FORM U-3A-2
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
Statement by Holding Company Claiming
Exemption Under Rule 2 from the
Provisions of the Public Utility Holding
Company Act of 1935
Kansas Gas and Electric Company
Kansas Gas and Electric Company ("KG&E") hereby files with the
Securities and Exchange Commission, pursuant to Rule 2, its statement claiming
exemption as a holding company from the provisions of the Public Utility
Holding Company Act of 1935 (the "Act") by reason of the provisions of Section
3(a)(2) of the Act. In support of such claim for exemption the following
information is submitted:
1. KG&E is a Kansas corporation whose principal executive offices are
located at 120 East First, Wichita, Kansas 67202. KG&E's mailing address is
P.O. Box 208, Wichita, Kansas 67201. KG&E's principal business consists of
the generation, transmission, distribution and sale of electricity. KG&E is a
wholly-owned subsidiary of Western Resources, Inc., formerly The Kansas Power
and Light Company. KG&E's subsidiaries are as follows: Wolf Creek Nuclear
Operating Corporation ("WCNOC"), a Delaware corporation, was incorporated on
April 14, 1986, to operate and maintain Unit No. 1 of the Wolf Creek
Generating Station ("Wolf Creek"). WCNOC does not own, and is not expected to
own, any utility assets as defined in the Act. Wolf Creek and WCNOC are each
owned by KG&E and two non-affiliated electric utilities, Kansas City Power &
Light Company ("KCPL") and Kansas Electric Power Cooperative, Inc. ("KEPCo")
(collectively, the "Wolf Creek Owners"), in the following percentages: KG&E,
47%; KCPL, 47%; and KEPCo, 6%.
KG&E provides electric services to customers in the southeastern portion
of Kansas, including the Wichita metropolitan area. At December 31, 1994, it
rendered electric services at retail to approximately 272,000 residential,
commercial and industrial customers and provides wholesale electric generation
and transmission services to numerous municipal customers located in Kansas,
and through interchange agreements, to surrounding integrated systems.
Neither KG&E nor any subsidiary of KG&E owns or operates any gas properties.
2. The principal electric generating stations of KG&E, all of which
are located in Kansas, are as follows:
Accredited
Capacity - MW
Name and Location (KG&E's Share)
Nuclear
Wolf Creek, near Burlington ........... 545
Coal
LaCygne Unit 1, near LaCygne .......... 343
LaCygne Unit 2, near LaCygne .......... 335
JEC Unit 1, near St. Mary's ........... 140
JEC Unit 2, near St. Mary's ........... 143
JEC Unit 3, near St. Mary's ........... 140
Subtotal .................... 1,101
Gas/Oil
Gordon Evans, Wichita ................. 517
Murray Gill, Wichita .................. 332
Subtotal .................... 849
Diesel
Wichita, Wichita ...................... 3
Total Accredited Capacity 2,498 MW
KG&E maintains 17 interconnections with other public utilities to permit
direct extra-high voltage interchange. It is a member of the MOKAN Power Pool
consisting of eleven utilities in Kansas and western Missouri. KG&E is also a
member of the Southwest Power Pool, the regional coordinating council for
electric utilities throughout the south-central United States.
KG&E owns a transmission and distribution system which enables it to
supply its service area. Transmission and distribution lines, in general, are
located by permit or easement on public roads and streets or the lands of
others. All such transmission and distribution systems are located within the
State of Kansas.
3(a). For the year ended December 31, 1994, KG&E sold 7,867,868,000 Kwh
of electric energy at retail and 1,589,974,000 Kwh of electric energy at
wholesale. All of KG&E's sales were within the Sate of Kansas. WCNOC
operates and maintains Wolf Creek on behalf of the Wolf Creek Owners and does
not engage in the sale of electricity. During 1994 neither KG&E or its
subsidiaries distributed or sold any natural or manufactured gas at retail.
(b) and (c). During 1994 KG&E sold, at wholesale, 802,195,000 Kwh of
electric energy to adjoining public utilities through interconnections at the
Kansas state line. During 1994, neither KG&E or its subsidiaries distributed
or sold electric energy at retail outside the State of Kansas. During 1994,
neither KG&E or its subsidiaries distributed or sold natural gas outside the
State of Kansas or at the Kansas state line.
(d) During 1994, KG&E purchased 302,079,000 Kwh of electric energy
from outside the State of Kansas or at the Kansas state line. During 1994,
neither KG&E or any of its subsidiaries engaged in the purchase for resale of
natural or manufactured gas inside or outside the State of Kansas.
4. Neither KG&E nor WCNOC hold, directly or indirectly, any interest in
an EWG or a foreign company.
KG&E hereby reserves the right to assert that WCNOC is not a Public
Utility for purposes of the Act, and that KG&E is not, by virtue of its
ownership interest in WCNOC, required to seek or file an exemption under the
Act as a public utility holding Company. KG&E makes this filing at this time
in order to preserve all rights it may have under the Act.
The above-named claimant has caused this statement to be duly executed
on its behalf by its authorized officer on this 27th day of February, 1995.
KANSAS GAS AND ELECTRIC COMPANY
By: Richard. D Terrill
Richard D. Terrill
Secretary, Treasurer and
General Counsel
Corporate Seal
Name, title and address of officer to whom notices and correspondence
concerning this statement should be addressed:
Richard D. Terrill
Secretary, Treasurer and General Counsel
Kansas Gas and Electric Company
c/o Western Resources, Inc.
P.O. Box 889
818 Kansas Avenue
Topeka, Kansas 66601
EXHIBIT A
A consolidating statement of income and surplus of the claimant and its
subsidiary companies for the last calendar year, together with a consolidating
balance sheet of claimant and its subsidiary companies as of the close of such
calendar year:
Statements of income and surplus and balance sheets of KG&E are
attached.
In conformance with prior discussions with the Commission's staff these
financial statements are not consolidating financial statements and financial
statements of WCNOC are omitted because:
WCNOC is the operating agent for the Wolf Creek Generating Station
and is owned 47% by KG&E. KG&E's $47 investment in WCNOC is
carried in Other Property and Investment - Other on the balance
sheet. All assets of the Wolf Creek Generating Station are owned
by KG&E, KCPL and KEPCo, the "Owners". WCNOC operates solely as
an agent of the Owners, and therefore, KG&E classifies, in its
financial statements, the payables, expenses and receipts (if any)
incurred by WCNOC as if such items had been incurred by KG&E.
WCNOC has no revenue or income. Payment for expenses are made
from checking accounts owned and funded by the Owners.
Exhibit A
KANSAS GAS AND ELECTRIC COMPANY
CONSOLIDATING BALANCE SHEET
(Dollars in Thousands)
December 31,
1994
ASSETS
UTILITY PLANT:
Electric plant in service (Notes 1, 6, and 12). . . . . . . . . $3,390,406
Less - Accumulated depreciation . . . . . . . . . . . . . . . . 833,953
2,556,453
Construction work in progress . . . . . . . . . . . . . . . . . 32,874
Nuclear fuel (net). . . . . . . . . . . . . . . . . . . . . . . 39,890
Net utility plant . . . . . . . . . . . . . . . . . . . . . . 2,629,217
OTHER PROPERTY AND INVESTMENTS:
Decommissioning trust (Note 3). . . . . . . . . . . . . . . . . 16,944
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,561
28,505
CURRENT ASSETS:
Cash and cash equivalents (Note 2). . . . . . . . . . . . . . . 47
Accounts receivable and unbilled revenues (net)(Note 6) . . . . 67,833
Advances to parent company (Note 14). . . . . . . . . . . . . . 64,393
Fossil fuel, at average cost, . . . . . . . . . . . . . . . . . 13,752
Materials and supplies, at average cost . . . . . . . . . . . . 30,921
Prepayments and other current assets. . . . . . . . . . . . . . 16,662
193,608
DEFERRED CHARGES AND OTHER ASSETS:
Deferred future income taxes (Note 9) . . . . . . . . . . . . . 102,789
Deferred coal contract settlement costs (Note 4). . . . . . . . 17,944
Phase-in revenues (Note 4). . . . . . . . . . . . . . . . . . . 61,406
Other deferred plant costs. . . . . . . . . . . . . . . . . . . 31,784
Corporate-owned life insurance (net) (Note 2) . . . . . . . . . 9,350
Unamortized debt expense. . . . . . . . . . . . . . . . . . . . 27,777
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,430
291,480
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $3,142,810
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see statement). . . . . . . . . . . . . . . . . . $1,925,196
CURRENT LIABILITIES:
Short-term debt (Note 5). . . . . . . . . . . . . . . . . . . . 50,000
Long-term debt due within one year (Note 6) . . . . . . . . . . -
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . 49,093
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . 15,737
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . 8,337
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,160
134,327
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes (Notes 1 and 9) . . . . . . . . . . . . . 689,169
Deferred investment tax credits (Note 9). . . . . . . . . . . . 74,841
Deferred gain from sale-leaseback (Note 7). . . . . . . . . . . 252,341
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,936
1,083,287
COMMITMENTS AND CONTINGENCIES (Notes 3 and 10)
TOTAL CAPITALIZATION AND LIABILITIES . . . . . . . . . . . . $3,142,810
Exhibit A
KANSAS GAS AND ELECTRIC COMPANY
CONSOLIDATING STATEMENT OF INCOME
(Dollars in Thousands)
Year Ended
December 31,
1994
OPERATING REVENUES (Notes 2 and 4). . . . . . . . . . . . . $ 619,880
OPERATING EXPENSES:
Fuel used for generation:
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . 90,383
Nuclear fuel. . . . . . . . . . . . . . . . . . . . . . 13,562
Power purchased . . . . . . . . . . . . . . . . . . . . . 7,144
Other operations. . . . . . . . . . . . . . . . . . . . . 115,060
Maintenance . . . . . . . . . . . . . . . . . . . . . . . 47,988
Depreciation and amortization . . . . . . . . . . . . . . 71,457
Amortization of phase-in revenues . . . . . . . . . . . . 17,544
Taxes (see statement):
Federal income. . . . . . . . . . . . . . . . . . . . . 50,212
State income . . . . . . . . . . . . . . . . . . . . . 12,427
General . . . . . . . . . . . . . . . . . . . . . . . . 45,092
Total operating expenses. . . . . . . . . . . . . . . 470,869
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . 149,011
OTHER INCOME AND DEDUCTIONS:
Corporate-owned life insurance (net). . . . . . . . . . . (5,354)
Miscellaneous (net) . . . . . . . . . . . . . . . . . . . 5,079
Income taxes (net) (see statement). . . . . . . . . . . . 7,290
Total other income and deductions . . . . . . . . . . 7,015
INCOME BEFORE INTEREST CHARGES. . . . . . . . . . . . . . . 156,026
INTEREST CHARGES:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 47,827
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 5,183
Allowance for borrowed funds used
during construction (credit). . . . . . . . . . . . . . (1,510)
Total interest charges. . . . . . . . . . . . . . . . 51,500
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . 104,526
Exhibit A
KANSAS GAS AND ELECTRIC COMPANY
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
December 31, 1994
(Dollars in Thousands)
Kansas Gas
and
Electric
BALANCE AT BEGINNING OF PERIOD. . . . . . . . . . . . . . $ 180,044
ADD:
Net income. . . . . . . . . . . . . . . . . . . . . . . 104,526
Total . . . . . . . . . . . . . . . . . . . . . . . . 284,570
DEDUCT:
Cash dividends:
Common stock. . . . . . . . . . . . . . . . . . . . . . 125,000
Total . . . . . . . . . . . . . . . . . . . . . . . . 125,000
BALANCE AT END OF PERIOD. . . . . . . . . . . . . . . . . $ 159,570
KANSAS GAS AND ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
1. ACQUISITION AND MERGER
On March 31, 1992, Western Resources, Inc. (formerly The Kansas Power and
Light Company) (Western Resources) through its wholly-owned subsidiary KCA
Corporation (KCA), acquired all of the outstanding common and preferred stock
of Kansas Gas and Electric Company (KG&E) for $454 million in cash and
23,479,380 shares of Western Resources common stock (the Merger). Western
Resources also paid $20 million in costs to complete the Merger. The total
cost of the acquisition to Western Resources was $1.066 billion.
Simultaneously, KCA and KG&E merged and adopted the name of Kansas Gas and
Electric Company. The Merger was accounted for as a purchase. For income tax
purposes the tax basis of the Company's assets was not changed by the Merger.
In the accompanying statements, KG&E prior to the Merger is labeled as the
"Predecessor" and after the Merger as the "Successor". Throughout the notes
to financial statements, the "Company, KG&E" refers to both Predecessor and
Successor.
As Western Resources acquired 100% of the common and preferred stock of
KG&E, the Company recorded an acquisition premium of $490 million on the
balance sheet for the difference in purchase price and book value and
increased common stock equity to reflect the new cost basis of Western
Resources' investment in the Company. This acquisition premium and related
income tax requirement of $311 million under Statement of Financial Accounting
Standards No. 109 (SFAS 109) have been classified as plant acquisition
adjustment in electric plant in service on the balance sheets. Under the
provisions of the order of the Kansas Corporation Commission (KCC), the
acquisition premium is recorded as an acquisition adjustment and not allocated
to the other assets and liabilities of the Company.
The pro forma information for the year ended December 31, 1992 in the
accompanying financial statements gives effect to the Merger as if it occurred
on January 1, 1992, and was derived by combining the historical information
for the three month period ended March 31, 1992 and the nine month period
ended December 31, 1992. No purchase accounting adjustments were made for
periods prior to the Merger in determining pro forma amounts, other than the
elimination of preferred dividends, because such adjustments would be
immaterial. This pro forma information is not necessarily indicative of the
results of operations that would have occurred had the Merger been consummated
on January 1, 1992, nor is it necessarily indicative of future operating
results or financial position.
In the November 1991 KCC order approving the Merger, a mechanism was
approved to share equally between the shareholders and ratepayers the cost
savings generated by the Merger in excess of the revenue requirement needed to
allow recovery of the amortization of a portion of the acquisition adjustment,
including income tax, calculated on the basis of a purchase price of KG&E's
common stock at $29.50 per share. The order provides an amortization period
for the acquisition adjustment of 40 years commencing in August 1995, at which
time the full amount of cost savings is expected to have been implemented.
Merger savings will be measured by application of an inflation index to
certain pre-merger operating and maintenance costs at the time of the next
Kansas rate case. While Western Resources and the Company (combined
companies) have achieved savings from the Merger, there is no assurance that
the savings achieved will be sufficient to, or the cost savings sharing
mechanism will operate as to fully offset the amortization of the acquisition
adjustment. The order further provides a moratorium on increases, with
certain exceptions, in the Company's Kansas electric rates until August 1995.
The KCC ordered refunds totalling $32 million to the combined companies'
customers to share with customers the Merger-related cost savings achieved
during the moratorium period. Refunds of approximately $4.9 million for the
Company were made in April 1992 and December 1993 and the remaining refund of
approximately $8.7 million was made in September 1994.
The KCC order approving the Merger required the legal reorganization of
the Company so that it was no longer held as a separate subsidiary after
January 1, 1995, unless good cause was shown why such separate existence
should be maintained. The Securities and Exchange Commission order relating
to the Merger granted Western Resources an exemption under the Public Utility
Holding Company Act (PUHCA) until January 1, 1995. Western Resources has been
granted regulatory approval from the KCC which eliminates the requirement for
a combination. As result of the sales of Western Resources' Missouri
Properties, Western Resources is now exempt from regulation as a holding
company under Section 3(a)(1) of the PUHCA.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General: The financial statements of KG&E include, through March 31,
1992, its 80% owned subsidiary, CIC Systems, Inc. (CIC). In April 1992, the
Company disposed of its 80% interest in CIC. KG&E owns 47 percent of Wolf
Creek Nuclear Operating Corporation (WCNOC), the operating company for Wolf
Creek Generating Station (Wolf Creek). The Company records its proportionate
share of all transactions of WCNOC as it does other jointly-owned facilities.
The accounting policies of the Company are in accordance with generally
accepted accounting principles as applied to regulated public utilities. The
accounting and rates of the Company are subject to requirements of the KCC and
the Federal Energy Regulatory Commission (FERC).
Utility Plant: Utility plant (including plant acquisition adjustment) is
stated at cost. For constructed plant, cost includes contracted services,
direct labor and materials, indirect charges for engineering, supervision,
general and administrative costs, and an allowance for funds used during
construction (AFUDC). The AFUDC rate was 4.07% for 1994, 4.41% for 1993,
6.51% for the nine months ended December 31, 1992, and 6.70% for the three
months ended March 31, 1992. The cost of additions to utility plant and
replacement units of property is capitalized. Maintenance costs and
replacement of minor items of property are charged to expense as incurred.
When units of depreciable property are retired, they are removed from the
plant accounts and the original cost plus removal charges less salvage are
charged to accumulated depreciation.
Depreciation: Depreciation is provided on the straight-line method based
on estimated useful lives of property. Composite provisions for book
depreciation approximated 2.7% during 1994, 2.9% during 1993, 2.9% during the
nine months ended December 31, 1992, and 3.0% during the three months ended
March 31, 1992 of the average original cost of depreciable property.
Cash and Cash Equivalents: For purposes of the Statements of Cash Flows,
cash and cash equivalents include cash on hand and highly liquid
collateralized debt instruments purchased with maturities of three months or
less.
Income Taxes: Income tax expense includes provisions for income taxes
currently payable and deferred income taxes calculated in conformance with
income tax laws, regulatory orders and Statement of Financial Accounting
Standards No. 109 (SFAS 109) (see Note 9).
Investment tax credits previously deferred are being amortized to income
over the life of the property which gave rise to the credits.
Revenues: Operating revenues include amounts actually billed for
services rendered and an accrual of estimated unbilled revenues. Unbilled
revenues represent the estimated amount customers will be billed for service
provided from the time meters were last read to the end of the accounting
period. Unbilled revenues of $21.4 and $22.3 million at December 31, 1994 and
1993, respectively, are recorded as a component of accounts receivable on the
balance sheets. At December 31, 1993, certain amounts of unbilled revenues
were sold (see Note 6).
The Company had reserves for doubtful accounts receivable of $1.9 and
$3.0 million at December 31, 1994 and 1993, respectively.
Fuel Costs: The cost of nuclear fuel in process of refinement,
conversion, enrichment, and fabrication is recorded as an asset at original
cost and is amortized to expense based upon the quantity of heat produced for
the generation of electricity. The accumulated amortization of nuclear fuel
in the reactor at December 31, 1994 and 1993, was $13.6 and $17.4 million,
respectively.
Cash Surrender Value of Life Insurance Contracts: The following amounts
related to corporate-owned life insurance contracts (COLI), primarily with one
highly rated major insurance company, are recorded on the balance sheets
(millions of dollars):
1994 1993
Cash surrender value of contracts. . . $320.6 $269.0
Borrowings against contracts . . . . . 311.2 (269.0)
COLI (net) . . . . . . . . . . . . $ 9.4 $ 0.0
The COLI borrowings will be repaid upon receipt of proceeds from death
benefits under contracts. The Company recognizes increases in the cash
surrender value of contracts, resulting from premiums and investment earnings
on a tax free basis, and the tax deductible interest on the COLI borrowings in
Corporate-owned Life Insurance (net) on the Statements of Income. Interest
expense included in corporate-owned life insurance (net) on the statements of
income was $21.0 million for 1994, $11.9 million for 1993, $5.3 million for
the nine months ended December 31, 1992, and $1.9 million for the three months
ended March 31, 1992.
Reclassifications: Certain amounts in prior years have been reclassified
to conform with classifications used in the current year presentation.
3. COMMITMENTS AND CONTINGENCIES
Manufactured Gas Sites: The Company was previously associated with six
former manufactured gas sites which contain coal tar and other potentially
harmful materials. The Company and the Kansas Department of Health and
Environment (KDHE) conducted preliminary assessments of these sites at minimal
cost. The results of the preliminary investigations determined the Company
does not have a connection to two of the sites.
The Company and KDHE entered into a consent agreement governing all
future work at the four remaining sites. The terms of the consent agreement
will allow the Company to investigate these sites and set remediation
priorities based upon the results of the investigations and risk analysis.
The prioritized sites will be investigated over a 10 year period. The
agreement will allow the Company to set mutual objectives with the KDHE in
order to expedite effective response activities and to control costs and
environmental impact. The Company is aware of other utilities in Region VII
of the EPA (Kansas, Missouri, Nebraska, and Iowa) which have incurred
remediation costs for such sites ranging between $500,000 and $10 million,
depending on the site and that the KCC has permitted another Kansas utility to
recover its remediation costs through rates. To the extent that such
remediation costs are not recovered through rates, the costs could be material
to the Company's financial position or results of operations depending on the
degree of remediation and number of years over which the remediation must be
completed.
Spent Nuclear Fuel Disposal: Under the Nuclear Waste Policy Act of 1982,
the U.S. Department of Energy (DOE) is responsible for the ultimate storage
and disposal of spent nuclear fuel removed from nuclear reactors. Under a
contract with the DOE for disposal of spent nuclear fuel, the Company pays a
quarterly fee to DOE of one mill per kilowatthour on net nuclear generation.
These fees are included as part of nuclear fuel expense and amounted to $3.8
million for 1994, $3.5 million for 1993, $1.6 million for the nine months
ended December 31, 1992, and $.5 million for the three months ended March 31,
1992.
The Company along with the other co-owners of Wolf Creek are among 14
companies that filed a lawsuit on June 20, 1994, seeking an interpretation of
the DOE's obligation to begin accepting spent nuclear fuel for disposal in
1998. The Federal Nuclear Waste Policy Act requires DOE ultimately to accept
and dispose of nuclear utilities' spent fuel. The DOE has filed a motion to
have this case dismissed. The issue to be decided in this case is whether DOE
must begin accepting spent fuel in 1998 or at a future date. Wolf Creek
contains an on-site spent fuel storage facility which, under current
regulatory guidelines, provides space for the storage of spent fuel through
the year 2006 while still maintaining full core off-load capability. The
Company believes adequate additional storage space can be obtained as
necessary.
Decommissioning: On June 9, 1994, the KCC issued an order approving the
decommissioning cost of the 1993 Wolf Creek Decommissioning Cost Study which
estimates the Company's share of Wolf Creek decommissioning costs, under the
immediate dismantlement method, to be approximately $595 million primarily
during the period from 2025 through 2033, or approximately $174 million in
1993 dollars. These costs were calculated using an assumed inflation rate of
3.45% over the remaining service life, in 1993, of 32 years.
Decommissioning costs are being charged to operating expenses in
accordance with the KCC order. Electric rates charged to customers provide
for recovery of these decommissioning costs over the life of Wolf Creek.
Amounts so expensed ($3.5 million in 1994 increasing annually to $5.5 million
in 2024) and earnings on trust fund assets are deposited in an external trust
fund. The assumed return on trust assets is 5.9%.
The Company's investment in the decommissioning fund, including
reinvested earnings was $16.9 million and $13.2 million at December 31, 1994
and December 31, 1993, respectively. These amounts are reflected in
Decommissioning Trust, and the related liability is included in Deferred
Credits and Other Liabilities, Other, on the Balance Sheets.
The Company carries $118 million in premature decommissioning insurance.
The insurance coverage has several restrictions. One of these is that it can
only be used if Wolf Creek incurs an accident exceeding $500 million in
expenses to safely stabilize the reactor, to decontaminate the reactor and
reactor station site in accordance with a plan approved by the Nuclear
Regulatory Commission (NRC), and to pay for on-site property damages. If the
amount designated as decommissioning insurance is needed to implement the
NRC-approved plan for stabilization and decontamination, it would not be
available for decommissioning purposes.
Nuclear Insurance: The Price-Anderson Act limits the combined public
liability of the owners of nuclear power plants to $8.9 billion for a single
nuclear incident. The Wolf Creek owners (Owners) have purchased the maximum
available private insurance of $200 million and the balance is provided by an
assessment plan mandated by the NRC. Under this plan, the Owners are jointly
and severally subject to a retrospective assessment of up to $79.3 million
($37.3 million, Company's share) in the event there is a major nuclear
incident involving any of the nation's licensed reactors. This assessment is
subject to an inflation adjustment based on the Consumer Price Index and
applicable premium taxes. There is a limitation of $10 million ($4.7 million,
Company's share) in retrospective assessments per incident per year.
The Owners carry decontamination liability, premature decommissioning
liability, and property damage insurance for Wolf Creek totalling
approximately $2.8 billion ($1.3 billion, Company's share). This insurance is
provided by a combination of "nuclear insurance pools" ($500 million) and
Nuclear Electric Insurance Limited (NEIL) ($2.3 billion). In the event of an
accident, insurance proceeds must first be used for reactor stabilization and
site decontamination. The Company's share of any remaining proceeds can be
used for property damage up to $1.2 billion (Company's share) and premature
decommissioning costs up to $118 million (Company's share) in excess of funds
previously collected for decommissioning (as discussed under
"Decommissioning").
The Owners also carry additional insurance with NEIL to cover costs of
replacement power and other extra expenses incurred during a prolonged outage
resulting from accidental property damage at Wolf Creek. If losses incurred
at any of the nuclear plants insured under the NEIL policies exceed premiums,
reserves, and other NEIL resources, the Company may be subject to
retrospective assessments of approximately $13 million per year.
Although the Company maintains various insurance policies to provide
coverage for potential losses or liabilities resulting from an accident or
extended outage, the Company's insurance coverage may not be adequate to cover
the costs that could result from a major accident or extended outage at Wolf
Creek. Any substantial losses not covered by insurance, to the extent not
recoverable through rates, would have a material adverse effect on the
Company's financial position and results of operations.
Clean Air Act: The Clean Air Act Amendments of 1990 (the Act) require a
two-phase reduction in sulfur dioxide and oxides of nitrogen (NOx) emissions
effective in 1995 and 2000 and a probable reduction in toxic emissions. To
meet the monitoring and reporting requirements under the acid rain program,
the Company installed continuous monitoring and reporting equipment at a total
cost of approximately $2.3 million. The Company does not expect additional
equipment to reduce sulfur emissions to be necessary under Phase II. Although
the Company currently has no Phase I affected units, the Company applied for
an early substitution permit to bring the co-owned La Cygne Station under the
Phase I guidelines.
The NOx and air toxic limits, which were not set in the law, will be
specified in future EPA regulations. The EPA's proposed NOx regulations were
ruled invalid by the Court and until such time as the EPA resubmits new
proposed regulations, the Company will be unable to determine its compliance
options or related compliance costs.
Federal Income Taxes: During 1991, the Internal Revenue Service (IRS)
completed an examination of the Company's federal income tax returns for the
years 1984 through 1988. In April 1992, the Company received the examination
report and upon review filed a written protest in August 1992. In October
1993, the Company received another examination report for the years 1989 and
1990 covering the same issues identified in the previous examination report.
Upon review of this report, the Company filed a written protest in November
1993. The most significant proposed adjustments reduce the depreciable basis
of certain assets and investment tax credits generated. Management believes
there are significant questions regarding the theory, computations, and
sampling techniques used by the IRS to arrive at its proposed adjustments, and
also believes any additional tax expense incurred or loss of investment tax
credits will not be material to the Company's financial position and results
of operations. Additional income tax payments, if any, are expected to be
offset by investment tax credit carryforwards, alternative minimum tax credit
carryforwards, or deferred tax provisions.
Fuel Commitments: To supply a portion of the fuel requirements for its
generating plants, the Company has entered into various commitments to obtain
nuclear fuel, coal, and natural gas. Some of these contracts contain
provisions for price escalation and minimum purchase commitments. At
December 31, 1994, WCNOC's nuclear fuel commitments (Company's share) were
approximately $12.6 million for uranium concentrates expiring at various times
through 1997, $122.9 million for enrichment expiring at various times through
2014, and $56.5 million for fabrication through 2012. At December 31, 1994,
the Company's coal and natural gas contract commitments in 1994 dollars under
the remaining term of the contracts are $721 million and $9 million,
respectively. The largest coal contract was renegotiated in early 1993 and
expires in 2020 with the remaining coal contracts expiring at various times
through 2013. The majority of natural gas contracts expire in 1995 with
automatic one-year extension provisions. In the normal course of business,
additional commitments and spot market purchases will be made to obtain
adequate fuel supplies.
Energy Act: As part of the 1992 Energy Policy Act, a special assessment
is being collected from utilities for a uranium enrichment decontamination and
decommissioning fund. The Company's portion of the assessment for Wolf Creek
is approximately $7 million, payable over 15 years. Management expects such
costs to be recovered through the ratemaking process.
4. RATE MATTERS AND REGULATION
Elimination of the Energy Cost Adjustment Clause (ECA): On March 26,
1992, in connection with the Merger, the KCC approved the elimination of the
ECA for most retail customers effective April 1, 1992. The provisions for
fuel costs included in base rates were established at a level intended by the
KCC to equal the projected average cost of fuel through August 1995, and to
include recovery of costs provided by previously issued orders relating to
coal contract settlements and storm damage recovery discussed below. Any
increase or decrease in fuel costs from the projected average will impact the
Company's earnings.
Rate Stabilization Plan: In 1988, the KCC issued an order requiring that
the accrual of phase-in revenues be discontinued effective December 31, 1988.
Effective January 1, 1989, the Company began amortizing the phase-in revenue
asset on a straight-line basis over 9-1/2 years. At December 31, 1994
approximately $61 million of deferred phase-in revenues remained on the
Balance Sheet.
Coal Contract Settlements: In March 1990, the KCC issued an order
allowing the Company to defer its share of a 1989 coal contract settlement
with the Pittsburg and Midway Coal Mining Company amounting to $22.5 million.
This amount was recorded as a deferred charge on the balance sheets. The
settlement resulted in the termination of a long-term coal contract. The KCC
permitted the Company to recover this settlement as follows: 76% of the
settlement plus a return over the remaining term of the terminated contract
(through 2002) and 24% to be amortized to expense with a deferred return
equivalent to the carrying cost of the asset. Approximately $18 million of
this deferral remains on the balance sheet at December 31, 1994.
In February 1991, the Company paid $8.5 million to settle a coal contract
lawsuit with AMAX Coal Company and recorded the payment as a deferred charge
on the Company's Balance Sheet. In July 1991, the KCC approved the recovery
of the settlement plus a return equivalent to the carrying cost of the asset,
over the remaining term of the terminated contract (through 1996).
5. SHORT-TERM BORROWINGS
The Company's short-term financing requirements are satisfied through
short-term bank loans and uncommitted loan participation agreements. Maximum
short-term borrowings outstanding during 1994 and 1993 were $172.3 million on
January 4, 1994 and $175.8 million on December 14, 1993. The weighted average
interest rates, including fees, were 4.5% for 1994, 3.5% for 1993, 6.4% for
the nine months ended December 31, 1992, and 7.1% for the three months ended
March 31, 1992.
6. LONG-TERM DEBT
The amount of first mortgage bonds authorized by the KG&E Mortgage and
Deed of Trust (Mortgage) dated April 1, 1940, as supplemented, is limited to a
maximum of $2 billion. Amounts of additional bonds which may be issued are
subject to property, earnings, and certain restrictive provisions of the
Mortgage. Electric plant is subject to the lien of the Mortgage except for
transportation equipment.
Debt discount and expenses are being amortized over the remaining lives
of each issue. The improvement and maintenance fund requirements for certain
first mortgage bond series can be met by bonding additional property. The
sinking fund requirements for certain pollution control series bonds can be
met only through the acquisition and retirement of outstanding bonds.
On November 1, 1994, the Company terminated a long-term agreement which
contained provisions for the sale of accounts receivable and unbilled revenues
(receivables) and phase-in revenues up to a total of $180 million. Amounts
related to receivables were accounted for as sales while those related to
phase-in revenues were accounted for as collateralized borrowings. At
December 31, 1993, outstanding receivables amounted to $56.8 million, were
considered sold under the agreement. The weighted average interest rate,
including fees, on this agreement was 4.6% for 1994, 3.7% for 1993, 6.6% for
the nine months ended December 31, 1992, and 7.9% for the three months ended
March 31, 1992.
7. SALE-LEASEBACK OF LA CYGNE 2
In 1987, the Company sold and leased back its 50 percent undivided
interest in the La Cygne 2 generating unit. The lease has an initial term of
29 years, with various options to renew the lease or repurchase the 50 percent
undivided interest. The Company remains responsible for its share of
operation and maintenance costs and other related operating costs of La Cygne
2. The lease is an operating lease for financial reporting purposes.
As permitted under the lease agreement, the Company in 1992 requested the
Trustee Lessor to refinance $341.1 million of secured facility bonds of the
Trustee and owner of La Cygne 2. The transaction was requested to reduce
recurring future net lease expense. In connection with the refinancing on
September 29, 1992, a one-time payment of approximately $27 million was made
by the Company which has been deferred and is being amortized over the
remaining life of the lease and included in operating expense as part of the
future lease expense. At December 31, 1994, approximately $24.8 million of
this deferral remained on the Balance Sheet.
Future minimum annual lease payments required under the lease agreement
are approximately $34.6 million for each year through 1999 and $680 million
over the remainder of the lease.
The gain of approximately $322 million realized at the date of the sale
has been deferred for financial reporting purposes, and is being amortized
over the initial lease term in proportion to the related lease expense. The
Company's lease expense, net of amortization of the deferred gain and a one-
time payment, was approximately $22.5 million for 1994 and 1993, $20.6 million
for the nine months ended December 31, 1992, and $7.5 million for the three
months ended March 31, 1992.
8. EMPLOYEE BENEFIT PLANS
Pension: The Company maintains noncontributory defined benefit pension
plans covering substantially all employees of the Company prior to the Merger.
Pension benefits are based on years of service and the employee's compensation
during the five highest paid consecutive years out of ten before retirement.
The Company's
policy is to fund pension costs accrued, subject to limitations set by the
Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.
The following table provides information on the components of pension
cost for the Company's pension plans (millions of dollars):
1992
April 1 | Jan.1 to
1994 1993 to Dec.31 | March 31
(Successor) |(Predecessor)
Pension Cost: |
Service cost . . . . . . . . . . $ 3.7 $ 3.2 $ 2.5 | $ .8
Interest cost on projected |
benefit obligation . . . . . . 9.7 9.5 6.7 | 2.1
(Gain) loss on plan assets . . . 2.1 (14.1) (5.8) | (9.0)
Net amortization & deferral. . . (11.4) 4.9 (1.0) | 6.7
Net pension cost . . . . . . . $ 4.1 $ 3.5 $ 2.4 | $ .6
The following table sets forth the plans' actuarial present value and
funded status at November 30, 1994 and 1993 (the plan years) and a
reconciliation of such status to the December 31, 1994, 1993, and 1992
financial statements (millions of dollars):
1994 1993 1992
Reconciliation of Funded Status:
Actuarial present value of
benefit obligations:
Vested. . . . . . . . . . . . . . . $ 94.0 $ 95.2 $ 82.9
Non-vested. . . . . . . . . . . . . 6.3 6.1 3.6
Total . . . . . . . . . . . . . . $100.3 $101.3 $ 86.5
Plan assets at November 30 (principally
debt and equity securities)
at fair value . . . . . . . . . . . . . $115.4 $119.9 $113.7
Projected benefit obligation
at November 30 . . . . . . . . . . . . (125.4) (125.5) (110.8)
Funded status at November 30. . . . . . . (10.0) (5.6) 2.9
Unrecognized transition asset . . . . . . (1.5) (1.7) (2.0)
Unrecognized prior service costs. . . . . 9.6 12.4 12.1
Unrecognized net gain . . . . . . . . . . (11.1) (20.6) (26.1)
Accrued pension costs at December 31. . . $(13.0) $(15.5) $(13.1)
Year Ended December 31, 1994 1993 1992
Actuarial Assumptions:
Discount rate . . . . . . . . . . 8.0-8.5 % 7.0-7.75% 8.0-8.5 %
Annual salary increase rate . . . 5.0 % 5.0 % 6.0 %
Long-term rate of return. . . . . 8.0-8.5 % 8.0-8.5 % 8.0-8.5 %
Retirement and Voluntary Separation Plans: In January 1992, the Board of
Directors approved an early retirement plan and a voluntary separation
program. The voluntary early retirement plan was offered to all vested
participants of the Company's defined benefit pension plan who reached the age
of 55 with 10 or more years of service on or before May 1, 1992. Certain
pension plan improvements were made including a waiver of the actuarial
reduction factors for early retirement and a cash incentive payable as a
monthly supplement up to 60 months or a lump sum payment. Of the 111
employees eligible for the early retirement option, 71, representing 6% of the
Company's work force, elected to retire on or before the May 1, 1992,
deadline. Another 29 employees, with 10 or more years of service, elected to
participate in the voluntary separation program. In addition, 61 employees
received Merger-related severance benefits. The actuarial cost, based on plan
provisions for early retirement and voluntary separation programs, and Merger-
related severance benefits, was approximately $3.9 million of which $1.8
million was included in the pension liability at December 31, 1992. The
actuarial cost was considered in purchase accounting for the Merger (See Note
1).
Postretirement: Western Resources adopted the provisions of Statement of
Financial Accounting Standards No. 106 (SFAS 106) in the first quarter of
1993. This statement requires the accrual of postretirement benefits other
than pensions, primarily medical benefits costs, during the years an employee
provides service.
Based on actuarial projections and adoption of the transition method of
implementation which allows a 20-year amortization of the accumulated benefit
obligation, the annual expense to be allocated to the Company under SFAS 106
was approximately $3.8 million in 1994 and $3.4 million in 1993. The
Company's total obligation to be allocated from Western Resources was
approximately $25.3 million and $23.9 million at December 31, 1994 and 1993,
respectively. To mitigate the impact of SFAS 106 expense, Western Resources
implemented programs to reduce health care costs. In addition, the KCC issued
an order to Western Resources and the Company permitting the initial deferral
of SFAS 106 expense. To mitigate the impact SFAS 106 expense will have on
rate increases, Western Resources will include in the future computation of
SFAS 106 expense allocated to the Company for computation of cost of service
and expense recognition, the actual SFAS 106 expense and an income stream
generated from corporate-owned life insurance policies (COLI) purchased in
1993 and 1992. To the extent SFAS 106 expense exceeds income from the COLI
program, this excess will be deferred (as allowed by FASB Emerging Issues Task
Force Issue No. 92-12) and offset by income generated through the deferral
period by the COLI program. Should the income stream generated by the COLI
program not be sufficient to offset the deferred SFAS 106 expense, the KCC
order allows recovery of such deficit through the ratemaking process by the
Company.
Prior to the adoption of SFAS 106 the Company's policy was to recognize
expenses as claims were paid. The costs of benefits were $0.8 million for the
nine months ended December 31, 1992 and $0.2 million for the three months
ended March 31, 1992.
The following table summarizes the status of the Company's postretirement
plans for financial statement purposes and the related amount included in the
balance sheet:
December 31, 1994 1993
(Dollars in Millions)
Reconciliation of Funded Status:
Actuarial present value of postretirement
benefit obligations:
Retirees. . . . . . . . . . . . . . . . . . . $ 12.9 $ 12.4
Active employees fully eligible . . . . . . . 8.5 8.4
Active employees not fully eligible . . . . . 3.9 3.1
Unrecognized prior service cost . . . . . . . (3.2) (.1)
Unrecognized transition obligation. . . . . . (19.3) (20.4)
Unrecognized net gain (loss). . . . . . . . . .9 (1.7)
Balance sheet liability . . . . . . . . . . . . . $ 3.7 $ 1.7
Year Ended December 31, 1994 1993
Assumptions:
Discount rate. . . . . . . . . . . . . . . . . 8.0-8.5 % 7.75%
Annual compensation increase rate. . . . . . . 5.0 % 5.0 %
Expected rate of return. . . . . . . . . . . . 8.5 % 8.5 %
For measurement purposes, an annual health care cost growth rate of 12%
was assumed for 1994, decreasing 1% per year to 5% by 2001 and thereafter.
The health care cost trend rate has a significant effect on the projected
benefit obligation. Increasing the trend rate by 1% each year would increase
the present value of the accumulated projected benefit obligation by $.3
million and the aggregate of the service and interest cost components by
$26,000.
Savings Plans: Effective January 1, 1995, the Company's 401(k) savings
plans were merged with the savings plans of Western Resources. Prior to the
merger of the savings plans, the funds of the plans were deposited with a
trustee and invested at each employee's option in one or more investment
funds, including a Western Resources common stock fund. The Company's
contributions were $1.8 million for 1994, $2.0 million for 1993, $1.7 million
for the nine months ended December 31, 1992, and $0.2 million for the three
months ended March 31, 1992.
9. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 96
(SFAS 96) in 1987. This statement required the Company to establish deferred
tax assets and liabilities, as appropriate, for all temporary differences, and
to adjust deferred tax balances to reflect changes in tax rates expected to be
in effect during the periods the temporary differences reverse. SFAS 96 was
superseded by SFAS 109 issued in February 1992 and the Company adopted the
provisions of that standard prospectively in the first quarter of 1992. The
accounting for SFAS 109 is substantially the same as SFAS 96.
In accordance with various rate orders received from the KCC, the Company
has not yet collected through rates the amounts necessary to pay a significant
portion of the net deferred income tax liabilities. As management believes it
is probable that the net future increases in income taxes payable will be
recovered from customers through future rates, it has recorded a deferred
asset for these amounts. These assets are also a temporary difference for
which deferred income tax liabilities have been provided. Accordingly, the
adoption of SFAS 109 did not have a material effect on the Company's results
of operations.
At December 31, 1994, the Company has alternative minimum tax credits
generated prior to April 1, 1992, which carryforward without expiration, of
$41.2 million which may be used to offset future regular tax to the extent the
regular tax exceeds the alternative minimum tax. These credits have been
applied in determining the Company's net deferred income tax liability and
corresponding deferred future income taxes at December 31, 1994.
Beginning April 1, 1992, the Company is part of the consolidated income
tax return of Western Resources. However, the Company determines its income
tax provisions on a separate company basis.
Deferred income taxes result from temporary differences between the
financial statement and tax basis of the Company's assets and liabilities.
The sources of these differences and their cumulative tax effects are as
follows:
December 31, 1994
Debits Credits Total
(Dollars in Thousands)
Sources of Deferred Income Taxes:
Accelerated depreciation and
other property items . . . . . . $ - $ (381,800) $ (381,800)
Energy and purchased gas
adjustment clauses . . . . . . . 2,245 - 2,245
Phase-in revenues. . . . . . . . . - (27,677) (27,677)
Deferred gain on sale-leaseback. . 110,556 - 110,556
Alternative minimum tax credits. . 41,163 - 41,163
Deferred coal contract
settlements. . . . . . . . . . . - (6,703) (6,703)
Deferred compensation/pension
liability. . . . . . . . . . . . 9,676 - 9,676
Acquisition premium. . . . . . . . - (317,610) (317,610)
Deferred future income taxes . . . - (102,789) (102,789)
Loss on reacquisition of debt. . . - (4,103) (4,103)
Prepaid power sale . . . . . . . . 1,577 1,577
Other. . . . . . . . . . . . . . . - (13,704) (13,704)
Total Deferred Income Taxes. . . . . $ 165,217 $ (854,386) $ (689,169)
December 31, 1993
Debits Credits Total
(Dollars in Thousands)
Sources of Deferred Income Taxes:
Accelerated depreciation and
other property items . . . . . . $ - $ (356,494) $ (356,494)
Energy and purchased gas
adjustment clauses . . . . . . . 3,257 - 3,257
Phase-in revenues. . . . . . . . . - (35,573) (35,573)
Deferred gain on sale-leaseback. . 116,186 - 116,186
Alternative minimum tax credits. . 39,882 - 39,882
Deferred coal contract
settlements. . . . . . . . . . . - (7,797) (7,797)
Deferred compensation/pension
liability. . . . . . . . . . . . 10,856 - 10,856
Acquisition premium. . . . . . . . - (300,814) (300,814)
Deferred future income taxes . . . - (102,789) (102,789)
Loss on reacquisition of debt. . . - (4,508) (4,508)
Other. . . . . . . . . . . . . . . - (8,365) (8,365)
Total Deferred Income Taxes. . . . . $ 170,181 $ (816,340) $ (646,159)
10. LEGAL PROCEEDINGS
The Company is involved in various other legal and environmental
proceedings. Management believes that adequate provision has been made within
the financial statements for these matters and accordingly believes their
ultimate dispositions will not have a material adverse effect upon the
financial position or results of operations of the Company.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value as set forth in Statement of Financial Accounting
Standards No. 107:
Cash and Cash Equivalents-
The carrying amount approximates the fair value because of the short-
term maturity of these investments.
Decommissioning Trust-
The fair value of the decommissioning trust is based on quoted market
prices at December 31, 1994 and 1993.
Variable-rate Debt-
The carrying amount approximates the fair value because of the short-
term variable rates of these debt instruments.
Fixed-rate Debt-
The fair value of the fixed-rate debt is based on the sum of the
estimated value of each issue taking into consideration the coupon
rate, maturity, and redemption provisions of each issue.
The estimated fair values of the Company's financial instruments are as
follows:
Carrying Value Fair Value
December 31, 1994 1993 1994 1993
(Dollars in Thousands)
Cash and cash
equivalents. . . . . . . $ 47 $ 63 $ 47 $ 63
Decommissioning trust. . . 16,944 13,204 16,633 13,929
Variable-rate debt . . . . 407,645 478,743 407,645 478,743
Fixed-rate debt. . . . . . 657,482 603,920 623,331 660,750
12. JOINT OWNERSHIP OF UTILITY PLANTS
Company's Ownership at December 31, 1994
In-Service Invest- Accumulated Net Per-
Dates ment Depreciation (MW) cent
(Dollars in Thousands)
La Cygne 1 (a) Jun 1973 $ 152,816 $ 98,124 343 50
Jeffrey 1 (b) Jul 1978 65,467 30,333 140 20
Jeffrey 2 (b) May 1980 66,475 26,921 143 20
Jeffrey 3 (b) May 1983 95,421 33,491 140 20
Wolf Creek (c) Sep 1985 1,376,335 317,311 545 47
(a) Jointly owned with Kansas City Power & Light Company (KCPL)
(b) Jointly owned with Western Resources and UtiliCorp United Inc.
(c) Jointly owned with KCPL and Kansas Electric Power Cooperative, Inc.
Amounts and capacity represent the Company's share. The Company's share
of operating expenses of the plants in service above, as well as such expenses
for a 50 percent undivided interest in La Cygne 2 (representing 335 MW
capacity) sold and leased back to the Company in 1987, are included in
operating expenses in the Statements of Income. The Company's share of other
transactions associated with the plants is included in the appropriate
classification in the Company's financial statements.
13. QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in Thousands)
The amounts in the table are unaudited but, in the opinion of management,
contain all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The
business of the Company is seasonal in nature and, in the opinion of
management, comparisons between the quarters of a year do not give a true
indication of overall trends and changes in operations.
1994
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Operating revenues. . . . . $139,087 $189,202 $154,987 $136,604
Operating income. . . . . . 33,607 56,978 33,548 24,878
Net income. . . . . . . . . 22,212 45,481 23,623 13,210
1993
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Operating revenues. . . . . $136,097 $191,941 $150,478 $138,481
Operating income. . . . . . 26,188 52,874 35,545 32,774
Net income. . . . . . . . . 13,692 46,406 24,274 23,731
14. RELATED PARTY TRANSACTIONS
Subsequent to the Merger, the cash management function, including cash
receipts and disbursements, for KG&E has been assumed by Western Resources.
As a result, the proceeds of cash collections, including short-term
borrowings, less disbursements related to KG&E transactions have been recorded
by the Companies through an intercompany account which, at December 31, 1994,
resulted in a net advance by KG&E to Western Resources of $64.4 million.
Certain of the Company's operating expenses have been allocated from Western
Resources. These expenses are allocated, depending on the nature of the
expense, based on allocation studies, net investment, number of customers,
and/or other appropriate allocators. Management believes such allocation
procedures are reasonable.
Exhibit B
Financial Data Schedule
[ARTICLE] OPUR3
[MULTIPLIER] 1,000
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-END] DEC-31-1994
[BOOK-VALUE] PER-BOOK
[TOTAL-ASSETS] 3,142,810
[TOTAL-OPERATING-REVENUES] 619,880
[NET-INCOME] 104,526
