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: |
| References | |
| NUDOCS 8005220642 | |
| Download: ML17053B654 (34) | |
Text
Central Hudson
...a regional energy company dedicated to service 0
0 0 0
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0 0 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 of the region's scenic beauty as the Catskills. the Shawangunk, and the Hudson Highlands.
Quality of Life In 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 of the Vanderbilt Mansion, a National Historic Site in Hyde Park 3. An intensive rehabilitation program Is under way in
Central Hudson CATSKILL~
....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 of the region served by Central Hudson extends from 10 miles south of Albany to 30 mlles north of New York City.
0 0 The area is known for its outstanding O natural beauty, characterized by the Hudson 0 River, the Catskill Mountains, and the KINGSTON ~ O 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 ~ POUGHKEEPSIE 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 of its 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. for example, has not been able to control the price of imported 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 of other 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 of life In the Mid-Hudson Valley since before the turn of the century. Over the decades, the use of energy, 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 of life style people would like to enjoy in the years ahead. The choices and trade-offs are numerous. It Is 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 . ~ 4 3 Letter to Shareholders.
Electricity S Natural Gas .... 6 Environment .... 7 Customers . .... 7 Construction .... 9 Finandal ... 10 Corporate ... 11 Management's Discussion and Analysis of the Summary of Operations .. 12 Financial Section 1S Board of Directors and Officers . 28 The annual meeting of holders of common shares willbe held on Tuesday, April 1. at 10:30 a.m.,at the South Avenue office of the Company In Poughkeepsie, New York. Notice of this meeting, together with the proxy statementand 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 Central Hudson Gas 8 Electric Corporation aNrms that equal Hudson's annual report to the Securities and Exchange employment opportunity shall be provided for all persons. This Commission, on Form 10-K. by writing to Mr. Joseph F. means that all personnel polides Including those related to compensation. benefit. transfers. promotlons. training. tuition Furlong, Secretary, Central Hudson Gas &Electric CorporatIon, assistance and sodal and recreational programs shall be 284 South Avenue, Poughkeepsie, New York 12602. A administered without regard to race. color. creed. age. sex or comprehensive statistical supplement to the Company's 1979 national origin. Recruiting and hiring practices shall be Annual Report, containing key financlal and operatIng results administered so as to assure fulfillmenof the Company's equal for a ten-year period, willshortly be available on request to Mr. employment opportunity objective.
Central Hudson Gas & Electric Corporation aNrms that It will Furlong. 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 quallfleCL Ibis means that CENTRAL HUDSON GAS 8c ELECTRIC CORPOMTION all personnel polldes Including those related to emplcynent.
promotion. demotion or transfer, training. compensation.
General Office benefit and termination shall be administered without 284 South Avenue, Poughkeepsie, New York 12602 discrimination based upon physical or mental handicap against Telephone (914) 452-2000 qualified handicapped Individuals.
Five-Year Summary of operations'Thousands of Dollars) 1979 1978 19?7 1976 1975 Operating Revenues:
Electric $ 225,971 $ 186,264 $ 184,391 $ 149,884 $ 138,414 Gas 28,813 24,738 23,449 20,831 19.897 Total. 254,784 211,002 207,840 170,715 1S8,311 Operating Expenses:
Operations . 169,742 132,554 133,688 100,917 92,604 Maintenance 9,818 8,151 8,098 6,794 6,611 Depreciation 14,839 13,393 13,279 12,859 12,569 Operating taxes 21,268 18,779 18,560 16,975 16,003 Federal income tax .. 5,965 9,891 7,099 6,392 4,453 Total 221,632 182,768 180,724 143,937 132,240 Operating Income 33,152 28,234 27,116 26,778 26,071 Other Income and Deductions:
Allowance for equity funds used during construction ......... ~...... 3,476 2,388 1,560 796 324 Federal income tax credit .. ~........, 1,111 859 703 439 734 Other net (333) (348) (90) (84) 17 Total. 4,254 2,899 2,173 1,151 1,075 Income before Interest Charges ....... 37,406 31.133 29,289 27,929 '7,146 Interest Charges:
Interest on debt 19,923 13,185 12,507 12,640 12,680 Other . 325 328 866 376 510 Allowance for borrowed funds used during construction ......... ~... (4,636) ~2,64D) (1,631) ~1,014) (381)
Total 15,712 10,873 11.542 12.002 12,809 Net Income 21,694 20,260 17.747 15,927 14,337 Dividends on Preferred Stock ........... 4,126 4,126 3,626 2,866 2,866 Income Available for Common Stock....... 17,568 16,134 14,121 13,061 11,471 Dividends Declared on Common Stock ..... 10,961 10,531 8,966 8,382 7.737 Amount Retained in the Business......... 6,607 5,603 5,155 4,679 3,734 Retained Earnings beginning of year..... 67,084 61.481 56,326 51,647 47,913 Retained Earnings end of year.......,... $ 73.691 S 67,084 S 61A81 $ 56,326 $ 51.647 Common Stock:
Average Shares Outstanding (000's) .... 5,373 5.310 4,873 4,873 4,440 Earnings Per Share on Average Shares Outstanding . $ 3.2? $ 3.04 $ 2.90 $ 2.68 $ 2.58 Earnings Per Share Assuming Conoerslon of the Conoerttble Debentures.......... $3.16 $293 $2.70 $250 $240 Dividends Declared Per Share .......... $ 2.04 $ 1.96
'1.84
$ 1.72 $ 1.72 Ratio of Earnings to Fixed Charges"...... 2.31 3.17 2.81 2.68 2.37
'This summary should be read In conJunction with the financial statements and notes thereto Included In the "Hnanclal Section" of this Annual Report.
"For the purpose of computing the Ratio of Earnings to Fixed Charges, earnings consist of net income plus fixed charges plus all federal Income tax amounts. Fixed charges consist of total interest charges, excluding the allowance for borrowed funds used during construction.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION POUG HKE E PS I E, N. Y. 12 6 02 March 3, 1980 To Our Shareholders:
We believe that 1979 was a year of accomplishment for your Company. We say this not only with regard 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.
All of these 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 of service. Although many customers feel that the rates for electricity and gas are too high, the Company's rate increases have been in line with 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 it is recognized that the market value of Central Hudson's stock has noticeably decreased along with that of other utilities during the last 10 to 15 years.
The Company's employees are fairly compensated.
The communities served by Central Hudson receive substantial benefits, primarilythrough flow utility services 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 of electricity and gas represents one of the best means of utilizing energy efficiently while at the same time conserving benefits natural resources; and we see in the future a further enhancement ofthe quality of life through the use of electricity and natural gas.
We dedicate this Annual Report to the services we render and to the Mid-Hudson Valley. one of the most beautiful regions in the world which affords its people great social, cultural and educational benefits.
Central Hudson is an essential part of the region: and as the years go by, the quality of life which we enhance willbe the principaljustification for our existence, and out of thatjustification will 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 Hudson River, the Hudson River Valley, and the Empire Crossroad of history. Prior to the advent of Henry State.
Hudson on the Hudson River in the Half Moon in 1609, Today, the sloops and the old steamboats are part of the river had been a focal point for an active Indian history, and clearly different modes of transportation clvllizatlon, artifacts of which are still discoverable in the and energy meet the needs of the residents of the area.
Valley. The epochal arrival of the explorer led to the Among the most significant energy resources are eventual establishment of the Hudson River as a major electrldty and gas, which have been supplied to the Mld-factor in the economy of New York State and the East Hudson Region by Central Hudson and its predecessor The famous Hudson River sloops carried the commerce companies since before the turn of this century. Central of the Valley, and the voyage of Robert Fulton's Hudson Is Identified with and is an integral part of its Clermont up the Hudson in 1807 introduced the age of area; and the means by which electricity and gas are the steamboat and opened up the Valley to further supplied, the technological, social and economic issues economic development The opening of the Erie Canal In involved In that supply, and the enhancement of the 182S made the Hudson the major route to the north quality of life which electricity and gas has provided and and west. Soon the banks of the river were used by the will provide In the future comprise the theme of this railroads as still another era began in the history of the report.
ELECTRICHlV Sterling Project The Company had been participating as a tenant in Electric Supply common in the Sterling Nuclear Plant, which was to have Present Supply been constructed in upstate New York and placed in Electricity is supplied to the Mid-Hudson region service in 1988.
primarily from the Roseton and Danskammer oil-fired The project was approved by the New York State Board generating plants and the Neversink and Sturgeon Pool on Electric Generation Siting and the Environment (Siting hydroelectric plants. Interconnections with other New York Board) in January 1978. However, the Siting Board State utilities, coordinated by the New York Power Pool, suspended the approval in May 1978 in order to and with other utilities throughout the Northeast reexamine the need for the plant in light of revised contribute to supply and reliability. projections that indicated a reduction in electric load growth in the State.
.Future Generating Plans On January 23, 1980, the Siting Board voted to The growth in peak load in the Central Hudson area withdraw the January 1978 approval on the basis that continues to slow down and future forecasts are the plant would not be needed until after 1990.
substantially below previous predictIons. However, a new Consequently, the plant cannot be constructed. The all-time peak of 633.2 megawatts was set on the Central 'Company does not expect that the failure of the project Hudson system on December 19, 1979. Growth does exist, to go for ward will affect its ability to satisfy the future and plans for the eventual replacement of oil as a primary electrical needs of its customers.
fuel have become critical. Through December 31, 19?9. the Company's 170/0 investment in the project amounted to $ 16.1 million.
Nine Mlle Point Additional information is contained in Note 8 on page24.
Central Hudson has a contractual commitment to participate in the development of Unit No. 2 of the Nine Hydroelectric GeneratIon Mile Point Nuclear Station. which is being constructed by Concerned by the rapidly rising price of fuel oil Central
~
Niagara Mohawk Power Corporation and which was Hudson has been engaged in the review of potential approximately 34% complete at the end of 1979. hydroelectric installations and will conduct indepth During the 1979-80 winter and early spring of 1980, studies if certain sites appear to be economically feasible the work force on the site was substantially reduced to for development avoid potential inefficiencies of winter weather work, and With financial assistance from the Department of to assess the possible impact on the project of the Three Energy and the New York State Energy Research &
Mile Island incident. Development Authority. an investigation of the Company's Central Hudson has a 9</>0 interest in this plant and as High Falls site concluded that it is economically desirable
. of December 31, 1979 had invested $ 75.1 million in the to redevelop that site at an approximate cost project. of $ 2.3 million.
S
Two years will be required for construction after the The principal elerrient of this strategy is a growing necessary approvals are obtained. emphasis on coal and uranium for the generation of A major renovation involving the resurfacing of the electricity. They are both domestic fuels: they are reliable, spillway of the Sturgeon Pool Hydroelectric Plant was more economical than oil, and can be used safely. The completed in 1979. and work on the intake structure is strategy also calls for conversion of existing oil-fired plants planned for 1980. The plant, in service since 1924, to coal, strong emphasis on energy conservation, continues to be an important source of hydroelectric increased imports of hydroelectric power from Canada, power for the Company. the development of small hydro plants, the use of refuse as a fuel source, and the development of new energy Coal Conversion sources, such as solar power.
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 The energy crisis has focused attention on the need to of Units Nos. 3 and 4 to coal-firing.
develop domestic energy resources. The increased The FEA order may not become effective until the U.S.
Environmental Protection Agency (EPA) has determined availability and use of natural gas will be essential if the that coal can be burned in compliance with all applicable United States is to achieve energy independence. As part air quality requirements and until the Department of of the gas industry, Central Hudson is supporting efforts to make the gas option a fundamental part of the Energy (DOE) has completed an Environmental impact .
'ation's energy future.
Statement At this time neither agency has acted.
As originally required by the Clean Air Act and EPA Natural Gas Supply regulations, the initial plan for conversion of Danskammer The Company has long-term contracts for the supply of Units Nos. 3 and 4 to coal included the use of flue gas natural gas from Columbia Gas Transmission Corporation, desulfurization (FGD) equipment and would have required Tennessee Gas Pipeline Company, and Texas Eastern an investment of $ 115 million.
Transmission Corporation.
Subsequent amendments to the Clean Air Act may During 1979, as in 1978, the supply of natural gas make it permissible to convert to coal without FGD improved.
equipment, in which case the conversion would require an In the spring of 1979, the Company's two major investment of about $ 65 million.
suppliers advised that curtailments would be lifted during ~
The Company's initial conversion plan (with FGD) and its revised conversion plan (without FGD) are currently under the 1979 summer period April 1 through October 31 and that less severe curtallments could be anticipated review by the EPA for compliance with air quality thereafter requirements, and the DOE has begun preparation of an As the result of the increase in the amount of gas environmental impact statement as required by law. After available, and under a petition to the Department of all necessary permits are obtained it is estimated that Energy for an exemption from the prohibition on the three years will be required for construction.
burning of natural gas as a primary fuel in boilers, the
'tate Company resumed the burning of gas as a primary fuel in Energy Master Plan Unit No. 2 at the Danskammer Plant on April 24. Prior to An Energy Master Plan, which is being developed by the this date, natural gas had not been burned as a primary State Energy Office, calls for the increased use of coal ~
fuel in Unit No. 2 since 1971.
natural gas and renewable energy sources, along with During 1979, 2,441,100 mcf. of natural,gas was burned greater emphasis on energy conservation to meet future in Unit No. 2 which offset 399,100 barrels of 1% sulfur energy needs.
fuel oil and produced S 2.383.000 in savings for the Central Hudson and other major electric companies in Company's electric customers and $ 325.000 in savings for New York State believe the Energy Master Plan is unrealistic and fails to deal effectively with the problem of the Company's gas customers.
With increased natural gas supplies, the Company's reducing the State's dependence upon foreign oil.
higher priority interruptible customers experienced Consequently, the electric utility industry in New York 9 days of interrupted service as compared to 58 days State has proposed an energy strategy for the 1980's and 1990's that is more economic and will result in more in 1978. Increased sales of gas to the Company's interruptible customers provided increased savings in the significant oil savings than can be achieved through the cost of gas to the Company's firm gas customers.
State plan.
The Company will continue to monitor closely the natural gas supply situation and will take full advantage of all gas supplies as they become available.
Energy Research Corporation, for which the.Company's E9MROMMENY share was $ 2?7,000: projects funded jointly with utilities using the waters of the Hudson River for cooling in their Providing electric and gas service affects the physical
.environment Central Hudson has been responsive to the generating plants, for which Company expenditures were need to protect the environment to the greatest extent $ 219,000; projects conducted solely by the Company, possible while keeping in mind the need to provide service which cost $ 510,000; and the Company's contribution of at a cost that does not place an unnecessary financial $ 187.000 to the cost of research and development burden on its customers. Maintaining a balance between performed by the New York State Energy Research and the two objectives sometimes requires the Company.to Development Agency which is mandated by Section 18-a challenge rules and regulations which it believes are not in of the Public Service Law. The Company has no control the best interest of either the environment or its over the manner in which such funds are expended.
customers. During the year, the Company continued research projects designed to assess the effects of solar heating on Cooling Towers electric system loads, the effects of various rate forms on In early 1975, the U.S. Environmental Protection Agency customer utilization of electric energy, the potential of notified the Company that it intended to require the various technologies for controlling the time of occurrence installation of cooling towers at the Roseton Plant at an of customer peak demands, and the efficacy of heat estimated capital cost of at least $ 72 million, of which pumps and other energy conservation devices and Central Hudson's share would be 35% in 1983. strategies in reducing energy usage and costs in Furthermore, an alteration of the cooling water intake residential and commercial buildings.
and discharge facilities at the Danskammer Plant may be required, which are part of the Company's research and development effort described below.
Extensive and continuing biological studies indicate that the costs of cooling towers and of discharge modifications Central Hudson is dedicated to the service of its would be grossly disproportionate to any possible customers. However, society is complex and always ecological benefits which might be realized. In addition, changing. Unlike earlier and more simple times, it is more the cooling towers will cause certain adverse difficult for businesses to provide goods or services that environmental and aesthetic effects. satisfy all customers, particularly during a period of rising Accordingly, the Company is contesting these prices. Nevertheless, during 1979, Central
~ requirements in administrative proceedings which its commitment to a high standard of service Hudson'ontinued commenced in December 1977 and are expected to by initiating and implementing several programs designed continue into 1981. to provide even greater service to customers.
Research and Development Number of Customers The Company is supporting a vigorous and varied During 1979, Central Hudson served an average of research and development program designed to enhance 208,459 electric and 43,51 5 gas customers.
the Company's understanding and control of the environmental effects of its operations, to improve Natural Gas Conversions existing energy technologies, and to develop and apply In May 1979, the Public Service Commission partially new technologies for the production. distribution. and removed the restrictions which had been placed on the conservation of energy. sale of natural gas to Commercial and industrial Expenditures for research and development in 1979 customers in 1972; were $ 1.75 million. Of this amount, $ 1.66 million was This action, combined with the nationwide effort to spent on electric projects. This amounts to .92% of utilize domestic resources, the significant price differential electric revenues, which is in keeping with the PSC between heating oil and natural gas and the slightly guideline calling for electric utilities to spend approx- improved outlook of future natural gas supplies resulted imately 1% of electric revenues on research and in a substantial increase in the number of customer development. requests for natural gas service. During 1979, more than The 1979 electric research and development program 900 individual residential customers, 1,000 apartment was divided into five principal categories: projects funded units and almost 200 commercial or industrial customers nationally. including those funded under the aegis of the applied for gas service. Although some of the requests Electric Power Research Institute, for which the had to be deferred until 1980, all individual customers Company's expenditures were $ 470,000: projects funded
'n a statewide basis through the Empire State Electric 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 Extra Security Program As part of Central Hudson's overall energy conservation The Company has implemented a new program entitled .
effort, a Home Advisory Service was instituted early in Extra Security Program to replace the former Account 65 1979. This educational service is designed to assist new plan.
home buyers'as well as existing homeowners. Energy The Account 65 plan offered customers who were 65 or Management Counselors contact customers by telephone, a monthly budget bill and a guarantee that the 'lder conduct personal visits, or provide mailings of energy service would not be disconnected for nonpayment during conservation literature. More than one thousand the period November 1 through April 15.
customers responded to a midsummer bill enclosure and This new plan is available to customers formerly were advised on construction methods and materials, enrolled in Account 65 and, in addition, to customers who retrofitting measures, household practices, and appliance are heads of a household and who are permanently selection techniques to conserve energy. retired or the recipient of Social Security benefits, including disability or survivors benefits.
Home Insulation and Energy Conservation Act In addition to budget billing and the guarantee that The year 1979 was the first full year of Central service will not be disconnected during the cold weather Hudson's compliance with a mandated State program for months, a customer's bill always indicates a due date conducting home energy audits for residential customers between the 6th and the 22nd of the month so that the in one-, two-, and three-family homes. utility bill can be paid during that period of the month The Company's Energy Management Counselors can when the greater number of such customers has income advise customers which of eleven energy conservation available from Social Security checks.
measures will provide a pay-back in less than eight years.
On-site (Type A) audits are conducted for a $ 10 fee; Computer Systems audits utilizing information provided by the customer During 1979,the Company completed the development (Type B) are completed without charge. Under this and implementation of a Materials Management System.
program, Central Hudson is required to provide financing This system permits faster and more efficient transfer of through local banks at an interest rate equal to the information required by the Purchasing and Stores Company's rate of return. The Company must pay any functions.
interest charges in excess of its authorized rate of return While the investment in programming is substantial, it and must guarantee the repayment of loans which are is anticipated that savings will be realized in future years provided to eligible customers. 'Ihe program also calls for as the result of reduced inventory requirements and the Company to advise customers that oil burner audits because the new system has the capability to accom-are available. modate increased activity without a corresponding During the first year of the program, 270 "A" audits increase in person~el.
and 352 "B" audits were conducted. In addition, 25,776 The Company is now in the process of preparing Do-It-Yourself audits (Type C) were also. distributed. subsystems and data necessary for the creation of a During 1980, this program will be combined with the Customer Information System.
Federal Residential Conservation Services Program. The first subsystem in service, a Bad Debt File, makes it possible for Customer Service Representatives to check Other Energy Conservation ActivÃes new service applications for unpaid final bills within a few Many other energy conservation activities were under- seconds, substantially reducing the time required for the taken by Central Hudson during 1979. Exhibits featuring necessary record checking. Additional programs will be effective use of energy and the home energy audit completed and placed in service during 1980.
program were displayed at numerous Energy Fairs and home shows throughout the service territory, including Right-of-Way Management the Newburgh and Kingston Home Shows and the A three-year right-of-way vegetation management Dutchess and Orange County Fairs. program, begun in 1978, has resulted in substantially
'fhe Dutchess County Fair display Included a kitchen improved electric transmission line reliability.
designed and built to accommodate the handicapped. This The judicious use of selective herbicides and the cutting model kitchen has since been installed at Gateway of dense, woody stem vegetation will assure control of Industries in Kingston, a United Way organization devoted noncompatible vegetation.
to rehabilitation of the handicapped. Long-term vegetation management plans for The first of three regional Energy Conservation maintenance of electric and gas rightswf-way are being Seminars devoted to education of members of the revised to incorporate use of techniques and materials banking community, real estate brokers and appraisers consistent with increasingly stringent environmental and was held in Orange County during December. regulatory requirements.
CQMSYRUCYIGj(6 the five operating districts, the most complex relocation occurred on Route 9 south of the City of Poughkeepsie.
Maintaining a high standard of reliable electric and gas During the last three years, the Company has been service for more than one-half million people in eight involved in street and highway relocation projects counties requires a major ongoing construction program. amounting to approximately $ 4.5 million, none of which Because of the nature of a utility system generating was reimbursable.
plants, transmission and distribution systems, and The construction program for 1980, including new substations Central Hudson's construction program projects and those carried over from 1979, amounts to involves large expenditures of capital. $ 47.5 million. This represents an increase of $ 7.0 million Company forces completed the construction of a 7.4- . over the $ 40.5 million expended in 1979.
mile, 69,000-volt transmission line in the Catskill District Of the 1980 construction expenditures, $ 24.3 million during 1979 with man-hour expenditures 40% below represents the Company's share of the cost of the Nine estimates for the project. Mile Point Nuclear Plant and the balance will be spent on Expenditures for electric and gas facility relocations due projects located, within the Company's service territory.
to municipal and highway projects totaled $ 1.6 million Estimated construction expenditures for the period during 1979. While projects were undertaken in each of 1980 through 1984 are set forth below.
Construction expenditures for the next five years are presently estimated to amount to $ 253.9 million. The estimates by years are as set forth below:
5-Year 1980 1981 1982 1983 1984 Total (Thousands of Dollars)
Construction Expenditures*
Participation in Unit No. 2 of the Nine Mile Point Plant (9%) ..... $ 24.300 $ 31,300 $ 30,400 $ 26,500 $ 23,100 $ 135,600 Purchase of an additional 5% interest in the Roseton Plant .............. 13,300 13,300 Expenditures excluding future major generating plants . 23,200 21,600 23,000 18,600 18,600 105,000 Total $ 47.500 $ 52.900 $ 66,700 $ 45,100 $ 41.700 $ 253,900
'Including allowance for funds used during construction ("AFDC"), a noncash item (see Note 1 of the Notes to Financial Statements).
The above five-year construction program does not include any provision for (1) the possible conversion from oil-firingto coal-firing of Units Nos. 3 and 4 of the Company's Danskammer Plant: (2) the possible installation of cooling towers at the Roseton Plant and the possible alteration ofthe coo! ing water intake and discharge facilities at 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.
If the Company is required to convert the Danskammer Plant units to coal-firing, the cost of conversion is presently estimated at $ 115 million ifflue gas desulfurization equipment is required and $ 65 million ifsuch equipment is not required.
The estimated cost of installing cooling towers at the Roseton Plant is at least $ 72 million, of which the Company's share would be 35% in 1983.
1, 1979 and at the December meeting the dividend rate was increased from $ .52 to $ .54 effective with the Large construction programs require regular financing dividend paid on February 1, 1980, an indicated annual and an ability to attract investors who believe in the rate of $ 2.16.
future success of a business. Without sound financing, a These increases were made in recognition of the business ultimately declines and is unable to serve its improved earnings realized by the Company and the need customers. Consequently. the role of the investor in of the shareholders to participate in the increase to help providing capital funds for expansion is essential to the offset the effects of inflation on their cost of living.
financial health of a business. In recent years, inflation, The total dividends declared during 1979 were $ 2.04 higher interest rates and other factors have made per share. With earnings per share of common stock financing one of the most exacting aspects of the utility reaching $ 3.27, the resultant pay-out ratio in 1979 was business. During 1979, Central Hudson's financial 62%. It has been the Company's objective over many condition remained strong, thus benefiting shareholders, years to keep the amount of earnings paid out in customers and employees alike. dividends around the two-thirds proportion. The Board of Directors, however. will continue to review and monitor its Financing dividend policy in light of any changing circumstances.
The usual "internal sources" of cash generated by the The total amount of the dividend paid in 1979 Company from depreciation, retained earnings, and amounted to $ 1.99 per share and it is estimated that the deferred taxes are not sufficient to meet all of its needs full amount is subject to federal income tax as ordinary for construction. Consequently, it must go to the financial income.
markets to obtain the balance of its requirements.
As part of its ongoing financing program the Company Rate Decision sold $ 20 million principal amount of first mortgage bonds At the conclusion of the rate proceeding. initiated by on September 27, 1979, and has filed a Registration the Company's rate increase application on November 27, Statement with the Securities and Exchange Commission 1978, the Public Service Commission authorized new rates to sell up to $ 16 million of common stock in February to become effective on November 3, 1979 to produce 1980. The Company also anticipates issuing additional additional annual gas revenue of $ 1,563,000 (4.8%) and first mortgage bonds during 1980 in an amount not to additional annual electric revenue of $ 22,043,000 (11.6%).
exceed $ 50 million. The rate increase allowed by the Commission was The 1979 issue of mortgage bonds, which mature in predicated on a 14.0% return on common equity capital 2009 and bear an interest rate of 103/4%, was sold to and a 9.93% return on total invested capital. The test underwriters by competitive bidding with total proceeds year was the twelve months ending October 31, 1980, the of $ 19.7 million to the Company. The cost to the Company first year in which the new rates will be eff'ective.
was 10.906%, which represents a new high level for the As a result of the Commission's rate order there will be ~
Company. However, subsequent to their sale the bond a change in the treatment of net revenues (revenues less markets were adversely affected by international incremental costs) resulting from sales of economy energy developments and Federal Reserve Board actions with the to other utilities. Such revenues were not taken into result that interest rates on later issues were even higher account in setting the new level of retail rates and, on offerings by companies with better credit ratings. accordingly, effective November 3, 1979, all net revenues The level of outstanding short-term debt in the form of resulting from any sales of economy energy to other Commercial Paper increased from $ 23 million at utilities will be credited to the retail customers via the December 31, 1978 to $ 45 million at December 31, 1979, fuel adjustment clause. This change will not affect the reflecting in part the payment on December 31 of the additional $ 22 million of electric rate relief to be received
$ 15 million installment due on the Company's term loan by the Company but will serve to reduce the cost of notes. The Company currently maintains lines of credit electricity to the Company's customers whenever economy with seven banks totaling $ 55 million. sales are made.
The total revenue increase authorized by the Dividend Increases Commission of $ 23,606.000 is approximately 87% of the During the year the Board of Directors increased the amount originally requested by the Company, as adjusted quarterly dividend rate on two occasions. At the to reflect a comparable treatment of net revenues from September meeting the dividend rate was increased from economy sales to other utilities.
$ .49 to $ .52 effective with the dividend paid on November
During the proceeding, the Company demonstrated that The Board of Directors promoted three oflicers to new
- its proposed revenue increase would comply with the offices and responsibilities during 1979.
federal anti-infiation guidelines under the gross margin John E. Mack III, formerly Vice President<ustomer test Services, was designated Executive Vice President.
The Commission also approved the Company's proposals L Wallace Cross, fiormerly a Vice President, was to institute a finance charge of 1i/a% per month on unpaid designated Senior Vice President-Finance and Accounting.
balances and a bad check charge of $ 5. These charges, Charles E Rider, formerly a Vice President, was which conform to common commercial practices, are designated Senior Vice President<orporate Planning.
intended to assess to individual customers the costs The changes were designed to provide a greater incurred by their actions. capability on the part of the corporation to respond to the The Commission also directed that a further proceeding needs of the future and to improve the efficiency of its be held to consider the design of the Company's electric operations.
rates. That proceeding will consider the allocation of revenue requirements among customer classes, the rate Corporate Planning structure applicable to each class, a marginal cost study Long-range physical and financial planning has always to be filed by the Company and time4iflerentiated rates. been necessary as a basis for meeting future customer needs at fair and reasonable prices. Lengthening lead Public Utilities Regulatory Policies Act of 19?8 times for major construction projects and escalating costs The National Energy Act included the Public Utility requires the development of new and more sophisticated Regulatory Policies Act (PURPA), which requires each techniques, in order to insure the maintenance of reliable state regulatory commission to consider six electric utility service and the availability of capital under terms which rate-making standards cost of service, declining block minimize rates to customers while providing a fair return rates. tim~fday rates, seasonal rates, interruptible rates to investors. However, increasing emphasis on and load management techniques. These standards will be environmental protection. the growing unpredictability of considered in the Company's present rate design world energy supplies, rapidly escalating prices for proceeding before the New York Commission. principal fuels, drastic changes In customer energy use In order to assess these standards, PURPA requires patterns and, most recently. the extreme volatility of the each utility to file detailed data every two years with the financial markets have greatly increased the degree of Federal Energy Regulatory Commission which has uncertainty with which long-range financial and facilities developed detailed rules that require the filing of , planning must contend. Government intervention, embedded and marginal cost studies and extensive load intended to resolve these problems, has more frequently data on each class of customer. added political irresolution, bureaucratic confusion and delay, and reduced fiexibllityof response to the factors complicating the planning process.
CQIRP GRATE To deal with this growing complexity the Company initiated, during 1979, a restructuring and elaboration of As are other corporations, Central Hudson is confronted its corporate planning systems and procedures. In June, with new challenges, many of short-term duration and the Board of Directors appointed a Senior Vice President-others that require planning and implementation with a Corporate Planning to assist the Chairman and President view over a longer period of time. During the past year, in formulating and coordinating the evaluation of various Central Hudson made significant organizational changes to strategies for the future development of the Company's help it operate more efficiently in the years ahead, and it business. Restructuring of the corporate planning initiated or continued other activities of major significanc organization, definition of major strategic options and for both the present and the future. development of the necessary'additional analytical tools were proceeding at year end.
Directors and Officers Marjorie S. Brown was elected to the Board of Directors to fill a 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 of the 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:
Advertising Case the Notes to Financial Statements on pages 20 through The Company's challenge of the Public Service 25 of this report Commission's prohibition of promotional advertising of electricity will be argued before the United States THE YEAR 1979 AS COMPARED TO THE YEAR 1978 Supreme Court in the spring of 1980. Earnings In early 1977, the Commission issued a "Statement of Policy on Advertising and Promotional Practices of Public Earnings per share of common stock were $ 3.27 for Utilities" which prohibited electric promotional advertising 1979 compared with $ 3.04 for 1978, an increase of 7.6o/o.
and the use of bill inserts to disseminate information on The primary factors contributing to this growth in matters of public controversy. In late 1977, the Company earnings were increased sales of electricity and higher commenced an action in state court challenging the electric and gas rates which became effective on Commission on the basis that its constitutional right of November 3, 1979. Earnings per share are shown after free speech was being violated. In the spring of 1979, the provision for dividends on preferred stock and are New York Court of Appeals, the highest court in New York computed on the basis of the average number of common State. sustained the Commission's determinations. shares outstanding during the year. The amount of such In a parallel action, the United States Supreme Court shares was 5,372,873 in 1979 and 5,310,373 in 1978.
has agreed to hear a case initiated by Consolidated Edison Operating Revenues Company of New York, inc. challenging the Commission's bill insert restriction. Total operating revenues increased $ 43.8 million (21%)
in 1979. Details of the revenue changes are as follows:
Roseton Litigation The legal action is continuing by the owners of the increase or (Decrease)
Roseton Plant Central Hudson. Niagara Mohawk Power from 1978 (Thousands of Dollars)
Corporation and Consolidated Edison Company of New York, Inc.to recover damages from certain contractors Bcctctc Gcc involved in the Roseton project. Sales to other utilities.......... 616,766, N/A It is alleged that the defendants'ailure to design and Customer sales ............... 11,701 $ 2,987 construct properly the Roseton Plant led to a series of Fuel and gas cost adjustment incidents, including a boiler implosion, which delayed the charges 8,470 451 completion and commercial operation of the Plant. Rate increase................. 2,829 312 At the present time no estimate can be made as to the Miscellaneous .............. ~ .. (79) 325 duration or outcome of the litigation. Total . .. .
~ $ 39,707 $ 4,075 Labor Negotiations After prolonged negotiations, the Company entered into The revenues received by the Company pursuant to the a two-year contract with two Local Unions of the application of the electric and gas cost adjustment clauses International Brotherhood of Electrical Workers. The only recover the additional costs incurred by the Company contract provides for a 7.129% general wage increase and, therefore. do not affect net income.
effective July 1, 1979, and only wages will be negotiated Total sales of electricity within the Company's service the second year of the contract. In addition, certain territory increased 3% in 1979 while sales of natural gas benefit programs were improved. were 12% higher than last year. Changes in sales by major customer classification are set forth below (parentheses denote decrease):
MR8kGEMEMY'S IO)ISISSIIQM Eiectr(c Residential 0% (5)%
AMIO) AMAWSIIS GF THE Commercial 3 (5)
SUMMRRV QF QPEEAYI[GII6S Industrial . 6 .2 Interruptible N/A 66 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 The 66% increase in the sales of interruptible gas service years 1978 and 1977. Certain additional information resulted from the improved availability of gas from the relating to changes between these years is provided in 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 12
the benefit of customers taking firm gas service. The Other Income and Interest Charges decrease in gas sales to residential and commercial The total amount of the Allowance for Funds used customers reflects the milder weather experienced during the heating months. During Construction (AFDC) increased $ 3.0 million'in Sales of economy energy to other utilities increased 1979, primarily as a result of the Company's participation in Unit No. 2 of the Nine Mile Point Plant and the Sterling 44% in 1979, with most of the increase occurring in the Plant. AFDC was computed at varying rates during 1978 two quarters of the year when such sales were 'irst and 1979. The weighted average AFDC rate was 8.55%
abnormally high. The net revenues from these sale's for 1978 and 9.91% for 1979. See Note 1 of the Notes to-contributed to the growth in earnings for the first 10 Financial Statements for additional information on this months of the year. However, as described in the section entitled "Rate Decision," effective November 3, 1979, all subject Total interest charges (excluding AFDC) increased $ 6.7 net revenues resulting from any sales of economy energy million, or 50%. Interest on mortgage bonds increased to other utilities are being credited to the Company's retail customers via the fuel adjustment clause. $ 556,000 due to the issuance of $ 20 million of 103/4%
bonds in September 1979. Interest on unsecured long-Operating Expenses term debt increased $ 4.4 million as a result of issuing Costs for operations increased $ 37.2 million (28%) in $ 35 million of term'loan notes in December 1978.
Short-term interest charges increased $ 1.7 million during 1979. The most significant increase occurred in the cost the year due to substantially higher interest rates and of fuel used in electric generation which was $ 24.3 million higher levels of borrowings. (See Note 4 of the Notes to more than in 1978. This increase resulted from Financial Statements for additional information.)
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 THE YEAR 19?8 AS COMPARED TO THE YEAR 1977 expensive energy from member companies of the New York Power Pool when such power was available. The cost Earnings of purchased gas increased $ 5.0 million as a result of a Earnings per share of common stock were $ 3.04 for 39% increase in the volume of natural gas purchased and 1978 compared with $ 2.90 for 1977, an increase of 5%.
higher rates charged by the Company's pipeline suppliers.
The primary factors contributing to this growth in Other expenses of operation were $ 2.2 million over last earnings were increased sales and a full year's effect of year. Increased wages and related fringe benefits
. together with increased production expenses resulting higher electric and gas rates which became effective from the acquisition of the additional 10% interest in the during 1977. As a result of the sale of 500,000 shares of common stock in February 1978, the average number of Roseton Plant were the primary factors accounting for shares outstanding increased from 4,872,873 in 1977 to
. this increase.
5,310,373 in 1978.
Maintenance expenses increased $ 1.7 million, or 20%.
The two most significant variations were a $ 646,000 Operating Revenues increase in the cost of maintaining electric generating units and a $ 379,000 increase in costs for storm repairs. Total operating revenues increased $ 3.2 million (2%) in During the year the Company's service territory 1978. Details of the revenue changes are as follows:
experienced two major storms, including tropical storm David, one of the most severe summer storms in the Increase or (Decrease)
Company's 79-year histoly. The $ 1.4 million increase in from 1977 depreciation is primarily due to the Company's additional ('housands of Dollars) investment in the Roseton Plant. 8ectrlc Gas Operating taxes increased $ 2.5 million. State and local Customer sales .. ~........... $ 4,948 $ 338 taxes levied on gross revenues increased $ 1.2 million, Rate increase 3,873 1,042 property taxes were up $ 917,000, and payroll taxes Sales to other utilities......... (2,545) N/A increased $ 243,000.
Federal income tax charged to "Operating Expenses" decreased $ 3.9 million in 1979. See Note 2 of the Notes Fuel and gas cost adjustment charges Miscellaneous (4,407) 4
'98) 7 to Financial Statements for a detailed analysis and reconciliation of the federal income tax. Total . $ 1.873 $ 1.289
Total sales of electricity within the Company's service up $ 142,000 and state and local taxes levied on gross territory increased 4o%%d in 1978 while sales of natural gas revenues increased $ 132,000. Partially offsetting these were 3o%%d higher than last year. Sales increases by major increases was a reduction of $ 134,000 in property taxes.
customer classification are set forth below: Federal income tax charged to "Operating Expenses" increased $ 2.8 million in 1978.
B~c Gas Residential Oo/o 2%%d Other Income, Interest Charges,and Preferred Dividends Commercial. 4 4 The total amount of AFDC increased $ 1.6 million in Industrial ........... 9 1978 primarily as a result of the Company's participation Interruptible......... N/A 0 in Unit No. 2 of the Nine Mile Point Plant and the Sterling Plant The weighted average AFDC rate for 1978 was The growth in sales of electricity and firm gas to 8.55o%%d .Durin g197 7AFDCwa scompute da t arat eo f 8o%%d.
industrial customers reflects an improved market for the Total interest charges (excluding AFDC) increased products of the Company's major industrial customers. $ 140.000. The $ 123,000 increase in interest charges on Sales of electric energy to other utilities decreased So%%d mortgage bonds is a result of a full year's interest on the in 1978, primarily as a result of a reduction in the amount $ 4.5 million of 6/4'/o bonds issued in June 1977. Short-of energy purchased by New York State Electric & Gas term interest charges increased $ S98,000 due to higher Corporation. levels of borrowings and higher rates of interest in effect during 1978. Other interest charges decreased $ S38,000:
Operating Expenses 1977 interest charges included the interest on the Costs for operations decreased $ 1.1 million (1o%%d) in promissory notes which matured on October 1, 1977 and 1978. The most significant item contributing to this the convertible debentures which matured on February 1, decrease was an $ 11.0 million (14'/o) reduction in the cost 1978.
of fuel used in electric generation. This decrease resulted The increase of $ 500,000 in dividends on preferred from lower fuel oil prices and a 7'/o reduction in stock is the result of a full year's dividend on the $ 15 generation. The cost of purchased electricity increased million of 8.40o/o preferred stock issued in May 1977.
$ 7.0 million, reflecting increased purchases of both capacity and energy from Niagara Mohawk Power COMMON SMCK DMDENDS AND PRICE RANGES Corporation under the Roseton Capability Sales Agree-Dividends have been paid by the Company and its ment and increased purchases of less expensive energy from member companies of the New York Power Pool principal predecessors for 76 years, and the common stock of the Company has been listed on the New York when such power was available. Despite a 5'/o increase in Stock Exchange since 1945. The price ranges and the the volume of gas purchased, the cost of natural gas was dividends paid for each quarterly period during the
$ 6,000 less than last year; increased refunds received Company's last two fiscal years were as follows:
from the Company's pipeline suppliers more than offset the effect of increased purchases and higher rates. Other 1979 ~Hi h Low Dividend expenses of operation were $ 2.9 million greater than last Fourth Quarter................ $ 19i/s $ 18 $ .52 year. The major portion of this increase resulted from Third Quarter................. 20i/4 18 .49 higher wages and related fringe benefits together with Second Quarter ......... ~ ~.... 20'/4 18 .49 the charge to expense of $ 518,000 for the cost of First Quarter ................. 20s/s 19s/4 .49 environmental studies for a'potential generating site, which costs were previously deferred but are no longer 1979 considered acceptable for capitalization.
Maintenance expenses increased $ 53,000 primarily as a Fourth Quarter ~ .............. $ 21 /s $ 19s/4 $ .49 Third Quarter................ 22 20'/s '.49 result of increased costs incurred in connection with the Second Quarter .............. 21 /4 20'/s .49 Company's tree-trimming program. Depreciation expense shows an increase of only $ 114,000 in 1978; however, the First Quarter ............. . ~ ~ 22'/s 2(Pe .47 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 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 of income, 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 of its operations and the changes in its financial position for the 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 PRICE WATERHOUSE & CO.
January 28, 1980 Statement of Retained Earnings (Thousands of Dollars)
Year ended December 31.
1979 1978 Balance at beginning of year $ 67.084 $ 61,481 Net Income 21,694 20,260 88,778 81,741 Dividends declared cash:
On cumulative preferred stock 4,126 4,126 On common stock ($ 2.04 per share 1979; $ 1.96 per share 1978) .. 10,961 10,531 15,087 14,657
~
Balance at end of year $ 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)
Year ended December 31 ~
1979 1978 Operating Revenues Electric................................... $ 181,705 $ 158,784 G as 0 I I ~ ~ 0 ~ I ~ 28,813 24,738 Total own territory 210,518 183,522 Revenues from electric sales to other utilities 44,266 27A80 254,784 211,002 Operating Expenses Operation:
Fuel used in electric generation (Note 1) 90,897 66,565 Purchased electricity 32,845 27,137 Purchased natural gas . 16,693 11,691 Other expenses of operation 29,307 27,161 Maintenance . 9,818 8,151 Depreciation (Note 1). 14,839 13,393 Taxes, other than income tax 21,268 18,779 Federal income tax (Note 2)................ 171 6.504 Deferred income tax net (Note 2) . ~..... 5,794 3,387 221,632 182,768 Operating Income 33.152 28,234 Other Income and Deductions Allowance for equity funds used during construction (Note 1) 3,476 2,388 Federal income tax credit (Note 2) 933 721 Deferred income tax credit (Note 2) 178 138 Other net (333) (348) 4,254 2.899 Income before Interest Charges 37A06 31,133 Interest Charges Interest on mortgage bonds 11,306 10,750 Interest on unsecured long-term debt. 5,195 762 Interest on short-term debt 3,422 1,673 Other Interest....... 262 272 Allowance for borrowed funds used during construction (Note 1)... (4,536) (2,640)
Amortization of premium and expense on debt 63 56 15,712 10.873 Net income . 21,694 20,260 DMdends on Preferred Stock 4,126 4,126 Income Available for Common Stock $ 17,568 $ 16,134 Common Stock:
Average Shares Outstanding (000's) 5,3?3 5,310 Earnings per Share On Average Shares Outstanding ..... $ 3.27 $ 3.04 Earnings per Share Assuming Conoersion of the Conoertible Debentures (iYote 3) $3.16 $2.93 16
Statement of Changes in Financial Position (Thousands of Dollars)
Year ended December 31, 1979 1978 Source of Funds Internal sources:
Net income $ 21.694 $ 20,260 Income items not requiring current outlays:
Depreciation accruals:
Charged to depreciation expense 14,839 13,393 Charged to other income accounts. 530 508 Deferred income tax net 5,616 3,249 Equity component of AFDC' (3,476) (2,388)
Other net 547 577 Net funds from internal sources 39,750 35,599 Available from financing:
Mortgage bonds 20,000 Term loan notes 35,000 Common stock. 10,340 Short-term debt 22,000 6,000 Total funds from external sources 42,000 51,340 Total source of funds . $ 81,750 $ 86.939 Application of Funds Construction charges:
Gross charges for construction . $ 40,526 $ 64,513 Less equity component of AFDC* 3,476 2,388 37,050 62,125 Dividends:
Preferred stock 4,126 4,126 Common stock. 10,961 10,531 15,087 14,65?
Retirement of securities and short-term debt:
Convertib! e debentures 8,000 Long-term promissory notes 175 175 Term loan notes 15,000 15,175 8,175 Net increase (decrease) in working capital, other than short-term debt and current maturities of long-term debt. 7.722 (769)
Changes In deferred and other accounts net 6,716 ? 75'I Total funds applied $ 81,750 $ 86.939
'Allowance for funds used during construction (AFDC). (See Note 1.)
17
Balance Sheet (Thousands of Dollars) 1979 1978 Utility Plant, at original cost Electric . ~ ~ ~ ~ 0 ~ 0 0 ~ ~ $ 425,811 $ 416,355 Gas . 50,520 49,335 Common. 21,951 20A26 498,282 486.116 Less accumulated depreciation. 152A07 140,813 345,875 345,303 Construction work in progress 98,019 72.S46 443.894 417,849 Other Property and Investments (Note 1) . 1,787 1.787 Current Assets Cash ~ ~ ~ ~ ~ ~ ~ ~ 3,267 3,282 Special deposits . 165 258 Accounts receivable from customers 21A28 16,962 Accrued unbilled utility revenues (Note 1) ~ ~ . 5,547 4,S47 Other receivables 202 1,594 Materials and supplies, at average cost:
FUe10 ~ ~ ~ ~ 0 ~ ~ ~ ...................... 17.568 9,951 Construction and operating ........... 6,766 6,277 Prepayments. 3.163 3,010 58,106 45.881 Deferred Charges Deferred electric fuel costs (Note 1) 6,711 2.550 Deferred gas costs (Note 1)........... 517 834 Deferred environmental costs (Note 1) 3,982 3,603 Unamortized debt expense ........... 1.756 1,SSS Unamortized project costs 513 616 Other ? S83 1,591
'I 6,062 10,749
$ 519,849 $ 476,266 18
December 3$ , 1979 and 1978 Uabilities 1979 1978 Capitalization Capital Stock (Note 5)
Cumulative preferred stock . S 61,030 S 61,030 Premium on cumulative preferred stock. 67 67 Common stock. 76.371 76,371 Capital stock expense ~2,245) ~2.245) 135.223 13S,223 Retained Earnings 73,691 67,084 Long-term Debt (Note 6) . 195,400 202,575 Unamortized Premium and Discount on Debt Net .. 168 470 404,482 405,352 Current Liabilities Long-term debt maturing within one year . 12,000 Sinking fund requirements. 175 175 Notes payable (Note 4) 4S,OOO 23,000 Accounts payable . 18,411 12.519 Accrued taxes 2,682 5,988 Accrued interest . 3.148 2,523 Customer deposits 2,744 2,698 Dividends declared 3,933 3,664 Other 4624 3,647 92.717 S4,214 Deferred Credits and Other Liabilities Deferred gas refunds . 1,177 1,182 Miscellaneous reserves 474 626 Other. 788 297 2A39 2,105 Accumulated Deferred Income Tax (Note 2) 20,211 14.595 SS19,849 $ 476.266
Notes to financial Statements Note 1 Summa~ of Accounting Policies General The Company is subject to regulation by the New York State 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 of property. together with removal 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 for the amount so capitalized is reported in the Statement of Income as follows:
the portion applicable to borrowed funds is reported as a reduction of interest charges while the portion applicable to other funds (the equity component) is reported as other income. The equity component of AFDC is not considered a current source of funds and therefore is not included as such in the Statement of Changes 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 of the estimated useful lives and estimated net salvage of properties. The provision for depreciation of transportation 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% of the original cost of average depreciable property in both 1978 and 1979.
The ratio of the amount of accumulated depreciation to the cost of depreciable 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 of depreciation 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 for service to municipalities and governmental bodies) are regulated by the 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 tarifffor retail electric service includes a fuel cost adjustment clause pursuant to which electric rates are adjusted to reflect changes in the average cost of fuels 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 of the 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. of fuel costs
'n its base rates and to recover over a 36-month period the portion of deferred fuel costs that was associated with this increase In base rates and corresponding reduction in fuel adjustment factor. At December 31, 1979. $ 5,655,000 of such costs remained to be recovered.
20
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 of gas 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 of the issues, the cost of certain environmental studies it was 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 for financial reporting purposes since their assets, liabilities and 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 2 Federal 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 of income tax currentlypayable and to provide for deferred 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 Act of 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 of the related property in accordance with a Statement of Policy of the PSC. The investment tax credit which is not deferred Is allocated equally between "Utility Operating Income" and "Other Income and Deductions" in accordance with the Uniform Systems of Accounts of the PSC.
The Company has a Tax Reduction Act Stock Ownership Plan which is funded by the use of the additional 1o/o investment tax credit permitted by the Tax Reduction Act of 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 of the items and amounts deferred or credited to income is as follows:
Amounts Deferred Amounts Credited 1979 1978 1979 1978 g7eusands of Dollars)
Operating Income:
Class life depreciation . $ 1,342 $ 1.175 $ 86 $ 64 Cost of removal 669 404 421 385 Investment tax credit . 2,383 1,699 Deferred fuel and gas costs 3,325 1,625 1,625 1,232 Other . 409 327 202 162 8,128 5,230 2,334 1,843 Other Income (Investment tax credit) .. 178 138 Total. $ 8,128 $ 5,230 $ 2.512 $ 1,981 Reconciliation: The following is a reconciliation of the difference between the amount of federal income tax as reported in the Statement of Income and the amount computed by multiplying the income before tax by the statutory tax rate.
1979 1978
%of %of Amount Pretax Amount Pretax
($ 000) Income ($ 000) Income Net income . $ 21,694 $ 20,260 Federal income tax (762) 5,783 Deferred income tax net........ 5,616 3,249 Income before tax $ 26,548 $ 29,292 Computed tax expense ................ $ 12,212 46.0%%d $ 14,060 48.0o/o Increases (reductions) in computed taxes resulting from:
Investment tax credit . (3,973) (15.0) (2,830) (9.7)
Allowance for funds used during construction....... (3,685) (13.9) (2,413) (8.2)
Deferred fuel and gas costs net ................. (1.768) (6.6) (393) (1.3)
Excess of tax depreciation over book depreciation (1,540) (5.8) (1,550) (5.3)
Cost of removal (836) (3.1) (505) (1.7)
Taxes and pension costs expensed on tax return and capitalized on books. (706) (2.7) (598) (2.1)
Other deferred costs (409) (1.6) (327) (1.1)
Miscellaneous items net (57) (,2) 339 1.1 Federal income tax (762) (2.9) 5.783 19.7 Deferred income tax net 5.616 21.2 '3,249 Total. $ 4854 18 3o/o $ 9,032 30.8o/o Note 3 Earnings per Share and Convertible Debentures At December 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 of earnings 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 of each 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 4 Short-Term Borrowing Arrangements and Compensating Balances At December 31, 1979 the Company maintained lines of credit with seven banks totaling $ 55,000,000. At that 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 differ from bank to bank, but in general call for the maintenance of average balances equal to 10o/o of the line of credit plus 10o/oof the 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 5 Capital Stock Details of capital stock at December 31. 1978 and 1979 are shown below:
Shares Shares Authorized Outstanding Common stock without par value (Note 3) . 10,000,000 5,372,873 Cumulative preferred stock, $ 100 par value 1,200,000 Redemption Price Eventual Current Through Minimum 4~/ao/o series $ 107.00 $ 107.00 70,300 4.75% series 106.75 106.75 20,000 4.35% series 102.00 102.00 60,000 4.96% series 101.00 101.00 60,000 7.72% series 107.00 1/31/81 101.00 130,000 7A4% series 106.80'08.40 1/31/83 101.22 120,000 8.40% series 5/31/82 101.00 150,000 Total 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 6 Long-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. $ $ 12.000 3.30% series, due December 1, 1982 6,000 6,000 3.20% series, due October 1, 1984 . 11,000 11,000 4/8% series, due May 15, 1988 18,000 18,000 7%o/o series, due January 15, 1999 ....... 20,000 20,000 9%o/o series, due June 1, 2000. 25,000 25,000 7'/4% series, due February 1, 2002 ....... 20,000 20,000 9'/4% series, due April 15, 2004 15,000 15,000 10%so/o series, due November 1, 2005 20,000 20,000 6~/4o/o series, due June 1, 2007 . 4,500 4,500 10'/4% series, due September 15, 2009. 20,000 159,500 151,500 Convertible debentures (Note 3):
4%o/o, due June 1, 1981 . 8,000 8,000 Promissory notes (net of sinMng fund requirements):
4.85%, due December 1, 1995 7,900 8.075 Term loan notes (see below) 20,000 35,000 Total long-term debt. $ 195,400 $ 202,575 23
In December 1978 the Company issued term loan notes aggregating $ 35 million to 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 right to 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 first two years is the "prime" rate in effect at the Irving Trust 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 of the related issues.
Note 7 Pension and Retirement Plan The Company has a noncontributory pension and retirement plan (Plan) available to all employees after one year's employment.
The cost of the Plan to the Company amounted to $ 2,694,000 for the calendar year 1978 and $ 2,526,000 for 1979. Approximately 20% of each 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 liability was $ 4,450,000 as of September 30, 1979, the end of the 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 of September 30, 1979 the assets of the Plan were sufficient to cover the liabilities in respect of the members of the Plan who are eligible for vested benefits.
Note 8 Commitments 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 of the Sterling Plant were approved by the New York State Board on Electric Generation Siting and the Environment (Siting Board) in January1978; however, in May 1978 the Siting Board suspended that approval in order to r~xamine the need for such Plant in light of revised 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 by the 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 will be permitted to amortize its investment in this project. plus any related cancellation charges, over a period of years 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 of the 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 of the 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 viith three pipeline suppliers. The earliest expiration date of any of these contracts is in 1988. The Company also has a contract for the storage of gas. Allsuch contracts are under tariffs on file with and 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 of the Nine Mile Point Nuclear Plant Commitments for minimum rentals under noncancellable leases are minor, and neither the present value of non-capitalized financing leases nor the impact on net income of capitalizing such leases is significant.
Note 9 Departmental 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:
Electric Gas Total 1979 1978 1979 1978 1979 1978 (Thousands of Dollars)
Operating Revenues ........... ~225.971 ~186,264 $ 28813 $ 24738 $ 254784 $ 211 002 Operating Expenses:
Depreciation. 13,305 11,887 1,534 1,506 14,839 13,393 Other, excluding income tax .. 176 494 140,689 24,334 18 795 200.828 159,484 Total 189799 152,576 25.868 20,301 215.667 172877 Operating Income before Income Tax .. 36,172 33,688 2,945 4,437 39,117 38,125 Federal 'Income Tax, including deferred income tax net ......... 5 733 8 799 232 1 092 5,965 9,891 Operating Income $ 30,439 $ 24,889 $ 2,713 '3,345 $ 33,152 $ 28,234 Construction Expenditures'...... $ 38,473 $ 62,703 S 2053 $ 1,810 $ 40526 $ 64 513 Identifiable Assets at December 31*
Net UtilityPlant $ 308.356 $ 307,944 $ 37,519 $ 37,359 $ 345,875 $ 345,303 Construction Work in Progress .... 95,781 70734 2,238 1 812 98.019 72546 Total UtilityPlant ............. 404,137 378,678 39,757 39,171 443,894 417,849 Materials and Supplies ........... 23488 15 511 846 717 24,334 16 228 Total $ 427 625 $ 394 189 $ 40603 $ 39 888 $ 468,228 $ 434 077
'Includes allocation of Common UtilityProperty.
Note 10 Selected Quarterly Financial Data (Unaudited)
Selected financial data for each quarterly period within 1978 and 1979 are shown below:
Earnings Per Income Average Available Share of for Common Operating Operating Net Common Stock Revenues Income Income Stock Outstanding (Thousands of Dollars) (Dollars)
Quarter Ended:
March 31. 1978 .............. $ 59A49 $ 9A67 $ 7,242 $ 6.210 $ 1.21 June 30,1978 ............... 48,398 5,878 3,882 2,850 .53 September 30, 1978 .......... 50,576 6,451 4,535 3,503 .65 December 31, 1978........... 52,578 6,438 4,602 3,570 .66 March 31. 1979 ...... 68,261 10,440 7,643 6,611 1.23 June 30,1979 ....... 56,523 6,555 3,821 2.789 .52 September 30, 1979 .. 62,949 7,345 4.650 3,618 .67 December 31, 1979... 67,051 8,813 5.581 4,549 .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 of plant is recoverable in revenues as depreciation. Therefore, the excess of the cost of plant stated interms of constantdollars 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 of replacing facilities, based on past practice, the Company believes that any higher costs it may experience upon actual replacement of existing facilities would be recovered through the normal regulatory process and that as part of this process it will be allowed to earn on the increased cost of its net investment Statement of Income from ContInulng Operations Adjusted for Changing PrIces for the Year Ended December 31, $ 979
('Ihousands of Dollars)
Conventional Constant Dollar Current Cost Historical Average Average Cost l 979 Dollars 1 979 Dollars Operating revenues $ 254,784 $ 254,784 $ 254,784 Operations 169,742 169,742 169.742 Maintenance 9,818 9,818 0,818 Depreciation 15,037 31,436 39,378 Operating taxes 21,268 21,268 21,268 Federal income tax 4,854 4,854 4,854 Interest charges 15,712 15,712 15,712 Other income and deductions (3,341) (3,341) (3,341) 233,090 249,489 257,431 Income (loss) from continuing operations (excluding reduction to net recoverable cost) $ 21,694 $ 5,295~, $ (2,647)
Increase in specific prices (current cost) of property, plant and equipment held during the year** $ 115,546 Reduction to net recoverable cost $ (37,106) (38,501)
Effect of increase in general price level (106,209)
Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost (29,164)
Gain from decline in purchasing power of net amounts owed 26,173 26,173 Net $ (10,933) $ (2,991)
'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, while net
~
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* 5,295 Income (loss) per common share (after dividend requirements on preferred stock)* $ .22 Net assets at year end at net recoverable cost 197,640 Current cost information Income (loss) from continuing operations'ncome (2,647)
(loss) per common share (alter dividend requirements on preferred stock)* $ (1.26)
Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost 29,164 Net assets at year end at net recoverable cost 197,640 General information Gain from decline in purchasing power of net amounts owed 26,173 Cash dividends declared per common share $ 2.32 $ 2.19 . $ 2.20 $ 2.18 $ 2.04 Market price per common share at year end $ 24.88 $ 27.37 $ 27.18 $ 22.52 $ 18.75 Average consumer price index 161.2 170.5 181.5 195.4 217.4
'Excluding reduction to net recoverable cost Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power. as measured by the Consumer Price index for All Urban Consumers (CPI-U). Current cost amounts reflect the changes in specific prices of plant from the date the plant was acquired to the present, and differ from constantdollar 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 of reproducing existing plant assets and was determined by indexing the surviving plant by the Handy-Whitman Index of Public UtilityConstruction Costs for the north Atlantic region with the exception of general structures which was indexed based on the Engineering News Report index. All other property for which 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 of fuel 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 of rate regulation in the Statement of Income from Continuing Operations, the excess of the 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 by the gain from the decline in purchasing power of net amounts owed. During a period of infiatlon, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed Is primarily attributable to the substantial amount of debt which has been used to financ property, plant, and equipment. Since the depreciation on this plant is limited to the recovery of historical 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 OFFICERS OF THE BOARD TRANSFER AGENTS ERNESI' ALTHOUSE THEODORE J. CARLSON COMMON STOCK Poughkeepsie, N.Y. Chairman of the Board and Principal Irving Trust Company Vice Chairman of the Board and ONcer and Chairman of One Wall Street Vice Chairman of Committee on Executive Committee New York N.Y. 10015 Finance: Member of Executive JOHN WILKIE PREFERRED STOCK Committee and Committee on Chairman of Committees on Rnance 4.35%. 4'%. 4.75%. 4.96% Series Compensation and Succession and on Audit Charles P. Kovar. Emory R. Osbom WILLIAMP. ARNOLD ERNEST E ALTHOUSE Central Hudson Gas & Electric Corporation New York. N.Y. Poughkeepsie. N.Y. 12602 President and Chief Executive ONcer Vice Chairman of the Board and Associated Dry Goods Corporation. Committee on Finance a department store chain: Member of ROY C. KETCHAM 7.44%. 7.72%, 8.40% Series Committee on Audit Chairman of Committee on Marine Midland Bank Compensation and Succession 2 Broadway RAYMOND T. BENEDICT New York. N.Y. 10004 Stamford. Ct. HERBERT I SHULTZ Lawyer, of Counsel, Cummings & Chairman of Retirement Committee REGISTRAR Lockwood: Member of Executive Committee and Committee on Finance COMMON SIQCK Ihe Chase Manhattan Bank JAMES IL BREED. M.D. OFFICERS 1 Chase Manhattan Plaza Poughkeepsie, N.Y. New York. N.Y. 10015 Surgeon H. CLIFTON WILSON Member of Committee on Audit President GENERAL COUNSEL MARJORIE S. BROWN JOHN E MACK III Executive Vice President Gould & WilMe Millbrook. N.Y. One Wall Street Homemaker, active in cMc and I. WALLACE CROSS New York, N.Y. 1000S philanthropic work. formerly executive Senior Vice President-Finance in retailing and promotional organizations and Accounting INDEPENDENT ACCOUNTANTS THEODORE J. CARLSON CHARLES E RIDER Price Waterhouse & Co.
Poughkeepsie, N.Y. Senior Vice PresidentMrporate Planning 153 East 53rd Street Chairman of the Board and Principal New York, N.Y. 10022 ONcer: Chairman of Executive CHARLES A. BOLZ Committee: Member of Retirement Vice President-Engineering Committee, and Committees on Finance WILLIAMA. KLING and on Compensation and Succession Vice PresidentMmmunlty Affairs ROY C. KETCHAM HENRY I WALKER Rshkill. N.Y. Vice President-Production Chairman of the Board and Chief Executive ONcer, Ketcham Motors. Inc.: JOSEPH F. FURLONG Chairman of the Board of The FishMll Secretary and Treasurer National Bank: Chairman of Committee JAMES E SMITH on Compensation and Succession: Assistant Vice President Member of Executive Committee WALTER A. BOSSERT. JR.
EDWARD J. MACK Assistant Secretary and Assistant Treasurer LaGrangeville, N.Y.
Lawyer: Member of Retirement CHARLES P. KOVAR Committee and Committee on Assistant Secretary Compensation and Succession EMORY R. OSBORN HERBERT 1. SHULTZ Assistant Treasurer 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 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 The sloop "Clearwater" passing the has been given the first prize, Grand Prix Award for Hudson Ughthouse opposite Athens.
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. g' 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 will be 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.
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
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