ML17053B654
| ML17053B654 | |
| Person / Time | |
|---|---|
| Site: | Nine Mile Point  |
| Issue date: | 12/31/1979 |
| From: | CENTRAL HUDSON GAS & ELECTRIC CORP. |
| To: | |
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| ML17053B655 | List: |
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| NUDOCS 8005220642 | |
| Download: ML17053B654 (34) | |
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Central Hudson
...a regional energy company dedicated to service 0
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I ANNUALREPORT l979 Central Hudson Gas & Electric Corporation 8005Sg0 ggg
4 Poughkeepsie to preserve the Union Street Historic District. 4. The New Windsor Cantonment reflects the region's Revolutionary War history. 5. The Hudson Va!ley Philharmonic is a major cultural asset for the people in the region. 6. The 0!d Rhinebeck Aerodrome is a unique tourist attraction in the Mid-Hudson Valley.7. Picturesque farms and farmland are as much a part ofthe region's scenic beauty as the Catskills. the Shawangunk, and the Hudson Highlands.
Quality ofLifeIn the Mid-Hudson Valley.1. Interstate 84, as shown in photo. the construction ofa new span of the Newburgh-Beacon Bridge, and the Foreign Trade Zone at Stewart Airport in Orange County are contributing to the economic development in the southern part of the Company's service area.2. The majestic Hudson River flows In front ofthe Vanderbilt Mansion, a National Historic Site in Hyde Park 3. An intensive rehabilitation program Is under way in
Central Hudson
....a regional G
energy company.
Central Hudson serves a population of SS0.000 in a region known as the Mid-Hudson Valley. In a north-south direction, the portion ofthe region served by Central Hudson extends from 10 miles south of Albany to 30 mlles north of New York City.
The area is known for its outstanding natural beauty, characterized by the Hudson River, the Catskill Mountains, and the Hudson Highlands and Shawangunk mountain ranges. The region is unified by three major highway systems: the New York State Thruway, Interstate 84, and the Taconlc Parkway. Major population centers served by Central Hudson are Poughkeepsie and Beacon in Dutchess County, Newburgh in Orange County, Mngston in Ulster County. and Catskill in Greene County.
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Qur 9edication to Service...
Energy is essentIal to our way of life. As a regional energy company, Central Hudson is aware ofits responsibility to provIde electric and gas service to more than one-half million people in the Mid-Hudson Region. This responsibility. however, is accompanied by a perception of how difficultit has become In recent years to fulfillgoals and objectives in a'world of unprecedented change. Central Hudson. forexample, has not been able to control the price ofimported oil,but neither has the federal government In response to sharply higher prices charged to consumers, energy companies have been confronted with unsound legislation, inappropriate regulation, and the inconsistentadmlnlstration of rules and regulations. Various Interests and points of view often place confllctlng demands upon a company such as Central Hudson. The public is exposed to a bewildering variety of opinions about energy matters that frequently create confusion rather than understanding.
Nevertheless. Central Hudson has succeeded in providing reliable service to its customers and holding down costs to the greatest extent possible. Excluding higher fuel costs, the Company's rates have remained in line with the prices ofother goods and services. Primarily, Central Hudson is dedicated to moving ahead, always keeping in mind the need to balance the interests of investors, customers, and employees.
Qur Contribution to the Quality of Life...
Central Hudson and its predecessor companies have been helping to Improve the quality oflife In the Mid-Hudson Valley since before the turn ofthe century. Over the decades, the use ofenergy, especially electricity and natural gas;. has stImulated economic growth which, In turn. has made progress possible in all other aspects of life. Between now and the end of the century, the question is not whether more or less energy is needed nor whether more or less technology Is required. What should be considered is the relationship between energy/technology and the level oflifestyle people would like to enjoy in the years ahead. The choices and trade-offs are numerous. ItIs clear, however, that if people choose to Improve their economic and social well-being. more energy and new technologies will be required. The challenge is to produce energy and apply technology effectively.
Qur Commitment to the Future...
Central Hudson's commitment to the future is to perform in the public interest and to participate in the public process of identifying and meeting future goals. The Mid-Hudson Valley Is a relatively unspoiled and beautiful area. Through proper resource planning, new economic opportunities can be realized while maintaining and enhancing the region's environment and quality of life.
tt!QNVEMYS Rve-Year Summary of OperatIons Letter to Shareholders.
Electricity Natural Gas Environment Customers Construction Finandal Corporate Management's Discussion and Analysis of the Summary of Operations..
Financial Section Board of Directors and Officers.
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... 10 11 12 1S 28 The annual meeting ofholders ofcommon shares willbe held on Tuesday, April1. at 10:30 a.m.,at the South Avenue office of the Company In Poughkeepsie, New York. Notice of this meeting, together withthe proxystatementand proxy. willbe mailed to shareholders about March 10. The management welcomes the personal attendance of shareholders at the meetIng.
Shareholders may obtain, without charge, a copy of Central Hudson's annual report to the Securities and Exchange Commission, on Form 10-K. by writing to Mr. Joseph F.
Furlong, Secretary, Central Hudson Gas &Electric CorporatIon, 284 South
- Avenue, Poughkeepsie, New York 12602. A comprehensive statistical supplement to the Company's 1979 Annual Report, containing key financlal and operatIng results fora ten-year period, willshortly be available on request to Mr.
Furlong.
CENTRAL HUDSON GAS 8c ELECTRIC CORPOMTION General Office 284 South Avenue, Poughkeepsie, New York 12602 Telephone (914) 452-2000 Central Hudson Gas 8 Electric Corporation aNrms that equal employment opportunity shall be provided for all persons. This means that all personnel polides Including those related to compensation. benefit. transfers. promotlons. training. tuition assistance and sodal and recreational programs shall be administered without regard to race. color. creed. age. sex or national origin.
Recruiting and hiring practices shall be administered so as to assure fulfillmenofthe Company's equal employment opportunity objective.
Central Hudson Gas & Electric Corporation aNrms that Itwill not discriminate against any employee or applicant for employment because of physical or mental handicap in regard to any position for which the Individual Is quallfleCLIbis means that all personnel polldes Including those related to emplcynent.
promotion.
demotion or
- transfer, training.
compensation.
benefit and termination shall be administered without discrimination based upon physical or mental handicap against qualified handicapped Individuals.
Five-Year Summary of operations'Thousands of Dollars) 1979 1978 19?7 1976 1975 Operating Revenues:
Electric Gas Total.
Operating Expenses:
Operations Maintenance Depreciation Operating taxes Federal income tax..
Total
$225,971 28,813 254,784
$ 186,264 24,738 211,002
$ 184,391 23,449 207,840
$ 149,884 20,831 170,715
$ 138,414 19.897 1S8,311 169,742 9,818 14,839 21,268 5,965 132,554 8,151 13,393 18,779 9,891 133,688 8,098 13,279 18,560 7,099 100,917 6,794 12,859 16,975 6,392 92,604 6,611 12,569 16,003 4,453 221,632 182,768 180,724 143,937 132,240 Operating Income Other Income and Deductions:
Allowance for equity funds used during construction......... ~......
Federal income taxcredit.. ~........,
Othernet Total.
3,476 1,111 (333) 4,254 2,388 859 (348) 2,899 33,152 28,234 27,116 1,560 703 (90) 2,173 26,778 796 439 (84) 1,151 26,071 324 734 17 1,075 Income before Interest Charges.......
Interest Charges:
Interest on debt Other Allowance for borrowed funds used during construction......... ~...
Total 37,406 19,923 325 31.133 29,289 13,185 12,507 328 866 27,929
'7,146 12,640 376 12,680 510 15,712 10,873 11.542 12.002 (381) 12,809 (4,636)
~2,64D)
(1,631)
~1,014)
Net Income Dividends on Preferred Stock...........
21,694 4,126 20,260 4,126 17.747 3,626 15,927 2,866 14,337 2,866 Income Available for Common Stock.......
Dividends Declared on Common Stock.....
Amount Retained in the Business.........
Retained Earnings beginning ofyear.....
Retained Earnings end ofyear.......,...
17,568 10,961 6,607 67,084 16,134 10,531 5,603 61.481 14,121 8,966 5,155 56,326 13,061 8,382 4,679 51,647 11,471 7.737 3,734 47,913
$ 73.691 S 67,084 S 61A81
$ 56,326
$ 51.647 Common Stock:
Average Shares Outstanding (000's)....
Earnings Per Share on Average Shares Outstanding Earnings Per Share Assuming Conoerslon ofthe Conoerttble Debentures..........
Dividends Declared Per Share..........
Ratio of Earnings to Fixed Charges"......
5,373
$3.2?
$3.16
$2.04 2.31 5.310
$3.04
$293
$ 1.96 3.17 4,873
$2.90
$2.70
'1.84 2.81 4,873
$2.68
$250
$ 1.72 2.68 4,440
$2.58
$240
$ 1.72 2.37
'This summary should be read In conJunction with the financial statements and notes thereto Included In the "Hnanclal Section" ofthis Annual Report.
"For the purpose ofcomputing the Ratio ofEarnings to Fixed Charges, earnings consist ofnet income plus fixed charges plus allfederal Income tax amounts. Fixed charges consist oftotal interest charges, excluding the allowance forborrowed funds used during construction.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION POUG HKE E PS I E, N. Y. 12 6 02 To Our Shareholders:
March 3, 1980 We believe that 1979 was a year ofaccomplishment foryour Company. We say this not onlywithregard to our earnings per share, which we are pleased to report increased from $3.04 to $3.27. but in a broader sense with respect to the well4elng of all who are involved in our affairs.
It is clearly no secret to anyone, especially to shareholders, that we face many frustrations. The economic climate is far from good. Inflation continues at an extremely high level. Fuel supplies are uncertain, and the cost of oil continues to rise unabatedly.
Governmental policies are difficult to comprehend and contently change.
The nonmilitary nuclear power program is very clouded, notwithstanding our confidence in the need for nuclear power to help supply our nation's energy requirements.
Allofthese factors appear to indicate an unfavorable perspective. But ifone looks at the business in a very simple and straightforward way, giving priority to primary functions and objectives, we find the following:
The Company continues to supply its customers with reliable electric and gas service and there are few complaints about the quality ofservice. Although many customers feel that the rates forelectricity and gas are too high, the Company's rate increases have been in linewith other increases in costs throughout our economy. In terms of value received, the price of electricity and gas is clearly reasonable.
The shareholders have been well served by continuous dividend payments which recently were increased, although itis recognized that the market value ofCentral Hudson's stock has noticeably decreased along with that of other utilities during the last 10 to 15 years.
The Company's employees are fairlycompensated.
The communities served by Central Hudson receive substantial benefits, primarilythrough utilityservices and tax revenues but also by the presence of Company employees in those communities.
And so your Company is financially sound and is performing well those functions for which it was founded.
From this perspective we face the future with optimism. Indeed, we feel that the use ofelectricity and gas represents one ofthe best means of utilizing energy efficientlywhile at the same time conserving natural resources; and we see inthe future a further enhancement ofthe qualityoflifethrough the use of electricity and natural gas.
We dedicate this Annual Report to the services we render and to the Mid-Hudson Valley. one ofthe most beautiful regions inthe worldwhich affords its people great social, cultural and educational benefits.
Central Hudson is an essential part ofthe region: and as the years go by, the quality of life which we enhance willbe the principaljustification forour existence, and out ofthatjustification will flow benefits our shareholders, customers, employees and the communities we serve.
President Chairman of the Board and Principal Officer
The Company's service area has literally been a Crossroad of history. Prior to the advent of Henry Hudson on the Hudson River in the Half Moon in 1609, the river had been a focal point for an active Indian clvllizatlon, artifacts of which are still discoverable in the Valley. The epochal arrival of the explorer led to the eventual establishment of the Hudson River as a major factor in the economy of New York State and the East The famous Hudson River sloops carried the commerce of the Valley, and the voyage of Robert Fulton's Clermont up the Hudson in 1807 introduced the age of the steamboat and opened up the Valley to further economic development The opening of the Erie Canal In 182S made the Hudson the major route to the north and west. Soon the banks of the river were used by the railroads as still another era began in the history of the Hudson River, the Hudson River Valley, and the Empire State.
Today, the sloops and the old steamboats are part of history, and clearly different modes of transportation and energy meet the needs of the residents of the area.
Among the most significant energy resources are electrldty and gas, which have been supplied to the Mld-Hudson Region by Central Hudson and its predecessor companies since before the turn of this century. Central Hudson Is Identified with and is an integral part of its area; and the means by which electricity and gas are supplied, the technological, social and economic issues involved In that supply, and the enhancement of the quality of life which electricity and gas has provided and will provide In the future comprise the theme of this report.
ELECTRICHlV Electric Supply Present Supply Electricity is supplied to the Mid-Hudson region primarily from the Roseton and Danskammer oil-fired generating plants and the Neversink and Sturgeon Pool hydroelectric plants. Interconnections with other New York State utilities, coordinated by the New York Power Pool, and with other utilities throughout the Northeast contribute to supply and reliability.
.Future Generating Plans The growth in peak load in the Central Hudson area continues to slow down and future forecasts are substantially below previous predictIons. However, a new all-time peak of 633.2 megawatts was set on the Central Hudson system on December 19, 1979. Growth does exist, and plans for the eventual replacement of oil as a primary fuel have become critical.
Nine Mlle Point Central Hudson has a contractual commitment to participate in the development of Unit No. 2 of the Nine Mile Point Nuclear Station. which is being constructed by Niagara Mohawk Power Corporation and which was approximately 34% complete at the end of 1979.
During the 1979-80 winter and early spring of 1980, the work force on the site was substantially reduced to avoid potential inefficiencies of winter weather work, and to assess the possible impact on the project of the Three Mile Island incident.
Central Hudson has a 9</>0 interest in this plant and as
. of December 31, 1979 had invested $75.1 million in the project.
Sterling Project The Company had been participating as a tenant in common in the Sterling Nuclear Plant, which was to have been constructed in upstate New York and placed in service in 1988.
The project was approved by the New York State Board on Electric Generation Siting and the Environment (Siting Board) in January 1978. However, the Siting Board suspended the approval in May 1978 in order to reexamine the need for the plant in light of revised projections that indicated a reduction in electric load growth in the State.
On January 23, 1980, the Siting Board voted to withdraw the January 1978 approval on the basis that the plant would not be needed until after 1990.
Consequently, the plant cannot be constructed. The
'Company does not expect that the failure of the project to go forward willaffect its ability to satisfy the future electrical needs of its customers.
Through December 31, 19?9. the Company's 170/0 investment in the project amounted to $ 16.1 million.
Additional information is contained in Note 8 on page24.
Hydroelectric GeneratIon Concerned by the rapidly rising price of fuel oil~ Central Hudson has been engaged in the review of potential hydroelectric installations and will conduct indepth studies ifcertain sites appear to be economically feasible for development With financial assistance from the Department of Energy and the New York State Energy Research &
Development Authority. an investigation of the Company's High Falls site concluded that it is economically desirable to redevelop that site at an approximate cost of $2.3 million.
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Two years will be required for construction after the necessary approvals are obtained.
A major renovation involving the resurfacing of the spillway of the Sturgeon Pool Hydroelectric Plant was completed in 1979. and work on the intake structure is planned for 1980. The plant, in service since 1924, continues to be an important source of hydroelectric power for the Company.
Coal Conversion In June of 1975 the Federal Energy Administration (FEA) (which subsequently was merged into the Depart-ment of Energy) issued an order prohibiting the use of oil for generation in Units Nos. 3 and 4 at the Danskammer Plant Compliance with this order would require conversion of Units Nos. 3 and 4 to coal-firing.
The FEA order may not become effective until the U.S.
Environmental Protection Agency (EPA) has determined that coal can be burned in compliance with all applicable air quality requirements and until the Department of Energy (DOE) has completed an Environmental impact Statement At this time neither agency has acted.
As originally required by the Clean AirAct and EPA regulations, the initial plan for conversion of Danskammer Units Nos. 3 and 4 to coal included the use of flue gas desulfurization (FGD) equipment and would have required an investment of $ 115 million.
Subsequent amendments to the Clean AirAct may make it permissible to convert to coal without FGD equipment, in which case the conversion would require an investment of about $65 million.
The Company's initial conversion plan (with FGD) and its revised conversion plan (without FGD) are currently under review by the EPA for compliance with air quality requirements, and the DOE has begun preparation of an environmental impact statement as required by law. After all necessary permits are obtained it is estimated that three years will be required for construction.
'tate Energy Master Plan An Energy Master Plan, which is being developed by the State Energy Office, calls for the increased use of coal ~
natural gas and renewable energy sources, along with greater emphasis on energy conservation to meet future energy needs.
Central Hudson and other major electric companies in New York State believe the Energy Master Plan is unrealistic and fails to deal effectively with the problem of reducing the State's dependence upon foreign oil.
Consequently, the electric utilityindustry in New York State has proposed an energy strategy for the 1980's and 1990's that is more economic and willresult in more significant oil savings than can be achieved through the State plan.
The principal elerrient ofthis strategy is a growing emphasis on coal and uranium for the generation of electricity. They are both domestic fuels: they are reliable, more economical than oil, and can be used safely. The strategy also calls for conversion of existing oil-fired plants to coal, strong emphasis on energy conservation, increased imports of hydroelectric power from Canada, the development of small hydro plants, the use of refuse as a fuel source, and the development of new energy sources, such as solar power.
The energy crisis has focused attention on the need to develop domestic energy resources.
The increased availability and use of natural gas will be essential ifthe United States is to achieve energy independence.
As part of the gas industry, Central Hudson is supporting efforts to make the gas option a fundamental part of the
'ation's energy future.
Natural Gas Supply The Company has long-term contracts for the supply of natural gas from Columbia Gas Transmission Corporation, Tennessee Gas Pipeline Company, and Texas Eastern Transmission Corporation.
During 1979, as in 1978, the supply of natural gas improved.
In the spring of 1979, the Company's two major suppliers advised that curtailments would be lifted during
~
the 1979 summer periodApril 1 through October 31 and that less severe curtallments could be anticipated thereafter As the result of the increase in the amount of gas available, and under a petition to the Department of Energy for an exemption from the prohibition on the burning of natural gas as a primary fuel in boilers, the Company resumed the burning of gas as a primary fuel in Unit No. 2 at the Danskammer Plant on April 24. Prior to this date, natural gas had not been burned as a primary fuel in Unit No. 2 since 1971.
During 1979, 2,441,100 mcf. of natural,gas was burned in Unit No. 2 which offset 399,100 barrels of 1% sulfur fuel oil and produced S 2.383.000 in savings for the Company's electric customers and $ 325.000 in savings for the Company's gas customers.
With increased natural gas supplies, the Company's higher priority interruptible customers experienced 9 days of interrupted service as compared to 58 days in 1978. Increased sales of gas to the Company's interruptible customers provided increased savings in the cost of gas to the Company's firm gas customers.
The Company will continue to monitor closely the natural gas supply situation and willtake full advantage of all gas supplies as they become available.
E9MROMMENY Providing electric and gas service affects the physical
.environment Central Hudson has been responsive to the need to protect the environment to the greatest extent possible while keeping in mind the need to provide service at a cost that does not place an unnecessary financial burden on its customers. Maintaining a balance between the two objectives sometimes requires the Company.to challenge rules and regulations which it believes are not in the best interest of either the environment or its customers.
Cooling Towers In early 1975, the U.S. Environmental Protection Agency notified the Company that it intended to require the installation of cooling towers at the Roseton Plant at an estimated capital cost of at least $72 million, of which Central Hudson's share would be 35% in 1983.
Furthermore, an alteration of the cooling water intake and discharge facilities at the Danskammer Plant may be required, which are part ofthe Company's research and development effort described below.
Extensive and continuing biological studies indicate that the costs of cooling towers and of discharge modifications would be grossly disproportionate to any possible ecological benefits which might be realized. In addition, the cooling towers will cause certain adverse environmental and aesthetic effects.
Accordingly, the Company is contesting these
~ requirements in administrative proceedings which commenced in December 1977 and are expected to continue into 1981.
Research and Development The Company is supporting a vigorous and varied research and development program designed to enhance the Company's understanding and control of the environmental effects of its operations, to improve existing energy technologies, and to develop and apply new technologies for the production. distribution. and conservation of energy.
Expenditures for research and development in 1979 were $ 1.75 million. Of this amount, $ 1.66 million was spent on electric projects. This amounts to.92% of electric revenues, which is in keeping with the PSC guideline calling for electric utilities to spend approx-imately 1% of electric revenues on research and development.
The 1979 electric research and development program was divided into five principal categories: projects funded nationally. including those funded under the aegis of the Electric Power Research Institute, for which the Company's expenditures were $470,000: projects funded
'n a statewide basis through the Empire State Electric Energy Research Corporation, for which the.Company's share was $2?7,000: projects funded jointlywith utilities using the waters ofthe Hudson River for cooling in their generating plants, for which Company expenditures were
$219,000; projects conducted solely by the Company, which cost $510,000; and the Company's contribution of
$ 187.000 to the cost of research and development performed by the New York State Energy Research and Development Agency which is mandated by Section 18-a of the Public Service Law. The Company has no control over the manner in which such funds are expended.
During the year, the Company continued research projects designed to assess the effects of solar heating on electric system loads, the effects of various rate forms on customer utilization of electric energy, the potential of various technologies for controlling the time of occurrence of customer peak demands, and the efficacy of heat pumps and other energy conservation devices and strategies in reducing energy usage and costs in residential and commercial buildings.
Central Hudson is dedicated to the service of its customers.
However, society is complex and always changing. Unlike earlier and more simple times, it is more difficultfor businesses to provide goods or services that satisfy all customers, particularly during a period of rising prices. Nevertheless, during 1979, Central Hudson'ontinued its commitment to a high standard of service by initiating and implementing several programs designed to provide even greater service to customers.
Number of Customers During 1979, Central Hudson served an average of 208,459 electric and 43,51 5 gas customers.
Natural Gas Conversions In May 1979, the Public Service Commission partially removed the restrictions which had been placed on the sale of natural gas to Commercial and industrial customers in 1972; This action, combined with the nationwide effort to utilize domestic resources, the significant price differential between heating oil and natural gas and the slightly improved outlook of future natural gas supplies resulted in a substantial increase in the number of customer requests for natural gas service. During 1979, more than 900 individual residential customers, 1,000 apartment units and almost 200 commercial or industrial customers applied for gas service. Although some ofthe requests had to be deferred until 1980, all individual customers who could be supplied from an existing main and who applied for service prior to October 1 were accommodated by the end of the year.
7
Home Advisory Service As part of Central Hudson's overall energy conservation effort, a Home Advisory Service was instituted early in 1979. This educational service is designed to assist new home buyers'as well as existing homeowners. Energy Management Counselors contact customers by telephone, conduct personal visits, or provide mailings of energy conservation literature. More than one thousand customers responded to a midsummer bill enclosure and were advised on construction methods and materials, retrofitting measures, household practices, and appliance selection techniques to conserve energy.
Home Insulation and Energy Conservation Act The year 1979 was the first full year of Central Hudson's compliance with a mandated State program for conducting home energy audits for residential customers in one-, two-, and three-family homes.
The Company's Energy Management Counselors can advise customers which of eleven energy conservation measures will provide a pay-back in less than eight years.
On-site (Type A) audits are conducted for a $ 10 fee; audits utilizing information provided by the customer (Type B) are completed without charge. Under this program, Central Hudson is required to provide financing through local banks at an interest rate equal to the Company's rate of return. The Company must pay any interest charges in excess of its authorized rate of return and must guarantee the repayment of loans which are provided to eligible customers. 'Ihe program also calls for the Company to advise customers that oil burner audits are available.
During the first year ofthe program, 270 "A"audits and 352 "B" audits were conducted.
In addition, 25,776 Do-It-Yourself audits (Type C) were also. distributed.
During 1980, this program will be combined with the Federal Residential Conservation Services Program.
Other Energy Conservation ActivÃes Many other energy conservation activities were under-taken by Central Hudson during 1979. Exhibits featuring effective use of energy and the home energy audit program were displayed at numerous Energy Fairs and home shows throughout the service territory, including the Newburgh and Kingston Home Shows and the Dutchess and Orange County Fairs.
'fhe Dutchess County Fair display Included a kitchen designed and built to accommodate the handicapped.
This model kitchen has since been installed at Gateway Industries in Kingston, a United Way organization devoted to rehabilitation of the handicapped.
The first of three regional Energy Conservation Seminars devoted to education of members of the banking community, real estate brokers and appraisers was held in Orange County during December.
Extra Security Program The Company has implemented a new program entitled.
Extra Security Program to replace the former Account 65 plan.
The Account 65 plan offered customers who were 65 or
'lder a monthly budget bill and a guarantee that the service would not be disconnected for nonpayment during the period November 1 through April 15.
This new plan is available to customers formerly enrolled in Account 65 and, in addition, to customers who are heads of a household and who are permanently retired or the recipient of Social Security benefits, including disability or survivors benefits.
In addition to budget billing and the guarantee that service will not be disconnected during the cold weather months, a customer's bill always indicates a due date between the 6th and the 22nd of the month so that the utilitybill can be paid during that period of the month when the greater number of such customers has income available from Social Security checks.
Computer Systems During 1979,the Company completed the development and implementation of a Materials Management System.
This system permits faster and more efficient transfer of information required by the Purchasing and Stores functions.
While the investment in programming is substantial, it is anticipated that savings will be realized in future years as the result of reduced inventory requirements and because the new system has the capability to accom-modate increased activity without a corresponding increase in person~el.
The Company is now in the process of preparing subsystems and data necessary for the creation of a Customer Information System.
The first subsystem in service, a Bad Debt File, makes it possible for Customer Service Representatives to check new service applications for unpaid final bills within a few seconds, substantially reducing the time required for the necessary record checking. Additional programs will be completed and placed in service during 1980.
Right-of-Way Management A three-year right-of-way vegetation management program, begun in 1978, has resulted in substantially improved electric transmission line reliability.
The judicious use of selective herbicides and the cutting of dense, woody stem vegetation will assure control of noncompatible vegetation.
Long-term vegetation management plans for maintenance of electric and gas rightswf-way are being revised to incorporate use of techniques and materials consistent with increasingly stringent environmental and regulatory requirements.
CQMSYRUCYIGj(6 Maintaining a high standard of reliable electric and gas service for more than one-half million people in eight counties requires a major ongoing construction program.
Because of the nature of a utilitysystem generating plants, transmission and distribution systems, and substations Central Hudson's construction program involves large expenditures of capital.
Company forces completed the construction of a 7.4-mile, 69,000-volt transmission line in the Catskill District during 1979 with man-hour expenditures 40% below estimates for the project.
Expenditures for electric and gas facility relocations due to municipal and highway projects totaled $ 1.6 million during 1979. While projects were undertaken in each of the five operating districts, the most complex relocation occurred on Route 9 south of the City of Poughkeepsie.
During the last three years, the Company has been involved in street and highway relocation projects amounting to approximately $4.5 million, none of which was reimbursable.
The construction program for 1980, including new projects and those carried over from 1979, amounts to
$47.5 million. This represents an increase of $7.0 million over the $40.5 million expended in 1979.
Of the 1980 construction expenditures,
$24.3 million represents the Company's share of the cost of the Nine Mile Point Nuclear Plant and the balance will be spent on projects located, within the Company's service territory.
Estimated construction expenditures for the period 1980 through 1984 are set forth below.
Construction expenditures forthe next fiveyears are presently estimated to amount to $253.9 million.The estimates by years are as set forth below:
Construction Expenditures*
Participation in Unit No. 2 of the Nine Mile Point Plant (9%).....
Purchase of an additional 5% interest in the Roseton Plant..............
Expenditures excluding future major generating plants.
Total 5-Year 1980 1981 1982 1983 1984 Total (Thousands of Dollars) 23,200 21,600 13,300 23,000 18,600 13,300 18,600 105,000
$47.500
$52.900
$66,700
$45,100
$41.700
$253,900
$24.300
$31,300
$30,400
$26,500
$23,100
$ 135,600
'Including allowance for funds used during construction ("AFDC"), a noncash item (see Note 1 ofthe Notes to Financial Statements).
The above five-year construction program does not include any provision for (1) the possible conversion fromoil-firingto coal-firing of Units Nos. 3 and 4 ofthe Company's Danskammer Plant: (2) the possible installation of cooling towers at the Roseton Plant and the possible alteration ofthe coo!ingwater intake and discharge facilitiesat the Danskammer Plant: and (3) compliance with other environmental and energy conservation requirements. Estimates of construction expenditures are subject to continuous review and adjustment Actual construction expenditures may vary from such estimates as a result of the matters referred to above or other causes.
Ifthe Company is required to convert the Danskammer Plant units to coal-firing, the cost of conversion is presently estimated at $ 115 millionifflue gas desulfurization equipment is required and $65 millionifsuch equipment is not required.
The estimated cost ofinstalling cooling towers at the Roseton Plant is at least $72 million,ofwhichthe Company's share would be 35% in 1983.
Large construction programs require regular financing and an ability to attract investors who believe in the future success of a business. Without sound financing, a business ultimately declines and is unable to serve its customers. Consequently. the role of the investor in providing capital funds for expansion is essential to the financial health of a business.
In recent years, inflation, higher interest rates and other factors have made financing one of the most exacting aspects of the utility business.
During 1979, Central Hudson's financial condition remained strong, thus benefiting shareholders, customers and employees alike.
Financing The usual "internal sources" of cash generated by the Company from depreciation, retained earnings, and deferred taxes are not sufficient to meet all of its needs for construction. Consequently, it must go to the financial markets to obtain the balance of its requirements.
As part of its ongoing financing program the Company sold $20 million principal amount offirst mortgage bonds on September 27, 1979, and has filed a Registration Statement with the Securities and Exchange Commission to sell up to $ 16 million of common stock in February 1980. The Company also anticipates issuing additional first mortgage bonds during 1980 in an amount not to exceed $50 million.
The 1979 issue of mortgage bonds, which mature in 2009 and bear an interest rate of 103/4%, was sold to underwriters by competitive bidding with total proceeds of $ 19.7 million to the Company. The cost to the Company was 10.906%, which represents a new high level for the Company. However, subsequent to their sale the bond markets were adversely affected by international developments and Federal Reserve Board actions with the result that interest rates on later issues were even higher on offerings by companies with better credit ratings.
The level of outstanding short-term debt in the form of Commercial Paper increased from $23 million at December 31, 1978 to $45 million at December 31, 1979, reflecting in part the payment on December 31 of the
$ 15 million installment due on the Company's term loan notes. The Company currently maintains lines of credit with seven banks totaling $55 million.
Dividend Increases During the year the Board of Directors increased the quarterly dividend rate on two occasions. Atthe September meeting the dividend rate was increased from
$.49 to $.52 effective with the dividend paid on November 1, 1979 and at the December meeting the dividend rate was increased from $.52 to $.54 effective with the dividend paid on February 1, 1980, an indicated annual rate of $2.16.
These increases were made in recognition of the improved earnings realized by the Company and the need of the shareholders to participate in the increase to help offset the effects of inflation on their cost of living.
The total dividends declared during 1979 were $2.04 per share. With earnings per share of common stock reaching $3.27, the resultant pay-out ratio in 1979 was 62%. It has been the Company's objective over many years to keep the amount of earnings paid out in dividends around the two-thirds proportion. The Board of Directors, however. will continue to review and monitor its dividend policy in light of any changing circumstances.
The total amount ofthe dividend paid in 1979 amounted to $ 1.99 per share and it is estimated that the full amount is subject to federal income tax as ordinary income.
Rate Decision Atthe conclusion ofthe rate proceeding. initiated by the Company's rate increase application on November 27, 1978, the Public Service Commission authorized new rates to become effective on November 3, 1979 to produce additional annual gas revenue of $ 1,563,000 (4.8%) and additional annual electric revenue of $22,043,000 (11.6%).
The rate increase allowed by the Commission was predicated on a 14.0% return on common equity capital and a 9.93% return on total invested capital. The test year was the twelve months ending October 31, 1980, the first year in which the new rates will be eff'ective.
As a result of the Commission's rate order there will be
~
a change in the treatment of net revenues (revenues less incremental costs) resulting from sales of economy energy to other utilities. Such revenues were not taken into account in setting the new level of retail rates and, accordingly, effective November 3, 1979, all net revenues resulting from any sales of economy energy to other utilities will be credited to the retail customers via the fuel adjustment clause. This change willnot affect the additional $22 million of electric rate relief to be received by the Company but will serve to reduce the cost of electricity to the Company's customers whenever economy sales are made.
The total revenue increase authorized by the Commission of $23,606.000 is approximately 87% of the amount originally requested by the Company, as adjusted to reflect a comparable treatment of net revenues from economy sales to other utilities.
During the proceeding, the Company demonstrated that
- its proposed revenue increase would comply with the federal anti-infiation guidelines under the gross margin test The Commission also approved the Company's proposals to institute a finance charge of 1i/a% per month on unpaid balances and a bad check charge of $5. These charges, which conform to common commercial practices, are intended to assess to individual customers the costs incurred by their actions.
The Commission also directed that a further proceeding be held to consider the design of the Company's electric rates. That proceeding willconsider the allocation of revenue requirements among customer classes, the rate structure applicable to each class, a marginal cost study to be filed by the Company and time4iflerentiated rates.
Public UtilitiesRegulatory Policies Actof19?8 The National Energy Act included the Public Utility Regulatory Policies Act (PURPA), which requires each state regulatory commission to consider six electric utility rate-making standards cost of service, declining block rates. tim~fday rates, seasonal rates, interruptible rates and load management techniques. These standards will be considered in the Company's present rate design proceeding before the New York Commission.
In order to assess these standards, PURPA requires each utilityto file detailed data every two years with the Federal Energy Regulatory Commission which has developed detailed rules that require the filing of embedded and marginal cost studies and extensive load data on each class of customer.
CQIRPGRATE As are other corporations, Central Hudson is confronted with new challenges, many of short-term duration and others that require planning and implementation with a view over a longer period of time. During the past year, Central Hudson made significant organizational changes to help it operate more efficiently in the years ahead, and it initiated or continued other activities of major significanc for both the present and the future.
Directors and Officers Marjorie S. Brown was elected to the Board of Directors to filla newly created position on the Board, effective September 28, 1979.
Mrs. Brown, a homemaker and resident of Millbrook.
N.Y.. is active in civic and philanthropic activities and formerly was an executive in retailing and promotional organizations. She is a member ofthe National Board of the U,S.O., a member of the Board of Directors of the National Institute of Social Sciences, and various Boards of the Salvation Army:
The Board of Directors promoted three oflicers to new offices and responsibilities during 1979.
John E. Mack III,formerly Vice President<ustomer Services, was designated Executive Vice President.
L Wallace Cross, fiormerly a Vice President, was designated Senior Vice President-Finance and Accounting.
Charles E Rider, formerly a Vice President, was designated Senior Vice President<orporate Planning.
The changes were designed to provide a greater capability on the part of the corporation to respond to the needs of the future and to improve the efficiency of its operations.
Corporate Planning Long-range physical and financial planning has always been necessary as a basis for meeting future customer needs at fair and reasonable prices. Lengthening lead times for major construction projects and escalating costs requires the development of new and more sophisticated techniques, in order to insure the maintenance of reliable service and the availability of capital under terms which minimize rates to customers while providing a fair return to investors. However, increasing emphasis on environmental protection. the growing unpredictability of world energy supplies, rapidly escalating prices for principal fuels, drastic changes In customer energy use patterns and, most recently. the extreme volatilityof the financial markets have greatly increased the degree of uncertainty with which long-range financial and facilities
, planning must contend. Government intervention, intended to resolve these problems, has more frequently added political irresolution, bureaucratic confusion and delay, and reduced fiexibllityof response to the factors complicating the planning process.
To deal with this growing complexity the Company initiated, during 1979, a restructuring and elaboration of its corporate planning systems and procedures.
In June, the Board of Directors appointed a Senior Vice President-Corporate Planning to assist the Chairman and President in formulating and coordinating the evaluation of various strategies for the future development ofthe Company's business. Restructuring of the corporate planning organization, definition of major strategic options and development of the necessary'additional analytical tools were proceeding at year end.
Advertising Case The Company's challenge of the Public Service Commission's prohibition of promotional advertising of electricity will be argued before the United States Supreme Court in the spring of 1980.
In early 1977, the Commission issued a "Statement of Policy on Advertising and Promotional Practices of Public Utilities" which prohibited electric promotional advertising and the use of bill inserts to disseminate information on matters of public controversy. In late 1977, the Company commenced an action in state court challenging the Commission on the basis that its constitutional right of free speech was being violated. In the spring of 1979, the New York Court of Appeals, the highest court in New York State. sustained the Commission's determinations.
In a parallel action, the United States Supreme Court has agreed to hear a case initiated by Consolidated Edison Company of New York, inc. challenging the Commission's bill insert restriction.
Roseton Litigation The legal action is continuing by the owners of the Roseton PlantCentral Hudson. Niagara Mohawk Power Corporation and Consolidated Edison Company of New York, Inc.to recover damages from certain contractors involved in the Roseton project.
It is alleged that the defendants'ailure to design and construct properly the Roseton Plant led to a series of incidents, including a boiler implosion, which delayed the completion and commercial operation of the Plant.
At the present time no estimate can be made as to the duration or outcome of the litigation.
Labor Negotiations After prolonged negotiations, the Company entered into a two-year contract with two Local Unions of the International Brotherhood of Electrical Workers. The contract provides for a 7.129% general wage increase effective July 1, 1979, and only wages will be negotiated the second year of the contract. In addition, certain benefit programs were improved.
MR8kGEMEMY'S IO)ISISSIIQM AMIO) AMAWSIISGF THE SUMMRRVQF QPEEAYI[GII6S The following discussion and analysis explains significant changes in the amounts of revenues and expenses between the years 1979 and 1978 and also between the years 1978 and 1977. Certain additional information relating to changes between these years is provided in 12 Sales to other utilities..........
Customer sales...............
Fuel and gas cost adjustment charges Rate increase.................
Miscellaneous..............
~..
Total...
~.
(Thousands of Dollars)
Bcctctc Gcc 616,766, N/A 11,701
$2,987 8,470 451 2,829 312 (79) 325
$39,707
$4,075 The revenues received by the Company pursuant to the application ofthe electric and gas cost adjustment clauses only recover the additional costs incurred by the Company and, therefore. do not affect net income.
Total sales of electricity within the Company's service territory increased 3% in 1979 while sales of natural gas were 12% higher than last year. Changes in sales by major customer classification are set forth below (parentheses denote decrease):
Residential Commercial Industrial Interruptible Eiectr(c 0%
3 6
N/A (5)%
(5)
.2 66 The 66% increase in the sales of interruptible gas service resulted from the improved availability of gas from the Company's pipeline suppliers. Such sales, however, did not contribute to the growth in earnings since the net revenues (revenues less incremental costs) from these sales are being reflected in the gas cost adjustment for the Notes to Financial Statements on pages 20 through 25 of this report THE YEAR 1979 AS COMPARED TO THE YEAR 1978 Earnings Earnings per share of common stock were $3.27 for 1979 compared with $3.04 for 1978, an increase of 7.6o/o.
The primary factors contributing to this growth in earnings were increased sales of electricity and higher electric and gas rates which became effective on November 3, 1979. Earnings per share are shown after provision for dividends on preferred stock and are computed on the basis of the average number of common shares outstanding during the year. The amount of such shares was 5,372,873 in 1979 and 5,310,373 in 1978.
Operating Revenues Total operating revenues increased $43.8 million (21%)
in 1979. Details of the revenue changes are as follows:
increase or (Decrease) from 1978
the benefit of customers taking firm gas service. The decrease in gas sales to residential and commercial customers reflects the milder weather experienced during the heating months.
Sales of economy energy to other utilities increased 44% in 1979, with most of the increase occurring in the
'irst two quarters of the year when such sales were abnormally high. The net revenues from these sale's contributed to the growth in earnings for the first 10 months of the year. However, as described in the section entitled "Rate Decision," effective November 3, 1979, all net revenues resulting from any sales of economy energy to other utilities are being credited to the Company's retail customers via the fuel adjustment clause.
Operating Expenses Costs for operations increased $37.2 million (28%) in 1979. The most significant increase occurred in the cost of fuel used in electric generation which was $24.3 million more than in 1978. This increase resulted from substantially higher fuel oil prices and an 8% increase in generation. The cost of purchased electricity increased
$5.7 million, reflecting primarily the purchase of less expensive energy from member companies of the New York Power Pool when such power was available. The cost of purchased gas increased $5.0 million as a result of a 39% increase in the volume of natural gas purchased and higher rates charged by the Company's pipeline suppliers.
Other expenses of operation were $2.2 million over last year. Increased wages and related fringe benefits
. together with increased production expenses resulting from the acquisition of the additional 10% interest in the Roseton Plant were the primary factors accounting for
. this increase.
Maintenance expenses increased $ 1.7 million, or 20%.
The two most significant variations were a $646,000 increase in the cost of maintaining electric generating units and a $379,000 increase in costs for storm repairs.
During the year the Company's service territory experienced two major storms, including tropical storm David, one ofthe most severe summer storms in the Company's 79-year histoly. The $1.4 million increase in depreciation is primarily due to the Company's additional investment in the Roseton Plant.
Operating taxes increased $2.5 million. State and local taxes levied on gross revenues increased $ 1.2 million, property taxes were up $917,000, and payroll taxes increased $243,000.
Federal income tax charged to "Operating Expenses" decreased
$3.9 million in 1979. See Note 2 of the Notes to Financial Statements for a detailed analysis and reconciliation of the federal income tax.
THE YEAR 19?8 AS COMPARED TO THE YEAR 1977 Earnings Earnings per share of common stock were $3.04 for 1978 compared with $2.90 for 1977, an increase of 5%.
The primary factors contributing to this growth in earnings were increased sales and a fullyear's effect of higher electric and gas rates which became effective during 1977. As a result of the sale of 500,000 shares of common stock in February 1978, the average number of shares outstanding increased from 4,872,873 in 1977 to 5,310,373 in 1978.
Operating Revenues Total operating revenues increased $3.2 million (2%) in 1978. Details of the revenue changes are as follows:
Customer sales.. ~...........
Rate increase Sales to other utilities.........
Fuel and gas cost adjustment charges Miscellaneous Total Increase or (Decrease) from 1977
('housands of Dollars) 8ectrlc Gas
$4,948
$ 338 3,873 1,042 (2,545)
N/A (4,407) '98) 4 7
$ 1.873
$ 1.289 Other Income and Interest Charges The total amount ofthe Allowance for Funds used During Construction (AFDC) increased $3.0 million'in 1979, primarily as a result of the Company's participation in Unit No. 2 of the Nine Mile Point Plant and the Sterling Plant. AFDC was computed at varying rates during 1978 and 1979. The weighted average AFDC rate was 8.55%
for 1978 and 9.91% for 1979. See Note 1 of the Notes to-Financial Statements for additional information on this subject Total interest charges (excluding AFDC) increased $6.7 million, or 50%. Interest on mortgage bonds increased
$556,000 due to the issuance of $20 million of 103/4%
bonds in September 1979. Interest on unsecured long-term debt increased $4.4 million as a result of issuing
$35 million of term'loan notes in December 1978.
Short-term interest charges increased $ 1.7 million during the year due to substantially higher interest rates and higher levels of borrowings. (See Note 4 ofthe Notes to Financial Statements for additional information.)
Total sales of electricity within the Company's service territory increased 4o%%d in 1978 while sales of natural gas were 3o%%d higher than last year. Sales increases by major customer classification are set forth below:
Residential Commercial.
Industrial...........
Interruptible.........
B~c Oo/o 4
9 N/A Gas 2%%d 4
0 The growth in sales of electricity and firm gas to industrial customers reflects an improved market for the products ofthe Company's major industrial customers.
Sales of electric energy to other utilities decreased So%%d in 1978, primarily as a result of a reduction in the amount of energy purchased by New York State Electric & Gas Corporation.
Operating Expenses Costs for operations decreased
$ 1.1 million (1o%%d) in 1978. The most significant item contributing to this decrease was an $ 11.0 million (14'/o) reduction in the cost of fuel used in electric generation. This decrease resulted from lower fuel oil prices and a 7'/o reduction in generation. The cost of purchased electricity increased
$7.0 million, reflecting increased purchases of both capacity and energy from Niagara Mohawk Power Corporation under the Roseton Capability Sales Agree-ment and increased purchases of less expensive energy from member companies of the New York Power Pool when such power was available. Despite a 5'/o increase in the volume of gas purchased, the cost of natural gas was
$6,000 less than last year; increased refunds received from the Company's pipeline suppliers more than offset the effect of increased purchases and higher rates. Other expenses of operation were $2.9 million greater than last year. The major portion of this increase resulted from higher wages and related fringe benefits together with the charge to expense of $518,000 for the cost of environmental studies for a'potential generating site, which costs were previously deferred but are no longer considered acceptable for capitalization.
Maintenance expenses increased $53,000 primarily as a result of increased costs incurred in connection with the Company's tree-trimming program. Depreciation expense shows an increase of only $ 114,000 in 1978; however, the depreciation provisions for certain properties transferred to "Plant Held for Future Use" in December 1977 were included in the depreciation expense account in 1977 whereas they are being charged to "Other Income Deduc-tions" in 1978. The annual amount of such depreciation is approximately $200,000.
Operating taxes increased $219,000. Payroll taxes were up $ 142,000 and state and local taxes levied on gross revenues increased $ 132,000. Partially offsetting these increases was a reduction of $ 134,000 in property taxes.
Federal income tax charged to "Operating Expenses" increased $2.8 million in 1978.
Other Income, Interest Charges,and Preferred Dividends The total amount of AFDC increased $ 1.6 million in 1978 primarily as a result of the Company's participation in Unit No. 2 of the Nine Mile Point Plant and the Sterling Plant The weighted average AFDC rate for 1978 was 8.55o%%d.During197 7AFDCwascompute dat arat eof 8o%%d.
Total interest charges (excluding AFDC) increased
$ 140.000. The $ 123,000 increase in interest charges on mortgage bonds is a result of a fullyear's interest on the
$4.5 million of 6/4'/o bonds issued in June 1977. Short-term interest charges increased $S98,000 due to higher levels of borrowings and higher rates of interest in effect during 1978. Other interest charges decreased
$S38,000:
1977 interest charges included the interest on the promissory notes which matured on October 1, 1977 and the convertible debentures which matured on February 1, 1978.
The increase of $500,000 in dividends on preferred stock is the result of a fullyear's dividend on the $ 15 million of 8.40o/o preferred stock issued in May 1977.
1979 Fourth Quarter
~..............
Third Quarter................
Second Quarter..............
First Quarter.............
~ ~.
$21 /s
$ 19s/4
$.49 22 20'/s
'.49 21 /4 20'/s
.49 22'/s 2(Pe
.47 COMMON SMCK DMDENDS AND PRICE RANGES Dividends have been paid by the Company and its principal predecessors for 76 years, and the common stock of the Company has been listed on the New York Stock Exchange since 1945. The price ranges and the dividends paid for each quarterly period during the Company's last two fiscal years were as follows:
1979
~Hi h Low Dividend Fourth Quarter................
$ 19i/s
$ 18
$.52 Third Quarter.................
20i/4 18
.49 Second Quarter.........
~ ~....
20'/4 18
.49 First Quarter.................
20s/s 19s/4
.49 14
FINANCIALSECFION 1979 ANNUALREPORT Report of Independent Accountants To the Board of Directors and Shareholders of Central Hudson Gas & Electric Corporation In our opinion, the accompanying balance sheet and the related statements ofincome, retained earnings, and changes in financial position present fairly the financial position of Central Hudson Gas & Electric Corporation at December 31
~ 1979 and 1978, and the results ofits operations and the changes in its financial position forthe years then ended, in conformity with generally accepted accounting principles consistently applied. Our examinations of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
New York, New York January 28, 1980 PRICE WATERHOUSE & CO.
Statement of Retained Earnings (Thousands of Dollars)
Balance at beginning ofyear Net Income Year ended December 31.
1979 1978
$67.084
$61,481 21,694 20,260 88,778 81,741 Dividends declared cash:
On cumulative preferred stock On common stock ($2.04 per share 1979; $ 1.96 per share 1978)..
4,126 10,961 15,087 4,126 10,531 14,657 Balance at end ofyear
$73.691 ~
$67.084
'Pursuant to the terms of the 4.85% promissory notes. due 199S. 66S.277 Is not restricted with respect to the declaration of dividends on common stock.
15
Statement of Income (Thousands of Dollars)
Operating Revenues Electric...................................
Gas 0
I I ~
~
0
~ I
~
Totalown territory Revenues from electric sales to other utilities
$ 181,705 28,813 210,518 44,266
$ 158,784 24,738 183,522 27A80 Year ended December 31 ~
1979 1978 Operating Expenses Operation:
Fuel used in electric generation (Note 1)
Purchased electricity Purchased natural gas Other expenses of operation Maintenance Depreciation (Note 1).
Taxes, other than income tax Federal income tax (Note 2)................
Deferred income taxnet (Note 2). ~.....
Operating Income 254,784 90,897 32,845 16,693 29,307 9,818 14,839 21,268 171 5,794 221,632 33.152 211,002 66,565 27,137 11,691 27,161 8,151 13,393 18,779 6.504 3,387 182,768 28,234 Other Income and Deductions Allowance for equity funds used during construction (Note 1)
Federal income taxcredit (Note 2)
Deferred income taxcredit (Note 2)
Othernet Income before Interest Charges 3,476 933 178 (333) 4,254 37A06 2,388 721 138 (348) 2.899 31,133 Interest Charges Interest on mortgage bonds Interest on unsecured long-term debt.
Interest on short-term debt Other Interest.......
Allowance for borrowed funds used during construction (Note 1)...
Amortization of premium and expense on debt Net income.
11,306 5,195 3,422 262 (4,536) 63 15,712 21,694 10,750 762 1,673 272 (2,640) 56 10.873 20,260 DMdends on Preferred Stock Income Available for Common Stock 4,126
$ 17,568 4,126
$ 16,134 16 Common Stock:
Average Shares Outstanding (000's)
Earnings per Share On Average Shares Outstanding.....
Earnings per Share Assuming Conoersion of the Conoertible Debentures (iYote 3) 5,3?3
$3.27
$3.16 5,310
$3.04
$2.93
Statement of Changes in Financial Position (Thousands of Dollars)
Source of Funds Year ended December 31, 1979 1978 Internal sources:
Net income Income items not requiring current outlays:
Depreciation accruals:
Charged to depreciation expense Charged to other income accounts.
Deferred income taxnet Equity component of AFDC' Othernet Net funds from internal sources
$21.694 14,839 530 5,616 (3,476) 547 39,750
$20,260 13,393 508 3,249 (2,388) 577 35,599 Available from financing:
Mortgage bonds Term loan notes Common stock.
Short-term debt Total funds from external sources Total source of funds 20,000 22,000 42,000
$81,750 35,000 10,340 6,000 51,340
$86.939 Application of Funds Construction charges:
Gross charges for construction Less equity component of AFDC*
Dividends:
Preferred stock Common stock.
Retirement of securities and short-term debt:
Convertib!e debentures Long-term promissory notes Term loan notes Net increase (decrease) in working capital, other than short-term debt and current maturities of long-term debt.
$40,526 3,476 37,050 4,126 10,961 15,087 175 15,000 15,175 7.722
$64,513 2,388 62,125 4,126 10,531 14,65?
8,000 175 8,175 (769)
Changes In deferred and other accounts net Total funds applied 6,716
$81,750
? 75'I
$86.939
'Allowance for funds used during construction (AFDC). (See Note 1.)
17
Balance Sheet (Thousands of Dollars)
UtilityPlant, at original cost Electric.
~
~
~
~
0
~
0 0
~
~
Gas Common.
Less accumulated depreciation.
Construction work in progress 1979
$425,811 50,520 21,951 498,282 152A07 345,875 98,019 443.894 1978
$416,355 49,335 20A26 486.116 140,813 345,303 72.S46 417,849 Other Property and Investments (Note 1).
1,787 1.787 Current Assets Cash
~
~
~
~
~
~
~
~
Special deposits Accounts receivable from customers Accrued unbilled utilityrevenues (Note 1)
~
~.
Other receivables Materials and supplies, at average cost:
FUe10
~
~
~
~
0
~
~ ~......................
Construction and operating...........
Prepayments.
3,267 165 21A28 5,547 202 17.568 6,766 3.163 58,106 3,282 258 16,962 4,S47 1,594 9,951 6,277 3,010 45.881 Deferred Charges Deferred electric fuel costs (Note 1)
Deferred gas costs (Note 1)...........
Deferred environmental costs (Note 1)
Unamortized debt expense...........
Unamortized project costs Other 6,711 517 3,982 1.756 513
? S83
'I 6,062
$519,849 2.550 834 3,603 1,SSS 616 1,591 10,749
$476,266 18
December 3$, 1979 and 1978 Uabilities Capitalization Capital Stock (Note 5)
Cumulative preferred stock Premium on cumulative preferred stock.
Common stock.
Capital stock expense Retained Earnings Long-term Debt (Note 6)
Unamortized Premium and Discount on DebtNet..
Current Liabilities Long-term debt maturing within one year.
Sinking fund requirements.
Notes payable (Note 4)
Accounts payable Accrued taxes Accrued interest Customer deposits Dividends declared Other Deferred Credits and Other Liabilities Deferred gas refunds Miscellaneous reserves Other.
Accumulated Deferred Income Tax (Note 2) 1979 S 61,030 67 76.371
~2,245) 135.223 73,691 195,400 168 404,482 12,000 175 4S,OOO 18,411 2,682 3.148 2,744 3,933 4624 92.717 1,177 474 788 2A39 20,211 SS19,849 1978 S 61,030 67 76,371
~2.245) 13S,223 67,084 202,575 470 405,352 175 23,000 12.519 5,988 2,523 2,698 3,664 3,647 S4,214 1,182 626 297 2,105 14.595
$476.266
Notes to financial Statements 20 Note 1Summa~ of Accounting Policies General The Company is subject to regulation by the New YorkState Public Service Commission (PSC) and the Federal Energy Regulatory Commission (FERC) with respect to its rates for service and the maintenance of its accounting records. The Company's accounting policies conform to generally accepted accounting principles as applied in the case of regulated public utilities and are in accordance with the accounting requirements and rate-maMng practices of the regulatory authorities having jurisdiction.
Utility Plant: The costs of additions to utility plant and replacements of retirement units of property are capitalized at original cost.
Costs include labor, materials and supplies, indirect charges for such items as transportation, certain taxes, pension and other employee benefits, and an allowance for the cost of funds used during construction. Replacement of minor items of property is included in maintenance expenses.
The original cost ofproperty. together withremoval cost, less salvage, is charged to accumulated depreciation at such time as the property is retired and removed from service.
Allowance for Funds used During Construction (AFDC): The Company includes in plant costs an allowance for funds used during construction approximately equivalent to the cost of funds used to finance construction expenditures. The concurrent credit forthe amount so capitalized is reported in the Statement ofIncome as follows:
the portion applicable to borrowed funds is reported as a reduction ofinterest charges whilethe portion applicable to other funds (the equity component) is reported as other income. The equity component ofAFDC is not considered a current source offunds and therefore is not included as such in the Statement ofChanges in Financial Position. AFDC was computed at varying rates during 1978 and 1979. The weighted average AFDC rate was 8.550%%d for 1978 and 9.910%%d for 1979.
Depreciation: For financial statement purposes, the Company's depreciation provisions are computed on the straight-line method using rates based on annual studies ofthe estimated useful lives and estimated net salvage of properties. The provision for depreciation oftransportation equipment is charged indirectly to various asset and expense accounts, while the depreciation provision for certain properties included in the account "Plant Held for Future Use" is charged to "Other Income Deductions" for accounting purposes. The Company's total provision for depreciation amounted to approximately 3.2% ofthe original cost ofaverage depreciable property in both 1978 and 1979.
The ratio ofthe amount of accumulated depreciation to the cost ofdepreciable property at December 31 was 29.30%%d in 1978 and 31.00%%d in 1979.
For federal income tax purposes, the Company uses an accelerated method ofdepreciation and generally uses the shortest life permitted for each class of assets.
Rates and Revenues:
Electric and gas retail rates applicable to intrastate service (other than contractually established rates forservice to municipalities and governmental bodies) are regulated bythe PSC. Transmission rates and rates for electricity sold for resale in interstate commerce are regulated by FERC.
Revenues are recognized on the basis of cycle billings rendered monthly or bimonthly. Estimated revenues are accrued for those bimonthly customers whose meters are not read in the current month.
The Company's tariffforretail electric service includes a fuel cost adjustment clause pursuant to which electric rates are adjusted to reflect changes in the average cost offuels used in electric generation and certain purchased power costs from the average of such costs during a base period. The Company's tarifffor gas service contains a comparable clause to adjust gas rates for changes in the price of purchased natural gas and certain costs of manufactured gas.
Deferred Electric Fuel Costs: The provisions ofthe electric fuel cost adjustment clause are suchthat changes in fuel costs incurred in the current month are not billed to customers until subsequent months. Therefore, in order to match costs and revenues, the Company defers that portion of such costs incurred in the current month which will result in a cost adjustment in subsequent months.
Effective November 3, 1979. the Company was authorized to Include an additional $.0015 per kwhr. offuel costs
'n its base rates and to recover over a 36-month period the portion ofdeferred fuel costs that was associated with this increase In base rates and corresponding reduction infuel adjustment factor. AtDecember 31, 1979. $5,655,000 of such costs remained to be recovered.
Deferred Gas Costs: In accordance with requirements applicable to all regulated gas utilities in the State, the Company defers each month any difference between the amount ofgas costs incurred which are recoverable through the gas adjustment clause (GAC) and GAC revenues.
The net deferral remaining at August 31 of each year is amortized over a subsequent twelve-month period for both billing and accounting purposes.
Deferred Environmental Costs: Pursuant to an Order ofthe PSC, the Company had been deferring, pending final resolution ofthe issues, the cost ofcertain environmental studies itwas conducting to contest certain provisions of the discharge permits issued by EPA for its Danskammer and Roseton plants. Effective November 3, 1979, the Company was authorized to charge to current operating expense the continuing costs ofthese studies and to recover over a 60-month period the costs that had been deferred.
Investments In Subsidiaries:The subsidiaries are wholly owned land-holding companies, and they are not consolidated forfinancial reporting purposes since their assets, liabilitiesand operations are not significant in relation to those of the Company. The Company uses the equity method of accounting for its investment in subsidiaries.
Note 2Federal Income Tax General: The Company's general policy with respect to accounting for the federal income tax is to reflect in income the estimated amount ofincome tax currentlypayable and to provide fordeferred taxes on timing differences between book and taxable income to the extent permitted for rate-making purposes.
DepreciatIon: In computing depreciation for federal income tax purposes the Company uses an accelerated method as permitted under the Internal Revenue Code, and the class life system prescribed in the Revenue Actof 1971.
Investment Tax Credit: The federal income tax is reduced by the investment tax credit. Ihe additional investment tax credit resulting from increasing the rate of such credit from 4'/o to 10'/o, as provided by the Tax Reduction Act of 1975, is being deferred and amortized over the life ofthe related property in accordance with a Statement of Policy ofthe PSC. The investment tax credit which is not deferred Is allocated equally between "Utility Operating Income" and "Other Income and Deductions" in accordance withthe Uniform Systems ofAccounts ofthe PSC.
The Company has a Tax Reduction Act Stock Ownership Plan which is funded by the use ofthe additional 1o/o investment tax credit permitted by the Tax Reduction Actof 1975. The 1o/o credit amounted to $283,000 for 1978 and is estimated to be $400,000 for 1979.
Deferred Income Tax: A summary ofthe items and amounts deferred or credited to income is as follows:
Operating Income:
Class life depreciation Cost of removal Investment tax credit Deferred fuel and gas costs Other.
Other Income (Investment tax credit)..
Total.
$ 1,342 669 2,383 3,325 409 8,128
$8,128
$ 1.175 404 1,699 1,625 327 5,230
$5,230 86 421 1,625 202 2,334 178
$2.512 64 385 1,232 162 1,843 138
$ 1,981 Amounts Deferred Amounts Credited 1979 1978 1979 1978 g7eusands of Dollars)
Reconciliation: The following is a reconciliation ofthe difference between the amount offederal income tax as reported inthe Statement ofIncome and the amount computed by multiplyingthe income before tax bythe statutory
- tax rate.
Net income Federal income tax Deferred income taxnet........
Income before tax 1979 Amount
($000)
$21,694 (762) 5,616
$26,548
%of Pretax Income Amount
($000)
$20,260 5,783 3,249
$29,292 1978
%of Pretax Income Computed tax expense................
Increases (reductions) in computed taxes resulting from:
Investment tax credit Allowance for funds used during construction.......
Deferred fuel and gas costs net.................
Excess of tax depreciation over book depreciation Cost of removal Taxes and pension costs expensed on tax return and capitalized on books.
Other deferred costs Miscellaneous itemsnet Federal income tax Deferred income taxnet Total.
$ 12,212 (3,973)
(3,685)
(1.768)
(1,540)
(836)
(706)
(409)
(57)
(762) 5.616
$ 4854 46.0%%d
$ 14,060 (15.0)
(2,830)
(13.9)
(2,413)
(6.6)
(393)
(5.8)
(1,550)
(3.1)
(505)
(2.7)
(598)
(1.6)
(327)
(,2) 339 (2.9) 5.783 21.2
'3,249 18 3o/o
$ 9,032 48.0o/o (9.7)
(8.2)
(1.3)
(5.3)
(1.7)
(2.1)
(1.1) 1.1 19.7 30.8o/o Note 3Earnings per Share and Convertible Debentures AtDecember 31, 1979 the 4%P/o convertible debentures, due June 1, 1981, were convertible into common stock at the rate of $31.48 per share, and accordingly 254,130 shares of common stock authorized and unissued were reserved for such purpose. The dual presentation ofearnings per share data in the Statementof Income reflectsth net reduction in earnings per share which would have been realized ifthe debentures outstanding at the end ofeach period had, in fact, been converted to common stock No debentures have been converted, and at December 31, 1979 the conversion price of $31.48 compared with a closing market price per share of $ 18.75.
Note 4Short-Term Borrowing Arrangements and Compensating Balances At December 31, 1979 the Company maintained lines ofcredit with seven banks totaling $55,000,000. Atthat time the outstanding short-term obligations, which consisted only of commercial paper, amounted to $45,000,000.
The total amount of commercial paper outstanding at December 31, 1979 was backed by the lines of credit maintained with the banks. Such commercial paper had maturities ranging from 29 days to 77 days and carried interest rates ranging from 13'/o to 14'/4o/a The average interest rate on such obligations was 14.2'/a
'ihe maximum amount of aggregate short-term borrowings during 1979 was $45,000,000, which occurred on December 31, 1979. The maximum amount during 1978 was $35,000.000, which occurred on February 10. The average amount of short-term borrowings during 1979, based on the monthwnd figures, was $30,333,000: the approximate weighted average interest rate, on the same basis, was 11.5o/a The comparable figures for 1978 were
$20,283,000 and 8.2o/o.
Compensating balance requirements are not formalized under the lending arrangements with banks, but the Company is expected to maintain certain average balances against its lines of credit and/or the average amounts borrowed. The requirements differfrom bank to bank, but in general call for the maintenance ofaverage balances equal to 10o/o ofthe line ofcredit plus 10o/oofthe average amount borrowed. Inasmuch as requirements are informal and are on an average basis, bank balances are not subject to any restrictions with respect to withdrawals.
Accordingly. amounts on deposit. including float, maybe greater or lessthan computed average balances at anygiven date. Substantially all cash balances were considered to represent compensating balances at December 31, 1979.
22
Note 5Capital Stock Details of capital stock at December 31. 1978 and 1979 are shown below:
Shares Authorized Shares Outstanding Common stock without par value (Note 3)
Cumulative preferred stock, $ 100 par value 10,000,000 1,200,000 5,372,873 4~/ao/o series 4.75% series 4.35% series 4.96% series 7.72% series 7A4% series 8.40% series Total Current
$ 107.00 106.75 102.00 101.00 107.00 106.80'08.40 Redemption Price Through 1/31/81 1/31/83 5/31/82 Eventual Minimum
$ 107.00 106.75 102.00 101.00 101.00 101.22 101.00 70,300 20,000 60,000 60,000 130,000 120,000 150,000 610,300 The cumulative preferred stock is redeemable only at the option of the Company and the sum payable per share is the then current redemption price plus accrued dividends thereon. In the event of involuntary liquidation the redemption price is $ 100 per share plus accrued dividends.
Expenses incurred on issuance of capital stock are accumulated and reported as a reduction in total capital stock and are not being amortized.
Note 6Long-Term Debt Details of long-term debt are shown below:
December 31. 1979 December 31. 1978 (Thousands of Dollars)
First mortgage bonds (net of current maturities):
2/8%
series, due December 1, 1980.
3.30% series, due December 1, 1982 3.20% series, due October 1, 1984 4/8%
series, due May 15, 1988 7%o/o series, due January 15, 1999.......
9%o/o series, due June 1, 2000.
7'/4%
series, due February 1, 2002.......
9'/4%
series, due April 15, 2004 10%so/o series, due November 1, 2005 6~/4o/o series, due June 1, 2007.
10'/4%
series, due September 15, 2009.
Convertible debentures (Note 3):
4%o/o, due June 1, 1981 Promissory notes (net of sinMng fund requirements):
4.85%, due December 1, 1995 Term loan notes (see below)
Total long-term debt.
6,000 11,000 18,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000 159,500 8,000 7,900 20,000
$ 195,400
$ 12.000 6,000 11,000 18,000 20,000 25,000 20,000 15,000 20,000 4,500 151,500 8,000 8.075 35,000
$202,575 23
In December 1978 the Company issued term loan notes aggregating $35 millionto three banks. The Loan Agreement under. which these notes were issued provides that the notes shall be paid in three consecutive annual installments commencing December 31, 1979. The Company has repaid $ 15 million and has the right to prepay further installments in whole or in part without penalty and also has the rightto defer, without penalty, payment of the outstanding balance until December 31. 1981. the date on which the final installment is due. The interest rate on such notes during the firsttwoyears is the "prime"rate in effect at the IrvingTrust Company and the rate during the third year is such rate plus.25%.
Expenses incurred on debt issues and any discount or premium on debt are deferred and amortized over the lives ofthe related issues.
Note 7Pension and Retirement Plan The Company has a noncontributory pension and retirement plan (Plan) available to all employees after one year's employment.
The cost ofthe Plan to the Company amounted to $2,694,000 for the calendar year 1978 and $2,526,000 for 1979. Approximately 20% ofeach year's cost was charged to construction. Based upon the Annual Valuation Report furnished to the Company by the independent actuary for the Plan, the unfunded liabilitywas $4,450,000 as of September 30, 1979, the end ofthe last Plan year. The unfunded liabilityis being amortized and funded over a period of fifteen years. Current service costs are funded annually.
The independent actuary has also furnished the Company with its opinion that as ofSeptember 30, 1979 the assets ofthe Plan were sufficient to cover the liabilities in respect ofthe members ofthe Plan who are eligible for vested benefits.
Note 8Commitments and Contingencies The Company has been participating as a tenant in common, owning 17% (195.5 mw.), in the Sterling Nuclear Plant proposed to be constructed by Rochester Gas and Electric Corporation in Cayuga County. New York. and scheduled for operation in 1988. The construction and siting ofthe Sterling Plant were approved by the New York State Board on Electric Generation Siting and the Environment (Siting Board) inJanuary1978; however, in May 1978 the Siting Board suspended that approval in order to r~xamine the need forsuch Plant in lightofrevised projections that indicated reduced electric load growth in New York State. On January 23, 1980, the Siting Board voted to withdraw the January 1978 approval on the basis that the Plant would not be needed until after 1990. Since the Sterling Plant construction and siting have not received the requisite approval bythe Siting Board, the project willnot be constructed.
Through December 31, 1979, the Company's Investment in the Sterling project amounted to $ 16.1 million.The Company believes that it willbe permitted to amortize its investment in this project. plus any related cancellation charges, over a period ofyears and to recover such costs through rate relief. During February 1980, the Company, together with the other owners of the project, expects to petition the PSC for such permission.
The Company's undivided interest in the ownership and output ofthe 1,200-mw. Roseton Plant was increased from 20% to 30% as of December 31. 1978. It is obligated to purchase a further 5% interest in 1982 and has an option to acquire the remaining interests ofthe other two owners in 2004. In addition, the Company is obligated to purchase specified amounts of Roseton Plant capability during the summer capability periods through 1982. The Company's share of direct operating expense for the Roseton Plant is included in the appropriate expense classification in the accompanying income statement The Company has long-term contracts for the supply of natural gas viiththree pipeline suppliers. The earliest expiration date ofany ofthese contracts is in 1988. The Company also has a contract forthe storage ofgas. Allsuch contracts are under tariffson filewithand approved by FERC. Reference is made to the section entitled "Natural Gas" for additional information regarding natural gas supply.
Reference is made to the section entitled "Construction" for information regarding the Company's construction program for the five-year period 1980-1984.
Reference is made to the section entitled "Electricity"for information regarding the Company's participation in Unit No. 2 ofthe Nine Mile Point Nuclear Plant Commitments for minimum rentals under noncancellable leases are minor, and neither the present value ofnon-capitalized financing leases nor the impact on net income of capitalizing such leases is significant.
Note 9Departmental Information The following presents certain information pertaining to the Company's operations for its electric and gas departments for the years ended December 31, 1978 and 1979:
Operating Revenues...........
Operating Expenses:
Depreciation.
Other, excluding income tax..
Total Operating Income before Income Tax..
Federal 'Income Tax, including deferred income taxnet.........
Operating Income Electric Gas Total 1979 1978 1979 1978 1979 1978 (Thousands of Dollars)
~225.971
~186,264
$28813
$24738
$254784 $ 211 002 13,305 11,887 176 494 140,689 1,534 1,506 24,334 18 795 14,839 13,393 200.828 159,484 5 733 8 799 232 1 092 5,965 9,891
$ 30,439 $ 24,889
$ 2,713 '3,345
$ 33,152
$ 28,234 189799 152,576 25.868 20,301 215.667 172877 36,172 33,688 2,945 4,437 39,117 38,125 Construction Expenditures'......
$ 38,473 $ 62,703 S 2053
$ 1,810
$ 40526
$ 64 513 Identifiable Assets at December 31*
Net UtilityPlant Construction Work in Progress....
Total UtilityPlant.............
Materials and Supplies...........
Total
'Includes allocation ofCommon UtilityProperty.
$308.356 $307,944
$37,519
$37,359
$345,875
$345,303 95,781 70734 2,238 1 812 98.019 72546 404,137 378,678 23488 15 511 39,757 846 39,171 717 443,894 417,849 24,334 16 228
$427 625 $394 189
$40603
$39 888
$468,228
$434 077 Note 10Selected Quarterly Financial Data (Unaudited)
Selected financial data for each quarterly period within 1978 and 1979 are shown below:
Operating Revenues Operating Net Income Income (Thousands ofDollars)
Income Available for Common Stock Earnings Per Average Share of Common Stock Outstanding (Dollars)
Quarter Ended:
March 31. 1978..............
June 30,1978...............
September 30, 1978..........
December 31, 1978...........
March 31. 1979......
June 30,1979.......
September 30, 1979..
December 31, 1979...
$59A49 48,398 50,576 52,578 68,261 56,523 62,949 67,051
$9A67 5,878 6,451 6,438 10,440 6,555 7,345 8,813
$7,242 3,882 4,535 4,602 7,643 3,821 4.650 5.581
$6.210 2,850 3,503 3,570 6,611 2.789 3,618 4,549
$ 1.21
.53
.65
.66 1.23
.52
.67
.85
Supplementary InformatIon to Disclose the Effects of Changing Prices The following supplementary information is supplied in accordance with the requirements of the Financial Accounting Standards Board Statement No. 33, Financial Reporting and Changing Pi1ces, for the purpose of providing certain Information about the effects of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.
Under the ratemaMng policy to which the Company is subject, only the original, or historical, cost ofplant is recoverable in revenues as depreciation. Therefore, the excess ofthe cost ofplant stated interms ofconstantdollars or current cost over the historical cost of plant is not recoverable in rates as depreciation. While the rate-making process gives no recognition to the current cost ofreplacing facilities, based on past practice, the Company believes that any higher costs itmay experience upon actual replacement ofexisting facilitieswould be recovered through the normal regulatory process and that as part ofthis process itwillbe allowed to earn on the increased cost ofits net investment Statement of Income from ContInulng Operations Adjusted for Changing PrIces for the Year Ended December 31, $979
('Ihousands of Dollars)
Operating revenues Operations Maintenance Depreciation Operating taxes Federal income tax Interest charges Other income and deductions Income (loss) from continuing operations (excluding reduction to net recoverable cost)
Increase in specific prices (current cost) of property, plant and equipment held during the year**
Reduction to net recoverable cost Effect of increase in general price level Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost Gain from decline in purchasing power of net amounts owed Net 169,742 9,818 15,037 21,268 4,854 15,712 (3,341) 169,742 9,818 31,436 21,268 4,854 15,712 (3,341) 169.742 0,818 39,378 21,268 4,854 15,712 (3,341) 233,090 249,489 257,431
$ 21,694 5,295~, $
(2,647)
$ 115,546
$ (37,106)
(38,501)
(106,209)
(29,164) 26,173 26,173
$ (10,933)
(2,991)
Conventional Constant Dollar Current Cost Historical Average Average Cost l979 Dollars 1 979 Dollars
$254,784
$254,784
$254,784
'Including the reduction to net recoverable cost. the Income (loss) from continuing operations on a constant dollar basis would have been S(31,811) for 1979.
"AtDecember 31 ~ 1979, current cost ofproperty, plant and equipment, net ofaccumulated depreciation was $913,434, whilenet historical cost was $443,894.
26
Five-Year Comparison of Selected Supplementary Flnanclal Data AdJusted for Effects of Changing Prices Un'Ihousands of Average 1979 Dollars)
Years Ended December 31, 1975 1976 1977 1978 1979
$213.498
$217,679
$248,951
$234,761
$254,784 Historical cost information ad'usted for eneral infiation.
Income (loss) from continuing operations*
Income (loss) per common share (after dividend requirements on preferred stock)*
Net assets at year end at net recoverable cost Current cost information Income (loss) from continuing operations'ncome (loss) per common share (alter dividend requirements on preferred stock)*
Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost Net assets at year end at net recoverable cost General information Gain from decline in purchasing power of net amounts owed Cash dividends declared per common share Market price per common share at year end Average consumer price index
'Excluding reduction to net recoverable cost 5,295
$.22 197,640 (2,647)
$(1.26) 29,164 197,640 26,173
$2.32
$2.19
$2.20
$2.18
$2.04
$24.88
$27.37
$27.18
$22.52
$ 18.75 161.2 170.5 181.5 195.4 217.4 Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power. as measured by the Consumer Price index forAllUrban Consumers (CPI-U). Current cost amounts reflect the changes in specific prices ofplant from the date the plant was acquired to the present, and differfromconstantdollar amounts to the extent that specific prices have increased more or less rapidly than prices in general.
The current cost of property, plant, and equipment, which includes land, land rights. intangible plant, property held for future use, and construction work in progress, represents the estimated cost ofreproducing existing plant assets and was determined by indexing the surviving plant bythe Handy-Whitman Index ofPublic UtilityConstruction Costs for the north Atlantic region with the exception of general structures which was indexed based on the Engineering News Report index. Allother property forwhich the Handy-Whitman Index is not available was indexed based on CPI-U. The current year's provision for depreciation on the constant dollar and current cost amounts of property, plant, and equipment was determined by applying the Company's depreciation rates to the indexed plant amounts.
Fuel inventories, the cost offuel used in generation, and gas purchased for resale have not been restated from their historical cost in nominal dollars. Regulation limits the recovery of fuel and purchased gas costs through the operation of adjustment clauses or adjustments in basic rate schedules to actual costs.
For this reason fuel inventories are effectively monetary assets. As prescribed in Statement No. 33, income taxes were not adjusted.
To properly refiect the economics ofrate regulation inthe Statement ofIncome fromContinuing Operations, the excess ofthe cost of plant stated in terms of constant dollars or current cost over the historical cost of plant is refiected as a reduction to net recoverable cost In addition, the reduction of net property, plant, and equipment should be offset bythe gain from the decline in purchasing power ofnet amounts owed. During a period ofinfiatlon, holders ofmonetary assets suffer a loss ofgeneral purchasing power while holders ofmonetary liabilitiesexperience a gain. The gain fromthe decline in purchasing power ofnet amounts owed Is primarilyattributable to the substantial amount ofdebt which has been used tofinanc property, plant, and equipment. Since the depreciation on this plant is limited to the recovery ofhistorical costs, the Company does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital.
27
DIRECIORS ERNESI' ALTHOUSE Poughkeepsie, N.Y.
Vice Chairman of the Board and Vice Chairman of Committee on Finance: Member of Executive Committee and Committee on Compensation and Succession WILLIAMP. ARNOLD New York. N.Y.
President and Chief Executive ONcer Associated Dry Goods Corporation.
a department store chain: Member of Committee on Audit RAYMONDT. BENEDICT Stamford. Ct.
Lawyer, of Counsel, Cummings &
Lockwood: Member of Executive Committee and Committee on Finance JAMES IL BREED. M.D.
Poughkeepsie, N.Y.
Surgeon Member of Committee on Audit MARJORIE S. BROWN Millbrook. N.Y.
Homemaker, active in cMc and philanthropic work. formerly executive in retailing and promotional organizations THEODORE J. CARLSON Poughkeepsie, N.Y.
Chairman of the Board and Principal ONcer: Chairman of Executive Committee: Member of Retirement Committee, and Committees on Finance and on Compensation and Succession ROY C. KETCHAM Rshkill. N.Y.
Chairman of the Board and Chief Executive ONcer, Ketcham Motors. Inc.:
Chairman of the Board of The FishMll National Bank: Chairman of Committee on Compensation and Succession:
Member of Executive Committee EDWARD J. MACK LaGrangeville, N.Y.
Lawyer: Member of Retirement Committee and Committee on Compensation and Succession HERBERT 1. SHULTZ Kingston. N.Y.
Vice President for Development, Vassar College: Chairman of Retirement Committee: Member of Committee on Audit JOHN WILKIE Katonah, N.Y.
Chairman of Committees on Finance and on Audit: Member of Executive and Retirement Committees H. CLIFTON WILSON Poughkeepsie, N.Y.
President: Member of Executive and Retirement Committees. and Committees on Finance and on Compensation and Succession OFFICERS OF THE BOARD THEODORE J. CARLSON Chairman of the Board and Principal ONcer and Chairman of Executive Committee JOHN WILKIE Chairman of Committees on Rnance and on Audit ERNEST E ALTHOUSE Vice Chairman of the Board and Committee on Finance ROY C. KETCHAM Chairman of Committee on Compensation and Succession HERBERT I SHULTZ Chairman of Retirement Committee OFFICERS H. CLIFTON WILSON President JOHN E MACKIII Executive Vice President I. WALLACECROSS Senior Vice President-Finance and Accounting CHARLES E RIDER Senior Vice PresidentMrporate Planning CHARLES A. BOLZ Vice President-Engineering WILLIAMA. KLING Vice PresidentMmmunlty Affairs HENRY I WALKER Vice President-Production JOSEPH F. FURLONG Secretary and Treasurer JAMES E SMITH Assistant Vice President WALTER A. BOSSERT. JR.
Assistant Secretary and Assistant Treasurer CHARLES P. KOVAR Assistant Secretary EMORY R. OSBORN Assistant Treasurer TRANSFER AGENTS COMMON STOCK Irving Trust Company One Wall Street New York N.Y. 10015 PREFERRED STOCK 4.35%. 4'%. 4.75%. 4.96% Series Charles P. Kovar. Emory R. Osbom Central Hudson Gas & Electric Corporation Poughkeepsie.
N.Y. 12602 7.44%. 7.72%, 8.40% Series Marine Midland Bank 2 Broadway New York. N.Y. 10004 REGISTRAR COMMON SIQCK Ihe Chase Manhattan Bank 1 Chase Manhattan Plaza New York. N.Y. 10015 GENERAL COUNSEL Gould & WilMe One Wall Street New York, N.Y. 1000S INDEPENDENT ACCOUNTANTS Price Waterhouse & Co.
153 East 53rd Street New York, N.Y. 10022 28
This feature-length film, narrated by Orson Welles, tells the story of the Hudson River from prehistoric times to the present day. Indians, explorers and soldiers, the development of agri-culture, transportation and commerce are among the many subjects depicted in this beautifully evocative and challenging work.
Presented on Public Service television, this film has been given the first prize, Grand Prix Award for best documentary at the Houston International Film Festival, and the prestigious Cine Golden Eagle Award, the top professional movie-maker's award In this country. The latter award assures inclusion as representative of the best in U,S, filmsat festivals all over the world.
Central Hudson is proud to be among the film's sponsors and to have assisted in publicizing the beauty and rich heritage of Henry Hudson's River.
A segment of the award-winning film willbe shown at the 1980 Annual Meeting of Share-holders. The film in its entirety is scheduled to be shown on national network television over the Public Broadcast System on April 16, 1980 at 10 P.M, Eastern Standard Time and 9 P.M. Central Time. Consult local listings in other time zones.
The sloop "Clearwater" passing the Hudson Ughthouse opposite Athens.
g' One of the many colonial stone houses at New Paltz.
y" The home of President Franklin Delano Roosevelt at Hyde Park.
LooMng up the Hudson from West Point
rf"),r>) '
V 4
, "i
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