ML17244A485
| ML17244A485 | |
| Person / Time | |
|---|---|
| Site: | Ginna  |
| Issue date: | 03/15/1979 |
| From: | ROCHESTER GAS & ELECTRIC CORP. |
| To: | |
| Shared Package | |
| ML17244A486 | List: |
| References | |
| NUDOCS 7905030359 | |
| Download: ML17244A485 (33) | |
Text
Annual Report for year ended December 31, 1978 Contents Highligllts2 Letter to Shareholders 3
Electric Operations 5 Gas Operations 6 Research and Development 6 The Rising Cost of Doing Business 8 Financial Statements 14 Management's Discussion and Analysis of the Summary of Operations 22 Financial and Statistical Information 23 Directors 2B Officers (Inside back coverj Shareholder Inquiries Communications regarding stock transfer requirements, lost certificates or dividend payments may be directed to Lincoln First Bank, N.A.
Other inquiries should be directed to D. W. Caple, Secretary and Treasurer at the Company.
The Company willprovide, without charge, a copy of the Annual Report on Form 10-K filed with the Securities and Exchange Commission with respect to fiscal year 1978, upon written request of any shareholder addressed to the Secretary.
Principal Office B9 East Avenue Rochester, New York14649 r
(716) 546-2700 Financial Contact Paul W. Briggs President Annual Meeting May1G,1979 At Rochester, Nevv York New York Stock Exchange Symbol Rochester Gas and Electric Corporation Common Stock-RCS Transfer and Dividend Disbursing Agent Lincoln First Bank, N.A.
Stock Transfer Department Post Office Box 1250 Rochester, New York 14603 Registrar Security Trust Company of Rochester One Easl Avenue Rochester, New York 1463B Co.transfer Agent Morgan Guaranty Trust Company of Nmv York 30 West Broadway New York, New York10015 Co.registrar The Chase Manhattan Bank, N.A.
One Chase fvtanhattan Plaza New York, New York 10015 Agent for Automatic Dividend Reinvestment Plan Lincoln First Bank, N.A.
Automatic Dividend Reinvestment Service Post Office Box 1507 Rochester, New York 14G03 Bond Trustee and Paying Agent Bankers Trust Company Post Office Box 310 Church Street Station New York, New York100t5
Highlights 1978 1977
% Change Common Stock Earnings per weighted average share Number of shares (000's)
Weighted average Pro forma weighted average after stock dividend paid in following year (See Note)
Actual number at December 31 Number of shareholders Price range (Sales on New York Stock Exchange) 1st quarter 2nd quarter 3rd quarter 4th quarter Cash dividends paid (100% taxable) 1st quarter 2nd quarter 3rd quarter 4th quarter Stock dividend paid (See Note)
Sales and Revenues Electricity to customers Kilowatt-hours (000's)
Revenue (000's)
Electricity to other utilities Kilowatt-hours (000's)
Revenue (000's)
Gas Therms (000's)
Revenue (000's)
Steam Pounds (000's)
Revenue (000's)
Total revenues Operating Expenses (000's)
Electric and steam fuels Purchased electricity Purchased natural gas.............;
Wages and benefits Depreciation Taxes-local, state and other..
Federal income taxes charged to operations Other expenses Total operating expenses Capital Expenditures, less allowance for funds used during construction (000's)
Net UtilityPlant at December 31 (000's)
Number of Employees
$2.46 13,774 14,187 14,733 48,148 High Low 21 Y>
17>/s 18Ys 17srs 19Ys 18 18>/>
16Ys
$.35
.35
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.36 3%
5,102,923
$202,G31 1,445391
$ 28,676 433,324
$118,531 2,963,500
$ 19,110
$368,948
$ 58,140 19,337 71,109 54,390 22,206 45,935 11,041 37+41
$319,699
. $112,552
$810,016 2,622
$2.12 12,474 12,848 12,890 44,135 High Low 20>is 17s/s 20Ys 18 21 >/s 19>/s 21>/s 19'.32
.32
.35
.35 3%
4,938,362
$179,940 1,453,590
$ 26,403 420,438
$105,797 2,950,287
$ 19,004
$331,144
$ 56,993 13,635 62,086 50,318 21,053 43,876 3,858 34,548
$286,3G7
$ 98,091
$722,780 2,624 10 10 14 9
3 13 (1) 9 3
12 2
42 15 8
5 5
186 9
12 15 12 Note: Thc 20tl> annual stock dividend was paid february 23, 1979 at thc rate ol three pcrccnt.
To',5h arch'olde rs:
After a disappointing year in 1977, common stock earnings in 1978 rebounded to $2.46 per share. This represents an increase of 34 cents, or 16 percent more than the 1977 earnings of $2.12 per share; a substantial improvement, especially since there were 1.3 million additional shares outstanding during 1978.
Earnings continue to be affected by the weak economy of the State, by inadequate rate relief, and by increasing costs, including those due to inflation and government regulation. Although earnings have improved, they are not at the level we believe they should be. On the plus side, some encouragement can be taken from the State government's more serious efforts to retain and attract business and industry.
Dividends paid per common share for the year totaled $1.41, 12 cents more than the $1.29 paid the previous year. Additionally, a three percent common stock dividend was paid in February 1979.
This is the 20th consecutive year in which a stock dividend has been paid.
Total customer revenues for 1978 were $340.3 million, a 12 percent increase over 1977 customer revenues of $304.7 million. Revenue from electric sales to other utilities rose 8.6 percent in 1978 and totaled $28.7 million. The gain resulted from a sustained strong market for RCRE's coal-fired elec-tricitythrough the New York Power Pool to utilities that would otherwise have to rely on the more expensive oil-fired electric generation. These sales brought total revenues for the year to $369.0 million, an11 percent increase over1977.
Kilowatt-hour sales of electricity to customers increased 3.3 percent for the year. Industrial kilo-watt-hour sales led gains with a six percent increase over 1977, a relatively strong growth. Residential kilowatt-hour sales increased 2.5 percent.
Natural gas sales in therms were up 3.1 percent over 1977. The gain is attributed primarily to colder than normal weather and the addition of more than 2200 gas space heating customers following the 1977 liftingof a New York State Public Service Commission (PSC) prohibition on additional gas service.
The performance of the Ginna nuclear power plant was excellent. The plant was available 81 percent of the time during the year and had regained its maximum dependable capacity of 470,000 kilowatts following the May 1978 installation of a new turbine rotor. Thus the nuclear power plant economically provided 60 percent of the electricity on our own system and, when compared with an equivalent amount of energy generated by a coal-fired plant, saved our customers $32 million in fuel costs for the year.
Operating expenses rose 11.6 percent, going to
$319.7 million in 1978 from $286.4 million in 1977.
Fuel expense, including purchased electricity and
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-g K,'eith W. Amish Francis E. Drake, lr.
Paul W. Briggs gas, went up 12.0 percent, an increase of $15.9 million. Employee wages and benefits expense increased 8.1 percent, or $4.1 million over 1977. The total number of employees, 2622, was reduced by two over the year while the number of customers continued to increase, resulting in improved productivity. Employee overtime was kept to a minimum. Taxes, including Federal income tax, increased
$9.2 million over1977, or19.4 percent.
Capital expenditures for 1978 were $112.6 million, excluding Allowance for Funds Used During Construction (AFDC). This was 15 percent more than the 1977 capital expenditure of $98.1 million.
A total of $38.7 million was required during 1978 for additional electric generating capacity. This included $3.6 million capital investment in our proposed Sterling nuclear power plant project,
$12.2 million for a 24 percent share of Niagara Mohawk Power Corporation's Oswego ~6 oil-fired plant, and $22.9 million for 14 percent of its Nine Mile Point ~2 nuclear plant. The Niagara Mohawk plants have been rescheduled to be operational in 1980 and 1984 respectively. These later operational dates willnot affect the Company's ability to meet projected increased customer electric demand unless we should experience an increase in the present growth rate of electric use.
Plans for a proposed 1,150,000 kilowatt nuclear power plant at Sterling, New York await reinstate-ment of a certification from the New York State Board on Electric Ceneration Siting and the Envi-ronment. In January 1978 this Board granted a construction certificate for the Sterling plant with an operational target for the year 1986. The Board suspended the certificate in May1978 and requested further proof of "need" for the unit.
Based on updated load growth projections that
. showed lower electric load growth in the State as a whole, the Siting Board felt there was a question as to the necessity for the unit in the time frame origi-nally requested. The four partners in the Sterling
project subsequently advised the Siting Board that the operational date for the plant could be extended to 1988 ifthe updated growth estimates proved to be accurate.
RG8 E continues to pursue the authorization for timely construction of the Sterling plant based on state-wide needs as well as customer needs on the Rochester system. Although construction cost esti-mates in an inflationary economy have greatly appreciated due to the delays in completion date of the project, it is our opinion that this plant repre-sents the best and most economic option for meeting electric energy demands in New York State and the Rochester system.
We petitioned the PSC in May 1978 for rate increases amounting to a total of $48.7 million in additional revenue, consisting of an 8.9 percent gas rate increase and a 17.8 percent increase in electric rates. The proceeding is in its final stages and the PSC decision is expected to be rendered in late Aprilwith the new rates to take effect in May.
The September 1978 sale of an additional 1,250,000 shares of common stock realized $23.4 million in new capital. In December 1978 RGB E completed the private placement with institutional investors of $40 million in first mortgage bonds at 9.5 percent interest.
More than 18 percent of holders of common stock are now participating in the Company's Auto-matic Dividend Reinvestment Plan as compared with 11 percent when the Plan was initiated in 1974.
During 1978, they invested more than $3.7 million in 206,427 riew shares of common stock.
We have consistently expressed support for the creation of Empire State Power Resources, Inc.
(ESPRI). This plan would have allowed power companies in New York State to join in common power plant licensing, financing and plant opera-tion, yet sustain the autonomy of the companies.
The plan would have benefited customers through lower generating costs than would otherwise be possible. The projected savings to RG8 E customers alone through the year 1998 would approach
$1 billion. In February 1979, after five years of lengthy deliberations, the PSC took an informal poll that indicated that the proposal would be disapproved.
We are still awaiting the formal decision. The verdict is very disappointing, and the higher costs it willproduce for the long-suffering consumers cannot be justified, in our opinion.
Once again, the PSC reported that RGB E had the lowest number of customer complaints per capita of any power company in New York State.
These figures are supported by our own consumer surveys that show customers give the Company very high marks for the quality and reliabilityof its service. The credit goes to our fine employees.
We anticipate modest increases in demand for both electricity and natural gas in1979. Gas supplies are sufficient and we willcontinue to expand gas 0
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s space heating service while balancing known supply with anticipated demand. Total kilowatt-
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hour sales of electricity to customers are projected to increase 3.1 percent. Our service area is expected to realize this growth despite the adverse economic
. factors that have significantly diminished load growth in other areas of the State.
Expenses willcontinue to increase, with taxes estimated to go up by 7.7 percent. Capital expendi-tures willgo up to $115 million, excluding AFDC.
Although we retain a markedly positive view of the future in our service area, efforts to improve performance as a utilityare regularly hampered by events and circumstances largely outside our control. The costs associated with virtually every segment of our business continue to rise, and infla-tionary pressures willundoubtedly necessitate further increases in our rates for natural gas and electricity.
The cost problems are compounded by a regu-latory environment that frustrates our attempts to build the generating capacity that willbe required if there is to be economic giowth in New York State.
Along with increased taxes, the burdens of exces-sive regulation and extraordinary regulatory delays are passed on to our customers as increased prices, and this further compounds the problems faced by businesses and consumers within our service area.
These problems are so important that we have taken the unusual step of preparing a special section to this report that can be found on page eight. We hope you will take the time to read it.
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Francis E. Drake, lr.
Chairman ol the Board and Chief Executive Ollicer Paul W. Briggs President Keith W. Amish Executive Vice President March 15, 1979
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Electric Operations Generation Over the past few years, three incidents of blade failures in one of the rows of a low pressure turbine rotor at the Ginna nuclear power plant had reduced plant availability-the percentage of time the plant is in service. In 1976, for example, the plant's availability was only 58 percent. A temporary modification to the turbine followingthe third blade failure allowed continued plant operation, but only at 86 percent of capacity.
RG8t E worked with the manufacturer in redesigning blades for a new turbine rotor to solve the problem.
The new rotor was installed in May 1978 and it has performed very well.
The plant is once again operating economically and efficiently at full capacity, providing more than half of the electricity for the Company's system. During the seven-month period from the time the rotor was replaced to the end of the year, the Ginna nuclear power plant recorded a remarkable 98 percent availability. For the entire year, the plant's availability was a noteworthy 81 percent.
For further reliability, the original rotor has been rebuilt with the improved blades and was replaced in the second low pressure turbine unit during the 1979 annual refueling, maintenance and inspection shut-down. The displaced rotor willbe rebuilt and kept at the nuclear power Following a major redesign of blade configuration, this new, 80-ton lowpressure turbine rotor was installed at the Cinna nuclear power plant.
plant as a spare to significantly reduce shutdown time in the event of any future, unforeseen rotor problem.
Distribution In the Rochester vicinity, a substation was constructed to meet electric demand at the new manufac-turing plant at Rochester Products, Fuel Systems Division of General Motors. An additional overhead trans-mission line was constructed to the Xerox Corporation facility in Webster providing greater capacity for Xerox and other area customers. As part of the115 KVtransmission construction project in the Rochester area, a major circuit was reconstructed in western Monroe County that increased capacity to suburban customers in the Town of Gates, including the expanding Apparatus Division of Eastman Kodak Company located there.
RG8 E continued its construction program extending 34.5 KVdistribu-tion facilities in the Genesee
- District, south of Rochester. The Canandaigua-Finger Lakes District expanded 115 KV facilities in meeting sustained growth in its area. A new12.5 KVservice was installed at the recently completed Voplex plant in Canandaigua.
In the Lakeshore District to the east, plans call for the construction of a 115 KVtransmission line along the recently acquired right-of-way section of the Hojack Line railroad to meet growth in that outlying district.
Streetlighting modernization programs in 1978 resulted in more than 2000 older incandescent lamps being replaced with high pressure sodium units in the northern part of the City of Rochester. This project, paid for by the City, increases lighting efficiency and enhances public safety.
A streetlighting modernization program was completed in the Village of Mt. Morris, and another is underway in the Village of Webster.
Electric and gas facilityrelocation on public property became a larger-than-normal undertaking in 1978 due to the extensive activity in road construction and highway improvement. The $7 million expense for this work must ultimately be borne by the Company's customers since there is only occa-sional and very minor reimbursement from government agencies that order the relocations.
This electric translormer replaced a unit that lailed in service in 1978. Itis one ol two transformers at an interconnection that reduces 345,000 volts to 115,000 volts for transmission in the RG&E system.
Electric to our C Kilowatt-Hour Sales ustomers by Classes millions 1500 j
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Udd L'2~8 LJ OQ us aa LJ OO Total Electric KWH Sales In Millions Year Total 1978 5103 1977 4938 1976 4806 1975 4521 1974 4408 1973 4540 1972 4292 1971 3982 1970 3802 1969 3578
,. LILJUU 1969 70 71 72 73 74 75 76 77 78 Gas Therm Sales to our Customers by Classes millions 150 100 ~
U Total Cas Therm Sales In Millions Year Total 1978 433 1977 420 1976 468 1975 424 1974 454 1973 435 1972 469 1971 442 1970 425 1969 403 mescal Cost L'LILI UL" J U
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1969 70 71 72 73 74 75 76 77 78 RC&E engineers designed an uncommon type ol gas pipeline support in this bridge that crosses the Oarge Canal. The support cables are underneaih the pipe insiead of above.
Gas Operations Supply Adequate RC&E's supply of natural gas, under contract with Consolidated Gas Supply Corpora-tion, remains adequate.
Deliveries of liquefied natural gas (LNC) from Algeria to our supplier continue on schedule, adding15 percent to the supplier's capacity. This, combined with increasing yields from the supplier's Louisiana offshore wells, provides assurances for adequate gas volumes in meeting existing and projected demands.
New Gas Service RC&E installed more than 1300 gas service lines to new residential, commercial and industrial customers in 1978. Including heating system conversions, more than 2200 gas space heating customers were added during 1978.
This expansion followed Public Service Commission approval in 1977 of the Company's petition to liftthe prohibition on accepting new or addi-tional gas service. The additional services have helped slow the decline in total gas deliveries seen over the last several years that resulted from customer attrition and conservation.
RG&E estimates that more than 3400 space heating customers willbe added in 1979 including new homes,
'commercial establishments and heating system conversions.
Therm BillingLiquefied natural gas (LNG) has a higher heat value (BTU's per cubic foot) than the domestic gas we have previously received. When LNG is mixed with domestic gas, as in the supplier's delivery to RG&E, the thermal value varies. For this reason, RGB E has changed its gas billingfrom hundreds of cubic feet to therms, one therm being one hundred thousand BTU's. Starting in May 1979, a gas customer's bill willbe calculated according to the average heat value (therms) used during the billing month. While this new system should have no effect on the amount of the customer's bill, it ensures that the Company's gas revenues willmore accurately reflect the heat value of the gas sold.
Research and Development, In 1978 RC&E invested $2.8 milliorrin research and development projects.
Half of that amount was directed to nation-wide utilityindustry supported research organizations as well as the research arm of New York State utilities, known by the acronym ESEERCO. One such ESEERCO program helps support the nuclear fusion experiments at the University of Rochester. The New York State Energy Research and Development Authority directly assessed RC&E
$G00,000 for state government spon-sored research and development projects.
The other half of the research and development funds was allocated to Company-sponsored and -coordi-nated projects such as the gas furnace demonstration program in which a number of residential gas furnaces have been modifie'd for test purposes in an attempt to improve efficiencies.
So far, an average gas saving of 17 percent has been achieved in the test homes while maintaining comfortable heating levels.
A broad, national program to encourage development of nuclear steam generation equipment and maintenance improvements was initiated in 1978 and is co-sponsored by RG&E. The research on a novel backhoe safety shutoff system that willprevent accidental damage to underground cable and pipeline has produced a prototype that willbe field-tested this year. In another research area under RG&E coordina-tion, data collected from several utilities were analyzed to determine spawning habits of fish along the southern shoreline of Lake Ontario. In all, RG&E directly supported more than 40 research and development projects in 1978.
Management Appointment Joseph J. Hartman was elected to the position of Vice President, Gas and Transportation by the board of directors effective December1, 1978. He succeeded Elvin A. Skibinski who retired after 33 years of service.
Mr. Hartman joined RG&E in194G as a co-op student in the Gas Department.
He held a series of engineering posi-tions in the Gas Department until 1974 when he was appointed Superin-tendent of General Maintenance.
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4 g~/'igpp'n the Laboratory for Laser Energetics of the College ol Engineering and Applied Science at the University ol Rochester, experiments are conductedin an attempt to harness thermal energy from nuclear lusion.
Povverlul laser beams are focused through mirrors and converge on a minute hydrogen pellet inside a target chamber (photo inset). The project is supportedin part by RC&E, and the experiment may one day lead to a virtually inexhaustible source ol tl>ennal energy for the generation of electricity.
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Gross Pay 1978 Oate l918 Electricity 1.7%
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l Th'e cost oflivinghas gone up drastically over the
.years, and we know itwillcontinue to rise untfl inflation, at least, is brought under control. But, it's not just the cost oflivingthat's gone up, it's the cost ofdoing business, too.
The i ationary economy has adversely affected business and industry as well as the individual. Despite eff'orts to minimize expenses, the rising cost ofdoing business has affected RG&E, particularly on costs over which the Company can exert littleor no control.
This special section of the 1978 annual report is intended to rtray, in plain talk, the rising costs and their effect on RG&E, its customers and shareholders.
Before getting into specifics on the cost increases, let's take a look at the overall impact on RG&E customers in general. From 1970 to 1978 the cost ofelectricity to RG&E customers had risen 84.5 percent, and the cost of gas went up 109 percent. How has the higher cost of electricity and gas aff'ected most RG&E customers? Based on wage figures published by the New York State Depart-ment ofLabor, our records show that in 19/0 the qrpical Rochester production worker paid 1.6 percent ofhis or On the subject ofrising costs, pressure groups and consumer activists often suggest that utilities, like RG&E, should hold the line on "their" rising costs and maintain existing rates or even lower them by reducing "profits."
Well, the fact is, RG&E has no control over most ofthe costs that comprise the rates. And as for "profits," there really aren't any profits in a strict sense ofthe word as we'l int out later. Let's take a look at the costs in RG&E's business.
Fuel expense consumes the largest portion ofthe revenue dollar. Today 40 cents of each revenue dollar go to pay for the fuels used in the generation ofelectricity, steam, and for the cost of natural gas. Over a nine-year period through the end of 1978, the cost ofcoal per ton more than doubled while oil and natural gas had tripled in cost. Nuclear fuel, processed and ready for use in a power plant, had a fourfold cost increase, yet itstill remains the most economical fuel for electric generation as seen in the accompanying chart that compares fuel cost on a BTU or heat value basis.
Tax 26.79'a 3.0%
Fuel Expense (Fuel costs per million BFU's) her gross income for electricity. In 1978, despite more than a ten percent increase in electric use by the average residential customer, the same worker still paid just 1.7 percent ofgross pay for electricity. Ifthat worker was a gas space heating customer, he or she paid 3.1 percent of gross income for gas in 1970, and only 3.0 percent in 1978. In the meantime the tax bite (property, income, social security and sales) out ofthat same gross pay went from 23.9 to 26.7 percent.
Most pay has kept pace with the inflationary impact on prices. Even though more actual dollars are needed to pay for electricity and gas, these forms ofenergy absorb about the same amount ofgross income as they did nearly ten years ago. The problem is that government taxes are taking greater amounts ofthe devalued gross paycheck dollars.
We'e certainly not saying that all ofour customers have incomes that have kept pace with escalating inflation.
The senior citizen, for example, on low, fixed income is having an extremely difficulttime meeting the continually increasing costs ofall essentials for living,including heat and electricity.
The phght ofa senior citizen in the situation described above is a very complex social problem that stems from rampant inflation. And, as a social problem, it is one that should not be placed upon any one segment of the economy or any one mdustry, whether it be a regulated natural monopoly or not. Recognizing this social problem, we at RG&E have expressed our support for an energy stamp program and have even offered to help develop such a plan. But, so far, the authorities have not accepted the offer. Further, we have contended that residential'heat and electricity are just as essential to our customers as food, and should be tax-exempt. In that regard, the State did reduce sales tax on electricity and gas by one percent in 1978.
na 1970 78 70 78 70 78 70 78 Coal Oil Gas Nudear The market price offuels is beyond the influence of RG&E's prudent and aggressive purchasing procedures.
Rising inflation gradually boosted fuel prices. The single most devastating factor, though, was the 1973 Arab Ofl Embargo that not only caused the price ofoil to double in a year, but also illustrated that the United States had become dangerously dependent on foreign oil sources.
This dependence, combined with the rapid cost increases, produced trade deficits that have seriously eroded the value ofthe American dollar and have helped promote uncontrolled inflation. It's a serious situation and one that is increasingly agitated by a glut ofself-defeating laws, regulations and taxes enact by the federal and state governments.
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The ratio ofRG&E customers to employees in 1970 was 168 to one. In 1978 there were 186 customers for each RG&E employee. This means that our employees have increased their productivity as their contribution in the struggle against inflation. Productive, competent employees provide for the best interest ofthe shareholder and the customer.
RG&E willcontinue to exercise control ofwage and benefit expenses, and we are observing the current volun-tary anti-mflationary guidelines.
RG&E's tax expense has tripled since 1970 going from $ 19 millionto $57 millionin 1978. And, the 1978 figure doesn't even include the $ 15.5 millionin sales tax RG&E had to collect from customers in their bills for the State and local governments. Aside from the visible sales tax, "hidden" taxes in the customer bills account for more than 15 cents ofevery dollar the customer pays to RG&E.
When sales taxes are included, the typical residential customer's billis more than 22 percent tax. And that's a cost ofgovernment, not ofenergy.
Tax Portion of 1978 Customer Bill22.5%
don 4 RNUC loocsrot,le Tax is another example ofexpense where RG&E can exercise littleor no control. Ofcourse, it could be pointed out that property taxes do mount up as we expand facili-ties such as substations, transformers and power lines. But, even here there is no option. We are obligated to meet growth, and are required by PSC law to serve the instant energy demands of customers regardless ofthe amounts called for. And just like every other property owner, we pay high tax rates on inflated values. The effect is cumulative.
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d In addition to the expenses just discussed, seven percent of the 1978 revenue dollar was used to pay for miscellaneous materials and services. Among other items this category includes fees assessed by regulatory agencies, expenses for regulatory compliance, legal counsel, and building and grounds maintenance. Here, too, there is really httle choice. We do, however, request bids where we can and look for the best price in the marketplace.
30/40/50 MVAElectric Transformer 10 Expense for employee wages and benefits has increased 80 percent since 1970, a relatively small increase compared to other items mentioned. This is an area where RGKE may and does exercise control-reasonable control.
And it has to be reasonable ifthe Company is to retain competent personnel and remain competitive in the labor and professional employment market. Let's face it, we'e in a highly complex, technical business. Low or inade-quate wages would produce nothing but a false economy.
1970-$ 127,500 1978-$ 278,000 Percentage increase-118.0%
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Millions 6120 100 80 60 40 20 0
Annual Capital Expenditures ln Millionsol Dollars, Excluding Allowance for funds Used During Construction ss 1 sro 1 isa 1970 71 72 73 74 75 76 77 78 In 1978, $ 112 millionwere needed to cover the cost ofnew facilities required to serve customers. Although 40 percent ofthat capital was raised internally, the rest had to come from a highly competitive money market. There is no alternative. Regardless ofmarket conditions we cannot and would not elect to ignore necessary additions to serve customer energy needs. To compromise on improvements and replacements that protect the energy systems is to gamble on efficient and reliable service to our customers, and we won't do that.
Cost ofcapital is a major area where we can exercise littleor no control other than continuing to employ effi-cient methods for raising funds in the capital marketplace where costs are rising rapidly. In March 1979, for example, we had to replace a maturing $ 16.7 millionthree percent interest bond withshort-term notes at more than 11 percent interest.
Although this may seem a little strange at first, RG&E's "profits" are actu-ally an expense. Our "profit"is nothing more than the amount that the New York State Public Service Commis-sion (PSC) allows us to pay for the money we have to borrow to build the facilities needed to serve customers. Put another way, we are allowed to earn a 'Sate of return" on the capital invested in plant used to serve the public.
The rates ofreturn are set by the PSC, but are in no way guaranteed. Without the ability to ay the costof P
money in interest and share-holder dividends we would not be able to raise the capital necessary to continue Gas and electric companies constitute the most capital-intensive industry in the entire economy. The average manufacturing concern, for example, invests 75 cents in plant for each dollar ofgross income while RG&E has had to invest more than three dollars for each gross income dollar. Large amounts ofmoney are required to pay for facilityexpansion, improvement and replace-ment. Prices for materials and labor have gone up, and so has the cost ofborrowing the money to finance the new facilities. For the most part, these costs cannot be controlled by us. Just as inflation has driven up costs in the markets where people shop, ithas also affected the markets where utihties purchase their hardware and money.
RG&E has a responsibility to supply electricity, gas and steam to its customers at the most economical prices.
But, try as we may, we have littlecontrol over most ofthe expenses incurred in fulfillingthis responsibility. We have consistently applied sound management policies and prin-ciples in attempting to minimize the amount ofrate increases while mamtaining the Company as a sound investment and reliable supplier. It's very discomforting to realize that uncontrollable costs have accounted for more than 80 percent ofcustomer cost increase since 1970!
The cost ofdoing business, especially power company business, is high, and itcontinues to go higher, driven by unbalanced federal and state budgets. Most of the cost is in fuels, taxes, capital expenditures and the cost of money. And, part ofthe cost is a result ofheavy regula-tion by all layers ofgovernment. We are not saying that regulation is unnecessary.
Some ofit is beneficia. But, like everything else, regulation has a price.
Since 1970, RG&E's spending for capital improve-ments just to comply with regulatory requirements and laws approaches $ 100 million.This expense amounts to almost a $20 millionannual cost to customers. To this we can add at least another $ 10 milliona year in operational expense to comply with various other federal and state regulatory requirements. Thus, a very conservative esti-mate of the annual cost ofgovernment regulation to our customers is $30 million, a very real part ofthe rising cost ofenergy.
We have taken this opportunity to present a story to you our shareholders, and hopefully to many ofour customers. It is not a unique story because each ofyou is experiencing the same pressures, the same cost increases, the same inflation, over-regulation and taxes. But, because utilities are sometimes regarded by the uninformed as unaffected by such pressures, we thought it important to spell out how these same factors, over which we have littleor no control, are driving up the abso-lute cost ofenergy.
Average Annual Use Per Residential Electric Customer Kijowatt Hours Average Annual Use Per Residential Space Heating lGas Customer Therms'101 1100 S12 1'lu 1101 1417 1717 1774 1727 l411 1969 70 71 72 73 74 75 76 77 78 1969 70 71 72 73 74 75 76 77 78
'Adjusted for normalized weather by degree days.
Earnings and Dividends Per Common Share in Dollars D Earnings per Common Share D Cash Dividends per Common Share (Adjusted for Stock Dividends) 2.12 2.24 2.12 1.04 1.$$
1.1$
1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 12
Source of 1978 Revenue Dollar in Cents Use of 1978 Revenue Dollar in Cents Electric Revenue Gas Revenue Cost of Fuels 40)l Pl)fels)sed llecstlc st Oes Steam Fuels nrrcisesed llecuiciry 194 55)t 324 Taxes 144 64 Depreciation 154 44 Interest on Bonds & Notes Misc. Materials
& Services Dividends (Com. 54 & Pfd. 24)
Electric Sales Steam to Other Utilities Revenue Wages
& Benefits Rein vested Earnings Capitalization in Millionsof Dollars 350 2))A 250 j,
150 1)5.1 1969 1970 1971 1972 1973 1974 1975 1976 1977 1970 a tong-Term r)ebs a Common Srs)relrorders'quisy a yrererred Equisy 13
HEI ROCHESTER GAS AND ELECTRIC CORPORATION e
Year Ended Oqcember 3'I Statement of Income tn.~~.to~4 I
1978 1)77 Operating Revenues (Note1)
Electric Gas Steam Electric sales to other utilities.
Total Operating Revenues Operating Expenses (Note1)
Operation Electric and steam fuels Purchased electricity Purchased natural gas..
Other Maintenance Depreciation Taxes-local, state and other..
Federal income tax-current (Note 3).
-deferred (Note 3)..
Total Operating Expenses Operating Income Other Income and Deductions Allowance for other funds used during construction (Note 1)
Other-net..
Total Other Income and Deductions Income before Interest Charges Interest Charges Long-term debt.
Short-term debt Other-net Allowance for borrowed funds used during construction (Note 1).
Total Interest Charges Net Income Dividends on Preferred and Preference Stock, at required rates Earnings Applicable to Common Stock Weighted average number of shares outstanding in each period, adjusted for stock dividends (000's)..
Earnings per Common Share (Note 1)
Cash Dividends per Common Share, adjusted for stock dividends (Note1)
$202,G31 110,531 19,110 340,272 20,676 360,940 50,140 19,337 71,109 65,605 26,246 22,206 45,935 5,166 5,075 319,699 49,249 0,705 4,410 13.123 62,372 25,594 1,588 416 (4,012) 22,78G 39,506 5,678
$ 33,908 13,774
$2.46
$1.41
$179,940 105,797 19,004 304,741 26,403 331,144 56,993 13,635 G2,086 62,494 22.372 21,053 43,876 961 2,897 286,367 44,777 G,473 1,310 7,703 52,560 22,542 1,319 494 (4 844) 19,511 33,049 6,512
$ 26,537 12,474
$2.12
$1.29 Statement of Retained Earnings It~ ~.ro.i~ I Balance at beginning of period Add Net income Total Deduct Issuance costs of preferred stock (Note 4)
Dividends on capital stock Cumulative preferred stock, at required rates (Note 4).
Preference stock (Note 4)
Common stock Cash (Note 1)
Stock (Note 4)
Total Balance at end of period 1978
$ 70,019 39/06 110,405 3,550 2,128 19,2G9 8,120 33,067
$ 77,330
$ 67,012 33,049 100,861 701 6,453 59 16,009 6,820 30,042
$ 70,019
ÃkL~~~
ROCHESTER GAS AND ELECI'RIC CORPORATION SalanCe Sheet trho dkofoolla 0 1978 At December 31 ASSETS UtilityPlant, at original cost (Note 1)
Electric Cas Steam Less-Accumulated depreciation and amortization Construction work in progress Net UtilityPlant Investment in subsidiary, at equity Current Assets Cash (Note 5)...
Accounts receivable Materials and supplies, at average cost Fossil fuel..
Construction and other supplies Pre payments Total Current Assets Deferred Debits Unamortized debt expense Deferred fuel cost (Note 1)
Other(Note4)..
Total Deferred Debits Total Assets CAPITALIZATIONAND LIABILITIES Capitalization (Note 4)
Long-term debt..
Preferred stock Preference stock Common shareholders'quity Common stock Retained earnings...........
Total common shareholders'quity Total Capitalization Current Liabilities Short-term debt (Note 5)
Long-term debt due within one year Accounts payable..
Taxes accrued, including income taxes Interest accrued Payroll accrued Other Total Current Liabilities Deferred Credits and Other Liabilities Accumulated deferred income taxes (Notes 1 and 3)
Other Total Deferred Credits and Other Liabilities..
Commitments and Other Matters (Note 6)
Total Capitalization and Liabilities
$669,104 171,120 17,735 857,959 261,477 59G,482 213,534 810,016 1,99G 11,777 31,700 12,G73 9,643 1,1 GO 6G,953 3,G20 5,362 5,439 14,421
$893,386
$384,303 G7,000 28,000 24G,938 77,338 324,27G 803,579 16,677 29,021 11,335 7,G67 2,59G 1,06G 68,362 18+94 3,051 21,445
$893,386
$609,387 162,946 17,442 789,775 229,122 5G0,653 162,127 722,780 1,947 6,617 30,332 10,787 9,724 927 58,387 3,348 6,338 5,574 15,260
$798,374
$3G1,022 67,000 28,000 212,533 70,819 283,352 739,374 9,000 18,635 4,G10 7,355 2,388 825 42,813 15,233 954 16,187
$798,374
RES ROCHESTER GAS AND ELECTRIC CORPORATION Statement of Changes in Financial Position tthousa d oIoolh
)
1978 1977 Year Ended December'31 Sources of Funds Operations Net income Principal non-cash charges (credits) to income Depreciation Amortization of nuclear fuel Deferred fuel costs Deferred income taxes-net Allowance for funds used during construction Other-net Total from Operations Financing Sale of long-term debt Sale of common stock Sale of preference stock Total from Financing Total Sources of Funds Uses of Funds Utilityplant Plant additions Nuclear fuel additions Less: allowance for funds used during construction Net Additions to UtilityPlant Dividends on preferred stock Dividends on preference stock Dividends on common stock..
Reduction of short-term debt-net Retirement of long-term debt Redemption of preferred stock, including call premium Capital stock expense Expense of issuing long-term debt Other-net Increase (decrease) in working capital (excluding short-term debt)
Total Uses of Funds Changes in Components of Working Capital Increase (decrease) in current assets Cash Accounts receivable....
Materials and supplies Fossil fuel.
Construction and other supplies..
Prepayments Total Increase (decrease) in current liabilities (excluding short-term debt)
Accounts payable Taxes Accrued interest and payroll Long-term debt due within one year Other-net Total Increase (decrease) in Working Capital excluding short-term debt
$ 39+86 22,20G 15,746 976 3,1G1 (13,517) 1,204 69,362 40,000 27,186 67,18G
$136,548
$105,191 20,878 13,517 112,552 3,550 2,128 19,269 9,000 16,677 902 490 (2,037)
(25,983)
$136,548 5 1GO 1,368 1,886 (81) 233 8,566 10,38G G,725 520 1G,G77 241 34,549
$(25,983)
$ 33,049 21,053 14,386 (2,886) 2,675 (11,317) 757 57,717 50,000 24,579 28,000 102,579
$160,296
$ 94,958 14,450 11.317 98,091 6,453 59 16,009 9,051 333 27,750 167 892 1,406 85
$160,296 188 (3,474)
(49) 351 281 (2,703) 482 1,651 1,234 (6,000)
(155)
(2,788) 85
Notes to Financial Statements Note 1. Summary of Accounting Policies General. The Company is subject to regulation by the Public Service Commission of the State of New York (PSC) with respect to its rates for service and the maintenance of its accounting records. The Company's accounting policies conform to generally accepted accounting principles as applied to New York State public utilities giving effect to the rate-making and accounting practices and policies of the PSC.
A description of the Company's principal accounting policies follows.
UtilityPlant and Depreciation. The cost of additions to utility plant and replacement of retirement units of property is capitalized. Cost includes labor, material, and similar items as well as indirect charges for engineering, supervision, etc. The Company capitalizes an allowance for funds used during construction approximately equivalent to the cost of capital devoted to plant under construction. Replacement of minor items of property is included in maintenance expenses.
Costs of depreciable units of plant retired are eliminated from utility plant accounts, and such costs, plus removal expenses, less salvage, are charged to accumulated depreciation and amortization.
Depreciation in the financial statements is provided on a straight-line basis at rates based on the estimated useful lives of property, which have resulted in provisions of 3.0'nd 3.1 /o per annum, of average depreciable property in 1977 and 1978, respectively.
Jointly-Owned Facilities. The followingtable sets forth the major electric generation projects currently planned which will add to the Company's present generating capability. Each participant must provide its own financing for these projects.
Oswego Nine Mile Fossil Point Nuclear Slcrling Unit ¹6$
Unit ¹2$
Nuclear 1980 1984 1988 850 1084 1150 204 150 322 24 14 28 Estimated year of completion Net megawatt capability RG&E's share-megawatts
-percent...
Nuclear Fuel and Decommissioning Costs. The cost of nuclear fuel and estimated permanent storage costs are charged to operating expense on the basis of the thermal output of the reactor. These costs are charged to customers through base rates and through the fuel cost adjustment clause.
iMiliionsol Dollars)
Total estimated project costs0a....
$252.60a
$1,441.4i$ l
$1,354.70s RG&E's share..............
60.6 201.8 379.3 RG&E's actual construction costs-1977.....
10.0 21.7 3.5
-1978.....
12.2 22.9 3.5 eTo be constructed and operated by Niagara Mohawk Power Corporation.
To be constructed and operated by Rochester Cas end Electric Corporation.
Construcdon costs exclude allowance for funds used during construction and certain overhead costs to be capitalized.
Total project costs include $8.5 million(or oil handling facililics,of which RC&E has not agreed upon the percentage participation, end excludes common facilities.
Total project costs include $89A millionfor the initialnuclear fuel loading and excludes common facilitics.
Total project costs include $114.7 millionfor the initialnuclear fuel loading.
Due to a Federal government policy adopted in 1977, the Company has changed its nuclear fuel cost computation to reflect the costs of permanent storage of spent nuclear fuel.
Prior years'uclear fuel cost computations anticipated spent nuclear fuel would be reprocessed.
Cumulative prior years'uel expenses would have been increased by approximately $8.0 million if they had been determined on the basis of current cost estimates for permanent storage of spent nuclear fuel, rather than on an estimated amount for reprocessing.
Ifthe government's permanent storage policy is continued, the Company believes that such amount willbe fullyallowable for rate-making purposes.
Decommissioning costs (costs to take the plant out of service in the future) for the Company's Ginna nuclear power plant cannot be estimated at this time. The Company believes that the costs of decommissioning willbe fullyallowable for rate-making purposes.
Allowance for Funds Used During Construction. The Company capitalizes an Allowance for Funds Used During Construction (AFDC) based upon the net cost of borrowed funds for construction purposes and a reasonable rate upon the Company's other funds when so used. The rate used for this purpose was 8'/a%, which became effective in May 1976.
In accordance with the order issued by the Federal Energy Regulatory Commission, AFDC is segregated into two component parts and classified in the Statement of Income to disclose an Allowance for Borrowed Funds Used During Construction as a credit to Interest Charges and an Allowance for Other Funds Used During Construction as a part of Other Income.
In December 1977, the Company began computing AFDC on its share of Nine Mile Point Nuclear Unit ~2 and Oswego Fossil Unit O6 at an average reduced rate of 6.85%%d, which is net of the income tax effect of the interest portion of AFDC.
Rates and Revenue. Revenue is recorded on the basis of meters read during the calendar year.
Tariffs for electric and steam service include fuel cost adjustment clauses which serve to adjust electric and steam rates from time to time to reflect changes in the average costs of fuels used in electric and steam generation from the average cost of such fuels during the base period. Tariffs for gas service contain a comparable clause to adjust gas rates for changes in the price of purchased natural gas.
Deferred Fuel Costs. Fuel costs which are recoverable under the electric, gas and steam cost adjustment clauses included in the tariff schedules of the Company are deferred until they are billed to customers. A reconciliation of recoverable gas costs with billed gas revenues is done annually as of August 31, and the excess or deficiency is refunded to or recovered from the customers during a subsequent twelve month period.
Federal Incorhe Tax. For income tax purposes, depreciation is computed using the most liberal methods permitted. In addition, certain costs capitalized for financial reporting purposes are deducted currently for income tax purposes. The resulting tax reductions are offset by provisions for deferred income taxes only to the extent ordered or permitted by regulatory authorities.
The 10% investment tax credit rate, which had been scheduled to return to 4% in 1981, has been made permanent by the Revenue Act of 1978. The prior rate of 4%%d is applied to reduce the current tax provision while, as recommended by the PSC, normalized tax accounting is followed in the application of the remaining 6%.
The Company uses the separate period approach in calculating the interim quarterly tax provision.
Pension Plan. The Company's retirement plan is noncontributory and covers all regular employees. Current service costs are funded annually. Past service costs are being amortized over a 40 year period.
Retirement plan expenditures for the years 1977 and 1978 were
$9.2 millionand $9.9 million, respectively. The actuarially computed value of vested benefits at December 31, 1978 exceeds the assets in the plan by approximately $15 million.
Earnings and Dividends Per Share. Earnings applicable to each share of common stock are based on the weighted average number of shares outstanding during the respective years, adjusted for stock dividends. Assuming the 1,250,000 shares of common stock issued on September 27,1978 were outstanding at the beginning of1978 and the proceeds were applied to reduce the short term debt, the earnings per share for 1978 would have been $2.36. Cash dividends per share are based on the shares outstanding at the time dividends are paid, adjusted for stock dividends. Cash dividends per share at the rates declared in each period amount to $1.34 for 1977 and
$1.42 for 1978.
Note 2. Departmental Financial Information pho~nch of oolfacs)
The Company's records are maintained by operating departments, in accordance with PSC accounting policies, giving effect rate-making process. The following is the operating data for each of the Company's departments and no interdepartmental adjustments are required to arrive at the operating data included in the Statement of Income.
Electcic Gas to the Total Operating information-1978 Operating revenues Operating expenses, excluding provision for income taxes Prctax operating income Provision for income taxes...................
Nct operating income Other incomc-nct Interest charges Nct income pcr statement of income.
Other information Depreciation Nuclear fuel amortization Capital expenditures
$231,307 181,428 49,879 9,244
$ 40,635
$ 16,984 15,746 100,194
$118,531 107,873 10,G58 1,96G 8,692 4,641 11,903
$ 19,110 19,357 (247)
(1G9)
(78) 581 455
$368,948 308,658 60,290 11,041 49,249 1 3c1 23 22,786
$ 39,586
$ 22,206 15,746 112,552 Investment information-December 31,1978 Identifiable assets...................
Assets utilized for overall Company operations (a)
Total assets pcr balance sheet..
$711,91 7
$146,299
$ 15,71 G
$873,932 19,454
$893,386 Operating information-1977 Operating revenues Operating cxpcnscs, excluding provision for income taxes Prctax operating income..
Provision for income taxes...................
Nct operating income Other incomc-nct Interest charges Nct income pcr statement of income.
Other information Depreciation Nuclear fuel amortization Capital expenditures
$206,343 165,858 40,485 4,041
$ 36,444
$ 15,333 14,386 90,722
$105,797 97,465 8/32 147 8,1 85 5,140 6,943
$ 19,004 19,186 (182)
(330) 148 580 426
$331,144 282,509 48,635 3,858 44,777 7,783 19,511
$ 33,049
$ 21,053 14,386 98,09I Investment information-December 31, 1977 IdcntiflabIc assets Assets utilized for overall Company operations (a)
Total assets pcr balance sheet (a) Consists primarilyof cash, prcpaymcnts and unamortized debt expense.
$626,464
$141,130
$ 16,619
$784,213 14,161
$798,374
~
~
% of Pretax Income Amount
$39,586 Amount
$33,049 Net income Federal income tax Current Deferred 5,166 5,875 11,041 (513)
(2,201)
(2,501)
(5,215) 5,826
$45,412
$21,797 961 2,897 3,858 (222)
Charged to operating expense Amort. of deferred investment tax credit..
AFDC net of tax rate difference Other.....................,
(1,460)
(1,682) 2,1 76
$35,225
$16,908 Included in Other Income...
Actual Federal income tax expense Income before Federal income tax 48.0 Computed tax expense Increases (reductions) in tax resulting from:
Excess of tax depreciation less amount deferred Expenses capitalized for financial statements including interest, payroll and use tax, etc.
Investment tax credit Property taxes on basis of date of taxable status Cost of removal, less net amount deferred.
Revenue taxes (deducted when paid)
Miscellaneous items, net.
Actual Federal income tax expense (3,580)
(10.2)
(3,525)
(7.8)
(7,765)
(2,624)
(254)
(655)
(9,3G1)
(4,955) 224 (724) 2.133 237
$ 5,826 (20.G)
(10.9)
.5 (1 6) 4.7
.5 12.8 (22.0)
(7.4)
(7)
(1.9) 146
$ 2,1 76 4
G.2 Npte 3. Federal Income Tax Provision (Thnusa'mnfoottars)
Th'e following is a reconciliation for the years 1977 and 1978 of the difference between the amount of Federal income tax expense reported in the Statement of Income and the amount computed by multiplying the income before tax by the statutory tax rate.
1978 1977
% of Prelax Income A summary of the deferred amounts charged or (credited) to income is as follows:
Investment tax credit Class life depreciation Fuel costs Nuclear fuel amortization.............
Nuclear fuel storage costs Fossil plant abandonment costs 7GS KVTransmission system abandonment costs OII)er.........................
1978
$ G,629 1,7G3 (469)
(142)
(4,989) 850 (481)
$ 3,161 1977
$ 2,003 1,379 1,386 (362)
(3,346) 2,160 (545)
$ 2,675 Note 4. Capitalization Long-Term Debt First Mortgage Bonds Sertes Due 3
L Mar. 1, 1979...
2s/e M
Aug. 15, 1980..
3)S N
June 1, 1982...
3Ye 0
Mar. 1, 1985...
4Ye R
July1,1987...
5 S
Oct.15,1989..
4ya T
Nov.15,1991..
4Ye U
Sept. 15, 1994..
5.3 V
May 1, 1996...
6 ye W
Sept. 15, 1997..
6.7 X
July1,1998...
8 Y
Aug. 15,1999..
9Ye Z
Sept. 1, 2000 10'/a AA Aug. 1, 1983 9Y<
BB June 1S,200G..
BYe CC Sept. 15, 2007..
9Yi DD Dec. 1, 2003 Less:
Series L due in 1979 Total Long-Term Debt.
(Thousands)
Principal Amount December 31, 1978 1977
$ 16,G77
$ 16,G77 12,000 12,000 6,000 6,000 10,000 10,000 15,000 15,000 12,000 12,000 15,000 15,000 1G,000 16,000 18,000 18,000 20,000 20,000 30,000 30,000 30,000 30,000 30,000 30,000 29,G67 29,667 50,000 50,000 50,000 50,000 40,000 400,344 360,344 16,G77
$383,6G7
$3G0,344 Capital Stock.
Preferred Stock (cumulative)-Par value $100; 2,000,000 shares authorized:
4 4.10 4'/a 4.10 4.95 4.55 7.50 11 Shares Series Outstanding F
120,000 H
80,000 I
G0,000 50,000 K
60,000 M
100,000 N
200,000 0
(Thousarxh)
December 31, 1978 1977
$12,000
$12,000 8,000 8,000 6,000 6,000 5,000 5,000 6,000 6,000 10,000 10,000 20,000 20,000 Redemption (per share) (a) 105 At any time 101 At any time 101 At any time 102.50 At any time 102 At any time 102 Before 3/1/80 108 Before 6/1/79 (b) 670,000
$67,000
$67,000 Bond premium applicable to the years 1977 and 1978 is $677,702 and $635,667, respectively.
Sinking and improvement fund requirements aggregate
$333,540 per annum. Such requirements may be met by certification of additional property or by depositing cash with the Trustee. The 1977 and 1978 requirements were met by certification of additional property.
19
Preference Stock-Par value $1; 5,000,000 shares authorized:
Series 7.6 A
Shares Outstanding 280,000 (thousands)
December 31, 1978 1977 Issued
$28,000
$28,000 12/20/77 During January 1985, the Company must offer to purchase on October 1,1985 all of the outstanding 7.6% Series A preference stock at a price of $100 per share. The shares remaining outstanding after such offer are callable at $100 per share at the option of the Company at any time after December 20, 1987.
Preference stock is subordinate to preferred stock but is senior to common stock.
Common Stock-Par value $5; 25,000,000 shares authorized:
Per (Thousands)
Share Shares Amount 11,366,111
$181,301 20.00 340,984 6,820 21.00 1,000,000 21,000 20.91 24,300 508 18.31-20.94 158,236 Outstanding, December 31, 1976 3% Stock Dividend.......
Sale ofStock...........
TRASOP4 Automatic Dividend Reinvestment Plan......
Capital Stock Expense Outstanding, December 31, 1977 3'X Stock Dividend.......
Sale ofStock...........
Automatic Dividend Reinvestment Plan......
Capital Stock Expense Outstanding, December 31, 1978 3,071 (167) 212,533 8,120 23,438 12,889,631 21.00 386,689 18.75 1,250,000 17.19-19.25 206,427 3,749 (902) 14,732,747
$246,938
'Tax Reduction Aci Stock Ownership Plan The Company's Certificate of Incorporation was amended on June 1, 1977 to authorize an additional 10,000,000 shares of common stock, par value $5 per share.
At December 31, 1978 there were 415,797 shares of common stock reserved and unissued under the Automatic Dividend Reinvestment Plan. No other shares of common, preferred or preference stock are reserved for officers and employees or for options, warrants, conversions, and other rights.
Note 5. Cash and Short-Term Debt At December 31, 1978, the Company had $7 million in temporary cash investments.
Under informal agreements with certain banks, the Company is expected to maintain an average compensating balance of 10 percent of the lines of credit plus an additional 10 percent of the principal amount of each borrowing. Under the agreements, withdrawal of the compensating balances is not legally restricted, and at December 31,1978 the balances amounted to
$4.4 million. Bank lines of credit aggregated
$64 millionand borrowings are at current floating prime interest rates. The (a) Redeemable at the option of the Company on 30 days'inimum notice, plus accrued dividends in all cases.
(b) Called for redemption on December 20,1977. The issuance costs related to Series 0 were charged to retained earnings, and the call premium of $2,750,000 related to this series was reported as other deferred debits and, beginning in January 1978, is being amortized in accordance with an order from the PSC.
The Company's Certificate of Incorporation was amended on June 1, 1977 to authorize 4,000,000 additional shares of cumulative preferred stock, having a par value of $25 per share.
None of this preferred stock has been issued.
Outstanding short-term debt and average interest rate at end of period:
Notes Payable Commercial Paper Maximum short-term debt outstanding during the period:
Notes Payable Commercial Paper Weighted average short-term debt and interest rates during die per lock Notes Payable Commercial Paper 1978 Rates Amount (Thousands)
$15,500 15,900 8.82%
7,769 7.84 9,450 1977 Rates Amount (Thousands) 7.00K
$ 7,000 6.63 2,000 25,000 26,500 6.42 10,960 5.35 11,148 The above averages were based upon the daily balances and interest rates in effect for the periods during which short-term borrowings were outstanding and before giving effect to the additional interest cost resulting from compensating balances.
Note 6. Commitments and Other Matters The Company's capital expenditures program involves an estimated expenditure of $115 million, not including allowance for funds used during construction, in 1979 and the Company has entered into certain commitments for purchase of materials and equipment in connection with such program.
Operations of the Company's generating stations are subject to various Federal, state and local environmental standards.
Under the Clean Water Act, the Company is required to obtain permits to discharge pollutants into the waters of the United States. The United States Environmental Protection Agency (EPA) issued National Pollutant Discharge Elimination System permits for all the Company's major generating facilities, but a number of conditions relating to thermal and chemical discharge limitations were contested by the Company in adjudicatory hearing requests submitted to EPA. The Company, the New York State Department of Environmental Conservation (which became a party to the adjudicatory hearings) and EPA have settled the hearing requests as described below.
The Company has reached agreement with the regulatory agencies on non-thermal effluent limitations and final permits containing these agreed limitations have been issued and are now in effect. Construction of treatment facilities is required to enable Company compliance with permit limitations for two of the Company's generating stations. Pending completioft of these facilities, the regulatory agencies have agreed in an Enforcement Compliance Schedule Letter to exercise their prosecutorial discretion to refrain from prosecuting the Company for violation of certain effluent limitation deadlines contained in the Clean Water Act so long as the Company adheres to a specified construction schedule for the facilities.
Construction of these treatment facilities is expected to require capital expenditures estimated at $10.5 millionover the next two years.
Company also issueS commercial paper at various discount rates, usually maturing within30-45 days.
Balances and average interest rates of short-term borrowings as of December 31 for the years indicated were as follows:
20
\\
The Comparty has pursued resolution of the contested thermal limitations by submitting demonstrations in an effort to justify less stringent limitations for three generating stations. The thermal conditions of the permits remain stayed pending resolution of the thermal issues either through regulatory agencies'pproval of the demonstrations and less stringent thermal limitations or, in the absence of such approval, through the resumption of the adjudicatory hearing process. Ifthe demonstrations and less stringent thermal limitations are not approved for any of the three facilities, the Company could be required to install cooling towers which would involve capital expenditures estimated at $53 million plus significant operating and maintenance expenses.
The Company believes that additional expenditures and costs made necessary by environmental regulations willbe fully allowable for rate-making purposes.
Through December 31, 1978, the Company has expended approximately $28.4 million (excluding land) with respect to its interest in the Sterling nuclear plant. The Company estimates that ifit were required to cancel all existing contracts relating to the construction of this project, it could incur up to $6 million in cancellation charges. The Company believes that, ifit were required to cancel the project, the PSC would permit it to amortize all expenditures involved over a period of several years and to recover those expenditures through rate relief.
On December 1,1978, the PSC ruled that the case involving the 765 KVtransmission facilitythat the Company had planned to construct be dismissed. The Company has petitioned the PSC requesting the amortization of the $2.1 million in expenditures for the line over a 3 year period, and to allow the Company to recover the unamortized costs through rate relief.
Note 7. Interim Financial Information (Unaudited)
In the opinion of the Company, the followingquarterly information includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results of operations for such periods. The variations in operations reported on a quarterly basis are a result of the seasonal nature of the Company's business and the availability of the Company's Ginna nuclear plant. Earnings per common share have been adjusted for stock dividends.
Note 8. Replacement Cost Information (Unaudited)
The impact of the rate of inflation experienced in recent years has resulted in replacement costs of productive capacity greater than the historical costs of such assets reported in the Company's financial statements.
In compliance with reporting requirements, estimated replacement cost information is disclosed in the Company's annual report to the Securities and Exchange Commission on Form 10-K.
Report of Independent Accountants To the Shareholders and Board of Directors of Rochester Gas and Electric Corporation In our opinion, the accompanying balance sheets and the related statements of income, retained earnings, and of changes in financial position appearing on pages 14 through 16 present fairly the financial position of Rochester Gas and Electric Corporation at December 31, 1978 and 1977, 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.
1900 Lincoln First Tower Rochester, New York 14604 January 26, 1979 Operating revenues..
Operating income...
Net income.......
Earnings on common stock.........
Earnings per common share (in dollars) 5,669 5,1 75 8,490
.37 Quaner Ended (Thousands)
Dec. 3 I, Sept. 30, June 30, 1978 1978 1978
$92,312
$73,6G5
$8G,942 8,4G6 9,527 12,009 7,088 6,596 9,909 Mar. 31, 1978
$116,029 19,247 15,993 14,574 Operating revenues..
Operating income...
Net income.......
Earnings on common stock.........
Earnings per common share (in dollars)
Dec. 3h 1977
$84,458 9,395 6,444 4,657
.35 Sept. 30, 1977
$67,199 7,479 4,61 9 3,044
.24 tune 30, 1977
$74,138 10,626 7,775 6,200
.51 Mar. 31, 1977
$105,349 17,277 14,211 12,G36 1.04
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Management's Discussion and Analysis of the Summary of Operations The followingfinancial review explains significant changes in the amounts of revenues and expenses between 1978/1977 and between1977/1976.
The Notes to Financial Statements on page17 of this report contain additional related information.
Operating Revenues Changes in Operating Revenues Increase or (Decrease) from Prior Year (Thousands of Dollars)
Electric Dcpartmcnt 1978 1977 Cas Department 1978 1977 Steam Department 1978 1977 Customer Revenues (Estimated) from:
Rate Increases..
Fuel Cost Adjustment Weather Effects............
Customer Sales Other....
Total Change in Customer Revenues Electric Sales to Other Utilities.
Total Change in Operating Revenues
$12,181 6,446 221 3,485 358 22,691 2,273
$24,964
$ 5,312 410 (82) 3,G05 137 9,382 8,1 44
$17,526
$ 2,555 5,582 3,259 (289) 1,6274 12,734
$1 2,734
$ 2,683 12,475 (1,1 44)
(7,631)
(1,613)*
4,770
$4,770 (23) 367 (314) 76 106
$106 1,824 (198)
(997)
(8) 621 G21
'Reflects a one-time sto gas heating billcredit in tne aggregate amount of approximately $1.6 miltion that was applied to residential customers in February 1977. The credit was made by thc Company on its own initiative in order to alleviate the economic burden to customers who were faced with record high gas heating bills caused by the scvcrc weather conditions in Ianuary 1977 and, in some cases, with reduced income due to plant shutdowns forced by natural gas cur tailmcnts.
Revenues from electric sales to other utilities increased in both 1978 and 1977. Fluctuations in electric sales to other utilities and in purchased electricity discussed under Operating Expenses below generally are related to the output and availability of electric generation from the Cinna nuclear plant.
Operating Expenses Changes in Operation and Maintenance Expenses Increase or (Decrcasc) from Prior Year (thousands of Dottar0 1978 1977 Electric and Steam Fuels Purchased Electricity Purchased Natural Cas Other Operation..
Maintenance
$ 1,147 5,702 9,023 3,191 3,874
$10,632 (4,5GO) 5,894 4,81 7 2,1G6 Total Change in Operation and Maintenance Expense
$22,937
$18,949 The 1977 increase in electric and steam fuels expense was mainly due to an increase in electricity generated in 1977 and an increased fuel cost per kilowatt-hour generated by nuclear fuel. Purchased electricity expense increased in 1978 due to both higher costs and higher kilowatt-hour purchases while the decrease in 1977 reflected mainly decreased purchases netted against a relatively modest increase in the cost per kilowatt-hour.
Purchased natural gas expense increased in both 1978 and 1977 as a result of higher pipeline rates and increased consumption due to colder weather in 1978.
The increase in maintenance expense of $3.9 million in 1978 and $2.2 million in 1977 reflects increases in the cost of labor and material to repair and maintain existing facilities, and increased activity in the repair and upkeep of transmission and distribution facilities.
Changes in Taxes Taxes-local, state and other increased $2.1 million in 1978 principally due to higher gross income taxes based on increased revenues. The 1977 increase of $3.4 millionwas also due to higher gross income taxes as well as higher property taxes resulting from the addition of new plant and increased property tax rates.
Total Federal income taxes increased $3.7 million in 1978 after declining $1.8 million in1977. See Note 3 to the Notes to Financial Statements for a detailed analysis.
Other Statement of Income Items The increase in allowance for funds used during construction of $2.2 million in 1978 and $3.8 million in 1977 was due to increases in utilityplant expenditures in both periods. See Note 1 to the Notes to Financial Statements.
Other-other income and deductions increased $3.1 million during 1978 principally due to added non-operating Federal income tax credits.
Interest on long term debt increased $3.1 million in 1978 and $3.2 million in 1977 as a result of additional bonds issued in December 1978, September 1977 and June 1976.
Dividends on preferred and preference stock decreased
$.8 million in 1978 due to the refunding in December 1977 of a series of preferred stock with the proceeds from the sale of a series of preference stock having a lower dividend rate.
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.ROCAESTER I"ASAND ELECTRIC CORPORATION Year Ended December 31 Summary Of OperatiOnS p~
.~.Io.tu I 1978 1977 197G 1975 1974'973 Operating Revenues Electric Gas Steam
$202,631 118,531 19,110
$179,940 105,797 19,004
$170,558
$146,629
$127,560
$116,512 101,027 82,478 75,463 64,633 18,383 17,337 16,321 10,014 Electric sales to other utilities 340,272 28,676 304,741 2G,403 289,9G8 18,259 246,444 25,496 219,344 14,697 191,159 21,112 Total Operating Revenues 3G8,948 331,144 308,227 271,940 234,041 212,271 Operating Expenses Operation Electric and steam fuels..
Purchased electricity Purchased natural gas Other..
Maintenance Depreciation Taxes-local, state and other Federal income tax-current
-deferred 58,140 19,337 71,109 65,685 26,24G 22,20G 45,935 5,166 5,875 5G,993 13,635 62,086 62,494 22 372 21,053 43,87G 961 2,897 46,3G1 18,195 56,192 57,677 20,206 18,621 40,502 (291) 5,65G 46,268 12 212 42,247 50,G29 19,700 17,414 36,157 4,162 1.133 36,G93 12,070 37,342 44,356 17,966 16,491 32,410 (3,126) 4,277 25,612 8,841 29,923 40,999 15,888 15,145 29,993 6,724 915 Total Operating Expenses 319,G99 286,367 263,119 229,922 198,479 174,040 Operating Income 49,249 44,777 45,108 42,018 35,562 38,231 Other Income and Deductions Allowance for other funds used during construction Other-net 8,705 4,418 6,473 1,310 4,G78 1,128 2,310 537 1,128 274 670 715 Total Other Income and Deductions Income before Interest Charges 13,123 7,783 5,80G 2,847 62,372 52,5GO 50,914 44,865 1,798 989 37,360 39,220 Interest Charges Long-term debt.
Short-term debt Other-net Allowance for borrowed funds used during construction (4,812)
(4,844)
(2,853)
(1,264)
(613)
(173) 25+94 22,542 19,378 16,963 14,965 13,738 1+88 1,319 1,054 1,568
',255 1,246 41G 494 246 1,227 210 103 Total Interest Charges 22,786 19,511 17,825 18,494 16,817 14,914 Net Income 39,586 33,049 33,089 26,371 20,543 24,306 Dividends on Preferred and Preference Stock, at required rates 5,G78 6,512 G,245 4,054 3,550 3,550 Earnings Applicable to Common Stock
$ 33,908
$ 26,537
$ 26,844
$ 22,317
$ 16,993
$ 20,756 Weighted average number of shares outstanding in each period, adjusted for stock dividends (000's) 13,774 12,474 11,983 10,987 10,628 Earnings per Common Share............
$2.4G
$2.12
$2.24
$2.03
$1.59 9,753
$2.12 Cash Dividends per Common Share, adjusted for stock dividends
$1.41
$1.29
$1.20
$1.15
$1.09
- In1974, the Company began deferring a portion of increased fuel costs to the period in which the related revenues were recorded.
$1.04
RKS ROCHESTER GAS AND ELECTRIC CORPORATION COndenSed BalanCe Sheet trhousa d ofool4 I
1978 At December 31 1977 1976 1975 1974 ASSETS UtilityPlant, at original cost Less-Accumulated depreciation and, amortization 261,477 229,122 198,778 185,455 167,645 150,600
$857,959
$789,775
$727,687
$693,404
$659,308
$618,891 Construction work in progress Net utilityplant Investment in Subsidiary, at equity 59G,482 213,534 810,01G 1,996 5G0,653 162,127 722,780 1,947 528,909 120,702 649,611 1,911 507,949 79,381 587,330 1,871 491,663 39,324 468,291 24,542 530,987 492,833 1,834 Current Assets.
Deferred Debits 66,953 14,421 58,387 15,260 61,090 8,151 53,796 7,450 52,678 8,213 38,982 4,874 Total Assets CAPITALIZATIONAND LIABILITIES
$893,386
$798,374
$720,763
$650,447
$593,712
$536,689 Capitalization Long-term debt..
Preferred stock Preference stock Common shareholders'quity Common stock Retained earnings
$384/03 67,000 28,000 246,938 77+38
$361,022 67,000 28,000 212,533 70,819
$311,395 92,000 181,301 67,812
$267,314 89,000 173,586 60,502
$267,348 67,000 154,758 53,568
$237,382 67,000 148,566 52,184 Total common shareholders'quity Total Capitalization Current Liabilities Deferred Credits and Other Liabilities.
Total Capitalization and Liabilities 324,276 283/52 249,113 234,088 208,326 200,750 803,579 68,362 21,445 739,374 42,813 16,187 652,508 54,652 13,603 590,402 51,712 8,333 542,674 43,952 7,086 505,132 29,091 2,466
$893,386
$798,374
$720,763
$650,447
$593,712
$536,689 Financial Data Capitalization Ratios (percent)
Long-term debt Preferred and preference stock Common shareholders'quity 1978 47.8 11.8 40.4 1977 48.8 12.9 38.3 At December 31 1976 47.7 14.1 38.2 1975 45.3 15.1 39.6 1914 49.3 12.3 38.4 1973 47.0 13.3 39.7 Total 100.0 100.0 100.0 100.0 100.0 100.0 Book Value per Common Share Adjusted for Stock Dividends-Year End
$22.01
$21.34
$20.89
$19.69
$19.55
$18.91 Internal Generation of Funds (percent) 39.5 35.9 44.6 42.5 42.3 89.8 Rate of Return On Average Common Equity-Year End (percent)
Effective Federal Income Tax Rate (percent)
Depreciation Rate-Electric
-Gas Interest Coverages Before federal income taxes (incld. AFDC)..
(excld. AFDC)..
After federal income taxes (incld. AFDC)...
(excld. AFDC)...
11.22 12.8 3.09 2.79 2.65 2.16 2.43 1.94 10.02 3.00 2.67 2.45 1.98 2.36 1.89 11.16 2.90 2.63 2.79 2.43 2.60 2.24 10.18 14.4 2.79 2.60 2.56 2.38 2.33 2.15 8.44 1.7 2.79 2.60 2.20 2.10 2.18 2.08
,11.35 22.9 2.71 2.48 3.09 3.04 2.61 2.58 24
RES ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Electric Department Electric Revenue (000's)
Residential Commercial Industrial..
Other..
Electric revenue from our customers Other electric utilities.
Total electric revenue Electric Expense (000's)
Fuel used in electric generation Purchased electricity Other operation Maintenance Depreciation Taxes-local, state and other Electric revenue deductions Operating Income before Federal Income Tax.
Federal income tax Operatin Income from Electric Operations 000's Electric Operating Ratio %
Electric Sales-KWH (000's)
Residential Commercial..
Industrial..
Other Electric sales to our customers Other electric utilities Total electric sales Electric Customers at December 31 Residential Commercial..
Industrial Other Total electric customers Electricity Generated and Purchased-KWH (000's)
Fossil Nuclear Hydro Pumped storage Less energy for pumping Other Total generated-Net Purchased Total electric ener y
Electric Generation Costs (000's)
Fossil Nuclear Hydro Other Electric Department Fuel Fossil
-Total BTU (million)
-Cents per million BTU........
Nuclear-Total BTU (million)
-Cents per million BTU........
System Net Capability-KW at December 31 Fossil Nuclear Hydro.
Other Purchased Total system net capability Net Peak Load-KW..
Annual Load Factor-Net %
1978 72,854 58,985 48,792 22,000 202,631 28,676 231,307 45,093 19+37 47,602 19/05 16,983 33,108 181,428 49,879 9,244 40,635 56.8 1,701,938 1,417,624 1+17,988 465+73 5,102,923 1,445+91 6+48+14 251,645 24,137 1,348 2,423 279,553 2,025,645 3,206,313 192,278 133,287 (189,453) 1,086 5,369,156 1+79,863 6,949,019
$38,995 25,561 1,229 57 21,139,146 144.27 35,812,171 43.97 443,000 470,000 47,000 29,000 339,000 1,328,000 983,000 63.9 1977 64,986 53,520 41,783 19,651 179,940 26,403 206,343 44,010 13,G35 45,011 16,339 15,333 31,530 165,858 40,485 4,041 36,444 57.7 1,660,425 1,392,023 1,431,855 454,059 4,9383 G2 1,453,590 6,391,952 250,121 24,023 1,353 2,328 277,825 2,272,182 3,018,305 222,391 193,340 (283,573) 850 5,423,495 1,400,505 6,824,000
$40,557 22,330 1132 44 23,862,599 136.92 37,822,209 38.04 443,000 470,000 47,000 29,000 338,000 1,327,000 987,000 62.0 1976 61,498 50,791 39,402 18,867 170,558 18,259 188,817 34,247 18,195 40,930 14,796 13,865 28,543 150,576 38,241 3,102 35,139 57.3 1,618,314 1,366,094 1,384,235 437,097 4,805,740 1,187,942 5,993,682 249,177 23,983 1 371 2 271 276,802 2,060,186 2,040,746 277,010 118,716 (180,317) 2,797 4,319,138 2,106,904 6,426,042
$36,901 13,485 973 118 21,822,976 137.42 23,837,620 25.69 452,000 470,000 47,000 29,000 342,000 1,340,000 934,000 63.8 1975 53,904 43,884 33,244 15,597 146,629 25,496 172,125 33,442 12,212 35,662 14,282 12 731 25369 133,698 38,427 5,069 33,358 55.5 1,530,421 1,294,81G 1,284,940 411,122 4/21,299 1,864,050 6,385,349 24G,613 23,874 1,380 2,305 274,172 1,731,723 3,026,894 265,401 98,743 (148,180) 2,198 4,976,779 1,888,091 6,864,870
$33,120 14,191 1,030 63 18,388,874 142.18 33,128,471 22.91 452,000 470,000 47,000 29,000 356,000 1,354,000 925,000 61.7 1974 45,354 37,908 30,858 13,440 127,560 14,697 142,257 25,739 12,070 32,177 12,390 11,977 22,784 117.137 25,120 (433) 25,553 57.9 1,456,335 1,226,333 1,346,116 379,379 4,408,163 1,182,902 5,591,0G5 244,063 23,827 1,365 2,316 271,571 1,961,453 2,079,539 234'8 131,311 (192,311) 12,806 4,227,366 1,836,911 6,064,277
$30,361 7,980 1,085 321 20,911,993 117.05 22,909,968 11.28 452,000 470,000 47,000 29,000 347,000 1,345,000 880,000 G3.3 1973 42,125 34,387 27,597 12,403 116,512 21,112 137,624 19,461 8,841 28,378 11,029 11,026 21,281 100,016 37,608 7,235 30,373 49.2 1,468,376 1,261,697 1,424,639 385,243 4,539,955 2,269,686 6,809,641 241,032 23,436 1,3GO 1,995 267,823 1,869,079 3,395,564 243'2 57,801 (86/62) 8,776 5,488,440 1,709,420 7,197,860
$18,099 10,368 1,083 123 20,331,338 62.12 36,683,359 18.62 457,000 420,000 53,100 42,500 352,000 1,324,600 922,000 G1.0 25
tCL~~iiR ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December.31 Gas Department Gas Revenue (000's)
Residential Residential spaceheating Commercial Industrial Municipal and other 1978 5,09G 74,425 20,535 13,891 4,584 1977 4,828 G6,900 18,057 12,014 3,998 1976 4,426 63,974 16,848 11,900 3,879 1975 3,964 52,584 13,593 9,167 3,1 70 1974 3,809 47,758 12,533 8,583 2,780 1973 3,627 40,453 10,433 7,648 2,472 Total gas revenue 118,531 105,797 101,027 82,478 75,463 64,633 Gas Expense (000's)
Purchased natural gas Other operation Maintenance Depreciation Taxes-local, state and other 71,109 15,810 5,768 4,641 10,545 G2,086 15,072 5,078 5,140 10,089 5G,192 14,921 4,510 4,194 9,729 42,247 13,310 4,500 4,137 8,715 37,342 11,492 4,757 3,978 7,937 29,923 11,420 4,043 3,615 7,281 Gas revenue deductions 107,873 97,465 89,546 72,909 65,506 56,282 Operating Income before Federal Income Tax.
Federal income tax 10,658 1,966 8,332 11,481 147 2,212 9,569 914 9,957 8,351 1,221 840 Operating Income from Gas Operations (000's)
Gas Operating Ratio %
8,692 8,185 9,269 78.2 77.7 74.9 8,655 72.8 8,736 7,511 71.0 70.2 Gas Sales-Therms (000's)
Residential Residential spaceheating Commercial..
Industrial Municipal 13,465 255,951 82,451 63,709 17,748 13,833 252,923 77,751 59,956 15,975 14,404 275,582 86,400 72,847 18,598 14,328 249,224 78,217 65,760 16,705 14,903 263,290 84,872 73,926 16,696 15,141 245,368 79,039 78,137 17,148 Total gas sales 433324 420,438 467,831 424,234 453,687 434,833 Gas Customers at December 31 Residential Residential spaceheating Commercial..
Industrial Municipal 38,0 I3 154/66 12,092 759 1,084 39,977 152,856 11,268 746 989 40,892 153,583 11,475 757 936 41,437 153,848 11,390 756 957 42,884 151,154 11,478 767 1,024 45,958 144,847 11,303 762 865 Total gas customers 206+14 205,836 207,643 208,388 207,307 203,735 Gas-Therms (000's)
Purchased for reforming and mixing Purchased for resale Other 449,904 13,178 428,811 10,123 9,830 478,935 7,911 23,160 421,252 7,019 31,518 438,494 7,063 30,834 422,718 6,535 Total gas available 463,082 438,934 496,676 451,431 477,075 460,087 Cost of gas per therm 15.26e 14.43<
11.37<
10.19<
8.49<
7.13<
Total Daily Capacity-Therms at December 31 Mixed gas Straight natural gas Total daily capacity Maximum daily sendout-Therms 4,164,000 4,164,000 4,164,000 4,164,000 4,164,000 4,164,000 3,183,678 3,578,468 3,497,861 269,000 3,895,000 4,164,000 3,041,070 410,844 410,844 3,871,448 3,762,672 4,282,292 4,173,516 3,192,631 2,985,392 Degree Days (Customer Billing)
For the period.
Percent (warmer) colder than normal 7,021 4.5 6,726 (0.1) 6,905 1.6 6,211 (7.2) 6,808 1.3 5,883 (12.2)
%Sic ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 St'earn 0'epartment 1978 1977 197G 1975 1974 1973 Steam Revenue (000's)
Commercial Industrial..
Municipal and other 6,087 6,352 6,401 5,668 5,419 3,6G8 10,732 10,455 9,799 9,8G2 9,396 5,470 2,291 2,197 2,183 1,807 1,506 876 Total steam revenue 19,110 19,004 18,383 17,337 16,321 10,014 Steam Expense (000's)
Fuel used in steam generation Other operation..
Maintenance Depreciation Taxes-local, state and other..
13,047 2 273 1.173 581 2,282 12,983 2,411 955 580 2,257 12,114 1,826 900 562 2,230 12,826 1,657 918 546 2,073 10,954 687 819 536 1,689 6,151 1,201 816 504 1,431 Steam revenue deductions 19,356 19,18G 17,632 18,020 14,685 10,103 Operating Income before Federal Income Tax.
Federal income tax (246)
(182) 751 (683) 1,636 (89)
(168)
(330) 51 (G88) 363 (436)
Operating Income from Steam Operations (000's)
(78) 148 700 5
1,273 347 Steam Operating Ratio %
Steam Sales-Lbs. (000's)
Commercial Industrial..
Municipal Total steam sales 86.3 86.0 80.7 88.8 76.3 81.6 898,904 933,G09 1,041,415 980,324 1,160,122 1,268,917 1,718+65 1,682,033 1,738,391 1,839,402 2,127,837 2,136,794 34G,031 334,G45 367,553 325,727 334,463 318,323 2,963/00 2,950,287 3,147359 3,145,453 3,G22,422 3,724,034 Steam Customers at December 31 Commercial Industrial..
Municipal Total steam customers 238 70 31 339 254 74 32 360 271 77 32 380 281 77 31 292 78 31 401 302 78 30 410 Steam Produced-Lbs.
(000's)
Produced by steam department........
By-product steam from electric department Total steam produced 1+53,053 1,194,132 1,408,029 1,387,3G3 1,532,24G 1,442,472 1,987,G38 2,133,853 2,193,283 2,344,G93 2,588,120 2,613,321 3+40,691 3,327,985 3,601,312 3,732,05G 4,120,3GG 4,0SS,793 Steam Department Fuel Total BTU (million)
Cents per million BTU 5,705,943 226.21 5,548,290 232.GO 6,022,360 203.35 6,230,767 6,807,500 203.08 196.31 6,849,830 89.80 Class of Service Effective Dale ol increase Rate Increases Granted Amount of Rale of Rate ol Increase Rclurn on Relurn on (Annual Basis)
Percent Rate Base Equity (000's)
Increase Authorized Authorized Class ol Service Date ol filing Pending Requests Amount (000's)
Percent Gas Electric October 25,1972 October 23, 1974 April20, 1976 November 11, 1977 February 18, 1978 April28, 1972 October 23, 1974 April20, 1976 November 11, 1977 February 2, 1978 Steam May11,1972 November 12, 1973 April15, 1975
$10,154 17,992 11,002 10,1 BG 3,000 3,67G 4,854 4,983 2,536 678 897 500 2,475 11.5%
7.96%
12.00%
1G.O 8.83 13.19 7.9 9.35 13.50 5.8 9.31 12.80 1.6 9.31 12.80 G.8 7.77 12.00 7.G 8.42 12.09 6.3 9.35 13.50 2.4 9.31 12.80
.6 9.31 12.80 11.4 6AB 5.1 7.25 12.0 8.G9 Electric May 26,1978 Gas May 26, 1978
$37,946 17.8%
10,789 8.9 27
Directors Keith W. Amish*
Executive Vice President, Rochester Gas and Electric Corporation Paul W. Briggs*
President, Rochester Gas and Electric Corporation John D. Cockcroft*
Former Chairman ol the Board, The R. T. French Company Wilmot R. Craig],
Former Chairman ol the Board, Lincoln First Banks Inc.
E. Kent Damontg Vice President and Secretary, Xerox Corporation Francis E. Drake, Jr.*
Chairman ol tht! Board and Chiel Executive Officer, Rochester Gas and Electric Corporation
'Member of the Executive and finance Committee of the Board of Directors J. Wallace Ely*t Chairman ol the Board, Security New York State Corporation Walter A. Fallon Chairman ol the Board and Chiel Executive Officer, Eastman Kodak Company Ernest J. Howe*tf Chairman of the Executiveand Finance Committee, Rochester Gas and Electric Corporation tMember of the Audit Commhtee of th>> Board of Dirc<tort
a) og
")
,V r
f gg)
Officers Francis E. Drake, Jr.
Chairman ol the Board and Chiel Executive Oificer Age 63, Years of Service, 41 Paul W. Briggs President Age 56, Years olService, 33 Keith W. Amish Executive Vice President Age 55, Years ofService,31 Joseph J. Hartman Vice President, Cas and Transportatfon Age 54, Years o!Service, 32 John L. Kennedy Vice President, Rates and Covernmcntal Affairs Age 60, Years ol Service, 38 John E. Maier Vice President, Employee Relations Age 51, Years olService, 31 Richard J. Rudman Vice President, Electric Transmission and Distribution Age 51, Years olService,33 Harry C. Saddock Vice President, Eiectn'c System Planning and Operation Age 49, Years olService, 28 Mario Silvestrone Vice President, Consumer Services, Corporate Communications and Purchasing Age 55, Years ol Ser vice, 28 Leon D. White, Jr.
Vice President, Electric and Steam Proddction Age59, Years olscrvice,41 Dean W. Caple Secretary and Treasurer Age 55, Years olService,30 Francis A. Sullivan, Jr.
Controller Age 55, Years olService, 28 Robert W. Ball Assistant Treasurer Age 62, Years olService,40 David C. Heiligman Assistant Secretary Age 38, Years ofService, 15 Robert C. Henderson Assistant Controller Age 38, Years of Service, 1S Stephen Kowba Assistant Controller Age59, Years olservice,28 John M. Kuebel Auditor Age43, YcarsolService,14
,Daniel C. Kennedy*
- Partner, Nixon, Hargrave, Devans 8 Doyle A. J. McMullen Chairman of the Executive Commiuee, Carlock Inc.,
and Director ol the parent company, Colt Industries, Inc.
Paul A. Miller Former President, Rochcstcr Institute ol Technology Edward J. Nelson Former President, Rochester Cas and Electric Corporation WilliamS. Vaughn*tg Former Chairman ol the Board, Eastman Kodak Company WilliamG. vonBergt Chairman ol the Board and Chief Executive Officer, Sybron Corporation tMember ot the Safary Review Committee of the Board of Directors II
Rochester Gas and Electric Corporation 89 East Avenue Rochester, New York 14649
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Rochester I
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OSWEGO GENESEE ONROE r
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ONTAIIIO CahandaiIIva r
ONONDAGA CAYUGA ERIE WYOMING LIVINGSTON YATES SENECA ALLEGANY s
SCHUYLER TOMPKINS CHAUTAUQUA CATTARAUGUS STEUBEN CHEMUNG TIOGA
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NIAGARA ORLEANS II Rochester I
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WAYNE OSWEGO GENESEE ONROE I
ONTARIO ONONDAGA CAYUGA ERIE WYOMING LIVINGSTON YATES SENECA ALLEGANY SCHUYLER TOMPKINS CHAUTAUOUA CATTARAUGUS STEUBEN CHEMUNG TIOGA
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Rochester Gas and Electric Corporation Annual Report 1978 I I I WBg
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