreciable utility plant and equipment for the years 1995, 1994 and 1993, respectively. The annual rate for nuclear plant and equipment is 2.88%, which excludes separately collected decommissioning costs. See Note 3 for additional information concerning ComEd's announcement of customer initiatives which include the acceleration of depreciation charges on nuclear generating units. Nuclear plant decommissioning costs are accrued over the expected service lives of the related nuclear generating units. The accrual is based on an annual levelized cost of the unrecovered portion of estimated decommissioning costs which are escalated for expected inflation to the expected time of decommissioning and are net of expected earnings on the trust funds. See "Decommissioning" under "Management's Discussion and Analysis of Financial Condition and Results of Operations," subcaption "Results of Operations," for a discussion of questions raised by the staff of the SEC and a FASB review regarding the electric utility industry method of accounting for decommissioning costs. Dismantling is expected to occur relatively soon after the end of the useful life of each related generating station. The accrual for decommissioning is based on the prompt removal method authorized by NRC guidelines. ComEd's twelve operating units have estimated remaining service lives ranging from 10 to 32 years. ComEd's first nuclear unit, Dresden Unit 1, is retired and will be dismantled upon the retirement of the remaining units at that station, which is consistent with the regulatory treatment for the related decommissioning costs. Based on ComEd's most recent study, decommissioning costs, including the cost of decontamination and dismantling, are estimated to aggregate $3.7 billion in current-year (1996) dollars excluding 23 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED a contingency allowance. ComEd estimates that it will expend approximately $15 billion, excluding any contingency allowance, for decommissioning costs primarily during the period from 2007 through 2032. Such costs are expected to be funded by the external decommissioning trusts which ComEd established in compliance with Illinois law and into which ComEd has been making annual contributions. Future decommissioning cost estimates may be significantly affected by the adoption of or changes to NRC regulations as well as changes in the assumptions used in making such estimates. On January 9, 1995, the ICC issued its Rate Order in the proceedings relating to ComEd's February 1994 rate increase request. In the Rate Order, the ICC determined that ComEd's annual nuclear plant decommissioning cost collections from its ratepayers should be reduced from the $127 million previously authorized in the 1991 ICC rate order to $112.7 million. The $112.7 million annual collection amount primarily resulted from the ICC's decision to exclude from ComEd's costs subject to collection a contingency allowance. Contingency allowances used in decommissioning cost estimates provide for currently unspecifiable costs that are likely to occur after decommissioning begins and generally range from 20% to 25% of the currently specifiable costs. However, the Rate Order established a rider which will allow annual adjustments to decommissioning cost collections outside of the context of a traditional rate proceeding. Such rider is intended to allow adjustments in decommissioning cost recoveries from ratepayers as changes in cost estimates occur. On February 28, 1995, ComEd submitted its initial rider filing to the ICC to increase its annual collections to $113.5 million, primarily reflecting additional expenditures at Dresden Unit 1, its retired nuclear unit. The ICC approved the rider filing on April 19, 1995. As a result of the decommissioning rider filing, beginning May 2, 1995, the effective date of the order related to the rider filing, ComEd began collecting and accruing $113.5 million annually for decommissioning costs. The assumptions used to calculate the $113.5 million decommissioning cost accrual include: the decommissioning cost estimate of $3.7 billion in current-year (1996) dollars, after-tax earnings on the tax-qualified and nontax-qualified decommissioning funds of 7.30% and 6.26%, respectively, as well as an escalation rate for future decommissioning costs of 5.3%. The annual accrual of $113.5 million provided over the lives of the nuclear plants, coupled with the expected fund earnings and amounts previously recovered in rates, is expected to aggregate approximately $15 billion. For the twelve operating nuclear units, decommissioning costs 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, 1995, the total decommissioning costs included in the accumulated provision for depreciation were $1,301 million. For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated liability at December 31, 1995 in current-year (1996) dollars of $257 million was recorded on the Consolidated Balance Sheets as a noncurrent liability and the unrecovered portion of the liability of approximately $138 million was recorded as a regulatory asset. Under Illinois law, decommissioning cost collections are required to be deposited into external trusts; and, consequently, such collections do not add to the cash flows available for general corporate purposes. The ICC has approved ComEd's funding plan which provides for annual contributions of current accruals and ratable contributions of past accruals over the remaining service lives of the nuclear plants. At December 31, 1995, the past accruals that are required to be contributed to the external trusts aggregate $182 million. The fair value of funds accumulated in the external trusts at December 31, 1995 was approximately $1,238 million which includes pre-tax unrealized appreciation of $165 million. The earnings on the external trusts accumulate in the fund balance and in the accumulated provision for depreciation. 24 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED Amortization of Nuclear Fuel. The cost of nuclear fuel is amortized to fuel expense based on the quantity of heat produced using the unit of production method. As authorized by the ICC, provisions for spent nuclear fuel disposal costs have been recorded at a level required to recover the fee payable on current nuclear-generated and sold electricity and the current interest accrual on the one-time fee payable to the DOE for nuclear generation prior to April 7, 1983. The one-time fee and interest thereon have been recovered and the current fee and current interest on the one-time fee are currently being recovered through the fuel adjustment clause. See Note 11 for further information concerning the disposal of spent nuclear fuel, the one-time fee and the current interest accrual on the one-time fee. Nuclear fuel expenses, including leased fuel costs and provisions for spent nuclear fuel disposal costs, for the years 1995, 1994 and 1993 were $390.7 million, $358.0 million and $385.9 million, respectively. Income Taxes. ComEd is included in the consolidated federal and state income tax returns filed by Unicom. Current and deferred income taxes of the consolidated group are allocated to ComEd as if ComEd filed separate tax returns. Deferred income taxes are provided for income and expense items recognized for financial accounting purposes in periods that differ from those for income tax purposes. Income taxes deferred in prior years are charged or credited to income as the book/tax timing differences reverse. Prior years' deferred investment tax credits are amortized through credits to income generally over the lives of the related property. Income tax credits resulting from interest charges applicable to nonoperating activities, principally construction, are classified as other income. AFUDC. In accordance with the uniform systems of accounts prescribed by regulatory authorities, ComEd capitalizes AFUDC, compounded semiannually, which represents the estimated cost of funds used to finance its construction program. The equity component of AFUDC is recorded on an after-tax basis and the borrowed funds component of AFUDC is recorded on a pre-tax basis. The average annual capitalization rates for the years 1995, 1994 and 1993 were 9.52%, 9.85% and 10.05%, respectively. AFUDC does not contribute to the current cash flow of ComEd. Interest. Total interest costs incurred on debt, leases and other obligations for the years 1995, 1994 and 1993 were $692.9 million, $729.5 million and $778.6 million, respectively. Debt Discount, Premium and Expense. Discount, premium and expense on long- term debt are being amortized over the lives of the respective issues. Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss from reacquisition in connection with refinancing of first mortgage bonds, sinking fund debentures and pollution control obligations prior to their scheduled maturity dates is deferred and amortized over the lives of the long- term debt issued to finance the reacquisition. Deferred Unrecovered Energy Costs. The fuel adjustment clause adopted by the ICC provides for the recovery of changes in fossil and nuclear fuel costs and the energy portion of purchased power costs as compared to the fuel and purchased energy costs included in ComEd's base rates. As authorized by the ICC, ComEd has recorded under or overrecoveries of allowable fuel and energy costs which, under the clause, are recoverable or refundable in subsequent months. Deferred unrecovered energy costs also include amounts to be recovered through the fuel adjustment clause for assessments by the DOE to fund a portion of the cost for the decontamination and decommissioning of uranium enrichment facilities owned and previously operated by the DOE. As of December 31, 1995 and 1994, an asset related to the assessments of approximately $179 million and $191 million, respectively, was recorded, of which the current portion of approximately $15 million was included in current assets on the Consolidated Balance Sheets. As of December 31, 1995 and 1994, a corresponding liability of approximately $152 million and $165 million, respectively, was recorded in other noncurrent liabilities and approximately $15 million was recorded in other current liabilities. 25 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED At December 31, 1995 and 1994, ComEd had unrecovered fuel costs in the form of coal reserves of approximately $448 million and $498 million, respectively. In prior years, ComEd's commitments for the purchase of coal exceeded its requirements. Rather than take all the coal it was required to take, ComEd agreed to purchase the coal in place in the form of coal reserves. ComEd has been allowed to recover from its customers the costs of the coal reserves through its fuel adjustment clause as the coal is used for the generation of electricity; however, ComEd is not earning a return on the expenditures for coal reserves. Such fuel costs expected to be recovered within one year amounting to approximately $24 million and $31 million at December 31, 1995 and 1994, respectively, have been included on the Consolidated Balance Sheets in current assets as deferred unrecovered energy costs. ComEd expects to fully recover the costs of the coal reserves by the year 2007. See Note 21 for additional information concerning ComEd's coal commitments. Reclassifications. Certain prior year amounts have been reclassified to conform with current period presentation. These reclassifications had no effect on net income. Statements of Consolidated Cash Flows. For purposes of the Statements of Consolidated Cash Flows, temporary cash investments, generally investments maturing within three months at the time of purchase, are considered to be cash equivalents. Supplemental cash flow information for the years 1995, 1994 and 1993 was as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Supplemental Cash Flow Information: Cash paid during the year for: Interest (net of amount capitalized)........... $604,202 $645,424 $677,669 Income taxes (net of refunds).................. $368,842 $ (4,923) $103,014 Supplemental Schedule of Non-Cash Investing and Financing Activities: Capital lease obligations incurred............... $198,577 $309,716 $213,758
(2) SETTLEMENTS RELATING TO CERTAIN RATE MATTERS Under the Rate Matters Settlement, effective as of November 4, 1993, ComEd reduced its rates by approximately $339 million annually and refunded approximately $1.26 billion (including revenue taxes), plus interest at five percent on the unpaid balance, through temporarily reduced rates over a refund period which ended in November 1994 (followed by a reconciliation period of five months). ComEd had previously deferred the recognition of revenues during 1993 as a result of developments in the proceedings related to a 1991 ICC rate order, which resulted in a reduction to 1993 net income of approximately $160 million or $0.75 per common share. The recording of the effects of the Rate Matters Settlement in October 1993 reduced 1993 net income by approximately $292 million or $1.37 per common share, in addition to the approximately $160 million effect of the deferred recognition of revenues and after the partially offsetting effect of recording approximately $269 million or $1.26 per common share in deferred carrying charges, net of income taxes, authorized in the Remand Order. Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd paid approximately $108 million (including revenue taxes) to its customers through temporarily reduced collections under its fuel adjustment clause over a twelve-month period which ended in November 1994. The recording of the effects of the Fuel Matters Settlement in October 1993 reduced 1993 net income by approximately $62 million or $0.29 per common share. 26 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (3) OTHER RATE MATTERS On January 9, 1995, the ICC issued its Rate Order in the proceedings relating to ComEd's February 1994 rate increase request. The Rate Order provides, among other things, for (i) an increase in ComEd's total revenues of approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an annual basis, including a $303.2 million increase in base rates, (ii) the collection of municipal franchise costs as an adder to base rates until May 1, 1995, when ComEd began collecting such costs prospectively on an individual municipality basis through a rider, and (iii) the use of a rider, with annual review proceedings, to pass on to ratepayers increases or decreases in estimated costs associated with the decommissioning of ComEd's nuclear generating units. See Note 1 under "Depreciation and Decommissioning" for information related to the level of decommissioning cost collections allowed in the Rate Order and subsequent rider proceedings. The ICC also determined that the Units were 100% "used and useful" and that the previously determined reasonable costs of such Units, as depreciated, should be included in full in ComEd's rate base. The rates provided in the Rate Order became effective on January 14, 1995; however, they are being collected subject to refund as a result of subsequent judicial action. As of December 31, 1995, electric operating revenues of approximately $319 million (excluding revenue taxes) are subject to refund. Intervenors and ComEd have filed appeals of the Rate Order with the Illinois Appellate Court. On December 11, 1995, ComEd announced a series of customer initiatives as part of its larger ongoing effort to address the need to give all customer classes the opportunity to benefit from increased competition in the electric utility business, while retaining the benefits (such as reliability) of current regulation and ensuring utilities' cost recovery for commitments made under the obligation to serve customers. The initiatives include a five-year cap on base electric rates at current levels and various customer service and incentive pricing programs designed to allow customers more choice and control over the services they seek and the prices they pay. These initiatives are in addition to previously implemented special discount contract rate programs for new or existing industrial customers. ComEd anticipates the initiatives will be fully implemented in 1997 and will reduce its revenues by approximately $42 million annually (including the effects of previously implemented initiatives and before income tax effects) primarily through changes in energy utilization and increase its costs by at least $30 million annually (before income tax effects) through the acceleration of depreciation charges on its nuclear generating units. ComEd expects to file a request for ICC approval of the accelerated depreciation initiatives in the near future. Management expects the financial impact of these initiatives will be substantially offset by ComEd's cost reduction efforts and expected growth in its business. ComEd also continues to consider the possibility of additional accelerated depreciation options. Under ComEd's initiatives, the five-year base rate cap at current levels became effective in December 1995 and will extend until January 1, 2001. The rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost recovery provisions. ComEd's fuel cost variances will continue to be collected through its fuel adjustment clause, and such collections will continue to be subject to annual reconciliation proceedings before the ICC. Likewise, nuclear decommissioning costs will continue to be collected as described in Note 1 under "Depreciation and Decommissioning." (4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK At December 31, 1995, the authorized shares of ComEd capital stock were: common stock--250,000,000 shares; preference stock--23,244,990 shares; $1.425 convertible preferred stock--96,753 shares; and prior preferred stock--850,000 shares. The preference and prior preferred stocks are 27 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED issuable in series and may be issued with or without mandatory redemption requirements. Holders of shares at any time outstanding, regardless of class, are entitled to one vote for each share held on each matter submitted to a vote at a meeting of shareholders, with the right to cumulate votes in all elections for directors. (5) COMMON STOCK At December 31, 1995, shares of common stock were reserved for the following purposes: Conversion of $1.425 convertible preferred stock.................. 98,688 Conversion of warrants............................................ 27,580 ------- 126,268 =======
Common stock for the years 1995, 1994 and 1993 was issued as follows:
1995 1994 1993 ----- ------- ------- Employee Stock Purchase Plan........................ -- 154,710 268,594 Employee Savings and Investment Plan................ -- 81,400 153,400 Conversion of $1.425 convertible preferred stock.... 3,630 190,050 22,375 Conversion of warrants.............................. 299 13,714 1,374 ----- ------- ------- 3,929 439,874 445,743 ===== ======= =======
At December 31, 1995 and 1994, 82,742 and 83,751 common stock purchase warrants, respectively, were outstanding. The warrants entitle the holders to convert such warrants into common stock at a conversion rate of one share of common stock for three warrants. (6) PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION REQUIREMENTS No shares of preferred or preference stocks without mandatory redemption requirements were issued or redeemed during 1995 or 1993. During 1994, 3,000,000 shares of preference stock without mandatory redemption requirements were issued and no shares of preferred or preference stocks without mandatory redemption requirements were redeemed. The series of preference stock without mandatory redemption requirements outstanding at December 31, 1995 are summarized as follows:
INVOLUNTARY SHARES AGGREGATE REDEMPTION LIQUIDATION SERIES OUTSTANDING STATED VALUE PRICE(1) PRICE(1) ------- ----------- ------------ ---------- ----------- (THOUSANDS OF DOLLARS) $1.90 4,249,549 $106,239 $ 25.25 $25.00 $2.00 2,000,000 51,560 $ 26.04 $25.00 $1.96 2,000,000 52,440 $ 27.11 $25.00 $7.24 750,000 74,340 $101.00 $99.12 $8.40 750,000 74,175 $101.00 $98.90 $8.38 750,000 73,566 $100.16 $98.09 $2.425 3,000,000 72,637 $ 25.00 $25.00 ---------- -------- 13,499,549 $504,957 ========== ========
-------- (1) Per share plus accrued and unpaid dividends, if any. The outstanding shares of $1.425 convertible preferred stock are convertible at the option of the holders thereof, at any time, into common stock at the rate of 1.02 shares of common stock for each share of convertible preferred stock, subject to future adjustment. The convertible preferred stock may 28 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED be redeemed by ComEd at $42 per share, plus accrued and unpaid dividends, if any. The involuntary liquidation price of the $1.425 convertible preferred stock is $31.80 per share, plus accrued and unpaid dividends, if any. (7) PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS During 1995 and 1994, no shares of preference stock subject to mandatory redemption requirements were issued. During 1993, 700,000 shares of preference stock subject to mandatory redemption requirements were issued. The series of preference stock subject to mandatory redemption requirements outstanding at December 31, 1995 are summarized as follows:
SHARES AGGREGATE SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(1) - -------------- ----------- ------------ -------------------------------------------------- (THOUSANDS OF DOLLARS) $8.20 249,990 $ 24,999 $103 through October 31, 1997; and $101 thereafter $8.40 Series B 360,000 35,758 $101 $8.85 300,000 30,000 $103 through July 31, 1998; and $101 thereafter $9.25 675,000 67,500 $103 through July 31, 1999; and $101 thereafter $9.00 650,000 64,431 Non-callable $6.875 700,000 69,475 Non-callable --------- -------- 2,934,990 $292,163 ========= ========
- -------- (1) Per share plus accrued and unpaid dividends, if any. The annual sinking fund requirements and sinking fund and involuntary liquidation prices per share of the outstanding series of preference stock subject to mandatory redemption requirements are summarized as follows:
SINKING ANNUAL SINKING FUND INVOLUNTARY SERIES FUND REQUIREMENT PRICE(1) LIQUIDATION PRICE(1) -------------- ----------------- -------- -------------------- $8.20 35,715 shares $100 $100.00 $8.40 Series B 30,000 shares(2) $100 $ 99.326 $8.85 37,500 shares $100 $100.00 $9.25 75,000 shares $100 $100.00 $9.00 130,000 shares(2) $100 $ 99.125 $6.875 (3) $100 $ 99.25
-------- (1) Per share plus accrued and unpaid dividends, if any. (2) ComEd has a non-cumulative option to increase the annual sinking fund payment on each sinking fund redemption date to retire an additional number of shares, not in excess of the sinking fund requirement, at the applicable redemption price. (3) All shares are required to be redeemed on May 1, 2000. Annual remaining sinking fund requirements through 2000 on preference stock outstanding at December 31, 1995 will aggregate $30,822,000 in each of 1996, 1997, 1998 and 1999, and $100,822,000 in 2000. During 1995, 1994 and 1993, 178,215 shares, 177,085 shares and 1,835,155 shares, respectively, of preference stock subject to mandatory redemption requirements were reacquired to meet sinking fund requirements. Sinking fund requirements due within one year are included in current liabilities. On June 28, 1993, ComEd redeemed the remaining 170,810 shares of its $2.875 Series of preference stock and all 1,050,000 shares of its $2.375 Series of preference stock, both at the optional redemption price of $25.25 per share, plus accrued and unpaid dividends. 29 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED On November 1, 1993, ComEd redeemed the remaining 75,000 shares of its $11.70 Series of preference stock (150,000 shares had been redeemed on August 1, 1993 at the optional redemption price of $105 per share, plus accrued and unpaid dividends). Of the remaining 75,000 shares, 37,500 shares were redeemed to meet the November 1, 1993 mandatory sinking fund requirement and 37,500 shares were redeemed as a permitted optional sinking fund payment, both at the sinking fund redemption price of $100 per share, plus accrued and unpaid dividends. On November 1, 1993, ComEd redeemed all 210,000 shares of its $9.30 Series of preference stock, of which 70,000 shares were redeemed at the optional redemption price of $101.03 per share, plus accrued and unpaid dividends, 70,000 shares were redeemed to meet the November 1, 1993 mandatory sinking fund requirement and 70,000 shares were redeemed as a permitted optional sinking fund payment, the latter two at the sinking fund redemption price of $100 per share, plus accrued and unpaid dividends. (8) COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF COMED FINANCING I In September 1995, ComEd Financing I (Trust), a wholly-owned subsidiary trust of ComEd, issued 8,000,000 of its 8.48% company-obligated mandatorily redeemable preferred securities. The sole asset of the Trust is $206.2 million principal amount of ComEd's 8.48% subordinated deferrable interest notes due September 30, 2035. There is a full and unconditional guarantee by ComEd of the Trust's obligations under the securities issued by the Trust. However, ComEd's obligations are subordinate and junior in right of payment to certain other indebtedness of ComEd. ComEd has the right to defer payments of interest on the subordinated deferrable interest notes by extending the interest payment period, at any time, for up to 20 consecutive quarters. If interest payments on the subordinated deferrable interest notes are so deferred, distributions on the preferred securities will also be deferred. During any deferral, distributions will continue to accrue with interest thereon. In addition, during any such deferral, ComEd may not declare or pay any dividend or other distribution on, or redeem or purchase, any of its capital stock. The subordinated deferrable interest notes are redeemable by ComEd (in whole or in part) from time to time, on or after September 30, 2000, or at any time in the event of certain income tax circumstances. If the subordinated deferrable interest notes are redeemed, the Trust must redeem preferred securities having an aggregate liquidation amount equal to the aggregate principal amount of the subordinated deferrable interest notes so redeemed. In the event of the dissolution, winding up or termination of the Trust, the holders of the preferred securities will be entitled to receive, for each preferred security, a liquidation amount of $25 plus accrued and unpaid distributions thereon (including interest thereon) to the date of payment, unless in connection with the dissolution, the subordinated deferrable interest notes are distributed to the holders of the preferred securities. (9) LONG-TERM DEBT Sinking fund requirements and scheduled maturities remaining through 2000 for first mortgage bonds, sinking fund debentures and other long-term debt outstanding at December 31, 1995, after deducting sinking fund debentures reacquired for satisfaction of future sinking fund requirements, are summarized as follows: 1996--$234,893,000; 1997--$689,168,000; 1998--$350,017,000; 1999-- $152,445,000; and 2000--$464,446,000. 30 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED At December 31, 1995, outstanding first mortgage bonds maturing through 2000 were as follows:
SERIES PRINCIPAL AMOUNT ------ ---------------------- (THOUSANDS OF DOLLARS) 5 1/4% due April 1, 1996.......................... $ 50,000 5 3/4% due November 1, 1996....................... 50,000 5 3/4% due December 1, 1996....................... 50,000 7% due February 1, 1997........................... 150,000 5 3/8% due April 1, 1997.......................... 50,000 6 1/4% due October 1, 1997........................ 60,000 6 1/4% due February 1, 1998....................... 50,000 6% due March 15, 1998............................. 130,000 6 3/4% due July 1, 1998........................... 50,000 6 3/8% due October 1, 1998........................ 75,000 9 3/8% due February 15, 2000...................... 125,000 6 1/2% due April 15, 2000......................... 230,000 6 3/8% due July 15, 2000.......................... 100,000 ---------- $1,170,000 ==========
Other long-term debt outstanding at December 31, 1995 is summarized as follows:
PRINCIPAL DEBT SECURITY AMOUNT INTEREST RATE - --------------------------------- ---------- ------------------------------------------------------- (THOUSANDS OF DOLLARS) Notes: Medium Term Notes, Series 1N due various dates through April 1, 1998 $ 50,500 Interest rates ranging from 9.40% to 9.65% Medium Term Note, Series 2N due July 1, 1996 10,000 Interest rate of 9.85% Medium Term Notes, Series 3N due various dates through October 15, 2004 322,250 Interest rates ranging from 8.92% to 9.20% Medium Term Notes, Series 4N due various dates through May 15, 1997 46,000 Interest rates ranging from 8.11% to 8.875% Notes due February 15, 1997 150,000 Interest rate of 7.00% Notes due July 15, 1997 100,000 Interest rate of 6.50% Notes due October 15, 2005 235,000 Interest rate of 6.40% ---------- $ 913,750 ---------- Long-Term Note Payable to Bank: Note due June 1, 1997 $ 150,000 Prevailing interest rate of 6.375% at December 31, 1995 ---------- Purchase Contract Obligations: Woodstock due January 2, 1997 $ 95 Interest rate of 4.50% Hinsdale due April 30, 2005 473 Interest rate of 3.00% ---------- $ 568 ---------- $1,064,318 ==========
Long-term debt maturing within one year has been included in current liabilities. The outstanding first mortgage bonds are secured by a lien on substantially all property and franchises, other than expressly excepted property, owned by ComEd. ComEd recorded an extraordinary loss of $33 million in the fourth quarter of 1995 related to the early redemption of $645 million of long-term debt which reduced net income by $20 million (after reflecting income tax effects of $13 million) or $0.09 per common share. 31 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (10) LINES OF CREDIT ComEd had total bank lines of credit of approximately $922 million and unused bank lines of credit of approximately $915 million at December 31, 1995. Of that amount, $915 million (of which $175 million expires on September 30, 1996, $72 million expires in equal quarterly installments commencing on December 31, 1996 and ending on September 30, 1998 and $668 million expires in equal quarterly installments commencing on December 31, 1997 and ending on September 30, 1999) may be borrowed on secured or unsecured notes of ComEd at various interest rates. The interest rate is set at the time of a borrowing and is based on several floating rate bank indices plus a spread which is dependent upon ComEd's credit ratings, or on a prime interest rate. Amounts under the remaining lines of credit may be borrowed at prevailing prime interest rates on unsecured notes of ComEd. Collateral, if required for the borrowings, would consist of first mortgage bonds issued under and in accordance with the provisions of ComEd's mortgage. ComEd is obligated to pay commitment fees with respect to $915 million of such lines of credit. (11) DISPOSAL OF SPENT NUCLEAR FUEL Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the selection and development of repositories for, and the disposal of, spent nuclear fuel and high-level radioactive waste. ComEd, as required by that Act, has signed a contract with the DOE to provide for the disposal of spent nuclear fuel and high-level radioactive waste from ComEd's nuclear generating stations beginning not later than January 1998; however, this delivery schedule is expected to be delayed significantly. The contract with the DOE requires ComEd to pay the DOE a one-time fee applicable to nuclear generation through April 6, 1983 of approximately $277 million, with interest to date of payment, and a fee payable quarterly equal to one mill per kilowatthour of nuclear-generated and sold electricity after April 6, 1983. As provided for under the contract, ComEd has elected to pay the one-time fee, with interest, just prior to the first delivery of spent nuclear fuel to the DOE. The liability for the one-time fee and the related interest is reflected in the Consolidated Balance Sheets. (12) FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of financial instruments either held or issued and outstanding. The disclosure of such information does not purport to be a market valuation of ComEd and subsidiary companies as a whole. The impact of any realized or unrealized gains or losses related to such financial instruments on the financial position or results of operations of ComEd and subsidiary companies is primarily dependent on the treatment authorized under future ratemaking proceedings. Investments. Securities included in the nuclear decommissioning funds have been classified and accounted for as "available for sale" securities. The estimated fair value of the nuclear decommissioning funds, as determined by the trustee and based on published market data, as of December 31, 1995 and 1994 was as follows:
DECEMBER 31, 1995 DECEMBER 31, 1994 -------------------------------- ---------------------------- UNREALIZED UNREALIZED COST GAINS FAIR COST BASIS GAINS FAIR VALUE BASIS (LOSSES) VALUE ---------- ---------- ---------- -------- ---------- -------- (THOUSANDS OF DOLLARS) Short-term investments.. $ 40,575 $ 283 $ 40,858 $ 65,203 $ 106 $ 65,309 U.S. Government and Agency issues.......... 156,745 17,636 174,381 94,450 (562) 93,888 Municipal bonds......... 496,707 34,970 531,677 478,074 (7,301) 470,773 Common stock............ 348,866 107,280 456,146 220,395 9,069 229,464 Other................... 29,757 4,708 34,465 18,788 2,722 21,510 ---------- -------- ---------- -------- ------- -------- $1,072,650 $164,877 $1,237,527 $876,910 $ 4,034 $880,944 ========== ======== ========== ======== ======= ========
32 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED At December 31, 1995, the debt securities held by the nuclear decommissioning funds had the following maturities:
FAIR COST BASIS VALUE ---------- -------- (THOUSANDS OF DOLLARS) Within 1 year......................................... $ 40,575 $ 40,858 1 through 5 years..................................... 73,996 76,978 5 through 10 years.................................... 229,132 247,521 Over 10 years......................................... 366,667 398,510
The net earnings of the nuclear decommissioning funds, which are recorded as increases to the accumulated provision for depreciation (only the realized portion prior to January 1, 1994), for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 ----------- --------- --------- (THOUSANDS OF DOLLARS) Gross proceeds from sales of securities.... $ 2,598,889 $ 811,368 $ 388,684 Less cost based on specific identification. (2,581,714) (811,997) (377,734) ----------- --------- --------- Realized gains (losses) on sales of securi- ties...................................... $ 17,175 $ (629) $ 10,950 Other realized fund earnings net of ex- penses.................................... 46,294 38,148 29,878 ----------- --------- --------- Total realized net earnings of the funds... $ 63,469 $ 37,519 $ 40,828 Unrealized gains (losses).................. 160,843 (57,948) 30,969 ----------- --------- --------- Total net earnings (losses) of the funds.. $ 224,312 $ (20,429) $ 71,797 =========== ========= =========
Current Assets. Cash, temporary cash investments and other cash investments, which include U.S. Government Obligations and other short-term marketable securities, and special deposits, which primarily includes cash deposited for the redemption, refund or discharge of debt securities, are stated at cost, which approximates their fair value because of the short maturity of these instruments. The securities included in these categories have been classified as "available for sale" securities. Capitalization. The estimated fair values of preferred and preference stocks, company-obligated mandatorily redeemable preferred securities of the Trust and long-term debt were obtained from an independent consultant. The estimated fair values, which include the current portions of redeemable preference stock and long-term debt but exclude accrued interest and dividends, as of December 31, 1995 and 1994 were as follows:
DECEMBER 31, 1995 DECEMBER 31, 1994 -------------------------------- --------------------------------- CARRYING UNREALIZED CARRYING UNREALIZED VALUE LOSSES FAIR VALUE VALUE (GAINS) FAIR VALUE ---------- ---------- ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS) Preferred and preference stocks................. $ 800,197 $ 14,769 $ 814,966 $ 818,111 $ (64,443) $ 753,668 Company-obligated mandatorily redeemable preferred securities of the Trust.............. $ 200,000 $ 6,000 $ 206,000 $ -- $ -- $ -- Long-term debt.......... $6,572,853 $470,175 $7,043,028 $7,448,236 $(450,429) $6,997,807
Long-term notes payable to banks, which are not included in the above table, amounted to $150 million and $400 million at December 31, 1995 and 1994, respectively. Such notes, for which interest is paid at prevailing rates, are included in the consolidated financial statements at cost, which approximates their fair value. Current Liabilities. The carrying value of notes payable, which consists of commercial paper and bank loans maturing within one year, approximates the fair value because of the short maturity of these instruments. See "Capitalization" above for a discussion of the fair value of the current portion of long-term debt and redeemable preference stock. 33 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED Other Noncurrent Liabilities. The carrying value of accrued spent nuclear fuel disposal fee and related interest represents the settlement value as of December 31, 1995 and 1994; therefore, the carrying value is equal to the fair value. (13) PENSION BENEFITS ComEd and the Indiana Company have non-contributory defined benefit pension plans which cover all regular employees. Benefits under these plans reflect each employee's compensation, years of service and age at retirement. During 1995, these plans were amended to more closely base retirement benefits on final pay. Funding is based upon actuarially determined contributions that take into account the amount deductible for income tax purposes and the minimum contribution required under the Employee Retirement Income Security Act of 1974, as amended. Actuarial valuations were determined as of January 1, 1995 and 1994. During 1994, the companies implemented an early retirement program for employees eligible to retire or who would become eligible to retire after December 31, 1993 and before April 1, 1995. A total of 679 employees accepted the program, resulting in the recognition of approximately $34 million of additional pension cost and an additional increase to the projected benefit obligation of that $34 million and $41 million of unrecognized net loss. The charge to income was approximately $20.5 million after reflecting income tax effects as a result of the program. The funded status of these plans at December 31, 1995 and 1994 was as follows:
DECEMBER 31 ------------------------ 1995 1994 ----------- ----------- (THOUSANDS OF DOLLARS) Actuarial present value of accumulated pension plan benefits: Vested benefit obligation.......................... $(2,839,000) $(2,105,000) Nonvested benefit obligation....................... (251,000) (359,000) ----------- ----------- Accumulated benefit obligation..................... $(3,090,000) $(2,464,000) Effect of projected future compensation levels..... (304,000) (485,000) ----------- ----------- Projected benefit obligation....................... $(3,394,000) $(2,949,000) Fair value of plan assets, invested primarily in U.S. Government, government-sponsored corporation and agency securities, fixed income funds, regis- tered investment companies, equity index funds and other equity funds................................. 3,060,000 2,547,000 ----------- ----------- Plan assets less than projected benefit obligation.. $ (334,000) $ (402,000) Unrecognized prior service cost..................... (73,000) 22,000 Unrecognized transition asset....................... (142,000) (155,000) Unrecognized net loss............................... 204,000 239,000 ----------- ----------- Accrued pension liability.......................... $ (345,000) $ (296,000) =========== ===========
The assumed discount rates were 7.5% and 8.0% at December 31, 1995 and 1994, respectively, and the assumed annual rate of increase in future compensation levels was 4.0%. These rates were used in determining the projected benefit obligations, the accumulated benefit obligations and the vested benefit obligations. Pension costs were determined under the rules prescribed by SFAS No. 87, including the use of the projected unit credit actuarial cost method and the following actuarial assumptions for the years 1995, 1994 and 1993:
1995 1994 1993 ----- ----- ----- Annual discount rate.......................................... 8.00% 7.50% 7.50% Annual rate of increase in future compensation levels......... 4.00% 4.00% 4.00% Annual long-term rate of return on plan assets................ 9.75% 9.50% 9.50%
34 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED The components of pension costs, portions of which were recorded as components of construction costs, for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 --------- --------- --------- (THOUSANDS OF DOLLARS) Service cost................................. $ 87,000 $ 97,000 $ 96,000 Interest cost on projected benefit obligation.................................. 225,000 213,000 204,000 Actual loss (return) on plan assets.......... (681,000) 37,000 (310,000) Early retirement program cost................ -- 34,000 -- Net amortization and deferral................ 418,000 (302,000) 61,000 --------- --------- --------- $ 49,000 $ 79,000 $ 51,000 ========= ========= =========
In addition, an employee savings and investment plan is available to certain eligible employees of ComEd, Cotter and the Indiana Company. During the fourth quarter of 1995, the employee savings and investment plan was amended for employees of ComEd, Cotter and the management employees of the Indiana Company. Each participating employee affected by the amendments may contribute up to 20% of such employee's base pay and the participating companies match such contribution equal to 100% of up to the first 2% of contributed base salary, 70% of the second 3% of contributed base salary and 25% of the last 1% of contributed base salary. During 1995, 1994 and 1993, the participating companies contributed $24,645,000, $22,750,000 and $21,948,000, respectively. (14) POSTRETIREMENT HEALTH CARE BENEFITS ComEd and the Indiana Company provide certain postretirement health care benefits for retirees and their dependents and for the surviving dependents of eligible employees and retirees. The employees become eligible for postretirement health care benefits when they reach age 55 with 10 years of service. The liability for postretirement health care benefits is funded through trust funds based upon actuarially determined contributions that take into account the amount deductible for income tax purposes. The postretirement health care plan for ComEd and the Indiana Company was amended, effective April 1, 1995. Prior to that date, the postretirement health care plan was fully funded by the companies. With respect to employees who retire on or after April 1, 1995, the plan is contributory, funded jointly by the companies and the participating employees. Actuarial valuations were determined as of January 1, 1995 and 1994. Postretirement health care costs in 1995 included $25 million related to a voluntary separation offer for union employees who accepted and left ComEd's employ by year-end 1995 combined with separation plans offered to selected groups of non-union employees. The funded status of the plan at December 31, 1995 and 1994 was as follows:
DECEMBER 31 ---------------------- 1995 1994 --------- ----------- (THOUSANDS OF DOLLARS) Actuarial present value of accumulated postretirement health care obligation: Retirees.............................................. $(457,000) $ (467,000) Active fully eligible participants.................... (25,000) (34,000) Other participants.................................... (418,000) (581,000) --------- ----------- Accumulated benefit obligation........................ $(900,000) $(1,082,000) Fair value of plan assets, invested primarily in S&P 500 common stocks and U.S. Government, government agency, municipal and listed corporate obligations........................................... 603,000 503,000 --------- ----------- Plan assets less than accumulated postretirement health care obligation....................................... $(297,000) $ (579,000) Unrecognized transition obligation..................... 374,000 531,000 Unrecognized net gain.................................. (285,000) (70,000) --------- ----------- Accrued liability for postretirement health care....... $(208,000) $ (118,000) ========= ===========
35 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED Different health care cost trends are used for pre-Medicare and post-Medicare expenses. Pre-Medicare trend rates were 14% for 1994 and 13.5% for the first three months of 1995, grading down in 0.5% annual increments to 5%. Post- Medicare trend rates were 11.5% for 1994 and 11% for the first three months of 1995, grading down in 0.5% annual increments to 5%. For the last nine months of 1995, pre-Medicare trend rates were 10%, grading down in 0.5% annual increments to 5%. Post-Medicare trend rates were 8% for the last nine months of 1995, grading down in 0.5% annual increments to 5%. The effect of a 1% increase in the assumed health care cost trend rates for each future year would increase the accumulated postretirement health care obligation at January 1, 1995 by approximately $161 million and increase the aggregate of the service and interest cost components of plan costs by approximately $20 million for the year 1995. The assumed discount rates were 7.5% and 8.0% at December 31, 1995 and 1994, respectively. The annual long-term rate of return on plan assets was 9.32% and 9.04% for the years 1995 and 1994, respectively, after including income tax effects. The components of postretirement health care costs, portions of which were recorded as components of construction costs, for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 --------- -------- -------- (THOUSANDS OF DOLLARS) Service cost.............................. $ 31,000 $ 47,000 $ 45,000 Interest cost on accumulated benefit obli- gation................................... 69,000 81,000 74,000 Actual loss (return) on plan assets....... (137,000) 9,000 (41,000) Amortization of transition obligation..... 23,000 29,000 29,000 Severance plan cost....................... 25,000 -- -- Other..................................... 83,000 (49,000) 9,000 --------- -------- -------- $ 94,000 $117,000 $116,000 ========= ======== ========
(15) SEPARATION PLAN COSTS Operation and maintenance expenses included $97 million for the year 1995 related to a voluntary separation offer for union employees who accepted and left ComEd's employ by year-end 1995 combined with separation plans offered to selected groups of non-union employees. These employee separation plans reduced net income by $59 million or $0.27 per common share for the year 1995. (16) INCOME TAXES The components of the net deferred income tax liability at December 31, 1995 and 1994 were as follows:
DECEMBER 31 ---------------------- 1995 1994 ---------- ---------- (THOUSANDS OF DOLLARS) Deferred income tax liabilities: Accelerated cost recovery and liberalized deprecia- tion, net of removal costs.......................... $3,379,987 $3,266,930 Overheads capitalized................................ 252,910 266,159 Repair allowance..................................... 219,585 210,655 Regulatory assets recoverable through future rates... 1,689,832 1,791,395 Deferred income tax assets: Postretirement benefits.............................. (235,353) (177,991) Unbilled revenues.................................... (116,274) (90,396) Loss carryforward.................................... -- (10,090) Alternative minimum tax.............................. (145,019) (283,331) Unamortized investment tax credits to be settled through future rates................................ (452,210) (471,058) Other regulatory liabilities to be settled through future rates........................................ (148,792) (179,755) Other--net........................................... (45,893) (58,999) ---------- ---------- Net deferred income tax liability..................... $4,398,773 $4,263,519 ========== ==========
36 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED The $135 million increase in the net deferred income tax liability from December 31, 1994 to December 31, 1995 is comprised of $187 million of deferred income tax expense and a $52 million decrease in regulatory assets net of regulatory liabilities pertaining to income taxes for the year. The amount of regulatory assets included in deferred income tax liabilities primarily relates to the equity component of AFUDC which is recorded on an after-tax basis, the borrowed funds component of AFUDC which was previously recorded net of tax and other temporary differences for which the related tax effects were not previously recorded. The amount of other regulatory liabilities included in deferred income tax assets primarily relates to deferred income taxes provided at rates in excess of the current statutory rate. The components of net income tax expense charged to continuing operations for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Electric operating income: Current income taxes........................... $344,221 $160,214 $(27,553) Deferred income taxes.......................... 188,008 169,307 123,383 Investment tax credits deferred--net........... (28,710) (28,757) (29,424) Other (income) and deductions................... (7,685) (23,062) (31,655) -------- -------- -------- Net income taxes charged to continuing opera- tions.......................................... $495,834 $277,702 $ 34,751 ======== ======== ========
Provisions for current and deferred federal and state income taxes and amortization of investment tax credits resulted in the following effective income tax rates for the years 1995, 1994 and 1993:
1995 1994 1993 ---------- -------- -------- Pre-tax book income (thousands)................. $1,233,010 $701,648 $137,453 Effective income tax rate....................... 40.2% 39.6% 25.3%
The principal differences between net income taxes charged to continuing operations and the amounts computed at the federal statutory rate of 35% for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Federal income taxes computed at statutory rate.. $431,554 $245,577 $ 48,109 Equity component of AFUDC which was excluded from taxable income.................................. (4,595) (7,920) (7,216) Amortization of investment tax credits........... (28,710) (28,810) (29,421) State income taxes, net of federal income taxes.. 65,972 40,140 13,138 Differences between book and tax accounting, pri- marily property-related deductions.............. 27,534 26,505 2,063 Other--net....................................... 4,079 2,210 8,078 -------- -------- -------- Net income taxes charged to continuing opera- tions........................................... $495,834 $277,702 $ 34,751 ======== ======== ========
Current federal income tax liabilities which were recorded prior to 1995 included excess amounts of AMT over the regular federal income tax, which amounts were also recorded as decreases to deferred federal income taxes. The excess amounts of AMT were carried forward and a portion was applied as a credit against the 1995 regular federal income tax liability. The excess amounts of AMT can be carried forward indefinitely as a credit against future years' regular federal income tax liabilities. 37 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED (17) TAXES, EXCEPT INCOME TAXES Provisions for taxes, except income taxes, for the years 1995, 1994 and 1993 were as follows:
1995 1994 1993 -------- -------- -------- (THOUSANDS OF DOLLARS) Illinois public utility revenue............... $229,546 $211,263 $199,498 Illinois invested capital..................... 106,830 109,373 111,126 Municipal utility gross receipts.............. 167,758 145,011 107,232 Real estate................................... 175,747 180,221 162,560 Municipal compensation........................ 78,602 72,647 56,878 Other--net.................................... 73,543 69,281 64,619 -------- -------- -------- $832,026 $787,796 $701,913 ======== ======== ========
(18) LEASE OBLIGATIONS Under its nuclear fuel lease arrangement, ComEd may sell and lease back nuclear fuel from a lessor who may borrow an aggregate of $700 million, consisting of $300 million of commercial paper or bank borrowings and $400 million of intermediate term notes, to finance the transactions. With respect to the commercial paper/bank borrowing portion, $20 million will expire on November 23, 1996, $10 million will expire on November 23, 1997 and $270 million will expire on November 23, 1998. ComEd has asked for an extension of the expiration dates. At December 31, 1995, ComEd's obligation to the lessor for leased nuclear fuel amounted to approximately $577 million. ComEd has agreed to make lease payments which cover the amortization of the nuclear fuel used in ComEd's reactors plus the lessor's related financing costs. ComEd has an obligation for spent nuclear fuel disposal costs of leased nuclear fuel. Future minimum rental payments, net of executory costs, at December 31, 1995 for capital leases are estimated to aggregate $647 million, including $231 million in 1996, $171 million in 1997, $112 million in 1998, $67 million in 1999, $37 million in 2000 and $29 million in 2001-2004. The estimated interest component of such rental payments aggregates $72 million. The estimated portions of obligations due within one year under capital leases are included in current liabilities and approximated $168 million and $147 million at December 31, 1995 and 1994, respectively. Future minimum rental payments at December 31, 1995 for operating leases are estimated to aggregate $141 million, including $9 million in 1996, $9 million in 1997, $9 million in 1998, $9 million in 1999, $8 million in 2000 and $97 million in 2001-2024. (19) INVESTMENTS IN URANIUM-RELATED PROPERTIES In May 1994, ComEd recorded a reduction in the carrying value of its investments in uranium-related properties after completing a review of various alternatives and reassessing the long-term recoverability of those investments. The effects of the reduction reduced 1994 net income by $34 million or $0.16 per common share. (20) JOINT PLANT OWNERSHIP ComEd has a 75% undivided ownership interest in the Quad-Cities nuclear generating station. Further, ComEd is responsible for 75% of all costs which are charged to appropriate investment, operation or maintenance accounts and provides its own financing. At December 31, 1995, for its share of ownership in the station, ComEd had an investment of $558 million in production and transmission 38 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED plant in service (before reduction of $185 million for the related accumulated provision for depreciation) and $75 million in construction work in progress. (21) COMMITMENTS AND CONTINGENT LIABILITIES Purchase commitments, principally related to construction and nuclear fuel, approximated $1,137 million at December 31, 1995. In addition, ComEd has substantial commitments for the purchase of coal. ComEd's coal costs are high compared to those of other utilities. ComEd's western coal contracts and its rail contracts for delivery of the western coal provide for the purchase of certain coal at prices substantially above currently prevailing market prices. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," subcaption "Liquidity and Capital Resources," for additional information regarding ComEd's purchase commitments. ComEd is a member of NML, established to provide insurance coverage against property damage to members' nuclear generating facilities. The members are subject to a retrospective premium adjustment in the event losses exceed accumulated reserve funds. Capital has been accumulated in the reserve funds of NML to the extent that ComEd would not be liable for a retrospective premium adjustment in the event of a single incident. However, ComEd could be subject to a maximum assessment of approximately $57 million in any policy year, in the event losses exceed accumulated reserve funds. ComEd also is a member of NEIL, which provides insurance coverage against the cost of replacement power obtained during certain prolonged accidental outages of nuclear generating units and coverage for property losses in excess of $500 million occurring at nuclear stations. All companies insured with NEIL are subject to retrospective premium adjustments if losses exceed accumulated reserve funds. Capital has been accumulated in the reserve funds of NEIL to the extent that ComEd would not be liable for a retrospective premium adjustment in the event of a single incident under the replacement power coverage and the property damage coverage. However, ComEd could be subject to maximum assessments, in any policy year, of approximately $27 million and $108 million in the event losses exceed accumulated reserve funds under the replacement power and property damage coverages, respectively. Under certain circumstances, member companies are eligible to continue to receive distributions from accumulated reserve funds, if declared by NML or NEIL, after insurance coverage has terminated on a nuclear generating station. ComEd expects that any such post-coverage distributions would begin about the time a station is decommissioned and continue for an undetermined period. ComEd's twelve operating nuclear units have estimated remaining service lives ranging from 10 to 32 years. Considering the circumstances related to the declaration of such distributions and the extended period over which such distributions may be declared, ComEd does not expect that any such distributions would have a material impact on its financial position or results of operations. The NRC's indemnity for public liability coverage under the Price-Anderson Act is supported by a mandatory industry-wide program under which owners of nuclear generating facilities could be assessed in the event of nuclear incidents. Based on the number of nuclear reactors with operating licenses, ComEd would currently be subject to a maximum assessment of $991 million in the event of an incident, limited to a maximum of $125 million in any calendar year. 39 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONTINUED In addition, ComEd participates in the American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters Master Worker Program which provides coverage for worker tort claims filed for bodily injury caused by the nuclear energy hazard. The coverage applies to workers whose "nuclear related employment" began after January 1, 1988. ComEd would currently be subject to a maximum assessment of approximately $36 million in the event losses exceed accumulated reserve funds. Shareholder derivative lawsuits were filed in 1992 and 1993 in the Circuit Court against current and former directors of ComEd alleging that they breached their fiduciary duty and duty of care to ComEd in connection with the management of the activities associated with the construction of ComEd's four most recently completed nuclear generating units. The lawsuits sought restitution to ComEd by the defendants for unquantified and undefined losses and costs alleged to have been incurred by ComEd. Both lawsuits were dismissed by the Circuit Court and that dismissal was affirmed by the Illinois Appellate Court. One of the plaintiffs has filed a petition for leave to appeal in the Illinois Supreme Court. During 1989 and 1991, actions were brought in federal and state courts in Colorado against ComEd and Cotter seeking unspecified damages and injunctive relief based on allegations that Cotter has permitted radioactive and other hazardous material to be released from its mill into areas owned or occupied by the plaintiffs resulting in property damage and potential adverse health effects. In February 1994, a federal jury returned nominal dollar verdicts on eight bellwether plaintiffs' claims in these cases. Plaintiffs have appealed those judgments. Although the remaining cases will necessarily involve the resolution of numerous contested issues of fact and law, ComEd's determination is that these actions will not have a material impact on its financial position or results of operations. ComEd is involved in administrative and legal proceedings concerning air quality, water quality and other matters. The outcome of these proceedings may require increases in future construction expenditures and operating expenses and changes in operating procedures. ComEd and its subsidiaries are or are likely to become parties to proceedings initiated by the U.S. EPA, state agencies and/or other responsible parties under CERCLA with respect to a number of sites, including MGP sites, or may voluntarily undertake to investigate and remediate sites for which they may be liable under CERCLA. ComEd generally did not operate MGPs as a corporate entity but did, however, acquire MGP sites as part of the absorption of smaller utilities and as vacant real estate on which ComEd facilities have been constructed. To date, ComEd has identified 44 former MGP sites for which it may be liable for remediation. ComEd presently estimates that its costs of former MGP site investigation and remediation will aggregate from $25 million to $150 million in current-year (1996) dollars. It is expected that the costs associated with investigation and remediation of former MGP sites will be incurred over a period of approximately 20 to 30 years. Because ComEd is not able to determine the most probable liability for such MGP costs, in accordance with accounting standards, a reserve of approximately $25 million was recorded as of December 31, 1995 and 1994, which reflects the low end of the range of ComEd's estimate of the liability associated with former MGP sites. In addition, as of December 31, 1995 and 1994, a reserve of $8 million was recorded representing ComEd's estimate of the liability associated with cleanup costs of remediation sites other than former MGP sites. ComEd presently estimates that its costs of investigating and remediating the former MGP and other remediation sites pursuant to CERCLA and state environmental laws will not have a material impact on its financial position or results of operations. These cost estimates are based on currently available information regarding the responsible parties likely to share in the costs of responding to site contamination, the extent of contamination at sites for which the investigation has not yet been completed and the cleanup levels to which sites are expected to have to be remediated. 40 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS--CONCLUDED (22) QUARTERLY FINANCIAL INFORMATION
NET INCOME AVERAGE EARNINGS (LOSS) NUMBER OF (LOSS) ELECTRIC ELECTRIC NET ON COMMON PER OPERATING OPERATING INCOME COMMON SHARES COMMON THREE MONTHS ENDED REVENUES INCOME (LOSS) STOCK OUTSTANDING SHARE - ------------------- ---------- --------- -------- -------- ----------- -------- (THOUSANDS EXCEPT PER SHARE DATA) March 31, 1994.......... $1,524,750 $213,458 $ 51,565 $ 36,020 213,780 $ 0.17 June 30, 1994........... $1,432,166 $185,297 $ (7,856) $(23,339) 213,923 $(0.11) September 30, 1994...... $1,855,532 $442,288 $283,608 $266,642 214,138 $ 1.25 December 31, 1994....... $1,465,073 $247,539 $ 96,629 $ 79,696 214,190 $ 0.37 March 31, 1995.......... $1,578,136 $262,149 $107,046 $ 90,138 214,191 $ 0.42 June 30, 1995........... $1,559,535 $278,230 $127,377 $110,512 214,192 $ 0.52 September 30, 1995...... $2,190,879 $583,819 $426,351 $409,677 214,193 $ 1.91 December 31, 1995....... $1,581,236 $221,266 $ 56,380 $ 36,866 214,195 $ 0.17
41 Commonwealth Edison Company One First National Plaza P.O. Box 767 Chicago, IL 60690-0767 [ComEd Logo] February 9, 1996 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Commonwealth Edison Company Commission File No. 1-1839 Ladies and Gentlemen: Submitted for filing under the Securities Exchange Act of 1934, as amended, is one copy of a Form 8-K Current Report relating to Commonwealth Edison Company. As stated in the Form 8-K Current Report, its purpose is to file certain financial information regarding Commonwealth Edison Company and its subsidiaries as of and for the year ended December 31, 1995. Sincerely, COMMONWEALTH EDISON COMPANY By: David A. Scholz ----------------------------------- David A. Scholz Secretary Enclosures -----END PRIVACY-ENHANCED MESSAGE-----