ML18038A257
ML18038A257 | |
Person / Time | |
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Site: | Nine Mile Point ![]() |
Issue date: | 12/31/1986 |
From: | William Allen, Carrigg J NEW YORK STATE ELECTRIC & GAS CORP. |
To: | |
Shared Package | |
ML17054C162 | List: |
References | |
NUDOCS 8706100052 | |
Download: ML18038A257 (70) | |
Text
NEW YORK STATE ELECTRIC 8 GAS CORPORATION 'f 986 ANNUALREPORT P
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Contents Highlights of the Year Letter to Stockholders Condensed Statement of Income General Review of the Year 5 Earnings and Dividends 6 Nine Mile Point II 6 Rates 8 Construction Expenditures 8 Power Supply 8 Financing 10 Research and Development 10 Dividend Reinvestment Plan 10 Energy Marketing 12 Customer Assistance 12 Electric Operations 14 Gas Operations 14 Board of Directors 14
..Balance Sheet 16 Statement of Income 17 Statement of Retained Earnings 17 Statement of Changes in Financial Position 18 PLA TSBURGH ~ ~
Notes to Financial Statements 19 Management's Discussion and Analysis of 31 Financial Condition and Results of Operations Financial and Operating Statistics 35 Directors and Officers 40 LAKE ONTARIO ESTER LOCKPORT 0R SYRACUSE 0 MECHANICVILL BUFFALO LANCASTER G N VA ~ AU RN ITHACA~
ONEONTA 0 HORNELL ELMIRA ~ ~ BINGHAMTON PENA5YLVAMA LIBERT TER Service Area BRE NYSEG's service territory is mainly composed of suburban and rural areas outside large cities. Over 40% ~ ELECTRIC of revenue is derived from residential customers.
The economy is supported by a diverse mix of light industry, agriculture, recreational facilities and
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C3 GAS ELECTRIC & GAS
~ DISTRICT OFFICES institutions of higher learning. College and industry research facilities provide a good base for growth of
'igh-technology firms.
Highlights 1986 1985 Increase Percent Gross operating revenues (thousands) $ 1,277,284 $ 1,241,780 $ 35,504 3 Income before interest charges (thousands) $ 394,822 $ 374,092 $ 20,730 6 Earnings available for common stock (thousands) $ 208,390 $ 183,207 $ 25,183 14 Earnings per share of common stock $ 3.86 $ 3.46 $ .40 12 Return on average common stock equity-percent 15.3 14.3 1.0 7 Dividends paid per share of common stock $ 2.60 $ 2.50 $ .10 4 Taxes per share of common stock ......... $ 4.46 $ 3.92 $ .54 14 Electricity sales to ultimate customers (million kwh) . 11,807 11,405 402 4 Electricity sales to other utilities (million kwh) 3,545 5,021 (1,476) (29)
Gas delivered (thousand dekatherms) 33,268 34,307 (1,039) (3)
Cost of fuel for electric generation (thousands) . $ 238,371 $ 280,397 $ (42,026) (15)
Total utility plant investment (thousands) ..... $ 4,373,045 $ 4,055,389 $ 317,656 8 Expenditures for construction (thousands) $ 230,892 $ 256,149 $ (25,257) (10)
Book value per share of common stock (average) . $ 25.24 $ 24.17 $ 1.07 4 Market value per share of common stock (year end) $ 31.38 $ 28.63 $ 2.75 10 This report is dedicated to the employees of New York State Electric & Gas Corporation whose hard work and conscientious efforts make possibfe our corporate theme, "Good Peopfe. Good Service.
, To the Stockholders:
rom an earnings standpoint, 1986 was a good year. Earnings of $ 3.86 a share were up 12/0 from last year, setting a record for the Company. Earnings quality also improved as the proportion of non-cash earnings declined from 670/o to 54%. Higher earnings allowed an increase in the dividend rate for the ninth consecutive year.
Our 18/o participation in the Nine Mile Point II nuclear project continues to be of concern. As indicated elsewhere in this report, the plant's completion was delayed earlier this year because additional testing was required for key safety valves. We believe this delay will result in commercial operation in the fourth quarter of 1987.
As with most nuclear plants built in this country since the 1979 incident at Three Mile Island, Nine Mile II has experienced cost increases far beyond those originally contemplated.
As a result, rate-setting commissions in many states have taken the position that a portion of plant costs was "imprudently" incurred. In our case, the New York State Public Service Commission has set a $ 4.16 billion limit on the costs that can be reflected in electric rates of the five utilities owning the $ 6 billion project. This means that roughly $ 2 billion, before tax offsets, will have to be absorbed by utility stockholders. The utilities agreed to the disallowance to avoid a prudence proceeding which would be long, costly and prolong uncertainty over the project. In addition, it would occupy the services of technical personnel needed to complete the plant.
The Company expects to record its share of the disallowed costs with a charge to expense later this year. We presently estimate this'charge to be $ 326 million, or $ 234 million after income tax effect. This equates to about $ 4.25 a share and would increase if the plant is further delayed. Because the write-off reduces common stock equity, it will have a continuing effect of reducing earnings by about 55 cents a share, based on a 130%%d return on equity. This will mean an end to our hard-earned nine-year record of dividend increases.
However, we believe that sales growth and reasonable regulatory treatment will enable us to resume modest dividend increases in a few years.
With Nine Mile's adverse effect on the Company, we have intensified our program to reduce costs. Among other things, we improved the operating efficiency of our power plants, effected capital-cost reductions that added ten cents a share to earnings in 1986 and cut the cost of coal used in generating electricity. At the end of 1986 we had fewer employees than in 1982,.despite the need to add more than 200 workers for Somerset Generating Station, which began operation in 1984, and hire employees to conduct state-mandated energy conservation and environmental activities. In 1987, we anticipate further cost savings, including a reduction in coal cost of nearly $ 10 million.
In addition to cutting costs, we have established an aggressive plan to selectively increase electric and gas sales, which helps keep rate increases to a minimum. There is particularly
good potential for profit in selling electricity during off-peak hours. With the decline in prices of purchased natural gas and increased gas availability, we have undertaken an ambitious program to add new communities to our gas franchise areas.
Despite our efforts to reduce costs and raise sales, we still must seek modest rate increases, primarily to recover the allowed costs of Nine Mile II. We have applied to the PSC for higher electric rates to be made effective over a three-year period beginning January 1, 1988.
We estimate the increases will be about 3 to 4% a year.
Our electric and gas rates for industrial customers will continue to be among the lowest in New York. This fact, together with the service area's proximity to urban markets and availability of skilled labor, augurs well for industrial expansion. To assist communities in attracting new industry, we are planning the establishment of a subsidiary to acquire, develop and sell plant sites to industry. Application has been made for PSC approval of the subsidiary.
In December 1986, the Company and Corning Natural Gas Corporation announced a study of the feasibility of NYSEG acquiring Corning, which serves 12,000 gas customers in the Corning, N.Y. area. The studies are continuing.
As the cover indicates, this report is dedicated to the 4,423 employees whose work contributes importantly to the success of the Company. We are proud of them and wish to publicly express our sincere appreciation for their loyalty,. diligence and hard work. They are, indeed, good people, providing good service!
For the Board of Directors, Chairman and Chief Executive Officer President and Chief Operating Officer March 2, 1987 James A. Corrigg (leftJ Wells P. Allen, Jr.
Consolidated Condensed Statement of Income 1986 1985 Increase (Thousands ofDollars)
REVENUES Sales of electricity $ 1,098,089 $ 1,051,579 $ 46,510 Sales of gas 179,195 190,201 (11,006)
Total 1,277,284 1,241,780 35,504 EXPENSES Wages and salaries of employees and contributions to retirement and insurance plans (exclusive of
$ 55,936,000 in 1986 and $ 57,075,000 in 1985 charged to construction, etc.) 126,307 118,711 7,596 Fuel used to produce electricity 238,371 280,397 (42,026)
Electricity purchased . 29,302 35,984 (6,682)
Gas purchased 111,147 129,809 (18,662)
Other materials, services and research . 114,742 94,138 20,604 Federal taxes 126,315 101,408 24,907 State and local taxes 114,424 106,286 8,138 Depreciation 100,796 98,085 2,711 Total 961,404 964,818 (3,414)
Income available to investors 315,880 276,962 38,918 AFDC AND OTHER NON-CASH RETURN .. 111,872 122,719 (10,847)
INVESTORS'HARE Interest on bonds . 146,021 138,665 7,356 Interest on notes payable and other 53,237 52,583 654 Dividends on preferred stock 20,104 25,226 (5,122)
Dividends on common stock 140,432 132,018 8,414 Total 359,794 348,492 11,302 RETAINED IN THE BUSINESS $ 67,958 $ 51,189 $ 16,769 AFDC is allowance for funds used during construction Electric Peak Loads (Winter)
Megawatts 2IN 2 le 2u8 78 79 Sl 81 52 83 Sl 8$ 86 81
Empfoyees work in snow and all kinds of weather to restore service after storms.
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'I A substation near Liberty is being expanded to permit greater transmission of electricity to downstate New York.
Sections of pipe are joined to supply natural gas to homes near Elmira. Last year the Company gained 1,600 new gas customers a record for recent years. j',
7
IVANJENSEN, control room operator at Greenidge Station, seeks maximum modernizing efficiency from the piant's generators.
NYSEG is and extending the useful life of Greenidge and other power plants that are 30 to 40 years old Construction Rates Power Supply Expenditures Total $ 333 Million Recovery of Nine Mile Costs Plant Efficiency Rises Proposed Construction expenditures in 1986 A key measure of efficiency of steam-were $ 333 million, including $ 102 The Company is proposing to the electric production systems is the million of AFDC and similar non- PSC that allowed Nine Mile II amount of heat used to produce cash charges. The largest single costs be phased into electric rates a kilowatt-hour (kwh), known as outlay was $ 181 million for the over a three-year period beginning "heat rate". NYSEG's heat rate in Company's share of the Nine Mile II on January 1, 1988. The increases 1986 was a low 9,959 Btu/kwh and nuclear project. would raise electric rates about a record for the Company. The 3 to 4% a year and annual revenues Company's average power plant heat About $ 35 million was spent as about $ 30 to $ 45 million annu- rate is among the lowest of major part of a program for extending electric utilities in the nation.
ally. The first segment, an application useful lives and improving operating for which was filed with the Com-efficiency of existing coal-fired The Company's present power mission on February 23, 1987, generating facilities. Another $ 35 supply capability of 3,004,000 would raise annual revenues $ 42 million was for upgrading substation kilowatts is largely composed of coal-and transmission lines. The re-million or 4%, based on a 13% fired generating facilities and return on equity.
maining $ 82 million was spent on long-term purchases. Most of the additions and improvements to The Company's previous increase purchased power is low-cost electric and gas distribution sys- in electric rates was in April hydroelectricity from the New York tems, including facilities to serve 1986 when a $ 65 million, or 7%, Power Authority's Niagara River new customers. This amount in- rise was approved. This increase project. There have been proposals cludes $ 57 million for minor primarily reflected the final segment to redistribute this power more projects, each $ 50,000 or less. of a three-year phase-in of capital broadly across the state but, at costs related to Somerset Generating present, the Governor and several In the three years 1987-1989, Station, which began operation legislative leaders oppose the action.
construction expenditures are pro-in 1984.
jected to total $ 648 million, of The Company's peak load of which $ 104 million is for completion 2,290,000 kilowatts occurred in of Nine Mile II. About $ 140 million Construction Program December 1985 and was not ex-is allocated for improvement of ceeded in the 1986-87 winter, Millions of Dollars existing generating facilities. The largely because of weather conditions.
remainder is for general system reinforcement.
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Underground electric services are installed to serve a large housing development north of Albany. State regu.
lations require new. home builders to contribute to costs of underground facilities.
The Company encourages off-peak use of electricity. An electric heating "mat" is checked here before the concrete foundation is poured for a new office building.
Heat stored by the mat during off-peak hours can be re-leased during the day when the office is in use.
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BRENDA PATTON, consumer repre-sentative at Monticello, counsels aersfKW+
customers having difficultypaying utility bills. NYSEG's twelve consumer representatives are specially trained and familiar with assistance programs.
Finance Research in making concrete. Sales of flyash Refundings Reduce Capital Costs Expenditures Total not only add to income, but re-
$ 12 Million duce costs by eliminating the need Capital requirements in 1986 were to dispose of ash in environmentally-
$ 394 million, which includes Research and development ex- certified landfills.
$ 231 million of cash construction penditures in 1986 amounted to $ 12 expenditures, $ 140 million for million with about half going Diuidend Reinljesfmenf refinancing of high-rate securities to projects of national and state Plan Allows Sale of Shares and $ 23 million for sinking funds research organizations. The re-and reduction of unsecured debt. mainder was spent on the Company's The Dividend Reinvestment and These needs were met with $ 277 own research efforts. Stock Purchase Plan was amended million in sales of securities and A major national research group, effective January 1, 1987 to permit internally-generated funds. participants to sell full shares the Electric Power Research credited to their plan accounts.
Refundings included $ 110 million Institute (EPRI), is the research This allows a holder with a small principal amount of high-rate first arm of the electric utility industry. number of plan shares to sell them mortgage bonds and $ 30 million Among its various projects, EPRI through the plan on the open principal amount of 15'/s% preferred is building a $ 20 million High market. Banks and brokers are often stock. In addition, $ 50 million of Sulfur Test Center at Somerset unwilling to handle small trans-15.83% notes due 1989 were replaced Generating Station, which will house actions. A fee is charged under the with adjustable-rate notes having a staff of 35 to 40 persons. The plan, but it is lower than a normal an interest rate of 6.4%. These center, scheduled for operation in brokerage commission.
refinancings reduced capital costs 1987, will seek better and less and, as a result, contributed about expensive ways to control sulfur About a third of the Company's ten cents a share to 1986 earnings. dioxide emissions from the nation's stockholders reinvest their dividends.
coal-burning power plants. NYSEG In 1986, over 900,000 shares were On January 1, 1987, a $ 30 million issue of 15% preferred stock was will be contributing about $ 5 purchased on the open market million in cash and services to the with dividends and optional cash redeemed through sinking fund and project over a five-year period. payments. Cash purchases are early-redemption provisions. This limited to $ 5,000 per quarter.
refunding will save the Company Successful research can pay about $ 2 million a year. dividends by holding down costs and Any stockholder of record is improving environmental protec- eligible to join the plan. Ifyou would tion. A new computer-assisted like further information, call the training program developed jointly toll-free number listed in the back with General Physics Corporation of this report.
saved an estimated $ 150,000 at one Electricity Sources 1986 generating station through im- NYSEG devotes considerable Kilowatt-hours effort to promoting industrial proved plant efficiency and is being expansion. Bottom lelt:
applied to others. The program Service area advantages for was also sold by General Physics to business are publicized across the nation and over-Coot 7lSS other utilities, yielding the Company seas. New, expanding or
$ 41,000 in royalties. merging companies include (clockwise from middle left):
I tSdrO 2SS Nuckar 2ss Another research project showed Finger Lakes Press, Auburn; that flyash, a by-product of burning Toshiba-Westinghouse trrdro ASS coal at power plants, was useful Electronics near Elmira; Taylor-Pohlman near Buffalo;
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Purchased 24tlt Huntington Analytical Services, east of Lockport, and IBM, north of New York City.
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BURTON TESSITORE, chief lineman at Binghamton, works to maintain the distribution system and the flow of electricity to customers. NYSEG's record for reliable electric service is among the best in the state.
Lnergy Marketing The Company has also initiated conservation tips and other useful New Program Established an incentive program to encourage information is sent regularly to employees, retirees, appliance dealers 35,000 elderly customers.
The Company recently adopted a and contractors to participate in strategic marketing plan to selec- these marketing efforts.
Project SHARE, a joint program tively boost electric and gas sales. with the American Red Cross, pro-It combines special rates for in- During the year, more than 17,000 vides grants to needy elderly or dis-home energy surveys were com- abled people to help them deal dustrial and commercial customers pleted. At customer request, the with energy emergencies. In four with rebates for residential customers who install appliances that use Company will conduct a free analysis years of operation the program of a home to determine where has distributed $ 772,300 to 3,704 energy efficiently or in off-peak hours. energy can be conserved. Financing needy families. In 1986, grants is also available for energy-related totaling $ 178,300 were issued to Appliance rebates are being offered improvements. 853 people.
to residential electric customers NYSEG industrial electric and Customers contribute to SHARE in various locations who buy energy-gas rates are among the lowest in by adding $ 1, $ 2, or $ 5 to their efficient air conditioners, water the state. The Company has intro- NYSEG payments. Stockholders may heaters or thermal storage space heating units for their homes.
duced special incentive rates to contribute by sending checks, The water heater and thermal storage attract new businesses to its service payable to Project SHARE-Red area or encourage existing ones Cross, to American Red Cross, 786 units are also being promoted to encourage off-peak usage. Other re-to expand. About 250 customers are Delaware Avenue, Buffalo, N.Y.
bates encourage residential cus-currently benefiting from these rates. 14209. Donations are tax-deductible.
tomers to switch to gas for space Customer Assistance A new customer-tested electric and water heating. and gas bill was introduced in Counseling, Energy Education December 1986. Among other things, Emphasized it presents the bill calculation NYSEG has an extensive program and shows a graph of the customer' Coal Used for Generation for counseling needy customers and energy use in the prior fourteen Cost per blillion Btu informing the public about energy months. Customer reaction so far Sero and energy conservation matters. has been favorable.
55/7 Size Slier Slhl SISS Consumer representatives in dis-5l& trict offices use their backgrounds in Sl85 social services and knowledge of human service agencies to help Sl.07 customers having financial diffi-culties. Energy conservation work-shops are sponsored for the general public and safety and energy educa-tion programs are presented to The Company. reaches out to thousands of school children each help customers. A new mobile office (top and middle year. In 1986, twenty-six service right) travels to rural locations area school teachers received modest outside Binghamton to bring grants to develop innovative energy services closer to customers.
Home energy surveys and education projects. An award- conservation are promoted at winning newsletter with energy state fairs and exhibits.
Workshops (bottom right) 77 78 79 80 81 87 83 85 85 88 deliver energy conservation tips to various public groups.
12
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CHRIS HEBDON, a forester in Geneva, pro! acts the environment and helps I v v maintain service along transmission and distribution lines. NYSEG's 36,000-mile transmission and distribution system requires continuous monitoring to assure reliable service.
Llectric Operations Operating expenses, excluding Board of Directors Retail Sales Increase 4% fuel, depreciation and taxes, in- Ttvo New Directors Elected creased about 5%. Fuel expense was Sales of electricity to retail cus- down 15% on a 10/o decrease in In January 1987, the Board of tomers rose nearly 4% from 1985. kilowatt-hours generated. On a Directors elected two new members, Corresponding revenues were up per-unit basis, fuel cost was $ 1.67 Ben E. Lynch, 49, and William 15%, largely reflecting higher per million Btu, a 1% reduction D. Turner, 54. The action brings the rates made effective in A'pril 1986. from 1985. Board to 13 members and con-Sales to other utilities declined templates the retirement, later in More than 11,000 residential 29%, primarily as a result of lower 1987, of two directors under the customers were added in 1986, a fuel costs at their oil-fired generating Company's mandatory retirement 2% increase, and the largest yearly facilities. Total sales were down provisions.
rise since 1973.
7%, while revenues were 4% higher.
Mr. Lynch is president of Win-Percent changes by major customer Gas Operations chester Optical Company, Elmira, category were as follows:
Total Sales Down 3% N.Y. He is active in local civic affairs and has a bachelor's degree in Kwh Sales Revenues Sales of gas to residential customers Residential 4 14 engineering from Cornell Univer-increased 4%, while revenues were sity and a master's degree in nuclear Commercial 17 3% higher. Sales to non-residential physics from California Institute Industrial 3 17 Total Retail 15 customers, including transpor- of Technology.
Other Utilities -29 -44 tation of customer-owned gas, were
-7 off 7%. Total sales were down 3% Mr. Turner, as group vice president Total and revenues were 6% lower. of The Singer Company, is respon-sible for its Training Systems Operating expenses, excluding . Group. He joined Singer's Link The Revenue Dollar-1986 purchased gas, depreciation and Simulation System Division in Bing-869tr Electricity taxes, increased 5%. The average hamton in 1958 and served in a
~l4 Gas I oo98 cost of gas purchased was $ 3.75 number of management positions.
tVhere it came from:
.a dekatherm, or 3o/o lower than the He has a bachelor's degree in Inthutrht 18c previous year. This is the third economics from Colgate University.
Conuemht 22c consecutive year that the unit cost of purchased gas has declined. Dr. Roy S. Arrandale, former Other Electri Utituies 8c senior vice president-research for The average number of gas Thatcher Glass Manufacturing Street Lighting a Other 1 1 c customers served was 132,500, a 1% Company,'lmira, retired from the Rcsidcntht CSC increase over 1985. The Company Board after 18 years of distinguished is seeking to expand its gas franchise service.
tvhere it vent: area to include several towns in Fuel lre interest to Bond ItoMers.
southeastern New York and in parts ctc. 1st OivMends-Common of counties located northwest of Stock tee Elmira. If all the franchises were Deprcchtion yc granted and received requisite PSC pividends-Preferred Stock ge approvals, it could, over a period Otherptaterhts and Scrviecs 8c of years, increase the number of Wages to Employees.
irgtuding Benefus 9c customers served by 15%.
Cas tt Electricity Purchased tpe Tares 18c tectatncd in thc gustnmr Sc 14
The Company promotes safety and energy awareness in schools. Topr A NYSEG representative uses sign language to teach electric safety to hearing. impaired youngsters. Be/owr The Company issued 26 mini-grants last year to teachers to support innovative energy projects in the classroom.
New York State Electric & Gas Corporation and Subsidiaries Consolidated Balance Sheet December 31 1986 1985 ASSETS (Thousands ofDollars)
UTILITYPLANT, at original cost (Note 1)
Electric . $ 3,004,799 $ 2,913,589 Gas 160,762 153,263 Common . 74,658 69,662 3,240,219 3,136,514 Less accumulated depreciation . 769,336 687,472 Net utility plant in service . 2,470,883 2,449,042 Construction work in progress (Notes 8 and 10) 1,132,826 918,875 3,603,709 3,367,917 OTHER PROPERTY AND INVESTMENTS 68,903 71,068 CURRENT ASSETS Cash 10,267 7,601 Special deposits 4,823 13,599 Accounts receivable 126,081 116,537 Fuel, at average cost 49,283 58,095 Materials and supplies, at average cost 44,272 38,688 Prepayments 27,546 20,454 262,272 254,974 DEFERRED CHARGES (Notes I, 9 and 10)
Abandoned project costs 108,926 117,608 Somerset Station phase in costs . 74,348 70,675 Unamortized debt expense 64,762 60,526 Accumulated deferred federal income tax 19,011 15,201 Other 23,053 18,650 290,100 282,660
$ 4,224,984 $ 3,976,619 CAPITALIZATIONAND LIABILITIES CAPITALIZATION(Notes 3-6)
Capital stock and retained earnings Preferred stock redeemable solely at the option of the Company . $ 160,500 $ 160,500 Preferred stock subject to mandatory redemption requirements . 22,820 87,470 Common stock equity Common stock 360,408 360,047 Capital in excess of par value 503,364 501,523 Retained earnings . 534,190 469,661 Total common stock equity 1,397,962 1,331,231 Long-term debt 1,928,40? 1,748,606 Total 3,509,689 3,327,807 CURRENT LIABILITIES Current portion of long-term debt and preferred stock 65,332 59,513 Commercial paper (Note 6) 110,600 118,300 Accounts payable 64,898 77,160 Dividends payable on preferred stock . 4,516 =
6,090 Pensions accrued 14,044 12,611 Taxes accrued 14,619 5,045 Interest accrued . 54,973 52,044 Other 28,555 31,324 357,537 362,087 DEFERRED CREDITS Accumulated deferred investment tax credit (Note 2) 106,436 75,438 Other 19,307 21,620 125,743 97,058 ACCUMULATEDDEFERRED FEDERAL INCOME TAX (Note 2) 232,015 189,667 COMMITMENTS AND CONTINGENCIES (Notes 7-10) .
$ 4,224,984 $ 3,976,619 The accompanying notes shown on pages 19 through 29 are an integral part of the financial statements.
16
New York State Electric & Gas Corporation and Subsidiaries Consolidated Statement of Income Years Ended December 31 1986 1985 1984 (Thousands ofDollars)
OPERATING REVENUES Electric . $ 1,098,089 $ 1,051,579 $ 921,248 Gas 179,195 190,201 207,818 Total 1,277,284 1,241,780 1,129,066 OPERATING EXPENSES fuel other(Note I)
Operation 238,371 280,397 227,998 182,710 167,923 141,056 Electricity purchased . 29,302 35,984 69,206 Gas purchased 111,147 129,809 146,040 Maintenance 88,486 81,591 68,606 Depreciation 100,796 98,085 65,198 Federal income tax (Note 2) 122,987 96,651 78,144 Other taxes (Note 12) . 122,400 113,587 102,152 Total 996,199 1,004,027 898,400 OPERATING INCOME 281,085 237,753 '30,666 OTHER INCOME AND DEDUCTIONS Allowance for other funds used during construction (Note 1) 63,168 50,263 68,145 Non-cash return utility plant in service (Note 1) ............. 9,868 40,185 22,002 abandoned projects (Notes I, 9 and 10) ....... 5,906 6,682 9,283 Abandoned project costs (Note 9) . 570 (11,026)
Federal income tax credit (Note 2) . 4,648 2,544 3,435 Income tax benefits from AFDC and non-cash return ........... 30,108 32,256 29,814 Other net 39 3,839 8,307 INCOME BEFORE INTEREST CHARGES 394,822 374,092 360,626 INTEREST CHARGES Interest on long-term debt 187,238 178,985 164,435 Other interest . 12,020 12,263 11,650 Allowance for borrowed funds used during construction (Note 1) . (32,930) (25,589) (26,835)
Interest charges net . 166,328 165,659 149,250 NET INCOME 228,494 208,433 211,376 PREFERRED STOCK DIVIDENDS 20,104 25,226 27,370 EARNINGS AVAILABLEFOR COMMON STOCK 208,390 $ 183,207 $ 184,006 EARNINGS PER SHARE $ 3.86 $ 3.46 $ 3.68 AVERAGE NUMBER OF SHARES OUTSTANDING 54,013,868 53,013,086 49,955,493 Consolidated Statement of Retained Earnings Years Ended December 31 1986 1985 1984 (Thousands ofDollar s)
Balance, beginning of year $ 469,661 $ 418,472 $ 352,524 Add net income 228,494 208,433 211,376 698,155 626,905 563,900 Deduct cash dividends Preferred stock (at serial rates)
Redeemable solely at the option of the Company .. 11,338 12,559 13,172 Subject to mandatory redemption requirements .. 8,766 12,667 14,198 Common stock ($ 2.60, $ 2.50, and $ 2.38 per share in 1986, 1985, and 1984, respectively) 140,432 132,018 118,058 160,536 15?,244 145,428 Deduct premium paid on preferred stock redemption (Note 5) 3,429 Balance, end of year . $ 534,190 $ 469,661 $ 418,472 The accompanying notes shown on pages 19 through 29 are an integral part of the financial statements.
New York State Electric & Gas Corporation and Subsidiaries Consolidated Statement of Changes in Financial Position Years Ended December 31 SOURCE OF FUNDS 1986 1985 1984 OPERATIONS (Thousands of Net income $ 228,494 -$ 208,433 $ 211,376 AFDC and other non-cash return . (111,872) (122,719) (126,265)
Depreciation . 100,796 98,085 65,198 Amortization of deferred charges . 25,188 23,773 13,659 Fuel and purchased gas costs deferred 1,332 2,820 6,015 Interchange profits deferred-net . (7,412) (10,121)Dollars'INANCING 15,181 Abandoned project costs . (570) 11,026 Federal income tax deferred net 38,538 59,820 23,897 Investment tax credit deferred net 30,998 1,727 22,688 Funds from operations 306,062 261,248 242,775 ARRANGEMENTS First mortgage bonds 175,000 200,000 Common stock 1,815 45,494 65,086 Long-term notes payable (6,200) 228,350 174,850 Commercial paper . (7,700) 58,200 (37,650)
Obligations under capital leases . 2 273 9,169 10,560 Funds from financing arrangements 265,188 516,213 412,846 Total funds available $ 571,250 $ 777,461 $ 655,621 APPLICATIONOF FUNDS Construction expenditures . $ 230,892 $ 256,149 $ 349,718 Capitalization of equipment leases . 2 273 9,169 10,560 Bonds and preferred stock reacquired 97,325 214,769 5,056 Securities to be redeemed or due within one year 64,204 58,010 142,283 Dividends on preferred stock 20,104 25,226 27,370 Dividends on common stock 140,432 132,018 118,058 Increase (decrease) in working capital* . 4,148 64,211 (4,499)
Other (net) . 11,872 17,909 7,075 Total funds applied $ 571,250 $ 777,461 $ 655,621 INCREASE (DECREASE) IN iUORKING CAPITAL CURRENT ASSETS Cash .
Special deposits capital'75,000 Accounts receivable .
$ 2,666 (8,776) 9,544
$ 3,273 (56,593)
$ (3,944) 59,946 (86) 22,690 Fuel (8,812) (10,843) 28,842 Materials and supplies 5,584 7,961 3,309 Prepayments 7,092 84 3,080 Total increase (decrease) in current assets .. 7,298 (56,204) 113,923 CURRENT LIABILITIES Current portion of long-term debt and preferred stock 5,819 (84,870) 120,633 Accounts payable (12,262) (30,548) (28,820)
Dividends payable on preferred stock ................ (1,574) (726) 64 Pensions accrued 1,433 (128) 522 Taxes accrued 9,574 (4,611) 3,604 Interest accrued 2,929 (1,469) 18,430 Other . ~ J ~ ~ ~ ~ ~ ~ ~ ~ (2,769) 1,937 3,989 Total increase (decrease) in current liabilities* . 3,150 (120,415) 118,422 Increase (decrease) in working $ 4,148 $ 64,211 $ (4,499)
'Exclusive of changes in commercial paper The accompanying notes shown on pages 19 through 29 are an integral part of the financial statements.
18
Notes to Consolidated Financial Statements
- 1. Significant Accounting Policies Deferred income taxes are provided on timing differences between book and taxable income to the extent permitted for
- a. Principles of consolidation ratemaking purposes.
The consolidated financial statements include the Company and its wholly-owned subsidiaries. Somerset Railroad Corpo- Investment tax credit, which reduces federal income tax ration (SRC), the only active subsidiary, owns rail facilities currently payable, is deferred and amortized over the lives for transport of coal and other supplies to the Somerset of the applicable property.
Generating Station (Somerset). All significant intercompany g. Deferred charges (See Note 9.)
balances and transactions have been eliminated in consoli- The Company defers certain fuel and purchased gas costs dation. which are subsequently reflected in billings to customers
- b. Accounting records through adjustment clauses in rates.
The Company maintains its accounting records in conformity Debt expense is deferred and amortized ratably over the with the uniform system of accounts prescribed by the Fed- lives of the related issues. Unamortized debt expense also eral Energy Regulatory Commission (FERC) and the Public includes premiums paid on reacquisitions of first mortgage Service Commission of the State of New York (PSC). bonds totaling approximately $ 41 million which is amortized
- c. Utility plant ratably over periods ranging from five to thirty years.
Cost of current repairs and minor replacements is charged h. Somerset Generating Station to appropriate operating expense and clearing accounts; cost Somerset plant costs of approximately $ 1 billion were phased of renewals and betterments, including indirect costs, is into electric rates in three segments to moderate rate in-capitalized. Original cost of utility plant retired or otherwise creases. The first segment of $ 365 million was included in disposed of and the cost of removal less salvage are charged electric rates effective April 1984. The second segment in-to accumulated depreciation. creased to $ 725 million the total plant costs included in In accordance with transition rules of Statement of Finan- electric rates effective in April 1985. The final segment was cial Accounting Standards No. 71, capital leases with incep- included in electric rates effective April 1986. When Somer-tion dates subsequent to 1982 have been capitalized while set began operating on August 17, 1984, a non-cash return those executed prior to 1983 and outstanding at December similar to AFDC was recorded on the portion of costs not in-31, 1986, consisting of additional assets and obligations of cluded in rate base. This non-cash return, which amounted approximately $ 7 million, were not capitalized. to approximately $ 10 million, $ 40 million and $ 22 million
- d. Allowance for funds used during construction (AFDC) for 1986, 1985 and 1984, respectively, is being amortized over the remaining life of the plant and is included in other and other non-cash return income in the Consolidated Statement of Income and in de-AFDC is a non-cash return which is shown in the Consoli-ferred charges on the Consolidated Balance Sheet. As of dated Statement of Income as allowance for other funds used December 31, 1986 the unamortized balance of non-cash during construction and allowance for borrowed funds used return was approximately $ 70 million.
during construction.
AFDC rates are determined according to FERC regulations. i. Retirement benefits The Company used net-of-tax rates of 10% for 1984 and 9.6% The Company has noncontributory retirement annuity plans for 1985, except during the last eight months of 1985 when which cover substantially all employees. Pension costs are a before tax rate of 12.3% was used for projects other than based on normal costs and the Company's policy is to fund Nine Mile Point nuclear generating unit No. 2 (Unit). In the pension cost accrued each year to the extent deductible 1986, the AFDC rate was 9.4% (net-of-tax) for the Unit and for federal income tax purposes. The provision for pension 12.1% (before tax) for projects other than the Unit. cost for 1986, 1985 and 1984 totaled $ 8.4 million, $ 12.6 million and $ 12.7 million, respectively.
Non-cash return was accrued on the portion of the Somer-set plant costs which were not included in rate base and is A comparison of accumulated plan benefits and net assets also accrued on certain unamortized abandoned project is as follows:
costs. (See Notes 1. h. and 9.) January 1 For AFDC and other non-cash return accrued at net-of-tax 1986 1985 rates, the Company is allowed revenues equal to the federal (Thousands ofDollars) income tax effect of the interest portion. Actuarial present value of
- e. Revenue accumulated plan benefits:
Vested $ 141,400 $ 140,700 Revenues from the sale of electricity and gas are recorded on Nonvested 21,000 19,300 the basis of meters read.
Net assets available for benefits 363,500 296,000
- f. Federal income taxes (See Note 2.)
The Company files a consolidated federal income tax return with its wholly-owned subsidiary, SRC.
19
The assumed investment rate of return used in determining effect on the results of operations or financial position of the actuarial present values was changed from 6.5% to 7.5%, Company.
effective January 1, 1986. The effects of changes in actuarial In addition to providing pension benefits, the Company assumptions and in plan provisions were to decrease the provides certain health care benefits for retired employees actuarial present value of accumulated plan benefits by ap- and their dependents. Substantially all of the Company's em-proximately $ 18.3 million and to reduce 1986 provision for ployees who retire under a Company pension plan may be-pension cost by approximately $ 4.4 million, substantially all come eligible for those benefits at retirement. Those and of which relates to the effects of changes in actuarial as-sumptions. 'nsimilar benefits for active employees are provided through insurance company whose premiums are based on the The required method for determining the actuarial present benefits paid during the year. The Company recognizes as value of accumulated plan benefits is based on current data expense the cost of insurance premiums which were approx-and, accordingly, fails to consider probable future events imately $ 8.0 million, $ 7.8 million and $ 7.6 million for 1986, such as future wage and salary increases and future employee 1985 and 1984, respectively. The cost of providing those service. Such events have been taken into consideration by benefits for 1,456 retirees and their dependents is not separ-the Company in determining the costs and funding concept able from the cost of providing benefits for the 4,423 active for the plans. The net assets available for benefits are based employees.
upon market value which will fluctuate depending on market j. Depreciation conditions. Depreciation expense is determined using straight-line rates, In December 1985 the Financial Accounting Standards based on average service lives, applied to the original cost, Board (FASB) issued Statement of Financial Accounting by groups of depreciable property in service. Depreciation Standards No. 87, Employers'ccounting for Pensions, accruals were equivalent to 3.1% of average depreciable which will be effective for 1987. The adoption of the require- property for 1986, 1985 and 1984.
ments of this statement is not expected to have a material
- 2. Federal Income Taxes Federal income tax expense consists of:
1986 1985 1984 (Thousands of Dollars)
Charged to operations:
Current $ 13,966 $ 1,182 $ (717)
Deferred net:
Accelerated depreciation . 42,896 46,206 32,029 Cost of reacquired debt 493 13,986 (142)
Income tax benefits from AFDC and non-cash return 30,108 32,256 29,814 Miscellaneous (3,744) (289) (5,857)
Investment tax credits deferred 39,268 3,310 23,017 122,987 96,651 78,144 Included in other income (4,648) (2,544) (3,435)
Total . $ 118,339 $ 94,107 $ 74,709 Effective rate . 34.1% 33.1% 26.1%
The effective tax rates differed from the statutory tax rate 1, 1986, reduction of investment tax credit carryforwards of 46% due primarily to the tax effect of AFDC, which is not and changes in depreciation rates and lives. In a memo-normalized. For 1986, 1985 and 1984 the tax effect of AFDC randum dated November 5, 1986, the Staff of the PSC has was 10.1%, 12.9% and 14.6%, respectively. recommended that the impact of the TRA of 1986 be deferred The cumulative net amount of income tax timing dif- until the benefits can be passed on to ratepayers in the next ferences for which deferred taxes have not been provided rate proceeding.
was approximately $ 544 million at December 31, 1986. The Company has approximately $ 91 million of unused The 'Ihx Reform Act of 1986 (TRA of 1986) was enacted on investment tax credits at December 31, 1986 which will ex-October 22, 1986. Among other things, the TRA of 1986 pro- pire beginning in 1999 and which reflects a $ 20 million re-vides for a reduction in the statutory corporate income tax duction for 1987 as a result of the TRA of 1986. Unutilized rates, elimination of the investment tax credit as of January carryfoiwards will be further reduced by $ 17 million in 1988.
20
- 3. Long-term Debt At December 31, 1986 long-term debt was (Thousands of Dollars):
First mortgage bonds Series Due Amount Series Due Amount 4 /s/0 May 1, 1987 $ 25,000 9.35o/o July 1, 2003 $ 43,700 3 7/sold Feb. 1, 1988 25,000 9 s/sold Mar. 1, 2005 75,000 17 s/sold Mar. 1, 1989 50,000 9 s/s% Jan. 1, 2006 56,986 17 s/s% Mar. 1, 1990 50,000 7 '/4 %%d June 1, 2006 12,000 4 s/s% May 1, 1991 25,000 6 ~/s% Dec. 1, 2006 25,750 ll s/4% Apr. 1, 1993 100,000 8 s/s% Nov. 1, 2007 Feb. 1, 2012 60,000 3,503 12 s/s% Jan. 1, 1994 100,000 18 o/o 14 7/s% July 1, 1994 50,000 16 /s% Aug. 1, 2012 1,800 8 ls%%d* Aug. 1, 1994 100,000 13 s/s% Dec. 1, 2012 100,000 8 s/s% June 1, 1996 50,000 16 July 1, 2014 1,173 5 s/sold Jan. 1, 1997 25,000 12 %" July 1, 2015 100,000 6 '/4/o Sept. 1, 1997 25,000 12 '/sold** Oct. 1, 2015 75,000 6 '/2o/o Sept. 1, 1998 30,000 10 /s/o' Feb. 1, 2016 125,000 7 /s%%d Nov. 1, 2001 50,000 i/4o%%d* Apr. 1, 2016 50,000 Total first mortgage bonds 1,434,912 Pollution control notes Interest Maturity Interest Rate Letter of Credit Rate Date Adjustment Date Expiration Date 12 May 1, 2014 60,000 12.30% July 1, 2014 40,000 3 /s%*** . Dec. 1, 2014 Dec. 1, 1987 Dec. 15, 1988 74,000
%*** Mar. 1, 2015** Mar. 1, 1988 Mar. 15, 1988 37,500 5.15%**'ar. 15, 2015*'ar.
7 15, 1987 Mar. 31, 1988 60,000 4 i/4%*** July 15, 2015** July 15, 1987 July 31, 1988 63,500 4.05%*** Oct. 15, 2015** Oct. 15, 1987 Oct. 31, 1988 30,000 3 s/4%*** Dec. 1, 2015** Dec. 1, 1987 Dec. 15, 1988 42,000 Total pollution control notes 407,000
- 6. 4375o/o notes payable due August 27, 1989 50,000 S RC commercial paper due December 31, 1989 39,900 Pa rticipations in mining company notes due April 5, 1989 7,775 0 bligations under capital leases (Note 1) 22,002 Unamortized premium and discount on debt-net (2,500) 1,959,089 Less debt due within one year-included in current liabilities 30,682 Total $ 1,928,407
- Issued 1986 '*Issued 1985 *'*Adjustable Rate At December 31, 1986 long-term debt which will become due during the next five years is:
1987 1988 1989 1990 1991 (Thousands of Dollars)
$ 30,682 $ 33,914 $ 159,603 $ 57,883 $ 32,348
The Company's mortgage provides for a sinking and im- rate adjustment date. The pollution control notes will bear provement fund. The provisions require the Company to interest at the same rate as the Revenue Bonds. On the in-make annual cash deposits with the Trustee equivalent to terest rate adjustment date and annually thereafter, the 1% of the principal amount of all bonds delivered and interest rate will be adjusted, not to exceed a rate of 15%, or authenticated by the Trustee prior to January 1 of that year at the option of the Company, subject to certain conditions, (excluding any bonds issued on the basis of the retirement a fixed rate of interest, not to exceed 18%, may become ef-of bonds). Pursuant to the terms of the mortgage, the Com- fective. Bondowners may elect, subject to certain conditions, pany has satisfied these requirements by crediting "bondable to have their Revenue Bonds purchased by the Trustee. The value of property additions" against the amount of cash to Company has irrevocable letters of credit which expire on be deposited. the letter of credit expiration dates and which may be ex-Mandatory annual cash sinking fund requirements are tended upon meeting certain conditions. These letters of
$ 3,000,000 for the 9/s% series due 2006, $ 2,100,000 for the credit support certain payments required to be made on the 9.35% series, $ 600,000 beginning June 1, 2001 for the 7i/4% Revenue Bonds. Payments made under the letters of credit series and $ 250,000 beginning December 1, 1992 for the in connection with purchases of Revenue Bonds by the 67/e% series. The amount increases to $ 500,000 and $ 750,000 Trustee are repaid with the proceeds from the remarketing on December 1, 1997 and December 1, 2002, respectively, of the Revenue Bonds. To the extent the proceeds are not for the 67/8% series. sufficient, the Company is required to reimburse the bank that issued the letter of credit.
The mortgage indenture secures the first mortgage bonds which constitute a direct first mortgage lien on substantially SRC has a letter of credit backed commercial paper pro-all utility plant. gram which provides for borrowing up to $ 60 million through December 31, 1989. The weighted average inter-Adjustable rate pollution control notes were issued to se- est rate for 1986, including fees for the letter of credit, cure like amounts of tax-exempt adjustable rate pollution amounted to 7%. Substantially all of the property of SRC, control revenue bonds (Revenue Bonds) issued by a govern- other than equipment, is subject to a lien of a mortgage mental authority. The Revenue Bonds will bear interest at and security agreement.
the rate indicated through the date preceding the interest
- 4. Common Stock and Capital in Excess of Par Value The following is a summary of changes in common stock and capital in excess of par value for 1986, 1985 and 1984:
Common Stock Capital in Excess
$ 6.66 2/a Par Value of Par Value Shares Amount Amount (7housands of Dollars)
Balance at December 31, 1983 48,501,706 $ 323,345 $ 427,786 Public offering: 1984 1,0001000 6,667 13,799 1986 32,100 214 850 Dividend reinvestment and stock purchase plan: 1984 2,415,307 16,102 25,150 1985 1,901,714 12,678 32,118 Employee stock ownership plans: 1984 160,385 1,069 2,171 1985 27,862 186 499 1986 22,123 147 574 Reacquired capital stock 1986 417 Balance at December 31, 1986 54,061,197 $ 360,408 $ 503,364 70,000,000 Shares authorized at December 31, 1986 22
- 5. Preferred Stock At December 31, 1986 serial cumulative preferred stock was:
Par Shares Value Authorized(1) Amount Redeemable and (Thousands Series Share Prior to Per Share Outstanding of Dollars) 3.759o 4 i/2o/o (1949)
$ 100 100
"'104.00 Redeemable solely at the option of the Company:
103.75 150,000 40,000
$ 15,000 4,000 4 15o%%d 100 101.00 40,000 4,000 4.40% 100 102.00 75,000 7,500 4.15%%d (1954) 100 102.00 50,000 5,000 6.48o%%d 100 102.00 300,000 30,000 8.80% 1 00 3/1/91 103.94 E 250,000 25,000 Thereafter 102.00 j 8.48o/o 2/1/89 2/1/94 1,000,000 25,000 Thereafter Adjustable Rate(2) 25 10/1/88 10/1/93 1,800,000 45,000 Thereafter Total $ 160,500 Subject to mandatory redemption requirements:(7) 4.5096 100 (3) 105.25 200 $ 20 9.009o 100 10/1/87(4) 104.00 184,500 18,450 9.1096 25 7/1/87(5) 25.33 360,000 9,000 15 25 1/1/92(6) 27.50 1,200,000 30,000 57,470 Less sinking fund requirements at par value included in current liabilities 34,650 Total $ 22,820 At December 31, 1986 redeemable preferred stock sinking fund requirements and preferred stock redemptions during the next five years are:
1987 1988 1989 1990 1991 (Thousands of Dollars)
$ 34,650 $ 4,670 $ 4,650 $ 4,650 $ 4,650 (1) At December 31, 1986 there were 1,550,000 shares of $ 100 par value preferred stock, 6,800,000 shares of $ 25 par value preferred stock and 1,000,000 shares of $ 100 par value preference stock authorized but unissued.
(2) The Adjustable Rate Serial Preferred Stock, Series A was issued in September 1983. Dividends paid from the date of issuance through the January 1, 1987 payment varied from 7~/2% to 12.95% per annum. The payment for April 1, 1987 has been adjusted to a rate of 7~/2o/o per annum and subsequent payments can vary from 7~/2% to 13'/2% per annum, based upon a formula included in the Certificate of Incorporation.
(3) By March 31, 1988, the Company must redeem at $ 103.25 per share the 200 outstanding shares of the 4.50o/o Series.
The Company reacquired 300 shares in 1985 and canceled the shares in 1986.
(4) On October 1, in each year 1987 through 1995, the Company must redeem at par 16,500 shares of the 9.00% Series.
Since 1984, 16,500 shares have been reacquired and canceled annually. The 9.0096 Series is redeemable at $ 104.00 per share prior to October 1, 1987. The $ 104.00 price per share will be reduced annually by $ .50. As of October 1, 1994 and thereafter, the redemption price will be at par. By September 30, 1996, the Company must set aside the amount required to redeem at par all shares outstanding.
(5) By July 1, in each year 1987 through'1989, the Company must redeem at par 120,000 shares of the 9.10o%%d Series. The Company reacquired and canceled 120,000 shares in 1986 and 1985.
(6) On January 1, 1987, the Company redeemed 1,104,000 shares of the 15o%%d Series at a price of $ 27.50 per share and 96,000 shares at par.
(7) The Company redeemed 300,000 shares of the 153/oo%%d Series in 1986 at a price of $ 110.00 per share plus accrued dividends.
The premium paid on reacquisition is reported as a charge to retained earnings.
23
- 6. Bank Loans and Other Borrowings The revolving credit agreement does not require compen-The Company has a revolving credit agreement with banks sating balances. The Company did not have any outstanding which provides for borrowing up to $ 200 million to July 31, loans under this agreement or prior agreements at December 1992. At the option of the Company, the interest rate on 31, 1986 or 1985.
borrowings is related to the prime rate or the London Inter- Interim financing in the form of short-term borrowings bank Offered Rate or the interest rate applicable to certain on commercial paper is utilized to finance construction ex-certificates of deposit. The agreement also provides for the penditures.
payment of a commitment fee on the unborrowed amount of one-quarter of a percent per annum.
Information relative to short-term borrowings is Commercial Paper Notes Payable 1986 1985 1984 "1985 1984 (Thousands of Dollars)
Ending balance $ 110,600 $ 118,300 $ 60,100 Maximum amount outstanding ........ $ 141,400 $ 145,700 $ 125,600 $ 70,000 $ 61,000 Average amount o'utstanding(l) ........ $ 93,300, $ 84,400 $ 57,800 '13,600 $ 12,800 During the period(2)
Weighted average interest rate:
On ending balance 6.1%
7.3/0 8.0%
8.5%
8.5%
10.7% . 8.4% 10.7%
(1) Calculated as the average of the sum of daily borrowings. ~
(2) Calculated by dividing total interest expense by the, average of the sum of daily borrowings.
- 7. Jointly Owned Generating Stations (See Note 8.) 8. Commitments and Contingencies (See Note 10.)
The Company has an undivided 50% interest in the output The Company has an undivided 18% interest in the and costs of three generating units comprising the Homer 1,084,000 kw Nine Mile Point nuclear generating unit No. 2 City Generating Station. The station is owned with Pennsyl- (Unit) being constructed by Niagara Mohawk Power Corpor-vania Electric Company which also operates the facility. The ation (Niagara Mohawk) near Oswego, New York. Ownership Company's share of the rated capability is 946,000 kw and its of the Unit is shared with Niagara Mohawk 41%, Long Island net utility plant investment is $ 270 million, which includes Lighting Company (LILCO) 18%, Rochester Gas and Electric
$ 6 million of construction work in progress. The accumu- Corporation 14% and Central Hudson Gas 6 Electric Cor-lated provision for depreciation as of December 31, 1986 was poration 9%.
$ 100 million. The Company's share of operation and main- On October 31, 1986 Nia'gara Mohawk obtained from the tenance expense of the station is reflected in the Consolidated Nuclear Regulatory Commission (NRC) a low power license Statement of Income. and a schedule exemption to permit the loading of fuel. The The Company entered into two contracts for the supply of fuel loading process has been completed. Niagara Mohawk coal to the Homer City Generating Station. By the terms of has informed the Company that it is awaiting approval by one contract dated January 2, 1985, the Company is obli- the NRC of certain engineering analysis related to repairs gated to pay termination costs under certain conditions for a made to the Unit's eight main steam isolation valves (MSIV) period of 17 years. The obligation at January 2, 1987 of $ 11.5 that verify their continued suitability for operation and that million will be reduced periodically through 2001. this approval is conditioned. upon the results to be obtained from the testing of a prototype valve which is currently in process.
In January 1987 Niagara Mohawk advised the Company that as a result of the MSIV repairs and engineering analysis, coupled with the NRC review and a consequent change in the estimated commercial operation date to September 1987, it revised the estimated total Unit cost to $ 5.878 billion
($ 4.059 billion of construction costs and $ 1.819 billion of AFDC), excluding nuclear fuel costs. In November 1986, Niagara Mohawk had estimated that the total Unit cost would be $ 5.787 billion ($ 4.010 billion of construction costs and
$ 1.777 billion of AFDC), excluding nuclear fuel costs. The Company's share of the new estimated cost is approximately
$ 1.114 billion, including AFDC but excluding nuclear fuel costs, plus $ 25 million for certain common facilities and other-costs for a total investment of approximately $ 1.139 24
billion in the project, excluding the $ 52 million payment legal validity of the Incentive Plan or the July 1984 Order by Niagara Mohawk as described below. As of December 31, which are discussed below; and (5) the provisions in the Offer 1986, the Company's investment in the project was $ 1.035 shall be in full satisfaction of any monetary penalty or in-billion, including AFDC but excluding nuclear fuel costs. centive provided for under the Incentive Plan or the July 1984 Order.
The testing and start-up of all new nuclear plants is sub-ject to the risk of encountering unforeseen problems and, On July 15, 1986 the cotenants, in response to a request therefore, it must be recognized that commercial operation by the PSC, notified the PSC that they would agree to modify of:the Unit may be later than currently projected. The Com- the Offer to provide for a change in the allowable cost to pany estimates that any delay in achieving commercial oper- $ 4.16 billion. In addition, in order to induce settlement ation beyond September 1, 1987 would add approximately among the cotenants, Niagara Mohawk entered into an agree-
$ 12 million each month to its share of the cost of the Unit, ment with the other cotenants (Cotenant Agreement) whereby the major portion of which is financing costs. it would make a payment to the cotenants, upon commercial operation of the Unit, for their shares of the $ 290 million Although no assurance can be provided as to the precise incremental disallowance between the original proposed al-date on which commercial operation will be accomplished, lowed cost of $ 4.45 billion and the revised proposed allowed the Company believes that the Unit will commence commer- cost of $ 4.16 billion. The Company's share of this payment cial operation in the fourth quarter of 1987.
would be $ 52 million. This payment will not cause a re-In connection with a 1982 PSC proceeding discussed fur- allocation of ownership interests in the Unit.
ther below, which concluded that completion of the Unit On October 3, 1986 the PSC issued Opinion No. 86-24 was warranted, the PSC stated that it would apply a strict approving the Offer, as modified by the $ 4.16 billion cost standard of prudence for all costs incurred in completing the allowance proposal, and terminating the Prudence Proceed-Unit. On July 3, 1985 the PSC issued an Order establishing ing. On October 22, 1986 the Attorney General of the State a proceeding to investigate the prudence of costs relating to of New York and the Consumer Protection Board of the State the construction of the Unit (Prudence Proceeding). On Sep- of New York (CPB) filed petitions with the PSC, requesting tember 18, 1985 the cotenants and the PSC Staff submitted that the PSC reconsider the conclusions reached in Opinion to the PSC an Offer of Settlement (Offer) to settle the Pru- No. 86-24 and resume the Prudence Proceeding. On Decem-dence Proceeding.
ber 17, 1986 the PSC issued an order which denied the peti-The Offer provided that a maximum of $ 4.45 billion of tions for rehearing. The Executive Director of the CPB and costs relating to construction of the Unit were to be included the Attorney General of the State of New York have publicly in rate base and disallowed costs would not be less than $ 900 expressed their intent to appeal the PSC action to the courts.
million. The cotenants may petition the PSC to increase the The Company cannot predict whether an appeal to the courts maximum in response to an extraordinary event and the co- will be taken or, if taken, the results thereof.
te'nants represented in the Offer that, at the time of the Based upon the terms of the Offer as approved by the PSC Offer, they were not aware of any facts that would warrant a and based on Niagara Mohawk's revised cost estimate dis-claim. The Offer also provides, among other things, that cussed above, the Company's share of the disallowed amount (1) the allowed costs for the Unit would be phased into rate (after reflecting the $ 52 million payment by Niagara Mohawk base over a reasonable period together with accumulated de-under the Cotenant Agreement) is expected to approximate ferred carrying costs on the portion of the Unit's cost that
$ 326 million, reduced to approximately $ 234 million after has not yet been included in rate base, and that the phase-in recognition of the federal income tax effect at a 46% rate.
of each cotenant's allocable share of allowed Unit costs will (See Note 10.) The disallowed amount to the Company will be resolved in the context of its rate proceeding; (2) certain be increased by its share of t6e cost of any further delays in tax benefits, based upon the accounting requirements arising the commercial operation of the Unit beyond September 1, out of the Offer, are to be reserved for the benefit of the 1987 and might be further increased dependent on the ulti-stockholders; (3) the level of expenditures for the Unit that mate PSC decision as to the costs covered by the Offer and are disallowed under the Offer shall be allocated among the by the implementation requirements that may ultimately be cotenants in proportion to their respective ownership inter- ordered by the PSC.
ests in the Unit and each cotenant waives any and all claims arising out of the design, engineering or construction of the Unit that it may have against any other cotenant or coten-ants; (4) the cotenants agree that they will not challenge the 25
In Niagara Mohawk's current rate case, the Staff of the cost requirements with respect to the Unit subsequent to PSC has raised generic issues with respect to the Offer which February 1984. In December 1986 LILCO paid all amounts may affect each of the cotenants. In their testimony, Staff owing on its share of the Unit and resumed payments to contends that the disallowance should include costs for com- cover current project expenditures.
mon facilities and certain other costs which the cotenants In light of the foregoing and the substantial cost increases, consider to be outside the scope of the Offer. If all such construction delays and licensing problems that have arisen costs were held to be within the scope of the Offer, the with respect to other nuclear generating stations, the Com-Company's share of the amount disallowed, net of any tax pany can predict neither the final cost of its share of the Unit benefits, would increase by approximately $ 16 million. nor the completion and licensing of the Unit consistent with Staff also proposed valuing the tax benefits associated with the present schedule. If the Unit were to be abandoned, it is the disallowed cost at a 34% rate and on a present value anticipated that, to the extent the Company's investment in basis. The Company believes those positions to be contrary the project ($ 1.035 billion at December 31, 1986 includ-to the Offer and, in the case of valuing tax benefits on a ing AFDC but excluding nuclear fuel costs) is not recovered present value basis, contrary to generally accepted account- through rates and alternative regulatory relief is not granted, ing principles. If Staff's positions were ultimately sustained the Company would have to charge expense with the project and the tax benefits associated with the disallowed cost were costs, net of the federal income tax effect. (See Note 10.)
valued at a 34% rate and on a present value basis, the reduc-tion in tax benefits would increase the Company's after-tax disallowance by $ 48 million. Niagara Mohawk has informed
- 9. Abandoned Projects New Haven the Company that it expects a decision on its current rate and Jamesport (See Note 10.)
The Company filed petitions with the PSC relative to the case, including the implementation requirements for the New Haven and Jamesport Projects, two abandoned nuclear Offer, in March 1987. The Company cannot predict whether generating projects, requesting authorization to (1) continue the Staff's proposals will ultimately be adopted and sustained.
to accrue AFDC on its share of costs until amortization of In April 1982 the PSC established an incentive rate of re- such costs commences to be recovered in rates, (2) amortize turn plan (Incentive Plan) for the ratemaking treatment of .
the investments through rates and (3) include in rates ap-the remaining construction costs of the Unit. In July 1984 propriate carrying charges on the unamortized balances. The the PSC issued an Order (July 1984 Order) that amended the projects were originally planned for completion on a joint Incentive Plan by imposing a $ 5.4 billion ceiling on the venture basis with LILCO.
Unit's final allowable cost. Under the amended Incentive On September 19, 1984 the PSC issued Opinion and Order Plan, the cotenants'ommon stockholders would, with a No. 84-25 which effectively authorized recovery of 70~%%d of certain limitation, be penalized by a 20~/o reduction in the the Company's investment in the New Haven Project. As a rate of return on common equity associated with the capital result of PSC Order No. 84-25, the Company charged $ 8.7 costs for the Unit in excess of $ 4.6 billion, but less than $ 5.4 million (net of federal income taxes) to expense in 1984 and billion. Capital costs for the Unit in excess of $ 5.4 billion would be borne in total by the cotentants'ommon stock-the balance was included in Deferred Charges Abandoned holders. Since the PSC's approval of the Offer was in full project costs in the Consolidated Balance Sheet. Through satisfa'ction of any monetary penalty provided for under the April 1985 the Company accrued a non-cash return, calcu-lated similarly to AFDC, on this deferred charge. Amortiza-Incentive Plan, as amended by the July 1984 Order, the In-tion of the deferred charge is being recorded ratably over five centive Plan and the ceiling imposed by the July 1984 Order years beginning May 1985 coincident with recovery in rates.
are not expected to be implemented.
As of December 31, 1986 the unamortized balance was $ 29 The Company is unable to predict what further actions or million.
proceedings, if any, may be instituted with respect to the On May 22, 1985 the Company filed a petition in the Unit.
Supreme Court of the State of New York (Albany County)
In February 1984 LILCO discontinued making construc- challenging the PSC's disallowance of a part of the Com-tion payments for the Unit and stated it wanted to disengage pany's investment in the New Haven Project. The proceeding itself from the Unit. Since that time, Niagara Mohawk and was transferred to the Appellate Division (Third Department).
LILCO have entered into agreements which initially provided The Company and LILCO have agreed that should the PSC for funding up to $ 400 million of the LILCO construction find that certain costs for predecessor projects included in the New Haven Project costs may not be recovered by LILCO through its rates, the Company would then refund to LILCO 26
its share of these costs. In Order No. 84-25 the PSC stated SFAS No. 90 is effective for the Company's financial re-that these costs should be allowed to be recovered in LILCO's porting commencing with fiscal years beginning after De-rates; therefore, the Company believes that no amount is cember 15, 1987 (Effective Date), with earlier application refundable to LILCO. encouraged. The provisions of SFAS No. 90 also apply to the In March 1982 the PSC authorized the Company to con- financial reporting of events occurring prior to the Effective Date.
tinue accruing AFDC on its Jamesport investment until the PSC renders its decision with respect to the prudence and The Company has analyzed the effect that the provisions disposition of the project costs. These proceedings are con- of SFAS No. 90 have on the Company's investment in the tinuing. If the Company's request to amortize its investment abandoned New I.laven nuclear generating project and the is denied and alternative regulatory relief is not granted, the disallowance of costs related to the Nine Mile Point nuclear Company would have to charge expense with the disallowed generating unit No. 2 (Unit). Based on that analysis, the costs, net of the federal income tax effect. The Company is Company has concluded that there would not have been a unable to predict the portion of the Jamesport investment, material adverse effect on the Company's consolidated finan-if any, which will be allowed to be recovered in rates. cial statements as a result of the abandoned New Haven In 1986 the Company recorded $ 5.9 million relating to nuclear generating project if SFAS No. 90 had been in effect non-cash return on its Jamesport investment which is in- in prior years. However, if SFAS No. 90 had been in effect cluded in other income in the Consolidated Statement of in 1986 and 1985, the net-of-tax loss on the Unit would have been allocated to each of those years and reported 1986 and Income. As of December 31, 1986 the Company's Jamesport investment of $ 80 million, before the federal income tax ef- 1985 earnings available for common stock would have been, fect, is included in Deferred Charges Abandoned project on a pro forma basis, approximately $ 115 million and $ 65 million, respectively, and related pro forma earnings per costs in the Consolidated Balance Sheet.
share would have been $ 2.13 and $ 1.23, respectively. In addi-tion, 1987 earnings available for common stock would be
- 10. Statement of Financial Accounting Standards reduced by approximately $ 22 million. (See Note 8.) The No. 90 Company currently anticipates application of SFAS No. 90 in Financial Accounting Standards currently applicable to regu- 1987 and anticipates recording the disallowance as a cumu-lated enterprises do not require, subject to certain excep- lative effect of a change in accounting principle.
tions, the immediate charge to expense of costs relating to a In order for the Company to be able to issue first mort-newly completed plant which are disallowed for rate pur- gage bonds or preferred stock, certain earnings requirements poses. Current standards also do not require the immedi- (subject to certain exceptions in the case of first mortgage ate recognition of a loss when the carrying amount of the bonds) under its Mortgage or Certificate of Incorporation abandoned project is greater than the present value of the have to be met for a twelve-month period. Tire impact of the probable future revenue for recovery of the abandoned project Unit's disallowed cost, as discussed above, is expected to have costs. Matters of this nature exist, or are expected to exist, a material adverse effect on such earnings and could result in the Company's operations and are more fully discussed in in the Company being unable to meet such requirements.
Notes 8 and 9. The Company's consolidated financial state- This adverse effect is expected to continue for as long as the ments as of December 31, 1986 were prepared in accordance Unit's disallowed cost is reflected in the determination of with current financial accounting standards. earnings for the applicable twelve-month period. If the In December 1986 the FASH issued Statement of Financial Company were unable to meet such earnings requirements Accounting Standards No. 90, Regulated Enterprises-Ac- such inability is not expected to have a significant impact on counting for Abandonments and Disallowances of Plant Costs the continuing operations of the Company.
(SFAS No. 90). SFAS No. 90 includes requirements that (1) when it becomes probable that part of the cost of a newly completed plant will be disallowed for ratemaking purposes and a reasonable estimate of the amount of the disallowance can be made, the estimated amount of the probable disallow-ance shall be immediately charged to expense, (2) AFDC be capitalized only if it is probable that it will be included as an allowable cost for ratemaking purposes and (3) if partial or no return on investment is likely to be provided on the al-lowed cost of the abandoned plant, then the loss on the abandoned plant shall be equal to the carrying amount of the abandoned plant less the present value of the probable future revenue for recovery of the abandoned plant costs.
27
- 11. Industry Segment Information Certain information pertaining to the electric and gas operations of the Company is:
1985 1984 Electric Gas Electric Gas Electric Gas (Thousands of Dolla'rs)
Operating:
Revenues ............ $ 1,098,089 $ 179,195 $ 1,051,579 $ 190,201 $ 921,248 $ 207,818 Expenses ............ 836,471 159,728 825,719 178,308 708,383 190,017 Income ............. 261,618 19,467 . 225,860 11,893 212,865 17,801 Depreciation* .......... 96,804 3,992 94,163 3,922 -60,923 4,275 Construction expenditures ......... 220,275 10,617 247,759 8,390 343,806 5,912 Identifiable assets** ..... 3,844,469 119,565'13,035 3,623,481 3,362,574 105,463
'Included in operating expenses.
- Corporate assets ($ 260,950, $ 240,103 and $ 265,109 at December 31, 1986, 1985 and 1984 respectively) consist primarily of cash, special deposits, accounts receivable, prepayments, unamortized debt expense and accumulated deferred income taxes.
- 12. Supplementary Income Statement Information Charges for maintenance, repairs and depreciation, other than those set forth in the Consolidated Statement of Income, were not significant in amount. Taxes, other than federal income taxes, are:
1986 1985 1984
~ (Thousands of Dollars)
Property . $ 62,245 $ 55,987 $ 48,598 Franchise and gross receipts 53,960 49,247 47,735 Payroll ,11,583 10,787 10,228 Miscellaneous 5,840 6,011 6,994 133,628 122,032 113,555 Amounts charged to accounts other than taxes (11,228) (8,445) (11,403)
Total other taxes $ 122,400 $ 113,587 $ 102,152 28
- 13. Quarterly Financial Information (Unaudited)
Quarter Ended March 31 June 30 Sept. 30 Dec. 31 (Thousands) 1986 Operating revenues . $ 381,321 $ 305,177 $ 274,945 $ 315,841 Operating income .. $ 87,150 $ 70,230 $ 62,475 $ 61,230 Net income $ 79,593 $ 55,269 $ 46,596 $ 47,036 Earnings available for common stock $ 73,599 $ 50,240 $ 42,031 $ 42,520 Earnings per share (in dollars) ....... $ 1.36 $ .93 $ .78 $ .79 Dividends per share (in dollars) ...... $ .64 $ .64 $ .66 $ .66 Average shares outst'anding 54,007 54,007 54,007 54,040 Common stock price (in dollars):*
High $ 32 $ 331/8 $ 38'/z $ 34'/4 Low $ 27'/a $ 28a/s $ 30 $ 30'/4 1985 Operating revenues . $ 361,982 $ 306,049 $ 270,992 $ 302,757 Operating income $ 69,546 $ 63,988 $ 51,381 $ 52,838 Net income $ 69,388 $ 53,852 $ 42,288 $ 42,905 Earnings available for common stock . $ 62,688 $ 47,510 $ 36,194 $ 36,815 Earnings per share (in dollars) ....... $ 1.20 $ .90 $ .68 $ .69 Dividends per share (in dollars) ...... $ .61 $ .61 $ .64 $ .64 Average shares outstanding 52,288 52,774 53,233 53,739 Common stock price (in dollars):*
High . $ 23'/2 $ 27'/z $ 29'/4 $ 28'/4 Low $ 21'/4 $ 23'/s $ 23'/4 $ 23'/e
- The Company's common stock is listed on the New York Stock Exchange. The number of stockholders of record at January 21, 1987 was 71,935.
Dividend Limitations: After dividends on all outstanding preferred stock have been paid, or declared and funds set apart for their payment, the common stock is entitled to cash dividends as may be declared by the Board of Directors out of retained earnings accumulated since December 31, 1946. Such dividends are limited if Common Stock Equity (40% at December 31, 1986) falls below 25/0 of total capitalization. Dividends on common stock cannot be paid unless sinking fund requirements of the preferred stock are met. The Company has not been restricted in the payment of dividends on common stock by these provisions.
29
Selected Financial Data 1986 1985 1984 1983 1982 (Thousands except per share data)
Operating revenues ......... $ 1,277,284 $ 1,241,780 $ 1,129,066 $ 993,589 S 953,714 Net income $ 228,494 S 208,433 S 211,376 $ 156,680 S 145,095 Earnings per share .......... $ 3.86 $ 3.46 $ 3.68 $ 3.06 $ 3.36 Dividends paid per share ..... $ 2.60 $ 2.50 $ 2.38 $ 2.26 $ 2.10 Average shares outstanding ... 54,014 53,013 49,955 43,530 36,414 Book value per share of common stock (year-end) .. $ 25.86 $ 24.65 $ 23.71 $ 22.75 $ 22.39 Interest charges ............ $ 199,258 $ 191,248 $ 176,085 $ 137,372 $ 109,266 AI DC and other non-cash return .......... $ 111,872 $ 122,719 $ 126,265 $ 91,641 $ 54,466 Depreciation $ 100,796 $ 98,085 $ 65,198 $ 56,799 $ 53,174 Other taxes $ 122,400 $ 113,587 $ 102,152 $ 90,604 $ 82,877 Construction expenditures $ 230,892 $ 256,149 $ 349,718 $ 466,642 $ 524,310 Total assets $ 4,224,984 $ 3,976,619 $ 3,733,146 $ 3,200,466 $ 2,728,005 Long-term obligations and redeemable preferred stock . $ 1,951,227 $ 1,836,076 $ 1,663,784 $ 1,426,681 $ 1,242,627 certifed public accountants Coopers 8 Lybrand To the Stockholders and Board of Directors New York State Electric 2 Gas Corporation and Subsidiaries Ithaca, New York We have examined the consolidated balance sheets of New York State Electric 6 Gas Corporation and Subsidiaries as of December 31, 1986 and 1985, and the related consolidated statements of income, retained earnings and changes in financial position for each of the three years in the period ended December 31, 1986. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the financial statements referred to above present fairly the consolidated financial position of New York State Electric 6 Gas Corporation and Subsidiaries at December 31, 1986 and 1985, and the consolidated results of their operations and the changes in their financial position for each of the three years in the period ended December 31, 1986, in conformity with generally accepted accounting principles applied on a consistent basis.
New York, New York January 30, 1987 30
Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources In addition, a continuous offering program for the sale of 1,500,000 shares of common stock commenced in December The Company has an undivided 180/0 interest in the 1,084,000 1986 and is expected to conclude by the end of the first kw Nine Mile Point nuclear generating unit No. 2 (Unit) quarter of 1987.
being constructed by Niagara Mohawk Power Corporation near Oswego, New York. The Company's share of the esti- Proceeds from these external financings were used for the mated construction cost is approximately $ 1.114 billion, in- redemption of $ 110 million principal amount of high interest cluding allowance for funds used during construction (AFDC) bonds originally issued in 1981 and 1979, and for the re-but'excluding nuclear fuel costs, plus $ 25 million for certain demption of the 300,000 outstanding shares of the Com-common facilities and other costs for a total investment of pany's 15'/8% Serial Preferred Stock (Cumulative, $ 100 Par approximately $ 1.139 billion in the project. As of December Value) originally issued in 1981. The balance of the proceeds 31, 1986, the Company's investment in the project was was used for the payment of short-term unsecured notes
$ 1.035 billion, including AFDC but excluding nuclear fuel which were used for construction purposes.
costs. (See Note 8.) The Company uses interim financing in the form of short-Construction expenditures, including AFDC, during the term unsecured notes, usually commercial paper, to finance period from 1984-1986 totaled approximately $ 1.1 billion. construction expenditures, thereby providing flexibility in The Unit was the largest construction project during those the timing and amounts of long-term financings. The Com-three years, requiring approximately $ 561 million. In ad- pany had $ 110.6 million of commercial paper outstanding dition, approximately $ 172 million was expended for the at December 31, 1986.
Somerset Generating Station (Somerset) which was placed The amount of external flinancings in 1986 decreased over in commercial operation in August 1984. requirements in 1985 and 1984, primarily due to the com-Estimated construction expenditures for 1987 through pletion of Somerset in 1984 and due to declining costs asso-1989 are included in the table below. The 1987 estimate has ciated with the Unit as. the Unit gets closer to its scheduled increased over the estimate made previously largely because completion date of September 1987. External financings for of increased costs related to the change in scheduled com- the period from 1987 through 1989 are included in the table mercial operation of the Unit to September 1987. The below.
Company's construction program is under continuing re- During 1986 the Company entered into a new revolving view and is revised from time to time. credit agreement with certain banks which provides for bor-Construction expenditures other than for the Unit are rowing up to $ 200 million to July 31, 1992. At the option of planned to extend service to new customers, for improve- the Company, the interest rate on borrowings is related to ments at existing generating stations and to improve oper- the prime rate or the London Interbank Offered Rate or the ating efficiency. With the scheduled addition of generating interest rate applicable to certain certificates of deposit. The capability from the Unit in 1987 and with the improvements agreement also provides for the payment of a commitment currently underway at existing generating stations, the fee on the unborrowed amount of one-quarter of a percent Company's generating capability will be sufficient and leaves per annum.
room for growth without the need for major expenditures The revolving credit agreement does not require compen-for new generating facilities. sating balances. The Company did not have any outstanding The regulatory treatment of the allowed cost of the Unit loans under this agreement at December 31, 1986.
has not yet been determined; however, the Company antici- In December 1986 the Financial Accounting Standards pates that when the Unit is allowed in rate base, the entire Board issued Statement of Financial Accounting Standards agreed upon cost for rate purposes will be phased in over a No. 90, Regulated Enterprises-Accounting for Abandon-period of years. Included in the Company's February 1987 ments and Disallowances of Plant Costs (SFAS No. 90) which rate filing is a request to phase-in the Unit's allowed costs is expected to have a material adverse effect on the Company's over a three-year period. The non-cash return included in consolidated financial statements. (See Note 10.) The Com-the table below relates to the deferral of financing costs pany has analyzed the effect that the provisions of SFAS during the phase-in period. No. 90 have on the Company's investment in the abandoned The Company's need for outside capital results primarily New Haven nuclear generating project and the disallowance from its construction program and its program to reduce the of costs related to the Unit. (See Notes 8 and 9.) Based on cost of capital by refinancing high-cost first mortgage bonds that analysis, the Company has concluded that there would and preferred stock. External financings in 1986 included: not have been a material adverse effect on the Company's consolidated financial statements as a result of the aban-
~
The sale of $ 125 million principal amount of First Mort- doned New Haven nuclear generating project if SFAS No. 90 gage Bonds, 10s/s% Series, due February 1, 2016. had been in effect in prior years. However, if SFAS No. 90
~ The sale of 50 million principal amount of First Mort-
$ had been in effect in 1986 and 1985, the net-of-tax loss on gage Bonds, 9I/4% Series, due April 1, 2016.
~ The sale of
$ 100 million principal amount of First Mort-gage Bonds, 83/8% Series, due August 1, 1994.
the Unit would have been allocated to each of those years bonds) under its Mortgage or Certificate of Incorporation and reported 1986 and 1985 earnings available for common have to be met for a twelve-month period. The impact of the stock would have been, on a pro forma basis, approximately Unit's disallowed cost (See Note 8.), is expected to have a
$ 115 million and $ 65 million, respectively, and related pro material adverse effect on such earnings and could result in forma earnings per share would have been $ 2.13 and $ 1.23, the Company being unable to meet such requirements. This respectively. In addition, 1987 earnings available for common adverse effect is expected to continue for as long as the Unit's stock would be reduced by approximately $ 22 million. (See disallowed cost is reflected in the determination of earnings Note 8.) for the applicable twelve-month period. If the Company were In order for the Company to be able to issue first mortgage unable to meet such earnings requirements such inability is bonds or preferred stock, certain earnings requirements not expected to have a significant impact on the continuing (subject to certain exceptions in the case of first mortgage operations of the. Company.
The following table sets forth certain data concerning the Company's estimated uses and sources of funds for the years 1987 through 1989.
1987 1988 .. 1989 Total (Thousands of Dollars)
Uses of Funds:
Construction Nine Mile Point Unit No. 2 Other Projects AFDC
$ 42,000 168,000 74,000 176,000, 9,000 s
S
~ 170,000
" 9,000 S 42,000 514,000 92,000 Total Construction 284,000 185,000, -'- 179,000 648,000 Working Capital 86,000 23,000 33,000 142,000 Nine Mile Point Unit No. 2 Non-Cash Return 32,000 37,000 ", '3,000 92,000 Retirement of Securities and Sinking Fund Obligations 65,000 35,000 150,000 250,000 Total $ 467,000 $ 280,000 '385,000 $ 1,132,000 Sources of Funds:
Niagara Mohawk payment (See Note 8.) $ 52,000
=
S $ S 52,000 Long-Term Financing '150,000 100,000 '40,000 390,000 Increase (Decrease) in Short-Term Debt (12,000) (19,000) 31,000 Internal Sources 277,000 199,000 214,000 690,000 Total $ 467,000 $ 280,000 $ 385,000 $ 1,132,000 Results of Operations Earnings Earnings available for common stock and earnings per share Earnings available for common stock and earnings per for 1986 increased 14% and 12%, respectively, as compared share for 1985 decreased less than 1% and 6%, respectively, with 1985, primarily as a result of higher retail electric sales as compared with 1984, which resulted primarily from a re-and greater amounts of AFDC capitalized. In addition, earn- duction in the. return on common equity from 16.2% to ings were higher due to the redemption of the 15~/8% pre- 15.5% allowed by the Public Service Commission of the ferred stock. These increases were partially offset by higher State of New York (PSC) in the April 1985 rate decision.
maintenance and operation-other expenses. The number of The decrease in earnings per share was also due to a greater average shares outstanding increased slightly during this number of average shares outstanding.
period.
o s 32 e
Operating Revenues Operating revenues increased 3o/o in 1986 compared with the prior year after increasing 10% in 1985. The increases were composed primarily of the following factors:
Increase (Decrease) from Prior Year 1986 over 1985 1985 over 1984 (Thousands of Dollars)
Electric Gas Electric Gas Rate increase $ 69,630 $ 1,586 $ 83,246 $ 5,233 Fuel cost adjustment (21,917) (2,212) (12,580) (8,477)
Electricity sales to other utilities (75,366) 63,864 Surcharge for (passback of) interchange profits 18,393 (31,862)
Sales volume and other 55,770 (10,380) 27,663 (14,373)
Total $ 46,510 $ (11,006) $ 130,331 $ (17,617)
The PSC granted the following rate increases which became effective on the indicated dates:
Electric % Increase Gas (Thousands of Dollars)
April 15, 1986 $ 64,590 7.0%
August 29, 1985 $ 3,120 .3/o $ 509 .2%
April 15, 1985 $ 78,458 9.1/o $ 2,172 1.0 lo April 24, 1984 $ 84,500 10.7/o $ 7,400 3.2 lo The rate increases in April 1986, 1985 and 1984 reflect the to stockholders. In 1985 and 1986, the effect was to increase three year phase-in of the Somerset plant costs of approxi- earnings by approximately $ .4 million and $ 1.2 million, re-mately $ 1 billion. In connection with the 1986 rate increase, spectively. This provision in the April 1985 rate decision will the Company agreed with the PSC to not file for further in- be in effect until January 1988.
creases in electric or gas rates to become effective before In addition, the April 1984 and the April 1985 PSC rate January 1, 1988. During that time, any costs incurred re- decisions contained provisions for customers to share in the sulting from commencement of commercial operation of the benefit or shortfall of profits from sales of electricity to other Unit will be deferred. The deferred accounting includes both utilities. The April 1984 rate decision provided that profits Unit related revenues and expenses and provision for carry- on electricity sales to other utilities exceeding $ 32.8 million ing charge allowances. during the twelve months ended April 15, 1985 be shared by In February 1987 the Company filed with the PSC for an ratepayers and stockholders on an 80/o/20% basis. The April electric rate increase of approximately 4/o to become effec- 1985 rate decision modified this provision to allow ratepayers tive in January 1988. The proposed increase assumes a 13o%%d and stockholders to share on an 80%/20%%d basis in the bene-return on common equity and a three-year phase-in of the fit or shortfall of all profits from sales of electricity to other allowed costs of the Unit. utilities above or below a monthly forecasted amount. As a Prior to the April 1985 PSC rate decision, fuel cost adjust- result of these provisions, $ 31.9 million was passed back to customers in 1985. However, in 1986, primarily as a result ment revenues received by the Company-completely recov-ered fuel costs not included in the base rates charged to of the decrease in electricity sales to other utilities, $ 18.4 customers, and therefore, did not affect earnings. The April million was charged to customers under this provision. As a 1985 rate decision provided that ratepayers and stockholders result of this sharing provision, 1985 earnings increased by share the effects of a variation in fuel costs from forecasted approximately$ 4million and 1986 earnings decreased by ap-levels up to a $ 6.6 million, after tax, maximum gain or loss proximately $ 3 million. The provision in the April 1985 rate decision will be in effect until January 1988.
Electric sales and revenue changes by major customer category are as follows:
Increase/Decrease from Prior Year 1986 1985 Sales Revenues Sales Revenues Residential 4o/o 14% 1/o 10%
Commercial 17 3 6 Industrial 3 17 1 2 Total Retail 4%%d 15'Yo 1% 7%%d Other Utilities -29% 44% 59% 60%
Total -7% 4% 14% 14%
33
In 1985 the Company's electricity sales to other utilities The 29% decline in sales to other utilities in 1986 is largely increased by 59/o primarily as a result of increased generat- attributable to lower oil prices which enabled oil-fired plants ing capability at favorable rates due to the commercial oper- of other utilities to produce electricity on a competitive basis ation of Somerset beginning in August 1984. with some of the Company's coal-fired units, thus reducing demand for the Company's generation.
Gas sales and revenue changes by major customer category are as follows:
Increase/Decrease from Prior Year 1986 1985 Sales Revenues Sales Revenues Residential 4% 3% -3% -4%
Commercial 1 1} 5 -5 Industrial -34 -35 -21 -23 Total -7% -6% -8% -8%
Industrial gas sales decreased in both 1986 and 1985 pri- was enacted on October 22, 1986. The impact of the TRA of marily as a result of certain large industrial customers pur- 1986 will be deferred until the benefits can be passed on to chasing gas directly from producers. The Company received ratepayers in the next rate proceeding. As a result of this revenues from these customers for transporting gas to them deferral, the Company does not expect the TRA of 1986 to from the producers. Although this resulted in a decline in have a material effect on its financial position or results of industrial gas revenues, there was a related decline in pur- operation. (See Note 2.)
chased gas costs and the effect on earnings after considering the transportation gas revenues was not significant. In 1986 Non-operating Income the decrease in unit sales to industrial customers was also AFDC was 27% higher in 1986 after declining 20% in affected by certain customers switching to oil. 1985. Greater levels of construction work in progress (CWIP) relating to the Unit were responsible for the 1986 increase, Operating Expenses while CWIP levels were lower in 1985 due to Somerset being Compared with the prior year, operating expenses declined placed in service in August 1984.
1% in 1986 after increasing 12% in 1985. The 1986 decline Non-cash return decreased 66% in 1986 after a 50% in-was due primarily to a decrease in energy costs, partially off- crease in 1985. A non-cash return was accrued on the set by increases in taxes. Somerset plant costs not included in rate base and on cer-Fuel expense decreased 15/o as a result of a decrease of tain abandoned project costs.
10% in electricity generated due primarily to lower sales to In total, AFDC and other non-cash return amounted to other utilities and more efficient generation coupled with 54%, 67% and 69% of earnings in 1986, 1985 and 1984, lower purchase costs for coal, as the fuel cost to generate respectively.
one kilowatt hour of electricity decreased 3%. In 1985 the 23% increase in fuel expense was due primarily to a 24% Interest charges before the reduction for AFDC-borrowed increase in electricity generated, partially offset by a 4% de- funds increased by 4% and 9% over the prior year in 1986 crease in fuel cost to generate one kilowatt hour of electricity. and 1985, respectively. The increases primarily resulted from additional borrowings to finance construction expenditures, Electricity and gas purchased was lower by 15% and 23% including pollution control facilities, and the redemption of in 1986 and 1985, respectively, resulting from lower pur- certain high-cost first mortgage bonds and preferred stock, chase costs per kilowatt-hour and per dekatherm, respec- partially offset by a decrease in the cost of debt as a result tively, in addition to significant decreases in the quantity of the Company's refinancing of certain high interest bonds of gas purchased as discussed above. In addition, the 1985 during each of the past three years.
decrease was also attributable to fewer kilowatt-hours pur-chased. The impact of inflation and changing prices on revenues and earnings available for common stock was not material Federal income and other taxes rose 17% in both 1986 and during the period from 1984 through 1986.
1985. The increases primarily resulted from higher taxable income and higher property taxes as a result of significant property additions. The Tax Reform Act of 1986 (TRA of 1986) 34
Financial and Operating Statistics SUMIiIARYOF EARNINGS 1986 1985 1984 1983 1982 1981 1976 OPERATING REVENUES (Dollars in Thousands)
Electric . $ 1,098,089 $ 1,051,579 $ 921,248 $ 785,723 $ 768,717 $ 674,740 $ 346,760 Gas . 179,195 190,201 207,818 207,866 184,99? 158,361 77,397 Total 1,277,284 1,241,780 1,129,066 993,589 953,714 833,101 424,157 OPERATING EXPENSES Operation fuel 238,371 280,39? 227,998 187,148 200,895 177,592 72,621 other ..... 182,710 167,923 141,056 128,986 125,044 108,294 60,132 Electricity purchased .. 29,302 35,984 69,206 66,575 68,781 72,591 49,569 Gas purchased ........ 111,147 129,809 146,040 160,415 132,300 112,176 47,944 Maintenance ......... 88,486 81,591 68,606 61,234 60,541 51,616 29,757 Depreciation ......... 100,796 98,085 65,198 56,799 53,174 49,448 32,589 Federal income tax .... 122,987 96,651 78,144 67,891 53,606 43,844 7,751 Other taxes .......... 122,400 113,587 102,152 90,604 82,877 72,935 44,296 Total 996,199 1,004,027 898,400 819,652 777,218 688,496 344,659 OPERATING INCOME .... 281,085 237,753 230,666 173,937 176,496 144,605 79,498 OTHER INCOME AND DEDUCTIONS Allowance for other funds used during construction .... 63,168 50,263 68,145 57,895 33,691 16,198 7,803 Non-cash return utility plant in service 9,868 40,185 22,002 abandoned projects ....... 5,906 6,682 9,283 8,927 9,256 8,544 Abandoned project costs ....... 570 (11,026)
Federal income tax credit...... 4,648 2,544 3,435 3,417 (328) 2,635 1,166 Income tax benefits from AFDC and non-cash return ........ 30,108 32,256 29,814 23,449 11,774 6,836 Other net ................. 39 3,839 8,307 1,608 11,953 (234) (158)
INCOME BEFORE INTEREST CHARGES 394,822 374,092 360,626 269,233 242,842 178,584 88,309 INTEREST CHARGES Interest on long-term debt .. 187,238 178,985 164,435 130,488 104,080 68,773 39,712 Other interest ............ 12,020 12,263 11,650 6,884 5,186 9,987 2,673 Allowance for borrowed funds used during
. construction ........... (32,930) (25,589) (26,835) (24,819) (11,519) (7,977) (5,961)
Interest charges net .. 166,328 165,659 149,250 112,553 97,747 70,783 36,424 NET INCOME .............. 228,494 208,433 211,376 156,680 145,095 107,801 51,885 PREFERRED STOCK DIVIDENDS .............. 20,104 25,226 2?,370 23,466 22,610 17,536 10,465 EARNINGS AVAILABLEFOR COMMON STOCK ......... 208,390 183,207 184,006 133,214 122,485 90,265 41,420 COMMON STOCK DIVIDENDS .............. 140,432 132,018 118,058 98,155 75,484 58,657 28,375 RETAINED EARNINGS ....... $ 67,958 $ 51,189 $ 65,948 $ 35,059 $ 47,001 $ 31,608 $ 13,045 Average number of shares of common stock outstanding (thousands) .............. 54,014 53,013 49,955 43,530 36,414 30,586 18,181 Earnings per average share ... $ 3.86 $ 3.46 $ 3.68 $ 3.06 $ 3.36 $ 2.95 $ 2.28 Dividends paid per share $ 2.60 $ 2.50 $ 2.38 $ 2.26 $ 2.10 $ 1.94 $ 1.60 35
Financial Statistics 1986 1985 1984 1983 1982 1981 1976 INCOME STATISTICS: (Dollars in Thousands)
Return on average common stock equity percent ........... 15.3 14.3 15.9 13.5 15.2 13.4 11.4 Mortgage bond interest times earned ...... 2.9 2.9 3.0 27 '. 27 2.8 2.4 Interest charges and preferred dividends times earned ...... 1.8 1.9 1.8 1.9 1.9 1.8 Average common stock equity per share $ 25.24 $ 24.17 $ 23.21 $ 22.62 '22.14 $ 22.01 $ 19.96 PROPERTY, PLANT AND EQUIPMENT: r,'3,109,469 Electric $ 4,129,838 $ 3,828,220 $ 3,526,364 $ 2,616,720 $ 2,105,593 $ 1,353,604 Gas . 164,426 154,675 147,120 142,0?2 -: 137,788 133,156 111,062 Common ............. 78,781 72,494 60,775 49,115 ." 50,432 49,278 36,743 Total ............. $ 4,373,045 $ 4,055,389 $ 3,734,259 $ 3,300,656 $ 2,804,940 $ 2,288,027 $ 1,501,409 ACCUMULATED DEPRECIATION $ 769,336 $ 687,472 $ 617,687 $ 563,118 $ 526,471 $ 490,579 $ 324,852 CAPITALIZATION:
Long-term debt ......... $ 1,959,089 $ 1,803,469 $ 1,691,367 $ 1,331,981 $ 1,123,789 $ 863,398 $ 635,526 Preferred stock ......... 217,9?0 252,620 277,300 278,950 236,075 246,812 176,543 Common stock equity .... 1,397,962 1,331,231 1,234,561 1,103,655 888,594 722,709 393,184 Total capitalization .. $ 3,575,021 $ 3,387,320 $ 3,203,228 $ 2,714,586 $ 2,248,458 $ 1,832,919 $ 1,205,253 CAPITALIZATION RATIOS (percent):
Long-term debt ......... 54.8 53.2 52.8 49.1 50.0 47.1 52.7 Preferred stock ......... 6.1 7,.5 8.7 10.3 10.5 13.5 14.6 Common stock equity .... 39.1 39.3 38.5 40.6 39.5 39.4 32.7 NUMBER OF STOCKI IOLDERS:
Common stock ......... 71,935 79,013 81,258 82,982 76,073 71,464 45,146 Preferred stock ......... 6,060 6,364 6,380 6,607 6,669 5,932 6,591 PAYROLL (including pensions, etc):
Charged to operations $ 126,307 $ 118,711 $ 108,707 $ 101,235 $ 94,219 $ 83,044 $ 51,175 Charged to construction and other accounts .... 55,936 57,075 56,573 53,422 51,015 44,504 34,419 Total .............. $ 182,243 $ 175,786 $ 165,280 $ 154,657 $ 145,234 $ 127,548 $ 85,594 Number of employees end of year ........ 4,423 4,360 4,347 4,378 4,426 4,307 4,170
Electric Sales Statistics 1986 1985 1984 1983 1982 1981 1976 Kwh Sales (millions):
Residential 4,791 4,615 4,575 4,398 4,412 4,429 4;093 Commercial 2 772 2,678 2,611 2,536 2,492 2,516 2 322 Industrial 2,899 2,811 2,832 2,691 2,621 2,845 2,369 Public authorities ..... 1,345 1,301 1,269 1,231 1,201 1,218 1,112 Subtotal 11,807 11,405 11,287 10,856 10,726 11,008 9,896 Other electric utilities .. 3,545 5,021 3,158 1,429 1,827 1,602 886 Total 15,352 16,426 14,445 12,285 12,553 12,610 10,782 Operating Revenues (thousands):
Residential $ 457,132 $ 401,345 $ 365,331 $ 335,284 $ 325,124 $ 271,335 $ 151,790 Commercial 235,246 201,654 190,891 169,537 163,755 142,643 79,857 Industrial 187,372 160,089 156,680 133,007 128,633 121,618 58,095 Public authorities ........... 109,181 93,180 86,400 75,490 72,357 64,113 35,808 Subtotal 988,931 856,268 799,302 713,318 689,869 599,709 325,550 Other electric utilities ........ 95,707 171,073 107,209 58,239 64,780 65,863 16,304 Other operating revenues ..... 13,451 24,238 14,737 14,166 14,068 9,168 4,906 Total operating revenues .. $ 1,098,089 $ 1,051,579 $ 921,248 $ 785,723 $ 768,717 $ 674,740 $ 346,760 Operating Revenues per kwh (cents):
Residential 9.54 8.70 7.99 7.62 7.37 6.13 3.71 Commercial 8.49 7.53 7.31 6.69 6.5? 5.67 3.44 Industrial . 6.46 5.70 5.53 4.94 4.91 4.27 2.45 Public authorities ............... 8.12 7.16 6.81 6.13 6.02 5.26 3.22 Subtotal 8.38 7.51 7.08 6.57 6.43 5.45 3.29 Other electric utilities ............ 2.70 3.41 3.39 4.08 3.55 4.11 1.84 Average revenue per kwh ..... 7.15 6.40 6.38 6.40 6.12 5.35 3.22 Number of Customers (average for year):
Residential 635,536 624,751 616,051 608,886 603,904 599,117 564,502 Commercial 64,563 63,368 62,115 60,710 59,482 58,164 54,808 Industrial 1,393 1,389 1,362 1,333 1,340 1,348 1,279 Other . 10,503 10,388 10,138 9,978 9,916 9,687 8,633 Total 711,995 699,896 689,666 680,907 674,642 668,316 629,222 Annual Average Use (kwh):
Residential 7,538 7,387 7,426 7,223 7,306 7,393 7,251 Commercial 42,935 42,261 42,035 41,772 41,895 43,25? 42,366 Industrial (thousands) 2,081 2,024 2,079 2,019 1,956 2,111 1,852 Annual Average Bill:
Residential $ 719 $ 642 $ 593 $ 551 $ 538 $ 453 $ 269 Commercial 3.644 3,182 3,073 2,793 2,753 2,452 1,457 Industrial 134,510 115,255 115,037 99,780 95,995 90,221 45,422 37
Electric Operating Statistics 1986 1985 1984 1983 1982 1981 1976 PRODUCTION DATA:
System Capability (megawatts):
Net generating capability:
Coal fired 2,366 2,366 2,376 1,733 1,731 1,720 1,377 Hydro 68 64 60 56 38 38 38 Diesel 7 7 7 10 ll ll 14 Total . 2,441 2,437 2,443 1,799 1,780 1,769 1,429 Purchased Power Authority ... 563 621 683 680 768 764 848 Other 300 350 242 200 Total system capability .... 3,004 3,058 3,126 2,779 2,898 2,775 2,477 Annual Load Factor (percent) 66.3 64.4 67.3 64.4 65.1 61.0 Coal Burned (thousands of net tons) . 5,334 6,051 5,126 4,666 4,803 4,867 3,395 Coal Heat Value (Btu per lb.) ..... 12,335 12,309 12,202 12,033 11,937 11,600 11,123 Btu per Kwh Generated (net) ..... 9,959 10,093 10,562 10,552 10,670 10,701 11,112 Kwh Production net (millions):
Generated:
Coal fired 13,196 14,769 11,850 10,641 10,748 10,552 6,797 Hydro 338 242 246 213 197 210 249 Total generated .. 13,534 15,011 12,096 10,854 10,945 10,762 7,046 Purchased Authority Power Other ...........
2,590
'464 2,315 491 2,980 650 2,023 714 2,104 663 2,061 904 4,076 869 Total . 16,588 17,817 15,726 13,591 13,712 13,727 11,991 Production Expenses (thousands):
Generated . $ 318,885 $ 353,265 $ 287,299 $ 237,309 $ 248,278 $ 216,805 $ 91,724 Purchased . 29,302 35,984 69,206 66,575 68,781 72,591 49,569 Total . $ 348,187 $ 389,249 $ 356,505 $303,884 $ 317,059 $ 289,396 $ 141,293 Costs per Kwh (mills):
Generated . 23.56 23.53 23.75 21.86 22.68 20.15 13.02 Purchased . 9.59 12.82 19.07 24.32 24.86 24.48 10.02 Operating expense (excl. production) 9.85 8.46 7.97 8.60 8.39 7.35 4.91 Total . 30.84 30.31 30.64 30.95 31.51 28.43 16.69 ELECTRIC OPERATION AND MAINTENANCEEXPENSES (thousands):
Production $ 348,187 $ 389,249 $ 356,505 $ 303,884 $ 317,059 $ 289,396 $ 141,293 Transmission 22,438 23,450 16,093 13,382 13,023 11,308 7,058 Distribution 49,522 46,120 42,494 39,111 36,495 32,287 21,569 Customer accounting ....... 19,220 18,255 17,824 16,603 16,568 13,449 7,672 Customer service . 8,867 7,005 6,149 5,221 4,457 3,719 2,507 Administrative and general 63,328 55,868 42,783 42,508 44,476 40,129 20,068 Total . $ 511,562 $ 539,947 $ 481,848 $ 420,709 $ 432,078 $ 390,288 $ 200,167 38
Gas Department Statistics 1986 1985 1984 1983 1982 1981 1976 Dekatherm (dth) Sales (thousands):
Residential 14,139 13,652 14,120 13,857 15,688 16,412 19,958 Commercial 7,343 7,392 7,761 7,514 8,123 8,044 9,484 Industrial . 5,126 7,790 9,817 9,296 9,804 11,509 9,243 Other 3 373 3,547 3,691 3,718 4,314 3,991 3,808 Subtotal 29,981 32,381 35,389 34,385 37,929 39,956 42,493 Transportation of customer-owned gas ................ 3,287 1,926 Total . 33,268 34,307 35,389 34,385 37,929 39,956 42,493 Operating Revenues (thousands):
Residential $ 91,068 $ 88,677 $ 92,288 $ 92,974 $ 83,16? $ 71,399 $ 40,387 Commercial 42,711 42,952 45,403 44,980 38,192 30,989 16,850 Industrial 24,429 37,734 49,087 49,217 43,383 40,077 13,668 Other 18,818 19,917 21,040 20,695 20,255 15,896 6,492 Subtotal 177,026 189,280 207,818 207,866 184,99? 158,361 77,397 Transportation of customer-owned gas .............. 2,168 921 Total operating revenues $ 179,194 $ 190,201 $ 207,818 $ 207,866 $ 184,997 $ 158,361 $ 77,397 Operating Revenues per dth:
Residential S 6A4 S 6.50 S 6.54 $ 6.71 $ 5.30 $ 4.35 $ 2.02 Commercial 5.82 5.81 5.85 5.99 4.70 3.85 1.78 Industrial 4.77 4.84 5.00 5.29 4.43 3.48 1.48 Other 5.58 5.62 5.70 5.57 4.70 3.98 1.70 Average revenue per dth ......... $ 5.90 $ 5.85 $ 5.87 S 6.05 $ 4.88 S 3.96 $ 1.82 Number of Customers (average for year):
Residential with house heating ....... 105,094 103,822 103,132 102,728 103,031 102,386 97,496 Residential without house heating 8,300 8,440 8,630 8,830 9,106 9,910 12,812 Commercial with space heating ....... 16,121 15,953 15,788 15,316 14,513 13,540 12,985 Commercial without space heating .... 1,406 1,396 1,415 1,410 1,286 1,080 1,266 Industrial 405 409 398 383 384 395 384 Other 1,173 1,159 1,137 1,139 1,135 1,144 1,142 Total . 132,499 131,179 130,500 129,806 129,455 128,455 126,085 Annual Average Use (dth):
Residential 125 122 126 124 140 146 181 Commercial 419 426 451 449 514 550 665 Industrial 12,657 19,046 24,666 24,272 25,531 29,137 24,070 Annual Average Bill:
Residential . S 803 S 790 $ 826 $ 833 $ 742 S 636 $ 366 Commercial 2,437 2,476 2,639 2,689 2,417 2,120 1,182 Industrial 60,319 92,259 123,334 128,504 112,977 101,461 35,594 Cost of Natural Gas Purchased:
Amount (thousands) ......... $ 111,147 $ 129,809 $ 146,040 $ 160,415 $ 132,300 $ 112,176 $ 47,944 Per dth 3.75 3.87 4.09 4.52 3.49 2.82 1.11 Gas Operation and Maintenance Expenses (thousands):
Production $ 111,538 $ 130,269 $ 146,401 $ 160,928 $ 132,724 $ 112,410 S 48,210 Transmission and distribution . 11,013 10,224 9,651 8,908 9,010 8,249 5,939 Customer accounting ........ 4,085 3,977 4,043 3,783 3,947 2,975 1,705 Customer service 2 227 1,779 1,580 1,328 1,141 871 321 Administrative and general 9,589 9,508 9,383 8,703 8,661 7,476 3,681 Total $ 138,452 $ 155,757 $ 171,058 $ 183,650 $ 155,483 $ 131,981 S 59,856 39
Directors Officers Wells P. Allen, Jr. Binghamton Executive Offices Chairman tk Chief Executive 4500 Vestal Parkway East, Binghamton, N.Y. 13903 Officer of the Company Tel. 607/729-2551 James A. Carrigg President 6i Chief Operating Wells P. Allen, Jr. Raymond A. Perine Officer of the Company Chairman itt Chief Vice President Executive Officer Gas Operations Alison P. Casarett . General Counsel:
Dean, The Graduate School James A. Carrigg Bernard M. Rider Huber Lawrence ti'bell Cornell University President ill Chief Vice President 99 Park Avenue Ithaca, N.Y. Operating Officer Electrical Engineering New York, N.Y. 10016 and Supply Eileen D. Dickinson Dolores R. Hix*
Free-lance Economic Researcher Richard Kroboth Vincent W. Rider Transfer Agent for Preferred Stock:
Brainard, N.Y. Assistants to the Chairman Vice President Manufacturers Hanover Trust Company Plant Operations and 450 tVest 33rd Street Everett A. Gilmour Robert B. MacKenzie Engineering Chairman of the Board,'he Executive Vice President New York, N.Y. 10001 National Bank Engineering and Operations Jack H. Roskoz and Trust Company of Norwich Vice President Transfer Agent for Common Stock:
Norwich, N.Y. E. Eugene Forrest Public Affairs Manufacturers Hanover Trust Company Senior Vice President 450 )Vest 33rd Street Alexander Horwitz Administration Michael J. Turkovic Director of various corporations Vice President New York, N.Y. 10001 Binghamton, N.Y. Allen E. Kintigh Purchasing Senior Vice President Charles F. Kennedy Generation John I. Fiala Chairman of the Executive Assistant Vice President and Finance Committee James A. Ackerman Plant Operations Stockholder Inquiries:
of the Company Vice President Communications regarding stock Area Administration John V. Kutz Ben E. Lynch Assistant Vice President transfer requests or lost certificates President Francis X. Carney Transmission and should be directed to the Transfer tvinchester Optical Company Vice President Distribution Operations Agent. Stockholders with changes of Elmira, N.Y. Research and Development address, dividend, dividend reinvest-Irene M. Stillings ment and other inquiries may call toll-Alton G. Marshall Orlin W. Darrach Assistant Vice President Chairman Ei Chief Executive Officer Vice President Consumer Affairs free between 8:00 a.m. and 4:30 p.m.:
Lincoln Savings Bank Customer Services Brooklyn, N.Y. 'Also Assistant Secretary In New York State:
Richard W. Page 1-800-521-1NGE David R. Newcomb Vice President Outside New York State:
Former President Human Resources 1-800-225-5NGE Buffalo Forge Company Buffalo, N.Y.
Ithaca Executive Offices Robert A. Plane Route 13, Dryden Road, Ithaca, N.Y. 14851 The Company files an annual report Director on Form 10-K with the Securities New York State Agricultural Tel. 607/347-4131 and Exchange Commission. Stock-Experiment Station Geneva, N.Y. Richard A. Jacobson Gary G. Chabot holders may obtain a free copy of this Senior Vice President Assistant Vice President report from the Secretary, Ithaca C. William Stuart Corporate Economics Executive Office, upon request.
Chairman Ec Chief Executive Officer C. tV. Stuart Ec Co., Inc. Matthew F. Felo, Jr. Daniel W. Farley Newark, N.Y. Vice President and Assistant Secretary Securities Listed on the New York Treasurer Stock Exchange:
William D. Turner James M. Niefer Group Vice President John D. Scott Assistant Secretary Common Stock The Singer Company Vice President 3.75% Preferred Stock Stamford, Conn. Economics Robert T. Pochily 8.80% Preferred Stock Assistant Treasurer Richard P. Fagan Adjustable Rate Preferred Stock Director Emeritus Comptroller Everett A. Robinson 8.48% Preferred Stock ($ 25 Par Value)
Assistant Comptroller 7Fs% First Mortgage Bonds due 2001 Edgar 1V. Couper Jaime S. Hecht 9ls% First Mortgage Bonds due 2005 Former Chancellor, New York Secretary 9I's% First Mortgage Bonds due 2006 State Board of Regents 8s/s% First Mortgage Bonds due 2007 Binghamton, N.Y.
40
New utility bills are prepared for mailing. NYSEG was the first utility in the state to issue two-page bills that make it easier for customers to under-stand charges for electricity and gas.
Meter readers will use portable, computerized devices soon to record meter readings, reducing errors and customer inquiries.
~ . '
THE ANNUALNEETINC ofstockholders willbe held at the Corporation s General Office Building on Route 18 (Dryden Road) in the Town of Dryden, N.Y. on Nay 8 1987 at ll a.m. Formal notice of the meeting, a proxy statement and form of proxy will be sent to stock-holders in early April.
BULK RATE New York State Electric & Gas Corporation U.S. POSTAGE PAID Box 287, Ithaca, New York 14851 New York State Electric 8 Gas Corporation
STATEMENT OF INCOME (Thousands of Dollars) 10-Year Portion of Common Stock Dividends Nontaxable 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 % Ch~cCe for Federal Income Tax Pu Operating Revenues ~hee1eeee a Electric (1) $ 377,103 $ 436,652 $ 454,860 $ 411,770 $ 384,160 $ 398,392 $ 291,999 $ 225,971 $ 186,264 $ 184,391 $ 149,884 152 None 1966 $ 2.96 Gas(2) .. 61 448 68 150 68 329 61 988 61 649 46 489 35 994 28 813 24 738 23 449 20 831 195 1985 2.90 None Total 438 551 504 802 523 189 473 738 445 809 444 881 327 993 254 784 211 002 207 840 170 715 157 1984 2.75 None 1983 2.60 None Operating Expenses 1982 2AS None Operation 240,196 316,553 352,642 325,158 321,419 333,966 235,252 169,742 132,554 133,688 100,917 138 1981 2.33 7 Maintenance. 19,733 14,884 13,814 14,456 12,937 12,450 11,132 9,818 8,151 8,098 6,794 190 1980 2.18 90 Depreciation. 24,894 24,249 22,531 20,524 16,923 16,108 15,220 14,839 13,393 13,279 12,859 94 1979 1.99 None Operating Taxes 42,551 41,675 39,681 35,693 31,474 29,274 24,481 21,268 18,779 18,560 16,975 151 1978 1.94 None 1977 1.60 None Federal Income Tax 31,965 20,781 24,150 15,123 6,102 7,381 (2,534) 171 6,504 4,552 4,050 689 Deferred Income Tax Net 7489 17 301 10 058 10 157 11,861 4,169 8 744 5 794 3,387 2 547 2 342 220 1976 1.72 10 Total 366 828 435 443 462 876 421 111 400 71 6 403 348 292 295 221 632 182 768 180 724 143 937 155 (a) As initiallyreported to shareholders; subject to acceptance by U.S. Treasury Department.
Operating Income. 71,723 69 359 60 313 52 627 45 093 41 533 35 698 33 152 28 234 27 116 26 778 Other Income and Deductions Allowance for Equity Funds Used During Construction 21,594 18,644 15,709 11,105 9,729 6,198 4,495 3,476 2,388 1,560 796 Federal Income Tax Credit..... (289) (18) (23) 45 537 928 41 8 933 721 628 409 (171)
Deferred Income Tax Credit.... 6,979 6,588 4,988 4,560 4,044 1,820 253 178 138 75 30 Other Net 371 ~604 621 ~389 461 ~533 ~295 ~333 ~348 ~90 ~84 542 Total 28 655 24 610 21 295 15 321 14 771 8 413 4,871 4 254 2 899 2 173 1 151 Income before Interest Charges .... 100 378 93 969 81 608 67,948 59 864 49,946 40 569 37.406 31 133 29 289 27 929 259 Interest Charges Interest on Mortgage Bonds .......... 37,226 37,200 33,664 29,674 24,918 21,043 15,017 11,306 10,750 10,627 10,469 256 Interest on Unsecured Long-term Debt .. 6,105 3,220 670 365 374 1,815 3,778 5,195 762 805 1,467 316 Interest on Short-term Debt........... 325 1,372 2,116 3,399 4,296 4,763 3,422 1,673 1,075 704 (100)
Other Interest 1,637 931 627 570 636 652 305 262 272 793 308 431 Allowance for Borrowed Funds Used During Construction (10,131) (7,788) (6,212) (5,324) (5,033) (7,718) (7,287) (4,536) (2,640) (1,831) (1,014) (899)
Amortization of Premium and Expense on Debt 311 241 179 95 56 73 866 Total 35 494 34 297 30 471 27 712 24 535 20 267 16 671 15 712 10 873 11 542 12 002 196 Net Income 64,884 59,672 51,137 40,236 35,329 29,679 23,898 21,694 20,260 17,747 15,927 307 Dividends on Preferred Stock 5614 6184 6459 5783 4126 4126 4126 4126 4126 3626 2866 96 Income Available for Common Stock .. 59,270 53,488 44,678 34,453 31,203 25,553 19,772 17,568 16,134 14,121 13,061 Dividends on Common Stock 40 393 33 945 28 860 23 480 20 638 16 751 13 308 10 961 10 531 8 966 8 382 Retained Earnings $ 18 877 $ 19 543 $ 15 818 $ 10 973 $ 10 565 $ 8 802 $ 6 464 $ 6 607 $ 5 603 $ 5 155 $ 4 679 303 Common Stock:
Average Shares Outstanding (000's) ....... 13,207 11,458 10,087 8,745 7,979 6,867 5,851 5,373 5,310 4,873 4,873 171 Earnings Per Share on Average Shares Outstanding Dollars . 4.49 4.67 4A3 3.94 3.91 3.72 3.38 3.27 3.04 2.90 2.68 68 Dividends Declared Per Share Dollars .... 2.96 2.93 2.78 2.63 2.51 2.39 2.20 2.04 1.96 1.84 1.72 72 Dividends Paid Per Share Dollars........ 2.96 2.90 2.75 2.60 2A8 2.33 2.18 1.99 1.94 1.80 1.72 72 Pay-out Ratio on Dividends Declared-Per Cent. 62 67 62 Retained Earnings Per Share on Average Shares Outstanding Dollars.......... 1.71 1.57 1.25 1.32 1.28 1.10 1.23 1.06 1.06 .96 (1) See footnote (a) on page.13.
(2) See footnote (a) on page 14.
'hange of 1,000 per cent or more.
ELECTRIC AND GAS REVENUES TO TOTAL OPERATING REVENUES Notes 600 V) lU 0
500 400
~ Electric Gas O
300 V) c 0 200 100 CI 0 I-j 1976 77 78 79 80 81 82 83 84 85 86 OPERATION AND MAINTENANCE EXPENDITURES TO TOTAL OPERATING REVENUES 600 Total Operating Revenues 500 tO Operating and Maintenance Expenditures =O 400 O
o 300 lO c
~
o 200 100 1976 77 78 79 80 81 82 83 84 85 86 USE OF REVENUE DOLLAR (IN CENTS) 1976 19S6 Cost of Fuels 470 Cost of Fuels 410 Fuel Used ln Elec. Gen.
331 250 Purchased Gas Fuel Used in Elec. Gen.
Sg Purchased Gas O 7g Purchased interest on Bds & Nts CD Purchased K Elect. Interest on Bds & Nts 100 7C 7$
Q Wages & Benefits I- Oepreciation Wages & Benefits 104 K SC 100 Depreciation 4p Reinvested Earnings 4g Other (net)
I- 1O 3g 19l'0l'Oividends cC I- Dividends Reinvested Earnings Taxes
INCOME FROM OPERATIONS ELECTRIC AND GAS DEPARTMENTS (Thousands of Dollars) 10-Year Ratio of Corporate 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 % ChancCe rat1 Revenues Electric Electric Gas Operating Revenues. $ 377 103 $ 436 652 $ 411 770 $ 398 392 $ 291,999 $ 225,971 $ 1 86 264 $ 184 391 $ 149,884 152 ~per Cnrr ~per Cenr 1986 86 14 Operating Expenses 1985 86 14 Production Operation......... 154,162 228,637 267,559 242,938 242,688 270,631 183,727 128,509 97,415 101,347 72,553 112 1984 87 13 1983 87 13 Maintenance....... 8,170 4,925 5,096 5,245 4,555 4,767 3,964 3,159 2,543 2,699 2,247 264 Transmission Operation......... 3,320 2,888 2,822 '2,462 2,895 2,412 2,020 1 773 1,792 1,582 1,604 107 1982 1981 86 90 14 10 Maintenance....... 1,652 1,036 863 1,275 1,055 1,020 1,098 1,340 971 843 582 184 1980 89 11 Distribution Operation......... 5,619 5,629 5,331 4,594 4,803 4,558 4,017 3,527 3,260 3,000 2,917 93 1979 89 11 Maintenance....... 7,039 6,628 5,683 5,622 5,155 4,643 4,372 3,673 3,210 3,172 2,659 165 1978 88 12 Customer Accounts and Service ......
1977 89 11 9,213 8,531 7,985 7,287 7,196 5,978 4,852 4,213 3,991 3,695 3,468 166 1976 88 12 Sales .
Administrative 8 General Operation.... 26,354 23,343 21,885 20,249 18,249 16,530 13,743 11,304 10,924 9,211 7,701 242 Maintenance .. 879 751 601 700 639 530 553 602 454 341 314 180 Ratio of Corporate Total Operation and Maintenance...... 216,408 282,368 317,825 290,372 287,235 311,069 218,346 158,100 124,560 125,890 94,045 130 eratin Income Depreciation 22,875 21,255 19,474 18,676 14,871 13,974 13,633 13,305 11,887 11,813 11,431 100 Electric Gas Operating Taxes 36,558 35,669 33,754 30,413 26,701 25,273 21,141 18,394 16,129 15,985 14,507 152 ~Per Cenr ~riant Federal Income Tax 29,443 17,721 20,789 15,027 4,669 6,512 (2,328) (26) 5,658 4,426 4,035 630 1986 91 9 Deferred Income Tax Net............ 6 822 16 688 9 228 9 186 11 167 3,951 8 428 5 759 3 141 2,241 2 226 206 1985 1984 91 89 9
11 Total Operating Expenses........... 312 106 373 701 401 070 363 674 344 643 360 779 259 220 195 532 161 375 160 355 126 244 147 1983 91 9 1982 88 12 Operating Income. $ 64 997 $ 62 951 $ 53,790 $ 48 096 $ 39 517 $ 37 61 3 $ 32 779 $ 30 439 $ 24 889 $ 24 036 $ 23 640 175 1981 91 9 1980 92 8 1979 92 8 Gas 1978 88 12 Operating Revenues. $ 61 448 $ 68 150 $ 68 329 $ 61 968 $ 61 649 $ 46 489 $ 35 994 $ 28813 $ 24 738 $ 23 449 $ 20 831 195 1977 89 11 1976 88 12 Operating Expenses Production Operation......... 33,555 40,484 40,222 41,211 39,616 28,690 22,602 16,763 11,771 11,783 9,809 242 Maintenance....... 54 41 40 48 46 68 52 73 50 54 36 50 Transmission Operation......... 465 386 450 447 378 370 324 311 280 284 240 94 ratin Ratio Maintenance....... 167 145 273 288 245 296 241 214 192 224 197 Electric Gas corlx3rate (15)
Distribution Operation......... 1,932 1,882 1,697 1,666 1,663 1,427 1,256 1,148 1,074 987 866 123 1986 1985 73.1 77.7 83.9 85.2 74.6 78.7 Maintenance....... 1,658 1,268 1,192 1,214 1,181 1,078 795 687 681 722 710 134 Customer 1984 81.6 84.3 81.9 Accounts and Service ...... 1,587 1,552 1,491 1 372 1,334 1,052 761 629 587 521 557 185 1983 82.4 91.0 83.6 Sales .. 94 93 95 91 54 87 39 1982 85.6 87.5 85.9 Administrative & General Operation.... 3,895 3,128 3,106 2,841 2,543 2,231 1,911 1,565 1,460 1,278 1,202 224 1981 87.9 89.2 88.1 Maintenance .. 114 90 65 64 61 48 57 70 50 43 49 133 1980 86.7 91.6 87.2 1979 84.0 89.8 84.6 Total Operation and Maintenance...... 43,521 49,069 48,631 49,242 47,121 35,347 28,038 21,460 16,145 15,896 13,666 218 1978 81.9 82.1 81.9 Depreciation 2,019 2,994 3,057 1,848 2,052 2,134 1,587 1,534 1,506 1,466 1,428 41 1977 83.4 85.0 83.5 Operating Taxes 5,993 6,006 5,927 5,280 4,773 4,001 3,340 2,874 2,650 2,575 2,468 143 1976 80.1 84.3 80.6 Federal Income Tax. 2,522 3,060 3,361 96 1,433 869 (206) 197 846 126 15 Deferred Income Tax Net........:... 667 613 830 971 694 218 316 35 246 306 116 475 (d) The Operating Ratio, expressed as a percentage, Total Operating Expenses........... 54 722 61 742 61 806 57 437 56 073 42 569 33 075 26 100 21 393 20 369 17 693 209 represents the relation of total operating expenses, excluding fedeal income taxes, to operating revenues.
Operating Income .. $ 6726 $ 6408 $ 6523 $ 4531 $ 5576 $ 3920 $ 2919 $ 2713 $ 3345 $ 3080 $ 3138 114 (Expressed in Per Cent),
Ratio of Operating Income to Year-end Net Plant (a):
Electric (includes allocation of common plant) ... 19.32 19.24 16.90 15.29 12.78(c) 12.33 10.71 9.87 8.95(b) 8.57 8.60 Gas (includes allocation of common plant)...... 14.25 14.64 15.56 10.64 13.37 9.75 7.38 7.23 8.95 8.20 8.53 Corporate Total Maintenance and Depreciation as Per Cent 18.70 18.69 16.74 14.74 12.85(c) 12.03 10.33 9.56 8.95(b) 8.52 8.59 g 7ry (, /0 0 47$ 2. ~K of Total Revenue . 10.18 7.75 6.95 6.70 6.42 10.21 10.29 11.51 (a) Net Plant excludes construction work in progress.
(b) Net Plant for 1978 excludes the 10% interest in the Roseton Phnt purchased as of 12/31/78. Change of 1,000 per cent or more.
9 (c) Net Phnt for 1982 excludes the 5% interest in the Roseton Plant purchased as of 12I31N2.
Notes UTlLITYPLANT 950
~ Construction Work Net utility plant pluS COn-struction work in progress, 900 850 800 750
~ ffet Utility Plant increased 156o%%d during the last 10 years. The average annual growth rate during this period was 9.5%.
m 700 650 Gross additions to ubkty phnt 600 (including construction work 550 in progress) in the last 5 o soo years amount to about 39%
450 00 of total 1986 phnt. The com-0 350 parable figure for the hst 10 300 years is 680%%d g 250 200 Net utility plant increased 150 24% during the ten.year per-100 iod 1976-1986 and the aver-50 age annual growth rate was 0 1.P%%d.
1976 77 78 79 80 81 82 83 84 85 86 CA I-K l-CAPITALlZATIQNAND SHORT TERM DEBT cC CQ Ch K
1000 900 800
~
r
~
f Short Term Oebt Long Term cC ~ Oebt O rg 7OO Prefened fL I-O UJ
~
0 o
600 5oo 0 ~ Stock Common Equity a 400 Capitalization increased 0 184% during the last 10 K '= 300 years while capitalization O
I- ~ 200 plus short-term debt in-creased 165% during the cC f?: same period. The average 100 annual rates of growth were 0- 10.7% and 9.9% respec-O tively.
1976 77 78 79 80 81 82 83 84 85 86 O
CL UJ O
O K
SUMMARY
BALANCESHEET AT DECEMBER 31 (Thousands of Dollars)
ASSETS 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 UtilityPlant (page12) $ 636,761 $ 611,905 $ 585,538 $ 567,160 $ 560,337 $ 524,517 $ 511,167 $ 498,282 $ 486,116 $ 445,235 $ 428,543 Less Accumulated Depreciation 253,168 240,878 225,284 210 025 196,133 179 268 165 487 152,407 140 813 127 049 116 709 Net UtilityPlant 383,593 371,027 360,254 357,135 364,204 345,249 345,680 345,875 345,303 318,186 311,834 Construction Work in Progress 555,735 441,863 343,253 253,630 186,777 160,249 123,827 98,019 72,546 49,337 36,610 Other Property and Investments 6,290 3,602 3,202 2,183 2,109 1,840 1,968 1,797 1,787 Current Assets Cash 1,690 1,653 1,264 1,576 2,133 2,958 3,341 3,267 3,282 3,590 3,031 Temporary Cash Investments 6,413 14,350 10,518 Special Deposits 19,727 53,473 7,730 2,929 6,200 252 247 165 258 191 374 Accounts Receivable from Customers 32,344 43,448 43,206 43,324 43,159 39,151 31,947 21,428 16,962 14,824 12,056 Receivable Nine Mile 2 Settlement 26,100 Accrued Unbilled UtilityRevenues. 8,475 8,963 8,377 7,910 7,529 7,535 5,771 5,547 4,547 4,769 4,308 Federal Income Tax Carry-back . 4,676 3,085 Other Receivables . 3,235 2,105 2,151 2,231 2,901 1,148 1,878 840 1,594 1 223 1,814 Materials and Supplies . 23,024 25,975 34,636 31,204 20,296 26,879 27,264 24,334 16,228 14,623 13,489 Prepayments . 8 119 6 524 5 403 5 106 4 694 4 259 3 771 3,163 3 010 2,646 2 732 129,127 156491 113,285 94,280 86,912 82 182 78,895 61 829 41 866 37 804 Deferred Charges Unamortized Debt Expense . 9,973 5,674 4,289 3,227 3,305 2,493 2,190 6,711 2,550 2,029 3,294 Unamortized Project Costs** 2,731 3,042 3,312 3,648 3,965 4,449 411 517 834 539 401 Unamortized Investment in Sterling Project'* .... 9,063 15,083 .13,795 17,698 21,127 Deferred Sterling Cancellation Charges 1,012 990 6,504 6,404 1,143 3,982 3,603 2,576 1,615 Deferred Electric Fuel Costs . 580 519 1,766 2,761 4,814 6,410 10,351 Deferred Gas Costs 894 1,579 2,207 1,874 1,362 1,000 623 1,756 1,555 1,642 1,472 Deferred Environmental Costs. 599 735 870 1,664 2 773 3,422 3,099 513 616 771 927 Deferred Roseton Litigation Settlement 6,449 7,371 8,292 9,213 Deferred Finance Charges Nine Mile 2 Project .. 41,971 22,119 9,200 3,259 Other' 9 681 8 429 8 011 7 229 7 561 3 824 3 661 2,573 1,591 1,637 1 373 82,953 65 541 58 246 56 977 46 050 21 598 20 335 16 052 10 749 9 194 9 082 Total. $ 1 157 698 $ 1 038 524 ~$ 878 240 ~$ 764 205 $ 686 052 $ 611 118 $ 570 705 $ 523,572 $ 476 266 $ 41 9 420 $ 396 181 LIABILITIES Capitalization (page 17). $ 960 21 5 $ 881 477 $ 740 403 $ 618 600 $ 573 967 $ 498 968 $ 404,482 $ 405 352 Current Liabilities Long-term Debt Maturing within One Year .. 11,000 6,000 18,000 12,000 8,000 4,200 Sinking Fund Requirements . 175 175 175 175 175 175 175 175 175 175 175 Notes Payable to Banks 18,000 Notes Payable (Commercial Paper) . 23,000 26,500 16,500 45,000 23,000 17,000 20,000 Accounts Payable. 27,234 22,259 26,850 23,080 14,991 26,669 25,808 18,411 12,519 10,609 9,725 Accrued Taxes 4,966 5,019 5,195 3,697 6,249 6,073 7,183 5,767 5,988 4,414 2,985 Accrued Interest. 8,055 8,885 7 322 6,533 6,626 5,855 4,022 3,148 2,523 2,689 2,720 Accrued Vacation 2,806 2,675 2,553 Customer Deposits. 2,809 2,688 2,479 2,677 2733 2,840 2,677 2,744 2,698 2,543 2,414 Dividends Declared 11,794 10,457 9,431 8,124 6,562 5,654 4,696 3,933 3,664 3 322 2,812 Sterling Cancellation Charges 444 622 1,643 3,286 Other 10,057 4 560 8,046 6,300 5,887 5 190 5,775 5 262 3 647 2 678 2,777 68,340 57,340 63,694 87 872 69 723 74 956 86 336 96,440 54,214 51,430 47,808 Deferred Credits and Other Liabilities* 17,833 8,091 6,159 5,746 3,568 6,143 4,223 2,439 2,105 1,937 962 Deferred Finance Charges Nine Mile 2 Project .. 41,304 22,119 9,200 3,259 Accumulated Deferred Income Taxes 70 006 69 497 58 784 48 728 38 794 31 051 28 702 20211 14 595 11 347 8 875 Total. $ 1,157,698 $ 1,038,524 $ 878,240 $ 764,205 $ 686 052 $ 611 118 $ 570,705 $ 523,572 $ 476,266 $ 419,420 $ 396,181 10
'Rechssified for 1980 to conform to current presentation.
"Rechssified for 1 982 to conform to current presentation.
Notes NET FUNDS FROM OPERATIONS TO TOTAL SOURCE OF FUNDS 250 From Internal Sources
~ 200 From External Sources O
~ 150 0
< 100 0
VH 1976 77 78 79 80 81 82 83 84 85 86 INTERNAL CASH FLOVf AND CASH CONSTRUCTION CHARGES 140 Cash Construction Charges 120 Internal ttl 100 Cash O
O 80 Flow'NTERNAL 0
60 CASH FLOW O REPRESENTS"NET
.-'= FUNDS FROM INTERNAL 40 SOURCES" LESS DIVIDENDS" 20 1976 77 78 79 80 81 82 83 84 85 86
STATEMENT OF RETAINED EARNINGS (Thousands of Dollars) 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Balance January1 . $ 145,856 $ 126,313 $ 110,495 $ 99,522 $ 88,957 $ 80,155 $ 73,691 $ 67,084 $ 61,481 $ 56,326 $ 51,647 Net Income 64 884 59 672 51 137 40 236 35 329 29,679 23 898 21 694 20 260 17 747 15 927 210 740 185 985 161 632 139 758 124 286 109,834 97 589 81 741 74 073 67 574 Dividends Declared cash:
On Cumulative Preferred Stock. 5,614 6,459 5,783 4,126 4,126 4,126 4,126 4,126 3,626 2,866 On Common Stock 40 393 33 945 28 860 23 480 20 638 16 751 13 308 10 961 10 531 8 966 8 382 Total. 164,733',184 46,007 40,129 35,319 29 263 24764 20877 17434 15,087 14,657 12,592 11,248 Balance December 31 . $ $ 145,856 $ 126313 $ 110 495 $ 99 522 $ 88 957 $ 80 155 $ 73,691 $ 67,084 $ 61,481 $ 56,326 Pursuant to the terms of the 4.85% promissory notes, due 1995, $ 156,319 is not restricted with respect to the declaration of dividends on common stock at December 31, 1986.
STATEMENT OF CHANGES IN FINANCIALPOSITION ($000)
SOURCE OF FUNDS 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Funds from Operations:
Net Income. $ 64,884 $ 59,672 $ 51,137 $ 40,236 $ 35,329 $ 29,679 $ 23,898 $ 21,694 $ 20,260 $ 17,747 $ 15,927 Income Items not Requiring Current Outlays:
Depreciation Accruals:
Charged to Depreciation Expense . 18,873 19,182 18,627 17,095 16,514 16,108 15,220 14,839 13,393 13,279 12,859 Charged to Other Income Accounts 781 765 738 767 697 629 586 530 508 265 243 Amortization of Investment in Sterling Project 6,021 5,067 3,904 3,429 409 Deferred Income Tax Net 510 ~
10,713 10,056 9,935 7,817 2,349 8,491 5,616 3,249 2,472 2,312 Allowance for Funds Used During Construction . (31,725) (26,432) (21,921) (16,429) (14,762) (13,916) (11,782) (8,012) (5,028) (3,391) (1,810)
Other Net. ~10 359 3 054 4 616 2 232 723 1 973 1,314 355 577 495 248 Net Funds from Operations. 69 703 72 021 67 157 57,265 46 727 36 822 37 727 32 959 30 867 Available from Outside Sources:
Mortgage Bonds. 50,000 92,250 45,000 44,900 30,000 50,000 20,000 4,500 Pollution Bond Funds Held by Trustee Net... 35,668 (46,005) 28,424 3,449 .
(5,730)
Term Loan Notes .
Preferred Stock. 20,000 15,000 Common Stock. 65,221 27,889 25,927 19,835 15,619 19,175 10,340 Short-term Debt 10 000 22 000 6 000 17,000 Total Funds from Outside Sources.... 150,889 75,893 101,313 49,376 69 005 45,619 69,175 42,000 51,340 19,500 17,000 Total Sources of Funds $ 220 592 $ 147 914 $ 168 470 $ 106641 $ 115 732 $ 82 441 $ 1 06 902 $ 77 022 $ 84 299 $ 50,367 $ 46 779 APPLICATION OF FUNDS Construction and Plant Expenditures:
Gross Charges for Construction'. $ 145,082 $ 129,918 $ 112,268 $ 84,373 $ 83,940 $ 56,050 $ 41,455 $ 40,526 $ 64,513 $ 32,343 $ 25,693 Less Allowance for Funds Used During Construction . 31,725 26,432 21,921 16 429 14 762 13 916 11 782 8 012 5,028 3,391 1,810 Net construction expenditures 113 357 103 486 90 347 67 944 69 178 42 134 29 673 32514 59 485 28 952 23,883 Dividends. 46,007 40,129 35,31 9 24 764 20 877 17,434 15,087 14,657 12,592 11,248 Retirement of Securities and Short-term Debt:
Mortgage Bonds. 55,000 11,000 6,000 12,000 Convertible Debentures 8,000 8,000 Long-term Promissory Notes. 175 175 175 175 175 175 175 175 175 4,375 325 Short-term Debt 23,000 3,500 1,500 27,000 3,000 Term Loan Notes . 10 000 10 000 15 000 55 175 175 34 175 3 675 6 175 19 675 49 175 15 175 8 175 7 375 325 Net Increase (decrease) in Working Capital, other than Short-term Debt and Current Maturities of Long-term Debt and Pollution Control Notes . (2,696) 3,555 4,206 169 8,232 6,170 7,722 (769) 1,240 9,796 Changes in Deferred and Other Accounts Net............ 8 749 569 4 423 5 590 7,383 4 450 6 524 2 751 208 1 527 Total Application of Funds ... $ 220,592 $ 147914 $ 168 470 $ 106,641 $ 115 732 $ 82 441 $ 106,902 $ 84,299 $ 50,367 $ 46 779
- Exotudes S26,100 Nine Mile 2 Settlement eceivabt e from Niagara Mohawk.
l2, 7o g/g g Q X 2 -QP
GROSS CONSTRUCTION CHARGES Notes 180 160 I
tu 14O Electric Production Of total construction charges of $ 816,568,000 in the past 10 years, $ 52,800,000 represents o 120 Other the cost of the Company's O 35c/o interest in the Roseton v- 100 Electric Generating Plant, 0
$ 465,729,000 represents the 80 investment to date in the con-0 struction of the Nine Mile 60 Point No. 2 nuclear facility,
> 4o
$ 88,385,000 represents the cost of steam generating facili-ties at the Danskammer, Point
.o Electnc Generating Plant and
$ 14,104,000 represents costs zO E3 1976 E3 77 E3 78 79 80 81 82 83 84 85 86 related to the abandoned Ster-ling Nuclear Phnt Project.
I-M O
0 NET UTILITYPLANT TO O TOTAL OPERATING REVENUE z 550 z Net Utility 500 Plant z 450 Total Operating 400 (0 Revenue LJI 0 350 C9 z Cl v-0 300 K 250 t
O 200 O 150 I-zIJl 100 50 tif I-1976 77 78 79 80 81 82 83 84 85 86 Cl K
RATIO OF ACCUMULATED DEPRECIATION C9 TO TOTAL DEPRECIABLE PLANT z
z 100 90 80 C5 70 z t- 60 cC The Company's annual pro-I- visions for depreciation are I
<~ 50 CL 40 computed on the straightline methodusing rates based on the estimated useful lives O 30 and estimated net salvage of I- properties.
z 20 Total depreciable plant in-10 cludes total utilityphnt in ser-I- vice, exclusive of nondepre.
ciable items such as hnd, I- 1976 77 78 79 80 81 82 83 84 85 86 intangibles, etc.
V)
DETAILOF UTILITYPLANT AND ACCUMULATEDDEPRECIATION (Thousands of Dollars) 10-Year 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 ~%Ghan e UtilityPlant December 31 Electric ~
$ 522,866 $ 506,204 $ 487,188 $ 472,340 $ 470,889 $ 441,945 $ 433,640 $ 425,811 $ 416,355 $ 377,753 $ 363,948 44 Gas 70,098 65,868 61,886 60,152 58,322 55,642 - 53,551 50,520 49,335 48,726 46,756 50 Ratio of Common. 43 797 39 833 36 464 34 668 31,126 26 630 23 876 21 061 20 426 18 766 17 838 146 Accumulated Net Ut(T(ty Depreciation Rant Per Total UtilityPlant......... 636,761 611,905 585,538 567,160 560,337 524,517 511,167 498,282 486,116 445,235 428,543 49 to Total Depre- Doihr of ciabte Plant Total Construction Work in Progress .. 666 736 441 663 343 263 263 630 186 777(a) 4 60 249 4 23 827 88 018 72 646 49 337 36610 December 31 Revenue Total. 1 182486 1 063 768 828 781 820 780 747 114 684 766 634 994 696 301 668 662 484 672 466 163 156 ~Pet Call t ~of~tars 1986 40.8 .87 1985 40.3 .73 Accumulated Depreciation December 31 1984 39.3 .69 Electric . 212,601 .202,685 190,723 178,217 166,916 152,555 141,251 129,599 119,904 107,185 98,673 115 1983 37.6 .75 Gas. 26,807 25,636 23,238 20,642 19,397 17,788 16,066 14,816 13,693 12,647 11,680 130 1982 35.4 .82 34.6 .78 Common ..;. 13 760 12 667 11,323 4 1 4 66 8 820 8 326 8 170 7 092 7216 7,217 6 366 116 1981 1980 32.8 1.05 Total 263 168 240 878 336 284 21 0 036 4 96 4 33 179 288 166 487 162 407 140 813 127 048 116 700 117 1979 31.0 1.36 1978 29.3 1.50 Net Utility December 31 (b) 1977 29.0 27.6 1.53 1.83 1976 Electric . 310,265 303,519 296,465 294,123 303,973 289,390 292,389 296,212 296,&1 270,568 265,275 18 Excluding Const ruction Work in Progress.
Gas. 43,291 40,232 38,648 39,510 38,925 37,854 37,485 35,704 35,642 36,079 35,076 23 Common 30 037 27 276 26 141 23,502 21,306 18,005 15,806 13 368 13,210 11 639 11 483 162 Total $ 383,593 $ 371 027 $ 360 264 $367 136 $ 364 204 $ 346 249 $ 346 680 $ 346 876 $ 346 303 $ 31 8,186 $ 31 1 834 24 Gross Construction Charges of Dollars Gross Additions to Plant During Year (b) Electric Electric Production.............. $ 7,867 4,647 $ 6,208 $ (3,808)(e) $ 19,513(d) $ 4,51 6 $ 816 $ 3,850 $ 34,396(c) $ 3,275 2,243 Total Production Other Other Electric. 13,327 17,575 10,300 7,638 (e) 12,270 9,208 8,755 7,800 7,125 12,976 10,415 1986 171,182 144,255 26,927 Gas. 4,640 4,171 1,859 2,081 3,228 2,276 3,143 1,352 754 2,235 1,379 1985 129,918 103,495 26,423 4 278 1984 112,268 93,271 18,997 Common 6 376 4 916 3 986 6 177 3 628 2 833 2061 2 828 1,130 828 14,828 1983 84,373 69,545(e)
Total . 31 210 31 300 3 886 40 188(d) 19 628 16 647 15,053 46 >03(ci 19 616 14866 1982 83,940(d) 68,872(d) 15,068 1981 56,050 41,373 14,677 1980 41,455 25,799 15,656 Retirements During Year 1979 40,526 28,564 11,962 Electric Production... 2,061 3,067 104 771 987 414 135 413 40 363 563 1978 64,513(c) 51,622(c) 12,891 Other Electric. 2,477 1,556 1,609 1,606 1,923 1,689 1,781 1,925 2,083 2,274 1977 32,343 20,227 12,116 Gas. 410 190 124 251 140 131 111 167 145 265 210 10-Year Common. 1,414 897 1 680 452 878 631 651 526 1 163 213 391 Total 816,568 647,023 169,545 Total. 6 362 4 164 3373 3083 3611 3088 2686 2887 3273 2824 3438 Adjustments During Year Ratios to Net Plant Electric Production... (137) 4 (253) (3,090) 15 (608) (2) (230) Percent Other Electric. (4) 7 8 67 (346) 2 (37) lug-term Gas (408) (54) (1) 2 Debt and Mortgage Common . 10 ~103 ~43 ~25 5 265 Preferred Stock Bonds Total. 8 ~88 ~884 10 ~757) ~3,178 ~176 ~848 1986 1985 1984 61.58 40.89 44.41 Net Additions to Plant During Year (b) 1983 58.12 43.78 1982 62.81 50.53 Electric Production............ 5,806 1,443 6,104 (4,575) 18,273 1,012 696 3,437 33,748 2,910 1,450 1981 59.60 46.19 Other Electric. 10,855 17,575 8,744 6,025 10,671 7,293 7,133 6,019 4,854 10,895 8,104 1980 59.21 44.62 Gas 4,230 3,981 1,735 1,830 2,680 2,091 3,031 1,185 609 1,970 1,171 1979 57.81 35.93 Common . 3 866 3 368 1 786 3 643 4 4 86 2 964 2 036 1 626 1 670 917 702 1978 36.26 1977 62.39 41.22 Total. $ 24 866 $ 26 367 $ 18,378 $ 6,833 $ 36,820 $ 13,360 $ 12,886 $ 12 166 $ 40,881 8 46 682 $ 11 427 1976 62.56 42.19 (a) Construction work in progress reflects transfer of $ 20,341 to extraordinary property losses for the (d) Gross additions include purchase of an additional 5% interest in the Roseton Plant at original book abandoned Sterling Nuclear Plant. cost of $ 17,056.
(b) Excluding Construction Work in Progress. Gross construction charges, however, reflect original book cost less accumulated depreciation in the (c) Gross additions include purchase of an additional 10% interest in the Roseton Plant at original book amount of $ 3,781.
cost of $ 33,620. (e) Adjustments include Roseton litigation settlement.
l2 Gross construction charges, however, reflect original book cost less accumulated depreciation, in the amount of $ 3,799.
" Change of 1,000 percent or more.
g-7g g(oOO>Q-0+
TOTAL ELECTRIC OPERATING REVENUES (OWN TERRITORY)
Notes 400
~ Resldentlal
~
350 300 ~ Commercial Oo 250 ~ Industrial 0
M 200 ~ Other 0 150 g 100 ro g Pp rt 1976 77 78 79 80 81 82 83 84 85 86 TOTAL ELECTRIC SALES (OWN TERRITORY) 4500
~ Resldentlal 'o 4OOO
~ Commercial 3500
~ Industrial 3000
~ Other 0
0 2500 2000 1500 K co 1000 O
I 500 C>
1976 77 78 79 80 81 82 83 84 85 86 4
4 AVERAGE USAGE PER CUSTOMER AND AVERAGE REVENUE PER KifH (RESIDENTIAL) 4K 8000 7000 12.0 10.5
~ Average Revenue Average Use es: 6000 90 A I-K 5 5000 O
7.5 K
4000 6.o ~
O 3000 4.5 hd I-2000 30 o O 1000 1.5 C
1976 77 78 79 80 81 82 83 84 85 86 4
ELECTRIC REVENUES, SALES, AND CUSTOMERS 10-Year 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 ~%0hah e Revenues Thousands of Dollars Residential . $ 139,416 $ 144,494 $ 141,034 $ 126,332 $ 116,294 $ 110,135 $ 90,265 $ 72,359 $ 65,368 $ 65,225 $ 57,134 144 Commercial . 103,468 118,329 112,107 100,671 92,536 87,092 70,109 54,122 47,339 46,023 39,680 161 Industrial 102,485 113,247 102,424 89,483 82,265 83,892 63,187 50,545 41,561 38,571 30,429 237 Street 8 Area Lighting. 3,863 4,068 3,979 3,802 3,799 3,843 3,473 3,007 2,767 2,802 2,610 48 Other. ~1639 4 493 5 670 3 333 3 353 '2 101 1 564 1 672 1 749 1 745 1 708 (196)
Total Own Territory (a) 347,593 384,631 365,214 323,621 298,247 287,063 228,598 181,705 158,784 154,366 131,561 164 Other Utilities 29510 52 021 89 646 88 149 85 913 111 329 63 401 44 266 27 480 30 025 18 323 61 Total Revenues $ 377 103 $ 436 652 $ 454 860 $ 411770 $ 384160 $ 398392 $ 291999 $ 225 971 $ 1 86 264 $ 184 391 $ 149 884 152 Sales Millions of Kwh.
Residential. 1,311 1,237 1,238 1,181 1,155 1,164 1,169 1,204 1,203 1,199 1,203 9 Commercial 1,185 1,185 1,118 1,062 1,032 1,023 1,006 984 957 922 897 32 Industrial .. 1,631 1,444 1,292 1,211 1,170 1,206 1,149 1,192 1,126 1,030 938 74 Street 8 Area Lighting. 30 30 31 32 34 35 35 35 35 35 36 (17)
Other. 2 1 1 1 1 1 1 1 1 1 1 100 Total Own Territory 4,159 3,897 3,680 3,487 3,392 3,429 3,360 3,416 3 322 3,187 3,075 35 Other Utilities 795 1 104 1 780 1 795 1 636 2,093 1 390 1 324 1 019 1 104 738 8 Total Sales 4,954 5,001 5,460 5 282 5 028 5 522 4 750 4,740 4,341 4,291 3,813 30 Customers Average Residential . 201,977 197,687 193,764 190,326 188,050 185,623 183,238 181,631 178,934 176,891 175,130 15 Commercial 26,381 25,391 24,616 24,365 24,003 23,744 23,380 22,966 22,296 21,553 21,289 24 Industrial 723 640 693 706 716 726 736 731 715 726 743 (3)
Street 8 Area Lighting. 2,856 2,849 2,828 2,872 2,899 2,948 3,061 3,126 3,130 3,186 3,256 (12)
Other (including other utilities) . 5 6 8 8 10 10 8 5 6 8 11 (55)
Total Customers. 231,942 226,573 221,909 218 277 215678 213051 210423 208,459 205,081 202,364 200,429 16 Residential Average Kwh. Per Customer 6,491 6,254 6,389 6,205 6,142 6,271 6,380 6,629 6,723 6,778 6,869 (6)
Average Revenue Per Kwh.. 10.63 11.69 11.39 10.70 10.07 9.46 7.72 6.01 5A3 5A4 4.75 124 Average Annual Bill. $ 690.26 $ 730.93 $ 727.86 $ 663.77 $ 618.42 $ 593.33 $ 492.61 $ 398.38 $ 365.32 $ 368.73 $ 326.24 112 Maximum Hourly Load Kw.Winter . 713,900 719,280 647,450 646,500 623,000 640,980 598,900 633,200 607,580 617,460 607,480 18 Summer 764,400 739,000 689,000 662,500 666,000 625,980 640,300 619,800 613,580 621,200 534,200 43 Annual Load Factor on Annual Peak 67 66 62 61 Revenues Per Cent of Total Own Territory Residential . 40 37 39 39 39 39 39 40 41 42 44 Commercial 30 31 31 31 31 30 31 30 30 30 30 Industrial 29 29 28 28 28 29 28 28 26 25 23 Street 8 Area Lighting. 1 1 1 1 1 1 1 1 2 2 2 Other 0 2 1 1 1 1 1 1 1 1 1 Total Own Territory (a) Revenues related to increased electric fuel costs billed pursuant to an electric fuel cost adjustment are . $ (36,654)e e
$ 11,838 $ 19,286 $ 7,479 $ 5,918 $ 36,663** $ 16,390 $ 28,792a e
$ 20,322 $ 24,729 $ 8,055 "Electric fuel costs rolled in to the base rates resulting from Rate Case Proceedings were 1.5c per kwh effective November 3,1979 and 1.2c per kwh effective July18, 1981. Effective July 25, 1986.75c was rolled out of base rates.
See section on "Rates" on page 3.
TOTAL FIRM GAS OPERATING REVENUES (OWN TERRITORY) 55 Notes 50 Residential without Heating 45 Ill Residential 40 Heating
~
O 35 Commercial Cl
~0 30 without Heating til 25 Commercial Heating O 20 H M Industrial and Other 5
Q 1976 oIiijP 77 78 79 80 81
~ ~ ~ ~ ~
82 83 84 85 86 TOTAL FIRM GAS SALES (OWN TERRITORY) 8000 Residential without C7 Heating 7000 LL Residential H Heating O 6000 Commercial without ~0 5000 C3 Heating m 4000 Commercial C C3 Heating Industrial Pn 3000 U O
and Other I- 2000 U o Cl Cl H 1000 H
Q tj a a a E ~ ~ a 1976 77 78 79 80 81 82 83 84 85 86 M
Lsl AVERAGE USAGE PER CUSTOMER AND O
Vl AVERAGE REVENUE PER MCF (RESIDENTIAI-)
180 9.00 Cl O z ~ 160 8.00 M LL- 140 7.00
'a Average MCF
~ 120 6.00 Per Customer
~
eL:
Vl O Vl
~O 100 5oo o Average Revenue LLJ C Per MCF
~et 8O 4.oo g K
)
ul g 6o 3.00 O
I c+ 40 2.00 U O O 20 1.00 I-Q R Lal 1976 77 78 79 80 81 82 83 84 85 86 Lsl
10-Year GAS REVENUES, SALES, AND CUSTOMERS 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 % Ghw<Ge Revenues Thousands of Dollars
$ 25,618 $ 25,620 $ 24,162 $ 23,824 $ 17,325 $ 14,090 $ 11,670 $ 11,868 $ 11,271 $ 9,885 170 Residential with Househeating $ 26,658 3 194 3 388 3 456 3 348 3 519 2 842 2,408 2 218 2 201 2165 1 945 64 Residential without Househeating 29,852 29,M6 29,076 27,510 27,343 20,167 16,498 13,888 14,069 13,436 11,830 152 Total Residential 18,120 17,788 17,170 17,658 15,596 9,714 7,318 6,086 5,880 5,447 4,770 280 Commercial 2,992 2,842 2,744 3,107 3,263 2,402 1,719 1,346 1,169 1,021 947 216 Industrial .
7 323 14,245 16,421 10,093 12,755 11,761 9,001 6,839 3,432 3,379 3,134 134 Interruptible and Seasonal.
3 161 4 269 2 918 3 600 2 692 2 032 1 094 654 188 166 150 Other Total Own Territory (a) . 61,448 68,150 68,329 61,968 61,649 46,076 35,630 28,813 24,738 23,449 20,831 195 Other Utilities 413 364
$ 61 448 $ 68 150 $ 68 329 $ 61 968 $ 61 649 $ 46 489 $ 35 994 $ 28 813 $ 24 738 $ 23 449 $ 20 831 195 Total Revenues Sales Thousands of Mcf. (b) 3,243 8 3,503 3,208 3,385 3,089 3,319 3,213 3,002 3,046 3,208 3,132 Residential with Househeating .
326 332 359 351 393 415 392 380 385 385 394 (17)
Residential without Househeating .
3,540 3,744 3,440 3,712 3,628 3,394 3,426 3,593 3,517 3,637 5 Total Residential . 3,829 2,678 2,724 2,478 2,561 2,071 1,776 1,718 1,815 1,746 1,838 57 Commercial . 2,887 491 438 450 437 538 517 424 382 374 339 388 27 Industrial 1,644 2,783 3,163 1,928 2,766 2,996 2,914 2,871 1 733 1,739 2,152 (24)
Interruptible and Seasonal.
- Other 315 153 116 217 260 134 102 109 78 60 76 314 Total Own Territory 9,166 9,592 10,197 8,500 9,837 9,346 8,610 8,506 7,593 7,401 8,091 13 Other Utilities 134 142 10 197 8,500 9 837 9 480 8 752 8 506 7 593 7 401 8 091 13 Total Sales 9 166 9 592 Customers Average Residential with Househeating . 30,452 29,080 27,978 27,204 26,311 25,200 23,620 22,567 22,252 22,103 21,919 39 Residential without Househeating 14,493 14,799 15,123 15,316 15 637 16 337 16,933 17,427 17,504 17,650 17 930 (19)
Total Residential .. 44,945 43,879 43,101 42,520 41,948 41,537 40,553 39,994 39,756 39,753 39,849 13 Commercial 4,979 4,634 4,445 4,329 4,131 3,720 3,515 3,332 3,352 3,368 3,411 46 192 160 141 142 134 140 140 139 139 142 155 24 Industrial Interruptible and Seasonal. 49 51 49 40 36 52 51 49 50 50 50 (2)
Other (including other utilities) 1 1 1 1 1 2 2 1 1 1 1 0 Total Customers. 50 166 48 725 47 737 47 032 46 250 45 451 44 261 43515 43 298 43 314 43,466 15 Total Residential 85.1 80.6 86.9 80.9 88.5 87.3 83.7 85.7 90.4 88.5 91.3 P)
Average Mcf. Per Customer 7.80 8.19 7.77 8.00 7.37 5.56 4.86 4.05 3.92 3.82 3.25 140 Average Revenue Per Mcf.
664.20 661.06 674.60 646.99 651.83 485.52 406.83 347.25 353.89 337.99 296.87 124 Average Annual Bill.
Househeating Saturation Per Cent . 67.8 66.3 64.9 64.0 62.7 60.7 58.2 56.4 56.0 55.6 55.0 23 Maximum Daily Send-out Mcf.. 67,542 67,441 65,341 65,632 62,122 56,054 53,719 55,301 44,350 45,668 47,532 42 Date . Jan. 8 Dec.18 Feb.1 Dec. 25 Dec. 13 Jan. 12 Dec. 25 Feb.11 Dec. 29 Jan.17 Jan. 22 Revenue Per Cent of Total Own Territory 43 38 38 39 39 38 39 40 48 48 47 Residential with Househeating 5 5 5 5 6 6 7 8 9 9 9 Residential without Househeating 30 26 25 29 25 21 21 21 24 23 23 Commercial .
5 4 4 5 5 5 5 5 4 4 5 Industrial .
12 21 24 16 21 26 25 24 14 15 15 Interruptible and Seasonal Other 5 6 4 6 4 4 3 2 1 1 1 Total Own Territory 100 100 100 100 100 100 100 100 100 100 100 Degree Days as Percent of Normal (c) 96 102 97 104 103 100 96 107 102 99 Degree days in billing cycle. 101 100 98 100 101 100 100 105 96 106 99 103 Degree days in calendar year (a) Revenues billed under the provisions of the gas cost adjustment clause are 10,422 12,147 10,363 15,514 13,159 7,872 2,500 8,708',257 8,355 5,704 (b) The average heating va!ue of gas sold is not less than 1,000 Btu. per cu. ft. Gas cost adjustment rolled in to the base rates resulting from Rate Case Proceedings was $ 1.50 per mcf. effective November 3, 1979.
(c) Normal = Twenty-year Moving Average 'Change of 1,000 percent or more.
14 g~oc /ooo52=D7
4 COST OF PURCHASED GAS TO GAS REVENUES Notes 90 75 u)
L
=rrr 60 O
O 45 rn c
0 30 TOTAL ELECTRIC OUTPUT gaO 15 IHI 1976 77 78 79 80 81 82 83 84 85 86 rn O 5000 x0
<<4000 ro Gas Revenue =O 3000 3d Purchased Gas Cost (And Percenrese ol Gee Rwenue) cn C
O
= 1000 1976 77 78 79 80 81 82 83 84 85 86 COST OF FUEL AND PURCHASED ELECTRICITY TO ELECTRIC REVENUE
~ Purchased ~ Generated 480 440 400
~ 360 O 320 O 280 O 240
~ 200 s ao
[] g P OI
-, TII'l 1976 77 l78 ImI 79 80 81 82 83 84 85 86 SYSTEM CAPABILITYAND LOAD AT PEAK 1200 (OWN TERRITORY) 1100 Electric 1000 Revenue 900 rn 800 Purchased Electricity (And Percentese of Electric Revenue)
Q I- cr 500 M Fuel Used in Electric Generation (And Percentese ol Electric Revenue)
~ 400 300 200 O
'z 100 0
19 76 77 78 79 80 81 82 83 84 85 86 V) 42: Purchased Capacity at Time Co of Peak (Including Reserves)
~
Generating Capacity D at Time of Peak K
)
LII Annual Peak (13 C9
ELECTRIC AND GAS PRODUCTION DATA 10-Year 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 ~%Chan e Electric Output Millions of Kwh.
Generated Steam. 3,769 3,748 4,229 4,315 3,624 3,810 3,351 3,535 3,295 3,520 3,261 16 Generated Hydro. 135 89 131 132 116 65 105 162 122 134 156 (13)
Generated Gas Turbine . 1 2 1 2 3 5 4 2 3 5 5 (80)
Total Generated ~3905 ~3839 ~4361 ~4449 ~3743 ~3880 3,460 3,699 3,420 3,659 3,422 14 Purchased for Own Territory 1,388 1,589 1,41 0 1,162 1,533 1,727 1,555 1,253 1,120 798 492 182 Purchased for Resale to Other Utilities 72 21 90 6 8 57 117 (100)
Total Purchased. ~1388 ~1589 ~1482 ~1162 1,554 ~1817 1,561 ~1253 ~1128 855 609 128 Pumped Storage (received from) . 32 133 119 8 38 16 6 Total Output 5,325 5,561 5,962 5,619 5,297 5,697 5,059 4,968 4,554 4,514 4,031 32 Pumped Storage (delivered to). 49 198 170 11 50 21 8 Company Use, Losses, etc 322 362 332 326 269 175 259 207 205 223 218 48 Balance Sold. ~4954 ~5001 ~5460 5,282 ~5028 5,522 ~4750 ~4740 ~4341 ~4291 ~3813 30 Electric Peak and Capacity Annual Peak(Own Territory) Mw. 764.4* 739.0* 689.0* 662.5* 666.0* 641.0 640.3* 633.2 613.6* 621.2" 607.5 26 Generating Capability at Time of Peak Mw.
Steam. 897.0 894.0 894.0 892.5 841.6 839.2 839.2 839.2 722.9 706.2 697.0 Hydro 42.6 42.6 42.6 42.6 44.6 45.6 44.6 45.6 44.6 44.6 45.6 P)
Gas Turbine. 43.0 43.0 43.0 38.0 38.0 48.0 38.0 48.0 38.0 38.0 48.0 (10)
Total . 982.6 979.6 979.6 973.1 924.2 932.8 921.8 932.8 805.5 788.8 790.6 24 Purchased Capacity at Time of Peak Including Reserves Mw. 64.0 63.0 110.6 8.3 168.3 172.4 255.6 124.8 296.8 211.8 108 Generating Capability Plus Purchased Capacity as Per Cent of Annual Peak 137 141 172 167 180 161 Gas Send-out Thousands of Mcf.
Purchased Natural Gas 9,645 14,627 15,548 12,332 13,472 14,272 12,670 11,232 7,965 7,603 8,420 15 Manufactured or Propane Gas . 2 5 3 1 19 3 1 1 3 14 2 Total 9,647 14,632 15,551 12 333 13,491 14,275 12,671 11,233 7,968 7,617 8,422 15 Company Use Boiler Fuel. 258 4,240 5,000 3,117 3,450 4,587 3,412 2,441 Other Company Use, Losses, etc.. 223 800 354 716 204 208 507 286 375 216 331 (33)
Balance Sold ~9166 ~9592 ~10 197 8,500 9,837 9,480 8,752 ~8506 ~7593 ~7401 ~8091 13 Electric Production Cost a Cost of Fuel and Purchased Cost of Purchased Gas and Steam Gas Turbines Purchased c Electricity as Per Cent of Fuel as Per Cent of Average Purchased Gas Cost e Electric Revenue Gas Revenue Cost of Heat Rate Thousands Cents Fuel Burned for Thousands Cents Thousands Cents Thousands Cents Thousands Cents Fuel and of per (Cents per Generation of per of pef of per of pef Electric Purchased Purchased Purchased Dolhrs Kith. ~MMtatc Btu Dollars Kwh. Dollars Kwh. Dollars Kwh. Dollars Mcf. Fuel fl~tl Etectlec0 Gas Fuel 1986 124,510 3.30 284.3 10,185 2,024 1.50 334 24.99 33,801 2A4 1986 33,386 356.4 1986 29 9 38 1986 54 54 1985 179,928 4.80 428.4 10,337 1,244 1.40 351 1653 50,538 3.18 1985 40,300 391.5 1985 39 12 51 1985 59 59 1984 215,833 5.10 474.4 10,153 2264 1.73 350 34.21 52,540 3.56 1984 40,063 379.8 1984 45 12 57 1984 59 59 1983 203,807 4.72 439.7 10,083 2,094 1.59 279 20.82 40,428 3.50 1983 41,068 445.7 1983 47 10 57 1983 66 66 1982 175,536 4.84 449.1 10,172 1,624 1AO 619 20.63 67,094 4.38 1982 39,345 392.6 1982 43 18 61 1982 64 64 1981 192,637 5.06 475.9 10,119 894 1.38 413 8.26 76,162 '.41 1981 28,579 295.1 1981 46 20 66 1981 62 62 1980 132,478 3.95 362.2 10,210 1,388 1.32 313 7.83 52,345 3.37 1980 22,525 243.3 1980 43 18 61 1980 63 63 1979 95,797 2.71 251.2 10,035 1,886 1.16 207 10.35 32,845 2.62 1979 16,693 189.9 1979 40 15 55 1979 58 58 1978 70,801 2.15 199.1 10,025 1,060 .87 223 7.43 26,991 2.41 1978 11,691 146.8 1978 36 14 50 1978 47 47 1977 81,614 2.32 217.6 9,978 1,240 .93 334 6.68 18,962 2.38 1977 11,697 153.8 1977 42 11 53 1977 50 50 1976 59,587 1.83 170.1 9,931 980 222 4A4 11,509 2.34 1976 9,698 115.2 1976 37 9 46 1976 47 47 (a) Includes cost of operation and maintenance. (e) Excludes gas purchased for boiler fuel.
(b) Includes production costs related to sales to other utilities.
15 Excludes electricity purchased for resale to other utilities.
$ 7@ k /cocle ~ -O~
(c)
(d) Fuel burned during 1979 through 1986 was a combination of fuel oil and natural gas Fuel burned during 1976 through 1978 was fuel oil. (Natural gas was used for ignition purposes only) " Annual peak occurred in the summer.
Change of1,000 percent or more.
Notes LABGIR EXPENSE (INCLUDING BENEFlTS}
TG TGTAL GPERATING EXPENSE 500 450 N 400 350 0
d 3OO 0 250 Vl 200 0
150 100 1976 77 78 79 80 81 82 83 84 85 86 Total Operating Union wage negotiations in 1985 resulted in a two-year Expenses working agreement, which provided for a 5.1% general wage increase effective July 1, 1985, and 5.0% effective July 1, 1986 together with fringe benefit improvements.
cC I-
~ Labor Expenses Compensation of professional supervisory and executive personnel is geared to a salary program designed to assure the Company's ability to attract and hold highly qualified management personnel.
Cl K Benefits provided by the Company include pensions, O group life insurance, hospitalization, major medical insur-I- ance, a dental plan, and a disability retirement plan.
O CI O
fL CL M
cC C9 Ch K
O I-
LABOR DATAAND INDUSTRIALREVENUES 10-Year 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 % Ch~<Ce LABOR DATA Employees Year End Classified 924 927 926 . 924 952 968 964 976 983 995 1,039 (11)
Supervisory and Professional 391 397 379 385 384 364 337 313 303 294 290 35 Executives . 12 10 12 11 10 13 13 9 10 9 9 33 Total (a) . 1 327 1 334 1 317 1 320 1 346 1 345 1 314 1 298 1 296 1,298 1,338 (1)
Weekly Wages Paid Year End Level Including Overtime . $ 736 $ 682 $ 596 $ 562 $ 518 $ 486 $ 442 $ 411 $ 375 $ 349 $ 324 127 Excluding Overtime. $ 615 $ 583 $ 546 $ 512 $ 481 $ 436 $ 402 $ 371 $ 345 $ 326 $ 302 104 Employee Compensation Thousands Payroll Charged to Operation and Maintenance Electric 29,726 27,756 26,441 26,060 23,522 21,043 18,916 17,420 15,651 14,230 12,963 129 Gas. 5,148 4,643 4,433 4,322 4,033 3,596 3,041 2,730 2,519 2,430 2,311 123 Payroll Charged to Construction and Other..... 11,985 11,107 9,578 7,905 8,083 7,703 7,202 6,666 6,152 6,395 6,593 82 Roseton Payroll Billed to Others (a). 3 890 3 555 3 483 3 026 2 950 2,591 2 289 2194 2 353 2 174 2 459 58 Total Payroll. 50,749 47 061 43 935 41 313 38 588 34 933 31 448 29 010 26 675 25,229 24.326 109 Annual Cost of Fringe Benefits Charged to Operation and Maintenance Thousands.. 7,016 6,865 6,629 6,399 5,564 4,894 3,986 3,565 3,434 2,930 2,250 212 Ratios for Payroll Charged to Operation and Maintenance:
Payroll (Including Benefits) as Per Cent of Corporate Revenues 9.6 7.8 7.2 7.8 7.4 6.6 7.9 9.3 10.2 9.4 10.3 P)
Benefits as Per Cent of Payroll. 20.1 21.2 21.5 21.1 20.2 19.9 18.2 17.7 18.9 17.6 14.7 37 INDUSTRIALREVENUES Thousands Electric Customers Building Products . 13,034 15,512 14,584 13,829 13,311 16,616 13,726 13,363 10,613 10,103 6,629 Chemicals & Petroleum. 1,361 1,534 1,687 1,476 1,262 1,229 1,007 796 735 722 612 Clothing . 209 308 369 131 116 152 145 139 136 126 115 Food Processing . 945 1,045 1,191 716 885 1,013 830 605 612 635 566 Foundries. 434 428 311 2,814 2,355 2,604 1,977 1,624 1,292 1,367 1,298 Machine and Metal Products. 78,167 85,669 75,218 60,034 53,650 51,183 36,593 26,840 21,421 19,737 16,157 Paper and Paper Products 2,574 2,969 3,293 3,101 2,753 2,712 2,121 1,734 1,550 1,353 1,123 Printing and Publishing . 2,134 1,897 1,500 1,240 1,873 1,909 1,551 1,185 1,001 948 779 Rubber Products 1,183 1,225 2,029 1,331 1,107 1,130 891 785 692 688 565 Textiles. 639 671 1,353 1,149 1,649 2,194 1,649 1,309 1,472 1,413 1,109 Miscellaneous 1,805 1,989 889 3 662 3 304 3 150 2 697 2 165 2,037 1,479 1,476 Total 102 485 113 247 102 424 89 483 82 265 83 892 63 187 50 545 41 561 38 571 30,429 1986 Revenues FIVE LARGEST ELECTRIC CUSTOMERS (Thousands) FIVE LARGEST GAS CUSTOMERS IBM 71,047 Powell & Minnock Brick Works, Inc. $ 1,786 Independent Cement 4,663 IBM 1,750 Lehigh Portland Cement Company 4,286 Technical Tape Corp. 794 VAWof America 2,068 Eastern Alloys, Inc. 495 Tarkett, lnc. 1,513 Vassar Brothers Hospital 316 (a) Includes the folkwiing number of employees at the Roseton Electric Generating Plant which the Company, Consolidated Edison Co. of New York, Inc. and Niagara Mohawk Power Corporation ovm as tenants in common: 112 114 113 107 107 16 The Company had, initially, a 200%%d urwfcvided interest in the occvnership of the Plant. As of December 31, 1982, the Company has a 350%%d uncfcvided interest.
The Company operates the Phnt as agent for the three ovmers.
CAPITALIZATIONRATIOS Notes 80 70 60 U 50 Q H D 40 30 20 10 0
1976 77 78 79 80 81 82 83 84 85 86
~
f 1 Common Equity
~ Other Long Term Debt COVERAGE RATIOS Preferred Stock M Morlgage Bonds (BEFORE INCOME TAX)
O O
ru 2 E
I-0
~ 1 O
X 1976 77 78 79 80 81 82 83 84 85 86 MARKET AND BOOK VALUE OF COMMON STOCK ~
I I Interest Charges Including AFDC M Interest Charges and Preferred Stock Dividends 35 30
~
1 1 Interest Charges Excluding AFDC 25 10 (tr 0 15 10 RATIO OF INCOME AVAILABLEFOR COMMON STOCK TO OPERATING REVENUE, TO AVERAGE EQUITY Cfl 25 K 1976 77 76 79 60 61 62 63 64 65 66 20 O'al Closing Price at Dec. 31 1
15
<<C ru O
tf'- Book Value ru at Dec. 31 10 C/3 CL K
Cl
~ High Low Market Value Range for the Year K
cC 1976 77 78 79 80 81 82 83 84 85 86 cC I-Cl IL To Operating Revenue
~ To Average Equity O
133
CAPITALIZATIONAND FINANCIALRATIOS 10-Year Book Value Per Share of Common 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 ~%Chan e Stock ear En Capitalization Thousands Value of Book First Mortgage Bonds .............. $ 327,400 $ 332,400 $ 312,400 $ 267,400 $ 278,400 $ 233,500 $ 209,500 $ 159,500 $ 151,500 $ 151,500 $ 147,000 123 Equity Number of Value Per Convertible Debentures............. 8,000 8,000 8,000 16,000 (100)
Shares Share
- (Thousands Long-term Promissory Notes......... 112,325 112,500 40,425 7,200 7,375 7,550 7,725 7,900 8,075 8,250 8,425 ~of Dollar Qho~osands ~Dolhrs Term Loan Notes 20,000 35,000 1986 439,860 14,106 31.18 Unamortized Premium and Discount on Debt Net ........... 608 ~679 ~50 821 ~253 470 501 (175) 1985 1984 356,084 307,156 12,075 11,007 29.49 27.91 Total Long-term Debt (a)........... 439325 444383 352217 273921 285025 240,229 216972 195,568 203,045 168 251 171 957 155 1983 263,649 9,621 27.40 Preferred Stock Par Value.......... 81,030 81,030 81,030 81,030 61 030 61,030 61 030 61 030 61,030 61,030 46,030 76 1982 227,912 8,509 26.78 Common Stock . 279,685 214,464 184,816 156,927 131,000 111,165 95,546 76,371 76,371 66,031 66,031 324 1981 197,709 7,456 26.52 Retained Earnings 164,733 145,856 126,313 110,495 99,522 88,957 80,155 73,691 67,084 61,481 56,326 192 1980 173,442 6,544 26.51 Premium on Stock 67 67 67 67 67 67 67 67 67 67 67 1979 147,884 5,373 27.52 Capital Stock Expense.............. ~4625 ~4,303 ~4,040 ~3840 ~2 677) ~2480 ~2326 ~2245 ~2245 . ~2,154 ~1,875 147 1978 141,277 5,373 26.29 Total Common Equity............. 439 860 356 084 307 156 263,649 227,912 197,709 '73,442 147,884 141,277 125 425 120 549 265 1977 125,425 4,873 25.74 Total Capitalization............... 960,215 881,477 740,403 618,600 573,967 498,968 451,444 404,482 405,352 354,706 338,536 184 1976 120,549 4,873 24.74 Current Maturities of Long-term Debt... 175 175 175 11,175 175 6,175 18,175 12,175 175 8,175 4,375 (96)
Short-term Debt. 23 000 26 500 16 500 45 000 23 000 17 000 20 000 (100)
Total Capitalization including Curent Market Value Per Share of Common Maturities of Long-term Debt and Stock and Shares Traded Short-term Debt $960 390 $ 881 652 $ 740 578 $ 652 775 $ 600 642 $ 521 843 $ 469 619 $ 461 657 $ 428 527 $ 379 881 $ 362 911 Market Number of Capitalization Ratios Per Cent Value of Common Shares Traded on Including Short-term Debt and Current Stock New York Maturities of Long-term Debt: (Dollars) Stock Long-term Debt 45.8 50.4 47.6 43.7 47.5 47.2 50.1 45.0 47.4 46.4 48.6 ~s ~Eaohan a Preferred Stock 8.4 9.2 10.9 12.4 10.2 11.7 13.0 13.2 14.2 16.1 12.7 1986 397/a-26s/a 11,357,000 Common Equity 45.8 40.4 41.5 40.4 37.9 37.9 36.9 32.0 33.0 33.0 33.2 1985 31'/4-23 4,381,400 Short-term Debt 3.5 4.4 3.2 9.8 5.4 4.5 5.5 1984 25s/e-16'Ia 3,786,200 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1983 26'/a-21'/a 1,961,000 1982 24s/4-17'/a 2,414,800 Selected Financial Indices: 1981 19 -16 1,017,100 Pretax Coverage of Total Interest 1980 19r/a-15 801,100 Charges (b): 1979 2(P/4-18 402,500 Including AFDC (c)........... 3.14 3.17 3.19 2.84 2.65 2.38 2.23 2.31 3.17 2.81 2.68 1978 22'Ia-19s/4 451,400 Excluding AFDC (c).......... 2A3 2.54 2.59 2.35 2.12 1.88 1.74 1.92 2.80 2.55 2.72 1977 223/a-19~/a 574,000 Pretax Coverage of Total Interest 1976 2(P/4-17'/a 498,000 Charges and Preferred Stock (I) Price range for the year on the New York Dividends (b) 2.66 2.51 2.23 1.86 2.07 2.08 Stock Exchange.
Percent of Construction Expenditures Financed from Internal Funds (d)............ 17% 31% 35% 41% 32% 38% 68% 61% 31% 63% 78%
AFDC as a Percentage of Income Available for Common Stock.... 55% 50% 49% 48% 50% 54% 60% 46% 31% 24% 14%
Effective Tax Rate (e)........... 34% 35% 36% 34% 27% 23% 19% 18% 31% 27% 27%
Ratio of Income Available for Common Stock Per Cent To Operating Revenue... 13.5 10.6 8.5 7.3 7.0 5.7 6.0 6.9 7.6 6.8 7.7 To Year-end Equity...... 13.5 15.0 14.5'5.7 14.4 14.6 14.0 12.7 11.9 11.4 11.3 10.8 To Average Equity....... 14.7 15.6 14.5 14.7 14.0 12.5 12.2 11.7 11.5 11.0 (a) Excludes current maturities of Iong-term debt. (c) AFDC includes any Sterling carrying charge amounts.
(b) For the purpose of computing these coverage ratios, earnings available for coverage consist of net income (d) Construction expenditures represent "Cash Construction Expenditures". Internal funds are "Funds from plus total interest charges plus all federal income tax amounts. Total interest charges exclude the allowance Operations" less "Dividends" (see page 11).
for borrowed funds used during construction. Preferred stock dividends represent the preferred stock divi- (e) The effective tax rate is computedby dividing the federal income tax as reported in the Statement of Income dend requirementt determined on a "pre-income tax basis". by the Taxable Incone.
8 7o C/oo ~2.~<
17 'Change of 1,000 per cent or more.
Notes DEBT MATURITYSCHEDULE (F) 75 70 65 (I) 60 55 0 50 45
~0 40 (F-)(F) 35 30 0 25 20 (A)(F) 15 (B) 10 5
0 U 1988 1990 1991 1992 1993 1994 1995 1999 2000 2002 2004 2005 2007 2009 2012 2014 2020 (A) INCLUDES $ 10 MILLIONSINKING FUND REQUIREMENT ON FIRST MORTGAGE BONDS MATURINGIN 1992.
(B) INCLUDES UNSECURED NOTES BALANCEOF $ 5.45 MILLIONAFTER ANNUALREQUIRED SINKING FUND PAYMENT.
(C) PROMSSORY NOTES WILLBE SUBJECT TO REPRICING AND INVESTOR TENDER ON EACH OCTOBER 1, COMMENCING OCTOBER 1 1989. THE COMPANY HAS A ONE-TIME OPTION TO CONVERT TO A LONG-TERM FIXED RATE AT ANYANNUAL
~
TENDER DATE.
(D) PROMISSORY NOTES WILLBE SUBJECT TO REPRICING AND INVESTOR TENDER ON A WEEKLY BASIS. THE COMPANY HAS A ONE-TIME OPTION TO CONVERT TO A LONG-TERM FIXED RATE.
(E) INCLUDES SINKING FUND REQUIREMENTS ON RRST MORTGAGE BONDS MATURINGIN 1994 ($ 5 IN 1992 AND $ 20 IN 1993).
(F) INCLUDES SINKING FUND REQUIREMENTS ON RRST MORTGAGE BONDS MATURING IN 1995 ($ 4 IN 1991, 1992, 1993 AND 1994).
COMPONENTS OF PERMANENT FINANCING CO O 800 Mortgage I- Bonds 700 lL Other Long Term Oebt 5tg 6oo Preferred K O 500 Stock cC z D M
p Ij Common LL o 4oo Stock O
K tfl 0 300 Ij K = 200 Q
I- 100 h4 5 ~
1976 77 78 79 80 81 82 83 84 85 86 0-O
Public Proceeds Redemption DETAILOF LONG-TERM DEBT Date Maturity Offering to Price (Thousands where Dollars are Indicated) 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Issued Date Price ~Ccm an 12/31/86 First Mortgage Bonds December 31 27/a% D ue 1980 $ 12,000 $ 12,000 $ 12,000 Dec. 1, 1950 Dec. 1, 1S80 (a) 101.12 3.3% D ue 1982 $ 6,000 $ 6,000 6,000 6,000 6,000 Dec. 1, 1952 Dec. 1, 1982 (a) 100.00 3.2% D ue 1984 $ 11,000 $ 11,000 11,000 11,000 l1,000 11,000 11,000 Oct. 1, 1954 Oct. 1, 1984 (a) 100.00 41/e% D ue 1988 $ 18,000 $ 18,000 $ 18,000 $ 18,000 18,000 18,000 18,000 18,000 18,000 18,000 18,000 May 15, 1958 May 15, 1988 102.172 101.39 100.22 142/z% D ue 1990 25,000 25,000 25,000 25,000 25,000 25,000 25,000 Dec. 2,1980 Nov. 15, 1990 100.00 99.25 (b) 17'le% D ue 1991 (i). 30,000 30,000 30,000 30,000 30,000 Aug. 26, 1981 Aug. 15, 1991 98.75 98.00 13% D ue 1992 (c) 35,000 35,000 35,000 35,000 35,000 Nov. 30, 1982 Dec. 4, 1992 (a) 100.00 (d) 14/a% D ue 1994(m)................ 45,000 45,000 45,000 May 30, 1984 June 12,1994 (a) 100.00 (m) 8'/e% D ue 1994 50,000 Sept. 1, 1986 Sept. 1, 1994 99.854 99.204 (n) 11% D ue 1995 20,000 20,000 July 2, 1985 July 2, 1995 (a) 100.00 (I) 7'la% D ue 1999 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Jan. 23, 1969 Jan. 15, 1999 100.00 99.18 102.95 Ss/ Due 2000 . 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 June 10,1970 June 1, 2000 100.50 99.625 104A3 7s/4 Due 2002 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Feb. 17,1972 Feb. 1, 2002 101.763 100.931 104.93 9 /4% Due 2004 . 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 Apr. 24, 1974 Apr. 15, 2004 101.500 100.407 106.31 10s/e% Due 2005 . 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Nov. 13,1975 Nov. 1, 2005 101.595 100.515 107.59 6'/4% Due 2007 . 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 June 9, 1977 June 1,2007 100.00 100.00 (e) 1Ã/4% Due 2009 . 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Sept. 27,1979 Sept. 15,2009 99.556 98.636 107.82(i) 12 /a% Due 2010 (i). 25,000 25,000 25,000 25,000 25,000 25,000 May 22, 1980 May 15,2010 100.00 99.125 11'/4 Due 2012 9 900 9 900 9 900 9 900 99M Sept. 30,1982 Sept. 1,2012 100.00 100.00 Total F irst Mortgage Bonds........ $ 327 400 $ 332 400 $ 312 400 $ 267 400 $ 278 400 $ 233 500 $ 209 500 $ 159 500 $ 151 500 $ 151 500 $ 147 000 Other Long-term Debt December 31 Promissory Notes 4.85% Due1995(g)............ 6,675 $ 6,850 $ 7,025 $ 7,200 $ 7,375 $ 7,550 $ 7,725 $ 7,900 $ 8,075 $ 8,250 $ 8,425 Dec. 21, 1965 Dec. 1, 1995 (a) 100.00 101.08 1984 Series A Due 2014(j) 16,700 16,700 16,700 Oct. 15, 1984 Oct. 1, 2014 100.00 100.00 O) 1984 Series B Due 2014(j) 16,700 16,700 16,700 Oct. 15, 1984 Oct. 1, 2014 100.00 100.00 0) 1985 Series A Due 2020(k) 36,250 36,250 Nov. 26, 1985 Nov. 1, 2020 100.00 100.00 (k) 1985 Series B Due 2020(k) 36 0M 36 000 Nov. 26, 1985 Nov. 1, 2020 100.00 100.00 (k)
Total Promissory Notes .......... $ 112 325 $ 112 500 $ 40 425 $ 7 200 $ 7 375 $ 7 550 $ 7 725 $ 7 900 $ 8 075 $ 8 250 $ 8 425 Convertible Debentures 4s/e% Due 1981............... $ 8,000 $ 8,000 $ 8,000 $ 8,000 June 15, 1966 June 1, 1S81 101.375 100.50 5s/4% Due 1978............... 8,000 - Feb. 25, 1971 Feb. 1, 1978 100.00 99.00 Term Loan Notes(a)(h)........... 20 000 35 000 Dec. 29,1978 Total Debentures and Other Notes $ 28 000 $ 43 000 $ 8 000 $ 16 000 (a) Placed privately. (j) Promissory Notes issues In connection with the sale by New York State Energy Research and (b) Not redeemable prior to November 15, 1987. Development Authority of tax-exempt pollution control revenue bonds, series A and B, bear (c) The13% first mortgage bonds have a sinking fund requirement of $ 10000 in 1991. interest at 7V2% per annum trom the date of issuance up to and including September 30, 1989.
(d) Not redeemable prior to December 4, 1989. The bonds will be subJect to repricing and investor tender on each October 1, commencing (e) Not redeemable prior to June1, 1987. October 1, 1989. The Company has a one-time option to conver t to a long-term fixed rate at any (f) Not redeemable prior to September1,1987. annual tender date.
(g) The 4.85% promissory notes have an annual sinking fund requirement of $ 175. (k) Promissory Notes issued in connection with the sale by New York State Energy Research and (h) In December1978 the Company issued term loan notes aggregating $ 35 million to three banks. Development Authority of tax-exempt pollution control revenue bonds, series A and B, had an The Loan Agreement under which these notes were issued provided that the notes should be paid interest rate of 51/8% through January 31, 1986. At that date these bonds became variable rate in three consecutive annual installments commencing December 31, 1979. The Company repaid obligations subject to weekly repricing and investor tender. The company has a one-time option
$ 15 million on December 31, 1979, $ 10 million on December 31, 1980, and $10 million on August 31, for each series to convert to a long. term fixed rate.
1981. The interest rate on such notes was the "prime" rate in effect at the Irving Trust Company. (I) The 11% tirst mortgage bonds have sinking tund requirements of $ 4,000 in each year 1991 (i) The17V6% and 123//8% first mortgage bonds were redeemed on September 15,1986. through1994; not redeemable prior to July 2,1992.
(m) The 145//8% first mortgage bonds have sinking tund requirements of $ 5,000 in 1992 and $ 20,000 In 1993. Not redeemable prior to June 12, 1991.
(n) Not redeemable prior to maturity.
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Notes Notes I-LQ Cl I-cb K
O O
L5
DETAILOF PREFERRED STOCK AND COMMON STOCK (Thousands where Dollars are Indicated)
Public Proceeds Redemption Date Maturity Offering to Price 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Issued Date Price ~Ccm an 12/31/86 Preferred Stock December 31
($100 Par Value) 4'/a% Preferred Stock ........ $ 6,690 $ 6,690 $ 6,690 $ 6,690 $ 6,690 $ 6,690 $ 6,690 $ 6,690 $ 6,690 $ 6,690 $ 6,690 Oct. 1, 1936 (a) 102.50 107.00 4'/a% Preferred Stock .....-... 340 340 340 340 340 340 340 340 340 340 340 Oct. 1, 1936 107.50 105.00 107.00 4.75% Preferred Stock ........ 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Apr. 1, 1949 103.75 100.55 106.75 4.35% Preferred Stock ........ 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 Nov. 1, 1954 (b) 100.00 102.00 4.96% Preferred Stock ........ 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 June 21,1961 (b) 100.00 101.00 7.72% Preferred Stock ........ 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 Feb. 25, 1971 100.00 98.55 101.00 7.44% Preferred Stock ........ 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 Jan. 17, 1973 101.22 100.323 104.94 8.40% Preferred Stock ........ 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 May 24, 1977 100.00 98.80 105.60 Adjustable Rate Preferred Stock 200M 20 000 20 000 20 000 Mar. 30, 1983 100.00 97.50 100.00(c)
Total Preferred Stock $ 81 030 $ 81 030 $ 81 030 $ 81 030 $ 61 030 $ 61 030 $ 61 030 $ 61 030 $ 61 030 $ 61 030 $ 46 030 Number of Registered Holders of Preferred Stock.......... 2,801 3,007 3,129 3,238 3,356 3,454 3,704 3,761 3,853 3,943 3,918 (a) Exchanged for earlier 6% preferred stock and issued on an equal share basis plus $ 2.50 cash per share.
(b) Placed privately.
(c) The adjustable rate preferred stock is not redeemable at the option of the Company prior to April1, 1988. A sinking fund provides for the annual retirement of 8,000 shares, at $ 100 per share, plus accrued dividends, on each March 30, commencing March 30, 1993. The dividend to be paid is at a fixed rate of 11% per annum from the date of issuance to January 1, 1984 and adjusted each quarter thereafter to be1% per annum below the highest of three specific Treasury rates. The rate will never be less than 6% per annum or greater than125% per annum.
Common Stock (No Par Value)
Number of Shares (Thousands)
December 31. 14,106 12,075 11,007 9,621 8,509 7,456 6,544 5,373 5,373 4,873 4,873 New Shares Issued (Thousands) 2,031 1,068 1,386 1,112 1,053 912 1171 Total Stated Value Shares Outstanding December 31 .. $ 279,685 $ 214,464 $ 184,816 $ 156,927 $ 131,000 $ 111,165 $ 95,546 $ 76,371 $ 76,371 $ 66,031 $ 66,031 Number of Registered Holders of Common Stock.......... 31,212 32,234 32,651 31,514 27,923 25,296 24,709 24,347 24,990 23,545 23,738
Notes DIRECTORS ERNEST E. ALTHOUSE WfkxNStreet, PA.
Vice Chairman of ths Board and Vice Chairman of the Committee on Finance; Mernbe of Xecutive OFFICERS OF THE BOARD THEODORE J. CARLSON Chairman ol the Board; Chairman of Executive and Retirement Committees TRANSFER AGENT & REGISTRAR COMMON & PREFERRED STOCK Morgan Sharehoklsr Sevices Tiust 30 Broadway New Ybrk, N.Y. 10015
~
Comrninee and Committee an JOHN WILKIE Campensat'cn and Succssscn Vice Chairman GENERALCOUNSEL of the xecutive Committee Gould & Witkie RAYMONDT. BENEDICT" Stamford, CT.
Lawyer, of Counsel. Cummings &
Mcmbe of xecutivs Committee and Committee on Finance
~; ERNEST E. ALTHOUSE'ice Chairman of the Board and of Cammfnee on Finance ROY C. KETCHAM One Waft Street New ark, N.Y. 10005 INDEPENDENT ACCOUNTANTS Price Waterhouse R. BREED, M.D. 'AMES Chairman of Committee on 153 East 53rd Street Compensation and Succession New+A, N.Y.10022 Poughkeepsie, N.Y.
Surgeon; Member of Committees HOWARD C. ST. JOHN on Audit and on Compensat'cn Chairman of Committee on Finance and Succession RICHARD H. EYMAN MARJORIE S. BROWN Chairman af Committee on AxQ Minbroak, N.Y.
Homemaker. active in civic and OFFICERS ph'nthropc work, formerly eccutlV8 Ifl fCtaTTing and JOHN E. MACKIII promotional organizations: ress'dent and Chief Xxcculis Offcer Member of Committee on Compensation and Succession L WALLACECROSS and Retirement Committee Saner Vice President-Finance, and Accaunbng THEODORE J. CARLSON Poughkeepsie, NY PAUL J. GANCI Senior Vice President-Opeations Chairman of the Board; Chairman of Executive WILLIAME. VANWAGENEN and Rctirencnt Committees; Vice President. Corporate Communications and Governmental Affairs GLADYS L. POWELL Secretary RICHARD H. EYMAN Norwa&. CT. ERIC M. MARKELL Treasurer Communications, Division of J. Walter JOHN F DRAIN Tfiampson Company; Chairman of Ccntrotfe Committee on Audit HERBERT M. ROUND EDWARD F.X. GALLAGHER Vice President. Corporate Newburgh, N.Y. Banning and Energy Control President and Owner Gattagher Transportation Sevices: ALLANR. PAGE Member of Retiremenl Committee Vce Presidcm.Xnginccring ROY C. KETCHAM CARL E. MEYER FeshhN, N.Y. Ass'stant Vce President. Production Chairman of the Board and Chief JOSEPH J. DeVIRGILIO,JR.
O Offccr, Kctcham Motors, lnc.;
'xccut've Vice ress'dent-Customer Servkm Q
I- Chairman of the Board of The Fishkil National Bank; Chaieenaee of the Committee on JAMES E. SMITH fjl Compensation and Succession; Member of Vce President K Xxccut'vs Committee WALTERA. BOSSERT, JR.
O JOHN E. MACKIII ecretary and Poughkeepsie.N.Y. Ssistant Treasurer President and Chief Executive Offcer, O Menber of Executive and CHARLES H. DENNY, JR.
Retirement Committees. and Treasurer and Cl Comminees on Finance and on Ass'stant Sccetary K Compensation and Succession HOWARD C. ST. JOHN Glenford, N.Y.
O Chairman ol the Board and resident.
Q I- Ulster Savings Bank; Lawyer, Cil Howard C. SL John & Associates:
Chairman of Committee on Finance CI LEE C. WHITE Washington, D.C.
Lawyer. White, Fine & VcrvRle; Member of Cammittee on Audit CL JOHN WILKIE LL Katonah, NY.'ice Charrnan of XxecufNe Comminee; Member af Retirement Committee and O Committees on Finance and Audit cC Retired 12/31/86 I- 20 "Retired 41/86 O
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Cs RMC fa THE REGION mfUSER VE Central Hudson is an investor-owned utilityserving more than 281,000 electric customers and 50,000 natural gas customers in the Mid-Hudson Valley and the eastern Catskill Mountains. Its 2,600 square-mile service territory reaches from 25 miles north of New York City to 10 miles south of Albany and includes portions of eight counties.
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