ML20053C565

Annual Financial Rept 1981

ML20053C565
Person / Time
Site:	Nine Mile Point
Issue date:	02/18/1982
From:	Donlon W, Haehl J NIAGARA MOHAWK POWER CORP.
To:
Shared Package
ML17053D166	List: ML17053D165 ML20053C565
References
NUDOCS 8206020324
Download: ML20053C565 (39)

Text

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Contents Highlights of1981 1

To our stockholders 1981 1980

% Change 3

Markets Total operating revenues

$2,150,718,000 $1,777,115,000 21 5 Construction income available for common stockholders $ 186,358,000 $ 133,201,000 40 7

Froductivity Earnings per common share

$2.35

$1.87 26 Dividends per common share

$1.61

$1.50 7

10 Research Common shares outstanding (average) 79,204,000 71,257,000 11 12 Consumer relations 14 people Utility plant (gross)

$4,985,315,000 $4,563,309,000 9

Gross additions to utility plant

$ 457,415,000 $ 378,503,000 21 16 Stockholder matters 16 Management's analysis Kilowatt-hour sales 32,890,000,000 32,588,000,000 1

21 Report of management Electric customers at end of year 1,361,000 1,360,000 and accountants Electric peak load (kilowatts) 5,616,000 5,543,000 1

22 Financial statements Natural gas sales (dekatherms) 109,758,000 101,321,000 8

35 Statistics Gas customers at end of year 428,000 423,000 1

37 Of ficers, directors Maximum day gas sendout (dekatherms) 824,777 740,594 11 37 investor nutes I

COVER THE 1981 REVENUE DOLLAR AND WHERE IT WENT Radiant sunrise finds Niagara Mohawk transmission structures standing like sentinels in morn-ing mist. These 345.000-volt car-

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J terrain from Edic Substation to p'

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New Scotland and represent only a small segment of our far-32< co== rc'aicusto- '$

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l 11g [nCome and other taxes Phorody Comehus G Moyn#han l q' ;j m indestnal custome,s lM] 7c oividends to stockholders

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Our service area To our stockholders:

Niagara Alohaw k Power Corp., one of the We are pleased to report a 26 percent earn-nation's major investor-owned utilities, ings increase to $2.35 per share of common

' has the largest and most diverse service stock in 1981, compared with relatively de-

. territory in New York State. A massive pressed earnings of 51.87 per share at the electric system extending from lake lirie close of 1980.

to New lingland's borders, to Canada and This substantial improvement indicates the

! Pennsylvania, serves the energy needs of Corporation's management can and will meet 1,361,000 customers. A natural gas sys-the needs and interests of both consumers tem serves 428,000 customers in cen.

and investors in today's complex times. A key tral, castern and northern New York, to this effort is the continuing strict manage-nearly all within the Company's electric ment of costs and expenses, coupled with a service area. Two Canadian subsidiaries, developing understanding of the Company's St.1.awrence Power Co. and Canadian problems by regulators.

Niagara Power Company, I.td., provide in 1981, the Board of Directors declared an electric service to parts of southern On-eight percent increase in our common stock tario. Other subsidiaries are flydra Co dividend, bringing the indicated annual div-Ilinterprises, Inc., N Al Uranium, Inc. and idend up to 51.64 from the previous 51.52.

Niagara Alohawk 1:inance, N.V. Our cor.

Dividends paid have increased every year for porate headquarters are 300 lirie the past ten years, demonstrating our continu-lloulevard West, Syracuse, NY 13202.

ing efforts to provide our stockholders a proper return on their investment.

ELECTRIC SERVICE AREA Assessing sales growth for Niagara Alohawk, our natural gas business is most promising. In 1981, industrial gas sales climbed by an im-pressive 24 percent over 1980, with many customers converting from more expensive oil. Our wholesale supplier assures us of more than enough of the fuel to meet demands well f

into the future, the result of new estimates of I-f available gas from varied sources. In Fght of pf h d

encouraging prospects-and with virtually all i

a vonn state previous restrictions on gas usage now lifted-we are examining our service area for both customarv and non traditiona' market f

growth opportunities.

Although long-range forecasts for electric BAS SERVICE AREA

-1 load growth continue to remain at I to 1.5 T """* 5 percent annually, industrial redevelopment

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8 stirrings were evidenced again in 1981 by L

T plans for a number of significant production, 6

milling and manufacturing expansions an-3

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""**y nounced or initiated by industries in our ser-f e'

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vice territory.

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Another positive note for Niagara Alohawk L

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,,,,,,,, j came late in 1981 when the Public Service

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Commission Administrative I.awJudge in our s

l current rate case recommended electric and gas increases totaling $231 million annually, y

1

or about 85 percent of the total 5273 million strategic p an for guiding our management of originally re(piested. Items includ:d in the the Company's hiture.

Judge's recommendation were the raising of

'lhe year's financing totaled 5316 million, the Company's rate of return on common with proceeds applied to construction and to equity, the initiation of upgraded cash-flow refunding $151 million of maturing securities.

.S considerations and more realistic deprecia-Total financing is estimated at approximately Y

tion allowances. The recommendation also

$300 millior in 1982.

provides for incorporation of a separate deci-As noted later in this report, the Corpora-(..

sion by the Commission in another proceed-tion experienced new levels of progress in g

ing that would enable the Company to re-energy conservation and environmental af-cmcr its investment in the Sterling Nuclear fairs..\\lany of our ongoing, richly diverse re-5ta' ion, for which planning ceased in 1980 search ventures are now advancing toward w hen the 5 tate Siting floard withdrew the actual demonstration and commercial appli-1 permit for construction. The Sterling cost re-cation, including a number of projects dedi-covery will extend over a 36 month period cated to air, land and water quality.

starting with the general rate adjustment.

Important to consumers. Niagara.\\lohawk's scheduled for a final decision in.\\ larch 1982.

residential electric rates are still lowest of all John G. Haehl, Jr.

As this report approached press time, the principal New York State utilitics and below Public Service Commissioners reached a con-the national average. Sening our customers sensus in support of completing Nine.\\ lite dependable, reasonably priced electricity and Point Nuclear 1 nit No. 2, under construction gas while raising carnings to more reasonable, on 1.ake Ontario. Following thousands of equitable levels poses a constant challenge-pages of expert testimony and arguments pre-this we welcome.

sented at public hearings. the Commissioners' All of us at Niagara.\\1ohawk pledge to make action upheld their Staft's recommendation 1982 a more successful year. As always, we and the co-tenants' position that completion are deeply grateful for the loyalty and support l

5 of the unit is warranted. The action is a major of our stockholders and the thousands of step toward concluding the prolonged reg-employees whose devotion to Niagara ulatory proceeding that has kept a cloud of

.\\1ohawk results in service to consumers of uncertainty over the project. Cited in New which we are justitiably proud.

York State's.\\ laster linergy Plan, ll nit No. 2 will be a vital addition to our varied electric s

generation mix, moving us closer to the goal of independence from costly OPEC oil.

John G. Haehl. Jr.

Creativity and innovation continued to Chairrnan of the Board and Chief Executive Officer William J. Donlon prove fruitful in etforts to improve the Corpo-ration's strength and productivity. Ilydra Co j /_ -

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Enterprises. Inc., a wholly owned unregulated g 1 j X) -

subsidiary, was formed as a pioneering diver-(/ William J. Donlon

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President silication venture to engage in co generation and small hydro projects; our oil fired Albany February 18,1982 5 team Station was modified to burn either oil or natural gas; geographic regionalization of our service area was initiated to streamline ticld operations; additional sophisticated new computer systems were installed; and, for the first time, leveraged preferred stock and over-seas Eurobonds were sold to help keep financ-ing costs down. Further, while planning al-ways has been a very pro.uinent activity in our business, additional emphasis has resulted in a highly significant achievement-the de-velopment of a comprehensive and integrated 8

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j vast upstate New York service area was over-l shadow ed by clouds of economic recession in 19Hl. Ilow eg er, during the year some promis-

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ing signs of entirely new or enlarged indus-E

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.m trial and commercial energy markets appear-ed that may well brighten our long range

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hori/ons.

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. r ily 1982, growth plans were announced by a broad spectrum of manufacturing and business firms, with at least 70 plant facilities or expansion projects proposed or under 4

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construction on our lines in total, these de-Aluminum for produc-n-,.,.

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velopments amount to an estimated 5270 mil-tion of beverage cans

• p7 lion in capital ot'llay and will provide speeds through ma-5

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1. Ag f '.

employment and. bs for some 2,700.

chinery at Ball Metal J:r ' g. []

y' - wr Cig largeted for our service territory m the early Saratoga Springs one i

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Container plant in

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1980s alone are: an 580 million brass mill, a of Niagara Mohawk's s

l SM-million mobile radio equipment plant, larger industrial cus-wh8kki:

529 million liquid oxygen and nitrogen pro,

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to r to o nlinein

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duction plant, 511-million fo 'd processing

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,p Ball produces three mil-

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!'r; facility, 58-million offset printing plant, 59-lion cans per year, re-a M i' million electric motor factory, 59 million quiring 124,000 MCF of

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9 small appliance production plant, $5 million natural gas and 18 mil-p Q 'I IIII technical center, 53 million research center li n KWH of electricity.

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and a 55-million foundrv.

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Growth and vitality are H,

g iniiiaicd a program ror ultimate redistributio" up BuNo's"Oa"in Aloreover, at the start of 1982 the Company k

of 111,250 kilowatts of so-called " replace-Street, where concrete

.j ment power"in the Niagara Frontier available rail beds have just been B~q to Niagara Alohawk from the Niagara Project emplaced for Niagara I'

of the N.Y. State Pow er Authoritv. lixtending Frontier Transportation over the next seven years, this energy will A", thor y Y g eg, nd Mai bring about the expansion of production Place Mall, with M & T g ammmmmme, i.

T summune facilities by !!. I. du Pont de Nemours & Co.,

Bank Plaza at right.

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[I Carborundum Corp. and 5KW Alloys, all in Niagara Falls. Construction expenditures by

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f these firms alone are estimated at $155 mil-

--a lion and will require some 2,000 construction

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workers and produce 200 permanent jobs.

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Whatever energy trends the future may i

bring. Niagara Alohawk must have and will

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have capacity to respond effectively to any t.

electrical demands. The timing, planning and I

construction of major generation and trans-J g.. f

'g ry.

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miwion projects, discussed in detail on pages 3

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Crew installs pole to product. While natural gas may serve as hoiler fuel initially (depending upon the location of' nese c g to Mines Corp. garnet op.

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the participating industry and prevailing fuel cration in eastern econonucs) coal, oil or wood may also be!

Adirondacks. Mine is used in the co-generation. Ilydra Co, not sub-largest producer in U.S.

f ject to regulation by the Public Service Com-

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[i nuwson, as expected to produce financiai re-et alued as abra iv mineral.

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turns for Niagara Stohawk while helping to 1/.

meet the nation's objective of independence I

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from imported oil. Its headquarters, estab-lished late in 1981, are One IJncoln Center,.

Suite 1225, Syracuse, NY 13202.

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Impressive overall sales gains of 3.3 per,

l cent over 1980 highlighted the year for Niag-(g" g..,

ara Sfohawk's natural gas system.

l Applications for new gas attachments were received from more than 4,700 residential, 725 commercial and industrial and 10 major g

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industrial customers. Up to 4 million 31CF N ' ; ;,,,

(thousands of cubic feet) of gas will be used i

annually by new General Electric Company.

I upstate manufacturing facilities and Albany Stall will be served an additional 2.3 million-31CF. In addition, expansions by copper and brassware, brewing, food processing, paper,'

abrasive products and building materials firms will consume an anticipated 4.6 million 51CF

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per year.

S through 7, are based upon this overriding Our construction budget for gas systeml responsibility, keyed to our best growth improvements and facilities in 1982 totals' information.

some 519.9 million, primarily for installation Our level load-growth forecast, however, of mains and service laterals. Despite almost I continues to allow for the deferral-most inevitable cost increases seen in the wake of likely until the 1990s-of a proposed threatened accelerated federal deregulation, H50,000-kilowatt coal-fired unit on I ake Erie continuing sales growth and an encouraging south of Dunkirk. The project site was cer-gas supply picture make this an ideal, favora-tified by the N.Y. State Hoard on Electric Gen-i>ly priced fuel when matched with oil.E cration Siting and the Environment following extensive proceedings and public hearings.

1 During the year, in an innovative move to diversify into familiar fields of established expertise, Ilydra Co Enterprises, Inc., a wholly owned subsidiary, was formed by Niagara Alohawk. Ilydra Co will specialize in marketing and constructing co generation steam clectric energy plants for industries as j

well as developing small hydroelectric projects.

I Co generation entails the production of steam for industries, with electricity as a by-r i

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o importance of timely completion of the unit, based on critical economic and financi.il con-siderations and other key factors.

Niagara Mohawk and the unit's four other co-tenant utilities estimate its cost at $3.7 bil-lion, including construction financing. The plant is expected to save up to 30,000 barrels of import (d oil daily when in service, or about 5900,000 daily at current oil prices.

Nuclear fuct to power the project is signifi-cantly lower in cost than fossil fuels.

The Company, which serves as agent for construction and operation of the unit, is 41 ated continuously throughout the remainder Fiberglass pipe receives percent owner. The other participants in its of the year at almost full capacity, breaking its finishing touches be-f reinstallation at Ben-construction and output are 1.ong Island own generation records.

"d I.ighting Co.,18%; New York State Electric &

t on a n River Gas Corp.,18%; Rochester Gas and Electric An extensive emergency exercise, with Replacement of 1%-

Corp., IM; and Central Iludson Gas & Elec-hundreds taking part, was conducted in Sep-mile wooden pipeline, tric Coqt,9%

tember to test the ability of Niagara Mohawk, in service since 1913, and other refinements the State of New York and Oswego County to d

Iaite in 1981, a major construction mile-respond to a hypothetical radiation-release

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p er capa i y stone Os achieved on Unit 2 as the reactor accident at Nine Mile Point. The realistic, percent.

primary containment concrete structure was day-long drill, a post-Three Mile Island re-finished. Present employment at the site is quirement by the ' Nuclear Regulatory Com-3,100 and will grow to a peak of 3,600 as the mission, was the first of its kind in New York project approaches completion.

State. For its leading role in the effort, Niagara Adjacent to Unit 2, Niagara Mohawk's Mohawk received positive appraisals from pioneer nuclear Unit No. I achieved more both the NRC and the Federal Emergency than 12 years of commercial service in 1981.

Management Agency, coordinator of the Upstate New York's first nuclear develop-overall cycrcise.

ment, the 610,000 kilowatt power prodi.cer was shut down temporarily in the spring for Efforts to expand and upgrade water-routine refueling and mairtenance. In addi-power opportunities u berever feasible in tion, a number of modifications were per-the service area continued through 1981.

formed to improve reliability and to m :et Complete reconstruction of the Granb3 new U.S. Nuclear Regulatory Commission Ilydro Station on the Oswego River progres-(NRC) requirements. The refueling included sed on schedule and by year-end a new power replacement of 200 of the 500 uranium fuel house was in place, with installation of two News media representa-assemblics in the reactor core, enough to 5,000. kilowatt generating units set for earlv tives cover briefing by continue plant operation until March 1983 1982. Formerly rated at only 4,600 kilowatt $,

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itno lea me en-Operations resumed in July and l' nit I oper-Granby is expected to commence commer-cy drill, the first su ch cial service in 1983 at mere than dot.ble its exercise in the state ELECTRICITY GENERATED AND PURCHASED former capacity. Old hydro units replaced in under new federal regu-I tions.Old Naval Militia BY TYPE OF FUEL,1981 this project date back as far as 1884.

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placement of m. take structures and a new temporary public infor-two-mile long tiberglass feedwater pipeline at mation nerve center and 1***$gCES the 21,000-kilowatt llennetts liridge Station press headquarters dur-C3 11% NUCLE AR on the Salmon River These substantial mod-ing the realistic, day-ifications were accomplished working in f[gg*a 9

g ie GAS especially close cooperation with the State graded Niagara 1)cpartment of Environmental Conservation, Mohawk's performance -

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' 19% OIL Oswego County 1.ake Ontario \\ ports Fishery favorably.

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1 Adsisory lloard and other organizations with a protective interest in the Salmon itives's na-tionally renowned trout and salmon re-sources. The changes yield greater water dis-charge capacity, enabling llennetts liridge to generate more kilowatt hours than previous-ly. In another hy dro modification, a section of an impoundment dam serving water storage needs of the 5.150-kilowatt !!phratah flydro c 24 e x

Station near Gloversville was replaced, up.

grading plant output and etliciency. These projects are among many in a comprehensive, 4

15-year hydro espansion program by Niagara 1

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1. inking generation sources with the con-sumer, the Company's power transmission and diuribution system is continually under-going refinements and additions. The pro-

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iccted in service date for a new 3d,000 volt line from 1.afay etic, south of Syracuse, to Oak-dale, near Ilinghamton, is September 1982.

This 65 mile intertie is a joint effort with the neighboring New York State I.lectric and Gas Corp. Also, preliminary licld work will begin in spring 1982 on a circuit to operate at 365,000 volts between Volney, south of Nine

.\\lile I oint, and.\\larcy, near l'tica, w hile sev-ew e ran "d

n n,e nst cral transmission switchyards and other linc3 prodHCimly tion on Oswego River are proposed or under construction to main-shows just-completed tain power reliability and supply to the many powerhouse substruc-communities the Company serves. A trans-A (luest for improving productivity and effi-ture, lef t, and intake and mission hallmark in the 1980s will be a com-ciency prevails in all Niagara Moh'awk plan-f ay co P e

W plex major linergy Management System (de-ning and work assignments. Many productiv-1983 startup at 10,000 scribed on page H) envisioned by Niagara ity strides were achieved in 1981, yielding kilowatts, Granby is

, MohawkE cost benefits and resource-use improvements, among first of projects enhancing dependability and creating man.

taking shape !n Niagara F

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Mohawk's extensive h

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major computer based systems through the 1990s on upper New j

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year. A highlight was installation of 500 ter-York State waterways.

minals linking strategic customer service 10-cations across Niagara Mohawk territory with

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a central customer data computer in Syracuse.

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'="4 Coupled with modernization of our tele-phone network, this advanced system is pro-viding upgraded technical capability to re-spond swiftly to individual bill and service in-(luiries. Another computer project will refine f

estimating, planning, scheduling and con-struction of energy projects, while the third system will help simplify corporate account-(

ing, financing and regulatory-related tasks.

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....L Construction of a suaster contrt I center, sout 'o of our largc dual furt gas ( ustomers.

t<> be the hub o' an estt usn e ss stem wide md ill form the heart of a new ( as l o.nl

'..inagement ( (.I \\1 ) program begun in 1981 1ncrgs \\l a n. ige m e n t ss stem ( l \\ts L is es

> i N1 ( o n t ri ils gas usage bs these customers pc( ted to hcgm m late 198.' m sy r.u usc In iirporating the lates; state of she art in requirmg them thriiugh a rcunhursement

(

tn hnologs. I.\\1s is now n cil mio the &. sign pl.m to swit( h temporarils triim gas to their st a ge it will further strengthen and nuider sn otulars fuel at periods of lugh demand on Nugara \\b > haw k's m.issn e t rar' a ussu 'n ttic os erall gas u stem. norm.ilh durmg scs cre nur t old prils lh rede(ing pc sk (b m.nid. not and distributo m sy stems sin proside iorc n onoma pow er deln crs to ( ustomers lhe onk is the i ost of ee bcht dow n and the dcIn ri) m un t.u ned. but the new niaster (imirii ( cnter will bc (omputer rehahaits i, linked to smaller regional ( ontroi ( enters m need los..d ht n inal tu' u r,c gas t.a ihncs. w ith Buttalo. M r.n usc. Alban) ain' Northern % w their assi n uted ( osts

. n.monved N ugara Tork and tii generatmg stations nul substa

\\bihaw k.md.ill of our s onsun crs henclit nons throughout the scrs a c teri airs initul f rom t ms ( ost citu tn c. prodin in ic oriented start up and testing is antic ipated in the mid

( on( cpt the unh program of its kind (on-1980s, w it h f ull st alc oper.nion taigeted f or din ted in a New T ork state utihts 199I siime N HI Icnuilt it riililial units ( sen si >r des a es tii rn en c md t r.msnnt data on Fuel conversion to natural gas.it our Al-tinuhinins at the s. unius f.k ilit ics ms i>ls ed )

hans stcam s t.i t h m w.is ac( t >niplished b) will be mstalled in iW I as a part of Ihis f ar Nin emhet. equippmg ihe plant with dual fuel inu cpf c.tp.ibilit'. lii su it( h tjtnckly h.R k t(i (nl u hen irat hing utilits

(

( inuj'uters alu s w ill ht hnked tti rena ste necew. irs during w inter peritids

<>t h:Rh de-telenn nntiirmg mstnanents at the f.a ihtics of m.md hs our gas customers The PM ap-View east of Oswego Harbor shows steam stahon f uel storage tank being sheathed with in-

===-s og g alation to prevent heat est aping f rom od stored gg gfr within This energy con-e u!

servation measure re-k I ??

t dut es costs by some $3 h

Lj t a nullion annually saving p g...

- gp more than 100 000 bar

- % ?y.-

y w#

rels of imported Oil whde also improving

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i ombustion efficiency of power plant hoders M*MW f

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I (CNG operation is re-tW fueled at one of two Niagara M hawk CNG f dhng s' aons Eighty vehicles in our motor fleet now operate on either CNG or gasohne whde further conver-

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sions are under way

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s NewN nstaned p.nes prou d a proposal in the ( orporatnin to rc

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%" Hic 'l i nullo in in s.n ings ( onsidering ( i nt the phint to bur n either p

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. gg niis pern >d irom t he un ditit a:n m for a net

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of gas scrsus unported oil arc mpc( ted ni nuinon in saungs

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1. N -a redn( non or cncrg; c osis io ( nasunwrs or L,_

a wm s"nw 'i 4 s nun""i *xuiai"o aner"s ai' t" e,i. < nt-pas

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N4 niend the xn suppk einiract hes and Juk ydf f

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I(m2 also u dl be siinght

,tn 4r 1,f ( osts to 1 on

,su mers ot some 513 5 y' ~

" 9i lhc ( orpora t n in's Priidut t n 't s Plaiunng mdhcn

g ys I)cpart mt nt (i >nt murs tii broaden it s respon-d}["

sihihties 3.pph m mdustrial engineering and Mod Po!e lowered into i T N kn n >nd e m ( - ik 1)( p nn( nt at e a

s p r r it d u "I

• • "'" Id"I de, u ans-,smn ncin m( ream cihoeno and ouinot i>uang f les redu ing labor po ihe scar priidut i n it s pl.m ne rs u cre ( alled and matenai < osts r,or upon ti> st rc.un h nc es crs d.ty admunstrat n in

' " ^ ' "

M' 'P "'""'"' ^" ' " ' " " " " '"

t t r r ted s R cs w ith pimith c results portion of pole is cut off fr and the remain.nq sec -

~

tien n uner ed ento Practical technical know-how, ( ond aned I

isturdv i % re e smeve w ith ( reat n e in hiiuse engmccrmg 1.ilent u di i" "

t at i r pu ted

.n mgs i st si im e s4 nullu m ist iin

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~f pi er tcJ i al s c. irk heside hi n nuny pl. int per h irm. int c in an u nusu.il c orrns t imwrs a tiim ( h.thcoge at ( 1su rgii st e.un st.it u m Ihr 9

plant's five fuel storage tanks, with capacities up to 16 million gallons of heavy residual oil, Research were completely covered with foam-type in-sulation and aluminum paneling in 1981.

Costing slightly over $1 million, the project has helped to case operation of plant boilers 1982 will be a threshold year in Niagara by stabilizing fuel temperatures in the huge 51ohawk energy research programming as tank structures, openly exposed to bitter cold select new technologies advance from and gale force winds off 1.ake Ontario. Pay-laboratory testing to actual field demonstra-back (in terms of energy saved) for the total tion, where their commercial potential will insulation job costs required only four he tried.

months. This measure was unique because of the size of the tanks.

At tlic R&D forefront is an experimental A further productivity and cost-cutting in-flue gas desulfurization (1:GD) plant novation entailed conversion of 80 vehicles in scheduled to begin prototype operation in Niagara Slohawk's motor llect to operate on spring 1982 at the company's llunticy Steam either compressed natural gas (CNG) or Station at Tonawanda, near iluthdo.

gasoline. Iirst initiated on a trial basis in 1980, This jointly sponsored five-year experi-this effort has provided annual savings of ment, costing up to $55 million, with Niagara more than 63,500 gallons of conventional Stohawk's sh c at 55 million as part of its motor fuel. As an environmental measure, research and development programs, involves I

CNG also lowers emission levels. The Com-equipment suppliers, New York State utilities pany plans major expansion of CNG through-and government agencies. It is designed to out its fleet.E demonstrate a technology to enable large power generating plants to burn low-cost, high-sulfur Eastern coal to produce electricity virtually without adverse air, land or water

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tai benefitu Famuy en;oys c omf orts unpacts inint initahl) sulf ur < >\\ide cinissnins of home in Niagara I he innis signita ant in produt t is pure sulfur.

Mohawk resean h prop a marketable clcnient in sharpls grim ing de et t 5eeming pf al tir diin-

"""E

'" ' ' nit ra st u ith trouhicsome u aste formatmn and data on slurrs In pr< >du( t s resultmg f rinn idher fluc passne solar f ac ilities gas desulf uri/.uion pri n esses lioth ( onsum now m use in our ser vice terntorv TweNe ers.md the em irimment w ill ultimatris hen upstate New York dit Wim ib n h N twl t i+ mddmn homes are bemy mom-Me e toredIli dt'ter mine h tiw

- 1,.,g at s allt.ips t it I lis cIlth'as <if s

the sun s energy b part < >l < >u r ( < >ntinumg solar rcx arc h coupled with oct tru ity bf -

p ri ig r.i m s a prat tu al corrgs f rom Ihe sun meets resu1ential and studs usmu I _' noidern hi>mes in < >ur scrs a c 3

utmtv needs J

WW g

area 4.is nuti.ited in sprmy 19M 1 W ith energs

( < >nscrs at n in and utih/at n in as a gi >al s arn ius With help tit mic ' r i g

s,,jJ r and Ilicril1Jl e nt'l p stiiram ss st('nis li1 sc ope tm hnn nin

,t-p the partu ipating dw cllmgs are under es alua spot es hair iixe finer In m un%<is ing ( < >mputers m.igncin t ape rc optu s m resear < n communnatmos dem

( rding.md rc on o r d.n a at quisa n in Ihe onstraten in Scacuse iinc s c.a studs is expn tcd t< > s irld hights 4.

E..n h tiher < ar r 6es same capaaty ter stm e mes

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pr.a tu al data < >t s alur t<> huilden.ind ( <in i

t r.a tiirs rcal csi.u c firnis and Ituding instuu sdges as more than 200

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i t o ins in addunin findings in ?fu. cnt u re are copper wires in < ons en-tiona! triephcine ( 1rCuit C \\PCL ICll

IC IIM IIII Ill I' 'llM f *'llML p! I"III"g h

< >t pim er generat mg.md dela crs t.u iht u s tii t lic. ids aillayc < it l }lc ( t illlp.llis.lfit! i t s ( t ill 11

sumers. A thermal storage research project New heat pump in-stalled at Albany area has been in progress at the site of the former Consumer relat10nS home as part of our Olympic Village (now a correctional facilit) )

P

't.ake Placid and energy conservation at a

ea MW studies with commerical and institutional ap-reside,tial customer plications are planned at a modern town hall Another ) car of positive programs dedicated and cc nsumer relations in Oswego County and a llaliston Spa school.

to helping all categories of customers was re.

repres entative. Program corded in 1981 by the Consumer Itclations is latest in company c P " " 'P A near-future alternate-energy prospect, I)cpartment.

u tconse e under extensive R&l) for ycars by Niagara energy and cut heating Mohaw k with other utility participants, is the A Ilonne Insulation and Energy Conserva-bills. More than 700 cus-low-temperature fuel cell. Albany Steam Sta-tion Prograin was introduced as required by tomers vith oilfurnaces tion has been selected as host site for an the Public Service Commission in 1981, mod, equippei their homes th e P

11,000 kilowatt fuel cell demonstration unit ifying our former llome Energy Audits in ef-8 e g eat targeted for operation in the mid-1980s. A feet since the 19~0s. Aimed at residential costs by up to S0 '.

o smaller fuel cell of similar design was installed consumers with up to four-family homes, the in 1981 at a generating station of Consoli-broadened program features thorough, free-dated Edison Co. of New York, Inc. These de-of charge inspections by trained specialists of Customer service tele-5 ices, first employed in the l'.S. manned space insulation and overall weather-tightness as phone representative P d program, are designed to supplement conven-well as furnate. boiler and water-heating

' jng one o u

r ed (

tional power production methods and oper-equipment. Itecommendations follow the in-computer terminals in-ate principally on hydrogen as a fuel. Similar spections, with estimates of costs for and sav-stalled in 1981. This al-in appearance to large batteries but requiring ings resulting from the various energy con-lows forinstant retrieval i

no charging fuel cells function without caus-servation improvements. Consumers also re.

of individual billing in-9 ing pollution, noise or vibration.

ceive a list of approved contractors in their e

Other research activities, including fossil, area and low-cost loans with liberal repay-history and electronic nuclear, load management and supply, con-ment terms are made available through the

" snapshot" of custom-servation, power delivery and environmental program.

er's most current bill.

i study projects, will amount to some SIO6M l

million mer the next live years. Many, such as g

p' w +-

our widely recogni/cd liber opticshatellite U

3 Jg communication It&I), expanded in 1981, are i

independent "in-house" assignments. The gl f

liber opticshatellite experiment, the first-y ever by an electric utility, could prme ben-f eficial in reducing the Company's operating expenses, if successful.

We also are participating in ventures with J4 y

1 other utilitics, government and industrv g

f groups such as the nationwide Electric Power "9m Itesearch Institute, Empire State Electric Energy Research Corp. and N.Y. State Energy Research and 1)ctelopment Authority.E h

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'Wr support t h ime scrs a c ( alls.mJ \\\\ mter He A;

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dens Ihe ( onsumer.\\ds isors ( ouncil on Inergs.\\ttairs u ah a non ( ompany s olun

+.

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%(I tects representing all walks of upper New

,p 3 ork state hte ( ontmucs ti> otter s aluable m-

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a respond to sut h spct iali/cd t ustomer groups A

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At industrial and commercial customer

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pis. -r.o mg of in c d.n t lassroom sessu ms on impros i M%; ;

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<smus p uemme-ing ligh t m g h ia d demand and energs 7..

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monnormg. the classes marked another suc s.

TOTAL GENERATING

<7.y 7...

( ess scar m 1981 \\itrndant e totaled somc gq

.( ' "

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COSTS. FOSSIL FUEL 1 '.,<

400 representat n es f rom s aried industrial VS NUCLEAR cerme, wr tv '

and commercial firms.md inst it ut ions on a. -

Niagara \\lohaw k hncs ( H sn.m ards for cv 5

t 6

. ^. '

- ph dbmc pmdmm@ M dw Med 5.60 I

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ijet n.ith ation ( ount d. tu o w cre presented t.y I

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_. N to upstate New h iirk I'\\l.\\ alunun for energs

,gg / -.\\.:

FOSSIL 4+.

management pra( tices learned in these FUELN-3.45

-4

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( < >mpam spimsiired scminars

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+

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2.99 3.05

%d s

S'*

+,,+

s w

l alc in 1981. scs cral c usttimer services W

ISW pc i. -

441 yQ jp.

w cre realigned under ime s a e president.I.he kcx y;M;p M NINS@

lius.md inher ( omp.un sponsored home tr.mster resultrd f rom a growing number of

- o encrgs t a inst rs at ti m pringrams u cre u idt h scrs a es ne m.n all.ible le s custimmers and necd

'gr A.;

s y puhla ved and.ub trtised throughout the ti> st rengthen communications with allied d$$fh"M 92 s c.H in.ill medi.i in < >u r s( rs a e arca In 1981.

rate..u t t auntmg.ind reyulattir) < >peratu ms E 77 78 79 80 81 primhit ti m.il emphasis beg.m inn the adsan tages iit noidern heat pumps and solar assisted MONTHLY RESIDENTIAL ELECTRIC COST FOR 500 KILOWATT-HOURS w ater brat mg ss sicms. both new corrgs

<>p in ms m upstair New T ork cm irons informa tion toiils ( onsisted o! a w ide scin tion of dis-

, plas s and exhibus. bdl ent losures brothurcs gtyAg

,4 m 4. m.

p m.. g 7

.et

. $ jm.s.- zy3 on

, m a,. m 4,

l NY Stats Avg.(notincluding NM) 51.07*

.ind t illa i print ( d maten.ils nuit nin picturc Boston. W.SW3

" E."VW'

-Mas.s.1 films alul slidt shi m s teles isnin tapc-and

~ ~ ~x-o 4

-+ -

speakers llureau present.ith ms Iti hundreds ot

Newar W W G C [ W sW tyy48.31-iirg.nu/.it o ms mcct mg.a ross the scrs u e ter partfoidlCTMf[$MZdgE40.81 ritiu s \\dthtionalh hundrcds of t ustomers pladeWPG' ^ MCMEC 38,48 at tendt d do H s iiurst It cocrgs

( onscrs at u m i

e s %., LJ.53 g

y Oevolernt, OH g

'_m w i n kslu ips and semin. irs

..too Angelse, CAj;ic-q' ga4A s,,

To maintain sensitivity and alertness g,,

National Avg.

33.60 "

i t onsumer s pn >bic m s and help them w it h Portland;ME3

[ 33.34 cnctgs

( ontrins a number i st dirrt t ( us giMoidGj

29.0f.

r tilm cr scrs u rs t iinimur tii he piipular t host l m( lude Istonded 1)ur I) ate Plan thulget

"~

4 P.n n u n i l'la n I hird P.u t s %itith at nin I ite 13

Management Institute. At the same time, a formal training program-first of its kind-is Eg planned for new customer accounting and consumer relations supervisors, with assis-l tance from Management Systems & Services.

In ongoing efforts to keep in step with the Also, an innovative Problem Analysis and changing times, in 1981 senior management Decision Alaking Process Program initiated in and the Corporate Planning Department con-1981 will be broadened in our ongoing man-ducted a series of formal assessments of the agement training curriculum.

many critical issues expected to influence the Company's direction and operations.

In ruanagernent and personnel develop-rnents of note, John J. Ehlinger, vice presi-These evaluation sessions forrned the dent of employee relations since 1970, re-basis for an extensive Corporate Strategic tired at the year end with -15 years of dedi-Plan in which management excellence, unity cated service to Niagara Alohawk. Alr.

of purpose and willingness to apply new con-Ehlinger was active in many professional and cepts and implement new actions to improve business organizations, particularly in the Niagara Alohawk's future were established as fields of industrial and labor relations.

standards. In addition to the issues, assump-At the outset of 1982, Niagara Mohawk's tions on future trends and developments total work force numbered 9,900, about the were used to formulate objectives, strategies same as in the late 1950s when there were and specific tasks. Milestone goals provide 333,000 less customers, considerably fewer measurement guidelines to " strengthen Niag-utility plant facilities and electric peak load ara Mohawk's ability to fulfill obligations to was il percent less than today. A two-year stockholders, customers, employees and the labor contract with 12 locals and System social communities in which it does busi-Council U-11, International llrotherhood of ness.. responding to changing environ-Electrical Workers, expires on May 31,1982.

ments while providing direction and integra-Approximately 7,700 employees or 78 per-tion vital to meeting needs of the business cent of all employees are affected by the environment." Under continuing develop-agreement.

ment in 1982, the Plan will provide a master The Employee Savings Fund Plan is sub-blueprint for Niagara Mohawk's future.

scribed to by 6,820 or 75'% of all cligible per-In the same spirit, following comprehen-sonnel. Employees allocate from 2't to 6% of sive studies, the Company is gradually imple-their wages toward purchase of common menting a regional management concept, stock or U.S. Government lionds. The Com-starting late in 1981 when the Syracuse and pany matched employee contributions by Oswego areas were combined into the Cen-50%, or 5 i,12 i,308, in 1981. The Plan holds tral Region and the Watertown and St.1.aw-8,291,059 shares or 10% of the outstanding rence areas were merged into a newly estab-common stock. In addition, employees may lished Northern Region. Hy early 1983, the make unmatched contributions of up to i% of reorganization will be accomplished in full their wages.

with a total of eight regions, compared with what previously had been 13 separate areas Alany stockholders have joined the As-for many years. The six other operating re-sociation of Investors in New York gions will be designated Capital, Genesce, Utilities, Inc. ( AINYU), a forceful stockhold.

Mohawk Valley, Frontier, Northeast and er organization formed three years ago to Southwest.

" protect the financial integrity of utilities to The Corporation's Training Department re-assure continued supply of power at reasona-corded another productive year in 1981, with ble cost to consumers and at reasonable profit emphasis on management development and to owners." AINYU's membership rolls have skills. A program for supervisors at fossil fired grown rapidly since its formation and the and nuclear generating stations is scheduled group is becoming increasingly influential in in 1982 in cooperation with Clarkson College utility-oriented government affairs and legis-14

Senior Vice President James J. Miller points

~~~

outfeatures of Niagara Mohawk's regional management plan,ini-tiated in 1981 for 1983 Normem Completion. Concept of eight regions to replace the previous 13 sepa-rate areas is designed to FIELD OPERATIONS REGIONAL ORGANIZATION improve field opera-

-Norm tions and streamline administration and c,,nese, communication channels.

bont.er -

./

I Mohawk

' Cat Centrol-Volley

'I h

h lation. Stockholders interested in AINYt! may residents may obtain information and service obtain information by writing P.(). Ilox related solely to stockholder account matters 12 4 23, Albany, N.Y.12212.

by calling a toll-free number established in 1982 for their cor.venience: 1 +800 962-Participation in the Company's Dividend 3236. Sharcowners living elsewhere in the Heinvestment and 5tock Purchase Plan con-continental linited States may call 1 +800 tinued to increase in 1981. Ilolders of both

+18-5-s50, while Syracuse, N.Y. area security common and preferred stock are eligible. The holders may dial t's-1511, extension 1983 limit on optional cash investments has been in the first year since its inception, Niagara increased to $30,000 yearly, in 1981, il,000 Mohawk's "In the Know" 5tockholder Infor-participants representing 20 percent of all mation Program has met with enthusiastic re-common stockholders, an increase of eight sponse. This program, designed to supple-percent over 1980, invested 521,153,000 in ment information provided in the quarterly new common shares.

and annual reports, is available to all share-1)ividends reinvested through the Plan holders by writing or calling our 5hareholder qualify for tax-deferred treatment as a result Services 1)cpartment at 300 lirie lloulevard of Congress enacting revisions in tax laws West, Syracuse, N.Y. 13202.5 during the 3 car. I!!fecth e January 1,1982, in-dividual taxpayers who have shares registered in their own name may exclude for federal income tax purposes up to $'50 ( $1,500 if a joint return) of dividend income reinvested in qualified shares until the shares are sold. A prospectus containing a complete description of the Plan has been mailed to all sharehold-ers. Those desiring further copics or informa-tion on the Plan are invited to call or write NMi'C I)ividend Reim estment Plan, P.(). Ilox I 31, 5) racuse, N.Y.13201.

The number of Niagara Mohawk stockhold-ers in 1981 totaled 210.0 l' New York State 15

quartirly div'id:nds and th:r:after until all di-Market price of common stock vidends thereon are paid or declared and set p rt f r p yment, the holders of such stock and related stockholder matters can elect two members of the Board of Direc-tors. No such dividends are now in arrears.

The Company's common stock and certain of Upon any dissolution, liquidation or wind-its preferred series are listed on the New (ork ing up of the Company's business, the holders Stock Exchange. The common stock is also of common stock are entitled to receive pro traded on the Amsterdam (Netherlands), Bos-rata all of the Company's assets remaining ton, Cincinnati, Midwest, Pacific and Phila-and available for distribution after the full delphia stock exchanges. The ticker symbol is amounts to which holders of preferred and "NMK" preference stock are entitled have been Preferred and common stock dividends satisfied.

were paid on March 31 June 30, September The indenture securing the Company's 30 and December 31. The Company presently mortgage debt provides that surplus shall be estimates that 10% of the 1981 and 65% of the reserved and held unavailable for the payment 1980 common stock dividends are a return of of dividends on common stock to the extent capital and therefore not taxable as dividend that expenditures for maintenance and re-income for income tax purposes. The remain-pairs plus provisions for depreciation do not ing percentage on common dividends and equal 2.25% of depreciable property as de-100% of preferred stock dividends are taxable fined. Such provisions have never restricted as dividend income.

the Company's surplus.

The table below shows dividends per share At year end, about 210,000 stockholders for our common stock and quoted market own common shares of Niagara Mohawk and prices:

10,000 hold preferred and preference stock.

The chart below summarizes common stock-Dmdend paid Pnce range holder ownership by size of holding:

DMDENDS PAID PER 1981 per share Kgh low COMMON SHARE Donars 1st Ouarter S.38

$12% $10%

Size of holding Total Total shares 2nd Quarter

.41 13% 11 (shares) stockholders held 1.s1 1.50 p 3rd Quarter

.41 13 10?s 1 to 99 58.923 1,970.520

,m36h$F 1

4th Ouarter

.41 13 % 11 100 to 999 142,174 33,660.850 f"" ' '

$1.61 1.000 or more 8.950 48,341.882 0

210.047 83.973.252 1980

(:

q 1st Ouarter S.36

$13

$109 L

3 2nd Quarter

.38 14 % 103s E

d 1

3rd Quarter

.38 14 I?

[1 1-4th Quarter

.38

2% 10 Management's discussion and

&a a.dd

$i.50 analysis of financial condition 77 78 79 60 81 and results of operations While the Company intends to continue the practice of paying cash dividends quarterly, Results of operations declarations of future dividends are necessar-Niagara Mohawk's earnings in 1981 were ily dependent upon future earnings, financial

$2.35 per share, up S.48 from 1980, S.35 above requirements and other factors, including re-1979, and $.46 above 1978 earnings, with !

strictions in governing instruments.

fewer shares outstanding in each of the earlier The holders of common stock are entitled to years.

one vote per share and may accumulate their The substantial improvement in the Com-votes for the election of Directors. Whenever pany's earnings per share for 1981 from 1980 dividends of preferred stock are in default in came primarily from rate relief granted in an amount equivalent to four full quarterly di-March 1980 and 1981, and increased electric vidends and thereafter until all dividends and gas sales to ultimate consumers, 0.4% j thereon are paid or declared and set aside for and 8.6%, respectively. However, operating I payment, the holders of such stock can emet a expenses including depreciatic,n increased majority of the Board of Directors. Whenever 21%, and Federal income and other taxes in-dividends on any issued preference stock are creased 16%, reducing the impact of the 21%

in default in an amount equivalent to six full increase in revenues. In addition, financing 16

EARNINGS PER costs were approximately 17% higher due to The discussion and analysis that follows COMMON SHARE higher debt levels, caused by increased work-highlights items that have had a significant ing capital and construction needs, at con-effect on operations during the three-year us tinued high interest rates.

period ended December 31, 1981. This dis-2.00 The Company's earned rate of return on cussion and analysis should be read in con-1.74 Common equity rose to 13.5% for 1981 af ter junction with the Notes to Consolidated Fi-MUlv falling to 10.8% in 1980 from the 11.4% rate nancial Statements and other financial and Y@DN k-.

on equity remains below the 16.0% currently this report and may not be indicative of future achieved in 1979. The Company's 1981 return statistical information appearing elsewhere in h

j approved by the New York State Public Ser-operations or earnings.

M R.

1 vice Commission (PSC) for the rate year be-Electric revenues increased $700 million or

{h ginning March 1981. Recent rate awards have 69% over the three-year period. This increase Q - - y 3,;

not provided an adequate return on equity or is largely attributable to recovery of increased

~

recovery of steadily increasing costs resulting fuel and purchased power costs and to a 77 78 79 80 81 from inflation, thus necessitating annual peti-lesser extent, to rate relief, as indicated by the EARNED RATE OF tions for rate increases.

table below:

RETURN ON COMMON EQUITY Percent Increase (decrease) from poor year 13.s In melhons of dollars Electric revenues 1981 1980 1979 Total p

11.4 Fi increase in base rates

$115.2 _ S 80.8

_$220.5 5 24.5 ii.i 10.4 M M.' M ?

f Fuel and purchased power cost increases 141.5 69.9 108.8 320.2 Sales to ultimate consumers.

27.1 1.1 20.7 48.9 f-Sales to other electric systems.

30.9 23.2 23.7 77.8

[

4, Miscellaneous operating revenues 11.8 7.4 13.1 32.3

[

$326.5

$182.4

$190.8

$699.7 L

f' y

qN Il-Electric kilowatt-hour sales were 32.9 billion in 1981, an increase of 0.9% from 1980. How-7 N 79~

ever,1981 electric kilowatt-hour sales are 1.3% below sales achieved in 1979 (see Electric and go Gas Statistics-Electric Sales appearing on page 36). Details of the changes in our electric ELECTRIC SALES revenues and kilowatt-hour sales by customer group are highlighted in the table below:

M,Ituans of Knbrs 2,M f

1981 o increase (decrease) from poor year 3

31.367 7-P'*7 o of al electnc 1981 1980 1979 M

Class of service revenues Revenues Safes Revenues Sales Revenues Sa'es p

f-Residential 28.1 %

19.5%

1.5%

13.2 a 0.7 b 11.9 6 1.7%

4 1

j Commercial 33.6 24.8 0.6 17.8 0.9 17.8 1.8 il Industrial 25.0 24.9 (0.6) 10.0 (6.2) 20.9 2.3 f

Municipal service 1.8 15.2 (2.6) 13.9 (0.4) 10.8 (0.7)

Total to ultimate consumers.

88.5 22.9 0.4 14.0 (2.1) 16.5 2.0 g

]

Other electric systems 8.0 29.0 6.5 27.9 (3.3) 39.9 13.0

-- g _ a_w]

Miscellaneous 3.5 24.8 18.4 48.0 77 78 79 80 81 Total 100.0%

23.4 %

0.9%

15.1 b (2.2)o 18.7 %

2.9%

GAS SALES vanons of meerms Gas revenues increased $171 million or 66% over the three-year period. As shown by the table

' 0",

below, this rise is primarily from increased costs of purchased gas recovered from customers 93.4 y

]

through the purchased gas adjustment clause.

p

=

a

{

'))

[:

.]

In mahans of dollars Increase (decrease) from poor year j

Gas revenues 1981 1980 1979 Total increase in base rates

$11.0

$ 1.2 S 4.6

$ 16.8 g.

Purchased gas cost increases.

4.8 67.3 42.3 114.4 Gas sales.

31.3 9.7 (1.4) 39.6 s]

$47.1 578.2 545.5 S170.8

,um_

==

==

=

77 78 79 80 81 17

G s salts w:re 109.8 million d katherms in 1981, an 8.3% incrtisa from 1980 and 13.6% from 1979 (see Electric and Gas Statistics-Gas Sales appearing on page 36). This increase is primarily a" 'butable to industrial sales which increased principally as a result of boiler conver-sions from oil to gas. The changes in residential and commercial sales during the last three years generally follow the weather pattern, offset by customer conservation efforts. Changes in gas revenues and dekatherm sales by customer group are detailed in the table below:

1981

% increase (decrease) from pnor year

% of Gas 1981 1980 1979 Class of service Revenues Revenues Sales Revenues Sales Revenues Sales Residential.

51.6*'.

6.1%

1.1%

18.6%

(1.5)%

11.3 %

(5.3)%

Commercial.

23.9 15.3 10.5 25.2 1.8 17.0 (1.3)

Industrial 20.7 28.5 23.9 50.3 26.5 42.7 9.5 TOTAL ELECTRIC AND Mal to ultimate consumers 96.2 12.6 8.6 25.2 4.5 16.7 (1.8)

^

EVENUES Other gas systems.

3.2 2.5 3.6 35.4 12.4 46.0 9.2 M@ons of donars Miscellaneous.

.6 21.2 50.0 15.3 2.151 Total

.100.0 %

12.3%

8.3*/.

25.6%

4.9%

17.5%

(1.4)%

1.777 In summary, total operating revenues in-ministrative Law Judge recommended rate in-creased $871 million, or 68% over the three-creases of $209.2 million (11.4%) electric and 1.226 year period,largely representing recoveries of

$22.3 million (4.3%) gas or about 85% of what fuel and purchased gas costs through fuel ad-the Company had requested. Because of the justment clauses and increased rates.

nearly year-long regulatory process for any Through the energy and purchased gas ad-rate proceeding, any increase determined by -

justment clauses, costs of fuel, purchased the PSC will not be reflected in the Company's power and gas purchased, above or below the operations until March 1982.

levels allowed in approved rate schedules, are in 1981, fuel and purchased power costs 77 78 79 80 81 billed or credited to customers.

continued to increase sharply, from $411 mil-On March 12,1981, the PSC approved rate lion in 1978, to $540 million in 1979, to $644 AVERAGE COST OF FUEL BURNED increases to provide the Company additional million in 1980 and to $840 million in 1981.

Do"ars annual revenues of $161,286,000 (11.0%) for The continued increases result primarily from electric and $16,918.000 (4.1%) natural gas.

higher coal, oil and purchased power costs

i4M8, These new rates became effective March 18, and changes in the mix of generation re-1981. The PSC had approved in 1980 rate in-sources. The Company's Nine Mile Point Nu.

P 88 e

3711

creases providing additional annual revenues clear Station Unit No. I was out of service for 888'l g ag g of $122,577,000 (11.5%) for electric and several months in 1981 and 1979 for

g

$3,263,000 (1.0%) natural gas. The 1980 rates scheduled refueling and maintenance requir-F

' ifs; ql9 were effective March 7,1980.

ing the replacement of this relatively low-cost p

h_ _

Further rate action, made necessary by con-nuclear generation with fossil fuel generation :

ig,

• X tinuing inflation, high interest rates and the and purchased power. (See Electric and Gas

~

need to increase cash flow, was requested on Statistics-Electricity Generated and Pur-h; m2 April 16,1981 when the Company filed for an chased appearing on page 36.) The following 77 78 79 80 81 annual increase of $273.4 million, including table summarizes the Company's average fos-

$245.7 million (14.0%) e!ectric and $27.7 mil-sit fuel and purchased power unit costs:

UNIT COST OF GAS lion (5.5%) gas. In December 1981, a PSC Ad-PURCHASED oonars per matherm 2.ss 2.5 Average cost per:

1981 1980 1979 1978 Ton of coal burned (dollars)

$47.44

$41.95

$39.08

$37.11 2.00 Barrel of oil burned (dollars).

$30.84

$23.72

$16.34

$12.58 Kilowatt-hour purchased (mills).

18.1 13.6 12.1 8.8 j

1.57 1.52 l

During 1981,in an effort to minimize such accelerated basis from a portion of fuel cost fuel cost increases, the Company converted savings through July 1982. Fuel cost savings {

its Albany Steam Station to burn natural gas in excess of capital costs recovered are being I as well as oil to enable utilization of lower cost passed on to customers through the fuel ad-fuel supplies. The cost of this conversion justment clause.

(about $7,500,000) is being recovered on an The total cost of gas purchased, net of re-77 78 79 80 81 18

funds from the Company's supplier, rose 6%

higher fuel costs. inflation has eroded the in 1981,41% in 1980 and 24% in 1979. These purchasing power of the dollar, as measured increases are primarily the result of deregula-by the Consumer Price Index, to less than tion of wellhead prices which increased the three-fourths of its 1978 value. The Company Company's cost per dekatherm purchased to is especially sensitive to inflation because of

$2.66 in 1981 from $2.59 in 1980, $2.00 in 1979 the large amount of capital it must raise to and $1.57 in 1978.

finance its construction program and because Other operation and maintenance expenses its prices are regulated using a rate base that increased 16.8% in 1981, 7.2% in 1980 and reflects the historical cost of its plant. Inflation 14.5% in 1979, as a result of increases in information in Note 10 of the Notes to Con-wages and associated benefits, higher costs solidated Financial Statements indicates the charged by suppliers and increased levels of approximate effect of inflation on certain as-maintenance. In May 1980, the Company en-pects of the Company's operations and finan-PE ^T tered a two-year labor agreement providing cial position.

EA E EXPENSE for m_ creased wages and supplementary ben-mons or donars efits of 9.64% and 9.35% in June 1980 and Financial position, liquidity and capital 37u 1981, respectively. The increase in other op-resources

1ts s' eration and maintenance expenses in 1981 As is common in the utility industry, internal soo.stid',j and 1979 was also attributable, in part, to the funds generated from operations are insuffi-26 refueling of Nine Mile Point Nuclear Station cient to meet the Company's capital require-3 $s,10y,3. gE [ase( Unit No. l.

ments. Therefore, significant funds from ex-

'a Wre~ '

in July 1980, the Company placed its Os-ternal sources are required on an annual rC4 wego Steam Station Unit No. 6 in commercial basis. External capital needs are first met 3

y.

l operation. This oil-fired unit, of which 24% is through utilization of short-term borrowing

j owned by Rochester Gas and Electric Corp.,

arrangements, including bank lines of credit 0" "P y was completed at a cost to Niagara Mohawk and commercial paper. These short-term bor-Lam...... d of approximately $240 million, including rowings are repaid through the issuance of '

77 78 79 80 81 allowance for funds used during ConstruClion securities, consisting of intermediate and (AFC). The effect of adding this unit to our long-term debt, preferred and preference TOTAL TAXES, plant in service is reflected in increased de-stock and common stock.

I" LUM WWE preciation expense.

Capital resources from internal and external T XE mons or oon.rs Federal and foreign income taxes rose in sources are used to pay for the Company's 242 1981,1980 and 1979 as a result of increased construction program, working capital needs,

,,, p income and an increase in the amounts on maturing debt issues and sinking fund provi-is, m' which deferred taxes are provided. The in-sions on outstanding debt and preferred 73 M '

crease in other taxes in these same three stocks. Sources and uses of funds during the is7 Fr # ~~

d years is dua principally to higher property past three years are reported in the Consoli-I 1

taxes resulting from property additions and dated Statement of Changes in Financial Posi-

]j higher state and local gross income taxes re-tion at page 24.

t sulting from increased revenues.

The Company presently has short-term The $13.1 million increase in AFC for 1981 bank credit arrangements aggregating $327

,j results from higher AFC rates (detailed in Note million including arrangements with Oswego

[

a 1 of Notes to Consolidated Financial State-Facilities Trust (OFT). At December 31,1981, s

y 77 78 79 80 81 ments) applied to increased overall levels of

$123.3 million of such arrangements were in plant under construction, partially offset by use or being held available to support the the suspension of AFC associated with the Company's outstanding commercial paper Company's investment in N M Uranium, Inc.

obligations. The Company generally issues (NMU). On April 1,1981, the Company sus-long-term debt secured by a mortgage on the pended accruing AFC on the NMU investment Company's properties. However, in 1981, the because of the uncertainty of full recovery of Company continued to borrow under its un-the investment (see Note 3 of Notes to Con-secured revolving credit and term loan ag-solidated Financial Statements). The impact reements and at December 31,1981 had $86 of this suspension of AFC reduced 1981 net millian outstanding (of a total amount availa-income by approximately $5.4 million ($.07 ble under these agreements of $110 million).

per share).

Preferred stock issues in recent years have The Company's revenues and costs of op-typically been redeemable at specified dates eration over the past three years show sub-and prices. Common stock is sold through stantial increases in several respects, due periodic public offerings as well as under the primarily to the effect of generalinflation and Company's Dividend Reinvestment Employee 19

Savings Fund and Employee Stock Ownership juste'd for non-cash expenses, such as depre-plans. At the 1981 annual meeting, the share-ciation, amortization of nuclear fuel and de-holders approved a 40 million share increase ferred income taxes, and non-cash income, in the number of common shares a nich the such as AFC. AFC represents the financing Company is authorized to issue.

costs of the Company's construction program in addition to the $86,000,000 outstanding and is added to the cost of construction until under the revolving credit and term loan such time as the capital projects are com-agreements, the Company completed pleted, and is then recovered through depre-

$339,963,000 of financing during 1981 as de-ciation included in rates charged to custom-tailed below. Short-term debt remained at the ers. As previously discussed, the Company 1980 level of $123.3 million.

suspended accruing AFC on its investment in NMU, based upon current regulatory restric-tions on the cost of NMU uranium recovered ANNUAL EXTERNAL First Mortgage Bords

$113.650,000 FINANCING BY TYPE Notes Payable.

67,000,000 from customers and based on currently de-unons or oou,rs Preferred Stock 58,000,000 pressed uranium market conditions. Although Comrnon Stockm.

101,313.000 the investment in NMU, which approxiraated 34s.o

$339.963.000

$84,500,000 (including inventory with a mar-

[oEBT F[

ket Value of $18,300,000) at December 31, COMMON W Includes puW sa% of 5 minion shares at $M 50 p" 1981, is not material to the financial position b7 PREFERRED share and proceeds from sa!es through dmdend rein-of the Company' a loss could be sustained t-vestment, employee savings fund and employee stock 0

NdP M M WW NM Wh NM

@d 163.9 U6 au sidiary (see Note 3 of Notes to Consolidated 31 5

[

Approximately $151 million of these funds Financial Statements).

Il was used to pay maturing bonds and to pro-While financial resources from operations, k

t.

vide for sinking fund requirements on existing as determined above, have been increasing in obligations. Total financing for 1982 is esti-recent years, such increases have not kept 77 78 79 80 81 mated to approximate $300 million. Of this pace with the Company's construction and amount, requirements for maturing debt and other requirements, thus necessitating in-CAPITAllZATION sinking funds total approximately $16.7 creasing amounts of outside financing. Dur-RATIOS million.

ing 1981, the Company began funding most of Percent The Company has endeavored to its disbursement as checks are presented to strengthen its capitalization structure through the banks on which the checks are drawn.

u w'a' i:

PnEFEAREO the reduction of long-term debt as a percent Previously these disbursements were funded

[asCsese'sh sMM of total capitf v*i~. The proportion of long-on a current basis. At December 31,1981, the term debt to toa. 1pitalization has decreased amount payable on outstanding bank checks from 49.1% at the end of 1979 to 45.7% at the was approximately $50,000,000. The Company pI end of 1981 while common equity as a percent and other investor-owned utilities have filed f ',"

• M ieg of total capitalization has increased from testimony with the PSC to seek generic reg-

[

. 4 38.0 ' at the end of 1979 to 41.2% in 1931.

ulatory policy changes which would improve o

[ 4. LONS45W OEST Construction and other capital require-cash flow and decrease the need for outside k

ments continue to increase. Net additions for financing. Additionally, the Company is seek-LW A-construction and nuclear fuel, excluding ing adequate overall earnings levels and cash 77 78 79 80 81 financing Costs, totaled $385.5 million in 1981, flow improvements in its periodic rate filings.

$319.7 million in 1980 and $316.9 million in Although not significant in 1981, adoption of SOURCE OF CAPITAL 1979. In recent years, the largest cost compo-new tax depreciation rates prescribed under R CON TRUCTION nent of construction programs has been the the Economic Recovery Tax Act of 1981 uu,on, or oon r.

cost of new generating stations.The only new (ERTA), and the full normalization require-major station presently under construction is ments thereunder, are expected to provide in-3as.s e2 C Nine Mile Point Unit No. 2, scheduled for creased future cash flow.

316.9319 7 Completion in late 1986, in which the Com-The Company's requirement for funds may 271.3 "

pany had invested about $546 million through be affected by possib'e increases in construc-

• 5g8 s2%.

December 31,1981. Outlays associated with tion costs brought on by inflation and reg-Construction of this nuclear unit, along with ulatory requirements, among other factors.

EXTERNAL other facilities requirements, are expected to Continued increases in internally generated 73 increase overall construction expenditures in funds and their adequacy in relation to the g [g w f

,p future yeara (see Notes 6 and 11 of Notes to Company's needs depend partly on the results h * " '"" % N' Consolidated Financial Statements).

of current and future rate cases and the extent

[

Financial resources provided internally to which increased rates can be translated n 78 79 80 8[

from operations consist of net income, ad-into improved earr.:ngs. The cost and availa-20

AVERAGE GROSS bility of externa'l sources of funds will be af-pose of such study was to establish a basis for

" "9 L

ER EL TRIC CUSTOMER adequate credit rating by the Company and timing and extent of other auditing proce-own conditions in the financial markets. Also, fi-dures that were necessary for expressing an 3,286 nanCial market Conditions influence the tim-opinion as to whether the financial statements

2. sos N3.oo7f'f ing and types of securities to be offered, re-are presented fairly. Their examination re-payment terms and the decision to place such sulted in the expression of their opinion which

%M ~ ' "

offerings privately with institutional investors follows this report. The independent accoun-k or publicly through underwriters. Any of these tants' examination does not limit in any way

~

factors could have an adverse effect on the management's responsibility for the fair pre-j Company's ability to fully implement its in-sentation of the financial statements and all

}

tended construction and financing programs.

other information, whether audited or unau-The Company will continue to explore and dited, in this Annual Report.

{g utilize other methods of financing,such as the The Audit Committee of the Board of Direc-Eurodollar market, tax-exempt financing tors, consisting of three directors who are not 77 78 79 80 si methods, leasing of equipment and similar employees, meets regularly with manage-non-traditional sources of funds. However, ment, internal auditors and Price Waterhouse management believes that traditional sources to review and discuss internal accounting of funds will provide the majority cf its controls, audit examinations and financial re-needs.a porting matters. Price Waterhouse and the Company's internal auditors have free access to meet individually with the Audit Committee Report of management The consolidated financial statements of Report of Niagara Mohawk Power Corporation and its independent accountants subsidiaries were prepared by and are the re-sponsibility of management. Financial infor-mation contained elsewhere in this Annual To the Stockholders and the Board of Report is consistent with that in the financial Directors of Niagara Mohawk Power statements.

Corporation To meet its responsibilities with respect t in our opinion, the accompanying consoli-financial information, management maintains dated balance sheets and the related consoli-and enforces a system of internal accounting eWs d ime W WM controls, which is designed to provide reasonable assurance, on a cost-effective earnings and of changes.in financial position basis, as to the integrity, objectivity and relia-present fairly the financial position of Niagara Mohawk Power Corporation and its sub-bility of the financial records and prc,tection of sdades at Decenter 31,1981 and 1980, and assets. This system includes communication through written policies and procedures, an suHs of %, operations and the

,f nges in me7 inancial position for each of organizational structure that provides for ap-propriate division of responsibility and the e ygars in the period ended December

, in conformity with generally ac-training of personnel. This system is also cepted accounting principles consistently tested by a comprehensive internal audit pro-applied. Our examinations of these state-gram. In addition, the Company has a Code of Conduct which requires all employees to ments were made in accordance with gener-lly ccepted auditing standards and accord-maintain the highest level of ethical standards ingly included such tests of the accounting and requires key management employees to formally affirm their compliance with the records and such other auditing procedures s we considered necessary in the Code.

ckwmstams.

The financial statements have been

[ )AM examined by Price Waterhouse, the Com-i pany's independent accountants, in accord-W C"W ance with generally accepted auditing stan-Syracuse. New York dards. As part of their examination, they made January 27.1982.

a study and evaluation of the Company's sys-3, tem of internal accounting control. The pur-February 9.1982 21

Consolidated statement of income and retained earnings NfAGAAA Mr) HAWK POWER CORPORATION AND SUBSIDIARY COMPAN:ES in thousands of dollars For the year ended December 31, 1981 1980 1979 Operatir g revenues:

Electric

$1,719,933

$1,393,467

$1,211,068 Gas.

430,785 383,648 305,435 2,150,718 1,777,115 1.516,503 Operating expenses:

Operation:

Fuel for electric generation,

582,033 462,573 380,101 Electricity purchased 257,788 181,223 159,453 Gas purchased 292,863 276,680 196,711 Other operation expenses.

258,124 221,879 200,917 Maintenance,

118,331 100,470 99,857 Depreciation (Note 2) 102,536 92,210 84,212 Federal and foreign income taxes (Note 9) 53,043 43,498 34,64C Other taxes 214,624 186,830 166,666 1,879,342 1,565,363 1,322,563 Operating income.

271,376 211,752 193,940 Other income and deductions:

Allowance for other funds used during construction (Note 1) 48,281 38,209 39,063 Federalincome tax credits (Note 1) 19,548 15,651 13,782 Other items (net).

9,598 5.995 524 77,427 59.855 53,369 Income before interest charges 348,803 271,607 247,309 Interest charges:

Interest on long-term debt.

131,146 115,809 105.399 Other interest 20,623 13,766 4,416 i

Allowance for borrowed funds used during construction (Note 1).

(23,609)

(20,607)

(18,536) 128,160 108,968 91,279 Netincome 220,643 162,639 156,030 Dividends on preferred stock 34,285 29,438 27,844 Balance available for common stock 186,358 133,201 128,186 Dividends on common stock.

127,781 106.967 92,136 Retained earnings for the year 58,577 26,234 36,050 Retained earnings at beginning of year 430,179 403,945 367,895 Retained earnings at end of year

$ 488,756

$ 430,179

$ 403,945 Average number of shares of common stock outstanding (in thousands) 79,204 71,257 63,976 Balance available per average share of common stock

$ 2.35

$ 1.87

$ 2.00 Dividends per average share of common stock.

$ 1,61

$ 1.50

$ 1.44

( ) Denues deduction 22

Consolidated balance sheet NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES In thousands of dollars At December 31, 1981 1980 ASSETS

{

Utility plant, at original cost (Notes 7 and 3)

$4,985,315

$4.563,309 i

Less accumulated depreciation and amortization (Note 2) 1,348,738 1,232,675 Net utility plant 3,636,577 3,330,634 Other property andinvestments.

42,130 16.451 Current assets:

Cash, including time deposits of $500 and $1,809, respectively(Note 4) 8,259 13,829 Accounts receivable (less allowance f or doubtful accounts of $2.800) 195,957 198,150 Materials and supplies, at average cost:

Coal and oil for production of electricity 149,102 107,508 Other 51,742 48,175 Prepayments 8,956 9.187 414,016 376,849 Deferred debits:

Unamortized debt expense 16,029 14,041 Deferred recoverable energy costs 50,477 61,839 Ot,er 16,703 9,005

~

33,209 84,885

$4,175,932

$3,808,819

_==

CA'>lTALIZATION AND LIABILITIES C@italization (Note 5):

Commcn stockholders' equity:

Common stock

$ 83,973

$ 75.231 Premium on capital stock,

895,804 802,954 Capital stock expense.

(10,599)

(10,363)

Retained earnings 488,ES 430,179 1,457,934 1,298,001 Redeemable preferred stock.

254,748 205,924 Non-redeemable preferred stock 210,000 210,000 Long-term debt.

1,619,369 1,443.607 Total capitalization 3,542,051 3.157,532 Curres,t liabilitles:

Short term debt (Note 4).

123,330 123.300 Long-term debt due within one year 9,250 142,500 Sinking fund requirements on redeemable preferred and preference stock (Note 5),

7,450 6,950 Accounts payable.

165,354 144,876 Payable on outstanding bank checks 50,358 Customers' deposits 4,769 4,952 Accrued taxes 23,343 27,837 Accrued interest 36,340 32,818 Accrued vacation pay 18,367 16,406 Gas supplier refunds payable to customers.

34,080 10,436 Other 5,814 6,132 478,455 516,207 Deferred credits:

Income tax refunds (Note 9).

9,943 1,772 Mandated refunds to customers (Note 9),

16,418 25.326 Accumulated deferred Federal income taxes (Note 9) 112,544 98,918 (Nher 16,521 9,064 155,426 135,080 Commitments and contingencies (Note 1f).

$4,175,932

$3,608,819

( ) Denotes deduct.on 23

Consolidated statement of changes in financial position

IAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPAN!ES For the year ended December 31, 1981 1980 1979 FINANCIAL RESOURCES WERE PROVIDED BY:

Operations:

Net income,

$220,643

$162,639

$156,030 Charges (credits) to income not requiring (not providing) working capital-Depreciation 102,536 92,210 84.212 Allowance for funds usea during construction (71,890)

(58.816)

(57,599)

Amortization of nuclear fuel 37,427 48,829 28.090 Provision for deferred Federal income taxes (net) 19,734 20,895 14.566 308,450 265,757 225,299 Outside financing:

Sale of common stock 101,313 93,823 75,266 Sale o' preferred stock.

58,000 25,500 Sale of mortgage bonds.

113,650 66,350 118,500 lasuance of long-term notes payable 67,000 Net borrowings under revolving credit f acilities(Note 5) 6,000 80,000 Increase in short-term debt 30 41,260 58,040 315,993 306,933 251,806 Other sources:

Deferred recoverable energy costs 11,362 (17,669)

(16,204)

Mandated refunds to customers (Note 9)

(10,445)

(6,758)

Income tax refunds 9,943 Other investments (23,349)

Sale of uranium (Note 3) 13,983 35,987 (Increase) decrease in working capital other than short term debt (see below)

(74,949) 48,346 33,660 Miscellaneous (net),

(708) 113 5,313 (88,146) 38,015 58,756 Total resources provided

$566,297

$610,705

$535,861 FINANCIAL RESOURCES WERE USED FOR:

Construction additions.

$439,418

$341,237

$347,544 Nuclearfue,

17,997 37,266 26,986 Allowance for funds used during construction (71,890)

(58,816)

(57,599)

Net additions,

385,525 319,687 316,931 Reduction of long-term debt,

9,530 145,387 90,000 Reduction of preferred and preference stock (Note 5) 9,176 9,226 8,950 Dividends,

162,066 136,405 119,980 Total resour;es used.

$566,297

$610,705

$535,861 (Increase) decrease in working capital other than short-term debt:

Cash

$ 5,570

$ (5,302)

$ 2,259 Accounts receivable 2,193 (18,660)

(52,271)

Coal and oil for production of electricity (41,594) 1,770 (39,046)

Other materials and supplies (3,567)

(12,E'32)

(5,807)

Long-term debt due within one year.

(133,250) 54,000 78,050 Accounts payable.

20,478 26,149 31,873 Payable on outstanding bank checks.

50,358 Accrued taxes and interest (972) 4,391 5,475 Gas supplier refunds due customers 23,644 Other (net) 2,191 (1,370) 13,127

$ (74,949)

$ 48,346

$ 33,660 24

l l

Depreciation and Nuclear Generating Plant Decomrnission-Notes to consolidated in9 Costs: For accounting purposes, depreciation is computed financial Statements on the straight-line basis using the average service lives by classes of depreciable property. 3or Federal income tax pur-NOTE 1. Summary of Significant Accounting Policies poses, the Company computes depreciation using accelerated methods and shorter allowable depreciable lives.

The Company is subject to regulation by the New York State Estimated decommissioning costs (costs to take the plant out Public Service Commission (PSC) and the Federal Energy Reg-of service in the future) of the Company's Nine Mile Point Nu-ulatory Commission (FERC) with respect to its rates for service clear Station Unit No.1 are recovered in rates and charged to and the maintenance of its accounting records. The Company's operations through depreciation charges. From July 1978 accounting policies conform to generally accepted accounting through March 1981, the annual nuclear plant depreciation rate principles. as applied to regulated public utilities, and are in reflected an estimated service life of the plant of 30 years and an accordance with the accounting requirements and ratemaking allowance for decomrnissioning costs at the annual rate of 1% of practices of the regulatory authorities.

the plant s cost. Beghnirig April 1981, as a result of a PSC rate s

n, o

ssioning cost aHowance was replaced Princinles of Consolidation: The consolidated financial statemei s include the Company and its five wholly-owned sub-0

1. "O sidiaries. All significant intercompany balances and transac-tions have been eliminated, no assurance that the revenues provided by the decommission-ing allowance will ultimately aggregate a sufficient amount to Utshty Plant: The cost of additions to utility plant and of re-decommission the plant. The Company believes that decommis-placements of retirement units or property is capitalized. Cost sioning costs, if higher than currently provided, will ultimately includes direct material, labor, overhead and an allowance for be recovered in the rate process, although no such assurance funds used during construction (AFC). The cost or current re-can be given.

pairs and maintenance is charged to expense. Whenever utility plant is retired, its original cost, together with the cost of re-Amortization of Nuc/sar Fuel: The cost of nuclear fuel, plus a moval, less salvage, is charged to accumulated depreciation.

rovision for disposal cost,is ch,3rged to operating expenses on The following table summarizes the components of Utility Plant:

the basis of the quantity of heat produced for the generation of electric energy. These costs are charged to customers through In thousands of dollars base rates or through the fuel adjustment clause. Until June At December 31.

1981 1980 1979, the Company had assumed that spent nuclear fuel would Electric plant.

$3,411.098 69

$3.223.017 be disposed of by reprocessing and that uranium recovered Nuclear fuel Wate 3).

248,836 5

230.780 through such reprocessing would have value. At that time, be-Gas plant 420,654 8

390.237 cause of proposed Federal action rendering the viability of dis-Common plant 71,198 1

67,474 posal by means of reprocessing questionable, the Company Construction work in progress.

833,529 17 651.801 g

g g

loja[utgyp! ant =.

$4,985,315 100

$4.563.309 age assumption. The Company believes that nuclear fuel dis-posal costs, which may be higher than presently provided for, Allowance for Funds Used During Construction: The Com-will continue to be recovered in the rate process, although no pany capitalizes AFC in amounts equivalent to the cost of funds such assurance can be given.

devoted to plant under construction. AFC rates are determined in accordance with FERC and PSC regulations. As a result of Revenues: Revenues are based on cycle billings rendered to rate proceedings, the Company began computing AFC at a rate certain customers monthly and others bi-monthly. The Company which is reduced to reflect the income tax effect of the borrowed does not accrue revenues for energy consumed and not billed at funds component of AFC for its Oswego Steam Station Unit No.

the end of any fiscal period. The Company's tariffs include elec-6 and Nine ele Point Nuclear Station Unit No. 2 on December 1, tric and gas adjustrnent clauses under which energy and pur-1976 and for the capitalized costs associated with its investment chased gas costs, respectively, above or below the levels al-in N M Uranium,Inc. on July 1,1978 (See Note 3). The AFC rates lowed in approved rate schedules, are billed or credited to cus-in effect during the three-year period ended December 31,1981 torners. The Company, as authorized by the PSC, charges opera-tions for energy and purchased gas cost increases in the period of recovery. The PSC has periodically authorized the Company AFC Netof tax to make changes in the level of allowed energy and purchased Penod rate AFC rate gas costs included in approved rate schedules. As a result of January 1,1979 through October 31,1979 9.25%

7.50 %

such changes, a portion of deferred energy costs would not be November 1,1979 through December 31,1979 9 60 7.75 recovered under the normal operation of the electric adjustment January 1,1980 through February 29.1980.

10.00 7.90 clause. However, the Company has been permitted to amortize March t,1980 through June 30,1980.

11.00 8.40 and bill such portions to customers, through the electric ad-O tober,1 0 hrough Dece be 980.

0 January 1,1981 through March 31,1981 11.10 8.75 ange April 1,1981 th rough Ju ne 30.1981 11.50 9.30 FederalIncome Taxes: The general policy,in accordance with July 1,1981 throu@ September 30,1981 11.75 9.60 PSC requirements, is to flow through the tax effect of timing October 117'

.o, auqh December 31,1981 11.85 9.75 differences between book and taxable income, that is, to record only income taxes currently payable. However, deferred taxes AFC is t gated into its two components, borrowed funds are provided on benefits realized from the class life system of (which are reflected in the Interest Charges section of the in-depreciation permitted under the Revenue Act of 1971 (shorter come statement) and other funds (which are reflected in the depreciable lives, repair allowance and cost or removal), on de-Other Income and Deductions section of theincome statement).

ferred energy and purchased gas costs, on nuclear fuel disposal 25

costs, nuclear generating plant decommissioning costs and on N3TE 2. Deprscirti*in certain other items, as approved by the PSC (see Notes 3 and 9).

The total provision for depreciation, including amounts charged ;

No deferred taxes are presently provided for other depreciation cleadng accounts, was W,MM for W81, $93,848,mor differences (including accelerated methods of depreciation),

1980 and $86,178,000 for 1979. The percentage relationship be-except under necessity certificates in prior years, or for other tween the total provision for depreciation and average depreci-items (such as taxes, a portion of AFC, pensions and certain able property was 2.8% m 1981 and 2.7% in 1980 and 1979. The i

other employee benefits) which are deductions currently for tax Company makes depreciation studies on.a continuing basis purposes but capitalized for accounting purposes.

and, when considered appropriate, adjusts the rates of its vari-The benefits resulting from an increase in the investment tax ous classes of depreciable property. Such adjustments are sub-credit from 4% to 10% and from the change in the limitation on ject to PSC approval.

the amount of credit which raay be claimed in any year have been deferred and are being amortized over the book life of the NOTE 3. N M Uranium, Inc.

property which gives rise to such credits. One-half of the 4%

investment tax credits realized have been allocated to Other During 1976, through a wholly-owned subsidiary,N M Uranium, Income and Deductions, consistent with PSC directives. For the Inc. (NMU), the Company purchased a 50 percent undivided in-projects specified in the AFC section above, the imputed tax terest in uranium deposits and associated mining equipment to benefit of the borrowed funds component of AFC has been cred-be held by a jointly-owned mining venture. The venture is an ited to Other income and Deductions.

operating arrangement whereby the Company pays its share of As directed by the PSC, the Company deferred a portion of the the capital and operating costs and in turn receives its propor-increase in Federal income ta*es for the year 1978 associated tionate share of production, Although acquisition of this interest with the tax gain on the sale of a portion of its interest in the was made primarily to provide a more assured future supply of j

Roseton Steam Station. The PSC authorized the Company to nuclear fuel for the Nine Mile Point Nuclear Station Units No.1 recover such increased taxes through its electric adjustment and No. 2, the Company has previously sold a portion of the clause over a one-year period commencing July 1978.

output to reduce net assets. During 1981, the Company did not Oswego Steam Station Unit No.6 attained in-service status f or sell any uranium produced by NMU while in 1980 such sales Federal income tax purposes in 1979 and generated investment totaled approximately $14,000.000. The investment in the sub-tax credits amounting to $14,400.000. During 1979, the year in sidiary, which includes costs incurred since acquisition and AFC which these credits would normally be recognized under the accrued through March 31,1981, has been reduced by the pro-Company's previously described Federal Income Tax account-ceeds from the sale of uranium, net of tax and is included in the ing policies, the Company deferred the full amount of these consolidated financial statements as part of the nuclear fuel credits. subject to the final decision of the PSC in a then pend-component of utility plant (See Note 1 of Notes to Consolidated ing rate case where the treatment of such credits was at issue.

Financial Statements). Such investment (including inventory The effect of such deferral on the 1979 results of operations was with a market value of approximately $18,300,000 at December to increase tax expense and thereby decrease income by 31,1981 and $6,100,000 at December 31, 1980) totaled

$6,500.000 ($.10 per share). In accordance with a 1980 PSC

$84,500.000 at December 31,1981 and $73,800,000 at December Order and consistent with the Company's 1979 deferral, the de-31,1980.

ferred investment tax credits attributable to the 4% portion are On September 8,1978, the PSC issued an order approving the being amortized over three years and the additional 6% portion Company's investment in NMU. its guaranty of certain NMU is being amortized over the book life of the plant.

notes and permitting, with prior approval, such subsequent ad-During the year, the Company adopted the provisions of the vances as may be necessary to finance the uranium prcject.

1 Economic Recovery Tax Act of 1901 (ERTA). The most signifi-Further, effective July 1,1978, all benefits associated with NMU cant provisions of ERTA, as it affects the Companyi Federal accounting-tax timing differences have been deferred. The ap-income tax policy, are a shortening of tax depreciable lives proval was subject to the condition that rates which the PSC will through use of the Acccierated Cost Recovery System (ACRS) approve in the future will reflect the cost of NMU uranium at the and full normalization of book and tax depreciation timing dif-lower of cost or the mar'<et price. Subject to PSC approval, the ferences and investment tax credits for 1981 property additions, comparison of cost to market will be on an aggregate basis over included in ER1 A were certain transition rules which allowed a the life of the project.

l delay in adopting mandated normalizaton requirements for fi-Recently, because of unsettled conditions in the uranium in-nancial accounting purposes until the first rate order sub-dustry, the market price of uranium has been below levels an-r sequent to enactment of ERTA. However, the Company has de-ticipated by the Company at the time of its investment. The mar-ferred the tax benefits associated with the difference between ket price of uranium has fallen to $23.50 per Ib. at December 31, l

depreciation provided under the previously allowed class hfe 1981 from $27.00 per Ib. at December 31,1980 and from approx-l system and ACRS. The deferral of such benefits, which are not imately $43.00 per Ib. during 1979. Management is continually I

significant,is consistent with a Statement of Policyissued by the evaluating the status of this mining operation to assure PSC.

maximum recovery of the Company's investment. However, due i

to regulatory restrictions on the extent to which the costs of Amortization of Debt issue Costs: The premium or discount uranium produced by this mining operation will be allowed in j

on long term debt issues is amortized ratably over the lives of future rates and considering the current market price level, a j

the issues' substantial portion of the Company's inv(stment may not be Pension Plans: The cost of pension plans is based upon cur-recoverable. Accordingly, the Company suspended accruing l

rent costs. amortization of unfunded past service benefits over AFC on this investment as of April 1,1981. Due to the uncertainty l

periods ranging from 15 to 40 years and amortization over 15 of future uranium market prices and operating costs over the

{

years of unfunded past service benefits arising from plan remaining productive life of the mine and of the period of utiliza-amendments. The Company's policy is to fund pension costs tion of the mine's output (through 1990) the potential loss. if any, i

accrued.

cannot be reasonably estimated.

i 1

26

NOTE 4. Short Tcrm Debt End C:nipensati'ng El:nro At December 31,1981, the Company had available $302.250,000 facilities and to purchase, or otherwise arrange for, the disposi-of bank credit arrangements consisting of a $70,000,000 con-tion of the facilities upon the termination of the Trust. The Letter tractual commitment with several banks under a Credit Agree-of Credit Facility and Revolving Credit Agreement of OFT re-ment, lines of credit of $107,250,000, and a Bankers Acceptance quire payment of fees which are based upon the amount of Facility Agreement of $125,000,000. All of these arrangements commercial paper outstanding.

are renewable on an annual basis. The Credit Agreement and The following table summarizes additional information certain of the lines of credit require the Company to maintain applicable to short-term debt:

compensating balances which are averaged over time. Cash r presenting compensating balarme requirements was not sig-nificant at December 31,1981. The Company has elected to pay

'"$gy "d8 %d'0 fees in lieu of maintaining compensation balances on its other lines of credit. The Bankers Acceptance Facility Agreement.

[,*h*'e which is used to finance the fuel oil inventory for one of the Notes payable 8 -

$ 26.000 Company's generating stations, provides for the payment of fees Commercial paper, including Oswego only upon the issuance of each acceptance.

Facihties Trust.

73,330 57,300 in March 1979, the Company entered into arrangements with Bankers Acceptances 50,000 40,000 Oswego Facilities Trust (OFT) providing for OFT to finance the

$123,330

$123.300 acquisition of a fuel oil storage terminal at Oswego, New York Weighted average interest rate (f) 13.27 %

17.53 %

and for construction of certain railroad loading and unloading For year endad December 31:

facilities associated with the terminal. OFT has a $25,000,000 Daily average outstanding

$116,230

$ 93.327 Letter of Credit Facility and Revolving Credit Agreement which Daily weighted average interest rate (f) 18.29%

13.78 %

are used to support its commercial paper obligations. The Com.

Maximum amount outstanding.

$203,430

$175.660 pany is obligated to make certain payments for its use of these (1) Excluding compensating balances and fees.

NITE 5. Capitalization CAPITAL STOCK The following table summarizes the shares of capital stock authorized, issued and outstanding:

December 31, 1981 1980 1979 Common stock, $1 par value: Authorized,

125,000,000(a) 85,000,000 85,000,000 lssued and outstanding.

83,973,252 75.231,144 67,952,043 Preferred stock, $100 par value: Authorized 3,400,000 3,400,000 3.400,000 issued and outstanding.

3,199,980 2.985.240 3.026.000 Preferred stock, $25 par value: Authorized S,600,000 9,600,000 9.600.000 1ssued and outstanding,

5,008.000 3.754.000 2.800.000 Preference stock, $25 par value: Authorized.

4,000,000 4.000,000 4,000,000 issued and outstanding.

1,000,000 1.220,000 1,360.000 (a) In May 1981, an increase of 40 milhon shares in the authonzed shares of Common stock was approved by shareholders The table below summarizes changes in capital accounts for 1979,1980 and 1981:

Non-redeemable Redeemable Redeemable preferred preferred preferred Capital stock Common stock stock stock stock premium and

($1 par value)

($100 par value)

($100 par value)

( $25 par value) expense (net)

Shares Amount

• Shares Amount

• Shares Amount

• Shares Amount

• Amount

• Balance January 1,1979:

62,180.277

$62,180 2,100.000 $210.000 964.000

$96,400 4,160.000 $104,000

$635,901 Sales in 1979 3,500.000 3,500 41,154 issued to benefit plans in 1979 2.271,766 2.272 28,198 Redemptions.

(38.000)

(3.800) 575 Balance December,31,1979.

67,952,043 67,952 2,100.000 210.000 926,000 92,600 4.160,000 104,000 705.828 Sales in 1980 4.000.000 4.000 1,020.000 25.500 50.134 issued to benefit plans in 1980 3.279,101 3.279 35.998 Redemptions.

(40.760)

(4.076)

(206.000)

(5.150) 631 Dalance December 31,1980:

75.231,144 75.231 2,100,000 210.000 885.240 88.524 4.974.000 124,350 792,591 Sales in 1981 5.000.000 5.000 250,000 25.000 1,320.000 33.000 51,706 issued to benefit plans in 1981 3,742,108 3.742 40.049 Redemptions.

(35.260)

(3.526)

(206.000)

(5.150) 859 Balance December 31,1981 83.973.252

$83.973 2.100.000 $210.000 1.099.980 $109.998" 6.088.000 $152.200"

$885.205

'In thorsands of dolldrs

• • Including sinMng fund requirements due w tthin one year 27

NON-REDEEMABLE PREFERRED STOCK (Optionally Redeemable)

The Company has certain issues of preferred stock which provide for optional redemption as follows:

Redemption price per share (Before adding accumulated dividends)

In thousands of dollars Eventual At December 11, 1981 1980 1979 December 31,1981 minimum Preferred $100 par value:

3.40% Series: 200.000 shares

$ 20,000

$ 20.000

$ 20.000

$103.50

$103.50 3.60% Series; 350.000 shares 35,000 35.000 35,000 104.85 104.85 3.90% Series: 240.000 shares 24,000 24.000 24,000 106.00 106.00 4.10% Series; 210.000 shares 21,000 21,000 21,000 102.00 102.00 4.85% Series; 250,000 shares 25,000 25.000 25.000 102.00 102.00 5 25% Series: 200,000 shares 20,000 20,000 20.000 102.00 102.00 6.10% Series: 250.000 shares 25,000 25.000 25,000 103.00 101.00 7.72% Series; 400.000 shares 40,000 40.000 40.000 107.37 102.36

$210,000

$210.000

$210.000 MANDATORILY REDEEMABLE PREFERRED STOCK The Cc,mpany has certain issues of preferred and preference stock which provide for mandatory and optional redemption as follows:

Reden ption pnce per sha'e (Before adding accumulated dividends)

In thousands of do!Iars Eventual At December 31, 1981 1980 1979 December 31,1981 minimum Pr:fitrid $100 par value:

7.45% Series; 510.000,528.000 and 546,000 shares.

S 51,000

$ 52.800

$ 54.600

$105.53

$100.00 10 60% Series; 339.980,357,240 and 380.000 shares 33,998 35,724 38.000 110.60 102.65 12.75% Series; 250.000 shares 25,000 (a)

(a)

Pr:;f rr:d$25parvalue:

8.375% Series; 1.600.000 shares.

40,000 40,000 40,000 26.76 25.00 9.75% Series; 1.068.000.1,134.000 and 1,200.000 shares.

26.700 28.350 30.000 26.80 25.00 9.75% Senes (second); 1,020.000 shares.

25,500 25,500 (b) 25.00 12.25% Series: 700.000 shares 17,500 28.06 25.00 12.50% Series; 620.000 shares 15,500 28.13 25.00 Pr:f r:nce$25parvalue:

7.75% Series; 1,080.000,1.220.000 and 1.360.000 shares.

27,000 30.500 34.000 25.83 25.00 262,198 212.874 196.600 Less sinking fund requirements.

7,450 6,950 6.950

$254,748

$205.924

$189.650 (a) Ent.re issue to be redeemed at par value of $100 per share June 30,1991.

(b) Not redeemable until Aont 1,1983.

These series require mandatory sinking funds for annual redemption and provide optional sinking funds through which the Company may redeem. at par, a like amount of additional shares (limited to 120,000 shares of the 7.45% series and 300,000 shares of the 9.75*6 series). The option to redeem additional amounts is not cumulative.

The Company's five-year mandatory sinking fund redemption requirements for preferred and preference stock are as follows:

In thousands of dollars No. of shares Commencing 1982 1983 1984 1985 1986 Pr:f:rred $100 par value:

7.45% Senes.

18.000 6:30,77

$1.800

$ 1.800

$ 1,800

$ 1,800

$ 1.800 10 60% Senes.

20.000 3'31 80 (a) 1.998(a) 2.000 2.000 2.000 12.75% Series.

250.000 6.30 91 Pr:f:rred $25 par value:

8.375% Series.

100.000 4:1 83 2.500 2,500 2.500 2.500 9.75% Series 66.000 10'180 1.650 1.650 1.650 1,650 1.650 9.75% Senes (second).

204.000 4!1 86 5,100 12 25% Senes 43.060 33187 12.50% Series 38,139 3'31 87 Pr:f r:nce$25parvalue:

7.75% Senes.

160.000(b) 93080 4.000 4.000 6.000 13.000

$7.450

$11.948

$13.950

$20.950

$13.050 (a) RequnemeNs for 1982 and a portion of 1983 requnements have been met by advance purchases.

(b) Increases to 240,000 shares at September 30.1984. the balance of the issue is to be redeemed September 30.1985, 28

LONG-TERM DEBT Long term debt and long-term debt due within one year consisted of the following:

In thousands of dollars in thousands of dollars At December 31.

1981 1980 At December 31, 1981 1980 First Mortgage Bonds:

9.95% Series due September 1,2004.

100,000 100,000 12.6% Sirias due October 1,1981

$ 125.000 10.2% Series due March 1,2005.

40,833 41,113 3%% Szries due December 1,1981 15.000 8.35% Series due August 1,2007 75.000 75,000 3%% Series due February 1,1983 25,000 25,000 8h% Series due December 1,2007.

50,000 50,000 3%% Senes due October 1,1983 40,000 40.000 Paul Smith's Electric tJght & Power &

3%% S1 ries due August 1,1984 25,000 25,000 Railroad Company First Mortgage Bonds:

10%% Stries due September 1,1985.

47,000 47,000 5%% Series due May 1,1985.

450 450 3%% Srries due May 1,1986.

30,000 30,000 Promissory Notes:

44% Series due September 1,1987.

50,000 50,000 8% Series A due June 1,2004 46,600 46,600 3%% Series due Ju,e 1,1988 50,000 50,000 14%% Series due August 11,1988.

50,000 Notes Payable:

17% Eurodollar Guaranteed Notes 4%% Series due April 1,1990 50,000 50,000 due September 15,1989.

50,000 15% Series due March 1,1991.

50,000 18% Adjustable London hterbank 4%% Series due November 1,1991 40,000 40,000 Offered Rate due September 15,1989.

17,000 4%% Series due December 1,1994 40,000 40.000 Prime rate plus %% (not to exceed 5%% Series due November 1,1996.

45,000 45,000 7%%) duein equal quarterly install-6%% Stries due August 1,1997 40,000 4C 000 ments through April 1,1984 6,250 8.750 6%% Stries due August 1,1998 60,000 60,000 Revolving Credit and Term Loan 9%% Series due December 1,1999 75,000 75,000 Agreements.

80,000 80.000 12.95% Series due October 1,2000 80,000 66.350 Revolving Credit Notes, 7h% Series due February 1,2001 65,000 65.000 floating prime rate 6,000 7%% Series due February 1,2002 80,000 80.000 Unamortized Premium.

4,486 5.844 7%% Series due August 1,2002 80,000 80.000 TOTAL LONG-TERM DEBT,

1,628,619 1,586.107 BW% Series due December 1,2003 80,000 80,000 Less long-term debt due within one year 9,250 142.500 9%% Series due December 1,2003 50,000 50.000

$1,619,369

$1,443.607 Certain of the Company's Mortgage Bonds provide for a mandatory sinking fund for annual redemption. The Company's five-year mandatory sinking fund redemption requirements for Mortgage Bonds are as follows:

Pnncipal In thousands of dollars amount Commencing 1982 1983 1984 1985 1986 Mortgag) bonds:

10.20% Series due March 1,2005.

$1,500 3/1>78

$ (a)

$ 1,333(a)

$ 1,500

$ 1,500

$ 1,500 8.35% Series due August 1,2007 750 8/1;82 750 750 750 750 750 8%% Series due December 1,2007 2,000 12/1/83 2,000 2,000 2,000 2,000 9 95% Series due September 1,2004.

5,000 9/1/85 5.000 5,000 14h% Series due August 11,1988 16,000(b) 8/11 86 16.000 12.95% Series due October 1,2000 5,333 9'30 86 5,333 9%% Series due December 1,2003 2.941 12/1,87

$ 750

$ 4.083

$ 4.250

$ 9.250

$30.583 (a) Requnements for 1982 and a portion of 1983 requirements have been met by advance purchases (b) Increases to $17.000.000 at August 11.1987.

The remaining series of mortgage bonds provide for a debt Finance N.V. and guaranteed by Credit Lyonnais. Annual bank retirement fund whereby payment requirements may be made in guarantee and support fees totaling %% of the notes outstand-lieu of cash, by the certification of additional property, the ing are paid by the subsidiary. In connection with the formation waiver of additional bonds or the retirement of outstanding and capitalization of this subsidiary, the Company also issued a bonds. The 1981 requirements for these series were satisfied by

$17,000,000 note payable which bears interest at the London the certification of additional property. The Company antici-Interbank Offered Rate, currently set at 18% through March 15, 1

pates that the 1982 requirements for these series will be satisfied 1982.

by other than payment in cash.

The Company has Revo;ving Credit and Term Loan Agree-Total sinking and debt retirement fund requirements of ments with seven banks aggregating $90 million. Each agree-mortgage bonds aggregated $10,400.000 for the year ended De-ment provides for borrowings on a revolving credit basis during cember 31,1981 and based upon the mortgage bonds then out-the first three years with the option to convert borrowings to a standing. are $9,500.000, $12,833,000, $13,000,000, $18.000.000 term basis for the last four years. Amounts converted to term and $39.333.000 for the years 1982 through 1986, respectively.

loans are payable in equal installments during the remaining Notes Payable include $50,000.000 Eurodollar Guaranteed term of the agreements. There are no penalties for early termina-Notes issued by the Company's subsidiary Niagara Mohawk tion or prepayment of these loans. The Company pays fees in 29

lieu of main:aining compensating balances for the unused por-The above tabla 'summafizes accumulated plan benefits at-tion of these credit arrangements. Interest on domestic borrow-tributable to employee wage levels and service rendered ings during the revolving credit period approximates the float-through December 31,1981 and 1980. These amounts do not ing prime rate, or under a Eurodollar option, b% above the take into consideration expected future service and the as-London interbank Offered Rate.

sociated actuarial assumptions which are considered in funding in 1981, the Company entered into agreements with the New the Company's ongoing pension plans.

York State Energy Research and Development Authority and a group of four commercial banks under which the Company may borrow up to $20 million on notes maturing no later than July NOTE 8. Information Regarding the Electric 1984, to finance a portion of its hydro-electric construction pro-ar.d Gas Businesses gram. The Company pays fees in lieu of compensating balances for the unused portion of this facility. Borrowings under these The Company is engaged in the electric and natural gas utility agreements, which aggregated $6.000.000 at December 31, businesses. Certain information regarding these segments is set 1981, are unsecured and bear interest at the floating prime rate.

forth in the following cable. General corporate expenses, prop-erty common to both segments and depreciation of such com-mon property have beet allocated to the segments in accor-NOTE 6. Jointly-Owned Generating Facilities dance with practice established for regulatory purposes. ldenti-fiable assets include net utility plant, materiais and supplies and The following table reflects the Company's share of jointly-deferred recoverable energy costs. Corporate assets consist of cwned generating facilities at December 31,1981.The Company other property and investments, cash, accounts receivable, pre-is required to provide financing for the unit in process of con-payments, unamortized debt expense and other deferred debits.

struction and for any additions to the units in service. The Com-in thousands o/ dollars pany's share of expenses associated with the Roseton units and 1981 1980 1979 Oswego Steam Station Unit No. 6 are included in the appro-priate operating expenses in the consolidated statement of in-Operating revenues:

Electric.

$1,719,933 $1,393.467 $1.211,068 come.

Gas 430,785 383.648 305.435 in thousands of dollars Total

$2,150,718 $1.777.115 $1.516.503 Construction Percentage Utihty Accumulated work in Operating income before taxes:

ownership plant depreciation progress Electric.

$ 288,990 $ 235.811 $ 200.718 Roseton Steam Station Gas 35,429 19.439 27.868 Units No.1 and 2(a) 30

$101,972

$19.878 227 Total

$ 324,419 $ 255.250 $ 228.586 Oswego Steam Station Unit No. 6.

76 249,161 10.791 3.624 p

Eiectric.

$ 360,580 $ 294,039 $ 257,954 fd (c).

41 546.414 a n iN Gas 35,729 20.027 28.231 (a) Central Hudson Gas and Electnc Corporation, the operator of the Total 396,309 314.066 286,185 pf ant. is obhgated to acquire an additional is of the Company's ongi.

Income taxes.

53,043 43.498 34.646 nal 40% interest in this unit in 1982.

Other income and deductions 29,146 21.646 14.306 (b) See Note 11.

Interest charges.

151,769 129.575 109.815 (c) Excludes amounts spent for nuclear fuel Net income

$ 220,643 $ 162.639 $ 156.030 Depreciation:

Electric,

S 91,571 $ 82,188 $ 74.957 NOTE 7. Pension Plans Gas 10,965 10.022 9.255 The Company and its subsidiaries have non-contributory pen-Total

$ 102,536 $ 92.210 $ 84.212 sion plans covering substantially all their employees. The total pension cost was $34,100.000 for 1981, $32.100.000 for 1980 and construction expenditures (including r uclear fuel):

$28,900.000 for 1979 (of which $9.300.000 for 1981, $8,500.000 Electnc.

S 424,596 $ 347,182 $ 351,972 for 1980 and $6.800,000 for 1979 was included in construction Gas 32,819 31.321 22.558 Total

$ 457,415 $ 378.503 $ 374.530 St dies indicate that the accumulated plan benefits, as de-termined by consulting actuaries, and plan net assets for the identifiable assets:

Company's plans at December 31,1981 and 1980 are as follows:

Electric.

$3,517,290 $3.203,737 $2.98 f.005 Gas 370,608 344.419 315.951 in thousands et dollars 1981 1980 Total 3,887,898 3.548,156 3.296.956 Corporate assets 288.034 260.663 231.981 Actuarial present value of accumulated Totalassets.

$4,175,932 $3.808.819 $3.528.937 benefits:

Vested

$270,000

$242.000 Non-vested 16,000 14.000 Total

$286.000

$256.000 NOTE 9. Federal and Foreign income Taxes Net assets available for plan benefits

$265.000

$250.000 Current Federal Tax Expense: The current Federal income tax expense for 1979 includes credits of $2.600,000 for investment The weighted average assumed rate of return used in deter-tax credit generated in 1979 and carried back to 1978.

mining the actuarial present value of accumulated plan benefits was 7% in each year.

Income Tax Refunds: !n 1974,1975 and 1978. the Company 30

received refunds resulting primarily from the adoption of the pany has notified the PSC of this refund and the reasons why a "guid:line" method of depreciation. These refunds, including distribution of this refund to customers should not be made.

interest net of tax, less principally amounts representing prior Pending a determination as to the ultimate disposition of this tax deficiencies paid, were recorded in Deferred Credits and refund by the PSC, the Company has recorded such amount, net totaled approximately $21,600,000 at December 31,1979. In Feb-of Federalincome taxes on the interest portion of the refund,in ruary 1980, the PSC ordered the flow-through to customers of Deferred Credits: Income tax refunds. The Company is unable to this amount (Electric-$13,300,000, Gas-58,300,000). The en-predict the ultimate disposition of this refund, tire amount, together with other mandated items and related tax investment Tax Credits: The Company deferred the net benefit effects, was recorded in Mandated Refunds to Oustomers and, of nvestment tax credits of approximately $21,500,000 ($.27 per commencmg in March 1980, is being refunded to electric cus-share), $8,000,000 ($.11 per share) and $15,100,000 ($.24 per tomers over three years and to gas customers over two years.

share) for the years ended December 31,1981,1980 and 1979, in September 1981, the Company received a refund of Federal respectively,in accordance with the general policy as stated in income tax, including interest thereon, amounting to approxi*

Note 1.

mately $13,600,000. The refund was in settlement of a refund The Company has unused credits at December 31,1981 of claim filed v;ith the Internal Revenue Service in February 1973 approximately $11,600,000 which may be utilized to reduce cur-relating to a deficiency assessment paid by the Company in Oc' rent tax expense in subsequent years. Such credits, if unused, tober 1972 as a result of an audit of the tax years 1957 through expire in 1996.

1962. The deficiency assessment arose as a result of the disal-lowance of certain deductions taken by the Company for the Components of income before income taxes:

loss of water rights at Niagara Falls terminated in connection with the redevelopment of Niagara power by the Power Author-in thousands of dollars 3,gg ity of the State of New York. In accordance with a PSC Order United States.

$247,374

$185,026

$172.215 issued in August 1981, the Company is required to notify the oreign 14.339 10.769 9.527 PSC of certain tax refunds and propose the methodology by ns a ng m a ns

(.30%

R848) which such refunds will be flowed through to customers or Income before income taxes.

$254,302

$190,486

$176.894 reasons why such flow-through should not be made. The Com-Summary Analysis:

In thousands of dollars 1981 1980 1979 Components of Federal and foreign income taxes:

Current tax expense: Federal

$ 6,996

$ 1,492

$ 1,618 Foreign 6,765 5,460 4,680 13,761 6.952 6.298 Deferred Federalincome tax expense,

39,282 36.546 28.348 Income taxes included in Operating Expenses,

53,043 43,498 34,646 Federal income tax credits included in Other Dcmne and Deductions (19,548)

(15,651)

(13,782)

Total.

$33,495

$27.847

$20.864 Timing Cfferences resulting in deferred Federallncome taxes (Note f):

Depreciation

$12,533

$12,834

$ 8,227 Cost of removalof property.

193 (127)

(1,010) investment tax credit.

21,501 7,985 15,149 Recoverable energy and purchased gas costs (1,811) 7.236 (239)

Necessity certificates.

(700)

(700)

(700)

Nuclear fueldisposal cost (12,224)

(12.383)

(5.388)

Sales and loans of nuclear fuel,

(83)

(1,304)

(5.678)

Sterling abandonment.

2,018 5,195 Gain on Roseton sale.

3.962 Other (1,693) 2,159 243 Deferred Federalincome taxes (net) _

$19,734

$20.895

$14,566 R:ctnciliation between Federal and foreign income taxes and the tax computed at pr5villing U.S. statutory rate on income before income taxes:

Computed tax

$116,904

$87.624

$81.372 Reduction attnbutable to flow-through of certain tax adjustments:

l Depreciation 9,422 8,616 13,329 Allowance f or f unds used dunng construction,

33,069 27.056 26,496 Taxes. pensions and employee benefits capitahzed for accounting purposes.

12,515 11.429 10.202 Real estate taxes on an acsessment date basis.

3,086 3.458 2,178 investment tax credit.

12,354 1,289 2,775 Deferred taxes provided at other than the statutory rate 7,424 743 6.752 Other 5.539 7,186 (1.224) 83,409 59.777 60 508 Federal and fgejgn income taxes

$33,495

$27.847

$20.864 31

NOTE 10. Supplement:ry Information to Disclose th) Effects of Chrnging Pric:s (Ur u'dited) -

Continued inflation, resulting in a decline in the purchasing Mohawk, are most significant in the areas of depreciation and pow:r of the dollar, is one of our nation's principal concerns.

utility plant and amounts owed on borrowed funds.

Inflition has an enormous impact on all sectors of the economy, in recognition of the fact that users of financial reports need including consumers, wage earners, investors, government and to have an understanding of the effects of inflation on a busi-industry.

ness enterprise, the following supplementary information is The Company's consolidated financial statements are based supplied for the purpose of providing certain information about on historical events and transactions when the purchasing the effects of both general inflation and changes in specific powir of the dollar was substantially different than at the pres-prices. It should be viewed as an estimate of the approximate ent. The effects of inflation on most utilities, including Niagara effect of inflation, rather than as a precise measure, Stittment of income from continuing operations adjus ted for changing prices for the year ended December 31,1981 in thousands of dollars Conventional Constant dollar Current cost histoncal cost average 1981 dollars average 1981 dollars Operating revenues

$2.150,718

$2,150.718

$2,150.718 Futi for electnc generation 582.033 582,033 582,033 Eltctricity purchased.

257,788 257,788 257,788

,i Gis purchased 292,863 292,863 292,863 Depreciation 102,536 248,821 304,038 Othtr operating and maintenance expenses.

591,079 591,079 591,079 l

Federal and foreign income taxes 53,043 53,043 53,043 Inttrest charges 128,160 128,160 128,160 Othtr income and deductions-net.

(77,427)

(77,427)

(77,427) 1,930.075 2,076,360 2,131,577 Income (loss) f rom continuing operations (excluding reduction to net recoverable cost),

$ 220.643 74.358'

$ 19,141 Increase in specific prices (current cost) of utility plant held during year"

$ 684,866 increase (reduction) to net recoverable cost,

$ (183.291) 158,123 Eff ect of increase in general price level (971,063)

Excess of increase in general price level over increase in specific prices af ter increase to net recoverable cost.

(128.074)

Gain from decline in purchasing power of net amounts owed 172,769 172,769 Net

$ (10,522)

$ 44.695

• Includ,ng the reduction to net recoverable cost, the income (loss) from continuing operations on a Constant dollar basis would have been $(108.933) for 1981 "At December 31,1981, current cost of utthty plant. net of accumulated depreciation, was $7,767.561 while histoncal cost or net cost recoverable through depreciation was $3.774.127.

Constant dollar amounts attempt to adjust for general infla-Fuelinventories, the cost of fuel used in generation, and elec-tion and represent historical costs stated in terms of dollars of tricity and gas purchased have not been restated from their his-equal purchasing power, as measured by the Consumer Price torical cost in nominal dollars. The recovery of energy and pur-Index for all Urban Consumers. Current cost amounts reflect the chased gas costs are limited to historical costs through the op-changes in specific prices of plant from the date the plant was eration of the Company's electric and gas adjustment clauses.

acquired to the present and differ from constant dollar amounts For this reason fuel inventories and deferred recoverable energy to the extent that specific prices have increased more or less costs are effectively monetary assets. Income taxes have not rapidly than prices in general.

been adjusted.

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

increased cost of its net investment when replacement of However, when an account could not be indexed by Handy-facilities actually occurs.

Whitman, other appropriate indices were used. The current To properly reflect the economics of rate regulation in the year's provision for depreciation and amortization on the con-Statement of Income from Continuing Operations, the increase stant dollar and current cost amounts of utility plant was deter-(reduction) of net utility plant to net recoverable cost should be mined by applying the Company's average annual depreciation adjusted by the gain from the decline in purchasing power of net rates to the indexed plant amounts.

amounts owed on borrowed funds. During a period of inflation, 32

hold;rs of monittry tssets suff:,r a' loss of gin:rtl purchasing tion on this plint is limited to the recov:ry of historic t costs, tha pow;r whila hold:rs of monitiry litbiliti:s expirirnca a gain.

Company does not have the opportunity to realize a holding Tha grin from the decline in purchasing power of net amounts gain on debt and is limited to recovery only of the embedded owed is primarily attributable to the substantial amount of debt cost of debt capital.

which his been used to finance utility plant. Since the deprecia-Fivs y:ar comparison of selected supplementary financial data adjusted for effects of changing prices in thousands of average 1981 dollars For the year ended December 31 1981 1980 1979 1978 1977 Oper ting revenues.

$2,150,718

$1.961,451

$1.900.163

$1,784.747

$1.839.761 Historical cost Information adjusted for general inflation:

income (loss) from continuing operations (excluding reduction to net recoverable cost).

$ 74,358

$ 26,454

$ 67,423 income (loss) per common share (after dividend requirements on prefIrred stock and excludmg reduction to net recoverable cost).

0.51 (0.09) 0.51 Net assets at year-end at net recoverable cost.

$1,614,015

$1.593.404

$1.635.063 t

Current cost information:

Incomi(loss) from continuing operations (excluding reduction to net recoverable cost)

$ 19,141

$ (34.083)

(2,524) income (loss) per common share (af ter dividend requirements on prifirred stock and excluding reduction to net recoverable cost).

(0,19)

(0.94)

(0.59)

Excess of increase in general price level over increase in specific prices af ter reduction to net recoverable cost

$ 187,251

$ 221,238

$ 316.677 Net assets at year-end at net recoverable cost.

$1,614,015

$1.593,404

$1,635.063 General information:

Giin from decline in purchasing power of net amounts owed

$ 172,769

$ 231.262

$ 266,468 CLsh dwidends declared per common share 1.61 1.66 1.80 1.90 1.97 Mirkit price per common share at year-end.

12.38 12.28 15.82 5

19.52 23.46 Avxrsgi consumer price index 272.4 246.B 217.4 195.4 181.5 N'iTE 11, Commitments and Contingencies Construction Program: The Company presently estimates that Also during 1980, the PSC directed Theodore Barry and As-the construction program for the years 1982 through 1986 will sociates and Canatom Limited to perform a comprehensive require approximately $1,806 million, excluding AFC and certain management audit of the Unit. This audit covered essentially the ovtrheads capitalized. By years the estimates are $371 million, same areas as the study commissioned by the co-tenants and a

$412 million, $395 million, $337 million and $291 million, respec-report thereon (the TB&A Report) was issued in July 1981. While tivzly. At December 31,1981, substantial construction commit-stating that the planned 1986 completion date is possible, the ments existed, including those for the Company's share of Unit TB&A Report states that a likely one-year slippage in schedule, No. 2 at Nine Mile Point Nuclear Station.

new regulatory requirements, higher escalation and other fac-Nine Mile Point Nuclear Station Unit No. 2: Nine Mile Point tors could increase the cost of the Unit significantly beyond the Nuclear Station Unit No. 2 (the Unit), a nuclear power plant to be current estimate. However, while recognizing that schedule constructed and operated by the Company and shared with slippage and cost increases in any major construction project other utilities, is the only major generating facility currently are always possible, the co-tenant utilities believe that the cur-undir construction by the Company. Ownership is shared by the rent cost estimate and the anticipated construction schedule are Comp;ny (41%). Long Island Lighting Company (18%), New reasonable.

York State Electric & Gas Corporation (18%), Rochester Gas and in July 1981, various parties petitioned the PSC to establish a El:ctric Corporation (14%), and Central Hudson Gas & Electric single conso4JaWd public evidentiary proceeding involving all Corporation (9%). Output of the Unit, which will have a projected of the co-tenants to consider the future of the Unit. In addition, cgpIbility of 1,084,000 kw., will be shared in the same propor-in certain co-tenants' rate proceedings, various motions were tions as the co-tenants' respective ownership interests.

made and petitions filed by intervening parties requesting a in carly 1980, the co-tenants engaged independent engineer-separate examination of the project. Also, in September 1981, ing cnd management consulting firms to perform a review of the the Staff of the PSC issued a report on a comparative analysis of Unit's estimated cost and scheduled in-service date, together the economic and financial feasibility of the Unit and coal alter-with engineering, construction and management systems at the natives. This report concluded that completion of the Unit is projict. Also, a reassessment was conducted by the Company warranted. In response to these motions and petitions and and Stone & Webster (the architect-engineer and construction based on the TB&A Report and PSC Staff's comparative tg:nt for the project). As a result of these reviews, a revised cost analysis,in September 1981 the PSC ordered an expedited pub-of $2.4 billion (exclusive of AFC and nuclear fuel) and a re-lic proceeding to inquire into the financial and economic cost scheduling of the operation date from 1984 to late 1986 were implications of completing the Unit. In December 1981, public announced in September 1980. The Company's share of the evidentiary hearings were held and briefs were submitted to the construction cost, exclusive of AFC and nuclear fuel, is now PSC. At a February 9,1982 PSC meeting the Commissioners estimIted to be $984 million ($2.214 per kilowatt).

reached a majority consensus that completion of the Unit is 33

J warranted and that no basis exists at this time to take further regulatory accounting treatraent prescribed by the PSC, the action regarding abandonment of the project.The Cornmission-Company's primary rate satting body. Although FERC has rate-ers also concurred with the PSC Staff's recommendation that making jurisdiction ever only about 10% of the Company's elec-the co-tenants must emphasize their attention to the project's tric revenues, representing sales to other electric systems and cost and schedule to minimize its impact on ratepayers and revenues from transmission of energy, it has the power to pre-indicated their intention to closely monitor construction ac-scribe books of account on which reports to stockholders are livities. In addition, the Commissioners decided to explore the based. Due to the extensive jurisdiction which the PSC has over feasibility of instituting a yet undefined incentive program that the Company's affairs,it is the opinion of the Company that the i could cause the return on the equity portion of theinvestment in financial statements based on the requirements of the PSC rep-f the Unit to vary depending on a variety of items related to the resent the proper presentation of the financial position and the project's ultimate cost and completion date. A formal PSC deci-results of operations of the Company.

sion is expected upon completion of its review of the feasibility Sterling Nuclear Station: As a result of a January 1980 dec.e-of instituting an incentive program. The Company is unable to sion by the New York State Board on Electric Generation Siting predict what recommendations or actions may arise as a result and the Environment to vacate the construction permit it had of this review or what further actions,if any, may be brought by previously issued because it could no longer find a public need the intervening parties.

for the proposed jointly-owned Sterling Nuclear Station generat-Long-term Contracts for the Purchase of Electric Power: At ing facility, the project was discontinued. The PSC has permit-January 1,1982 the Company had contracts to purchase electric ted the Company to accrue AFC on the discontinued project, power from the following generating facilities owned by the Through December 31,1981, the Company's costs associated Power Authority of the State of New Yo k (PASNY):

with its 22% interest in the project, when reduced for Federal Expiration Purchased Estimated income taxes, approximated $18,000,000 including AFC. The date of capacity annual Company, together with the other co-owners, petitioned the F.acihty contract in kw capacity cost PSC to seek recovery of these and all subsequently incurred St. Law rence-costs associated with cancellation of this project. In January hydroelectric project 1985 115.000 $ 1.380,000 1982, the PSC granted the Campany permission to commence 1990 1,122,432 13,469,000 recovery of its costs, together with carrying charges on the un-rEproject oe e recovered balance, over a three year period. The Company ex-Blenheim-Gilboa-pumped storage pects to commence recovery in March 1982.

generatmg station.

2002 550,000 12,540,000 Fit Patrick-nuclear plant year-to-116.000*

10.456,000 year basis NOTE 12. Quarterly Financial Data (Unaudited) 1.903.432

$37.845.000 -

Operating revenues, operating income, net income and earn-

• 98.000 6 for winter of 1982-83 ings per common share by quarters for 1981,1980 and 1979 are shown in the following table. The Company,in its opinion, has The purchase capacities shewn above are based on the con-included all adjustments (consisting only of normal recurring tracts currently in effect. The estimated annual capacity costs accruals except for giving effect to the deferral of Oswego Unit,

are subject to price escalation and are exclusive of applicable No. 6 investment tax credit during the quarter ending December energy charges.

31,1979-see Note 1) necessary for a fair presentation of the litigation: In 1978, several electric customers brought suit results of operations for the quarters. Due to the seasonal nature against the Company and PASNY requesting that certain power of the utility business, the annual amounts are not generated evenly by quarter during the year.

purchased from PASNY be allocated exclusively for their benefit and are asking monetary damages for the difference between rates chargnd by the Company and rates that would otherwise Orerating e

g Ne Earnings per have been charged if this power had been furnished to them Quarters ended revenues income income common share since the initiation of the suit in 1978 and for the six years prior December 31 thereto A settlement was reached wherein these electric cus-1031

$529.844

$63,879

$52,063

$.52 tomos will receive an initial allocation and thereaf ter an in-1980 479,512 52.085 37,756

.41 creased allocation (through December 31, 1987) when their.

1979 416,066 41.570 28,005

.31 proposed plant expansion activities are completed. No mone-September 30 tary damages were awarded and the settlement will not affect 1981

$481,377

$60,831

$48,500

$.48 the consolidated financial statements of the Company.

1980 379.705 37,742 26.020

.25 1979 335.944 34,764 25,511

.29 FERC Audet: During 1979, the staff of FERC conducted a com-June 30 pliance audit of the Company covering the years 1973 through 1981

$528.216

$69.303

$55.696 S.61 1978. All of the adjustments proposed by FERC have been re.

solved and recorded by the Company except certain adjust-ments concerning the base cost of nuclear fuel on which AFC should be applied. The resolution of these adjustments has been March 31 1981

$611.281

$77,363

$64.384

$.76 deferred pending the development of generic rulemaking3 by 6

the FERC concerning accounting for nuclear fuel. If the asso-60'

~86 ciated recommended adjustments are sustained by FERC, the resulting reduction in retained earnings would approximate

$26,000,000 through 1981. The Company believes that the ad-justments are not justified and is contesting them. The recom-mended adjustments result from FERC staff taking exception to 34

Selected financial data 1981 1980 1979 1978 1977 Operations:(000's)

Operating revenues

$ 2,150,718

$1.777,115

$1.516.503

$1.280.248

$1.225.832 Net income 220,643 162.639 156.030 141.162 123.832 Common stock data:

Book value per share at year-end

$17.36

$17.25

$17.33

$17.14

$16.95 Earnings per average common share.

2.35 1.87 2.00 1.89 1.74 Davidends paid per common share 1.61 1.50 1.44 1.36V 1.31 V:

l Capitalization:(000's) l Common equity

$1,457,934

$1.298.001

$1.177.725

$ 1.065.976

$ 968.236 l

Non-redeemable preferred stock 210,000 210.000 210.000 210.000 240.000 Redeemable pref erred stock 254,748 205.924 189,650 198.600 126.400 Long-term debt 1,619.369 1.443.607 1.443.056 1.414.997 1.394.387 Total 3,542,051 3.157.532 3.020.431 2.889.573 2.729.023 First mortgage bonds maturing within one year 140.000 80.000 Total 3,542,051 3.297.532 3.100.431 2.889.573 2.729.023 l

Capitalitation ratios (including first mortgage bonds maturing wrthon one year):

Common stock equity 41.2*a 39.4's 38.0*b 36.9'b 35.5'6 l

I Preferred stock 13.1 12.6 12.9 14.1 13.4 Long-term debt 45.7 48.0 49.1 49.0 51.1 Financial ratios:

Raho of earnings to fued charges 2.63 2.43 2.61 2.58 2.49 Ratio of earnings to fixed charges and preferred stock dividends 2.10 1.93 2.03 1.95 1.90 Otner ratios *.of operating revenues:

~

Fuel, purchased power and purchased gas 52.6 51.8 48.6 44.5 44.6 Mair.tenance and depreciation 10.3 10.8 12.1 12.6 13.2 Total taxes.

11.2 11.9 12.4 13.5 13.6 Operating income 12.6 11.9 12.8 14.4 14.7 Dalance available for common stock 8.7 7.5 8.5 8.8 8.0 Rat.o of depreciation reserve to gross utility plant 27.1 27.0 26.3 26.2 25.6 Ratio of mortgage bonds to net utility plant 39.0 43.4 47.0 46.7 48.6 Miscellaneous:(000's)

Gross additions to utility plant.

$ 457,415

$ 378.503

$ 374.530

$ 316.'280

$ 289.931 Total utility plant 4,985,315 4.563.309 4.218,528 3.905.374 3.647.274 l

Accumulated depreciation and amortization.

1,348,738 1.232.675 1.110.563 1.021.417 935.212 i

To*al assets.

4.175.932 3.808.819 3.528,937 3,189.112 3.019.054 i

l l

l l

h l

\\

35

Electric and gas statistics ELECTRIC CAPABILITY ELECTRIC STATISTICS thouunds ot ado *.Kfs 1981 1980 1979 A: Jar %ary 1 1982 1981 1989 Electric sales + vo, s or no nrs j h'j"*

Resider tial.

8,459 8.333 8.269 g

Huntley Niagara River.

705 10 785 785

"'266 Dunkirk Lake Ene 540 7

600 585 273 274 Municipal serwce.

Total coal fuel

,.. 1,245 17 1.385 1.370 Other electnc systems 3.111 2.921 3.022 Residuat oil fuel 32.890 32.588 33,315 Albany. Hudson River" 400 5

400 400 Oswego. Lake Ontarao.

1,736 24 1.821 1.200 Electrit,tevenues i rnouseds of dm.nj i

Residential.

. $ 483,852 $ 404.899 $ 357.818 Roseton. Hudson River.

3 58 5

357 360 Msddle de stillate o,1 fuet Commercial.

578,186 463.315 393.173 20 Combustion turb,ne industnal 429,870 344.053 312.833 and diesel units.

310 4

310 3 54 Municipal serwce 31,274 27,147 23.832 Total oil fuel.

. 2.804 38 2 888 2.314 I

Other electnc systems 137,341 106.429 83.188 M scellaneous.

59,410 47.614 40.224 Nuclear fuel Nine Mile Point. Lake Ontano 610 8

610 610

$1.719.933 $1.393 467 $ 1.211.068 Purc hased-Electric customers tave age, Residential.

1,223,484 1.217 214 1.206.459 F iPatr ck. a e Ontar 116 2

141 154 Commercial.

131,119 131.210 130.119 Totalnuclearfuel....

726 1b 751 764 Industrial 2.807 2.896 2.906 O_ther.

3,232 3 222 3 189_

Total the_rmal sources.._.....

4,775_. _.6._5_ _1_024 4.448 I

Owned and leased hydro stations (81).

650 9

733 733 Residentlah4,eragej Purchased-firm contracts Ar'nu ai k w-hr. use Power Authonty-Niagara River.

1,122 15 1,122 1,122 per customer 6,914 6.343 6.8 54 Power Authonty-l St Lawrence River.

115 2

115 115 i

Cost to customer per kw-hr.

5.72C 4 btic 4.33e 1

Annual revenue Power Authonty-Blenhmm-Gdboa per customer

$335.47 $332.64 $2% 58 Pumped Storage Plant

$50 8

550 550 i

Other 67 1

75 76 Total hydro sources 2,504 35 2.595 2.5 %

l G AS ST ATISTICS,

1981 1980 1979 Totai capability' 7,279 100 7.619 7.044 Cas safs @cusm e wm 3g39

,a) i 3 97c Resivelt af.

51,701 51 121 51 895 Electric peak load during year.

5,616

'5.543 5.641 l

Co nmercial.

26.342 23.333 23.415 A ant.e capatory can te.ncreased donna nean load re.cas 6 p roases industrul 26,826 21.647 17,109 imm neetmng mte conrected systerns Hyeo station L@bdity.* r,ased on Other gas systems 4,889 4.720 4.199 ange De c enw st eam eon cond,t,ons 109,75'8 1'01I321 96.6iti

~

"Come ted in 1981 to bum neurai gas (n *ed as om tu a fuei Gas revenues r Trousa"es of apa si Residential.

$222,280

$209.416

$176,567 ELECTRICITY GENERATi:D AND PURCHASED dt.inons et6. ha e Commercial.

102,727 89.088 71.139 1981 N

1980 1979 s

Industnal 89,337 69.506 46.260 a

Thermal:

Other gas systems 13,795 13A55 10.014 M'scellaneous.

2,646 2.183 1.455 Generated Coal 7,046 20 7.213 20 7 275 20

$430,785

$383.648

$305 435 Oil.

7,044 19 7,392 21 g.534 24 g

Nuclear 3,270 9

4.538 13 4,005 8

Natural gas.

681 2

Residential.

393,182 388.720 383.617 Commercial.

30,564 29 632 29 009 j

industnal 510 530 525 ear f om

[

Other.

2 2

2 Pcwer Authurity 690 2

934 2

722 2

Total thermal.... 18,731 52 20.077 56 19.536 54 1

424,278 4',6 934 412.153 Hydro:

Residential, Average, GeneraSd.

3,700 to 3.1/ 5 9

3,641 10 Annual use per customer 1

I f ce=#ew s ).

131.5 131 5 135 3 Purchased f rom l

Cost to customer Power Authonty 8,522 24 8.9M 25 8.263 23 Total h ydro 12,225 34 12.100 34 11.904 33

{

@ de are -

$4.30

$4.10

$3 40 Other purchased pow er-Annual revenue per customer

$565.34 $538 73 $460 27 14 3 616 1;

,621 13 Total generated 4.M.,7_

_v anous_sourc_es Maximum day gas and purchased 35.863 100 35,793 100 36.061 100 sendout e re%.

824,777 740.594 750 666 36

---

A

m smummmmmmmmmmmmma

)fHcers Directors Investor notes

>hn G. Hashi, Jr.

James Bartlett Dividend Reinvestment Plan

, airman of the Board and Executive Vice President, Syracuse Stockholders are encouraged to enroll nef Executive Off.cer in Niagara Mohawk's popular Dividond Thomas J. Brosnan "I "

[o*nt' Consultant (formerly Vice President-Research and Reinvestment and Stock Purchase Plan, Development. Environmental Matters), Syracuse which offers new tax-deferral features.

imse Eartlett See page 15

.ecutive Vice President Edmund M. Davis chard C. Clancy Partner, Hiscock, Lee, Rogers. Henley & Barclay, Annual Meeting

.nior Vice President attorneys-at-law, Syracuse The annual meeting of stockholders will W am J. Donlon h W m Map, % at h h no cePre ident President Syracuse pany's main office in Syracuse. A formal

.hn M. Haynse onior Vice President Edward W. Duffy notice of meeting, proxy statement and imse J. Miller Chairman of the Board and Chief Executive Officer, proxy form will be sent to holders of inior Vice President Manne Midland Banks,Inc., a bank holding company, Buffalo common stock in early April.

ihn H.Ter' John G. Haehl, Jr.

Transfer Agents

~.'

[nera ounsel n Secretary Chairman of the Board and Chief Executive Officer Syracuse Preferred Stock and Preference Stock:

ichard F.Torrey Edwin F.Jaeckle Marine Midland Bank, N.A.

nior Vice President Senior Partner,useckle, Fleischmann & Mugel, 140 Broadway, New York, N.Y.10015 ansld P.Dios attorneys-u-law. Butf alo Common Stock:

ce President-Engineering Lagman Martin Morgan Guaranty Trust Company t

ahn J. Ehlinger Consu! tant (formerly Senior Vice President and of NewYork

+

ce President-Employee Relations G'"8' C U"S'I) S '8CUS*

Y lillem C. Frankfin 30 W. Broadway, New York, N.Y.10015 lce President-Purchasing Baldwin Maull Disbursing Agent

.hn P.Hsnnessey Director of various corporations, New York Preferred, Preference and Common ce President-Management Mertha Hancock Northrup Stocks' stems and Services Housewife, former President, Crouse-trying Memorial Niagara Mohawk Power Corporation omas E. Lempges Hospital Board. Syracuse 300 Erie Boulevard West ce President-Nuclear Generation ontid L MacVittle Frank P.PIskor Syracuse, N.Y.13202 ce President-Fossil Generation President Emeritus, St. Lawrence University, Canton g

ugsne J. Morel Donald B. Riefler Common and Certain Preferred Series:

a9emIn ha nan, Sources andses oUunds Commmee, Listed on New York Stock Exchange rvices nd Risk M Morgan Guaranty Trust Compy ? of New York, mmsa F. Morrell commercial bank, New York Co'nmon Stock:

ce President-Corporate Planning Abo traded on Amsterdam (Nether-res'ident System Project eside t. A Swyer Company,inc., builders and lands), Boston, Cin cin nati, Midwest, e

t anagement construction managers, Albany Pacific and Philadelphia stock

anges, snnsth A.Tramutola John G. Wick fe* P Cox, Barrell Walsh, Roberts & Grace, attorneys-at-law.

Ticker symbol: NMK s n as and ns U"8' obert M. Ctsery, Jr.

Form 10-K Report e

ce President and General A copy of the Company's Form 10-K re-unager-Western Dmsion port filed annually with the Securities

~

tymond Kolarz BOARD COMMITTEES and Exchange Commission is available ce President and General lanager-Central Dmsion Executive Committee af ter March 31,1982 by writing the

___=_

ichard H. Kukuk John G. Haehl, Jr., Chairman Treasurer at 300 Erie Boulevard West, ce President and General Edmund M. Davis Syracuse, N.Y.13202.

'anager-Eastern Division Edwin F.Jaeckle nthony J. Baratta, Jr.

Frank P. Piskor ontroller Baldwin Maull ohn W. Powers John H. Terry, Secretary Compensation Committee w

P. Gu eth, Jr.

ssistant General Counsel Baldwin Mault, Chairman Edwin F.Jaeckle erman B. Noll ssistant General Counsel Edmund M. Davis L'*iSA S*Y

ficholas L Prioletti, Jr.

ssistant Controller Audit Committee d2m F.Shstfer Edward W. Duffy. Chairman ssistant Controller Lewis A. Swyer lanry B. Wightman, Jr.

Frank P.Piskor

,f ssistant Contro!!er b__

Cornmittee on Corporate Public Policy arold J. Bogan Frank P. Piskor, Chairman ssistant Secretary Martha H. North rup ossph F. Clsary Lew s A. Swyer ssistant Secretary i

John G. Wick redarick C. McCal1, Jr.

ssistant Secretary Finance Committee The information in this report is not given in con-llchard N. Wescott Donald B. Rief f er, Chairman nection with the sale of, or offer to buy, any N

ssistant Treasurer John G. Wick security.

4tvea Dec 3f,1987 Edmund M. Davis printed in u.s A.

37 m

=

Y NIAGARA N u MOHAWK 100 E Alf BOUL E VARD WE ST SYRACUSF NE W YORK 13202 Day begins for Niagara Mohawk service representative with drive down country road on trouble call to customer s home About 400 dedicated service personnel stand ready to respond to consumer energy emergencies any hour day or nignt e

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