ML18037A331

Forwards Annual Financial Rept 1980

ML18037A331
Person / Time
Site:	Nine Mile Point
Issue date:	04/01/1981
From:	Eric Thomas LEBOEUF, LAMB, LEIBY & MACRAE
To:	Harold Denton Office of Nuclear Reactor Regulation
References
NUDOCS 8104060711
Download: ML18037A331 (40)

Text

r" REGULATO INFORMATION DISTRIBUTION 'EM'RIDS)

ACCESSION NBR 8104060711 . DOC ~ DATE: 81/04/01 NOTARIZED; NO 'OCKET FACIL:53

~ Nine Mile Point Nuclear Station< Unit 1E Niagar a Powe 05000220 50 410 Nine Mile Point Nuclear Station< Unit 2E Niagara

~

aloha 05000410 AU ~H AUTHOR AFFILIATION THOMA eE'sBR LeBoeufz Lambg Leiby L MacRaeI RECIP ~ NAME RECIPIENT AFFILIATION DENTONgH ~ RE Office of Nuclear Reactor Regulationi Ofrector SUBJECT! Forwards Annua:l Financial Rept 1980 TITLE'. Annual COOEY MOO4S Financial, Reports COPIES RECEIYEDsLTR 'ISTRIBUTION ENCL + SIZEI NOTES!.

RECIPIENT COPIES RECIPIENT COPIES IO'ODE/NAME; LTTR ENCLI IO CODE/NAME LTTR ENCL ACTION: I P P 0 L I'O E T' 1 0 YOUNGBLOODgB 1 0 NORRIS g S ~ 05 1 RUSHBROOK'gM ~ 05 fr POLKEP ~ 0 KIPKR~ K ~ 1 0 INTERNALS NRC PORE 1 ~

1 RKG F IL ~ 01 UT FIN BR 02'3 1 1 EXTERNAL: LPOR 1 1 APR 7 t98)

TOTAL NUMBER OF COPIES REQUIREDS: LTTR 10 ENCL 6

I LEBOEUF, LAMB, LEIBY ec MACRAE I333 NEW HAMPSHIRE AVENUE, N. W.

WAsHINGTON, D. C. 20036 TELEPHONE 202 427 7200 CABLE ADDRESS LEON A.ALLEN,JR. CAMCRON F. M4c RAC~IIE 4 LESWIIIiWASHINOTQAiD.C, RANDALLJ. LcBOEUF, JR,1929 19'75 KR NKST S. BAI LARD, JR. QEAARD A.MAHKR HORACE R. IAMB I934 l977 G ~ S. PKTCR BCRGCN SHEILA H. MARSHAI.L TELEXI440274 JAMES P. McQRAN CRY, JR ~ < ADRIAN C. LEIBY I 952 I978 GEOFFRY O.C ~ BKST TELECOPIER DAVID P. BICKS PHILIP PALMER McGUIQAN TAYLOR R BRIGGS E, ELLSWORTH McMKCN,ZZZ 202 4d7 7d43 I 40 BROADWAY CHARLCS N.BURGER WILLIAMD. MORRISON JOSCPH F. MURPHY NEW YORKiN,Y, IOOOB THOMAS K.BURKE WILLIAM A CARNAHAN 4 HARVEY A. NAPIKR TELEPHONE 2I2 2BD IIDD JOHN B,CHASE JAMES O'MALLKY,JR, < CABLE ADDAESS ROGER D. FELDMAN ~ 2 BRIAN D (YNCII L 2 EUGENE R. FIDKLL 4 2 J ~ MICHAEL PARISH LESWIN, NEW YORK JACOB FRIKDLANDER JOHN C.RICHARDSON 4 TELEXI 4234IB WILLIAMW. ROSENBLATT ANDREW QANSBCRG JOHN A.RUDY QERARD GIORDANO JAY G. SAFER 47 SEAKELEY SOVARE DONALD J.GRKKNC PATRICK J ~ SCOQNAMI OLIO LONDON WIX SDBp ENGLAND JAM CS A. GRKCR,IZ HAROLD M. SKIDEL JOHN L.GROSE 2 RAYMOND N. SHIBI.EY 4 TCLEPHONE OI 493 733I DOUGLAS W HAWKS HALCYON G SKINNER TELEXI 2$ 9dd CARL D ~ HOBELMAN JOSEPH S. STRAUSS MICHAEL IOVENKO SAMUEL M.SUGDCN JAM CS F. JOHNSON, 4~ + EUGENE B.THOMAS,JR, 4 RONALD D.JONFS LEONARD M. TROSTKN 42 HARRY H.VOIGT 4 JAMES A. LAPENN GRANT S. LEWIS KIMBA WOOD LOVEJOY CAMERON F. M4CRAE 2 H. RICHARD WACHTEL GERARD P. WATSON THOMAS A.ZIERK

~i I.I.'.-.'j !, i RESIDENT PARTNLRS WASHINGTON OFFICE

~ RESIDENT PARTNERS LONDON OFFICK ADMITTED TO THC DISTRICT OF COLUMBIA BAR April 17 1981,'. pX ppq, {) "1981~

Mr. Harold R. Denton II,SI NUaX<t ZIQULA~

Director ~

Qg CONSIISSID'8 Office of the Nuclear Reactor Regulation U. S. Nuclear Regulatory Commission Washington, D. C. 20555 Re: Niagara Mohawk Power Corporation Nine Mile Point One Docket No. 50-220

Dear Mr. Denton:

As counsel for Niagara Mohawk Power Corporation and pursuant to Section 50.71(b) of the Commission's Regula-tions I enclose one copy of Niagara Mohawk's 1980 Annual Report. An extra copy of this report is enclosed for your convenience.

Very truly yours, Eugene B. Thomas, Jr.

Enclosures

>>ocodo7) i

Niagara Mohawk Power Corporation 1980 Annual Report Our service area Niagara Mohawk Power Corp., one of the Nation's major investor-owned utilities, has the largest and most diverse service investor notes territory in New York State. A massive Annual Meetfng electric system, extending from Lake Erie The annual meeting of stockholder to New England's borders, to Canada and be held on May 5, 1981 at the Con Pennsylvania, serves the energy needs of main office in Syracuse. A formal 1360,000 customers. A natural gas sys- of meeting, proxy statement and tem serves 423,000 customers in central, form will be sent to holders of cc eastern and northern New York, nearly all stock in early April.

within the Company's electric service area. Two Canadian subsidiaries, St. Law- Transfer Agents rence Power Co. and Canadian Niagara Preferred Stock and Preference Stot Power Company, Ltd., provide electric Marine Midland Bank, NA.

service to parts of southern Ontario. Cor-140 Broadway, New York, N.Y.

porate headquarters is 300 Erie Boule- 1001,'ommon vard West, Syracuse, NY 13202. Stock:

Morgan Guaranty Trust Company of New York ELECTRIC SERVICE AREA 30 W. Broadway, New York, N.Y. 10I Disbursing Agent Prefen ed, Preference and Common Stocks:

Niagara Mohawk Power Corporatio 300 Erie Boulevard West Syracuse, N.Y. 13202 NEW YORK STATEr The road ahead Stock Exchanges The cover montage features Niagara Mo- Common and Certain Preferred Sef hawk people involved in planning. Listed on New York Stock Exchang Effective planning for the coming years Common Stock and decades for the early 1980s and Also traded on Amsterdam (Nethef intermediate years to 2000-is an essen- Boston, Cincinnati, Detroit, Mi tial part of the utility business. Looking GAS SERVICE AREA Pacific Coast and PBW stock excl beyond the '90s, a whole new century lies ahead to test the Company and the Jt Ticker symbol: NMK Nation. WHNlaea Reviewed in this Annual Report is a ka- Form 10-K Report ravre rrlrt leidoscope of positive activities and taagva row ROeW A copy of the Company's Form l planning designed to keep in step with evrrero ~ruuva port filed annually with the Securi changing times. Niagara Mohawk is con- Overvvte "

Exchange Commission is availah fident that it is on a sound course to meet March 31, 1981 by writing the Tr NEW YORK STATE the future and to continue providing for oloea at 300 Erie Boulevard West, Syrac energy needs. The interests of our stock- 13202.

holders, consumers and employees The Information In this report ls not given In connec dominate this vital planning mission as sale of, or offer to buy, any security.

the new decade dawns. Prlnterf fn V.SA

Highlights of 1980 1980 1979 '!o Change Total operating revenues $ 1,777,115,000 $ 1,516,503,000 17 Income available for common stockholders $ 1331201,000 $ 128,186,000 4 Earnings per common share $ 1.87 $ 2.00 (7)

Dividends per common share $ 1.50 $ 1.44 4 Common shares outstanding(average) 71,257) 000 63,976,000 11 Utilityplant(gross) $ 4,563,309,000 $ 4418,528,000 8 Gross additions to utility plant $ 378,503,000 $ 374,530,000 1 Kilowatt-hour sales 32,588,000,000 33/15,000,000 (2)

Electric customers at end of year 1,360) 000 1,348,000 1 Electric peak load(kilowatts) 5,403,000 5,641,000 (4)

Natural gas sales (dekatherms) 1 01,321,000 96,618,000 5 Gas customers at end of year 423,000 416,000 2 Maximum day gas sendout(dekatherms) 740,594 750,666 (1)

The 1980 revenue dollar Residential customers 35lr, Industrial customers 234 Contents 2 To our Stockholders:

customers 31 g 4 Coming to grips All others with the future 5 Planning tomorrow's 11'nd 10'ommercial energy timetable where it went Fuel for production of electricity 8 Research quest Gas purchased and electricity purchased 10 Programing for the consumer 16'g 12 People in planning 14 Management's analysis 36'epreciation 17 Stockholder matters 5g 18 Report of management Income and and accountants other taxes 124 Wages, salaries, 19 Financial statements employee benefits 124 Retained in business 14 31 Statistics Interest and other costs net Dividends to stockholders 6g 33 Officers, directors

To our stockholders:

Earnings declined by 13 cents to $ 1.87 per share of common stock in 1980, com-pared with $ 2.00 per share in 1979.

This earnings decrease reflects the interacting influences, largely beyond our direct control, of increasing inflation, high interest costs, economic recession The Commission is currently in a and a reduction in electric sales to our period of new appointments and consid-own customers during the year. Such eration of possible regulatory changes.

sales totaled 29.7 billion kilowatt-hours in More realistic and reasonable regulatory 1980, against 30.3 billion Kwh in 1979, the treatment will be no less than essential to first decrease of this type experienced by enable Niagara Mohawk to earn the al-Niagara Mohawk since 1975. Gas sales lowed rate of return and maintain finan-rose 4.9 percent in 1980, compared to a cial integrity. Our continuing to provide

- ~

"'-4"' decline last year. All these developments, satisfactory service for consumers in fu-combined with insufficient rate relief, ad- ture years will hinge in large part on the versely affected earnings. decisions and attitudes of our.regulators, The lower earnings resulted in the "The Road Ahead" theme of this An-Company's current rate of return on nual Report underscores the ever-in-common equity dropping to 10.8 creasing urgency of effective planning in percent well below the 14 percent au- our business. We are striving to add a J

<g4$ 1 thorized earlier by the N.Y. State Public further degree of sophistication to our Vga+ Service Commission. Such conditions future-oriented work, designed to help us

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mandate pursuing further rate increases cope effectively with the volatile business g+

to maintain dependability of energy ser- conditions we experience.

John G. Haehi, Jr. vice and adequate earnings for stock- Current 15-year load forecasts indicate holders. annual electric growth at I to 1.5 percent.

We see the potential for recovery of While growth in our service territory has earnings in 1981 from present depressed been static in recent years, industrial re-levels. As this report goes to press, we development efforts hold promise.

await a decision by the N.Y. State Public Financing in 1980, detailed in this re-Service Commission in our pending rate port, totaled $ 266 million, including refi-case. As 1980 ended, the Administrative nancing of $ 80 million of maturing debt.

Law Judge issued a recommendation for In 1981, extensive financing to meet con-increased, rates totaling $ 160 million, struction needs, including construction approximately 70 percent of the total re- at Nine Mile Point Nuclear Unit No. 2 in quested. He recommended that the Com- particular, and to refund $ 140 million in pany's rate of return on common equity bonds coming due during the year, is ex-be adjusted upward to 15.4 percent. pected to exceed $ 400 million.

Because of the vital importance of pro- We now anticipate resuming construc-viding stockholders a fair return, on their tion of Unit No. 2 at full scale starting in growing investment in the Company, in spring 1981, depending upon the final re-AS May 1980,,the Board of Directors in- sults of reassessments, audits and studies creased the annual common stock divi- initiated during the past year. Presently.

J. Donion 'illiam dend by 8 cents per share, up 5.6 percent. the project is nearly one-third complete.

The success of Nine Mile Point Unit No.

1 has surpassed our brightest expecta-tions, bolstering our faith in nuclear technology for its dependability, safety, cost-effectiveness and contribution to oil displacement. Niagara Mohawk's nuclear commitment lies deeply rooted in the early 1960s, when we first embarked on a plan to construct the unit. Performance at Nine Mile Point has enabled us to demon-strate the great potential that nuclear technology offers all upstate New York. was offset by conservation measures and The pride our management and reduced gas usage. Average annual gas employees share in Unit No. 1 is the re- use per residential customer declined 28 sult of more than a decade of commend- percent in 1980, despite colder degree-able operation. day experience.

Despite inflation and related cost spi- Settlement of the Massena municipal rals for all services and goods, the price electric distribution system problem was of Niagara Mohawk service continues to reached on January 6, 1981. We agreed to rise at a rate lower than other living sell Massena, which undeniably had costs. Electricity and natural gas remain power to condemn, all facilities served in outstanding values. Our residential elec- and about the Town for $ 7.7 million, tric rates continue to be the lowest of any thereby providing the most economic major New York State utility and below separation of facilities. The settlement the national average. represented reasonable value and there-In 1980, we engaged an independent by protected our stockholders'. Intf.rests.

consultant to conduct a system-wide cus- Our newly restructured senior man-

'tomer attitude survey which revealed agement organization is consistent with

'that Niagara Mohawk is considered reli- our planning objectives. We are confident able by an overwhelming majority of our the Company's officers, management and customers. A substantial majority also employees are prepared as shown on indicated the Company is "hard-working the following pages to come fully and and friendly, that Niagara Mohawk does a capably to grips with the challenges the good job of communicating and is willing future is sure to bring in the unsettled to listen to consumers." We are gratified times in which we live and do business.

by these perceptions a clear endorse- We sincerely appreciate the continuing ment of our service quality. The survey loyalty and support of our stockholders, also stressed we must reassure consum- employees and customers.

ers we are doing everything possible to protect them in terms of energy supply and price.

An example of our continuing such protective efforts is the conversion of Al- John G. Haehf, Jr bany Steam Station from oil to natural Chairman of the Board and Chief Executive Officer gas, scheduled for fall 1981 completion.

The changeover, subject to regulatory approvals, would equip the station with dual capability to burn either gas or oil, offering a most desirable combination of fuel-cost reduction and oil-displacement.

William J. Oonlon Our gas operations grew in 1980, at- President tracting 7,000 new customers. Much of the increased consumption that normally follows additional customer attachments February 2, 1981

Coming to grips with the future Never before has planning required more concentrated effort and attention from Niagara Mohawk. Unpredictable events and forces of the 1970s are almost sure tc persist through this decade, taking new variations, testing management's flex-ibility and presenting imposing chal-lenges to the most carefully laid plans.

Among the shifting trends the Com-I pany must continue to cope with in the years ahead will be the leveling-off oi electric load growth, regulatory uncer-tainties and long "lead times" presently up to ten years or more involving con-struction of major generating installa-tions and other facilities. These problems are common to the electric utility industry.

In such a setting, and faced also with fluctuating social and. economic. trends and the complexities of financing, on-target planning is critical to Niagara Mo-hawk's well-being. This task today calls for increasingly farsighted planning and use of sophisticated and innovative re-sources and machinery for future decision-making strategies. The Com-pany recognizes the need to capitalize on both "in-house" and external resources and agencies to help prepare as effi-ciently and accurately as humanly possi-ble for whatever variable conditions the future may bring.

Complex, computerized studies ana surveys, analysis of statistics on the eco-nomics, demographics and energy-use Energy needs of ADM Milling Co. plant, recently converted from a retired cement production facility to a substantial new flour and grain operation, are discussed by Consumer Relations Supervisor James W.

Keegan, left, and Richard A. Vercruysse, Plant Manager. Niagara Mohawk 115,000-volt feeder and customer's own sub-station, left, meet electric requirements of mill, near Hudson, New York.

patterns prevailing in the Company's ser-vice area are more essential than ever to equipping Niagara Mohawk to handle the challenges of the years ahead. As an out-growth of earlier planning by the Com-pany, three major computer-oriented sys-tems presently in the early stages offer significant promise in our efforts to maximize productivity and operating effi-ciency. The first will improve customer Planning tomorrow's accounting procedures through a direct, on-line system with computer termihals energy timetable at customer service locations. The sec-'nd Consistent with long-standing plans to will enable construction and mainte- bripg new electric generation sources on nance field supervisors to make more line in the 1980s, full-scale construction effective use of manpower and material at Nine Mile Point Nuclear Unit No. 2 has resources for planning, estimating, Presently, Niagara Mohawk's long- been tentatively scheduled to resume in scheduling and reporting their assigned range electric sales forecast indicates spring 1981. On this basis, completion is projects. The third involves upgrading yearly growth of about 1 to 1.5 percent in targeted for late 1986.

corporate accounting systems to provide, the Company's service area, a sign of its In 1980, the work force at the Lake On-on a more current basis, expanded infor- mature economy and energy conserva- tario project was reduced in large part to mation and data on Company operations tion practiced to an increasing extent allow the sponsors time to re-examine and finances, to aid in all types of plan- since the early 1970s. While this is sharp- work programing for the 1.08-million ning. It also will provide an effective tool ly reduced from electric sales forecasts of kilowatt unit in light of federal and state in administration of regulatory matters. a decade ago, the Company still must be regulatory uncertainties and questions Another project, still in the embryo stage prepared to meet projected increased raised by the 1979 Three Mile island nu-(the Energy Management System dis- power demands and oil displacement clear plant accident.

cussed on page 7) will furnish Niagara objectives.

Mohawk with the most current state-of- The expectation is that new upturns in Together with the four other utility the-art system to control and coordinate energy demands may be spurred by re- co-owners of the unit, the Company

. generation, transmission and distribution newed industrial and commercial activity engaged independent. engineering and,,

- facilities; as economic conditions improve in up- management consultants early in 1980 to As we'look down the road ahead with state New York. Growth already is being examine the status of engineering, con-others in both the public and private sec- experienced near Buffalo and Syracuse, struction and management systems at the tors, the N.Y. State Energy Master Plan for example. Two automotive manufac- project. A decision to return to full con-announced in 1980 with its proposed turers have begun expansion totaling struction will be based on that review schedules and sites for principal genera- $ 480-million alone and impressive plus an assessment performed by con-tion and transmission projects will be of multi-million dollar research, restaurant sultants retained by the N.Y. State Public greatest significance to Niagara Mohawk and hotel, educational, aluminum pro- Service Commission covering essentially and other utilities in the N.Y. Power Pool. duction, beverage and other industrial the same areas. It is anticipated that find-At the same time, the Power Pool is per- developments were announced or under ings by the Commission's consultants will forming its own studies, with economic way throughout our service territory dur- closely parallel those already reached in and demographic models of future years, ing the year. the utility-sponsored audit.

and the Public Service Commission has Preliminary reassessment indicates undertaken a detailed analysis of the In mapping plans and strategies for that construction costs to have Unit No. 2 state's total energy reliability picture. The the natural gas side of the business, ready for operation by late 1986 will Company has implemented many potential for sales growth continues to approximate $ 2.4 billion, excluding fi-planning-oriented recommendations improve, but at moderate levels due to nancing costs. The previous $ 135-billion from a study of management and opera- energy conservation by customers and estimate was based on 1984 completion.

tions in the late 1970s, and a residential continuing refinement by manufacturers The cost difference results from this appliance saturation survey was con- of new gas appliances and equipment two-year deferral and greater inflation, ducted in 1980 to aid in forecasting elec- with greater efficiency. To meet,gas,, modifications to meet newqregulations tric usage and to assess load manage- needs, 67 miles of new mains and other and varied increases related to engineer-ment potential and energy conservation gas service facilities were installed during ing and construction work programs.

effects on our System. Detailed up-to- the year. About $ 6.2 million is earmarked Similar cost hikes, for essentially the date findings of the 1980 Census also are for new gas facilities in 1981. Markets for same reasons, are common to nuclear expected to be helpful in forecasting and this relatively low-cost, clean-burning facilities under construction elsewhere in future chartwork. fuel should broaden during the 1980s.r the United States.

Despite reduced activity at Unit No.

in 1980, there was significant cor IV

,I V struction activity during the year. Tl.

900-ton reactor pressure vessel an associated shielding were installed, whi!

work on other key components prt ceeded satisfactorily. When the plai goes into commercial operation, it wi

~ ~ save from 20,000 to 30,000 barrels of in

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ported oil daily. This will save consumer hundreds of millions of dollars over th unit's life, compared to an oil-fired pow~

producer of the same size.

Unit No. 2's ownership and future ou

~ ~ put are shared by Niagara Mohawk Long Island Lighting Co., 18', Ne '1%;

York State Electric & Gas Corp., 18".

I@ ~>>P 'I&/~, Rochester Gas and Electric Corp., 14" and Central Hudson Gas & Electric Corp 9X.

The next refueling of Nine Mile Poir Nuclear Unit No. I is scheduled for sprin 1981. This nuclear cornerstone in th

'c Company's array of generation source achieved another fine record of outstanc ing performance and reliability in 1980. I commercial service since 1969, th 610,000-kilowatt project has compiled capacity factor of 85 percent in 1980. Th-plant operated for 338 days through 198 (an availability factor'of 92percent) Thi places it among the top five percent o the nation's nuclear stations. Thi.

spring's planned shutdown will entai partial reloading of the nuclear reactor i+ routine plant maintenance work an~

P I addition of further safety refinements.

During the year, Niagara Mohaw!

and three other New York Stat~

Q V PV utilities continued to pursue recovery t amounts spent toward construction of-proposed 1.15-million kilowatt nuclea plant planned on Lake Ontario west c Oswego. The sponsors'oint intentions t>>

build the Sterling plant were terminate<

early in 1980 when the N.Y. State Boar on Electric Generation Siting and th Environment reversed itself and revoke the certificate for construction, grante World's largest land-based cranes hoist

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900-ton reactor vessel 28 stories above Lake Ontario during installation at Nine Mile Point Nuclear Unit No. 2. Scene high-lights year's construction activity at the 1.08-million kilowatt power plant site.

1990s. Early in 1980, the State Board cer-tified the LEGS site for the 1.7 million- ELECTRICITY GENERATED AND kilowatt coal-fired installation, uncondi- PURCHASED BY TYPE OF FUEL tionally approving plans for the first unit b:It noting approval of a second unit in 1978. Earlier approval at the federal would require proof of need by Niagara level was granted in 1977 when the Nu- Mohawk or a group of utilities. Ultimately, clear Regulatory Commission issued a li- the proposed station would save some 11 Hydro 34%

cense to construct Sterling after the util- million barrels of imported oil yearly.

ities had demonstrated that the site was environmentally acceptable and that The Company plans to modify the  : Nuclear 15%,

necessary engineering and safety criteria oil-fired, 400,000-kilowatt Albany had been met. Steam Station to add natural gas, a In seeking recovery of its investment, burning capability measure offering cost the Company plans to spread the cost advantages as well as reducing usage of over several years to lessen the effect imported oil. Certain regulatory approv-upon its customers. Niagara Mohawk's als will be necessary for the changeover, share in Sterling is 22 percent. which involves an investment of $7 mil-NM Uranium, Inc., a southern Texas lion. A contract has been signed with our uranium mine in which Niagara Mohawk wholesale gas supplier to provide the owns half interest, produced more than fuel. The proposal calls for bringing Al-500,000 pounds and sold to third parties bany's four converted units on line in fall

$ 14 million of uranium in 1980. United 1981 and operating primarily on gas, at Keyed to delivery of energy from States Steel Corp. owns the other half and least until late 1983. By that time, a final generation sources to load growth manages operation of the facility, the decision is expected to be formulated by centers, the Company's power trans-world's largest mining development of its the U.S. Department of Energy regarding mission system is undergoing a number kind. conversion of Albany to coal, a modifica- of significant improvements and addi-tion that could cost well over $ 100 mil- tions. A major, $ 8.9-million, 345,000-volt The new Unit No. 6 at Oswego Steam lion, depending upon pollution abate- transmission switching station was"com-Station began commercial operation ment equipment required. Originally a pleted and put into service at Elbridge, on July 3, 1980. Under construction since coal-fired project, the station was con- west of Syracuse, and progress was made 1972, more than a year before the OPEC verted to oil fuel for combined environ- on a new 230,000-volt underground cable oil embargo, the 850,000-kilowatt unit mental and economic reasons in 1969. in Buffalo and a 345,000-volt line from La-went on line for a reasonable capital However, since the OPEC embargo, Al- fayette, near Syracuse, to Oakdale, near outlay-$ 290 per installed kilowatt, bany was cited by the Department of Binghamton. The 65-mile line is being excluding financing costs. This is sub- Energy as a prime candidate for conver- erected jointly with New York State Elec-stantially less than for any generating sion back to coal. Oil-fueled Niagara Mo- tric 8c Gas Corp., with Niagara Mohawk plant planned in N.Y. State over the next hawk generation units at Oswego have constructing the northerly 40 miles and decade. Capacity of Unit No. 6 is shared, been ruled out for coal conversion for NYSE8cG the southern section.

with Niagara Mohawk receiving 646,000 technical and cost reasons. Looking at transmission and distribu-kilowatts (76 percent) and Rochester Gas As part of a hydroelectric development tion of energy in the mid-1980s and be-and Electric 204,000 kilowatts (24 per- and expansion plan scheduled through yond, the Company has started designing cent) of net capability. the 1980s, excavation work will continue an extensive Energy Management System Because of uncertainty in electric load during early 1981 in the renovation and (EMS) that will employ the most sophisti-growth, construction of the first 850,000- enlargement of Granby Hydro Station on cated equipment and controls to further kilowatt unit at the planned Lake Erie the Oswego River. Built in 1915, this enhance and modernize power delivery Generating Station is being delayed until 4,600-kilowatt "run-of-river" plant is throughout the upstate New York region.

the need for its capacity is more clearly being replaced with a new power house In various planning stages since the late determined. At hearings before the State and two units that will more than double 1970s, EMS's base will be a new master Board on Electric Generation Siting and its output to 10,000 kilowatts.nitidl power control center to be built in Syra-the Environment, the Company originally commercial service is set at 1983 for cuse, linked via computers to regional proposed an in-service date of 1985, with Granby, the first of 15 new or renovated power control centers in Buffalo, Albany, construction to begin in 1980. However, hydro facilities which are part of a pro- central and northern New York. The sys-continuing load-growth studies now indi- gram to obtain increased, relatively tem promises a more efficient use of cate that the need for power from Lake lower-cost energy wherever feasible on existing power facilities, besides adding Erie's first unit would not occur until the rivers and streams in our service area. to their reliability.s

PQg I yr It&

II Research quest Energy research and develcpment has in-creased lrom only $ 500,000 for project expenditures in 10":G to more than $ 14 million in 1980. R&C occupies an increas-ingly strategic place in engineering, envi-l*

• C '4 ronmental and overall operations plan-ning. in recent years the Company has earned recognition for its initiative and pioneering in the research field.

To speculate on the 1990s, fully suc-cessful application of R&D projects now under way by Niagara Mohawk could re-sult in an estimated 16 percent yearly re-duction in fuels used for electric genera-tion, equal to saving more than 8.5 mil-lion barrels of imported oil. The Com-pany's own in-house research projects represent nearly 40 percent of the total funding for the R&D program. These seek renewable energy resources, energy con-servation improvements and methods of reducing the effect of power generation and delivery upon the environment.

Foremost among in-'house research accomplishments in 1980 was initial success with a sophisticated communica-tions demonstration, combining satel-lites, lasers and fiber optics technology. If applied throughout Niagara Mohawk's 24,000-square-mile electric System, the experiment could lead to reducing annual operating expenses by approximately $ 5 million, in addition to improving high-speed data, voice and video com-munications.

The project employs two orbiting Na-tional Aeronautics and Space Administra-tion satellites for transmittal of data con-cerning power operations, weather and Special antenna for satellite research program is adjusted by Thomas L. lerlan, Communications Tester, at power trans-mission substation. Combining two orbit-ing NASA satellites, advanced fiber optics and lasers, project promises to improve reliability of electric service and cut oper-ating costs. Niagara Mohawk is first elec-tric utility to explore this communications frontier.

Costing up to $ 55 million, the five-year FGD study on one of Huntley's 100,000-kilowatt units is intended to re-move 90 percent of sulfur oxides dis-charged from stacks of large power plants burning higher sulfur coal. Sulfur oxides entrapped in the process are converted to pure marketable sulfur. In addition, disposal problems related to waste by-products are virtually eliminated because materials used by the "scrubber" are re-cycled in the process.

Niagara Mohawk is host utility and project manager of the FGD demonstra-tion. Co-sponsors include the Empire related conditions between the Com- State Electric Energy Research Corp.

pany's Power Control Center and a key (ESEERCO) the research arm of the electric switchyard in central New York. state's seven investor-owned utilities, the At the same time, the project utilizes ca- U.S. Environmental Protection Agency, Electric Power Research Institute and Another innovative effort while also bles containing hair-thin, computer-to- reducing gasoline usage was converting computer fiber optics. Light originating Rockwell International Corp., developer of the FGD process. Long in the planning, more than 80 Company vehicles to oper-from laser sources travels as signals ate on either compressed natural gas or through the fiber optics and is instantly the project has attracted nationwide attention. FGD may help in*solving prob- gasoline. CNG compressor fillingstations "translated" into messages. Each tiny fiber has'the same communications ca- lems linked with acid rain a complex were installed at two key service centers environmental concern arising in recent in Syracuse and Albany. When fully oper-pacity as more than 200 copper wires in ational in 1981, this pilot project is ex-an ordinary te!ephone circuit and is unaf- years.

In Niagara Mohawk's pursuit of alter- pected to reduce fleet motor fuel needs fected by customary problems that peri-nate energy sources, plans also matured by 159,000 gallons per year. Considera-odically cause telephone interference. tion is already being given to expanding The satellite/fiber optics system shows in 1980 to a stage where installation of a 10,000-kilowatt fuel cell demonstration the project.

significant promise, not only for its high R&D strides were achieved in a unit at a Niagara Mohawk power genera-linkup reliability value when storms tion site is anticipated sometime in the number of varied projects in 1980 both threaten communications during power independent studies by Niagara Mohawk emergencies but for enhancement of mid-1980s. The Company and other util-as well as cooperative programs. These energy management between major ities have been committed to extensive fuel cell research since the 1960s, after include:

Northeastern power control centers and other important utility locations. successful results were experienced in

~

Olympic Village Thermal Energy Stor-the US. manned space program. Free of age and Load Management

~ Darrieus and Grumman IVind Turbines In a far-reaching research mission pollution, noise and vibration, the with participants representing both gov- battery-like units are designed to sup- ~ Solid Polymer Water Electrolysis for ernment and private sectors, construc- plement conventional methods of power Hydrogen Production tion progressed to the one-third mark in production and do not require recharg- ~

Community-Wide, IVater-Source Heat 1980 on an experimental Flue Gas Desul- ing. Operation continues as long as air Pump Applications furization (FGD) prototype at Niagara and a fuel containing hydrogen are fed to, ~

Selected Solar Energy Installation iVlohawk's Huntley Station in Tonawanda, the cell electrodes. A 4,800-kilowatt fuel Monitoring near Buffalo. The demonstration is to en- cell prototype is scheduled at a New York City generation station in early 1981 and

~ IVind-Powered Pumped Hydroelectric able power producers to burn lower cost, will supply power to customers of Con- Storage high-sulfur Eastern coal with little envi-ronmental effect while offering consid- solidated Edison Co. of New York, one of ~ Refuse-Deriued Fuels for Power Co-erable long-range cost advantages for the nine utilities participating in the generation electric consumers. program. ~

Synthetic Fuels Development 0

Programing for the consumer Because reliance on energy service i:

certain to continue growing in the com-ing years, the Company has responsibilit to remain alert and sensitive to consum ers'roblems.

1 h Niagara Mohawk is constantly plan 1 ning, initiating and refining program.

~ . h V 'V %VI I and services to help all categories o energy users residential, commercia I

and industrial in these inflationar times. It is especially sensitive to th~

difficulties of residential consumers, par=

ticularly the elderly. Senior consumer:

are burdened more and more by soaring food, shelter, medical and energy costs.

It is a long tradition in the Company that Niagara Mohawk employees contrib-( hh r ute much personal time and effort help-iV I ing people and bettering the I v ~'-'

communitie'n I

4g which they live. This volunteer work, which the Company encourages in the spirit of good citizenship, recognizes tha W) a utility's prosperity is permanently geared to the socioeconomic well-being of its service area.

Direct services and programs initiatec.

or receiving renewed emphasis during

'V' the year by Niagara Mohawk to help senior and other consumers with their energy concerns included:

1r~ ~ Extended Due Date, Plan,aids 1

senior N consumers in making bill payments, without penalty, after arrival of social V

i' security, social security insurance or disability income checks.

~

Budget Plan levels off seasonal "highs" in energy costs by spreading estimatec t: annual costs into 12 nearly equal pay-

~~,~A% ~~@ W,h;hh ments.

~ Third-Party Notification permits a thirc hrIC~C$ ...

party, designated by the customer, tc receive any notices of service discon-nection because of non-payment o:

bills.

~

Life-Support Program assists consum-ers who use any type of electrically op-erated life-support equipment in the event of emergency outages or non-payment of bills.

Audience hears Nancy L. Hughes, Con-sumer Relations Representative, describe insulation and heat-saving measures at home energy conservation workshop in Buffalo. Hundreds of these informative h . I seminars were conducted by Niagara ht) Mohawk specialists across the Company's service area.

4THLY RESIDENTIAL ELECTRIC COST FOR 500 KILOWATT-HOURS generate public awareness of the Audit Program.

In addition to Home Energy Audit printed materials, consumers are pro-vided booklets, brochures, films, video-tapes and speakers programs on a broad NYStatoAvg.(not tncfuding NM) 43.37']

~ ln-Home Service Calls by iViagara Mo- selection of energy conservation topics.

hawk personnel for check on gas or Further, in the past year Company con-electric emergencies, at no charge. servation specialists presented "No-

~ Winter Referral Program, in coopera- Cost/Low-Cost" energy workshops in all tion with social service agencies, iden- areas served. These informative evening tifies hardship cases and helps them sessions teach consumers how low-cost obtain emergency bill payment aid. do-it-yourself projects can save energy and cut down fuel bills.

The Company's long-standing efforts to Another successful program in 1980 help consumers save energy and control -was the Energy Management Action Pro- National Avg. 29.14, fuel bills were again evidenced in 1980, gram, created the previous year for major when more than $ 2.6 million in low-cost industrial and commercial customers. A loans were arranged through the Home total of more than 450 representatives Includes fuel and PASNY credit adiustments as applicable

'NM Rate Department as of December at. t sad Energy Audit program, surpassing similar from a cross-section of key industrial and "e.H. Report with Rates Effective 7/t/ao loan arrangement efforts by all other New business firms attended seminars and York State utilities. were awarded certificates in this special- previous years, the Council's observa-ized program. The five-day sessions, con- tions and recommendations are proving In the past two years since the audit ducted by Niagara Mohawk instructors, highly significant in the Company's con-concept took form, more than 76,000 cover specific lighting, heating, load de- sumer relations and public affairs pro-customers have participated, requesting mand and energy monitoring unique to graming. A notable example is Council one of three types of home audits. These large energy users. Interest was so high in guidance in developing some of the con-include inspections by Company special- many areas that the sessions were over- sumer programs described above. In ists (50 specialists were trained across subscribed. addition, the Council monitors legislative the System) and recommendations on bills and proposals affecting consumers energy conservation measures. Also pro- To help guide and assist in identify- and energy policies and prepares rele-vided are lists naming local contractors ing customer-related problems, the vant "issue papers" for release to news who will perform necessary improve- Consumer Advisory Council on Energy Af- media from time to time.

ments on customers'omes and informa- fairs provided many valuable insights and As a further measure to identify with tion on obtaining low-cost energy con- suggestions again, in 1980. Independently, consumers, an extensive customer opin-servation loans, with liberal repayment the 27 volunteer Council members, rep- ion and attitude survey was conducted in terms. Well before the outset of the 1980 resenting a broad cross-section of cus- 1980 by an independent market opinion heating season, Niagara Mohawk tomer interests, drafted a "Consumer' research firm. It was the first such survey stepped-up a System-wide promotional Bill of Rights and Responsibilities" for in several years. Customer reactions cov-campaign, advertising in newspapers, distribution to legislators, regulatory ered a wide spectrum, with the topics radio, television and in bill enclosures to agency leaders and news media. As in ranging from basic trust in Niagara Mohawk and opinions on the cost of elec-tricity and gas to nuclear power, envi-Issue is debated at task force meeting of Consumer Advisory Council on Energy Affairs. ronmental concern and municipal own-Council members are volunteers from outside the Company and represent varied ership. A special committee is evaluating consumer and community interests. From left are Clarence Dart of Saratoga Springs, these attitude findings, both to analyze Ralph Falco of Syracuse, Chairman Sidney A. Sherwin, Jr., of Batavia, William Roden of the general feelings customers have to-Trout Lake, Henry J. Osinski of Buffalo and Floyd Nolan of Pulaski. ward the Company and to guide the formulation of specific plans with regard to the positives and negatives identified.

In late 1980, the Public Service Com-mission approved the Company's time-of-use electric rate proposal. Effective January 1, 1981, the new time-based rates are mandatory for large industrial and I>> commercial users, but optipnal for. resi-dential consumers. It is expected that only large-use residential consumers

/~~kg" ~ g'.:r-.~ could shift enough usage to off-peak times to benefit from the plan, while prin-cipal industrial and commercial custom-ers could realize as much as a 10 percent decrease in power costs. ~

People in planning As the Company prepares to meet obsta We~w ~" cles and challenges along the road aheaa

'ipApP~f the unending task of employee training a Niagara Mohawk becomes more para mount than ever in planning.

Efforts to develop and to refin~

employee skills and knowledge, all look I ing to the future, resulted in productivit and efficiency gains throughout the Corn pany's ranks in 1980. Formalized trainin courses focused upon consumer service:

(the latest teaches customer servic people operation of a new, on-line cus tomer system using cathode ray tub>>

terminals and a new computerized tele 1

phone system), management develop I'

ment, varied technical assignments, fiel<

instruction, new e'mployee orientation coping with personal stress and a host o other subjects. Also, a fully equippe~

training center for formal instruction o fossil plant and nuclear station employ-ees was completed near the Oswego Steam Station.

~ ~

In addition, the year saw planning-oriented achievements by the Company';

~a Am Productivity Planning Department serving as an in-house "consultant"

~ ~

tc.

upgrade use of manpower and physica; resources through a new managemen'niform planning system. In this system mathematical, physical and..behaviora.

sciences are integrated with the latest industrial engineering methods to bring about productivity and cost-cutting improvements. Planning and operation ot power transmission and distribution sys-tems were among key review assign-ments by Productivity Planning in 1980.

The department will continue to help management and supervisory employees streamline everyday planning, organizing staffing and control work everywhere in the Corporation.

At the close of 1980, employees num-bered 9,700, about the same as in 1973 while the sales, scope of operations and number of customers served has grown significantly.

Rescue Squad members Ted Coller, right, and Kenneth Plum respond to accident call while on night ambulance duty in northern New York Town of Norfolk.

Coller, a Niagara Mohawk Station Mainte-nance Mechanic, is among many Company employees serving as medical emergency volunteers and contributing personal time toward the safety and well-being of their communities.

The proven success of the constantly growing Dividend Reinvestment and Stock Purchase Plan continued as par-On June 1, 1980, a new two-year con- .ticipation rose 15 percent in 1980. Hold-tract went into effect with 12 local unions ers of both common and preferred stock of System Council U-ll, International are eligible. The limit on optional cash Brotherhood of Electrical Workers investments has been increased to (AFL-CIO). Provisions of the pact, all on Niagara Mohawk and wish to hear its $ 30,000 per year. Under the Plan, pur-within Federal Wage Guidelines, affect position on energy issues and current chases of newly issued stock are made some 7,600 in the work force and include events. In further response to this need, directly from the Company-without in-yearly wage increases of 8.5 percent. the Company initiated its "In-the-Know" curring brokerage commissions or ser-communications program in 1980 to keep vice charges. The purchases are made As one of upstate New York's largest stockholders updated on energy devel- from the reinvestment of dividends and employers, Niagara Mohawk recognizes opments, financial affairs and stockhold- optional cash payments from the par-its responsibility to provide equal job er services. In addition, "NMK Digest," a ticipants. The Plan also provides the opportunities. The Company is continu- newsletter distributed to security Company funds for financing. In 1980, ing to improve representation of minority analysts, brokers and interested stock- 39,000 participants, representing 18 per-groups among its,employees and, in the holders, is published periodically. For cent of all common stockholders, in-same light, has long been recognized for information on any of these activities, vested $ 18,909,000 in new common leadership in community volunteer proj- write John W. Powers, Treasurer, 300 Erie shares. Literature and application forms ects involving employment and job Boulevard West, Syracuse, NY 13202. are available by writing NMPC Dividend training. Reinvestment Plan, P.O. Box 131, Syra-Employees desiring to upgrade their The Association of Investors in New cuse, NY 13201.

formal education in job-related fields en- York Utilities, Inc., formed in 1979 as a roll in a Company Aid-to-Education plan "grass roots" stockholder organization, In another action to plan and to meet which provides substantial financial already has grown to nearly 1,700 mem- the challenges of managing the Corpo-assistance. About 800 employees took bers, with the majority owning Niagara ration in today's business climate, major advantage of the Plan in 1980. The Cor- Mohawk shares. AINYU is a non-profit, modifications in our senior management poration's Scholarship Program assists independent group of owners of stocks, structure were implemented in 1980.

employees in providing their sons and 'bonds or other securities in investor- Changes involved the election of John G.

daughters an opportunity to obtain a col- owned, tax-paying N.Y. State utilities. Haehl, Jr., to Chairman of the Board and lege education or go on to graduate study Among its objectives through collective Chief Executive Officer and William J.

in engineering, business and finance. action are "protecting the financial Donlon to succeed Mr. Haehl,as Presi-Four undergraduate scholarships, each integrity of utilities to assure continued dent. At the same time, Richard C. Clancy, with a total value of $ 8,000, are awarded supply of power at reasonable cost to John M. Endries and John M. Haynes were annually, and one $ 5,000 graduate fellow- consumers and at reasonable profit to elected senior vice presidents. Donald L.

ship is granted every two years under the owners." Other goals include "improving MacVittie was elected Vice President of Program. the regulatory climate of administrative Fossil Generation; Thomas E. Lempges, The Employee Saving Fund Plan is sub- bodies and to preserve the free- Vice President of Nuclear Generation; An-scribed to by 6,700 or 76 percent of all enterprise, tax-paying system in the gen- thony J. Baratta, Jr., Controller; John W.

eligible personnel. They allocate from 2 eration and distribution of power in New Powers, Treasurer; and Richard N. Wes-percent to 6 percent of their wages to- York State." Information on AINYU is cott, Assistant Treasurer. Later in the ward purchase of common stock or U5. available by writing to its corporate office year, Nicholas L. Prioletti, Jr., was elected Government Bonds. The Company at Old Camby Road, Verbank, NY 12585. an Assistant Controller.a matched employee contributions by 50 percent for a total $ 3,682,000 in 1980. The Plan holds 6,907,000 shares or 9% of the Membership growth in outstanding common stock. In addition, Association of Investors employees may make unmatched contri- in New York Utilities, Inc.,

butions of up to 4% of their wages. is reviewed, from left, by The reorganized Public Affairs and AINYU Executive Vice President John Howley, Corporate Communications Department Vice Presidents Joseph L.

has broadened activities to better com- Ottenheimer and Karr municate with stockholders and the pro- Parker, Jr.,'~Treasur'er fessional investment community. For the Ruth Kovacs and Presi-third year, members of senior manage- dent A. B. Wellborn. First ment made informative presentations to formed in 1979 by secur-stockholders at regional meetings in key ity holders with interest in communities in upstate New York. The investor-owned utilities, number of persons attending these ses- AINYU has grown to sions and their enthusiasm indicate that nearly 1,?00 members.

stockholders want the latest information

Management's discussion and analysis of financial condition and results of operations Results of operations Niagara Mohawk's earnings in 1980 were

$ 1.87 per share, down $ .13 from 1979, $ .02 below those of 1978 and up $ .13 from 197? earnings when fewer shares were outstanding.

The decrease in the Company's earn-

,I ings per share for 1980 from 1979 came primarily from a 2.1% decrease in electric sales to ultimate consumers; an increase I

of 19% (net of change in capitalization policy discussed below) in inflation-fed operating expenses; and a 14% rise in Federal income and other taxes. In addi-tion, financing costs were approximately 18% higher due to higher debt levels, caused by increased working capital and construction needs, and due also to his-torically high interest rates. These factors were only partially offset by new electric and gas rates, which became effective in March 1980. Also, the Compariy Changed its capitalization policy with regard to certain other operation and maintenance expenses arising as a result of construc-tion activities. These costs are now being capitalized, whereas in prior years they were charged to other operation and maintenance expenses. The impact of this change was to increase net income and earnings per share for the year ended December 31, 1980 by approximately

$ 4,700,000 and $ .07 per share, respective-ly. The prospective impact of this change has been considered in the Company's pending rate proceeding.

The Company's Rate of Return on Equity fell to 10.8% for 1980 after showing a steady increase from 10.4% in 1977, to 11.19o in 1978 and to 11.4% in 1979. The Company's current Rate of Return on Equity is well below the 14.0% approved by the New York State Public Service Commission (PSC) for the rate year be-ginning March 1980. Recent awards have not provided an adequate return on equity or recovery of steadily increasing costs resulting from inflation, thus ne-cessitating annual petitions for rate increases.

The discussion and analysis that follows highlights items that have had a significant effect on operations during the three-year period. This discussion and analysis should be read in conjunction with the Notes to Consolidated Financial

'tatements and other financial and statistical information appearing elsewhere in this report and may not be indicative of future operations or earnings.

Electric revenues increased $ 406 million or 41% over the three-year period. This increase is largely attributable to recovery of increased fuel and purchased power costs and, to a lesser extent, to rate relief, as indicated by the table below:

ELECTRIC Increase (decrease) from prior year In millions of doiiars Revenues 1980 1979 1978 Total Increase in base rates . ' 80.8 S 24.5 S 14.9 $ 120.2 Fuel and purchased power cost increases . 69.9 108.8 (2.6) 176.1 Sales to ultimate consumers'............. 1.1 20.7 16.7 38.5 Sales to other electric systems ........... 23.2 23.7 0.8 47.7 Miscellaneous operating revenues ....... 7.4 13.1 2.8 23.3

$ 182.4 $ 190.8 $ 32.6 $ 405.8 Electric kilowatt-hour sales were 32.6 billion in 1980, a decrease of 2.2% from 1979, reflecting both the effects of a recessionary economy in the Company's service area and conservation efforts by our customers. Details of the changes in our electric revenues and kilowatt-hour sales by customer group are highlighted in the table below:

1980  % increase (decrease) from prior year

%of electric 1980 1979 1978 Class of service revenues Revenues Sales Revenues Sales Revenues Sales Residential ....... 29 1% 13.2/o 0.7% 11 9% 1.7% 5 1% 2 9%

Commercial ...... 33.2 17.8 0.9 17.8 1.8 2.4 4.0 Industrial 24.7 10.0 (6.2) 20.9 2.3 2.0 2.6 Municipal service . 2.0 13.9 (0.4) 10.8 (0.7) 2.9 Total to ultimate consumers . 89.0 14.0 (2.1) 16.5 2.0 3.2 3.1 Other electric systems ....... 7.6 27.9 (3.3) 39.9 13.0 1.4 5.0 Miscellaneous .............. 3.4 18.4 48.0 11.6 Total 100.(j/o 15.1% (2.2)% 18.7% 2.9% 3.3% 3.2/o Gas revenues increased $ 146 million or 61% over the three-year period. As shown by'the table below, this rise is almost entirely from increased costs of purchased gas recovered from customers through the purchased gas adjustment clause.

GAS Increase (decrease) from prior year In millions of dollars Revenues 1980 1979 1978 Total Increaseinbaserates......... $ 1.2 $ 4.6 S 2.2 S 8.0 Purchased gas cost increases . 67.3 42.3 9.8 119.4 Gas sales . 9.7 (1.4) 9.9 18.2

$ 78.2 $ 45.5 $ 21.9 $ 145.6 Gas sales were 101.3 million dekatherms in 1980, a 4.9% increase from 1979. The changes in sales during the last three years generally follow the weather pattern offset by customer conservation efforts. The increase in 1980 industrial revenues and sales is attributable in part to an increase in boiler conversions from oil to gas. Changes in gas revenues and dekatherm sales by customer group are detailed in the table below:

1980  % increase (decrease) from prior year

%of gas 1980 1979 1978 Class of service revenues Revenues Sales Revenues Sales 'evenues Sales Residential .. 54.6% 18.6% (1.5)% 1 1.3% '5.3)% 5.4% 1.2/o Commercial . 23.2 25.2 1.8 17.0 (1.3) 18.0 13.7 Industrial .... 18.1 50.3 26.5 42.7 9.5 10.5 4.7 Total to ultimate consumers . 95.9 25.2 4.5 16.7 (1.8) 8.8 4.7 Other gas systems .......... 3.5 34.4 12.4 46.0 9.2 22.6 13.0 Miscellaneous ...............6 50.0 15.3 12.8 Total 100.0/o 25.6% 4 g% 17 5% (1.4)% 9.2o/o 5 0%

15

In summary, total operating revenues required the replacement of low-cost nu- When this apparently substantial growth increased $ 551 million, or 45% over the clear generation with fossil fuel genera- in operating revenues is adjusted for the three-year period, this rise largely repre- tion and purchased power. current purchasing power of the dollar, a sents recoveries of fuel and purchased The total cost of gas purchased by the more realistic picture for the three-year gas costs through fuel adjustment Company from Consolidated Gas Supply period is presented. Adjusted to 1980 dol-clauses. Through our energy and pur- Corp. rose 41% in 1980, 24% in 1979 and lars, operating revenues increased in chased gas adjustment clauses, costs of 11% in 1978. These increases are primar- 1980 from 1977 by $ 110 million or 7%,

fuel, purchased power and gas pur- ily the result of deregulation of wellhead while net income declined substantially chased, above or below the levels al- prices which increased the Company's due to the effects of depreciation stated lowed in approved rate schedules, are cost per dekatherm purchased to $ 259 in in terms of the current cost of plant in billed or credited to customers. 1980 from $ 2.00 in 1979, $ 1.57 in 1978 and service. Over the same period cash divi-On February 29, 1980, the PSC ap- $ 1.52 in 1977. dends per share declined $ 29 when the proved rate increases to provide the Other operation and maintenance ex- relative purchasing power of the dollar is Company additional annual revenues of penses increased 7.2% in 1980, 1459'n considered. Inflation information in Note

$ 122,577,000 (11.5%) for electric and 1979 and 4.8% in 1978, as a result of in- 11 of the Notes to Consolidated Financial

$ 3,263,000 (LOS) natural gas. These new creases in wages and ass@elated benefits, Statements indicates the approximate ef-rates became effective March 7, 1980. In higher costs charged by our suppliers fect of inflation on these and certain addition, the PSC ordered the flow- and increased levels of maintenance, par- other aspects of the Company's opera-through to customers of 821.6 million in tially offset by a change in the Company's tions and financial position.

income tax refunds and interest(see Note capitalization policy discussed previous-10 of the Notes to Consolidated Financial ly. In May 1980, the Company entered a Statements) of which $ 6.8 million was re- two-year labor agreement providing for Liquidity and capital resources fu'nded during 1980. increased wages and supplementary ben- As is common in the utility industry, Further rate action, made necessary by efits of 9.64% and 9.259'n June 1980 and internal funds generated from operations a recessionary economy, record inflation 1981, respectively. The increase in other are insufficient to meet the Company's and unprecedented high interest rates, operation and maintenance expenses in capital requirements. Therefore, signif-was requested on April 18, 1980 when the 1979 was also attributable, in part, to the icant funds from external sources are re-Company filed for an annual increase of refueling of Nine Mile Point Nuclear Sta- quired on an annual basis. External capi-

$ 231 million, including $ 214 million tion Unit No. 1, discussed above. tal needs are first met through utilization (14.1%) electric and $ 17 million (4.2%) In July 1980, the Company placed its of short-term borrowing arrangements, gas. In December 1980, a PSC Administra- Oswego Steam Station Unit No. 6 in including bank lines of credit, commer-tive Law Judge recommended rate in- commercial operation. This oil-fired unit, cial paper and bankers acceptances.

creases of 8149.7 million (9.5%) electric of which 24% is owned by Rochester Gas These short-term borrowings are repaid and 811 million (2.5%) gas or about 70% ' and Electric Company, was completed at through the issuance of securities, includ-of what the Company had requested. Be- cost to the Company of approximately ing intermediate and long-term debt, pre-cause of the nearly year-long regulatory $ 239.5 million, including allowance for ferred and preference stocks and com-process for any rate proceeding, any in- funds used during constructiOn (AFC). mon stock.

crease determined by the PSC will not be The effect of adding this unit to our plant Capital resources from internal and ex-reflected in the Company's operations in service is reflected in increased depre- ternal sources are used to pay for the until the second quarter of 1981. ciation expense. Company's construction program, work-In 1980, fuel and purchased power Federal and Canadian income taxes ing capital needs, maturing debt issues costs continued to increase sharply, from rose in 1980, 1979 and 1978 as a result of and sinking fund provisions of outstand-

$ 404 million in 1977, to $ 411 million in increased operating income and an in- ing debt and preferred stocks. Sources 1978, to $ 540 million in 1979 and to 8644 crease in the amounts on which deferred and uses of funds during the past three million in 1980. The continued increases taxes are provided. The increase in other years are reported in the Consolidated result primarily from higher coal, oil and taxes in these same three years is due Statement of Changes in Financial Posi-purchased power costs and changes in principally to higher property taxes re- tion at page 21.

the mix of generation resources. (See sulting from property additions and The Company presently has bank cred-Electric and Gas Statistics Electricity higher state and local gross income taxes it arrangements aggregating 8300 million.

generated and purchased). The average resulting from increased revenues. At December 31, 1980, $ 123.3 million of cost per ton of coal burned was $ 41.95 in The Company's revenues and costs of such arrangements were in use. The 1980 compared to 839.08 in 1979, $ 37.11 operation over the past three years show Company generally issues long-term debt in 1978 and $ 34.00 in 1977; the average substantial increases in several respects, secured by a mortgage on the Company's cost per barrel of oil burned was $ 23.72 in due primarily to the effect of general in- properties. In 1980, the Company also 1980 compared to $ 16.34 in 1979, $ 12.58 flation and higher fuel costs. Inflation has borrowed $ 80 million under new seven-in 1978 and $ 12.94 in 1977. The average eroded the purchasing power of the dol- year bank revolving credit and term loan unit cost of purchased power was 13.6 lar, as measured by the Consumer Price borrowing agreements (of a total amount mills per kilowatt-hour in 1980 compared Index, to about three-fourths of its 1978 available under these agreements of $ 90 to 12.1 mills in'1979, 8.8 mills in 1978 and value. The Company is especially sensi- million). Preferred stock issues in recent 7.9 mills in 1977. In addition, the Com- tive to inflation because of the large years have typically been of $ 25 par value pany's Nine Mile Point Nuclear Station amount of capital it must raise to finance and redeemable at specified dates and Unit No. I was out of service for several its construction program and because its prices. Common stock is sold through months in 1979 for scheduled refueling prices are regulated using a rate base that periodic public offerings as well as under and maintenance.'his scheduled outage reflects the historical cost of its plant. the Company's Dividend Reinvestment,

mployee Savings Fund and Employee Financial resources provided internally tock Ownership plans. from operations consist of net income, Market price of During 1980, Niagara Mohawk com- adjusted for non-cash expenses, such as common stock and related

>leted $ 265,650,000 of financing as de- depreciation, amortization of nuclear fuel stockholder matters ailed below and increased short-term and deferred income taxes, and non-cash Iebt by $ 41.3 million. income, such as allowance for funds used The Company's common stock and cer-during construction (AFC). AFC repre- tain of its preferred series are listed on Seven-Year Bank Revolving Credit and sents the financing costs of the Com- the New York Stock Exchange. The com-Term Loan Borrowing $ 80,000,000 pany's construction program and is mon stock is also traded on the Amster-12.95% First Mortgage added to the cost of construction until dam (Netherlands), Boston, Cincinnati, Bonds (1) 66,350,000 such time as the capital projects are Detroit, Midwest, Pacific Coast and PBW 9.75% Preferred Stock 25,500,000 completed, and is then recovered stock exchanges. The ticker symbol is Common Stock (2) 93,800,000 through depreciation included in rates "N 8265,650,000 charged to customers. While financial re- MID'referred and common stock. dividends sources from operations, as determined were paid on March 31, June 30, Septem-(1) Excludes $ 13,650,000 scheduled for March above, have been increasing in recent ber 30 and December 31. The Company 1981 delivery at the same interest rate. years, such increases have not kept pace presently estimates that 65% of the 1980 (2) Includes public sale of 4 million shares at with the Company's construction and and 1979 common stock dividends is'a

$ 14.125 per share and proceeds from sales other requirements, thus necessitating through dividend reinvestment, employee sav- return of capital and therefore is not tax-increasing amounts of outside finandng. able as dividend income for income tax ings iund and employee stock ownership plans at varying prices. The Company and other investor- purposes. The remaining percentage on owned utilities have filed testimony with common dividends and 100% of preferred Approximately $ 99.5 million of these the PSC to seek regulatory policy changes stock dividends are taxable as dividend funds were used to pay maturing bonds which would improve cash flow. Addi- income.

and to provide for sinking fund require- tionally, the Company is seeking ade- The table below shows dividends per ments. Total financing for 1981 is esti- quate overall earnings levels and cash share for our common stock and quoted mated to exceed $ 400 million. Of this flow improvements in its periodic rate market prices:

amount, requirements for maturing filings.

bonds and preferred stock sinking funds The Company,',s requirement for funds Dividend paid Price range may be affected by possible increases in 1980 per share High Low total approximately $ 149.5 million.

The Company has endeavored to construction costs brought on by infla- 1st quarter $ .36 $ 13 $ 10'/s strengthen its capitalization structure tion and regulatory requirements, among 2nd quarter .38 14'/4 10~/s through the reduction of long-term debt other factors. Continued increases in in- 3rd quarter .38 14 12 as a percent of total capitalization. The ternally generated funds and their"'ade- 4th quarter .38 12% 10 proportion of long-term debt to total cap- quacy in relation to the Company's needs $ 1.50 italization has decreased from 49.0% at depend partly on the results of current the end of 19?8 to 48.0% at the end of and future rate cases and the extent to which increased rates can be translated 1979 1980 while common equity as a percent of total capitalization has increased from into improved earnings. The cost and 1st quarter $ .36 $ 15% $ 13'/2 36.9% from the end of 1978 to 39.4% in availability of external sources of funds 2nd quarter .36 14'/e 13 1980. will be affected by the retention and 3rd quarter .36 ~ 14>/s 1274 Construction and other capital re- maintenance of an adequate credit rating 4th quarter .36 14 12 quirements continue to increase. Net by the Company and conditions in the fi- $ 1.44 additions for construction and nuclear nancial markets. Financial market condi-fuel, excluding financing costs, totaled tions, among other factors, influence the

$ 319.7 million in 1980, $ 316.9 million in timing and types of securities to be of- While the Company intends to con-1979 and $ 271.3 million in 1978. In recent fered, repayment terms and the decision tinue the practice of paying cash divi-years, the largest cost component of con- to place such offerings privately with in- dends quarterly, declarations of future struction programs has been the cost of vestors or publicly through underwriters. dividends are necessarily dependent new generating stations. The Company's Any of these factors could have an ad- upon future earnings, financial require-Oswego Steam Station Unit No. 6 attained verse effect on the Company's ability to ments and other factors, including re-commercial operation status in July, fully implement its intended construction strictions in governing instruments.

1980. The principal new station presently and financing programs. The Company The holders of Common Stock are enti-under construction is Nine Mile Point will continue to explore and utilize other tled to one vote per share and may Unit No. 2, scheduled for completion in methods of financing, such as the Euro- accumulate their votes for the election of late 1986, in which the Company had in- dollar market, tax exempt financing Directors. Whenever dividends of Pre-vested about $ 400 million through De- methods, leasing of equipment and simi- ferred Stock are in default in an amount cember 31, 1980 (See Note 12 of Notes to lar non-traditional sources of funds. equivalent to four full quarterly dividends Consolidated Financial Statements). Out- However, management believes that tra- and therafter until all dividends thereon lays associated with construction of this ditional sources of funds will provide the are paid or declared and set aside for nuclear unit, along with other facilities majority of its needs. ~ payment, the holders of such stock can requirements, are expected to increase elect a majority of the Board of Directors.

overall construction expenditures in fu- Whenever dividends on any issued Pref-ture years. erence Stock are in default in an amount 17

equivalent to six full quarterly dividends Report of management and thereafter until all dividends thereon are paid or declared and set apart for The consolidated financial statements of accordance with generally accepted at payment, the holders of such stock can Niagara Mohawk Power Corporation and diting standards. As part of their exan elect two members of the Board of Direc- its subsidiaries were prepared by and are ination, they made a study and evaluatic tors. itlo such dividends are now in arrears. the responsibility of management. Finan- of the Company's system o( internal ai Vpon any dissolution, liquidation or cial information contained elsewhere in counting control. The purpose of sue winding up of the Company's business, this Annual Report is consistent with that study was to establish a basis for re! lant the holders of Common Stock are entitled in the financial statements. thereon in determining the nature, timir to receive pro rata all of the Company's To meet its responsibilities with re- and extent of other auditing procedur.-

assets remaining and available for distri- spect to financial information, manage- that were necessary for expressing a bution after the full amounts to which ment maintains and enforces a system of opinion as to whether the financi.

holders of Preferred and Preference internal accounting controls, which is de- statements are presented fairly. The Stock, having priority over Common signed to provide reasonable assurance, examination resulted in the expression Stock, are entitled have been satisfied. on a cost effective basis, as to the integ- their opinion which follows this repor The indenture securing the Company's rity, objectivity and reliability of the fi- The independent accountants'xamin; mortgage debt provides that surplus shall nancial records and protection of assets. tion does not limit in any way manag.

be reserved and held unavailable for the This system includes communication ment's responsibility for the fair preser payment of dividends on Common Stock through written policies and procedures, tation of the financial statements and a to the extent that expenditures for main- an organizational structure that pro- other information, whether audited c tenance and repairs plus provisions for vides for appropriate division of respon<< unaudited, in this Annual Report.

depreciation do not equal 2.25% of de- sibility and the training of personnel. This The Audit Committee of the Board r preciable property as defined. Such pro- system is also tested by a comprehensive Directors, consisting of three director visions have never restricted the Com- internal audit program. In addition, the who are not employees, meets regulars pany's surplus. Company has a Code of Conduct which with management, internal auditors an About 211,000 stockholders presently requires all employees to maintain the Price Waterhouse & Co., to review an own common shares of Niagara Mohawk highest level of ethical standards and re- discuss internal accounting control.

and 1),000 hold preferred and preference quires key management employees to audit examinations and financial repor.

stock. The chart below summarizes formally affirm their compliance with the ing matters. Price Waterhouse & Co. an common stockholder ownership by size Code. the Company's internal auditors have fre of holding: The financial statements have been access to meet individually with the Aud examined by Price Waterhouse & Co., the Committee at any time, without manag>>

Sizeolholding Total Totalshares Company's independent accountants, in ment present.a (Shares) stockholders held 1 to 99 . 60,081 2,049,822 100 to 999 142,628 33,600,937 1,000 or more ~

8,089 39,580,385 Report of independent accountants .

210,798 75,231,144 PRICE WATERHOVSE & CO To the Stockholders and the Board of Directors of Niagara Mohawk Power Corporation In our opinion, the accompanying consolidated balance sheets and the relate consolidated statements of income and retained earnings and of changes in financia position present fairly the financial position of Niagara Mohawk Power Corporatio.

and its subsidiaries at December 31, 1980 and 1979, and the results of their operation and the changes in their financial position for each of the three years in the perio ended December 31, 1980, in conformity with generally accepted accounting princ.

ples consistently applied. Our examinations of these statements were made in accor dance with generally accepted auditing standards and accordingly inc)uded such test of the accounting records and such other auditing procedures as we considere necessary in the circumstances.

Syracuse, New York January 28, 1981

Consolidated statement of income and retained earnings NIAGARAMOHAWKPOWER CORPORATION AND SUBSIDIARIES ln thousands ol dollars For the year ended December 31, 1980 1979 1978 Operating revenues:

Electric $ 1,393)467 $ 1,211,068 $ 1,020,313 Gas 383,648 305,435 259,935 1,777,115 1,516,503 1,280,248 Operating expenses:

Operation:

Fuel for electric generation 462,573. 380,101 311,000 Electricity purchased 181,223 159,453 99,536 Gas purchased 276,680 196,711 158,229 Other operation expenses (Note 1) 221,879 200,917 181,995 Maintenance (Note 1) 100,470 99,857 80,759 Depreciation (Note 2) 92,210 84,212 80,683 Federal and Canadian income taxes (Note 10) 43,498 34,646 31,123 Othertaxes 1861830 166,666 152,550 1,565,363 1,322,563 1,095,875 Operating income 211,752 193,940 184,373 Other Income and deductions:

Allowance for other funds used during construction (Note 1) . 38,209 39,063 28,971 Federal income tax credits (Note 1) 15,651 13,782 11,690 Other items (net) 5,995 524 1,545 59,855 53,369 42,206 Income before interest charges 271,607 247,309 226,579 Interest charges:

Interest on long-term debt 115,809 105,399 99,874 Otherinterest 13,766 4,416 1,573 Allowance for borrowed funds used during construction (Note 1) . (20,607) (18,536) (16,030) 108,968 91,279 '5,417 Net Income. 162,639 156,030 141,162 Dividends on preferred stock 29,438 27,844 28,660 Balance available for common stock .. 133I201 128,186 112,502 Dividends on common stock 106,967 92,136 81,261 Retained earnings for the year . 26,234 36,050 31,241 Miscellaneous charges (Note 6) . (1,180)

Retained earnings at beginning of year 403,945 367,895 337,834 Retained earnings at end of year S 430,179 S 403,945 S 367,895 Average number of shares of common stock outstanding (in thousands) . 71,257 63,976 59,661 Per average share of common stock:

Balance available for common stock S 1.87 $ 2.00 $ 1.89 Dividends paid . $ 1.50 $ 1.44 $ 1.36t/2

() Denotes deduction.

19

Consolidated balance sheet t

NIAGARAMOHAWKPOWER CORPORATION AND SUBSIDIARIES ln thousands of dollars At December 31 ~

1980 1979 ASSETS Utilityplant, at original cost (Note 3 and Page 31) . $ 4)563)309 $ 4,218,528 Less accumulated depreciation and amortization (Note 2) 1,232,675 1,110,563 3)330)634 3,107,965 Other property and inveatments 16,451 16,149 Current assets:

Cash, including time deposits of $ 1,809 and $ 650, respectively 13,829 8,527 Accounts receivable (less allowance for doubtful accounts of 1981150 179,490

$ 2,800 and $ 2,400, respectively) .

Materials and supplies, at average cost:

Coal and oil for production of electricity 107,508 109,278 Other . 48,175 35,543 Prepayments ............ ..... ....... ............ ... 91187 6,709 376,849 339,547

, Deferred debits:

Unamortized debt expense 14,041 14,124 Deferred recoverable energy costs 61,839 44,170 Other 9) 005 6,982 84,885 65,276

$ 31808) 819 $ 3,528,937 CAPITALIZATIONAND LIABILITIES Capitalization (Note 6):

Common stockholders'quity:

Common stock $ 1 par value; authorized 85,000,000 shares; issued 75,231,144 shares and 67,952,043 shares, respectively ...... $ 75,231 $ 67,952 Premium on capital stock 802,954 716,386 Capital stock expense (10,363) '10,558)-

Retained earnings (Page 19) . 430)179 403,945 1,298,001 1,177,725 Redeemable preferred stock (Note 7 and Page 30) 205)924 189,650 Non-redeemable preferred stock (Page 30) . 210,000 210,000 Long-term debt (Page 30) 1)443)607 1,443,056 Total capitalization 3,157)532 3,020,431 Current liabilities:

Short-term debt (Note 4) 123,300 82,040 Long-term debt due within one year (Page 30) 142,500 88,500 Sinking fund requirements on redeemable preferred stock (Note 7) 6,950 6,950 Accounts payable 144,876 118,727 Customers'eposits . 4,952 4,934 Accrued taxes . 27,837 25,537 Accrued interest 32,818 30,727 Accrued vacation pay 16,406 14,569 Other . 16,568 17,315 516,207 389,299 Deferred credits:

Income tax refunds (Note 10) 1,772 21,606 Other . 9,064 =11,933 10,836 33,539 Mandated refunds to customers (Note 10) 25,326 Accumulated deferred Federal income taxes (Note 10) 98,918 85,668 Commitments and contingencies (Note 12)

$ 3,808,819 $ 3,528,937

( ) Denotes deduction.

20

Consolidated statement of changes in financial position NIAGARAMOHAWKPOWER CORPORATION AND SUBSIDIARIES fn thousands of dollars For the year ended December 31. 19SO 1979 1978 Financial resources were provided by:

Operations:

Net income . $ 162,639 $ 156,030 $ 141,162 Charges (credits) to income not requiring (not providing) working capital Depreciation 92,210 84,212 80,683 Allowance for funds used during construction . (58,816) (57,599) (45,001)

Amortization of nuclear fuel. 481829 28,090 27,107 Provision for deferred Federal income taxes(net) . 20,895 14,566 7,955 265,757 225,299 211,906 Outside financing:

Sale of common stock 93,823 75,266 70,462 Sale of preferred stock . 25i500 74,000 Sale of mortgage bonds . 66,350 118,500 31,500 Borrowings under revolving credit and term loan agreements (Note 14) 80,000 Increase (decrease) in short-term debt 41,260 58,040 (15,200) 306I933 251,806 160,762 Other sources:

Sale of utility plant (Note 5) 34,955 Deferred recoverable energy costs (17,669) (16,204) (3,015)

Mandated refunds to customers (Note 10) (6,758)

Income tax retunds 1,885 Sale of uranium (Note 3) . 13,983 35,987 (Increase) decrease in working capital other than short-term debt (see below) 48,346 33,660 22,006 Miscellaneous (net) 113 5,313 (5,049) 38,015 58,756 50,782 Total resources provided $ 610,705 $ 535,861 $'423;450" Financial resources were used tor:

Construction additions . $ 341,237 $ 347,544 $ 277,758 Nuclear fuel 37,266 26,986 38,522 Allowance tor funds used during construction. (58,816) (57,599) (45,001)

Net additions . 319,687 316,931 271,279 Reduction of long-term debt . 145,387 90,000 10,450 Reduction of preferred stock (Note 6) 9,226 8,950 31,800 Dividends .. 136,405 119,980 109,921 Total resources used $ 610,705 $ 535,861 $ 423,450 (Increase) decrease in working capital other than short-term debt:

Cash $ (5,302) $ 2 259 $ (4,207)

Accounts receivable. (18,660) (52,271) (5,364)

Income tax retund claims 8,391 Coal and oil for production of electricity 1,770 (39,046} 9,710 Other materials and supplies . (12,632) (5,807) (3,369)

Long-term debt due within one year . 54,000 78,050 200 Sinking fund requirements on redeemable preferred stock . 5,150 Accounts payable 26,149 31,873 7,823 Accrued taxes and interest 4,391 5,475 4,349 Other (net) (1,370) 7,977 4,473

$ 48,346 S 33,660 S 22,006

N otes to consolidated poses, the Company computes depreciation using accelerated methods and shorter allowable depreciable lives.

financial statements As a result ot a PSC rate decision, estimated decommission-NOTE 1. Summary of Significant Accounting Policies ing costs (costs to take the plant out ot service in the tuture) of The Company is subject to regulation by the New York State the Company's Nine Mile Point Nuclear Station Unit ¹1 began to Public Service Commission (PSC) and the Federal Energy Reg- be recovered in rates and charged to operations in July 1978 ulatory Commission (FERC) with respect to its rates for service through revised depreciation charges. The change in the annual and the maintenance of its accounting records. The Company's nuclear plant depreciation rate, from 4.00'/o to 4.33/o, reflects an accounting policies conform to generally accepted accounting increase in the estimated service lite of the plant from 25 to 30 principles, as applied to regulated public utilities, and are in years and the establishment ot an allowance for decommission-accordance with the accounting requirements and ratemaking ing costs at the annual rate of 1'/o of the plant's cost. Prior to July practices of the regulatory authorities. (See Note 12.) 1978, decomissioning costs were not charged to current opera-tions and were not recognized in rates charged to customers.

Principles of Consolidation: The consolidated financial There is no assurance that the additional revenues provided by statements include the Company and its three wholly-owned the decommissioning allowance will ultimately aggregate a subsidiaries. All signiticant intercompany balances and trans- sufficient amount to decommission the plant. The Company be-actions have been eliminated. lieves that decommissioning costs, it higher than currently pro-Utility Plant: The cost of additions to utility plant and of re- vided, will ultimately be recovered in the rate process, although placements of retirement units of property is capi>alized. Cost no such assurance can be given.

. includes direct material, labor, overhead and an allowance for Amortization of Nuclear Fuel: The cost of nuclear fuel, plus funds used during construction (AFC). The cost of current re- estimated disposal cost, is charged to operating expenses on pairs and maintenance is charged to expense. Whenever utility the basis ot the quantity ot heat produced for the generation ot plant is retired, its original cost, together with the cost ot re- electric energy. These costs are charged to customers through moval, less salvage, is charged to accumulated depreciation. base rates or through the fuel adjustment clause. Until June Other Operation and Maintenance Expenses: During 1980, the 1979, the Company had assumed that spent nuclear fuel would Company changed its capitalization policy with regard to certain be disposed of by reprocessing and that uranium recovered Engineering, Quality Assurance and Transmission and Distribu- through such reprocessing would have value. At that time, be-tion costs arising as a result ot construction activities, thus cause of proposed Federal action and because there is no re-achieving a more proper capitalization of these costs. This processing facility in operation, the Company abandoned its re-change in capitalization policy, net of Federal income taxes, processing plans in tavor of a permanent storage assumption.

resulted in an increase in net income for 1980 of approximately The Company believes that nuclear fuel disposal costs, which

$ 4,700,000 ($ .07 per share). The prospective impact of this may be higher than presently estimated, will continue to be re-change has been considered in the Company's pending rate covered in the rate process, although no such assurance can be proceeding. given.

Revenues: Revenues are based on cycle billings rendered to Allowance for Funds Used During Construction: The Com-certain customers monthly and others bi-monthly. The Company pany capitalizes AFC in amounts equivalent to the cost of funds does not accrue revenues tor energy consumed and'no@billed at devoted to plant under construction. AFC rates are determined the end of any fiscal period. The Company's tarifts include elec-in accordance with FERC and PSC regulations. As a result of rate proceedings, the Company began computing AFC at a rate tric arid gas adjustment clauses under which energy and pur-chased gas cost, respectively, above or below the levels allowed which is reduced to reflect the income tax etfect of the borrowed in approved rate schedules are billed or credited to customers.

tunds component of AFC, for its Oswego Steam Station Unit ¹6 The Company, as authorized by the PSC, charges operations for and Nine Mile Point Nuclear Station Unit ¹2 on December 1, 1976 and tor capitalized costs associated with its investment in energy and purchased gas cost increases in the period of recov-N M Uranium, Inc. on July 1, 1978 (See Note 3). The AFC rates in ery. The PSC has periodically authorized the Company to make eftect during the three-year period ended December 31, 1980 changes in its electric adjustment clause. As a result of such

'ere: changes, a portion of deferred energy costs would not be recov-AFC Net of tax ered under the normal operation of the electric adjustment Period rate AFC rate clause. However, the Company has been permitted to amortize January 1, 1978 through December 31, 1978 ... 9.00'/o 7.20'/o and bill such portions to customers, through the electric ad-January 1, 1979 through October 31, 1979..... 9.25 7.50 justment clause, over 36 months from the eftective date ot each November 1, 1979 through December 31, 1979 . 9.60 7.75 change.

January 1 1980 through February 29, 1980 .... 10.00 7.90

~

Federal income Taxes: The general policy, in accordance with March 1, 1980 through June30,1980 ......... 11.00 8.40 PSC requirements, is to flow through the tax eftect of timing July 1, 1980 through September 30, 1980 ...... 10.00 8.20 October 1, 1980 through December 31, 1980... 10.25 8.30 ditferences between book and taxable income, that is, to record only income taxes currently payable. However, deferred taxes AFC is segregated into its two components, borrowed funds are provided on benefits realized trom the class life system ot (which are reflected in the Interest Charges section of the in- depreciation permitted under the Revenue Act of 1971 (shorter come statement) and other funds (which are reflected in the depreciable lives, repair allowance and cost of removal), on de-Other Income and Deductions section of the income statement). ferred energy and purchased gas costs, on nuclear fuel disposal costs and on certain other items, as approved by the PSC (see Depreciation and Nuclear Generating Plant Decommission- Notes 3 and 10). No deferred taxes are provided for other depre-ing Costs: For accounting purposes, depreciation is computed ciation differences (including accelerated methods of depre-on the straight-line basis using the estimated useful lives by ciation), except under necessity certificates in prior years, or for classes of depreciable property. For Federal income tax pur- other items (such as taxes, a portion of AFC, pensions and cer-22

tain other employee benefits) which are deductions currently for sured future supply of nuclear fuel for the 'Nine Mile Point Nu-tax purposes but capitalized for accounting purposes. clear Station Units ¹1 and ¹2, the Company has indicated it The benefits resulting from an increase in the investment tax would sell a portion of the output to reduce net assets and asso-credit from 4% to 10% and from the change in the limitation on ciated carrying charges. In connection therewith, during 1980 the amount of credit which may be claimed in any year have and 1979 the Company sold uranium produced by NMU for been deferred and are being amortized over the book life of the approximately $ 14,000,000 and $ 36,000,000, respectively. The property which gives rise to such credits. One-half of the 4% Company expects to sell additional portions of the NMU output investment tax credits realized have been allocated to Other in the future, subject to market conditions. The investment in the Income and Deductions, consistent with PSC directives. For the subsidiary, which includes costs incurred since acquisition and major projects specified in the AFC section above, the imputed AFC, has been reduced by the proceeds from the sale of ura-tax benefit of the borrowed funds component of AFC has been nium, net of tax. Such investment totaled $ 73,800,000 and credited to Other Income and Deductions. $ 72,000,000 at December 31, 1980 and 1979, respectively, and is As directed by the PSC, the Company deferred a portion of the included in the consolidated financial statements as part of the increase in Federal income taxes for the year 1978 associated nuclear fuel component of utility plant.

with the tax gain on the sale of a portion of its interest in the On September 8, 1978, the PSC issued an order approving the Roseton Steam Station. The PSC authorized the Company to Company's investment in NMU, its guaranty of certain NMU recover such increased taxes through its electric adjustment notes and permitting, with prior approval, such subsequent ad- ~

clause over a one-year period commencing July 1978. vances as may be necessary to finance the uranium project.

Oswego Steam Station Unit ¹6 attained in-service status for Further, effective July 1, 1978, all benefits associated with NMU Federal income tax purposes in 1979 and generated investment timing differences have been deferred. The ap- 'ccounting-tax tax credits amounting to $ 14,400,000. During 1979, the year in proval was subject to the condition that rates which the PSC will which these credits would normally be recognized under the approve in the future will reflect the cost of NMU uranium at of cost or the market price. Subject to PSC approval, the the'ower Company's previously described Federal Income Tax account-ing policies, the Company deferred the effect of these credits, comparison of cost to market will be on an aggregate basis over subject to the final decision of the PSC in a pending rate case the life of the project.

where the treatment of such credits was at issue. The effect of Recently, because of unsettled conditions in the uranium in-such deferral on the 1979 results ot operations was to increase dustry, the market price of uranium continues to be depressed tax expense and thereby decrease income by $ 6,500,000 ($ .10 below levels anticipated by the Company at the time of its in-per share). In accordance with a February 1980 PSC Opinion vestment. The market price of uranium has fallen to $ 27.00 per and Order and consistent with the Company's 1979 deferral, the lb. at December 31, 1980 from approximately $ 43.00 per lb. dur-deferred investment tax credits attributable to the 4% portion =ing 1979. Management is continually evaluating the status of are being amortized over three years and, effective July 1, 1980, this mining operation to assure maximum recovery of the Com-the additional 6% portion is being amortized over the book life pany's investment. However, due to regulatory restrictions on of the plant. the extent to which the costs of uranium produced by this min-Amortization of Debt Issue Costs: The premium or discount ing operation will be allowed in future rates and due to the on long-term debt issues is amortized ratably over the lives of current market price level, a substantial portion of the Com-the issues.'ension pany's investment may not be recoverable.-

Plans: The cost of pension plans is based upon cur- NOTE 4. Short-term Debt and Compensating Balances rent costs, amortization of unfunded past service benefits over At December 31, 1980, the Company had available periods ranging from 15 to 40 years and amortization over 15 $ 300,000,000 of bank credit arrangements consisting of a years of unfunded past service benefits arising from plan $ 70.000,000 contractual commitment with several banks under amendments. The Company's policy is to fund pension costs Credit Agreements, lines of credit of $ 105,000,000, and a Bank-accrued. 'rs Acceptance Facility Agreement of $ 125,000,000. All of these NOTE 2. Depreciation arrangements are renewable on an annual basis. The Credit Agreement and most of the lines of credit require the Company The total provision for depreciation, including amounts to maintain compensating balances which are averaged over charged to clearing accounts, was $ 93,848,000 for 1980, time. Net of "float approximately $ 1,900,000 of cash at De-

$ 86,178,000 for 1979 and $ 83,117,000 for 1978. The percentage cember 31, 1980 represented compensating balances. The relationship between the total provision for depreciation and Company has elected to pay fees in lieu of maintaining compen-average depreciable property was 2.7% in each year. The Com- sating balances on its other lines of credit. The Bankers Accep-pany makes depreciation studies on a continuing basis and, tance Facility Agreement provides for the payment of fees only when considered appropriate, adjusts the rates of its various upon the issuance of each acceptance. Acceptances are used to

~

classes of depreciable property. Such adjustments are subject finance the fuel oil inventory for one of the Company's generat-to PSC approval. ing stations.

In March 1979, the Company entered into arrangements with NOTE 3. N M Uranium, Inc. Oswego Facilities Trust (OFT) providing for OFT to finance the During 1976, through a wholly-owned subsidiary, N M Ura- acquisition of.a.fuel oil storage terminal at Oswego, New York nium, Inc. (NMU), the Company purchased a 50 percent un- and for constructfon of certain railroad loading and unloading divided interest in uranium deposits and associated mining facilities associated with the terminal. OFT has a $ 25,000,000 equipment to be held by a jointly-owned mining venture. The Letter of Credit Facility and Revolving Credit Agreement which venture is an operating arrangement whereby the Company are used to support its commercial paper obligations. The Com-pays its share of the capital and operating costs and in turn pany is obligated, under a Distribution Contract with OFT, to receives its proportionate share of production. Although acquis- make certain payments for its use of these facilities and to pur-ition of this interest was made primarily to provide a more as- chase, or otherwise arrange for, the disposition of the facilities 23

upon the termination of the Trust. The Letter of Credit Facility and Revolving Credit Agreement of OFT require payment of fees which are based upon the amount of commercial paper out-t 7.75% preference series. Expenses of issuing the 11.75% pre-ferred series of $ 1,200,000 were charged to retained earnings.

standing. NOTE 7. Sinking and Debt Retirement Fund Requirements of The following table summarizes additional information Redeemable Preferred Stock and Mortgage Bonds applicable to short-term debt: Certain ot the Company's preferred,and preterence stock In thousands of dollars 1980 1979 series and mortgage bonds provide for a mandatory sinking fund for annual redemption, at par, as follows:

At December 31:

Number of shares or Short-term debt: principal amount Notes payable . $ 26I000 in thousands Commercial paper, including Oswego of dollars Commencing Facilities Trust 57,300 68,040 Preferred $ 100 par value:

Bankers Acceptances............... 40,000 14,000 7.45% Series ......... 18,000 June 30. 1977

$ 123,300 $ 82,040 10.60% Series ......... 20,000 March 31, 1980 Weighted average interest rate(1) . 17.53o/o 13.85%

Preferred $25 par value:

For year ended December 31: 8.375% Series ........ 100,000 April 1, 1983 Daily average outstanding....... $ ,93,327 $ 35,888 9.75% Series .. ~ ~ ~ . ~ ~ ~ 66,000 October 1, 1980 Daily weighted average 9.75% Second Series . 204,000 April 1, 1986 interest rate(1) ............... 13.78o/o 11.40%

Preference $ 25 par value:

Maximum amount outstanding .. $ 175,660 $ 102,100 7.75% Series ......... 140,000 September 30, 1980 (1) Excluding compensating balances and fees.

Mortgage Bonds:

NOTE 5. Jointly-Owned Generating Facilities 10.20% Series due The following table reflects the Company's share of jointly- March 1,2005 ...... $ 1,500 March1,1978 owned generating facilities at December 31, 1980. The Company 8.35% Series due is required to provide financing tor the unit in process of con- August 1,2007 ..... 750 August 1;1982 struction and for any additions to the units in service. The Com- 8.625% Series due pany's share ot expenses associated with the Roseton units and December1,2007 .. 2,000 December 1,1983 9.50o/o Series due Oswego Steam Station Unit ¹6, which attained commercial op-December 1,2003 .. 2,941 December 1, 1987 eration status on July 3, 1980, are included in the appropriate 9.95% Series due operating expenses in the consolidated statement of income. September 1, 2004 .. 5,000 September 1, 1985

~

In thousands ol dollars 12.95% Series due Percentage Utility Accumulated Construction work in October1,2000 .... 5,333 September 30, 1986 ownership plant depreciation progress ~

'Increases to 160,000 shares at September 30, 1982 and 240.000 shares at Roseton Steam Station .Setttemt)er 30, 1984.

Units ¹1 and 2 (a) These series also have optional sinking tunds through which Oswego Steam Station the Company may redeem, at par, a like amount of additional Unit ¹6(b) 76 244,166 3,497 1,663 shares or bonds (limited to 120,000 shares of the 7.45% series Nine Mile Point Nuclear Station Unit ¹2(b) (c) (d) 41 398,609 and 300,000 shares of the 9.75% series). The option to redeem additional amounts is not cumulative.

(a) The Company sold to Central Hudson Gas and Electric Corporation Yo of its original 40% ownership for book value of approximately The Company's five-year mandatory sinking fund redemption

$30,400,000 in 1978. Central Hudson is obligated to acquire an addi- requirements are as tollows: In thousands ol dollars tional yo of the Company's original interest in this unit in 1982. 1981 1982 1983 1984 1985 (b) In 1978. the Company sold certain common facilities associated with these units. for book value of approximately $ 4,600,000. Preferred Stock (c) See Note 12. $ 100 par value:

7.45% ...... $ 1,800 $ 1,800

...... ',000 (d) Excludes amounts spent for nuclear tuel. $ 1,800 $ 1,800 $ 1,800 10.60% 2,000 2,000 2,000 NOTE 6. Capital Stock $ 25 par value:

Premium on capital stock increased $ 86,500,000 in 1980, 8.375% .....

$ 69,500,000 in 1979 and $ 65,400,000 in 1978 from the sale of 9.75% ...... 650 1 7,279,101, 5,771,766 and 5,057,636 shares of common stock, re- Preference Stock spectively. As a result of the toregoing, and as a result of the $ 25 par value:

1980 issuance of 1,020,000 shares of $ 25 par value preferred 7.75% ...... 3,500 4,000 4,000 6,000 6,000 stock, second 9.75% series, the 1978 issuance of 1,600,000 $ 6,950 $ 9,450 $ 11,950 $ 13,950 $ 13,950 shares ot $ 25 par value preferred stock, 8.375% series and the issuance of 1,360,000 shares of $ 25 par value preference stock, Mortgage Bonds 7.75% series, capital stock expense increased $ 400,000 in 1980, 10.20o/o Series .. $ 1,500 $ 1,500 $ 1,500 $ 1,500 8.35% Series .. 750 750 750 750

$ 200,000 in 1979 and $ 600,000 in 1978.

8.625% Series . 2,000 2,000 2,000 In 1978, $ 30,000,000 (300,000 shares) of 11.75% series pre-9.95% Series .. 5,000 terred stock was redeemed. In accordance with a PSC directive, the $ 3,500,000 call premium on the redemption was charged to $ $ 2,250 $ 4,250 $ 4,250 $ 9,250 capital stock expense and is being amortized over the life of the 'Requirements for 1981 have been met by advance purchases during 1980.

24

The remaining series of mortgage bonas provide for a debt Preliminary studies dicate that the accumulated plan bene-retirement fund whereby payment requirements may be made in fits, as determined by consulting actuaries, and plan net assets lieu of cash, by the certification of additional property, the for the Company's plans at December 31, 1980 are as follows:

waiver of additional bonds or the retirement of outstanding ln thousands of dollars bonds. The 1980 requirements for these series were satisfied by Actuarial present value of the certification of additional property. The Company antic- accumulated plan benefits:

ipates that the 1981 requirements for these series will be satis- Vested $ 244>000 fied by other than payment in cash. Non-vested 10,000 Total sinking and debt retirement fund requirements of mort-Total $ 254,000 gage bonds aggregated S:0,4GO,GOO for the year ended De-cember 31, 1980 and, based pon the mortgage bonds ti>on Net assets available for plan benefits $ 248,000 ou',standing, are $ 10,4OC,OCC, $ 11,150,000, $ 13,150,000,

$ >3,15C,OOC and $ 1C,15C,OGO for the years 1981 through 1985, The weighted average assumed rate of return used in deter-respectively. mining the actuarial present value of accumulated plan benefits was 7%.

NCTE 8. Pension Plans As prescribed by Statement of Financial Accounting Stan-The Company and its subsidiar! es have non-contributory pen- dards No. 36, effective in 1980, the above table summarizes sion plans cover.'ng substantially all their employees. The total accumulated plan benefits attributable to employee wage levels pension cost was $ 32,1CO,CGO for 1980, $ 28,900,000 for 1979 and and se'rvice rendered through December 31 1980. These ~

$ 25,700,000 for 1978 (of which $ 8,500,000 for 1980, $ 6,8CO,COO amounts do not take into consideration expected future service for 1979 and $ 5,800,000 for 1978 was included in construction and applicable actuarial assumptions which are considered in costs). funding the Company's ongoing pension plans.

NOTE 9. Information Regarding the Electric and Gas Businesses The Company is engaged in the electric and gas utility dance with practices established for regulatory purposes. Identi-businesses. Certain information regarding these segments is set fiable assets include net utility plant, materials and supplies and forth in the following table. General corporate expenses, prop- deferred recoverable energy costs. Corporate assets consist of erty common to both segments and depreciation of such com- other property and investments, cash, accounts receivable, pre-mon property have been allocated to the segments in accor- payments, unamortized debt expense and other deferred debits.

ln thousands of dollars 1980 1979 1978 Operating revenues: Electric .. $ 1,393,467 $ 1,211,068 $ 1,0)0,313 Gas 383,648 305,'435 259,II35 Total . $ 1,777,115 $ 1,516,503 $ 1,280,248 Operating income before taxes: Electric S 235,811 S 200,718 $ 188,236 Gas . 19,439 27,868 27,260 Total . S 255,250 $ 228,586 S 215,496 Pretax operating income, including AFC: Electric .. S 294,039 S 257,954 S 233,006 Gas 20,027 28,231 27,491 Total 314,066 286,185 260,497 Income taxes . 43,498 34,646 31,123 Other income and deductions 21,646 14,306 13,235 Interest charges 129,575 109,815 101,447 Net income S 162,639 S 156,030 S 141,162 Depreciation: Electric S 82,188 $ 74,957 S 71,750 Gas 10,022 9,255 8,933 Total . S 92>210 S 84,212 $ 80,683 Construction expenditures (including nuclear fuel):

Electric S 347,182 S 351,972 S 301,583 Gas . 31,321 22,558 14,697 Total S '378,503 $ 374,530 S 316,280 Identifiable assets: Electric . $ 3,203,737 $ 2,981,005 $ 2,717,224 Gas 344,419 315,951 294,667 Total . 3,548,156 3,296,956 3,011,891 Corporate assets 260,663 231,981 177,221 Total assets, $ 3,808,819 $ 3,528,937 $ 3,189,112 25

NOTE 10. Federal and Canadian lnc Taxes Current Federal Tax Expensel The current Federal tax ex-pense for 1979 includes credits ot $ 2,600,000 for investment tax t

redevelopment of Niagara power by the Fower Authority of the State of New York. The Company has instituted suit for recovery of this amount.

credit generated in 1979 and carried back to 1978. Investment Tax Credits: The Company has deferred the net Income Tax Refunds: In 1974, 1975 and 1978, the Company benefit ot investment tax credits ot approximately S8,000,000 received refunds resulting primarily from the adoption of the ($ .11 per share) S15,100,000 ($ .24 per share), $ 6,900,000 ($ .12

~

"guide-line" method of depreciation. These refunds, including per share) for the years ended December 31, 1980, 1979 and interest net of tax, less principally amounts representing prior 1978, respectively, in accordance with the general policy as tax deficiencies paid, were recorded in Deterred Credits and stated in Note 1.

totaled approximately $ 21,600,000 at December 31, 1979. The Company has unused credits at December 31, 1980 of In a PSC Opinion and Order issued in February 1980, the approximately $ 26,500,000 which may be utilized to reduce cur-Commission ordered the tlow-through to customers of the rent tax expense in subsequent years, ot which $ 14,100,000 ex-

$ 21,600,000 (Electric customers $ 13,300,000, Gas custom- pires in 1986 and $ 12,400,000 expires in 1987.

ers $ 8,300,000). The entire amount, together with other man- The following represents the U.S. and Canadian components dated items and related tax effects, was recorded in Mandated of income before income taxes:

Refunds to Customers and, commencing in March 1980, is In thousands ol dollars being retunded to electric customers over three years and to gas 1980 1979 1978 customers over two years. United States ................ S185,026 $ 172,215 $ 156,725 Income Tax Assessment: In October 1972, the Company paid a Canada 10,769 9,527 7,838 net assessment ot $ 16,800,000 for the years 1957 through 1962 Consolidating eliminations.... (5,309) (4,848) (3,968) relating to the deductions taken for the loss ot the Company's Income before income taxes S190,486 $ 176,894 $ 160,595 water rights at Niagara Falls terminated in connection with the Summary Analysis: In thousands o! dollars I

1980 1979 1978 Coinponents of Federal and Canadian income taxes Current tax expense:

Federal S 1,492 S 1,618 $ 7,608 Canadian. 5,460 4,680 3,870 6,952 6,298 11,478 Deferred Federal income tax expense 361546 28,348 19,645 Income taxes included in operating expenses ........ 43,498 34,646 31,123 Federal income tax credits included in Other Income and Deductions (15,651) (13,782) (11,690)

Total . $ 27,847 $ 20,864 $ 19,433 Timing ditferences resulting in deferred Federal income taxes (/Vote 7)

Depreciation .. $ 12,834 S 8,227 $ 22,753 Cost ot removal of property (127) (1,010) 2,310 Investment tax credit 7,985 15,149 6,899 Recoverable energy and purchased gas costs . 71236 (239) 7,012 Necessity certificates (700) (700) (700)

Nuclear fuel disposal cost . (12,383) (5,388) (28,411)

Sales and loans of nuclear fuel (1,304) (5,678)

Sterling abandonment 5,195 Gain on Roseton sale 3,962 (3,962)

Other . 21159 243 2,054 Deferred Federal income taxes (net) $ 20,895 $ 14,566 S 7,955 Reconciliation between Federal and Canadian income taxes and the tax computed at prevailing U.S. statutory rate on income betore income taxes Computed tax $ 87,624 $ 81,372 $ 77,086 Reduction attributable to flow-through of certain tax adjustments:

Depreciation 8)616 13,329 13,931 Allowance for funds used during construction 27,056 26,496 21,601 Taxes, pensions and employee benefits capitalized for accounting purposes . 110429 10,202 8,537 Real estate taxes ot1 an assessment date basis .. 3,458 2,178 560 Investment tax credit ........... 1,289 2,775 10,874 Deferred taxes provided at other than the statutory rate ........... 743 6,752 1,824 Other 7,186 (1,224) 326 59,777 60,508 57,653 Federal and Canadian income taxes $ 27,847 $ 20,864 $ 19,433 26

NOTE 11.~ Supplementary Information to disclose the Effects of Changing Prices (Una ted)

Continued inflation, resulting in a decline in the purchasing Mohawk, are most significant in the areas of depreciation and power of the dollar, is one of our nation's principal concerns. utility plant and amounts owed on borrowed tunds.

Inflation has an enormous impact on all sectors ot the economy, In recognition of the fact that users of financial reports need including consumers, wage earners, investors, government and to have an understanding of the eftects ot inflation on a busi-industry. ness enterprise, the following supplementary information is The Company's consolidated financial statements are based supplied for the purpose of providing certain information about on historical events and transactions when the purchasing the effects of both general inflation and changes in specific power ot the dollar was substantially different than at the pres- prices. It should be viewed as an estimate of the approximate ent. The effects of inflation on most utilities, including Niagara effect of inflation, rather than as a precise measure.

Statement ollncome from continuing operations adjusted for changing prices for the year ended December 31, 1980 In thousands of dollars Conventional Constant dollar Current cost historical cost average 1980 dollars average 1980dollars Operating revenues ...., .. $ 1,777,115 $ 1,777,115 $ 1,777,115 Fuel for electric generation 462,573 462,573 462,573 Electricity purchased . 181,223 181,223 181,223 Gas purchased 276,680 276,680 276,680 Oepreciation 92,210 230,881 285,729 Other operating and maintenance expenses 509,179 509,179 509,179 Federal and Canadian income taxes . 43,498 43,498 43,498 Interest charges . 108,968 108,968 108,968 Other income and deductions net (59,855) (59,855) (59,855) 1,614,476 1,753,147 1,807,995 Income (loss) trom continuing operations (excluding reduction to net recoverable cost) . $ 162,639 S 23,968' (30,880)

Increase in specific prices (current cost) ot utility plant held during year'* $ 424,206 Increase (reduction) to net recoverable cost $ (255,294) 144,928 Effect of increase in general price level (769,580)

Excess of increase in general price level over increase in specitic prices after increase to net recoverable cost (200,446)

Gain from decline in purchasing power of net amounts owed............ 209,546 209,546 Net S (45,748) S. 9,100

'Including the reduction to net recoverable cost. the income (loss) from continQing operations on a constant dollar basis would have been $ (231;326) for 1980.

"At December 31, 1980, current cost of utility plant. net of accumulated depreciation, was $ 6,940,885 while historical cost or net cost recoverable through depreciation was $ 3.443.376.

Constant dollar amounts attempt to adjust for general infla- mined by applying the Company's average annual depreciation tion and represent historical costs stated in terms of dollars of rates to the indexed plant amounts.

equal purchasing power, as measured by the Consumer Price Fuel inventories, the cost ot fuel used in generation, and elec-Index for all Urban Consumers. Current cost amounts reflect the tricity and gas purchased have not been restated from their his-changes in specific prices of plant from the date the plant was torical cost in nominal dollars. The recovery of energy and pur-acquired to the present and differ from constant dollar amounts chased gas costs are limited to historical costs through the op-to the extent that specific prices have increased more or less eration of the Company's electric and gas adjustment clauses.

rapidly than prices in general. For this reason fuel inventories and deferred recoverable energy The current cost of utility plant net of accumulated deprecia- costs are effectively monetary assets. Income taxes have not tion and amortization, represents the estimated cost of replac- been adjusted.

ing existing plant assets in kind. Since existing utility plant is not The Company is subject to the jurisdiction of regulatory com-expected to be replaced precisely in kind due to technological missions in the determination of a fair rate of return on its changes, current cost does not necessarily represent the re- investment. Current ratemaking policy provides for the recovery placement cost of the Company's utility plant. The portion of the of historical costs. Therefore, any difference between the histor-accumulated amortization relating to disposal costs of nuclear ical cost of utility plant and utility plant stated in terms of con-fuel was not used in the calculation ot current costs but rather stant dollars or current cost not presently includible in rates as reclassitied to a monetary liability. In most cases, current costs depreciation, is reflected as an increase (reduction) totnet were determined by indexing surviving plant dollars by the recoverable cost. While the ratemaking process gives no recog-Handy-Whitman Index of Public Utility Construction Costs. nition to the current cost of replacing utility plant, based on past However, when an account could not be indexed by Handy- practices, the Company believes it will be allowed to earn on the Whitman, other appropriate indices were used. The current increased cost of its net investment when replacement of year's provision for depreciation and amortization on the con- facilities actually occurs.

stant dollar and current cost amounts of utility plant was deter- To properly reflect the economics of rate regulation in the 27

Statement of Income from Continuing erations, the increase owed is primarily ributable to the substantial alnount of debt

~

(reduction) of net utility plant to net recoverable cost should be which has been used to finance utility plant. Since the deprecia-adjusted by the gain from the decline in purchasing power of net tion on this plant is limited to the recovery of historical costs, the amounts owed on borrowed funds. During a period of inflation, Company does not have the opportunity to realize a holding holders of monetary assets suffer a loss of general purchasing gain on debt and is limited to recovery only of the embedded power while holders of monetary liabilities experience a gain. cost of debt capital.

The gain from the decline in purchasing power of net amounts Five year comparison of selected supplementary financial data adjusted for effects of changing prices In thousands of average 1980 dollars For the year ended December 31, 1980 1979 1978 1977 1976 Operating revenues $ 1,777,115 $ 1,721,587 $ 1,617,017 $ 1,666,861 $ 1,559,298 Historical costinformation adjusted for general inflation Income (loss) from continuing operations (excluding reduction to net recoverable cost) S 231968 S 61,087 Income (loss) per common share (after dividend require-ments on preferred stock and excluding reduction to net recoverable cost) S (0.08) S 0.46 Net assets at year-end at net recoverable cost ..........'. $ 1,443,657 $ 1,481,401 Current costinformation

"~ Income (loss) from continuing operations (excluding reduction to net recoverable cost) S (30,880) S (2,286)

Income (loss) per common share (after dividend require-ments on preferred stock and excluding reduction to net recoverable cost) S (0.85) S (0.53)

Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost .. S 200,446 $ 286,916 Net assets at year-end at net recoverable cost ........... $ 1,443,657 $ 1,481,401 Generalinformation Gain from decline in purchasing power of net amounts owed . S 209,546 $ 241,426 Cash dividends declared per common share ................ S 1.50 S 1.63 $ 1.72 S 1.79 $ 1.79 Market price per common share at year-end ................. 6 11.13 S 14.34 S 17.68 S 21.25 $ 20.82 Average consumer price index 246.8 217.4 195.4 181.5 170.5 NOTE 12. Commitments and Contingencies Construction Program: The Company presently estimates that ($ 11,000,000) were prudently incurred in principle. The PSC has the. construction program for the years 1981 through 1983 will deferred a determination on costs incurred subsequent to require approximately $ 964,000,000, excluding AFC and certain January 1978 ($ 4,000,000) and whether all costs should be overheads capitalized. By years the estimates are $ 289,000,000, shared between ratepayers and stockholders until further

$ 327,000,000 and $ 348,000,000, respectively. At December 31, phases of their review are completed. While management be-1980, substantial construction commitments existed, including lieves all costs are tully recoverable, no such assurance can be those for the Company's share of Unit ¹2 at Nine Mile Point given.

Nuclear Station. Nine Mile Point Nuclear Station Unit ¹2: Construction ac-Sterling Nuclear Station: As a result of a January 1980 deci- tivities at this unit were slowed during 1980 pending completion sion by the New York State Board on Electric Generation Siting of an overall project reevaluation. In early 1980, independent and the Environment to vacate the construction permit it had engineering and management consultants were engaged by the previously issued because it could no longer find a public need co-owners to review the project's estimated cost and scheduled for the proposed jointly-owned Sterling Nuclear Station generat- in-service date, together with the status of engineering, con-ing facility, the project was discontinued. Through December struction and management systems at the project. Preliminary 31, 1980, the Company's costs associated with its 22% interest in results indicate a new project cost, based on a 1986 commercial the project, when reduced for Federal income taxes, approx- operation date, of approximately $ 2,214 per kilowatt (for an imated $ 15,000,000. The Company, together with the other co- estimated total cost to the Company of $ 984 million), exclusive owners, has petitioned the PSC to seek recovery of these and all of allowance for funds used during construction and the cost of subsequently incurred costs associated with cancellation of this nuclear fuel. The increase from the November 1978 estimate project. The PSC is currently holding hearings to determine the ($ 1,248 per kilowatt; $ 554 million total cost to the Company) is proper accounting treatment and ratemaking principles to be attributable to a two-year extension of the in-service date from applied to the loss arising from regulatory rejection of this proj- 1984 to 1986 and greater inflation, changes being made to ac-ect. All costs are subject to a detailed audit during a later phase commodate new regulatory requirements in part resulting from of the PSC's review of the petition. The PSC has permitted the the Three Mile Island incident, and various increases associated Company to accrue AFC on the discontinued project and has with the engineering and construction work programs.

determined that costs incurred through January 1978 During 1980, the New York State Public Service Commission 28

r ~

authorized an audit of the Nine Mile Point Unit ¹2 project cover- NOTE 13. Quarterly Financial Data (Unaudited) ing essentially the same areas as the co-owner initiated assess- Operating revenues, operating income, net income and earn-ment. A report on the PSC mandated audit results is expected in ings per common share by quarters for 1980, 1979 and 1978 are early 1981. The resumption of full scale construction is antici- shown in the following table. The Company, in its opinion, has pated in the spring of 1981, depending on the results of re- included all adjustments (consisting only of normal recurring assessments and audits initiated during the past year. accruals except for giving effect to the deferral of Oswego Unit Long-term Contracts for the Purchase of Electric Power: At ¹6 investment tax credit during the quarter ending December January 1, 1981 the Company had contracts to purchase electric 31, 1979 see Note 1) necessary for a fair presentation of the power from the following generating facilities owned by the results of operations for the quarters. Due to the seasonal nature Power Authority of the State of New York (PASNY): of the utility business, the annual amounts are not generated Expiration Purchased Estimated evenly by quarter during the year.

date of capacity annual In thousands of dollars Facility contract in Kw. capacity cost Operating Operating Net Earnings per Quarters ended revenues income income common share St. Lawrence hydroelectric project ... 1985 115,000 $ 1,380,000 December 31 Niagara Falls 1980 $ 479,512 $ 52,085 $ 37,756 $ .41 hydroelectric project ... 1990 1,122,432 13,469,000 1979 416,066 41,570 28,005 .31 Blenheim-Gilboa- 1978 321,788 33,881 26,977 .32 pumped storage September 30 generating station ...... 2002 550,000 11,220,000 FitzPatrick nuclear plant year-to- 141,000 11,310,000 1980 $ 379,705 $ 37,742 $ 26,020 $.25

.29 year basis 1979 335,944 34,764 25,511 1,928,432 $ 37,379,000 1978 276,442 37,571 27,273 .32 June 30 127,000 Kw. for winter of 1981-82 1980 $ 425,238 $ 57,729 $ 44,701 $ .54 The purchased capacities shown above are based on the con- 1979 352,107 50,114 41,878 .56 tracts currently in effect. The estimated annual capacity costs 1978 309,666 47,976 35,527 .49 are subject to price escalation and are exclusive of applicable March 31 energy charges. $ 64,196 $ 54,162 $ .69 1980 $ 492.660 1979 412,386 67,492 60,636 .86 Litigation: Several electric customers have brought suit 1978 372,352 64,945 51,385 .78 against the Company and PASNY requesting that certain power purchased from PASNY be allocated exclusively for their benefit NOTE 14. Revolving Credit and Term Loan Agreements and are asking monetary damages for the difference between rates charged by the Company and rates that would otherwise During 1980, the Company entered into several seven-year have been charged if this power had been furnished to them revolving credit and term loan agreements with seven banks since the initiation of the suit in 1978 and for the six years prior aggregating $ 90 million. Borrowings are inttially made. under thereto. In the opinion of management, the ultimate liability, if two to three year revolving credit periods. Balances outstanding any, resulting from this suit will not materially affect the consoli- at the end of the revolving credit period are converted to four to dated financial statements of the Company. five year term loans. The Company pays fees in lieu of maintain-ing compensating balances for the availability of these credit FERC Audit: During 1979, the staff of FERC conducted a com- arrangements. Interest on borrowings during the revolving cred-pliance audit of the Company covering the years 1973 through it period approximate the domestic floating prime rate or, under 1978. All of the adjustments proposed by FERC have been re- a Eurodollar option, i/s% above the London Interbank Offered solved except certain adjustments concerning the base cost of Rate. Amounts converted to term loans are payable in equal nuclear fuel on which AFC should be applied. The resolution of installments during the remaining term of the agreements.

these adjustments has been deferred pending the development There are no penalties for early termination or prepayment of of generic rulemakings by the FERC concerning accounting for these loans. At December 31, 1980, revolving credit loans nuclear fuel. If the associated recommended adjustments are amounted to $ 80,000,000 with interest at the domestic floating sustained by FERC, the resulting reduction in retained earnings prime rate.

would approximate $ 13,000,000 through 1978 and $ 24,000,000 through 1980. The Company believes that the adjustments are not justified and is contesting them. The recommended adjust-ments result from FERC staff taking exception to regulatory accounting treatment prescribed by the PSC, the Company's primary rate setting body. Although FERC has ratemaking juris-diction over only 10% of the Company's electric revenues, rep-resenting sales to other electric systems and revenues from transmission of energy, it has the power to prescribe books of account on which reports to stockholders are based. Due to the extensive jurisdiction which the PSC has over the Company's affairs, it is the opinion of the Company that the financial state-ments based on the requirements of the PSC represent the proper presentation of the financial position and the results of operations of the Company.

29

Long-term debt In thousands ol dollars In thousands ol dollars At December 31,, 1980 1979 At December 31, 1980 1979 First Mortgage Bonds: 8~/4% Series due December 1, 2003 . 80,000 , 80,000 274% Series due January 1, 1980 ... $ $ 40,000 9'/2% Series due December 1 2003 .

~ 50,000 50,000 2r/s% Series due October 1, 1980... 40,000 9.95% Series due September 1, 2004 100,000 100,000 12.6% Series due October 1, 1981 ... 125,000 125,000 10.2% Series due March 1 2005.....

~ 41,113 44,000 3s/s% Series due December 1, 1981 . 15,000 15,000 8.35% Series due August 1, 2007 .... 75,000 75,000 3~/z% Series due February 1, 1983 .. 25,000 25,000 8Fs% Series due December 1, 2007 . 50,000 50,000 3~/4% Series due October 1, 1983... 40,000 40,000 Paul Smith's Electric Light & Power &

3~/s% Series due August 1, 1984 .... 25I000 25,000 Railroad Company First Mortgage Bonds:

10%% Series due September 1, 1985 47,000 47,000 SV2% Series due May 1, 1985....... 450 450 3s/s% Series due May 1 1986.......

~ 30,000 30,000 Promissory Note, 8% Series A due 4r/s% Series due September 1, 1987 50,000 50,000 June 1, 2004. 46,600 46,600 3r/s% Series due June 1, 1988 ...... 50,000 50,000 Revolving Credit and Term Loan 4s/4% Series due April 1, 1990 ...... 50,000 50,000 Agreements ( Note 14) 80,000 4~/z% Series due November 1, 1991 . 40,000 40,000 Notes payable:

4Ys% Series due December 1, 1994 . 40,000 40,000 7s/4%dueNovember1,1980 ...... 6,000 5r/s% Series due November 1, 1996 . 45,000 45,000 Prime rate plus ~/a% (not to exceed

~,r 6~/4% Series due August 1. 1997 .... 40,000 40,000 7t/a%) due in equal quarterly install-6~/z% Series due August 1, 1998 .... 60,000 60,000 ments through April 1, 1984....... 81750 11,250 9t/s% Series due December 1, 1999 . 75,000 75,000 Unamortized premium ............. 5,844 6,256 12.95% Series due October 1, 2000 .. 66,350 Total long-term debt ............... 1,586,107 1,531,556 7s/s% Series due February 1, 2001 .. 65,000 65,000 Less long-term debt due within one year 142,500 88,500 7%% Series due February 1, 2002 .. 80,000 80,000 7s/4% Series due August 1, 2002.... 80,000 80,000 $ 1,443,607 $ 1,443,056 Preferred stock Cumulative preferred stock, authorized 3400000 shares, S 100 par value and 9600000 shares, $ 25 par value Cumulative preference stock, authorized 4,000,000 shares, $ 25 par value Redemption price per share (Before adding accumulated dividends)

In thousands of dollars Eventual At December 31, 1980 1979 December 31, 1980 minimum Non-redeemable (optionally redeemable)

Preferred $ 100 par value 3.40% Series; 200,000 shares ......... .... $ 20,000 $ 20,000 $ 103.50 $ 103.50 3.60% Series; 350,000 shares ......... 351000 35,000 104.85 104.85 3.90% Series; 240,000 shares ......... 24I000 24,000. 106.00 106.00 4.10% Series; 210,000 shares ......... 21,000 21,000 102.00 102.00 4.85% Series; 250,000 shares ......... 251000 25,000 102.00 102.00 5.25% Series; 200,000shares ......... 20,000 20,000 102.00 102.00 6.10% Series; 250,000 shares ......... 25,000 25,000 103.00 101.00 7.72% Series; 400,000 shares ......... 40)000 40,000 107.37 102.36

$ 210,000 $ 210,000 Redeemable (mandatorily redeemable Note 7)

Preferred $ 100 par value 7.45%Series;528,000and 546,000shares .... $ 52,800 $ 54,600 105.77 100.00 10.60% Series; 357,240 and 380,000 shares .... 351724 38,000 110.60 102.65 Preferred $ 2S par value 8.375% Series; 1,600,000 shares ............. 40,000 40,000 26.87 25.00 9.75% Series; 1 134,000 and 1,200,000 shares .

~

28,350 30,000 26.9275 25.00 9.75% Series (Second); 1,020,000 shares ..... 25,500 25.00 Preference $ 25 par value 7.75% Series; 1,220,000 and 1,360,000 shares . 30,500 34,000 25.00 212,874 196,600 Less sinking fund requirements ~... ~ . ~....... 6,950 6,950

$ 205,924 $ 189,650

• Not redeemable until April 1, 1983.

'*Not redeemable until October 1, 1981, 30

Summary of utility plant In thousands of dollars At December 3't ~ 1980  % 1979 Utilityplant:

Electric plant ............... $ 3,223,017 71 $ 2,859,533 Nuclear fuel (Note 3) ."........ 230,780 5 206,206 Gas plant 390,237 9 367,652 Common plant .............. 67,474 1 63,920 Construction work in progress 651,801 14 721,217 Total utility plant .. S4,563,309 100 $ 4,218,528 Selected financial data 1980 1979 1978 1977 1976 Operations: (000's)

Operating revenues $ 1,777,115 $ 1,516,503 $ 1,280,248 $ 1,225,832 $ 1,077,230 Income from continuing operations 162,639 156,030 141,162 123,832 108,449 Common stock data:

Book value per share at year-end $ 17.25 $ 17.33 $ 17.14 $ 16.95 $ 16.55 Earnings per average common share from continuing operations . 1.87 2.00 1.89 1.74 1.61 Dividends paid per common share 1.50 1.44 1.36'/a 1.31'/s 1.24 Capitalization: (000's)

Common equity . $ 1,298,001 $ 1,177,725 $ 1,065,976 $ 968,236 S 922,735 Non-redeemable preferred stock 210,000 210,000 210,000 240,000 240,000 Redeemable preferred stock . 205,924 189,650 198,600 126,400 128,200 Long-term debt . 1,443,607 1,443,056 1,414,997 ~

1,394;387 1,268;969 Total . 3,157,532 3,020,431 2,889,573 2,729,023 2,559,204 First mortgage bonds maturing within one year 140,000 80,000 Total . 31297,532 3,100,431 2,889,573 2,729,023 2,559,204 Capitalization ratios: (including first mortgage bonds maturing within one year):

Common stock equity . 39.4% 38.0% 36 9o/o '5.5% 36.0%

Preferred stock . 12.6 12.9 14.1 13.4 14.4 Long-term debt . 48.0 49.1 49.0 51.1 49.6 Financial ratios:

Ratio ot earnings to fixed charges . 2.43 2.61 2.58 2.49 2.35 Ratio ot earnings to fixed charges and preferred stock dividends 1.93 2.03 1.95 1.90 1.82 Other ratios-% of operating revenues:

Fuel and purchased power . 36.2 35.6 32.1 33.0 31.6 Purchased gas 15.6 13.0 12.4 11.6 11.6 Maintenance and depreciation 10.8 12.1 12.6 13.2 13.3 Taxes 13.0 13.3 14.3 14.0 13.9 Operating income . 11.9 12.8 14.4 14.7 15.4 Balance available for common stock ........... 7.5 8.5 8.8 8.0 7.9 Ratio of depreciation reserve to gross utility plant . 27.0 '.";26.3 26.2 25.6 25.3 Ratio of mortgage bonds to net utility plant ....... 43.4 47.0 46.7 48.6 47.4 Miscellaneous: (000's)

Gross additions to utility plant S 378,503 $ 374,530 S 316,280 S 289,931 S 282,702 Total utility plant 4,563,309 4,218,528 3,905,374 3,647,274 3,377,306 Accumulated depreciation and amortization .. 1,232,675 1,110,563 1,021,417 935,212 854,033 Total assets ..... 3,808,819 3,528,937 3,189,112 3,019,054 2,816,300 31

flectric and gas statistics Electric capabillty 1980 1979 1978 Thousands of kilowatts At January I, 1981  % 1980 1979 Electric sales(Millions ofkwhrs)

Thermal Residential........ 8,330 8,269 8,127 Coal fuel Commercial ....... 9,361 9,279 9,117 Huntley, Niagara River ..

Dunkirk. Lake Erie .....

785 600 8'85 10 585 785 585 Industrial .........

Municipal service ..

11,703 273 12,471 274 12,187 276 Total coal fuel 1,385 18 1,370 1,370 Other electric systems ......... 2,921 3,022 2,675 Residual oil fuel 32,588 33,315 32,382 Albany, Hudson River.... 400 5 400 400 Oswego, Lake Ontario ... 1,821 24 1,200 1,190 EleCtrlC reVenueS (ThOuSandS OfdO!Ia)S)

Roseton, Hudson River .. 357 5 360 360 Residential ........ S 404,899 S 357,818 S 319,667 Middle distillate oil fuel Commercial ....... 463,315 393,173 333,862 20 Combustion turbine Industrial ......... 344,063 312,833 258,649 and diesel units......... 310 4 354 354 Municipal service .. 27,147 23,832 21,515 Total oil luel 2,888 38 2,314 2,304 Other electric Nuclear luel systems ......... 106,429 83,188 59,445 Nine Mile Point, Lake Ontario .... 610 8 610 610 Miscellaneous..... 47,614 40,224 27,175 Purchased $ 1)393)467 $ 1 211)068 $ 1 020)313 firm contract Power Authority FitzPatrick, Lake Ontario ...... 141 2 154 176 Electric customers(Average)

Total nuclear fuel 751 10 764 786 Residential........ 1,217,214 1,206,469 1,197,060 Commercial ....... 131,210 130,119 128,481 Total thermal sources .. 5,024 66 4,448 4,460 Industrial ......... 2,896 2,906 2,873 Hydro Other............. 3,222 3,189 2,257 Owned and leased hydro stations (81) . 733 10 733 733 1,354,542 1,342,683 1,330,671 Purchased firm contracts Power Authority Niagara River.... 1,122 15 1,122 1,122 Residential (Average)

Power Authority- Annual kw-hr. use St. Lawrence River .............. 115 1 115 115 per customer ...... 6,843 6,854 6,790 Power Authority Cost to customer Blenheim-Gilboa per kw-hr.......... 4.86I) 4.33fl 3.93ft Pumped Storage Plant .......... 550 7 550 550 Annual revenue Other . 75 1 76 76 per customer ...... $ 332.64 $ 296.58 $ 267.04 Total hydro sources ... 2,595 34 2,596 2,596 1980 1 979 1978 Total capability'. 7,619 100 7,044 7,056 Gas sales (Thousands of dekafherms)

Residential.... ... 51,121 51,895 54;793' 1980 1979 1978 Commercial ....... 23,833 23,415 23,734 Electric peak load during year .. 5,403 5,641 5,485 Industrial ......, .. 21,647 17,109 15,630 Other gas systems . 4,720 4,199 3,845 Available capability can be increased during heavy load periods by purchases 101)321 96,618 98,002 from neighboring interconnected systems. Hydro station capability is based on average December stream-flow conditions. Gas revenues (Thousands of dollars)

Residential........ $ 209,416 $ 176,567 $ 158,599 Commercial ......., 89,088 71,139 60,794 Electricity generated and purchased (Millions ofkw-hrs.) Industrial ......... 69,506 46,260 32,422 1980  % 1979  % 1978 Other gas systems . 13,455 10,014 6,858 Thermal Miscellaneous..... 2,183 1,455 1,262 Generated S383,648 $ 305,435 $ 259,935 Coal ............ 7,213 20 7,275 20 7,016 20 Gas customers (Average)

Oil .............. 7,392 21 8,534 24 8,691 25 Residential ........ 388,720 383,617 382.691 Nuclear ......... 4,538 13 3,005 8 4,467 13 Commercial....... 29,682 29,009 28)451 Purchased Nuclear from Industrial ......... 530 525 522 Power Authority . 934 2 722 2 886 2 Other ............. 2 2 2 418,934 413,153 411,666 Total thermal ....... 20,077 56 19,536 54 21,060 60 Hydro Residential (Average)

Generated ......... 3)175 9 3,641 10 3,472 10 Annual use per customer Purchased from (dekatherms) ............. 143.2 Power Authority . 8,925 25 8.263 23 8,563 24 Cost to customer Total hydro ......... 12,100 34 11,904 33 12,035 34 (per dekafherm) ........... $ 4.10 $ 3.40 $ 2.89 Other purchased power Annual revenue various sources . ..... 3,616 10 4,621 13 2,118 6 per customer ........... $ 538.73 $ 460.27 $ 414.43 Total generated Maximum day gas and purchased .. ..... 35,793 100 36,061 100 35.213 100 sendout (dekafherms) ..... 740,594 750,666 655,408 32

Officers ~

John G. Haehl, Jr.

Chairman of the Board and Chief Executive Officer William J. Donlon President James Bartlett Executive Vice President Richard C. Clancy Senior Vice President John M. Endrfes Senior Vice President John M. Haynes Senior Vice President James J. Miller Senior Vice President John H. Terry Directors Senior Vice President, General Counsel and Secretary James Bartlett Richard F. Torrey Executive Vice Presfdent, Syracuse Senior Vice President Donald P. Disc Thomas J. Brosnan Consultant (formerly Vice President-Research and Development, Vice President Engineering Environmental Matters), Syracuse John J. Ehllnger Vice President-Employee Relations Edmund M. Davis William C. Franklin Partner, Hiscock, Lee, Rogers, Henley & Barclay, attorneys-at-law, Syracuse Vice President-Purchasing William J. Donlon John P.Hennessey President, Syracuse Vice President Management Systems and Services Edward W. Duffy Thomas E Lempges Chairman of the Board and Chief Executive Officer, Marine Midland Vice President-Nuclear Generation Banks, Inc., a bank holding company, Buffalo Donald I MacVittle John G. Haehl, Jr.

Vice President Fossil Generation Chairman of the Board and Chief Executive Officer, Syracuse Eugene J. Morel Edwin F. Jaeckie Vice President Administrative Services and Risk Management Senior Partner, Jaeckle, Fleischmann & Mugel attorneys-at-law, Buffalo

~ James F. Morrell Vice President-Corporate Planning Lauman Martin Consultant (formerly Senior Vice President and General Counsel) Gerald K. Rhode Syracuse

~

Vice President System Project Management

. Kenneth A. Tramutola Baldwin Maul(

Director of various corporations, New York Vice President Rates Robert M. Cleary, Jr.

Martha Hancock Northrup Housewife, former President, Grouse-Irving Memorial Hospital Board, Syracuse Vice President and General Manager Western Division Raymond Frank P. Plskor Kola'ice President and General Manager Central Division President, St. Lawrence University, Canton Rfchard H. Kukuk Donald B. Rlefler Vice President and General Manager Eastern Division Chairman, Sources and Uses of Funds Committee, Morgan Guaranty Anthony J. Baratta, Jr.

Trust Company of New York, commercial bank, New York Controller Lewis A. Swyer John W. Powers President, L.A. Swyer Company, Inc., builders and construction Treasurer managers, Albany, Edward P. Gueth, Jr.

John G. Wick Assistant General Counsel President and Chief Executive Officer, Merchants Insurance Group. Buffalo Herman B. Noll Assistant General Counsel Nicholas L Prlolettl, Jr.

BOARD COMMITTEES Assistant Controller Executive Committee Audit Committee Adam F. Shaffer John G. Haehl, Jr. Chairman

~ Edward W. Duffy, Chairman Assistant Controller Edmund M. Davis Lewis A. Swyer Henry B. Wightman, Jr.

Edwin F. Jaeckle Frank P. Piskor Assistant Controller Frank P. Piskor Harold J. Bogan Baldwin Maull Committee on Corporate Public Policy Frank P. Piskor, Chairman Assistant Secretary John H. Terry, Secretary Martha H. Northru'p Joseph F. Cleary Compensation Committee Lewis A. Swyer Assistant Secretary Baldwin Maull, Chairman Frederick C. McCall, Jr.

Edwin F. Jaeckle Finance Committee Donald B. Rlefler, Chairman Assistant Secretary Edmund M. Davis John G. Wick Richard N. Wescott Edmund M. Davis Assistant Treasurer

V NIAGARA ~ r U MOHAWK 300 ERIE BOULEVARD WEST SYRACUSE. NEW YORK 13202 C

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With. downtown Syracuse in foreground and central New York hill country as distant backdrop, new Carrier Dome appears in pale glow as evening arrives in city; Multipurpose Syracuse University sports arena has air-supported roof. Dome's electric needs are met by two Niagara Mohawk 13,200-volt feeders.