Text

R. E. Ginna - Annual Report for Year Ending December 31, 1976
	ML18143A779
Person / Time
Site:	Ginna
Issue date:	12/31/1976
From:	Drake F; Rochester Gas & Electric Corp
To:	; Office of Nuclear Reactor Regulation
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DEADLINERETURN DATE RECORDS FACILITYBRANCH

0 9

Cover Energy requirements continue to increase. Our society's need for additional electric energy is neither a result of waste nor frivolous use, but rather a product of normal growth and progress.

Some of the elements that are contributing or will contribute to this growth in our service area are depicted in this report-a new hospital, new products, a new office building, and a proposed refuse recycling plant. They all contribute to a better way of life and a more healthy economy.

Energy is essential for growth, and RG&E is prepared to meet the needs now and in the future.

RC&E Service Area/ Business The Company supplies electric, gas and steam service wholly within the State of New York. It is engaged in the production, purchase, transmission, distribution and sale of these services in an area serving nine counties centering about the City of Rochester.

The Company's territory, which has a population of approximately 883,000, is well diversified among residential, commercial and industrial consumers.

In addition to the City of Rochester, which is the third largest city and a major industrial center in the State, it includes a large and prosperous farming area.

~ Major RG&E Electric Lines

~ Major RG8 E Gas Lines cx N.Y.S. Power Authority Electric Line W Beebee Electric Generating Station C5 Russell Electric Generating Station n Ginna Nuclear Power Station Q Major Electric Substations Q Natural Gas Supply Stations Q Sterling Plant Site NEW YORK STATE ge ot4TARIO

~I.i C OSWEGO NIAGARA ORLEANS RocII@IItr WAYNE Buttalo ERIE GENESEE WYOMING MONROE P (,I

'IVINGSTON ONT IO Csnandaig s

YATES SENECA CAYUGA ONONDAGA AI.L GANY SCHUYLER TOMPKINS CHAUTAUOUA CATTARAUGUS STEUSEN CHEMUNG TIOGA PENNSYLVANIA

Annual Report for year ending December 31, 1976 Contents Highlights 2 Letter to Shareholders 3

Electric Operations 6

Gas Operations 9

Research and Development 9

Forecast 10 Management'5 Discussion and Analysis of the Statement of Income 11 Financial Statements/Operating Statistics 13 Directors 24 OffICels ffnside back cover)

+~a Q

i-'tiictiiaci coiitnlN7~ gZ QKQlA RY MCKEfR1K Principal Ofnce 89 East Avenue Rochester, New York 14649 (716) 546-2700 Financial Contact Paul W. Briggs President Annual Meeting May 18, 1977 At Rochester, New York Bond Trustee and Paying Agent Bankers Trust Coinpany Post Office Box 318 Church Street Station New York, New York 10015 New York Stock Exchange Symbol Rochester Gas and Electric Corporation Common Stock RGS Transfer Agent Lincoln First Bank of Rochester Stock Transfer Department Post Ofgce Box 1250 Rochester, New York 14603 Registrar Security Trust Company of Rochester One East Avenue Rochester, New York 14638 Co.transfer Agent Morgan Guaranty Trust Company of New York 30 West Broadway New York, New York 10015 Co-registrar The Chase Manhattan Bank (National Association)

One Chase Manhattan Plaza New York, New York 10015 Agent for Automatic Dividend Reinvestment Plan lincoln First Bank of Rochester Automatic Dividend Reinvestment Service Post Office Box 1507 Rochester, New York 14603 Shareholder Inqutrtes Communications regarding stock transfer requirements or lost certificates may be directed to one of the Company's stock transfer agents.

Other inquiries should be directed to D. W. Caple, Secretary and Treasurer at the Company.

The Company willprovide, without charge, a copy of the Annual Report on Form 10-K filed wilh the Securities and Exchange Commission with respect lo fiscal year 1976, upon wriltcn request of any sharcholdcr addressed to the Secretary.

Highlights Common Stock Earnings per weighted average share Number of shares (000's)

Weighted average Pro forma weighted average after stock dividend paid in following year (See Note)

Actual number at December 31 Number of shareholders Price range (Sales on New York Stock Exchange) 1st quarter.

2nd quarter 3rd quarter 4th quarter Cash dividends paid (100% taxable) 1st quarter 2nd quarter 3rd quarter 4th quarter Stock dividend paid (See Note).

1976

$2.37 11,296 11,634 11,366 40,153 High Low 17'/s 15i/s 16%

15'h 18'/4 15 /s 19~/s 17

$.32

.32

.32 3%

$2.15 10 10,356 10,667 10,880 39,704 High Low 15%

10'7%13'/s 17Vs 15 16'/2 15

$.31

.31

.32

.32 3%

1975

% Change Sales and Revenue Electricity to customers Kilowatt-hours (000's)

Revenue (000's)

Electricity to other utilities Kilowatt-hours (000's)

Revenue (000's)

Gas Therms (000's)

Revenue (000's)

Steam Pounds (000's)

Revenue (000's)

Total revenue 4,805,740

$170,558 1,187,942

$ 18,259 467,831

$ 101,027 3,147,359

$ 18,383

$308,227 4,521,299

$ 146,629 1,864,050

$ 25,496 424,234

$ 82,478 3,145,453

$ 17,337

$271,940 6

16 (36)

(28) 10 22 13 Ciperating Expense (000's)

Electric and steam fuels Purchased electricity Purchased natural gas Wages and benefits Other expense

'P Total operating expense s

$ 46,361 18,195 56,192 47,097 30,786

$198,631

$ 46,268 12,212 42,247 44,133 26,196

$ 171,056 49 33 7

18 16 Taxes (000's)

Local, state and other Federal income tax charged to operations

$ 40,502

$ 36,157 5,365 5,295 12 1

Capital Expenditures (000's)

Utilityplant, less allowance for funds used during construction Nuclear fuel Net UtilityPlant at December 31 (000's)

Number of Employees

$ 67,162 13,829

$649,611 2,644

$ 71,733 6,415

$587,330 2,653 (6) 116 Note: The 18th annual stock dividend was paid February 25, 1977 at the rate of three percent.

To Shareholders Company earnings on common stock in 1976 were $26.8 million compared with the $22.3 million earned in 1975.

This 20 percent increase in earnings reflects rate increases granted in April 1976, and a gradual strengthening of the economy in the RGSE franchise area.

Earnings per share were $2.37, an increase of ten percent over 1975's

$2.15 per share, thus more than offsetting the dilution resulting from the October 1975 offering of one million shares of common stock.

Total revenue from electric, gas and steam sales, including electric sales to other utilities, was $308 million, an increase of $36 million, or 13 percent over the $272 million received in 1975.

Customer revenues increased

$43.5 million over 1975. An estimated

$ 10.9 million of this revenue was a direct result of rate increases that were approved in April 1976, and which allowed a 7.9 percent increase for electricity and 6.3 percent for gas.

Recovery of increases in the cost of purchased electricity, fuels used in the generation of electricity and steam, and in the cost of natural gas, amounted to

$ 18.6 million more than in 1975.

Customer use of electricity and gas increased in 1976. Electric consumption was 4.8 million megawatt-hours (MWH), or six percent more than the 4.5 million MWH consumed in the previous year. Gas delivery totaled 467.8 million therms, an increase of ten percent over the 424.2 million therms delivered in 1975.

A moderate summer in our service area, 18 percent cooler than 1975, reduced electric sales below the level normally experienced. Much colder-than-normal weather in late fall and early winter tended to compensate and was responsible for most of the increase in gas sales.

Growth in customer sales, the greater utilization of RG8 E capacity on its own system, and diminished capacity due to Ginna plant outages caused revenue from electric sales to other utilities to decline $ 7.2 million in 1976.

On two occasions turbine blade failures in the low pressure section of the Ginna nuclear power plant's 470 megawatt (MW) unit caused lengthy outages. The availability of the Ginna nuclear power plant in 1976 was 58 percent, as compared with 77 percent availability in 1975. In spite of the reduced availability, Ginna's operation still saved RG&E customers

$ 21 million in fuel costs alone when compared with the cost of coal that would have been used to generate an equal amount of electricity.

Operation and maintenance costs during 1976 were $ 198.6 million, 16 percent more than the 1975 costs of

$ 171 million. Fuels for the generation of electricity and steam totaled $46.4 million, about the same as 1975 costs.

More electricity was purchased in 1976 to replace the loss of Ginna plant power, increasing the cost of purchased electricity by 49 percent to a total of

$ 18.2 million. Natural gas cost was up

$ 13.9 million, or 33 percent over 1975, reflecting increased sales and the higher cost of pipeline gas. Costs for materials in 1976 rose 12 percent on the average.

Total local, state and other taxes paid amounted to $40.5 million, representing an increase of $4.3 million, or 12 percent more than 1975 taxes.

Capital expenditures in 1976 totaled

$ 81 million, exclusive of allowance for funds used during construction. Of that amount, $2.8 million was expended for RG8 E's proposed 1,150 MW nuclear power plant near Sterling, New York.

The project willbe shared by Central Hudson, Orange and Rockland, and Niagara Mohawk, and RGRE's participation is 28 percent. State and federal hearings on the Sterling project were closed in November 1976. If approvals are received, we plan to break ground in 1977, and have the plant in operation by 1984.

francis E. Drake, /r.

Paul W. Brims We spent $27 million for participation in two other generating plant projects.

RG8 E has a 24 percent share in Niagara Mohawk's proposed 850 MWoil-fired plant near Oswego, New York, scheduled for operation in 1979, and a 14 percent share in its 1,084 MW nuclear power plant at Nine Mile Point near Oswego that is expected to be operational in 1982. Our participation in these projects, and the construction of the Sterling plant, willenable us to closely match capacity with actual load growth, and shield our customers from the burden of large capital outlays for wholly-owned projects.

During 1976 we continued to support the Empire State Power Resources, Inc.

(ESPRI) proposal. New York State' seven investor-owned power companies are seeking to establish ESPRI as a statewide subsidiary generating company for site selection and power plant construction in the 1980's and beyond. The ESPRI organization will be able to achieve economies by unified power plant licensing, financing and construction. If ESPRI becomes a reality, savings to RG8 E customers through 1998 are estimated to be a minimum of

$542 million, and statewide consumer savings through ESPRI could be at least

$6.3 billion during the same period.

In April 1976, after the full 11-month statutory period, the New York State Public Service Commission allowed RG8 E to increase its gas rates by $ 5 million a year, or 74 percent of the amount requested, and by $ 11 million a year, or 42 percent of the electric request. In granting what amounted to only half of the requested dollar increase, the PSC stated that the new rates were being set for a period of one year. As expected, these rates proved entirely inadequate and, after eight months of experience, the Company was forced to file again for electric and gas rate increases on December 3, 1976. We have petitioned for a 12.2 percent increase in electric rates and a 7.3 percent increase for natural gas.

These rates would generate an additional $20.1 million in annual electric revenues and $ 7.0 million in gas. Because the PSC procedures on rate filings inevitably require the full 11 months permitted by statute, new rates are not expected to become effective until November 1977.

Our estimate for the Company's capital requirements over the next ten years is

$ 1.3 billion. It is expected that 40 to 50 percent of the required capital is to be generated internally, with the balance to be acquired through long-term financing.

In June 1976, the Company sold

$50 million of first mortgage bonds at 9/4 percent interest. Proceeds from the issue were used to defray capital costs and to pay $35 million in short-term debt.

During 1976, the Automatic Dividend Reinvestment (ADR) program continued to gain popularity, with 15.2 percent of our shareholders participating. This participation represented 11 percent of all common shares outstanding, and a total investment of $2.6 million as compared with the $ 1.9 million invested in 1975. This reinvestment plan is an important source of capital funding and is becoming more significant with the issue of nearly 160,000 shares of common stock annually.

The greater demand for electricity by our customers in 1976 reflects a revitalization in the economy. An encouraging 7.7 percent gain in industrial electric consumption over 1975 led the growth. Residential and commercial electric consumption rose 5.7 percent and 5.5 percent, respectively, and total electric consumption was up 6.3 percent.

As previously stated, gas usage increased ten percent in 1976, due mainly to colder weather. Because of the gas emergency which occurred early in 1977, we feel it is necessary to focus some special attention on the subject of natural gas supplies.

In the summer and early fall of 1976, our natural gas supplier, Consolidated Gas Supply Corporation, had stored gas to maximum capacities, and also had access to additional supplies through interstate pipelines. Because of this supply situation, the Company and the supplier agreed that limited additional quantities of gas could be provided to some of our customers whose supply had been restricted by allotment. The increased deliveries began in July and ended December 31, 1976.

The apparent satisfactory supply situation, and the prospect of increased gas supplies to be made available in 1978 from the importation of liquified natural gas (LNG) from Algeria by our supplier, prompted us to petition the PSC early in December for a relaxation of its 1975 order that prohibited the addition of new gas customers. This request was subsequently postponed by the Company.

The widespread and prolonged cold weather that set records in many parts of the country in January of this year quickly and completely reversed the national gas supply situation. In mid-January the Company was advised by its gas supplier that a critical situation existed, and customer curtailments should be invoked. As a result, those customers with the ability to convert to alternate fuels were requested to do so, and the Company requested all customers to reduce thermostat settings to 65 degrees in the daytime and 60 degrees at night. In a series of steps, steep curtailments were ordered for commercial and industrial customers.

For a ten-day period commencing January 29, industrial customers were restricted to using only the amount of gas necessary to protect equipment from damage. Moderating temperatures and emergency purchases of gas from Canada and the Pacific Coast allowed the restrictions to be eased somewhat on February 7, and on February 9, industrial customers were permitted to return to normal operations.

The severe weather in January 1977 resulted in abnormally high gas sales.

The Company did not feel that it should take undue advantage of these unusual circumstances while, at the same time, customers were faced with record high heating bills, and often with reduced income due to plant shutdowns forced by natural gas curtailments. To partially alleviate the economic burden, the Company made a one-time reduction of ten dollars in each bill for residential gas heating customers. This amounted to a revenue reduction of $ 1.5 million, before taxes.

It should be realized that residential gas customers have the highest priority, and the Company had no legal control over their usage during the gas shortage.

It was mainly the voluntary cooperation of the residential gas spaceheating customers in reducing their consumption that freed up gas for industrial use, thus minimizing the overall economic impact of the gas shortage on the community.

Consequently, it was felt the Company's long-range objectives would be best served ifthe Company shared the economic burden that the extremely cold weather had placed on the community. The public reaction to the decision has been very positive.

The gas supply situation is still a senous problem. Stored gas reserves have been reduced far below normal, and it seems certain that some curtailments and conservation measures will remain in effect. A replenishment of stored gas this summer, and the anticipated 1978 allotments of LNG, could materially improve the gas supply picture in the near future.

Last year we reported that of all gas and electric utilities operating in New York State, RG8rE had the lowest number of complaints registered with the Public Service Commission in both gas and electric categories. We are happy to report that we still maintain that enviable position, thanks to the outstanding efforts of our employees.

Again this year we have been able to reduce our work force, reflecting a continued increase in employee productivity.

While it is difficultto make any firm, long-term projections, there is no question, in our opinion, that there will be a steady growth in the use of electricity. Although gas demands

'presently exceed supply, we believe there is room for growth in the gas business as new gas resources become available. As we are meeting our customers'aily requirements, we shall place a high priority on maintaining flexibilityin planning for their future energy needs.

Sincerely, ail//C~8~$

Francis E. Drake, Jr.

Chairman of the Board and Chief Executive Officer Paul W. Briftfts President March 1, 1977 First Federal Plaza adds a new look to the Rochester skyline. The 20-story structure is scheduled for occupancy in 1977.

0 Total Capability 0

Total Capability Forecast Required Capability goad plus required reserve)'

Peak Loads Actual 0

Peak Loads Forecast 2000 1750 1500 1250 C

K Z

Q 1000 750 500 RG8 E System Capability and Electric Loads Thousands of Kifowats Operations Even with the influence of energy conservation

measures, supported by RG&E through customer communications programs, energy demands continue to grow.

In 1976, electric consumption by residential customers rose 5.7 percent while commercial and industrial use showed 5.5 percent and 7.7 percent gains, respectively. Overall, 1976 total kilowatt-hour sales to our customers were 6.3 percent more than the previous year.

Natural gas sales to existing customers increased ten percent in residential, 10.5 percent in commercial, and 10.8 percent in industrial. Combined gas sales for the year were 10.3 percent more than 1975, and colder-than-normal weather from September through December resulted in gas sales 14 percent above projections for that period.

7 S as z IZ /

0 r

F Steam sales for the year were approximately the same as in 1975.

Increased use due to cold weather was offset by loss of steam customers and by conservation measures.

Electric Operations The Company is engaged in several long-range programs designed to meet expanding electric energy needs. Construction is in progress on Niagara Mohawk's Oswego tlt6 oil-fired plant and its Nine Mile Point tls2 nuclear power plant. RG&E has a 24 percent share of the 850 MW Oswego plant scheduled for operation in 1979, and a 14 percent share in the Nine Mile Point 1,084 MW plant that will be operational in 1982.

In October 1976, RG&E signed an agreement with the County of Monroe in which the Company agreed to use refuse derived fuel (RDF) that will be a by-product of the County's refuse recycling facility now under construction. Two coal-fired boilers at Russell Station will be initially modified to accept the confetti-like RDF. The fuel deliveries are expected to start in 1979 when the recycling plant begins operation. Costs for boiler modification will be recovered in RDF price adjustments, and the cost of the fuel will be tied to the market price of coal, thus having no impact on fuel cost adjustments for electric customers.

The Company's reinforcement of electric power supply to the downtown Rochester area continued with the start of the installation of a second 115,000 volt pipe-cable. Additional 115,000 volt overhead transmission lines are also under construction to major load centers. These projects will provide greater operational flexibilityand will accommodate substantial future growth.

250 1968 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 Actual Forecast

'The most recent generating unit added to the RCgE system was thc Cinna nuclear plant which was completedin 1970, at approximately one. sixth ofthe present cost of a comparable unit. Itis estimated that the plant has saved customers more than S 100 millionin fuel costs alone duringits operaung lifeumc, andit provides electricity at the lowest total cost ofany steam generating unit on our system. This fow-cost generating capacity willconunue to benelit RC&E customers.

Turbine Blade Failure On April 10, 1976, the Ginna nuclear power plant was returned to service following the annual refueling, inspection and maintenance shutdown which commenced February 1, 1976. This planned shutdown had

j~

been advanced in order to replace an entire row of turbine blades in the low-pressure end of the unit as a result of a blade failure experienced on January 29, 1976.

On August 7, 1976, damage was again sustained in the replaced section, forcing another shutdown. There appeared to be a design deficiency in one row of blades in the low-pressure section of the turbine, and it was concluded that a simple replacement of the failed blades would not be an adequate solution. As a temporary

measure, three rows of low-pressure blades were removed, and baffles were substituted to simulate normal pressure drops. The plant was returned to service on September 4, with its capacity reduced to 86 percent of normal. A new low-pressure rotor has been ordered and is expected to be installed during the refueling period in the spring of 1978.

These lengthy outages in 1976 reduced the availability of the Ginna nuclear power plant and somewhat diminished the savings to customers.

In 1975, our customers realized fuel savings of more than $33 million as a result of nuclear plant operation, while the savings amounted to only $ 21 million in 1976.

T~T""

top An RC&E crewman repairs a line connection during the severe ice storm ofMarch 1976. Crews responded quickly to widespread power outages.

bottom Iett An engineer examines blade damage in Cinna Station's turbine. A new turbine rotor is being designed and fabricated for installauon in 1978.

bottom right An opossum is released at the site for the proposed nuclear power plant near Sterling, New York. A thorough study of animal and insect habitat was made.

Y)$

Electric Kilowatt-Hour Sales to our Customers by Classes millions Residential 1500 1000 500 0

1500 Commercial 1000 500 0

1500 Industrial 1000 500 0

500 Other 0

1967 68 69 70 71 72 73 74 75 76 Total Electric KWH Sales Year Total in millions 1976 4806 1975 4521 1974 4408 1973 4540 1972 4292 1971 3982 1970 3802 1969 3578 1968 3280 1967 2993 top left A section of 12-inch plastic gas line replacement is prepared for insertion into older 16-inch gas mains. The plastic pipe resists corrosion and seepage.

top right To minimize disruption of service and traffic, gas conversion work was accomplished at night whenever possible.

center right Personnel of the health physics laboratory in the nuclear power plant at Ginna Station continually test the environment, both inside and out.

bottom Pictured is a model of the Monroe County refuse recycling facilityscheduled for completion in 1979. RC8 E has contracted with the County to purchase refuse derived fuel (RDF) from the faci%ty for boiler use at the Russell Station generating plant.

Gas Operations On June 30, 1976, a valve was turned that ended the manufactured gas era for RG&E customers an era that began in 1848.

Conversion of manufactured gas customers'quipment to straight natural gas has taken place during the last several years, and was completed in the spring of 1976. An annual savings of

$ 1.8 million is projected because of operational and tax cost reductions. The conversion also made an additional 225 million cubic feet of natural gas available annually that had been consumed in the gas manufacturing process.

Work continued in 1976 to improve gas lines. An innovative technique has been developed that permits modern 12-inch plastic piping to be inserted into the older 16-inch distribution lines made of cast iron or steel. This procedure is less expensive than replacing the older lines and, in addition, these new lines are more durable, more corrosion resistant, and more easily installed.

Research and Development In 1976, RG&E invested $ 1.8 million in support of research and development programs More than half of the total expenditure was allocated by the Company directly to institutions and organizations to finance specific research.

One project involves a $35,000 grant to Rochester Institute of Technology (RIT) for development of a modern, solar-assisted, energy-efficient home.

RG&E is also providing technical advice and instrumentation for the home scheduled to be completed on campus in early 1977. The Company is also assisting RIT on a study of wind-generated electricity.

At Rensselaer Polytechnic Institute, RG8rE is funding a study for an improved thermal window for better insulation, and a project that hopes to further improve preventive maintenance of transformers.

Through Stone and Webster Engineering Corporation, RG8 E is supporting environmental study at Worcester Polytechnic Institute that will reduce fish impingement on power plant cooling water intake systems.

The Company participates in other research programs through the Empire State Electric Energy Research Corporation (ESEERCO) and the Electric Power Research Institute (EPRI). One of the major ESEERCO projects involves a Cas Therm Sales lo our Customers by Classes Residential Total Gas Therm Sales Year Total in millions 1976'68 1975 424 1974 454 1973 435 1972 469 1971 442 1970 425 1969 403 1968 374 1967 349 New Appointment Robert C.

Henderson was named an Assistant Controller for the Company effective October 20, 1976. Mr. Henderson joined the Company's accounting department in 1963, and at the time of his promotion was Manager of Financial Analysis.

Retirement Donald R. MacCollum, Senior Vice President Gas, Transportation, and Fuels Research, retired August 1, 1976, after 42 years of service with the Company.

Albert J. Klemmer It is with deep regret that we note the death of Albert J.

Klemmer, Vice President of Customer Services, who died on April 27, 1976. A native of Rochester, New York, he was highly respected within the community and the Company.

$22 million test installation of "scrubbers" in the stacks at Niagara Mohawk's Huntley Station. By removing sulfur dioxide, the equipment will reduce air pollution and allow the burning of more abundant, and less Industrial expensive, high-sulfur coal. RG&E is also participating in a major national program to develop a liquid metal fast breeder reactor. It is our position that development of a commercial breeder Other reactor is an essential component of a viable National Energy Policy.

1967 68 69 70 71 72 73 74 75 76 A quality research and development program can be to everyone' advantage, and RG&E, is continuing to support programs aimed at providing clean, abundant energy for the future.

millions 250 200 150 100 50 100 50 100 50 50 9

forecast 1977 We expect an increase in earnings for 1977. Electric consumption by our customers is forecast to increase 4.9 percent in 1977. Commercial and industrial reaction to a continuing economic recovery may drive the estimate beyond this conservative level.

Any revitalization of housing starts will increase residential electric consumption. The sale of electricity to other utilities willdecrease due to the increased requirements of our customers.

RG8 E has taken steps, through advance planning, that will meet increasing energy requirements through the late 1980's, and support healthy economic growth in the area.

Gas sales for 1977 are projected to decrease 3.2 percent, but the uncertainty of the gas supply situation will affect any estimate. No new load growth is anticipated for steam.

It is expected that taxes, materials and operating costs willcontinue to rise.

Local, state and other taxes are projected to increase by $4.4 million over 1976 payments. A wage adjustment that was granted in February 1977, together with merit and promotional increases, will increase payroll by $5.1 million during the year.

The Company forecasts that its capital expenditures for 1977 will amount to

$ 100 million for property and equipment plus $ 16.6 million for nuclear fuel. The forecast for utility plant expenditures includes $ 70.5 million for projects initiated prior to january 1, 1977, and $29.5 million for new projects in 1977. The expenditures include $ 11 million of allowance for funds used during construction, leaving

$ 105.6 million for new construction.

Capital willbe provided by use of internal funds and external financing.

We presently plan 1977 financing through $40 million of bonds,

$20 million of common stock, including Automatic Dividend Reinvestment Plan shares, plus $ 15 million in short-term debt. The balance of funds to finance construction and to refund the

$ 6 million of Series D Bonds that will mature September 1, 1977 is expected to be supplied by internal cash flow.

Electric Generating Projects Plant Net Estimated Megawatt Year of Total Project Capability Operation Cost (1)

Millionsof Dollars RC&E's Share Estimated Construction Cost (1)

Megawatts Percent 1977 Total Millionsof Dollars Oswego Unit f)f6Oil (2)..............

850 Nine Mile Point Nuclear Unit sjs2 (2).....

1084 Sterling Nuclear (4)....................

1150 1979

$247.0 204 24

$ 9.8

$ 59.3 1982 863.0 (3) 150 14 19.9 120.8 1984 927.4 (5) 322 28 3.8 259.7

$33.5 (1) Construction costs are exclusive ofallowance for funds used during construction, and certain overhead costs to be capitalized.

(2) To be constructed and operated by Niagara Mohawk Power Corporation.

(3) Total project costs include $70.7 million for the initial nuclear fuel loading.

(4) To be constructed and operated by RC&E.

(5) Total project costs include $87.0 million for the initial nuclear fuel loading, 10

Management's Discussion and Analysis of the Statement of Income The followingfinancial review discusses major changes that affected differences in Net Income, between 1976/1975 and between 1975/1974, as reported in the Statement of Income on page 14 of this report. The Notes to Financial Statements on page 17 of this report contain additional information that relates to this discussion.

Revenue Changes in Electric Revenue rates effective in April 1976 increasing revenue $5 million annually. Previously rates increasing revenue

$4.9 million annually were approved in October 1974.

Revenue changes from weather effects, on a degree day basis, resulted from 11.2 percent colder weather in 1976 than in 1975 and 8.8 percent warmer weather in 1975 than in 1974.

Changes in Steam Revenue Customer Revenue (estimated) from Rate increases Fuel cost adjustment Sales Other Total Change in Customer Revenue Electric Sales to Other Utilities....

Total Change in Electric Revenue..

Increase or (Decrease) from Prior Year 1976 1975 IThoukaoCk of Oot)an)

$ 8,449

$ i3,474 9,395 2,176 6,051 3,307 34 112 23,929 19,069 (7,237) 10,799

$ 16,692

$29,868 Customer Revenue (estimated) from Rate increases Fuel cost adjustment Weather effects..............

Sales '........................

Other Total Change in Steam Revenue...

Increase or (Decrease) from Prior Year 1976 1975 IThouwnkh of Dot)ark) 960 875 (109) 1,845 977 (760)

(796)

(947) 14 3

$ 1,046

$ 1,016 Customer Revenue (estimated) from Rate increases Gas cost adjustment Weather effects Sales Other.

Total Change in Gas Revenue.....

Increase or (Decrease) from Pikor Year 1976 1975 (Thousand of Dollars)

$ 2,460

$ 3,517 9,266 7,422 4,488 (3,419) 2,297 (460) 38 (45)

$ 18,549

$ 7,015 Total gas revenue increased by $ 18.5 million in 1976 principally due to higher gas cost adjustments and colder than normal weather during the fourth quarter of the year.

In addition the Company received approval of new gas Total revenue from electric customers increased

$23.9 million in 1976 and $ 19.1 million in 1975. Effective April 20, 1976 the Company received approval to increase electric rates $ 11 million annually. Previously rates increasing revenue $ 17.9 million annually were approved in October 1974.

Electric kilowatt-hour sales to our customers increased 6.3 percent in 1976 and 2.6 percent in 1975. Unlike 1975 when industrial consumption lagged, 1976 showed increased consumption in the residential, commercial and industrial sectors reflecting an improved economy, new electric residential heating customers and an extremely cold fourth quarter.

Revenue from electric sales to other utilities decreased

$ 7.2 million in 1976 and increased

$ 10.8 million in 1975.

Surplus system generation was not available for sale during 145 days of 1976 and during the 114-day shutdown of the Ginna nuclear station in 1974. Nuclear generating capacity was available for nearly ten months in 1975.

Changes in Gas Revenue A steam rate increase designed to raise annual revenue $2.5 million was approved in April 1975.

Expense Changes in Operation and Maintenance Expense Electric and steam fuels Purchased electricity Purchased natural gas Other operation Maintenance Total Change in Operation and Maintenance Expense Increase or (Decrease) from Prior Year 1976 1975 IThoukanCk of Dollars) 93

$ 9,575 5,983 142 13,945 4,905 7,048 6,273 506 1,734

$27,575

$22,629 Total operation and maintenance expense increases in 1976 and 1975 were affected by several major factors.

Ginna nuclear plant electric generation, which has a much lower cost than generation at fossil-fueled plants was available almost eight months of 1974, nearly ten months in 1975 and approximately seven months in 1976.

The 1975 increase in electric and steam fuels expense was mainly attributed to increased fuel supply costs and an increase in electricity generated in 1975. The purchased electricity expense increase in 1976 reflects an 11.6 percent increase in kilowatt-hour purchases and a 13.2 percent decrease in Company kilowatt-hour electric generation due to shutdowns at the Ginna nuclear plant.

The increases in cost of purchased natural gas were primarily caused by increases in pipeline rates in both periods. The amount of increase was higher in 1976 mainly because of increased consumption due to colder weather.

The increase in other operation and maintenance expenses in 1976 and 1975 reflects increased payroll and related expenses and the higher cost of materials and supplies.

Changes in Federal Income Tax Increase or (Decrease) in Tax from Prior Year 1976 1975 (thousands of Dollars)

$ 2,982

$ 4,756 Change in tax resulting from difference in pretax income...

Change in tax resulting from differences in items deductible for tax purposes but not expensed on the books for which tax benefit is recognized currently........

Other Total Change in Federal Income Tax........

(3,274)

(215)

(507)

(169)

(508)

$ 4,079 See Note 2 to the financial statements for a detailed analysis.

Changes in Taxes Taxes local, state and other increased

$4.3 million in 1976 and $3.7 million in 1975, principally due to higher property taxes resulting from the addition of new plant, increased property tax rates, and higher franchise and gross income taxes based on increased revenues.

Other Statement of Income Items The increase in allowance for funds used during construction of $4 million in 1976 and $ 1.8 million in 1975 was due to increases in utility plant expenditures in both periods. The rates used to capitalize allowance for funds used during construction were: January 1, 1972 to August 31, 1973, 7t/z%; September 1, 1973 to May 31, 1974, 8%;

June 1, 1974 to June 30, 1975, 10%; July 1, 1975, to April 30, 1976, 8'/4%; and effective May 1, 1976, 8/a%.

Interest on long term debt increased

$2.4 million in 1976 and $2 million in 1975 reflecting additional bonds issued in June 1976 and August 1974.

The 1976 decrease of $ 1 million in other interest reflects mainly interest on contract payments for jointly-owned generating facilities amounting to less than $.1 million in 1976 as compared with almost $ 1 million in 1975.

Preferred stock dividends increased

$2.2 million in 1976 because of additional preferred stock issued in October 1975.

Rate Increases Cranted Amount of Rate of Rate of Increase Percent Return on Return on Class of Effective (Annual Basis) of Rate Base Equity Service Date of Increase (000's)

Increase Authorized Authorized Electric Gas Steam March 25, 1971 October 25, 1972 October 23, 1974 April 20, 1976 April 28, 1972 October 23, 1974 April 20, 1976 November 20, 1970 May 11, 1972 November 12, 1973 April 15, 1975

$ 5,900 10,154 17,992 11,002 3,676 4,854 4,983 1,157 897 500 2,475 7.48%

11.50 16.00 7.90 6.80 7.60 6.30 21.00 11.40 5.10 12.00 7.72%

12.00%

7.96 12.00 8.83 13.19 9.35 13.50 7.77 12.00 8.42 12.09 9.35 13.50 4.32 6.48 7.25 8.69 Pending Requests Class of Service Date of Filing Amount (000's)

Percent Electric December 3, 1976

$20,096 12.20%

Gas December 3, 1976 6,998 7.30 12

ity Financial Statements Income 14 Balance Sheet 15 Changes in Financial Position 16 Retained Earnings 17 Notes to Financial Statements 17 Report of Independent Accountants 20 Operating Statistics Electric Department 21 Gas Department 22 Steam Department 23 top Iclt and risbt RG&E employees provide the talent far the Women's and Men's Charuses which entertain audiences throughaut the Company's service territory.

ccntcr Surgery is shown in one of5Vong Memorial Hospital's 20 operating rooms. The 647-bed, modem facilityis now one of the region's largest hospitals and is primarily electric.

bottom Production in 1976 expanded at the Rochester-based Eastman Kodak Campany with the introduction of Kodak instant cameras and film.

ROCHESTER CAS AND ELECTRIC CORPORATION Statement Of InCOme trhovsands oI uolte')

Year Ended December 31 1976 1975 1974 1973 1972 Revenue (Notes I and 3)

Electric Gas Steam

$ 170,558 101,027 18,383

$ 146,629 82,478 17,337

$ 127,560 75,463 16,321

$116,512,$ 102,709 64,633 65,865 10,014 9,199 Electric sales to other utilities 289,968 18,259 246,444 25,496 219,344 14,697 191,159 21,112 177,773 14,063 308,227 271,940 234,041 212,271 191,836 Expense (Notes I and 3)

Electric and steam fuels Purchased electricity Purchased natural gas Other operation Maintenance Total operation and maintenance expense Depreciation Taxeslocal, state and other.

Federal income tax (Note 2) 46,361 18,195 56,192 57,677 20,206 198,631 18,621 40,502 5,365 46,268 12I212 42,247 50,629 19,700 171,056 17,414 36,157 5,295 36,693 12,070 37,342 44,356 17,966 148,427 16,491 32,410 1,151 25,612 8,841 29,923 40,999 15,888 121,263 15,145 29,993 7,639 21,979 8,049 31,318 37,922 14,872 114,140 14,565 27,885 1,660 263,119 229,922 198,479 174,040 158,250 Operating Income 45,108 42,018 35,562 38,231 33,586 Other Income and Deductions Allowance for funds used during construction (Note I)...

Other Income before Interest Charges 7,531 1,128 8,659 53,767 3,574 537 4,111 46,129 1,741 670 2,411 447 456 715 203 1,162 659 37,973 39,393 34,245 Interest Charges Interest on long term debt Interest on short term debt Other 19,378 16,963 1,054 1,568 246 1,227 14,965 2,255 210 13,738 1,246 103 13,738 1,160 102 Income before giving effect to a change in recording month-end revenue and expense Effect on calendar year 1972 of recording four additional days of revenue and expense (Note 3) 20,678 33,089 19,758 17,430 26,371 20,543 15,087 24,306 15,000 19,245 706 Net Income Dividends on Preferred Stock, at required annual rates..

Earnings Applicable to Common Stock Weighted average number of shares outstanding in each period (000's)

Earnings per share of common stock based on weighted average number of shares outstanding in each period, adjusted for stock dividends: (Note 1)

Income before giving effect to a change in recording month-end revenue and expense Effect on calendar year 1972 of recording four additional days of revenue and expense (Note 3)

Net earnings per share Cash Dividends per Common Share, adjusted for stock divide ds (Note 1) 33,089 26,371 20,543 24,306 19,951 6,245 4,054 3,550 3,550 3,550

$ 26,844

$ 22,317

$ 16,993

$ 20,756

$ 16,401 11,296 10,356 10,018 9,1 2.37 2.15 1.70

.09 2.26 1.96 1.27 1.21 1.16 1.11

.06 2 37 2.15 1.70 2 26 1.87 14

ROCHESTER GAS AND ELECTRIC CORPORATION BalanCe Sheet I I

~,~~uI ASSETS UtilityPlant, at original cost (Note 1)

Electric Gas Steam At December 31 1976

$551,724 158,386 17,577 1975

$516,199 160,322 16,883 1974

$485,889 156,951 16,468 1973

$453,484 149,399 16,008 1972

$442,337 142,320 15,273 727,687 693,404 659,308 618,891 599,930 LessAccumulated Depreciation and Amortization Electric Cas Steam 158,216 34,967 5,595 142,046 38,365 5 044 125,941 37,114 4,590 111,401 34,965 4,234 103,240 32 177 4,388 198,778 185,455 167,645 150,600 139,805 Construction work in progress 528,909 120,702 507,949 79,381 491,663 39,324 468,291 24,542 460,125 16,539 Investment in subsidiary, at equity (Note 1)

Current Assets Cash (Note 5)

Accounts receivable Materials and supplies, at average cost Prepayments 649,611 1,911 6,429 33,806 20,209 646 587,330 1,871 7,247 24,217 21,675 657 530,987 1,834 7,458 25,354 19,017 849 5 434 22,239 10,799 510 13,651 19,643 9,888 530 492,833 476,664 61,090 53,796 52,678 38,982 43,712 Deferred Debits Unamortized debt expense Deferred fuel cost (Note 3)

Other CAPITALIZATIONAND LIABILITIES Capitalization (Note 4)

Common Shareholders'quity Common stock Retained earnings Preferred Stock Long Term Debt.

Total Total common shareholders'quity Total shareholders'quity 2,651 3,452 2,048 8,151

$720,763

$ 181,301 67,812 249,113 92,000 341,113 311,395 2,308 3,739 1,403 7,450

$650,447

$ 173,586 60,502 234,088 89,000 323,088 267,314 2,477 3,737 1,999 8,213

$593,712

$ 154,758 53,568 208,326 67,000 275,326 267,348 1,981 2,893 4,874

$536,689

$ 148,566 52,184 200,750 67,000 267,750 237,382 2,081 1,335

, 3,416

$523,792

$ 124,045 47,069 171,114 67,000 238,114 237,417 Nuclear Fuel Contract.

Current Liabilities Short term debt (Note 5)

Long term debt due within one year Accounts payable Taxes accrued, including income taxes Interest accrued Payroll accrued Other 18,051 6,000 18,153 2,959 6,306 2,203 980 21,500 14,544 6,505 6,100 2,005 1,058 21,000 11,028 2,428 6,767 1,909 820 12,909 8,922 4,657 1,763 840 652,508 590,402 542,674 505,132 475,531 2,145 18,000 14,088 4,958 4,993 1,633 821 Reserves and Deferred Credits Injuries and damages Other Accumulated Deferred Income Taxes (Notes I and 2)

Commitments and Other Matters (Note 6) 54,652 497 548 1,045 12,558 51,712 520 748 1,268 7,065 43,952 672 454 1,126 5,960 29,091 720 63 783 1,683 44,493 787 68 855 768 Total

$720,763

$650,447

$593,712

$536,689

$523,792 15

JKW ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 1976

$ 33,089 Working capital was provided by:

Net income Non-working capital items:

Depreciation of utilityplant........

Amortization of nuclear fuel Deferred fuel cost Deferred income taxes Allowance for funds used during construction Other (net) 18,621 6,125 287 5,493 (7,531) 274 Total from operations 56,358 Statement of Changes in Financial Position nI, 1 975

$26,371 17,414 7,591 (2) 1,105 (3,574) 599 49,504 1974

$20,543 16,491 2,584 (3,737) 4,277, (1,741) 514 38,931 1973

$24,306 15,145 6,829 915 (447)

(265) 46,483 1972

$ 19,951 14,565 5,322 (4)

(456) 352 39,730 Financing Proceeds of short term debt (net)

Sale of first mortgage bonds Sale of common stock Sale of preferred stock 50,000 2,626 3,000 55,626 Total

$111,984 500 17,258 22,000 39,758

$89,262 21,000 30,000 494 51,494

$90,425 19,726

$ 66,209 15,095

$54,825 19,726 15,095 Working capital was used for:

Utilityplant Plant additions less allowance for funds used during construction...

Nuclear fuel.

Preferred stock dividends Common stock dividends Payment of short term debt (net)

Reduction of long term debt.....................................

Nuclear fuel contract due in one year.

Capital stock expense.......

Other (net)

Increase (decrease) in working capital (exclusive of short term debt)...

Total

$ 67,162 13,829 80,991 6,245 14,312 3 449 6,000 133 (51) 905

$ 111,984

$71,733 6,415 78,148 4,054 12,258 1,555 (611)

(6,142)

$89,262

$50,931 5,240 56,171 3,550 11,614 75 (820) 19,835

$90,425

$34,181 3,195 37,376 3,550 9,922 18,000 2,145 925 1,619 (7,328)

$66,209

$25,618 6,876 32,494 3,550 8,751 3,500 3,542 284 931 1,773

$54,825 Changes in working capital accounted for by:

Increase (decrease) in current assets Cash Accounts receivable Materials and supplies Fossil fuel Construction and other supplies Prepayments (818) 9,589 (1,456)

(10)

(11) 7,294 (211)

(1,137) 3,381 (723)

(192) 1,118 5,120 3,098 339 13,696 218 693 (20)

(4,730)

$ 2,024

$ (8,217) 3,115 2,596

$ 1,188 6,644 (186)

(754)

(80) 6,812 Increase (decrease) in current liabilities other than short term debt Long term debt due within one year Accounts payable Taxes Accrued interest and payroll Other (net)

Changes in working capital, as above 6,000 3,609 (3,546) 404 (78) 6,389 905 3,516 4,077 (571) 238 7,260

$ (6,142)

(1,881)

(6,494) 2,256 (20)

(6,139)

$ 19,835 (1,179) 3,964 (206) 19 2,598

$ (7,328) 3,907 712 422 (2) 5,039

$ 1,773 16

PKM ROCHESTER GAS AND ELECTRIC CORPORATION Statemerit of Retained Earnings Irh-~~3.I~I.~I Year Ended December 31 1976 1975 1974 1973 1972 Balance at beginning of period Adjustment to record subsidiary at equity Balance at beginning of period as adjusted Net income 60,502 33,089 93,591 53,568 26,371 79,939

$60,502

$53,568

$52,184 949 53,133 20,543 73,676 47,069 24,306 71,375 44,624 19,951 64,575

$47,069

$44,624 Dividends on capital stock:

Cumulative preferred stock, at required annual rates (Note 4)

Common stock:

Cash (Note 1)

Stock (Note 4) 6,245 14,312 5,222 25,779 4,054 12,258 3,125 19,437 3,550 11,614 4 944 20,108 3,550 9,922 5,719 19,191 3,550 8,751 5,205 17,506 Balance at end of period

$67,812

$60,502

$53,568

$52,184

$47,069 Notes to Financial Statements Note 1. Summary of Accounting Policies General. The Company is subject to regulation by the Public Service Commission of the State of New York (PSC) with respect to its rates for service and the maintenance of its accounting records.

The Company's accounting policies conform to generally accepted accounting principles as applied to New York State public utilities giving effect to the rate making and accounting practices and policies of the PSC. A description of the Company's principal accounting policies follows.

UtilityPlant and Depreciation. The cost of additions to utility plant and replacement of retirement units of property is capitalized. Cost includes labor, material, and similar items as well as indirect charges for engineering, supervision, etc. The Company capitalizes an allowance for funds used during construction approximately equivalent to the cost of capital devoted to plant under construction. Replacement of minor items of property is included in maintenance expenses.

Costs of depreciable units of plant retired are eliminated from utility plant accounts, and such costs, plus removal expenses, less salvage, are charged to accumulated depreciation and amortization.

Depreciation in the financial statements is provided on a straight-line basis at rates based on the estimated useful lives of property, which have resulted in provisions as follows:

19722.7%, 1973-1975 2.89o, and 19762.9% per annum, of average depreciable property.

Amortization of nuclear fuel assemblies is charged to operating expense each month based upon the thermal output of the reactor and the total book cost of the fuel load.

Allowance for Funds Used During Construction. The Uniform System of Accounts of the PSC defines Allowance for Funds Used During Construction (AFDC) as the net cost of borrowed funds for construction purposes and a reasonable rate upon the Company's other funds when so used. The rates for such purpose were:

January 1, 1972 to August 31, 1973, 73/2%; September 1, 1973 to May 31, 1974, 8%; June 1, 1974 to June 30, 1975, 10%; July 1, 1975 to April 30, 1976, 83/~%; and effective May 1, 1976, 83/8%.

The rate changes, together with the impact of the large increase in construction work in progress during the years 1974-1976, account for the variance in the amount of the allowance. Based on an average of the Company's capitalization and upon the costs of short-term and long-term debt (without adjustment for income taxes) and preferred stock in the respective periods, the portion of AFDC attributable to funds provided by common stock equity for the years 1972 through 1976 was equivalent to 1.4%, 1.1%,

5.99o, 9.1% and 14.3% of Earnings Applicable to Common Stock.

Rates and Revenue.

Revenue is recorded on the basis of meters read during the calendar year.

Tariffs for electric and steam service include fuel cost adjustment clauses which serve to adjust electric and steam rates from time to time to reflect changes in the average costs of fuels used in electric and steam generation from the average cost of such fuels during the base period. Tariffs for gas service contain a comparable clause to adjust gas rates for changes in the price of purchased natural gas.

Federal Income Tax. For income tax purposes, depreciation is computed using the most liberal methods permitted. In addition, certain costs capitalized for financial reporting purposes are deducted currently for income tax purposes. The resulting tax reductions are offset by provisions for deferred income taxes only to the extent ordered or permitted by regulatory authorities.

The Tax Reduction Act of 1975 has temporarily increased the investment tax credit rate from 4% to 10% for 1975 and 1976. The prior rate of 4% is applied to reduce current tax provisions.

However, as recommended by the PSC, normalized tax accounting is follbwed in the application of the temporary 6% increase.

Pension Plan. The Company's retirement plan is noncontributory and covers all regular employees.

Retirement plan benefits are provided for by payments made to an insurance company and to trust funds with banks. Current service costs are funded annually.

The period over which prior costs are being amortized was changed in 1976 from 30 years to 40 years.

17

Retirement plan expense for the years 1972 through 1976 was

$5.4 million, $5.7 million, $5.5 million, $6.8 million and $ 8.1 million, respectively. The increase in cost in 1976 over 1975 is primarily due to amendments to the plan and changes in actuarial assumptions.

The actuarially computed value of vested benefits at December 31, 1976 exceeds the assets in the plan by approximately $20 million.

Earnings and Dividends Per Share. Earnings applicable to each share of common stock are based on the weighted average number of shares outstanding during the respective years, adjusted for stock dividends. Cash dividends per share are based on the shares outstanding at the time dividends are paid, adjusted for stock dividends. Cash dividends per share at the rates declared in each period amount to $ 1.20 for 1972, $1.22 for 1973, $ 1.24 for 1974, $ 1.26 for 1975, and $1.28 for 1976.

Investment in Subsidiary Company. As prescribed by the PSC, the Company has recorded its subsidiary, Canadea Power Corporation, on an equity basis as of January 1, 1974. Prior years'inancial statements have not been restated due to the immaterial effect on prior years. The effect of the change on 1974 net income and earnings per share is not significant.

NOte 2. Federal InCOme TaX PrOViSiOn ttteu54ndsof Oouan)

The following is a reconciliation for the years 1972 through 1976 of the difference reported in the Statement of Income and the amount computed by multiplying the 1976 1975 4/4 of 4/4 of Pretax Pretax Amount Income Amount Income Net income

$33,089

$26,371 between the amount of Federal income tax expense income before tax by the statutory tax rate.

1974 1973 1972 4/4 of 4/4 of 4/4 of Pretax Pre!ax Pretax Amount Income Amount tncome Amount tncome

$20,543

$24,306

$ 19,951 Federal income tax Current.

Deferred Charged to operating expense.............

Amort. of deferred investment tax credit......

Other Included in Other tncome..................

Tax effect on calendar year 1972 of recording 4 additional days revenue and expense.....

Actual Federal income tax expense............

Income before Federal income tax.............

(291) 5,656 5,365 (163)

(1,271)

( l,434) 3,931

$37,020 4,162 1,133 5,295 (28)

(829)

(857) 4,438

$30,809 (3,126) 4,277 1,151 (792)

(792) 359

$20,902 6,724 915 7,639 (418)

(418) 7,221

$31,527 1,664 (4) 1,660 21 21 651 2 332

$22,283 Computed tax expense Increases (reductions) in tax resulting from:

Excess of tax depreciation less amount deferred Expenses capitalized for financial statements including interest, payroll and use tax, etc...

Investment tax credit.

Property taxes on basis of date of taxable status Cost of removal, less net amount deferred.....

Miscellaneous items, net....................

Actual Federal income tax expense............

(5,120)

(2,257)

(1,159)

(603)

(704)

$ 3,931 (13.8)

(3,032)

(9.9)

(6.1)

(1,228)

(4.0)

(3.1)

(955)

(3.1)

(1.7)

(437)

(1.4)

(1.9)

(655)

(2.1) 10.6

$ 4,438 14.4 (2,121)

(10.2)

(1,320)

(6.3)

(1,152)

(5.5)

(312)

(1.5)

(272)

(1.3) 359 1.7 (1,374)

(890)

(527)

(204)

(487)

$ 7,221 (4.4)

(1,218)

(5.5)

(2.8)

(1,650)

(7.4)

(1.7)

(384)

(1.7)

(.6)

(101)

(.4)

(1.5)

(50)

(.2) 22.9

$ 2,332 10.5

$17,770 48.0

$ 14,788 48.0

$ 10,032 48.0

$ 15,133 48.0

$ 10,696 48.0 (3,996)

(10.8)

(4,043)

(13.1)

(4,496)

(21.5)

(4,430)

(14.1)

(4,961)

(22.3)

A summary of the deferred amounts charged or (credited) 1976 Investment tax credit

$ 3,423 Class life depreciation 1,082 Fuel costs (138)

Nuclear fuel..............................

289 Other..................

837

$ 5,493 to income is as follows:

1975 822 850 1

(755) 157 5 1,705 1974 640 1,794 1,615 228

$ 4,277 1973 600 315 915 1972 (700) 295 401 (4) 18

During 1972 the Company converted from a fiscal month basis to a calendar month basis for purposes of closing revenue and major expenses on the same date in order to more nearly match revenue with expense. The effect of this change on net income for 1972 is 12 cents a share of common stock. Of this amount $0.7 millionor nine cents a share is the cumulative nonrecurring effect on net income to January 1, 1972 and is shown as a separate item in the Statement of Income. The remaining three cents a share is included in income from operations.

Pro forma amounts of net income and earnings per share which would reflect the effect of a retroactive application of the change are not presented due to the immaterial effect on prior periods.

Note 4. Capitalization Capital Stock Common StockPar value $5; 15,000,000 shares auth onzed:

rrhoukandk)

Amount

$ 104,029 5,205 14,582 513 (284) 124,045 5,719 19,238 489 (925) 148,566 4,944 99 Per Share Shares 6,939,909 208,198 767,061 27,008 Outstanding, December 31, 1971 3% Stock Dividend............

Sale of Stock.................

Employee Purchases...........