ML19268A259

1978 Annual Rept. Associated Cash Flow & Earnings Data Encl

ML19268A259
Person / Time
Site:	Nine Mile Point
Issue date:	12/31/1978
From:	NIAGARA MOHAWK POWER CORP.
To:
Shared Package
ML18039A058	List: ML18039A057 ML19268A259
References
NUDOCS 7908030309
Download: ML19268A259 (33)

Text

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Highlights of 1978 Contents 1978 197'  % Crarge 1 Presidentlietter Total operating revenues S1,280,248,000 $1,225,332.000 4 3 Financial summary 4 Sales and revenues income available for common stockholders S 112,502,000 S 98,127.000 15 5 Dividends, financing Earnings per common share $1.89 $1.74 9 6 Electnc growth outicok, Dividends per common share S1.36 % S1 31 % 4 construction programs 8 Nuclear power success  !

Common shares outstanding (average) 59,661,000 56.279,000 6 9 Alternate energy, environment Utility plant (gross) $3,905,374,000 S3.647.274.000 7 10 Gas outlock 11 Consumer programs Gross additions to utility plant S 316,280,000 S 289.931.000 9 12 Employees, stockholders

' bowatt-hour sales to customers 32,382,000,000 31,367,000.000 3 13 Financial statements 23 Statistics Electnc customers at enc of year 1,336,000 1.326.000 1 25 Officers and directors Electric peak load (kilowarm 5.485.000 5.405.000 1 L

I Natural gas sales to customers (cucic feet) 95,333,000,000 90.327.000.000 5 : l

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, Gas cu s.omers at end of year 413,000 413.000

! Maxim am day gas sendout(cuale feet) 637,556.000 660,974.0C0 H) l Service representative Howar,.

i

! Blair, Jr. of Potsdam hastens out on i 4 night trcubleshootiry call, a tipical l l assignment for him and the 400

DIVIE ENDS EARNINGS PER COMMON TOTAL OPERATING , other service recs wno stand ready ;

j PER COMMON SHARE SH ARE (RESTATED) REVENUES to respond to any consumer energy l l_ Con a's covars W -o-scid:Jaes emergency in our area. A norinern i New York native who joined the al = h[ ;[; tN-

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.t l Company 15 years ago. Howard

. takes personal satisf action in work- i j

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w m:

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TN t ing "out f ront" and h?lping our

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_.f 7A 1977 , , ' L226' a consumers on a person-to-person mmm m..e . . , , , w% - -- bas:s-in betng counted on.

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,& eV 1975 ? i ,

m 1 _ 97R- .

i Annual Meeting l L ;T' yg; , 17 Q yp . mm m 7

i f0 7.

~ - ~e 4_ Ai2 ' g. p~.~ m. M.-4W ,, L 1,974

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• eay AcM Transfer Agents Ne~ec Snc W F e'e e :e Ecc<

Our service area ,-

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• CC4 Niagara Mohawk is one of the na- c;- ;,3.;c, t!cn s leadtng investor-owned *TI% Ver:3- G ra-r, Tr_st utstres. witn tt e largest service

' area in New Ycrk State. Electncity #4M.d,M ~Db' CCHC aw CSea Wa E '^ 9 30^ 3) N* ^ * ' N Y T5 f rom our massive system. extend- gg pg ,

g(sglsjng Ag3nt , , , , , , r -

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ing from Lake Ene to New Eng- , 3%~

! land's bcrders, to Canada ar a '&W y, N agra V: aa< F:wa C: ccra y Pennsylvanta. serves the electnc Y ' f,W: W N @iA F E' e BCs e r[^9st reed s of 1.336.000 custo mers. O u r f.%#.p.e / Wg i 3 ' ' 3 2"* N " '

St ek Exchan_ges natural gas system serves .m  %'{f , . , = , ,,,,e,,,"

413 000 customers in central.

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eastern and northern New York. near!y all within cur .

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Uc: Ame'$N. A ster:3 .Ne' era-as electnc serwce area. Two < M" Mg B:s :r c ~a: CC c t ' caer y,' m - m 3 Canadian sucsidianes. 9,f , eM

NEW YOF,K STATE "'

23--m Tiche Symbh: NM 3 p y. , c .

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Company and Canadian g,,

Niagara Power Company Ltd.. cro-3,,, yy

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h M 3 (,.h 4 6 v'de electnc service to parts of s-0E c a ;eC. n c- s a. 3 ac e southern Ontano Our corporate 2" * * *" re' Yr:~ l' . r 3 0. <' * -] Te < :e headquarters is 3CO Ene BotJevard W.. Syracuse.N.Y.13202.

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To our stockholders Niagara hichawk's earnings showed a nonceable gain over those of 19"-up 15e per common share to $ 1.89 in 19'S.

This improvement resulted pnncipally from electnc and natural gas rate m-creases, totaling $35 million annually, effectiv July S. Also mtiuential were reduced maintenance costs and the continuance of tightenea cost controls. These earr. mas redect the fact that 19'S kilowatt-hour sales to c,ur customers were 3' r above those of 19'~, while gas sales were up 5cc .

. . - < y mu . mg Because earning projections remained substantially below levels apptoved by the W#WM2m;1gg Public Service Commission in itsJuly 19~S decision, we requested the Commis-gppewn 1

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ston to reconsider the electric portion or the case and to approve a u million, j

, 31,ri increase. This adjustment would have helped us achieve the revenue levels

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already approved by the Commission. Unfortunately, that was not to be. On i hmnW,GEW-MT 7 @

February 8,19~9, the Commission considered our request at an open meeting. It

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$ M d M IUkE hh l is the Company's understanding that the Commission agreed to allow Niagara blohawk a rate increase of approximately Sl~ million,!ess than half our request l

A formal opinion is expected by early Alarch.

M EM E.H "

W%%.yW,NN

% [4TL V/1-iN, WM Based on our cost and revenue projections for the early 1080s, Aca consista:t u nh wm 6- &

g g yg  : feder.d u ace and; r ce pidelines we are now proceeding with plans to sle for

,m.r,44#w. CM n. nm electnc and gas rate increases i spnne 19 9. L nder most circumstances, nearlv a l @u - d j p g %,; gg* P one-year lead time mest be allowed for the evaluation of our sling before new I u-DM,MWQ e

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'M , rates may be placed into effect. We must aggresuvely seek such rate adjustments m to mamtam earmnes.

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Afost dramatic of all the cost mcreases affecting our busmess is the spiraling cost or e % , of constructing new electnc generanng facilities to meet long-terrn energy -

quirements m our service area. For example, the cost,includine nnancmg, of a nuclear-electnc generating unit, about $24' per kilowatt in 1969, has n creased more than nvefold to approximately $1,390 per kilowatt m 19'S. Com-nred plant construcnon costs have also mulnplied drastically. The PSC has re-cently derned the combmed effort of New York State utilities to activate Empire State Power Resources, Inc. < ESPRI : as an electnc construction and eeneration company. This disappomung acnon Precludes the nnancme cost savmes ESPRI offered. In addition, ESPRI was expected to provitie a smgle engmeerme, con-strucnon and management oreanizanon at cost savmgs over the n separate groups of eacF utility.

Discussed in some detail on pace 6, the slowdown in upstate New York's economy and the impact of higher enerey costs have resulted m the rescheduline or maior power instalianons. At Present, our planners estimate our 15-year elec-rne growth at an averace 2.+ annually. with even less grow th throuch 1951, as acamst a 4.4 " annual growth proiecnon made m 19'i Despite the resultine decline m our construcnon program, we soll estimate the need for 50M million m tatural ex; enditures over the next three years. The compienon of a sixth generating unit at our Osweco Steam Stanon m lWU will help assure our cus-mmers that we can meet their necas.

The hve-year-old, to3tiy saca or enorts bv the Town of Af assena to expropnate our electnc distnhunon taulities aae te on as 19'S enced. Last fall, the New York State Court of Appeals ruied that Sla3sena (represennng only U.2 ofour t!cttric sales} wu!j condemn our propernes under New York State Law and enter the c:ettnc distnbunon Su, mew AIonths later, Nueara Stohaw k connaces to <erve Alas <ena w hiie a condemnanon commission becms its ".ork and the c.;j JU U u) s- 1 7908030 Y\., .

Town contends for temporary possession vichout 2ny long-range assurance or confidence of success.

Elsewhere in our system, municipal takeover proposals are suegested from time to time. Recently, however, the diminished availability oflow-cost, untaxed hydro power from the New York State Power Authority has discouraged all but the most zealous supporters of government ownership.

The once bleak outlook for natural gas supply brightened in 19 S. Because or conservanon, mcre sed wellhead producnon and the advent ofliquened natural gas, we now have gas available to serve markets closed for years due to a lack of an assured supply. Alore widespread use ofgas in homes, busmesses and industries, stimulated by revised federal policies, wil! help reduce dependente upon expen-sive foreign oil. L'se of natural gas instead of od also carries environmental bene 6ts. We have filed with the PSC tariff modifications to permit unrestricted sale and use of naturalgas.

Early in 19~9, we reported with granncanon that our Nine Able Pomt Nuclear Station achieved status in 19 S as the " Number One ' boiling water re ctor unit m the world. Designed and encineered by our own in-house technical talent, the neacly 10-year-old,610,000-kilowatt unit operated 95 G orthe calendar year 19~S. This surpasses the performance of any similar nuclear reactor in the world.

Store unportantly, this outstandmg nuclear performance saved upstate New York consumers many mdlions of dollars m enerer costs. It offset - uvalent use of

~.3 million barrels of oil. Alore detatis on this "nuticar succt , mn y are pre-sented on pace S.

Construction tinancme requirernents w ere met m 10~S by sale or 5 40 m.' lion or S.3~5' < pr eferred stock, and 5 50 mdlion of 91 mortgace bonds, both private placements, and a negonated o::crmg of 3.5 mi!! ion shares of common stock At year end, our short-term debt was only 52 i mi!! ion. Permanent nnancme re-quirements for 19~9 are not anacipateu to exceed 5150 million, mc!uding receipts from common stock sales via the Dividend Remvestment and Stock Purchase Plan and the Employee Savmgs Fund Plan.

We were especially pleased in December 19 S to raise the quarterly dividend on our common stock to Me per share, thereby r.usma the mdicated annu.d disidend to 51.+1 from the previous 51.3 6. This adjustment, the fourth mcrease for our common dividend in six years,is m keermg with ot r pledge to provide ou stockholders a r ur return on their constantly growing as estment.

As we enter this tinal year of the 19~0s-a challeneme, oren traumatic decade im allin the electric and gas utility industry-cach of us in nanacement at Niagara Afohawk expresses grantude to our stockholders and e mployees for their support and con tidence.

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=n .y , ~ .:,, .y February 21,19 9 2

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Financial review In l' mags were 51.89 pe r sult of a reducnon m fcel costs.

shart, ap 15e over 19" when Electric sales to our customers in-fewer shares were outstanding. creased 3. IG , surpassing the 2.S0 Total revenues wre 51,280 mil- rise in 19" A lien in 19'S, an increase of 55

• milhon or 4.F; . Contributing t Followine theJulv 19 S rate m- ib7' crease, Niagara 51ohawk 61e ' an EM.

the nse m revenues were increased sales, modestly higher rates and appeal with' the PSC statine that the new rates would fall far short of

\P' additional revenues from Pur-

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generating the Commission- *4 chased gas adjustments. The tables approved revenue levels. The 1

I #y # Nw r, on page 4 indicate changes m elec- Company emphasized that an addi-tnc and gas revenues and sales. #- ghe ' .j.

tional 53' million 0.5 S > increase d. .M a i',

Electric m rates would be essential to _ f; p:fyg.a si g$ MyL ,

Niagara Afohawk's electric reve.

nues mcreased 533 million m 19 8, realize the approved earmnes levels. The Company turther gigggggg ggg w

reaching 51,020 million followmg p mted out that sales forecasts in J} yg%ggr;r D;Q j= _ y an mcrease of S125 million the the onemal rate case werg based on lP pre cms year. These revenues projections made m 19 6, more gs., . . g.

benehted from penodic rate ad- than 11 years before the PSC de- p, g , h'. E cisi n, while actual saies m 19 justments mcluding a 528 million and 19'S pro ced to be much lower C9 g; ; ,a s 7.pg#f~  ;

annual adjustment effecnve Tulv S. MMp^

19'S. In a weicome reversai of'

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than ana'cipated'. L'nt'ortunateIy, M..(hgf

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trends, fuel and purchased power Commission consideranon of our ** M D 9

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costs passed on to our customers request at a recent open meeang $ p:

through the Company s adjustment 2ndicates acreement to grant less 4 4 M 3

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clause w ere low er m '19'S, the re_ than half the Company's requested merease. A torma,. decision was an- - - @ ,gylWW tm3 % .R a f;." M sg'rgx.m%

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ncipated by early Alarcn 19'9. ' gt N M y! Mh,yd [i .

ELECTRIC SALES About 10.000 customers ".ere .

kf1f 'j'*hINh cy 'L. i A pr W h f b',

W . ~WA W ces s k w s Inc lines in 19-'S, brmeme the total

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3sg R Wh7Mg to 1,4 36,000 at the year eni Aver.

Mgr?

)e%Q'g 4 f.l * ! gp&egd y' f,j b Q e W 2.3* 5 -

ace pnce per kilowatt-hour paid by [ k p @ g p$ $

W-b Y Mhj residential consumers rose from gg,@dg yff kf M'[M 5 4 %g [2 j t, gruV a t % g;<g.( 4MC to i93C, up onl) 2' com- / '

C-* "

W. M M frp $LA m "m%3 spr . Tn , , ,

13 F -d Q A g y ,3 e ry

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pared to the increase m the Con-sumer Pnce Index of ~ . It is g+',g .,?

ac y'ind

.. p4 M . % g-dtp&

U' t{pk VP [ q}P T vug 3% q i d)pU< M w nonna k WQ- .m5-;g fj & ?

same unir cost as in 1"?+a ----mo reout mem]Q l3lj sy k..mp @;y p

arvis grid.6 Mj%

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M :han ,1 iears aco. On December 15,,19 <s, the Company recorded f6f>vfT@;4.npw%.v w O 6 gl fdW d %@% kPN 4 m v., ww a new electric peak load of 5,M,000 kdowatts, some ?O,000 ghQ db 7 9

[ g$ $w $ h M N N " Md [m[

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E-GAS SALES kw mer se 'W'-' rea

w mwm 03s ~ err.c Hr.e/ Ter n w Tml m of tuel for electnc cener- ~c'e ' " Pe^ ' m

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'" r"_ -- m 5m7-mm"'.m a'.n,,e s a . ' ; ~ .,#. anon leveled oft in 19 8 arter a 3.U :M4 -

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• muhon mcrease m 14__. Our tuel m. , --s . 3 s , . 3 , , , , 7~ . _ y.

costs were adversely affectem, m m ,g ; ' /. _ g_ in u ra s e m -.r.e,,

n 1

.. a- ,1 i to" bv the need to take Nine 7 ,'c ev-ManY:w3us

% = g; . y w, ;~Lm NIde Pomt Nuclear 5tanon out or sce' 3 N 3eCOe7',as<ea-

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struce for normal refueling and mamtenance. However, m 19 S

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nuc' ear stanon served to stabihze tuel costs by reducmc consumpnen L . i. ; !: 3 J U s. Udv

of more expensive fossil fuels. Mohawk rate adjustment of 3.30 cubi: feet (mcf) of gas for residen-About one-third of Niagara (58 million annuallyi effectiveJuly tial customers was 12e or 4.2'T Mohawk's electric sales is met by 8,19~S also contributed to the more in 19 S than m 19" energy purchased from other elec- revt aue increase.

tnc systems. The unit cost of such Other f actors

" purchased power" has increased in in addition, gas sales registered a Higher labor costs were the pny each of the past two years. S'g ncant turnaround in 19~8,in- mary reason for the incre. 'ot516 creasing $r; to 95.3 billion cubic million in "other operatic Natural gas feet. This followed a 9.37 drop che penses" m 19'S and $ la r i en in Natural gas revenues climbed 522 previous year. The year-to-year re- 19". Mamtenance expenses for million m 19'S and 524 million m versal retleccs the colder weather m 19'S v.ere 54 million below those 19" due largely to , nce mcreases 19~S followmg mandated energy mcurred in 19" when SIS million allowed by tne Federal Energ3 curtailments during the nrst half of more , rcam.enance work was re-Regulatory Commission to Con- 19". Gas customers numbered quired at our steam generanng sta-solidated Gas Supply Corporation, 413,000 at the end of both years. nons and on our electnc distribu-our sole supplier. A Niagara Average revenue per thousand tion system than m 19 6.

ELECTRIC mcrease aecrease'"cc pr1cr per cc  % of ta'r  % "C*3SeCm ?97' r% ccs or :sy, e e "c E e:!m vcwam Fese % es 1979 197' C:3's ct $er, tce 'e<e N es reseses ws increase in base rates $12.0 S 54 2 ifesidential 31 5 3 Fuel and purchased power cost Commercial 33 2 4 increases (2.6) 78.9 Industnal 25 2 3 Sales to ultimate consumers . 19.6 13.8 Municipal service 2 3 -

! Sales to otner electnc systems .

t

0. 8 (24 0) ,otal to ultimate consumers o 91 3 3 II Miscellaneous ccerat:ng revenues 2.8 1.8 -

Cther e.ectnc systems e 1 5 l $32.6 $12a.7 Miscellaneous 3 12 -

100 % 3 3 l

i GAS crem Pcmse*cm cr cr re .c 3 %cct*c'a: Soas c'e ise "7 0" l -- e sc' h rs as u:

Reve ses '973 G7' C: ass et te ..ce 'ese m es e.en es 'e et increase in base rates . S 2.2 $ 8.2 Residentral 61 5 1 Purchased gas cost increases 98 27.9 Commercial 23 18 14 Gas sales 99 (12.2) Industnal 13 11 o

$21.9 '

$23.9 To.at to uit: mats consumers 97 9 5

=" '

Other gas systems . 2 23 13 Miscellaneous 1 13 -

100% 9 5

_ _._a I:

THE 1978 REVENUE DOLLAR AND WHERE IT WENT l' l

1 Chd7e 2 l c..,;n *:- ~ m ra , C le -

) y ~ yg 9~  ; ys <r -

W ky"7Q"s l

l 5478.266 5% 37c Pes.dential customers c ,;;l Fuel for production of electncity 24c 5311,000 -f t  : : , 2 l

{'

: Wages, salanes. empioyee 3 , , O = ,.;dj benefits 14c 177.459 6%l 31c Commercial customers55 -i 5i .:*

Erl,att lncome and other taxes 14c 173 076 l 4

394 656 5 ,

I

{ { _ ' K] Gas purchased 12c 158 229 11 l

, jE ,g Interest and other costs-cet 11c 140.293 (3) l 291 071 3 23c Industnal customers If -

Dmdends to stcckho!ders 9c

.l 109 921 10 l

[n".  ; E!ectnc:ty purcnased 8e 99 536 7!

116 255 5 9c NIothers f @" W'; Ceprec:ation f

6c 80 683 5

[ Petamed in business 2c 30 061 25 I 4

i ,,.

JUJ O U

Federal and Canadian income taxes Financing INCOME (BEFORE INTEREST (net) rose $2 million in 19~S, at- AND INCOME TAXES) AND In December, Niagara Sfohawk INTEREST CHARGES tributable to increased earnit.gs. In sold 531.5 million of 91 $ 25-year ""'o "5 " o"

19 S the Company changed its as- first mortgage bonds through pri- -m m-e-sumption regarding the deductibil- vate placement, with an additional 1973 b d N , g g s2p ny for tax purposes of naclear fuel 518.5 million sold in February m. .r .w 1 c m oisposal costs as desc.. bed in Notes l and 9 to the Consolidated Finan-19 9. LastJuly,534 million or '977 WrMEb W

- $ c, senes $25 par value prever- m~

cial Statements. ence stock ( 1,360,000 sharesi was 1976 f.M M~ u"w ~w C207 -

Real estate, revenue and other sold to redeem 530 million, ~ " ~-m 1975w-%o  ? .CM" W* "a G'T-1 1. ,5 c.- c senes r,100 par value pre-taxes were up by 3 6 million m 19 8 and 51 million in 19-~ because of ferreci stock < 300,000 shares; on

, . 197a t %m r e -w w 470 property additions, higher tax rates August 31. T,ne redempnon prae e e t e.

and improved revenues. was 5111.~5 per share, plus divt. mterest mcome charges

. den !s accrued to the redemption The increase in allowance for tunds & TOTAL TAXES. INCLUDING 511 -

U)% issued INCOME TAXES used durmg 340 milhon < 1,600,000 shares > ot-m 19,S construction-.lh.

milhon and 31], mi on m ~ -

'. " m ^ 5 d :0 *S S '.rr senes 325 par value pre-15---resulted from additiona! 1978 m a.K W R V E,4VM

- , a2 -

terred stocx.

construcnon work in progress and InJune, (5 million shares of com-emw nuclear fuel in process.

. mon stock were sold publicly at 19_'%ag d7 ,f"% A97- e A nse m the cost or carital and the 314._,5 per share. Throuchout ..

issuance of addm.onal secunties to  : #WAW the year some 1.6 million shares 1976 JF.. m W ~'* w- d.Aj --

fmance construction resulted .m m-were sold through our Dm..dend ,5 .

7 c creases in dividend requirements ..

39n 3s c;gv.n ayu.

Reinvestment and 5tock Purchase m --- r- t on preferred stock, as erage . .

Plan and Employee davmes ..rund ~% a number or. shares of common stock Plan. Except for the preterence 'aniwm

~

W A q; outstandine and interest charees ,

stocx sate m Tulv, these transaenons for both 19 8 and 19 , - -

were made to nnance our construc- AVERAGE GROSS Dividends t:on program. ELECTRIC UTILITY PLANT PER ELECTRIC CUSTOMER A h.igher quarterly dividend of 30c Ma nagement study OcEn per share, ravible December 41; Niacara Mohawk is m the rm, rd '--- -

p.m-19.S to holders of common stock 1978 -

- 2,60s of re_ orc; N,os ember 3 , was Je- year of a PSC-ordereJ study or m _m- - - _

management and oreranons bv an - -

clared in October. The previous 1977 s .s w,Ja4 '2 A

, independent consuinng nrm, - _.,_.m.s-s,,J

, .u , . e dividena had been m effect

-236 ,~~l smce a 21 'e increase m May 19s _

~

Arthur 't oune & Comranv. -

1976 It was the fourth tiivaiend hike in Phase Two of this stuJy calls for  ;-%t.g ,q che past six vears. implementation of mutuallv aereed 1975 2 08

~

T,ne table below shows dividene,s upon rt :ommendanons presentea - t- .rr.,_ ]

by Artaur 't our- 'maase One. In 1

19N ' 2.cc per share of our common stock anc $me cases, Niacara Mohaw k had ~" "

4 ""I d "C '5 ininatui imrcovements who w ere I

L mca c ; y T :e later folded nto the Pha'e On' AVERAGE COET 1978 CP ~" ~T "^ recornmendation3. bome of the OF FUEL BURNED recommendanor s will require con- ""

1 st q u arter $ 33':- $154 51a'2 suerable nme to implement.

,rc c cuarter 33'. 1_: 13,'4 '

197e -4 m -- 37,1 r 3rd cuarte 33 15's 134 We are connnually makme other W "[- -.: 3.e--, -7

. 1 ath quarter 26 12 7 13 % ma:or reoreamzanon erfurts. sucn 17-"' Nyny sj g

$; p- - as the mercer of the information NA-

== mm Systems Department into the M m- 1r6N sW. , G;**mw -w;3zp atement bystems and hervNes D :- -e 9' ,

1' cuar er S 31 ta 15 4 partment. Impros ements has e als > irs (, rMet .g f '? 332 2nd quarter 33 7 164 124 . een e made m the schealine ut ~""*"

3rd cuarter ~~ ""~*'*'*

'S "M* * )N5 ca ' l 'e ' 4 m mntenam w ork, bud et rep >rt- '9N Ch auarter 33 164 5

" and p D ) Ct mana.3; ment - y

'h%.91 2 rare . cn et c 3!

3; ,,'_,_ _ . _ ' _ et 3 5

[ .( fi.1 JUJ Ud!

A forward look at the '80s Before the OPEC oil embargo and scheduled comp!enon dates for is about ~5 ^, complete. The main tra onset of persistently high int!a- major new generating units. components, mcluding boiler, tur-tion and other economic ills, lone- bine and generator assemblies, are Despite the slowdown in crowth, term growth m. electric energy use N,iaeara Afohawk must continue all m. place or bemg mstalled. E. e was expected to average 4# per -

planmng additional enercy facilities are also proceedm.g with plans to year in our sernce terntory.

for tuture needs. Substantial power delis er oil bv rail to a storace tacd.-

By the raid-19_Os, new projections projects-with long lead times- ity near the stanon m addition to began to indicate a reduction in will be essential, even though cur- the regular seasonally limited barge rent forecasts are below ongmal es- shipments via the 3t. Liwrence customer demand for electricity, the reselt of weakening economic nmates. durncient supplies of reli- River to Lake Ontano.

trends, rising pr!ces for primary able electric energy mW be availa- Construction of this oil-nred addi-energy and customer conservanon. ble when needed ;o meet the ex- tion becan in late 19- 2, more than Niacara Sfohawk and most A pected growth in demand in our 3 3. ear before the OPEC oil em-U.S. utilities have been affected, service terntory. bargo. As a viul component of our with present estimates in our ser- divecsitied generanon mix it will Construction programs vice terntory pomung to an average re-force our ability to meet up-y.early growth of only about _, A, , The next power producer to go on st N,ew i,ork's future neect for im.e m our system will be the 5300 From an energy supph.er s stand-million jomtly owned (see page - > a3 ndable electric service.

pomt, this chance m out!ook hcs S50,000-kilowatt Oswego Steam At the annual metting last Af ay, m added another racer to the alreadv Station Unit No. 6 when it beems light or revised load forecasts, complex process of plannme large, commercial operanon m 1950. Niagara Sfohaa k announced the base-load generarme units and re- While Oswego area labor difficul. res. heduline or two 8 50,000-lated transmisston facilines. One nes caused a three-month lae m its ki!owatt coal-nred umts to be built result has been the deferral o: the construction last summer, the umt near Lake Ene. south of Dunk.rx, N.Y. These has e been defen ed unnl at least the late 1980s with acram E ,wepr a n, ear we m ,s a cr.e'cc-r:r - e a - Pau u A .er about six years required for their a ea He 'cco ca :mr re e r:w:4 Ocys 9:m tre 24 cccme,s rt S*a~ ",ec- construction. Thus far, the cost or e ec&c Stat cn e e e cv M N r,- es ,are cozer s merecrescaa3, ma, e s cc carea.se a crcca s ec ge-eat - c a e as in :re stecs ct ras vrm environmenal and enemeenne arc ser.ec ,a 3gra ,..,cw a c eececessa . A carcames +cr ear;vao g ars studies and rubh.c heannes on this

-m project amount to 51 N mdlion.

du -Qt i hiMMt Extensive dau have been submitted the New York Sure Board of Elec-Gz.

~; fn.~f:m mw tnc Genernion Sinne and the En-unment and a decision is ex-h.

tyr W~rcM.

W"l @ ~ pected m early 19 9 1 Y( . mm .- ^

J F October 19S4 is the new scheduled

. ~1, , , _~ t 4 9# M7 ' mwg/Mh .$f M N4EO commercul date for Nme Able

),

o/ Cg i  % f7th '. Q y] Pomt Nuticar Umt No. 2 on Lake w-w*s.k g g ggyq(py onuno. ,omey owned by Nogara g%~I a; p u %.,@qm?g fd \ %' . pm,ps O Or Afohawk and four other New York A~ s Ws 3 , "M;]

p -l 3 4, q". '

s.ute mvestor-ownem, unhnes. sen h.Y - M 6 9 %. . N;i,. MWkd/ backs ir mstruction,includme

,+u 1

w m., # # e' w e h. -

a'  : uA a. a new, untoreseen recuatory e-Q; c ,sA nG, @e -j @

i M's ?W+e#L,e4(* quirements and a summer Ione

%~y > , +, C,gg[N #nn.^

2 8[

k~{#c

% i./

nkg n,4-dh 3

.Qwf

$@ work stoppage ansme f rom 03we.co area Lbiar problems. ice

• y[g

• j(( F(MTIZhQ3 i.h,._ pardy responsible tor the new

. . o s.

kk Q

~ wm.

'[' C \n~

gy[

W

., ,, yI 1

., w~

p[~

~

k.

n- p~

kJ,

s mmelenmn aye. neuys m en.

,elneerlne, Ia 'ncatI(In an u eli s e r' m c ~ W .a ; 39 m: MhW::" or mam comronents also mntnb-g ft b ,, i ( ,p 'q g g g e m;gM~p 7'ff5 p,.a,j

'.ff 4p s .Q .4 w4y

. ns ~. .

stru< non sunca m lan me (a.y s m ; e &

1mnM00-www umt a hd n

.s ' t t 2'1. n :s.- .. 1:n' ,

pN ,q-nM M; %,, , ,

'm - nim @iiut_,3' t'>m pact 6

1 s \j r 9

Despite our best efforts to keep Niaeara Afohawk has transferred ELECTRICITY GENER ATED AND Unit No. 2's cost down, latest pro- 2(; of ownership of Unit No. 6 to PURCHASED BY TYPE OF FUEL iections indicate a new total of Rochester Gas and Electnc, and tne 5 i.35 billion, excluding tinancmg agreement calls for its output to be .A costs, with Niagara Mohawk's share shared on the same basis. [ nQM p %; Q , g at 555 3.5 million. In addition to Shares owned by parncmants m C NM ' MW spiraling milanon, mcreases stem Nine Afile Point Nuclear Unit No. 'geNMWMmg e@m" it trom new requ rements,largely m' volving reactor and piping systems, 2 include Niagara Mohawk 4 l'l , D'M MNC _

Long Island Lichting Co. IS;, M"N" "37 NW imrosed by the U.S. Nuclear Reg-J-2 3Nh&N New York State Electnc & Gas ulatory Commission on all clear power projects. \\ e are ma ng Corp. IS', , Rochester Gas and im.W h$f h NC h/F Electnc 1F;, and Central Hudson N every ettort to contam or reduce Gas x Electric Corp. 9'l costs over which we have some control such as oncome desien re. Snares of the projected Sterline views, mnovative construction unit will be Rochester Gas and techmques, work sampling and Elecuic 28;, Niagara Mohawk 22< ,

productivity analysis programs. Central Hudson 1 C , and Orange These measures have already saved and Rockland Utilities, Inc. 5 3' some 568 million in the cost or the nuclear un;t and will be pursued Hydro expansion throuchout the remamder of the We also are moving to expand prorect. waterpower capabilines at sites lona held by the Company to Fro-Uranium supply duce an addinonal 205,000 Our uranium subsiaiarv. N M kilowatts for the Niaaara Mohawk Uramum, Inc., owns ha!f.of a min- Power grid by the early 1970s. Un-mg facihty m 30uthern Texas with expected regulatorv cevelopments United States Steel Corp., as -particularly environrnental operator. ownmg the otha half regulaaons-are slowing our proc-Producaon capacity was expanded ress. Early m 19 8 we Med with the a 19'S to 1.000.000 pounds per Federal Energy Reculatory Com-3 car. NMU's share of the output mi3sion for approval to replace the will be used to help assure supplies nearly 65-year-old,2000-kilows.

for our ',ine Mile Pomt Nuclear Granby Hydro Sution on the Os-Units No. I and 2. Initially, how- wego River with a new 10,000-ever, sales of producaon are ex- kdowatt plant, our nrst proicct m pected m order to recover more this hydro expansion.

quickly a pornon or our invest- Before the sudden upturn m oil mert. and thus reduce associated and coa'. costs in the ITOs, new costs at nnancmg < see Note a on hydro power developments were PJC' ' not economically tea'ble. How-Shared generation ever,it is now rossibt to des e!or Arrancements neconated by Niac_ tormerly uneconomic hydro sit;s at ara Monau k ana uve other New costs comretitive witn tossil-tuel York State utihnes to share owner- E'""lfi'm. More than O' oftha ship of!arce upstate teneranng sta_ new hydro capacity will be on the nons recen ed tinal approval trom Hueson, with the remamder on the PSC m 19Y The stations are seven other nvers m northern and Osw eco Umt No. o. Nine Mile cental New York.

Pomt Nuclear Unit No. 2. and the Key electnc transmission knes to 1,1 m.000-kilowatt 5tenine Nu- xcer race with tustomer enere) c! car SLnon proposed near Lake requirements in certam areas anJ Ontano m the neichbonng semce to reinforce the defendabdity or area of Rochester Gas x E!ectnc power surrly, w ere also compiecea Corp. m 19Y L  !; } , 7

) i ,. J

Decade of nuclear success In 19~9, we will observe the 10th anmversarv of operation of our Nine Afile Point Nuclear Station ._ ./

_ . . y .A Unic No. I on Lake Ontario. m s, a -

ma -,~-o .. . .. ..,, .....,,s.+

One ot the nrst nuclear power ra..,___..

o ...-.. -

-.---u ~-

4-mpg g

.---r--

n plants to co on line in the U.S. and MIT C* ' -- g~ [ %.g q%m.,s.

T, q;y, *4M

• 4bm

'A,w meer - e 4 39- 49 d'OYY the nrst in upstate N.Y., this  ;

Aa d,.J &pMdif@ILF s

610,000-kilowatt power producer has achieved an enviable record for e -  %

q&>s s

• • ..d

4 N*y. Sg N y MN c

,,.ag a g{ex;,-)4 a wwig pc-[p;g.gg~

m. m se exyM

, a_, - ug:g=

safety, reliability and economy. It is N -

4g h:w also one of the nrst such units de-signed and engmeered by a utility \ ~.

s1 egw4 R. E ps^g;, gw p*,dd *l jr@~'i].QggD 2 with its own engmeering staff. ,

w fm  % 6@w,,W Afost nuclear plants operating m 4 g . y,, I:qm u 4,*bt QS wpg 4 . ;  ;

g ,. / ,

the U.S. today were designed by A. "

I F. I:lU:13 consultine enemeenng nrms. "'VCME, W _ m7M m

4QN Y',! j+ b, i - ~1 ~ ,

r ,

%n g , /

From commercial startup in De- gr Agy M  : . A*f"%v:S,a ,

t

[ .a yy L-cember 1969 through 19.,S, N.ine Mile No. I cenerated 29.4 billion

%y g

p,gg gwg .,,

v

.'q, gj G iovvv ,V

.Ad o %s+fhL silowatt-hours. Prou,uce tnis a 4 amount of power from fossil fuels g(R 7 ~~-4 ,, a 4

would have required 48 mim on barre'n of oil or la' milli'on tons of~  % p^ *;/M'rR,**b.

b g- p

-~

Y*Q'i

$ If af ] ' *

• ' *i g O

coal, resultine m substantially wg ~-

higher costs to consumers. hgl'w m, mz__. - - ~ ' ~ ~

World record 2ec en J Cc age c" et 5-a cre rce at N re M 4 ?ctr: %; ear UN Nc 1 cegr in 19 8, the unit was on line and ms ru: ear ca eer <n re u s Na., ,n ' 355 anc senec .w e ncTa e sewe cr.cr producmg electncity more than 0 c mg N agra Ycrav n T2 varrmg cer:rc. cr+s m N re e e Pc r s e.e 95 G of the time Me imimt yven- er'e0 P's "e3:0' C ce r: 3 L :e se o vea s ag:":- re L: er pepa*:rf tau of all!mlun u at<r r a.:m m ti:ee C " ' S ' C ' L ^ * "'

• 3 ? ="' * ' : * * 'C ' 5 ' C ' * * ~ * ' C * = Y * ' ? 3 7 e ' e 'e C = ' =

. , ce : a c,:e.e s 5:..,e r:eas ce cc c t am rg c cg a s n rea=c cm.scs ara u o rf 3 It also achievea a thermal --.

w a ,,3.,r 6 . .a ,m. m< o- -a m m capacity factor < ratio of actual out-put to the maximum output from continuous p' nt operanon at rated power > of %. a 19 S L. 5. .recorm 2 One of the reasons for these ac- sumers, we has e mtensined infor-tor boiline water reactors. In 1u)-. a comphshments was our dece!op- manon actinnes m the com-alone, gener ttine equivalent ment or operanne philosophies to

' mumnes we serve. In the past tear, enerey at an oil-fueled stanon cut back approximatch 9 ofthe - throuch our volunteer speakers would have :equired a.cout -4

.down nme ' normally neeJee, to Bureau presentanons, with a spe-million barrels of oil at an au; mea i refuel the reactor with uramum. cial team of tramed speakers, we cost of about 3 0 milhon. Onemally, the umt was designe3 hase teached an audience of for refueling year!y, but under new thousands.

operatine procedures, refuehng is Addinhnally, our Company rep-non required only once eserv 11 '

TOTAL GENER ATh CCSTS: -

resentanves meet frequently with FOSSIL FUEL VS NUCLEAR fo , years. envernment leaders, and a broad ces:,r.w selecnon or matenal on nuclear Nuclearinformation technoloey is cistributed to

_h I

,e jU <g In retent years, misintormanon, schools, canous commumtv croups

y C # -

,}gM, 7n wntusion and unwarranted mis- and the news media. Our pubhc trust about nuclear-electnc enerer Eterc" In:ormation Center at Nme E nave become mtreame'y wice- Shle Pumt attracts thousands of us-df'g.

sprea'd. To counter ann-nuclear et- itors catn year. They see an m-

M for;s and to he!r foster

mpro eu .

teresone and ecutanonal procram 2., v, - .v e s r y m s.m. rubitc awareness of the many ai mduame vaned exhibits on nuticar

^

• 7 7m, r-. vantaees nuc! ear enere; otters con- power s ,

t

,q i ..

~' ] i ti

New energy sources constant search Our pursuit of alternate energy bmes modern heat pumps, 1982. After the OlymP ics, the vil-sources and new methnds of pre- monitors and computine equip- lage will be converted to a serving the environment is expand- ment with the latest in solar mimmum security mstitution oper-mg in both scope and diversity. As technology. Dunng the Center's ated by the U.S. Bureau of Pnsons.

IF9 began, we were eneaged in 51 hrst year of operation, energy trom The txpenment, estimatea to cost separate research and development the sun helped substannally to more than 52 mdlion,is jomtiv erocrams. We have been author- meet heating needs and reduce sponsored by the U.S. Department

. zed by the Public Senice Coramis- electnc demand, al thouch payback of En~rgy, N.Y. State Public Ser-ston to spend some m, ., million as on the solar: heat pump system's m- vice Commission, N.Y. State recoverable operatmg expense on inal investment will take many yea:s. Energy Research and Deselopment research os er the nent hve years' Authonty and the nanonwit.e a Elec-uich most programs linked to con- Environmental research A research venture offenng long- tnc Power Research Institute.

servmg energy and preserving or improving our .ur,!and and water range environmental gams mvolves qualitv. the proposed mstal! anon of a pdot

" scrubber ~ on the stack at our nee u c ey ye-.y or ac m e.a Fuel cells Huntley Steam Station on the re arces. ass = a:e se~: eser:-

In a i .t research project we have Nugara River. Targeted for wartup sce: s: a-c crc ; rr a r;er ;&D been< .rsumg tor years, tuel cells in 1951. this pioneerme pro;cct s "e C 3'" 'SC3C'3" O C^32

'._e* e c c:c% ce ume 'acc r:% L are shi svmu increasmg promist as du.u objecnve is to al!ow large  % g,,, gg ns e., 3 ,. y g s uble s nerey proeucers. h.el ce!!s power stanons to burn lower-cost c3 cc , reg..cg a me,c. : e se,s are a sp tee-age development on Eastern coal wrule ptoJucme com- cas crem: w .rns e e: c x~

w hich we are workmg iomtly w:th parans ely less pollution. Better 7 seva: e ; red c r :ser ^

n " ^ ' R 3"J 3'eCS "' -

United Technologies Corp. and control of sulfur dioxide emissions ,,,m ..y

",2 ",.e -e

- e n _3ra,2. , g g ,7 "

r eicht electnc utihnes. We expect to is a nationwide pnonty for all elec- ~~ ' ~ ~ ~ ~

place a v.600-ki:owatt umt on hne tnc unhnes.

m our system m 19FS, whi!e a ,.

4,400-kdowatt demonstrator :s Olympic village 3

'Ip .r*

j ,-

currently schecu!ca, for surtup m The Company is protect manacer .. .o m h.N

'J >g 1980 bv Consobeated Ednon of a forward lookmg energy stuJv ), .-

Company of New York, Inc.. planned m connectior 'ith the b . .m another parta. pant, at a Manhatun 160 Winter Olympic Games at [

Like P! acid. Thn research venture if - ~

eeneratine site.

holds sigmhcant promne for the f p

.' 1 '

Wind power ennte e!cerne unlitv industrv.

" I' N )'", . -

b List year also saw the expenmenul Under study will bt nve identicai ~~~ ~ % N 0I l'*

arrlicanon of a "Darneus" tyre budames to house more than 1.000 . .d b

7wi,...E.,

windmdl to the creranon or an e!cctnc cener mr--our third wmd Olympic athletes and omculs. Each of the dormitory-type structures ' h*%@%

i gi M study in upsute New York and our will be equipped u uh a durerent ,a ' [ DG U Y7 fourth os erall on a o monal les e! thermal energy storage svuem tor 5 9 % e f *- q yf

.p 7, Resembling a gunt e gbeater, the prototype is mo anted on a silo to comparanve srace beanne tests under simdar conditions Oc .um 7'r,M[W];

• ' ~4  % N(M1 f()

Jetermme the pomb!e se of thn is to collect data for es entual apph- #'

h Oh II Tf~[-

type omevme m rrauce surpte mental snowatts on a workmc

< anon m un'av surriy smenn m h a re rears -WQNK)RWy2

. fd

$$\ yPT g

' arm. Clarkson Coi;eue, Piitsdam, h0MjDD D kd n manaeme the etort u:th jomt Ebe ten me wdl esemuaik be- s;Md N g parnaronon by Nucam mnawk anj ses en other prn ate :ndustr:es.

mme the Ras Br"ok Corre'nona Faaint it n beine budt by Con.

cressional authonzanon to sers e ,n-n%gf W.,nQg P pp.g gy Q**7 h, g/gjp i

w *1<; %;

% tNMd V Solar m .N- as the Olympic s idace see

%# e-t

.Q

Nuaara WhawN :s also :mok ea m catx wser The prwram u:!! cet h M. . d

<.o Ri, 4 g.

ar remh anne sure Unn er-a Nm York alumm u e mer m m eermry 1+o uem m mercame m mesa e n h(.g%..p.

rym..e@ee, gH 4 and Con!crente Center at 'he Al- w upymc the a rmitimes. and .r 1

'&nW c

'anytampas.Tns croiett mm-Cl w n n m.e : ..i sc.uc m rou an y" a ,a _ y h ,u,W-fuem x 6 n ,

JUJ L'i '

9

Service to our consumers

-mv.c.c.v . n . - .m .ess w~ # m ,.e m 4c Cas supply The improved na uralgas supply

% ((%' Mn E.N,T,c.Nvh=M,TS$.n$, s p w 4MN,.['(I$M~,

n  %

outlook enabled us to remove

, 1 ek4;~p~f, % Wa; m.v yhs _; 7 ,

m( ,

g. . p,y Q M, %n; 4 m fy.;;

cw -x y .;

v some restrictions on new sales and

( tg. pmm my

, em. q y%dmV 7 fn; m]4'-Z ug;W p irrY w h,,,4 ~j 1V to seek addinonal gas markets m

,L, 4;N#(

V .

O .amm 1 19-.h,. The Company has nled an d

F

- A. * . W6 apphcanon with the PSC to com-(V%&~d$s  :.p@Nx W[ hp a\  ? pletely reopen our gas markets.

nf. '. .

' ilyNd ' !!;;,, increased quantities of gas, mclud-MNE .n% 2M5MMf .M W ffQEt yU p u ~$g"';Y . .+.-::O;a ^ "'

. ing liqueried natural gas from 4, 7 N Na ~ y *s f. e <

a .% .I  ; .

Algena, have become available p @f n n"4 g [c #

trom Consohd.;ted Gas Supply

,?.

. h g {e% ~ ~::: 0.

- 9 Corp., our wholesale source. Con-M,.~#n%q/$

- - t @ ; 's

,h<

.g n . . . . .

u.+++: n servation efforts by our customers

..m w N p 3 #w tA . *

" N:

a.;d, g Y have also contributed to the more 3 g.,,, i Y4 [A AN F. .

.4[( NM favorable supply outlook.

%, 7-Ms E, 7b[= b sh Nm,

. + AI# c%

h , 8 i-h;% @((~Y7.d In 19~8,3.582 permits were issued t.y W gm a ML yp ,

y q 4Ql to quah.neu applicants for gas ser-M%  ; " , Cd ;j ' K) , .

^7 wi i vice in residential, commercial and b h' y - [ h' Q. .4R p - ;) \ W at .

• tMY.hi3N N F N M'"1 C

% g$. t h 4 industrial cateyones. Those apply-ing must meet certam msulation

.m N. vy,,. , ,,. '. ,

' >+?j -pQ7..,4, -4)) and enertv-conservanon standards.

.A .M

' [ M . 'j)h 'e

% yh/f

%, Commercial and industnal appli-7  ; " *^ . g)[.s '. cants requesang more than 25,000 r, & d, Qy, N@gp,$ Ia .: - sg<gy4 pv.ppw

[,1 9 ' 2.

T/ db(g v,N b m

Q+ - mcf yearly require appros al ;ay Consolidated Gas and the Public w

-P px* S g* b f

.g%a M. Ng 4~. g;% f \ *<

wy f - 5ervice Commission.

.! ~ ,; , ,, .-- The itaroved supply situaaon alsa 5' Jinn,---

~~

ff b n _~fa m - helped stimulate some economic en e Ma t ,

expansion m our service terntory, e*t. ccrsar er r acom ecreseme ".rcer.s ret ed couc e m .

.a: e, core.r reme as ne ma es ccmcuat.cc s ,n cu ere g, a : t crcg am 'c- creanne 5M new iobs and placmg customers 5 cn irfor a! sess crs are re'c. 'g nr ccrsur ers cut cas en ere 7, area industries in a more compett-ccs's 3rd ocq ad "g ener7p o*f C e";,1 crc 5 s c / se /'Ce te r'!;rt arc e snc,; ed tis e p()sition, compared with indus-e Carcar / , ' 3 55 excecu c eceo e es a 5 sqee r e e:m:ai e g eerrg * :m enes in other states. Although gas me ?re ur ; esa ct B u c n T3 e as a er:ec e or ra c anes cr e c as <gs. ,re tertam to co up, m part e g i j e3r'1 .

because of recent tcJeral!ccisla-non. gas uill soll remain compen-ns e with other fucis m terms ;t costs, contemence, and ensiron-mental benetits.

In October 108, we tiled with the Public Service Commnsion tor ap-proval to change to " therm" mea-surement billine for cas sers ae.

Conversion to a heatso ,ent basis from the customary wbic-reet s ol-ume billing is desirable as the Company becms to recen e a

,o J' J tl i 1. .

mixture of U.S -produced and formation on issues and controver- MONTHLY RESIDENTI AL ELECTRIC COST-500 isW-HRS Algerian-imported gas from our stes.

supplier. The imported gas con- , _ .. o tains about 100 more heat energy Energy audits per cubic foot than the domestic Under the State's newly enacted (j.g,p .p{/yg , gg

"~

vanety, requinng that bills be cal- Hor.v Insulation and Energy Con- h' culred on the number of therms servation Act, Company represen-WWE vr euncts INT d%%'cese used mstead of cubic feet con- titives are conducting energy ef- e sumed nciency audits of customer homes 4.w.m

- r .z..mrw.

-um eu .m m--mmm -1 throuchout our service area. Our hhpr Consumer Advisory Council consumers themselves are also rar-ticipating m the audits on a selt-

%.wa0

_...o r3M;Mm

1. %d _ M @F As we approach the 1980s, one or our most effecove contacts with help basis by completing question- . _ ,,,,,,o swc.em - emsu

" " =

our customers is our Consumer n ai. e s.

wsO Aare 3.cr '2 U 79

.gtgvisorv {ounci.i on Enerev Af- Ir addinon to the audics, we pro- 'Ea sca E ect-c .nstua Sur.ey W 7a fairs, a grass ioots concept vide lists oflocal contractors u ho mitiated in 19~ . This all-volunteer will undertake energy-conservanon group, with 26 members from measures such as insulation, weath-across our service territory, repre- erstnpring, storm wmdows and sents a cross-secnon at consumer doors and the hke. At the same mterests. Orgamzed to advise us on time, consumers are advised how to consumer!unlity matters, its pn- c,btam low-interest loans for tinanc-mary objective is to provide a me the work. Loans, rancmg from means of two-way communications 5200 to 5 3,000 for improvements recarding any of our operations, on one , two- and three-family procedures and policies. homes, bas e epayment options ex-Meeting each month, the Council tendine up to eer-n years.

offers us valuable advice and in-s[cht on onsumer relanons and Other consumer programs public mformanon acovines. par- To serve consumers better on an ticularly chose affectine consumers mdividual, more Personal basis and directly. The grour consists or re- help them soke their own special nred persons and representantes energy problems, a number ofin-of mdustry, small busmess, labor novante programs and acavines unions, con 3umers and the clerey. are under way. These mclude a Amone the nrst such groups to be winter referral program for hard-formed in the U 5. by a unlity, m ship cases, strengthenmg mterreia-only two years the Council's tionships with vanous soual service suggesnons bas e produced tan;:b!e acencies and maintamme hsts et results m helpme us to better un- customers requinne electncally derstana our c ustomers require- operated life-surrort medical ments and respond to their need< equipment. Also mcluded are a Guest speakers at Council meet- cons ement buccet payment pDn, mes hat e mt!uded the Ch.urman of third-party normcanon plan f or the PrHic Sers ac Commmion- cusn >mers who may neeJ heir.

leaders or anncuhtv and an:.- 2 i-imur tohow-up3 "-here disc 0-nuclear organm nons, as w ell a3 top nanons occur and resone home Company manacement- d! to gis e energ-tonservanon devnes tor Counul members a calante or m- sa:ety and emciency.

Oj '

Our " backbone" employees, stockholders Employees 19 6 and now performing more Stockholders Oar overall work force numbered functions than ever. Dunng 19~8, Our stockholders now number 9.300 at the end of 19~8 and 19", new formal traming t wrams about 216,000 with 204.000 hold-about the same as 20 years ago, were moroduced at o' o ssd . ine common shares and 12,000 when we had approximately f ueled generating stant is and m ownmg preferred and preference 300,000 fewer customers. our gas operations. E e connnue to stock. As show n bv the chart be-I Yearly wage increases of 6.9' < and "

~.10, effecnveJune 1' 19~8 and

((fu t r u crad tl e ai  !

than 100 shares.

our service as well as employee 19,9, respectively, were part of a performance and producnvitv.

two-vear centrict siened with 12 '

Sece cW c7 .c

' w ,cw 5 "res Company contributions to the su cres eu local's making up S'ystem Couned Pres:

_l U-l; of the International Brother. Employee Savings Fund Plan 1 to 99 61.100 2.081.282 hood of Electrical Workers ( AFL. amounted to 5 2,991,000 Jun r.e 100 to 999 136.500 30.842.736 CIO). The aercement also meluded 19'S. Some 6,500 or ~ r of all i 1.000 or more 6.400 29.256.259 improvements in certam employee eligible employees are subscnbtrs. 204.000 62.180.277 l

benetits such as retirement, vaca_ allocating from 2 to 6' of their tions, life msurance, ana chances mes a matched 500 by the Com-in health and accident msurance. pany > roward che purch.nc of Niag- Dividend Reinvestment Plan Some ~,400 represented emplos ces ara Mohawk common s ock or U.S.

Another year of growth was noted

~

are covered by the contract. Government secunnes. The Plan holds 5,062.000 shares or x ' of for our Dmdend Rems estment E.mp!oyce onentanon, manace- and Stock Purchase Plan. The Plan the ourstandine common stock.

ment developmcnt, techmcal m- purchases newly :ssued stock di-Emplovees mav also make addi, struenon anc consumer seruces rectly from the Company without -

tramme are prouded by our Tram- tiod ' unmatched contributions of up to C of their waees. mcur mg brokerage commnsions ing Department, centrahzeti m or ser ice charees. The;c purchases In 19~S, w e renewed insurance are mde trom the rena estment or prouding cos erace for Niacara dindends and opnonal cash pav-

"e c y n vec cne ccrta= ce s: re' Monawk and subsidianes acamst

~e rua - ,, ments from I,arnm* ants-

-Nri cc we~c 7l h, es en nc,deh, -

c e,,s

, . h.t.., " nganons incuned as a mdt o!- .

J,v .

_3 c...,

x. _.r,ew,.~,

,, m u mdemnincanon o* officers and Ji- Some of the tuads the Company

-c e: saer -scrs er r,a age em rectors. The cos crace also insures requires to meet its nnancmg needs e mes-sucn merer g - the otticers and Jirector > tor habd- are provided bv the Plan. In 19's.

s: erts re an a c+ w em m s ity acamst which they may not be about 25,000 parnurants, repre-4 .

~,a. 3-

, , y. , . -- ,..c g g i , - .>..,<r.m.-p .,-w -y .

c~ r n .-  % a s 3 s m . m inaemnitied bv the Company or its senung Ic, , of all common stocs- ,

subsidianes. This msurance obu- holders, ins ested 510.13 0,000 in O hb dch e2 N rhrerma.' O rrs "m.j sta es T 3,raue a'e 3 c ges ously does not protect aeainst a new common shares.

n e red a rst v .cn,srer ~ dishonest act or breach of trust. .

na- g ce o em sas & a - T a The insurance, authonzed b the staronej nuary 1,19 9, the Com-Buuness Corporanon Law of New pany anumed the responsibihty for York, was purchased trom Na, adnunnnanon of the Man. At the 4<

~

nonal Union Fire insurance Co. for '"*'"*"IkI'"'"""d ITN*

N  % a term from January 1,19~9 to ence etkholders became clie:ble b[;h@dk

d. N January 1, lW2 at an annual pre _

mium of 505,000.

to participate and opnonal cash

'"ntnbutioas w ere mcreased to gI,oS.# 7 55.000 quaneriy. Ininatea m 19~ ;

@%[p tQ We sadly note the ecath on "" ' , /* * " I "' ' " ' h E * * " -

! W ,l %9 We i Februarv ~ 19 9 or Edmund H.

• M *' " " " " #9*fE As w;Ay m : - r n A ,

Iw. , n, aisaneunbed member or Trust Compant of New T i rrx. E.e umM .- a . - wul be clad to provide appu, canon hNQM M_Km "5 e

y by  ;

turms and literat ;re Jescnbme the e%

6V

1. ' 4e . .

.enced executis e uce presuent emn moeuormomm 5thMd m >w ?e addressed t(r W e.

4 y' r =

and cruer execunve ornce or-3 y Q[R g%

pgMdp ' 4k"'kam jhQ . [ Aeway , Inc. and a leader m nanonal and 3 tate auncultural WPc or. eenc Pe!r,estr ent Pan a g gg .31 af m-w h j, i

Syracuse N Y 301 ,

% w4 e3eM. g ~~ _ f e s'"

i 9 As s v -, as .

y yY w .a D -- -

= m naerm

.a;' M l; gl ii $ 'h ! J g

cJJ (,

.n .g . m 4' ,

a' & '

d;

• K 4, , (5[M M-f '

g ge i e,; 4 % r

<b

Consolidated Statement ofIncome and Retained Earnings N!AG ARA VCHAM PCSEA CCFPCP AT CN AND SLEC ! ARES m % sa x e x es cr : e ,sar emec Ce:ercer 31 1978 '977 96 '375 1974 Operating revenues:

E!ectnc S1,020.313 S 987.760 5 863.012 5795.917 $671.246 Gas. 259.935 ?38.072 214.218 176.289 159.564 1,280.248 1.D5 332 _

1.077.230 972.206 830.810 Operating expenses:

Operation:

Fuei for electnc generation . 311,000 311.185 241.040 223.095 136.983 E!ectricity purchasea 99.536 93.019 99.297 86.533 122.476 Gas purchased 158,229 142.071 124.811 94.960 E6.900 Other cperaton expenses 181,995 166.297 152.759 136.470 127.100 Main te n o.v e 80,759 84.536 66.171 58.724 59.753 Dep reciation (Note 21 80.683 77.113 77.629 69 228 63 055 Federal and Canadian income taxas (Note 9) . 31,12'a 22.124 17.696 14.630 14.0501 Other taxes 152,550 148.989 131.817 113.997 102.248 1,095.875 1.045.334 911.420 797.637 694.465 Operatingincome . 184.373 160.438 165.810 174.569 136.345 Oth er incom e (net):

Allowance for cther f unds (total funds 1976 and prior) usec dunng construct.on (Ncte 7) 28.971 21.660 20.711 29.376 27.373 income tax ref unds (Note 91 - -

8.936 - -

Income tax and other dems ; net)(Note 9) 13.235 3 645 1.251 2.153 52S 42.206 25.305 30 948 31.529 27.901 income befcre interest charges 226.579 205 803 196 753 2:e C9s ,e4 2 26 Interest charges:

interest on !cng term dett 99.874 91.563 87.270 84.018 66 080 Cthe. interest 1.573 2.392 1.039 7.285 11.659 Niowance for torrowed funds used during constructon r Nete :) . (15.030) (1?.484) - - -

85.417 61.971 88 309 91.303 77.739 Income before cumulative effect of accounting change 141,162 123 S32 108.449 114.795 E6.507 Cumulative effect of accounting change < Note 3' - -

9 406 Net income f Ncte 31 141,162 123 332 108.449 114 795 95.913 Dmcends on creferred stock 28.660 25.7C5 23.546 19 430 15.C82 Balance available for common stock 132.502 98.127 84,903 95.365 80 331 Omcencs on ccmmon stock . 81.261 'a 033 65 642 56.590 49 444 Retairec earr ngs for tS year 31.241 24 C94 19 261 33I775 31.387

%scellaneous cnarges /Ncte 7) (1.180) - - - -

Retainec earn:ngs at beginn;ng of , ear 337.834 313.740 294.479 255 704 224 317 Petarred earn:rgs at end of year S 367.895 3 337 534 $ 313 740 S294.479 5255 704 Average number of shares of ccmmon stock outstanding on it'ossaadst 59.661 56 2'9 52.731 47 059 42 C32 Per average share of common stock:

Sa'an:e wanat e f or ccmmen stock te*cre cumulam,e effect of accountng change S 1.89  : 1 74 5 a 51 5 2.03 5 1 70 Cumulair,e e??ect of account ng cnange rNcte 3; - - - -

22 saiance adatte for common stocs ; Note 3r S 1.89 5 1 ~4 5 1 61 3 2 03 3 1 32 0% ceras ca.J $ 1.36'2 3 ' 31 2 5

• 24 5 12 3 e

> :entes ce: :e I. V

) , ~.;

13

Consolidated Balance Sheet NlAGAPA VCHAV,K POV.ER CC APCAAT:CN AND SLBS'CIATES m :ssancs y cyrs At Cecemcer 31. 1978 19 7 ASSETS Utility plant, at original cost (Note 4 and Page 27) . $3,905.37 % $3.647.274 Less accumulated deprec'ation and amortization (Note 2) 1,021,417 935.212 2,883,957 2.712.062 Ot'her property and investments 14,535 15.584 Current assets:

Cash, including time deposits of $5.595 and $1.275. respectively 10,786 6,579 Accounts receivable (less allowance for doubtful accounts of $2.000 and $1.500, respertnely) . 127,219 121.855

!.icome tax refuna claims (Note 9) -

8.391 Materials and supphes, at average cost:

Coal and oil for production of electricity 70.232 79.942 Other 29,736 26.367 Prepayments 4.383 5.152 242,356 248.286 Dererred debits:

Unamcrtized debt expe ,se 13,848 14.375 Ceferred recoverable energy costs (Note 3) 2.,966 24,951 Other 6,450 3.796 48,264 43,122

$3,189.112 $3.019.055

= = _ = _ _ - - . = = = _ _ _

LI A BILITIES Capitalization (Note 7;:

Common stockholders' equity.

Common stock-51 par value, authorized S5.0C0.000 (65.000.000 in 1977) shares.

issued 62,180.277 shares and 57,122.641 shares. respe :tnely $ 62,180 $ 57.123 Premium on capital stock . 646,878 581.473 Capital stock expense (10,977) (8.194)

Retained earnings (Page 73) 367,895 337.S34 1,065,976 968.236 Preferred stock (Page 22) . 408,600 366.400 Long-term dett tFage 21) . 1.414.997 1.394.38' Total capitalization 2,889.573 2.729.C23 Currentliabilities:

Short-te m debt (Note 5) . 24,000 39 200 Long-term debt due within one year <Fage 27j 10,450 10.250 S nk:ng fund requirements on preferred stock (Page 22) . 1.800 1.600 Accounts payatie . 86.854 79 031 Custcmers' deposits 4.902 4.734 Accrued taxes 22,184 18 680 Accrued rnterest 28,605 27 760 Accrued vacat:cn pay 13.228 11 757 Other 8.385 0.220 200,408 199.532 Deferred credits:

Income tax refunds / Note 96. 21.606 19.721 Cther 10.945 9.1 C 6 32.551 28327 Accumulated deferred Federalincome taxes rNcte 9 66.580 61.672 Commitments / Note 17) - -

$3.189,112 33 019.054

=- .- =. =1 = .

) 6.0 14

['

J>l Ll}

Consolidated Statement of Changes in Financial Position N: AGARA YCHAWK PCLER CCRPCR ATICN AND S$5'CI APES

• Nu.53nas at r vs Fct "'e year eNec ece-te< 31 1973 197' 1976 '975 1974 7ctal Financial resources were provu d by:

Operations:

Income before cumulative effect of accounting change . $141,162 5123.832 S1'8,449 S 114.795 S 86.507 S 574.745 Charges (credits) to incc me not requir-ing (not providing) werking cap;tal-Depreciation - 80,6R3 77.113 77.629 69.228 63.055 367.708 Allowance for funds used dunng construction (45.001) (34.144) (20.711) (29.376) (27.373) (156.605)

Amnrtcation of nuclear fuel . 27.107 21.458 22.555 11.481 10.665 93.266

, Provision for deferred Feceral income taxes ;aet) . 7.955 13.333 14.628 11.800 (280) 47.436 211,906 201.592 202.550 177.928 132.574 926.550 Cumulative effect of accounting change . - - - -

9.406 9.4C6 Outside financing:

Sale of common stock 70,462 21.522 70.105 72.557 29.964 264.610 Sale of preferred stock . 74,000 -

30.000 70 000 174.000 Sale of mortgage conds . 31,500 125.000 -

100.000 125.000 381.500 Sale of promissory note (net) -

2.338 5 671 10.839 27.752 46.600 issuance of long-term notes payab!e -

15.000 18.C00 - -

33.000 Increase (decrease)in short-term dect (15.200) (1 550) (3.114) (117,786) 129 3C0 (13.350) 160,762 162.310 115.662 135.610 312.016 686.360 Other sources:

Sa'e of utihty p! ant (Note 68 34.955 - -

53.366 -

S8 321 Defe. red reco',eratie energy cests . (3.015) 4.654 8.785 i391) (37 799? (27.966)

Income tax refunds 1.885 300 (3 666) 1.241 26.856 216C6 (Increase) decrease in wcrning cacital other than srort-term deot 22.006 1 667 30.465 (122.3SS) (12.727) 150.977)

MsceHaneous (net) . (5.049) 52 4203 7.592 6.C31 12.829 50,782 6.673 34.767 t% ~e0) (17.629) 13 813 Total resources provided . S423.450 $370.575 5352 979 5 252.758 $436.357 $1.836.129 Financial resources were used for:

Construction additions $277,758 5264 913 5105 676 S 194 155 5283.544 5 f.216 346 Nuclear fuel . 38,522 25.018 87.026 11.959 11.503 174.028 Allo A3nce for funds used cunng construction (45.001) (34.144: ;20 711) [29.376) (27.373) (156.605)

Net additions 271.279 255.737 261.991 176 738 267.974 1.233.769 Peduct:on of long term dett 10.450 13.NO - -

103.867 127 567 Reduction of preferred stock (Note 7) 31.800 1.500 1.800 - -

35.400 Dudends. 109,921 99.738 39.138 76 020 64.526 4 ~.393 Total resources used . 5423.450 5370 575 S352.979 S 252.758 S436 367 S1 936.129 (Increase) decrease in working capital other than short term debt:

Cash S (4.207) S 475 5 13 620 S t3 C67) S 4 431) S 2.390 Accounts receisacle (5.364) 1 5 250) (11 C41) (16 310) (19 5C5i t 37 A70)

Recen,able f rom plant snaring . '2.402 (12 402) - -

Income tax ref und claims 3.391 t1 3531 (300) 15 639 i16.977) 5.4C0 Coal and oil for production of e'ectncity 9.710 113.017i 4 15 433) 626) t33 483: .52.343)

Other materials and sucphes (3,369) (1 490i 1 193 *213 f 10.12 41 '12 577)

Long-term dect due witnin cre ', ear . 200 to250 -

(103 567! 55 d67 37 55C#

Accounts payac:e 7.323 ' 001 11982 (E55> 3.644 26 535 Accrued taxes and :nterest 4.349 9.3

• 7 d235 2A35 6C9 26915 Ctneri et). 4.473 1.'34 4.337 14 548) 1.673 3 169

$ 22.006 5 1 ^ar S 33 465 Si122.225) 5.i2.727, 5 80 9)

-=: -

. _ = - -

T fI

'( 15 fJ ,J J l;

' i !

Notes to Consolidated Financial Statements NOTE 1. Summary of Significant Accounting Policies sion the plant. The Company believes tnat decommissioning The Company is subject to regulation by the New York costs, if higher than currently provided. will ultimately be re-State Public Service Commission (PSC) and the Federal covered in the rate process, althougn no such assu ance can Energy Regulatory Commissica (FERC) with respect to its be gtven.

rates for service and the maintenance of its accounting rec-Amornzation of Nuclear Fuel: The cost of nuclear fuel. plus ords. The Company's accounting policies conform to gener-ally accepted accounting pnnciples, as apolied to regulated estimated disposal cost,is charged ta operating expenses on the basis of the quantity of heat produced for the generation public utilities, and are in accordance with the accounting of electnc energy. These costs are charged to customers requirements and ratemaking practices of the regulatory au-thonties. through base rates or through the fual adjustment clause.

The Comoany has assumed that spent nuclear fuel will be Utihty Plant: The cost of additions to utihty plant and cf disposed of by reprocessing and that urantum recovered replacements of retirement units of property is capitalized. tr ough sucn reprocessing will have value. Howe.ver, recent Cost includes direct matenal. labor, overhead and an allow- events and proposed Federal action could result in the aban-ance for funds used dunng construction (AFC). The cost of donment of reprocessing p'ans since there is no reprocess-current repairs and maintenance is charged to expense. ing facihty presently in operation and it has been proposed Whenever utility plant is retired, its onginal cost, together that reprocessing be deferred indefinitely. The Company be-with the cost of remova! less salvage is charged to accumu- heves that under either its reprocessing assumption or an lated depreciation. alternative permanent storage assumption similar to that proposed by the Department of Energy, costs would be ap-Allowance for Funcs Used Dunng Construct:on: .he i Com-prox mately equal. The Company ceheves that nuclear fuel pany capital;2es AFC in amounts equivalent to the ccst of funds devoted to plant under construct'en (8'o for the period disposal costs, which may be higher than presently esti-mated, will continue to be recovered in the rate process, al-January 1.1974 through Jure 30,1976 and 9'o effective July though no such assurance can be given.

1,1976L As a result of rate proceedings. effec 0ve Decemcer Pnor to 1978, estimated nuc! ear fuel discosal :osts were 1.19/o for its Oswego Steam Staton Unit #b and Nine Mde deducted currently for Federal income tax purocses. Due to Point Nuc! ear Station Unit #2 and ' "; * ,1978 for capitahzed the uncertamties concerning disposal cost alternatives and costs associated with its investment in N M Uranium. Inc. (see attendant cost estimation cr:teria, in 1973 the Company has Note 4L the Company tegan computing AFC at a rate which assumed that nuclear fuel discosal ccsts are not currently is reduced to reflect the income tax effect Of the borrowed deduct;Me for Federal incor e tax purposes. Pnor years tax funds comoonent of AFC hab:h!K were not matenally affected by such change in as-Ef fective January 1.19 , ,.- ,C reused its accounting pro-

<i.ren sumption. In December 1975. the PSC granted the Company cedures for determining the AFC ate and required segrega-t:on of AFC into its two component parts. borrowed fLnds permission to provide de' erred taxes on the accountmg-tax timing differences of current and p ior penod nucl ear fuel and other funds The revision had no effect on income in g i 1977. Tl e Company. since January 1.1977. nas ref?ected the

~

borrowed funds component in the Interest Charges sect;on cf Revenues. Revenues are based on cycle tinings rendered the income staternent. The Company has not reclassified AFC to certain customers monthly and others bi-mor'hly. The into its borrowed and other funu components for pericds Company does not accrue revenues at the end of any fiscal pncr to January 1 1977. penod for energy sold but not btMed at that date The Com-Cecreciat:on and Nuclear Generatrg Plant Decom ms- cany s tanffs irciude electnc and gas adjustment clauses under wnich energy and purchased gas ccsts respectwely.

Sicntng Costs: For accounting purposes. deprec:ation is above or teio the levels anowed in accrowed rate schedules ccmputeo on the stra+cnt-hne basrs using the estmated use-are bd!ed cr credited to customers. Ef'ect:ve January 1.1974 ful hves by c' asses cf depreciab'e property. For Federal 'n-i e Company adopted the cohcy of charging cperat:cos for come tax pur;:cses. the Company cor putes depreciation using accelerated rnethods and snorte r ailowable deprect- energy cost increases in the pened of recovery (see Note 3h a e es. Effective September 1.1975, the Company began defernng s milar purcnased gas costs as directed by *e PSC. anich As a result of a recent PSC proceeding, est; mated decom-change did not have a matenal effect on mcome rass:cnmg costs tccsts to take the piant cut of serace in the future; of the Company s N:ne Mde Pcint Nuc: ear Station Unit Feceral Income 7 axes: The general pchcy. n acccrdance al tegan to ce recovered in rates and charged to cperations eth PSC requirements. is to flow inrougo the tax effect of in Juiy 1978 through reused cecrec at!on charges. The 0 ming differences between back and taxable income !nat :s.

cnange m the annual nuc! ear piant derreciat:on rate. from record onty nccme taxes currently payat.e. However. de-4 OCS to 4 33% reflects an mcrease n the estimated seroce ferred taxes are provided on benefits eal zed from the class hfe of the plant from 25 to 30 years and t~e estacosnment of hfe system cf deprec:ation cermitted under the Resenue Act an ancw ance 'or drccmm!ss.on ng costs. !o be reccgmzed at of 1971 <shc ter depreciatie hses. reca r aHowance a-d cost the annual rate cf 1 % cf t"e c! ant s cost P";r to Ju:y t 973. c' removah. cn energy and purchased gas costs on nuc: ear cecommissicnmg costs we a rct crarged to current opera- fLei d;scosa! costs and on certa n otheritems as accroved by tions and were not 'ecogn: zed in rates charged to customers the PSC isee Note 91 No deferred taxes are prouded 'or otner Eecause of uncerta nt.es there s no assurance inat tre addo cecrec:aticn dif'erences nclud'ng acce'erated met cds o' t;onal revenues crav ced by ine decommiss cmng auc^ance cecreciancnh excect under recess ty certtf cates :n enor en ult.mately aggregate a suffic ent amoet to cecommis- years cr 'or other ;tems tsuch as tases. a pcrt'on cf AFC.

I < p 5 16 J ,J V! G

pensions and certain other employee benefits) which are de- Effective March 1,19i5 anc July 1,1978. the PSC author-ducted currently for tax purposes but capitah7ed for account ized the Company to make changes in its electnc adjustment ing purposes. clause. As a result, approximately $31,000.000 and Effective January 1,1975, the benefits resulting from an SS.800.000. respectaely. of deferred energy costs would not increase in u e investment tax credit from 4*a to 10 o and have been recovered under the normal operation of the elec-from the charge in the limitation on the amount of credit tric adjustment clause. but the Company was permitted to which may be claimed in any year has been deferred. One- amortize and bill sucn amounts to customers, through the half of the 4*o investment tax credits reahzed have been alto- e'ectnc adjustment clause, over 36 months from the effective cated to Other Income (Net) for the year 1978, consistent with date of each change.

PCC directives. For the major projects specified in the AFC section above, the imputed tax benefit of the Dorrowed funds NOTE 4. M M Uranium, 'nc.

Component of AFC has been credited to Cther Income (Net). During 19/ v, sough a snolly-owned subsidiary, N M As directed by the PSC. the Ccmpany has deferred a por- Uranium. Inc. (NMU). the Company purchased a 50 percent tion of the increase in Federalincome taxes for the year 1978 undivided interest in uranium deposits and associated min.

associated with the tax gain on the sale of a portion of its ing equipment for approximately $52,500.000 consisting of interest in the Roseton Steam Stat on. The PSC has au- $34.500 000 in cash and S18.000.000 in 7V notes payable thortzed the Company to re' ver increased taxes through its guaranteed by the Company (see page 211. Although acquisi-electnc adjustment c!ause over a one-year penod comman. - tron of this interest was made primarily to provide a more ing July 1978. assured future supply of nuciear fuel for the Nine Mile Point Pension Plans: The cost of pension plans is based upon Nuclear Station Units #1 and 2. the Company excects to se,I a current costs, amortization of unfunded past service berefits port:on of the output to reduce net assets and associated over periods rangmg from 15 to 40 years and amcrtization carrying charges. The net assets, including costs incurred over 15 years of unfunded past service tenefits arts;ng from s.nce acquisition of the subs: diary tota!ing $37.564.000, have plan amendments. been metoded in Utihty Plant in the consohdated fmancial statements.

NOTE 2. Depreciation On September 8.1978. the PSC issued an order a:prov ng The percentage reiatonship between the total provis:on for the Company's investment m NMU. its guaranty of the NMU depreciation and average deprec:ab:e prcoerty was 2.7S in notes and permitting, w:th enor aporoval. such subsequent 1978 and 1977 and 2 . n 1976.1975 and 1974. The Com. advances as may be necessary to fmance the uranium prop pany makes deprec . . stud *es on a contmumg bas:s and ect. Fur *her. effective July 1.1973. all tenef:ts asscciated witn adjusts the rates cf :s .7ous c:usses of depreciat e procer. N'JU accounting-tax t:mmg differences have been deferred.

ty. subject to PSC accrc.ai anen cens;dered apprcenate. The accroval was subject to the condition that rates the Effective Cecemcer 1.1976. consistent with a PSC rate deci. PSC mU accrose m the future win reHect the cost of NMU yn electnc denrc.non p*ous.cns were mccified resulting uranium at the lower of cost or the market pnce Sub;ect to in a reduction in cepreciat:cn egense of 54 300.CCO for tre PSC apcro.al the compar! son of cost or market wdl be on an year 1977. As a result of the rate dec:sien which cecame aggregate basis over the hfe of the project. White manage-effective July 1.1978 the electnc depreciatica crmsion for ment beheves that such aggregate costs will be less than the 1978 was mcreased approximately $1,100.000 aggregate market price of tne uran,um produced over the hfe of the project, no such assurance can be gwen.

NOTE 3. Deferred Recoverable Energy Costs Effectue Ja uar/ 1.1974. as perm:tted cy a PSC pohcy NOTE 5. Shor* Term Debt and Compensating Balances statement, the Company changed its acCountmg for n- The Board of Directors has authorized the CCmcany to ob-creased energy costs above or Oe;ow the leve's anowed :n ta n snort-term unsecured loans of up to 5250 C00.000. m-rate schedules to defer those costs untll the t;me they are ciudmg the issuance of commercial paper uo to a mammum biMed to custcmers. thus ach.evmg a cetter matcning of re/-

of $125.000.000. Unused hres of crecit and unused amounts enue and exce se. This accountmg cnange. net of de' erred under the Credit Agreement generaNy are held avadacte to mccme taxes of 53.170.000. resulted rn an increase n net support commerc al cacer outstanding at any time income for 1974 of 534 629.0C0 (5 52 per sh aren of which At December 31. 1976. the Company had avariacle

$25.223.000 !SE per snare) was crecited to ncome before 5174 500.0C0 of bank cred.t arrangements consistmg cf a cumulatue effect of accountmg cnange and 's3.406.CCO (5 22 555 OCO 000 contractual commitment with several tanns cer shaiet ret cf de' erred inccme taxes of 5400 000. reo- under a Credit Agreement hnes cf credit cf 569.500 CCC and a resented tre cumulatwe effect to January 1.1974 of the ac- Eangers Accectance Facihty Agreement of 350 000 CCC An of countmg crange Whde the results of o; erat.cns for an years Sese arrangements are renehaufe on an annual casis since 1974 have teen reported on !"e basis of the new Tre Cred:t Agreement and most of me hres of credit re-methcd. "e resuits of ccerat:ons on a cro forma bas.s for quire the Company to mamta n ccmcersahng ca ances 1974 would nave teen as fcucws- Arucn are aseraged over ime Net of flo a t. acord ately wgg 73 c , 52.700 COO of casn at December 31.1979. represem com-n~ >2 ue' cersatmg baf arces. Tne Ccmcany nas e ected to 037 'ees m

'~~

7 '

__ _ . . . _ Feu of mairiaming cor 1pensanng talances en its other unes ss reccce: 51 92 550 531 T e Banwers Accectance Facity Agreement prowces for me P c tm a amcunts retect'ng tne payme-t of fees cN ucen the ssaance of eacn acceptarce

c s s em acchcat on cf the change Acceptances are used tc '. nance me fuel co ,nventory at cne

c. r7, ce'erral accountmg 5t70 571 425 cf the Ccmcany s generatmg stat!ons U r l'

',) 17 JUJ l' i

The fc swing table summarizes additional information F 375% ser.es and 1.360.000 shares of $25 par value prefei-apphcable to short term debt: ence stock 7.75*o series. capital stock expense increased m meusns cf ras $615.000 in 1978 and $115.000 in 1977 m78 19r In August 197C S30.000.000 (300.000 shares) of 11.75'o

~

At December 31: serie_ preferred stock was redeemed. In accordance with a Short-term debt: PSC directive. the $3.525.000 call premium on the redemp-Notes payable S21.000 $ - tion was charged to capital stock expense and is being amor-Commercial paper 3.000 24 200 tized over the life of the 7.75 o preference series. Expenses of Bankers Acceptances -

15 000 issuing the 11.75 o preferred stock of $1.180.000 were

$24.000 539.200 charged to retained earnings.

Weighteo average interest rate 10 59Y 6.82 o' For year ended December 31: NOTE 8. Pension Plans Daily average outstanding $10,744 S40,344 The Company and its subsidiaries have non-contributory Dally weighted average pension plans covering substantially all their employees. The interest rate 9.17e o 5.81 Y total pension cost was $25.694.000 for 1978. S22.489.000 for Maximum amount outstanding . 539.200 $85.650 1977. S20.762.000 for 1976 $18.825.000 for 1975, and Scu ry ccmcem u ng o rces ra vas $15.589.000 f or 1974 (of which $5.754.000 f or 1978.

$4.668.000 for 1977. 53.878.000 for 1976. $3.344.000 for 1975, and $3.755.000 for 1974. was included in construction costs).

NOTE 6. Jointly-Owned Generating Facilities The Company's pohcy is to fund pension costs accrued Preliminary studies indicate that the estimated amount of The following table reflects the Company's share of sested benefits at December 31,1978 exceeded the net assets jointly-owned generating f acilities at December 31,1973 The of the plans by approximately $100.000.000.

Company is required to provide financing for the units in process of construction and for any add tions to the Roseton units. The Company s share of expenses associated witn th; NOTE 9. Federal and Canadian income Taxes Roseton units are ,ncluded in the acpropnate operat:ng ex- Income Tar Refunds: Operations for the year 1974 include penses in the consohdated statement of income a credit of $4.700.000 attributable to the carryback benefit of a net operating tax loss

~'

3FS '

ihe Company recewed refunds in 1974 and 1975 totahng p

,m o- , ,

3 ccf. c. ; .w . - $21.400.C00. including interest, as a result of the retroactive

. .  :-e: s ry r' m, adoption of "guidehne ' hves in computing tax depreciation Roseton Steam Station for the years 1966 through 1968 in an Opin:en and Crder on a Units el and 2 ia) 30 $ 1 C0.861 511 396 5 2.145 Compar, s rate proceeding, dated November 16,1976. the Oswego Steam Station PSC directed that $12.400.000 of the amounts recmed for Unit #6 to) 76 - -

175.693 the years 1966 through 1968 be treated as a reduction in rate N.ne %fe Point Nuclear base The PSC. however, reserved the right to treat such Station Unit a2 (b) 41 - -

224 135 amount d,fferently in future rate proceedings contingent on Sterhng Nuclear the then prevaihng circumstances. The Company appealed Staticn (c)

_ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ .~ ~

22 14.680 this treatrrent to sancus Courts and on June 19.1978, the Supreme Court of the Untted States dismissed, for want of 4 e  : E- #

1

]ar iunsdiction. the Appeal filed by the Company. thus terminat-q >'

- cyt, , r Qw%m 3e ;m 7 ing the htigat.on The port:en of the refunds and interest for

,-  ; o , a 3:4 m3 mr> e &r > , the years 1966 through 1968. previously included in Deferred Cred:ts totahng approumately $9 000.0C0 ($ 17 per snare).

m, 1. - , 4 s - - en: 3 a x vm , , . - tnat was no longer subject to a future contingency, was cred.

~e re , myt;"- e . c:

-t e6 r ' i : - " ' " '

• 3

-Ow.- <[4> w ec i ., i :

.ted to Ctrer Income (Net) in 1976 w rre u m vej e , w f - 3 m .3 ,e 3 x In 1978. the Company received a refund of 59.200.000 in-cr . n p: w cluding :nterest net of tax. resulttog from the settlement of all 1 yy a &p r, em n : 3J>- n"a ~ .g audit issues for the year 1969, including the adoption of the

- +

.c m , on s P .,_n _ - , w guidehre ' method of depreciation The PSC is :urrertly

f - , r - 3 wm +mr .+n,W~ -

considerirq the procer accounting and ratemaking treatment of the 1969 refund.

The total tax refunds and interest recorded m Ceferred NOTE 7. Capital Stock Credc 3 at Decernber 31,1978 approomated $2t M00 C00 On May 7 1976. by in amendment to the Ceitificate of Net Operat,nq toss Dunng 1977,1976 and 1975, the Com-Inccrporation. each authenzed but un!ssued share of cre-cany utihzed $300.000. $20.100.000 and $22iC0 000 rescec-ferred stock and c#erence stock was changed nto four taely of net operating tax loss carryforwards.

r ares with a car .a ue of $25 each !n 1979 the authcrized shares of cornm mn stock were mcreased Premium on capital hestment Tar Credits The Company has deferred tne net stocx :ncreasou 565 405.000 m 1978 and $20.150 CCO in 1977 benefit et insestment tax cred.ts approximating $6 900 0C0 f rom tre e " 5 057.636 and 1. 3 71311 shares of coramon 1512 cer snarei. 36.100.C00 ($ 11 cor share). 54 ACO.CCO is C9 stock. ro . i + sely As a resuit of the foregoing ard the 1973 per snare) and $12.500.000 (S 27 per snaret for the fears issuance a 1.6C0 CCO snares of $25 par vaMe pre' erred stock ended December 31.1973.1977,1976 and 1975. rescectuety.

18 j. y {j l tj i.\)

J.,;

is-

in accordance with the general policy as stated in Ncte 1. Income Tax Assessment: In October 1972, tiie Company The investment tax credit carryforward previous ly coned- paid a net assessment of $16.800.000 for the years 1957 ered availab'a as of December 31,1977 was applied , , a re- through 1962 relating to the deductions taken for the toss of suit of a change in assumpt:on concerning the current de- the Company's water nghts at Nragara Falls terminated in ductibility of naclear fuel disposal costs (see Note 1). The connection with the redevelopment of Niagara power by the Company has nc t' vestment tax credit carryforward at Ce- Pnwer Authority of the State of New York. The Company has cember 31,1978, instituted suit for recovery of this amount.

. '%sras Ct Mrs Summary Analysts: 1978 :97 19'S *q's W4 Components of Feceral and Canadian income taxes Current tax expense:

Federal S 7,608 $ 434 - -

S(5.50(

Canadian 3.870 3.314 5 2.550 $ 2.830 1.730 11,478 3.748 2,550 2.830 (3.770)

Deferred Federalincome tax expense 19.645 18.376 15.34L 11.800 (280)

Income taa es included in ocerating excenses 31.12: 22.124 17 S96 14 630 (4.050)

Deterred Federalincome taxes included in Other !ncome (Net) (11.690) (5.043) s718' Total $19.433 S17.081 517.173 $14.630 $ (4.050)

. Timing differences resulting in deferred Federalincome taxes (see Note 1)

Deprec:ation 522,753 S 7.146 S.223 $ 1.313 S 995 Cost of removal of property . 2.310 245 566 M991 (750)

Investment tax cred:t . 3.899 6.077 4 847 12 7 -

Recoverable energy and purchased gas costs . 7,012 69 ' 650 ' 70 Necessity ceraficates (700) (700) (70J) <70s Nuclear fuel oiscosal cost (28,411) - - -

Gain on Roseton sale (3.962) - - - -

Pi nsion costs under the age retirement allowance pian - - - -

42.555)

Cther. 2.054 496 42 40 -

Deferred Federal income taxe_,4 neti . S 7,955 513.333 314 E23 511.500 $ 250 Peconcil:ation between Federal and Canadan inccme tues arc the tax computed at preva: ling U S statutory rate (48N cn inccme before income taxes and cumulatWe (ffect of account:ng change Computed tax $77,086 567.633 360.301 562.124 $39.579 Reduction attnbutable to flow-through of certin tax adjustments:

Decreciation 13.9a1 19.7C3 19 741 20.'23 16.602 Anowance for funds used cunng ccnstruct:cn 21.601 16.389 9 942 14.100 13 426 T ues, pensions and employee berefits capitahzed for accounting purcoses 8.537 7.071 5.731 7.920 7.112 Peal estate taxes en an assessment cate basis 560 1.C42 2.813 3 035 4 415 Investment tax credit . 13.165 - - - -

Income tax refunds -

619 4313 - -

Other. (141) 5.733 583 2 316 2.074 57.653 50.55' 43 123 47 494 43.6:9 Federal and Canadian income taxes . $19.433 $ 17.091 $ 17.179 514 630 $(4050)

NOTE 10. Information Regarding the Electric and Gas caymenta unamortzed dett excense and ctrer deferred dr--

Businesses u._

The Comoany is engaged 'n the eiectnc and gas uMty Se Cemcany prov.ces e!ecmc anc cas service to accrox-cus.resses Certa.n irformation regarding these segments 'ma*e y '5.CC0 ;eceral state anc cca: gase nmental agency

'or the yaars enced Decemter 31.197S and 197' is set 'crth ;ccabcns. Du :ng 'ne years endec De: ember 31 1975 and on the 'onowing oage General corporate excenses. crocerty '97' accroxrmateg 5134 CCC ^CO and 512:'.CCO.000 escec-common to both segments ano decrec:at:cn of sucn ccm- t .e'y. af reve Le vas ecei<ed ' rom these agen: es men croperty have teen anocated to t e :eaments n accor- Oretax ocorabng 'ncor e. mc;uc ng AFC .vas 5150 C'~ CCO cance with cractices estabbshed +cr regWatorf curcoses eectric. 74 34C 0C0 gas 'or '976 5'37 753 C00 e ect "C.

Corporate asse+s ccnsist cf other prccerty and r",estmen's 520.7 37 CCC gas fo- '975 arc S t C.974.000 e ectnc.

cash. accounts recervacie. income ax reNna c a:ms. pre- 5 t 5.721.0C0 cas 'cr 1974

'. j 1: u 1

!c reusancs of acws 1973 1977 E ec nc Gas Tc:ai E'ecmc Gu 7:01 Operating revenues $1.020.313 $259.935 S1.280.248 $ 987.760 $238.072 51.225.832 Operating expenses Depreciation . 71.750 8.933 80.683 68.400 8.713 77.113 Other exclucing income taxes 760.327 223.742 984 069 742 541 203.556 946.097 Total 832.077 232.675 1.064.752 810.941 212.269 1.023.210 Operating income befo , taxes 188.236 27.260 215.496 176.819 25.803 202.622 AFC. 44.770 231 45.001 33.991 153 34.144 Pretax operating income, including AFC S 233.CC6 S 27.491 260.497 5 210.810 S 25.956 236.766 Income taxes 31.123 22.124 Other income (net) 13,235 3 645 Interest charges . 101.447 94.453 Net income ___. _

$ 141.162 _ _5. 123.832 Construction expenditures (including nuclear fuel) S 301.583 $ 14.697 5 316.280' S 277.828 5 12,103 $ 289.931 Idectifiable assets:

Utility plant. net $2.595.298 S288.659 $2.383.957 $2.428.623 $283,439 $2.712.062 Matenals and supphes . 98.C58 1.910 99.968 104.653 1.656 106.309 Deferred recoverable energ'j costs 23.S68 4.C98 27.966 19.170 5.781 24 951 Corporate assets 177.221 175.732 Total assets . 53.189.112 S3.019.054 NOTE 11. Commitments NOTE 13. Quarterly Financial Data (Unaudited)

The Comcany presently est: mates that the construct:en Operating revenues. coerating income. net :ncome and pogram for the years 1979 thrcugh 1981 wit! recu;re over earnings cer common share by quarters for 1978 and 1977 5635.000.0C0. excluding AFC and certain overheads are shown in the folicwing tab le. Th:. Company. in its opinion, capital: Zed At Decemtser 31.1978. substantial construction has included all adjust ments (consisting only of normal re-commitments exist. including those fcr the Company s share curnng accruals) necessary for a fa:r staterrent of the results of Urut #2 at Nme Mile Point Nucl ear Stat:en. Ur.t *S at of operat:on for the quarters. Due to the seasonal nature of Oswego Steam Station and the Sterhng Nuc: ear Sta on. the utihty business. the annual amcunts are not generated evenly by quarter dunng the year.

NOTE 12. Replacement Cost (Unaudited)

" m u- r . ; n Because of inflation, the cost cf replacing the Company s _

C:er y Cya r a .e- Er asce plant in seruce today would eueed t*e arnounts actually " "

d "P' ^C' 2 ^ " P9 spent for such 'acihties and reported in the Company s finan. Cecemter 31 c:al statements. The Company tele.es that any nigrer re. 1978 5321.788 533.881 S26 977 $ 32 placement costs it rnay experience wdl be recovered througn 1977 S309 348 S38100 $24 001 5.31 the normal regulatory process The Cornpany has Computed September 30 the replacement cost data in accordance mth Secunt es and 1978 5276A42 537.571 $27.273  ; 32 Exchange Commission requirements and such data are re- 1977 S282.209 535.488 521.4C3 $ 27 ported in its Form 1C-K. June 30 1978 $3C9 666 547.976 $35 527 5 49 1977 S 2 S 1.762 $42.647 529.902 3 40 Yarch 31 1978 5372.352 564.945 S51.385 5 75 1977 5352 513 564 263 549.520 57' I

I J J "'

20

Summary of Electric and Gas Utility Plant

' ~:vsy:s 3 aca3?s At Dece-cer 31 1978 o 197' Utility plant:

Elecinc plant $2,680,999 69 $2.625.797 Nuclear fuel uv *e 4) . 215,207 6 175.894 Gas plant 350,029 9 341.010 Common plant . 59,726 1 57.584 Construction work in progress 599,413 15 446.999 Total utility plant . $3,905,374 100 S3.647.274 Long-Term Debt

'e ~ bsar:s ur :fars At Cece re 3: 1978 197' First Mortgage Bonds:

224 o Senes due January 1,1980 . S 40,000 S 40.000 2's*o Senes due October 1,1930. 40,000 40.000 121'o Senes due October 1.1991. 125,000 125.000 32s* 2 Senes due Decemte r ',1981. 15,000 15 000

'" 2*o Senes due February 1.1983. 25 000 25.000 3'4'2 Senes due Octccer 1.1983. 40,000 40,0C0 3' e'2 Senes due August 1.1934 25,000 25.000 lois *- Senes due Sectember 1,1985 47,000 37.000 359*o Senes due May 1.1986 30.000 20.000 4'a* 2 Senes due Seatemter 1,1987 50,000 50.000 3's' Ser;es due June 1.1993. 50,000 50 000 414'o Senes due Mr,I 1.1990 . 50,000 50.000 4' zo a Senes due . ovemcer 1.1991 - 40,000 40.0C0 458 o Senes due Decemter 1.1994 40,000 40 000 5's% Senes due November 1.1996. 45.001 45 000 e'4*o Senes due August 1.1997 - 40.000 40.000 6'2% Senes due August 1 1993. 60.000 60 000 9's% Senes cue December 1,1999. 75,000 75.000 72s% Seres due Fecruary 1. 2001 65.000 65.CC0 75 s3 2 Senes due February 1. 2002. 80.000 30.000 714% Senes due August 1. 2002. 80.000 80.0C0 8'4% Senes due Cecember 1. 2003. 80,000 50 C00 9':% Series due Decemcer 1. 2003. 31.500 -

10 2% Senes cue ',1 arch 1. LCS 47.000 50.000 8 35% Senes due August 1. 2007 75,000 75 000 85s=o Senes due December 1. 2007 50.000 50 000 Paul Smem's El ectr'c L:gnt & Power &

Ra'iroad Comcarv ' t Mortgage Bonds:

4':'s Senes due July 1.1979 450 450 5':% Senes due May 1,1985 450 a50 dromissory Note. 3 23 Senes A due June 1. 2004 46,500 46300 Notes cayabie:

734% due in equal mstallmerts.

Novemter 1.1978.1979 and 980 (Note 4) . 12.000 13 000 Pnme rate plus ' 23 2 (not to exceed 7': 2) 3 due m 24 ecual quarterly installments ccmr encing Ju!y 1 1978 13,750 15 000 Unamomzea cremru m 6.697  ? 137 Totallong-term debt 1.425.447 1.404 c37 Less long-term cett due uth<n c e year 10.450 10.250

- =- =:.-. = - - -

$1.414.997 51.394 367

=- = = . .

, , 21 v .

Preferred Stock Cumulative pu eferred stock, authomed 3,400,000 shares, S100 par value and 9,6CO.0C0 sharet $25 par vs:ua Cumulative prefererce stock, authonzed 4,000.000 shares S25 par value Penemt on pr'ce cer snee iri N ',3rdS of CCI!39 t BeWe aCC.R 'T aCC r' '3:?1 O s tCe" 51 At Decemcer 31. 1978 197< Decembcr ' J i,1978 Evesal Preferred $100 par value NP 3.40% Senes; 200.000 shares . . $ 20,000 5 20.000 $103.50 $103.50 3.6C% Senes; 350.000 sharas 35,000 35,000 104.85 104.85 3.90% Senes; 240.000 shares 24,000 24.000 106.00 106.00 4.10% Series; 210.000 shares 21,000 21,000 102.00 102.00 4.85 o Series: 250.000 shares 25,000 25.000 102.00 102.00 5.25% Senev 200.000 shares 20.000 20.000 102.00 102.00 6.10% Senes. 250.000 shares 25,000 25.000 103.00 101.00 7.45 % Senes; 564.000 and 582.000 sharec 56,400 58.200 106.25 100 00 7.72% Senes; 400.000 shares 40,000 40.00C 107.37 102.35 10.60% Senes: 400.000 snares 40,000 40.000 110.60 102.65 11.75% Senes (Note 7) -

30.000 - -

Preferred $25 par value 8 375% Senes; 1.600.000 shares 40.000 -

27.09 25.0')

9 75% Series: 1.200.000 shares 30.000 30.000 27.1825 25.00 Proference $25 par value 7.75% Senes; 1.360.000 shares 34.000 -

25.00 Total preferred and pref erence stock 410.400 368,200 Less sinking fund requirements . 1.800 1.800

$408.600 $366.400 e m eeurn oncer 1 W Certain of the Company s preferred stock senes provide for a mandatory sinking fur.d for the annual redemption. at par.

as follows:

Vter et sra es Ng rv "g Preferred $100 par value 7.45 % Serias 18.000 June 30.1977 10 60% Senes 20.000 March 31,1980 Pref erred $25 par value 8 375% Senes 100.0C0 A p o l 1,1983 9.75% Senes 65 00C Cctober 1.1980 Preference $25 par value 7 75% Senes 140 000 September 30.1980 These senes also have optional sinking funds through wh'Cn the Company may redeem, at par, a hke amount of additional shares ihmited to 120.0C0 shares of the 7.45% Senes and 3C-0.000 snares of the 9.75% Ser. ash The mae.atory sinking fund for the 7.75%

Senes ncreases bv 20.000 shares ard 80.C00 shares beg.nning September 30.1982 and 1984. respectively.

Report ofIndependent Accountants PR:CE WATEPHOUSE & CO To the Stoccolders and tne Board of D: rectors cf Syracuse. New York Ni dara Moraws Power Corcoration Jan uary 24.1979 We have exam.ned the conschdated balance sheets of ments. Accordingly, our present opinion un the financiai N!agara Mohawk Pcwer Corocrat:on and 'ts subsic: anes as statements, as presented nerein. is no longer auahfied wi*h of Cecember 31.1978 and 1977. and the related censondated rescect to this matter.

statements of income and retained earnings and of cnanges in our oc.nion. the conschdated f:nanc:a! statements exam-in Snancial posmon for the fue years ended Cecemter 31. ined by us present fa:rty the Snancial posmon of Niagara 1978. acceanrg on pages 13 througn 22 Our examinations of Monawk Power Corporation ana its subsidranes at Cecember these statements were made ;n accordance mth generally 31.1978 and 1977. and the results of their cperations and the accepted audit.ng stancards and accord:ngly included such changes ;n their financial position for each of the five years in tests of the accourtirg records and such other auditing orc- the pened ended Cecember 31.1978 in ccaformity with gen-cedures as we cons:dered recessary :n the circumstances. erady accepted accounting pnnc@es cons stent!y acphert in our report cated January 25.1978. our coin.on on the dunng tne cenod sucseq'< ~ to the conge. with whch we Snanctal statements was quahfied as te:rg subject to the concur. in tne method of accounting 'cr ncreased energy effect, if any. On the Snancial statements of the uit.nate res- ccsts mace as of January 1.1574. as described in Notes 1 clution of certain ht: gat:cn relating to gwdehne refund and 3.

ctatms ' As expla>ned in Note 9 the Ltrgat an was te*m natec d 'f

n uure 197 ~ with no resulting effect on tre f:nanc:al state- [ ,t.u [./J.AAMK '

22 ),J U-

Financial Statistics Capitalization ratios: 1978 'F' Comm( n stock equq . 36.9 6 35 5 2 Preferrad stock . 14.1 13.4 Long 'erm debt . 49.0 51.1 Ratic of ear,1ings to fixed charges 2.58 2.49 Ratio of earnings to fixed charges and preferred stock d!vider.ds . 1.95 1.90 Other ratios 's of operating revenues:

Maintenance and depreciation . 12.6 13 2 Taxes. 11.3 14 0 Crerating income 14.4 14.7 Balance ava'ab:e fcr common stock 8.8 8.0 Ratio of depre:iation and amortization reserve to gross utility plant . 26.2* b 25.6*o Ratio of mo:i._ r e borids to net utility plant 46.7'b 48 6 o Electric Capability

>: ; ras .* K ua Thermal a' r i r, 1979 *. ^'-

Coal fuel Huntley. N:acara River . 785 11 63i Dunkirk. La<e Ene 585 8 640 -

7ctm ccat fuel 1.370 19 1.471 Res: dual cil fuel Atany, Hucson Riser 400 6 400 Oswego. Lane Ontario . 1,19C 17 1 225 Rcseton, Hudson Riser . 360 5 .t 80

\fdele CISt:llate oil fuel 20 Combustion turcine and d:esel units 354 5 354 Total oil feal 2,304 33 2.459 Nuctear fuel Nire Mile Point. Lake Ontano . 610 9 610 eurchased f rm contract i

Power Autncn*'s-Fit:Patnct Laxe Ontano 176 2 124 Total nuclear Lei 786 11 794 Total thermal souraes 4,460 63 4.724 Hydro Cwred and leased hvero stations i31 in 19731 733 10 717 Purchased-firm contracts Power Authenty-N:3gara River . 1,122 16 1.161 Power Authonty-St Lawrence River 115 2 115 Power Authonty-Bienne m-G toa Purn;ed Storage P!ut 560 8 550 Other . 76 1 74 Total hydro sources 2,596 37 2.637 Total capability

• 7.056 l00 ' 361 1973 -

Electric peak load during year 5.49i 5 aC5 L4 v. e o m v na m 33: ,- 1. -- 1 m - n -- -

_ ' , J v" 1 .,  :*f '" i;  ; E 13 f .# : t'" Tv" * ,

^

S

,) N L- '

y

Electric and Gas Statistics Electricity generated and purchased: 19'8 *. t977  %

Af4ces cr aves i Thermal:

Generated Coal. 7,015 20 7,579 22 Oil 8,691 25 8.293 24 Nuclear . 4,467 13 2.946 8 Purchased-Nuclear from Power Authority 886 2 911 3 Total thermal . 21,060 60 19.729 57 Hydro:

Generated 3,472 10 3.782 11 Purchased from Power Authority 8,563 24 8.851 fe.,

Total hydro 12,035 34 12.633 37 Ott'cr purchased power-vanous sources 2,118 6 1.926 6 Total generated and purchased . 35,213 100 34.288 100 Electric sales: 1978 19 P Gas sales: 1978 19 "

<=,1, r : c > ,w , , *?.. ces n . ,c . .eep Residential . 8.1 z - 7.595 kesidential . 53,301 52.684 Commercial 9.117 8.770 Commercial . 23.088 '0.305 incustrial 12,107 11.878 Industrial 15.204 14.528 Municipal seruce . 276 276 Cther gas system s 3,740 3.310

~

Other electric systems 2.675 2.548 95.333 90.8 5 32,382 31.357 Gas revenees:

Electric revenues: - "' scr r Ws

' %s 2r = 1 c rrs; Residential . S158,599 $150.5 0 Residential . .S 319.667 3304.229 Commercial . 60,794 51.512 Commercial . 333.862 325.985 Industrial 32.422 29.336 f.1dustrial 258.649 253.690 Otner gas systems 6.858 5595 Municipal service . 21,515 20.905 Miscellaneous . 1,262 1.119 Other e!ectric systems 59,445 58.601 5259.935 5228.075 Miscellaneous . 27,175 24 350

$1,020.313 $987.760 Gas customr.rs:

2, e n ;,

Electric customers: Residen'.al . 382.691 384.197

". m ca) Commercrai . 28,451 23 632 Resident <al . 1,197,060 1.187.318 Industrial 522 540 Commercial . 128.481 128.070 Other 2 2

'ndustnal 2.873 2.876 411.666 413.371 Cther . 2,257 2.235 1,330.671 1.320.499 Residential:

.e~ ;e Residential: Annual use per customer ' &

139.3 f 3 7.1 Annua! kw-hr. use cer customer 6,790 6 649 Ccst to customer :_ m- . m Cost to customer per kw-hr. 1.93c 3 S5c /: '

52.98 52 E6 Annual revenue cer customer . 3267.34 5256 23 Annual revenue per customer . 5414.43 5331 75 Maximurn cay gas sendout 637,556 6E0.974 C (' 1 J,< U_m 24

. i 1

I Officers Directors I I'

i

' John G. Ha ehl. Jr. James 8artiatt Lauman Martin eres cert arc Ch e+ E,ecutw CM.cer > g, w ; yeer:, Sy,acuse Ccrsonant Jcr-e v Sen:cr V ce Pns'cer t and l James Bartlett Gereral Coursen. $fracuse i Exec, ne V ce : es cent l

-l Thomas J.1,rosnan William J. Donfon '

Ccesu. tart Jcrmer'y V.ce Baldwin Maull Sencr V ce P es cent i p,es.ce-t ;esearm arc Cese>ccrent' em ar cus ccmaws New Ycm Jam *a J. Miller  ! Enwronmertai Vatters t Syracuse Sen'cr vice P es cem i John H. Terry Martha H ancock Northrup Edmund M. Davis acusew ie te-rer P os; cent C 'use.u.irm Semor V.ce rres ce-t. Genera! Ccursei Paarer +sccc( Lee egers r Hen ey &

9 i 2rc e_ecreta y pa Vemer:a: Mcsc tal Boarc. ayracuse

_ - ay. a*torreys-at , w dy a_ se a m Richard F. Torrey Sen cr dce P es. cert Frank P. Piskor Richard C. Clancy Edward W. Cuffy P estem St Lav> vce Ume s ty. Carten s ce P es. cert Aesearch anc Cna rman of tre aca c and Ch ef Exec Ae Esren~ema' A"a rs Chce . Var;ne Vic!ard Banas 'rc . a ca%

gccm av M c f Donald P.Dise l'ce estcert-E  ; neermg DonW C Riefler  ;

( ..a rman Scurces rc Uses cfr ,rcs i John J. Ehlinger f Edmund H. Fallon* Ccmmte t vergan ^. .ararti Trust Ccmcam '

j twecuhe Censu< tant. r, gway 'rc.. curcras,rg etNewvcm ccmme rat car ( New v er*

. Pce -es, cert-con,ee Peiatens I and marwet ng crgamcatten. Syracuse l' John M. Endries l

l Ne P'es cem a^c Ccr:rci:er (ewis A. Swyer ,

I Willia m C. Fra nklin John G. Haehl. Jr.

, < ce P es ce-t :urcras rg Pes cent arc C" et E3ecuMe C".cer

"' S ' U * " L '# O ^^C" arc Cc S*r, C7 C9 Ta ?ge - Cry 34 Mc . Mce s l 1 e ,a a - se j John M.Haynes I

/ Ce P es cent a-c T easu e-  !

l i John P. Honnestey Edwin F. Jaeckle John G. Wick i e F es cert-Va age- ert S,ste-s Ser:cr Pa- e aec<e P'e!scrmarr & %ger P esice-t arc Ch e+ Evecot .e C" cer a-c Sem.ces acc enat. ao Bu"a o Verc an:s msur3 ce Grc c pu a c  !

Eugene J. Morel l ce Pes ce-t-E c r<ee Ee . Ces vc ? sw Va' age ~ert i James F. Morrell ce % ce -Cc:c ate ma~ g Gerald K. Rhode i Board committees

, ce P?s ceN-3,5% ~ ec ect l Executive Committee h

!  : - e li 7 Y r a > ~v a-t ,

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Kenneth A. Tramutola

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Raymond Kolarz

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Richard H. Kukuk  ?

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As s:r* cr: r e' Committee on Corporate Public Policy M

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John W. Powers P am 3 : s c C r a r r. 'hkN ; t [ M- '

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/ 7 dyf~' [Y"* 4 Harold J. Bogan i E c v c "* 4 c^*

.; 3 37 g 3 7, Vagara Verawk ccs;tiori cacer.s reviewed cy Cirectors at

er'od;c meetmg cf Commcee on Cercorate i scac Pchcy Joseph F. Cleary ~

Finance Committee st9 c. a.rmanerar k p P sacr. ;ett. ccmurc H adcr* arc'

. 3 3 , . c ,, c

• r. ~ n e m , - r . ~ 3 ~m a_ r, y

eM IN3 r arcccx Ncr* ruc Fredertek C. McCall mG <m Ass 57! 3ec e 3 v-/.este " C: . s c^ E ;~u c

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v. L. J , d s.4  ;

Buildings near Lake Placid to house athletes for 1980 Winter Olympic Games *. , ce scene of one-of-a-kind energy research project by Niagara Mohawk. (See page 9 ins.de )

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                                                                                                                                                                                    .        i j ' ) ,)              N '- '

IIIAGARA MCHA'4K PC'4ER CCRPCRA"'ICII A:D SUBSDIARY CCMPA7IE3 STATEMET:' CF CC:ISCLI ATED EA?3I'!G3 (In "'heusands of Ecllars) Three :bnths ?selve Months Ended June 30, Ended June 30, 1G79 1970 1C79 197c Operating re tenues: Electric $286,3h5 $2h9,139 $1,C56,h20 $1,013,521 Gas 65,762 60,527 276.303 255,053 352,107 30G,cco 1,362,723 1,273,574 Cperating e:Genses: C;eration: Fuel for electric generatien 85,928 79,259 323,325 326,773 Electricity pu chased 37,Lh5 22,966 123,337 92,667 Gas purchased 37,683 32,163 171,lh2 156,c67 Cther operation expenses 50,6CO h3,950 193,0C2 172,689 Maintenance 22,35C 19,h26 33,971 83,195 Depreciation 20,959 19,957 S2,635 73,5k2 Feder'_1 and C m dian inecne taxes 6,635 5,739 3h,5Ch 23,063 Other taxe: 39,3h3 38,160 156,2k9 153,250 301,993 261,cQ] 1.l?3,c65 1,057,Cc6 C;eratirg incene 50,llh 47,970 lac,C5c 15e,5C0 Cther incene (net): Allcun:e for other t.:nds 2:ed durir4 ccnct n eticn 9,h59 6,352 3h,296 25,171 Feda-a' 4-acne ta ces h,lh5 1,639 13,007 6,261 Cther itens (net) h7 110 1,702 (638) 13,ccl c 651 54,Cc5 30.514 In:cne before interest charges c3,795 Sc,c27 2'3.153 217,322 Interest charges: Interest en lcng-tern debt 25,923 2k,956 101,530 96,303 Cther interest 613 193 2,035 2,703 Allcennee fer bc rcwd funds used d&_ng ccnctructi;n (h,62h) (h,Cha) /17,226) (ik,6C6) m. c ,,,, ,, c ., ,,eO- c. ,,u a , h, ,, .", e *. .4--. ~- - a h', o~4 7; :~~ s ,,ci ': A. , ~u c'h '70, Cc, 01tidends en preferred stcck 6,901 7,2k7 2 0, , h27 27.03k Balance anilable fcr ::=rn stock 3 3a,0c7 3 2L200 S 126,037 3 1C5,255 Average nunber of chares cf :=cn stock cutstandirq du-i 4 the - ericd (in thcusands) 4. 2 , T. a h - A., ' O. c.

                                                                                .:   ,c ,
                                                                                       ~-                :~., e 2ar.i gs per average s'ao-*      #

ac ~ Cn ste d 30.56 30.h9 32.C~ 31.Sh ""ne abcve infor ation is not given in :cnnection vith an't 311e of, er effer ;c cel.' or buy, any steck or security. n r l ' (m ,

fil ACARA l'0HA'lK POWER CORPORATIO;l AtlD SUBSIDIARY COMPA!!IES C0iiSOLIDATED BALAf;CE SHEET

        -                                                   (U;AUnITFn)

At June 30, 1979 1978 (In inousands of Dollars) ASSETS Utility plant, at original cost: Electric.......................................... $2,747,237 $2,676,171 iluclear fuel...... .. ............................ 202,769 194,4S0 Gas............ .................................. 355,103 345,209 Cc: o n . . . . ....... ................. ...... CD,208 57,9 3 Cons truc tion work in p rogress . . . . . . . . . . . . . . . . . . . . . 673,143 506,503 Total........................................ 4,039,510 3,780,253 Less-accumulated depreciation and amortization. . . . 1,053,573 986,262 lie t u ti l i ty pl a n t . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~2,930,937 2,794,006-O t h e r p ro p e r ty an d i n ve s tmen t s . . . . . . . . . . . . . . . . . . . . . . 14,859 15,240 Current assets: Cash..... ........................................ 4,242 7 ,81 2 Tempora ry cash i nves tmen ts . . . . . . . . . . . . . .. ... 6,200 36,931 133,982 112,857 Accounts receivable (trade)....................... Less-allowance for doubtful accounts............ (2,000) (1,600) In come ta x re fu nd cl a ims . . . . . . . . . . . . . . . . . . . . . . . . .

                                                                                                       -                       8,027 itaterial and supplies, at average cost:

Coal and oil for production of electrici ty. . . . . . 46,674 64,539 32,369 28,535 0ther................................. ......... Prepaid real estate taxes......................... 23,337 23,395 2,767 2,794 Other prepayments........ .............. .......

                     ~

252,62T. 283,450 Deferred debits: Unamortized debt expense..... . ......... ..... .. 13,455 13,836 Deferred recoverable energy costs.. .. .. . ...... 32,102 11,533 5,fla 3,956 Other.... ....................................... 51,i71 29,391i T G J9.588 3 D 22,036-

                                                                                              = =     - -

( ) Denotes Deduction i

flI AGARA i'0 HAWK POWER CORPORATIO:l AtlD SUBSIDIARY COMPA:ilES C0:lSOLIDATED BALAtlCE SHEET (Ui1 AUDITED) At June 30, 1979 1978 (In Thousands of Dollars) LIABILITIES Capitalization: Common stockholders' equity: Common stock - $1 par value; authorized 85,000,000 shares, issued 63,287,744 and 61,360,036 shares, respectively...... ...... . $ 63,288 $ 61,360 P r en i tr.1 o n c a p i t a l s t o c k . . . . . . . . . . . . . . . . . . . . . . . . 661,145 636,033 Capital stock expense........................... (10,780) (8 ,51 2) Retained earnings............................... 411,419 372,138 1,125,072 ~l,061,069 Cumulative preferred stock - $100 par value; authorized 3,400,000 shares; issued 3,046,000 and 3,364,000 shares, respectively (includes sinking fund requirements).............. ....... 300,800 33a,600 Cumulative preferred stock - $25 par value; authorized 9,600,000 sSares; issued 2,800,c00 ...................................... 70,00D 70,000 Cumulative preference stock - $25 par value; authorized 4,000,000 shares; issued 1,350,000 shares and none , respectively. . . . . . . . . . . . . . . . . . 34,000 - To tal s tockholders ' equi ty. . . . . . . . ......... 1,529,872 1,.;65,669 Long-tern debt................ ................... 1,390,526 1,391,417 To tal ca pi ta li za ti on . . . . . . . . . . . . . . . . ...... 2,920,39B 2,857,036 Current liabilities: Short-term debt.................. ..... .......... 35,125 - Long-term debt due within one year..... .. ..... 50,450 9,375 Sinking fund requirements on preferred stock.. ... 3,800 1,E00 A c c o u n t s p aya b l e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,570 59,376 Cu s tome r s ' d ep o si ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,839 5,001 Accrued taxes...... ......... ............ .. ... 41,785 36,747 Accrued interest.. ... ............... .. ...... 29,227 28,407 Accrued vacation pay.. ........................... 13,818 12,104 Other . . .. ...... .... . ......... ... ........ 5.E38 11,312 271,152 16a,622 Deferred credits: Inco:re tax refunds .................. .. . . .... 21,605 19,870 Other.. ......... ...... . . .. ... .. .. .. 11,584 9,763 33 W J 29.6M Accumulate:i deferred federal incom 70,740 o.u . .. .. ... ... . . .. . 74.849 53,299,55J $3.i22.CSE ( ) Denotes Daduction b3 0 .

(3) NIACARA M0 HAWK POWER CORPORATION 1979 Internal Cash Flow Projection for Nina Mile Nc. 1 Nuclear Power Station (Thousands of Dollars) 1978 1979 (Actual) (Projected) Net Income Af ter Taxes $141,162 $154,440 Less: Dividends Paid 109,921 120,607 Retained Earnings 31,241 33,833 Adjustments: Depreciation and Amortization 107,790 100,151 Deferred Income Taxes and Investment Tax Credits 7,955 11,418 Allowance for Funds Used During Construction (45,001) (58,179) Total Adjustments 70,744 53,390 Internal Cash Flow S101,985 S 87,223 Average Quarterly Cash Flow $ 25,496 S 21,806 Percentage Ownership in All Operatin; Nuclear Units ';ine Mile No. 1 - 1007, Maximum Total Contingent Liability 413,000 NOTE: Previously, these projections were exhibitet. utilizing a Scurces and Uses of Funds Statement where allowance for funds used during construction t' AFC ) was included as both a source and a use of funds. This cash flow projection has been prepared follcwing the standardized format, and excluding A FC, as is prescribed in the September 1978 NRC Regulatory Guide (9.4). c ' ~J L ' '~

   ~;10/'O                                                                      's

(O A narrative statement indicating which capital expenditures (if any) would be curtailed to ensure that retrospective premiums up to $10 m'.llion would be availaale for pavment. It is Niagara Mohawk's view that the curt ailment of capital expenditures to ensu re payment of possible retrospective premiums of up t o $10 million would not be a material probler, as this amount represents only about 3.8^ of current ly scheduled const ruc-tion expenditures, net of Allowance for Funds I' sed During Construction (AFC), for the year 1979. DATE: .Tu l y 27, 1979 CERTIFIED:

                                              ';I AGARA MOIIA'n'E PEiER CORPORATION
-                                                          ~   <   , . .

_ _ u s. , John . I!aynes

                                              \'i c e President and Treasurer s.

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