ML17261A110

Annual Rept 1978.

ML17261A110
Person / Time
Site:	Ginna
Issue date:	12/31/1978
From:	ROCHESTER GAS & ELECTRIC CORP.
To:
References
NUDOCS 7904090169
Download: ML17261A110 (66)

Text

AnnualReport.foryearendedDecember31,1978ContentsHighlights 2LettertoShareholders 3ElectricOperations 5GasOperations 6ResearchandDevelopment 6TheRisingCostofDoingBusiness8Financial Statements 14Management's Discussion andAnalysisoftheSummaryofOperations 22Financial andStatistical Information 23Directors 28Officers(insidebackcover)Shareholder Inquiries Communications regarding stocktransferrequirements, lostcertificates ordividendpaymentsmaybedirectedtoLincolnFirstBank,N.A.Otherinquiries shouldbedirectedtoD.W.Caplc,Secretary andTreasurer attheCompany.TheCompanywillprovide,withoutcharge,acopyoftheAnnualRcportonForm10-KfiledwiththeSecurities andExchangeCommission withrespecttofiscalyear1970,uponwrittenrequestofanyshareholder addressed lotheSecretary.

Principal 0(gee89EastAvenueRochester, NewYork14649(716)546-2700Financial ContactPaulW.BriggsPresident AnnualMeetingMay16,1979AtRochester, NewYorkNewYorkStockExcltange SymbolRochester CasandElectricCorporation CommonStock-RCS TransferandDividendDisbursing AgentLincolnFirstBank,N.A.StockTransferDepartment PostOfficeBox1250Rochester, NewYork14603Registrar SecurityTrustCompanyofRochester OneEastAvenueRochester, NewYork14630Co-transfer AgentMorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015 Co-registrar TheChaseManhattan Bank,NA.OneChaseManhattan PlazaNewYork,NewYork10015 AgentforAutomatic DividendReinvestment PlanLincolnFirstBank,N.A.Automatic DividendReinvestment ServicePostOfficeBox1507Rochester, NewYork14603BondTrusteeandPayingAgentBankersTrustCompanyPostOfficeBox310ChurchStreetStationNewYork,NewYork10015 a'cs-2@0tPAfter-~oqtevoveiP V9040901(o't Highlights 19781977%ChangeCommonStockEarningsperweightedaverageshare.Numberofshares(000's)WeightedaverageProformaweightedaverageafterstockdividendpaidinfollowing year(SeeNote)ActualnumberatDecember31Numberofshareholders Pricerange(SalesonNewYorkStockExchange) 1stquarter.2ndquarter3rdquarter.4thquarter.......,

..Cashdividends paid(100/staxable)1stquarter.2ndquarter..3rdquarter.4thquarter.Stockdividendpaid(SeeNote)SalesandRevenuesElectricity tocustomers Kilowatt-hours (000's).Revenue(000's)Electricity tootherutilities Kilowatt-hours (000's).Revenue(000's)GasTherms(000's)Revenue(000's)SteamPounds(000's)Revenue(000's)TotalrevenuesOperating Expenses(000's)ElectricandsteamfuelsPurchased electricity Purchased naturalgas.Wagesandbenefits..Depreciation Taxes-local, stateandotherFederalincometaxeschargedtooperations OtherexpensesTotaloperating expensesCapitalExpenditures, lessallowance forfundsusedduringconstruction (000's)NetUtilityPlantatDecember31(000's)NumberofEmployees

$2A613,77414,18714,73348,148HighLow21y217r/s18t/s17s/s19'/s1818'/41GYz$.35.35.3G.363%5,102,923

$202,6311,445,391

$28,G7G433024$1185312,963,500

$19,110$368,948$58,14019,33771,10954,39022,20645,93511,04137,541$319,699$112,552$810,01G2,622$2.1212,47412,84812,89044,135HighLow20%17s/s20s/s1821'/419'/s21/s19'.32.32.35.353%4,938,3G2

$179,9401,453,590

$2G,403420,438$105,7972,950,287

$19,004$331,144$56,99313,63562,08650,31821,05343,8763,85834,548$28G,3G7$98,091$722,7802,6241010149242158551869121512313312Note:The20thannualstockdividendwaspaidFebruary23,1979attherateolthreepercent.

projectsubsequently advisedtheSitingBoardthattheoperational datefortheplantcouldbeextendedto1988iftheupdatedgrowthestimates provedtobeaccurate.

RG8tEcontinues topursuetheauthorization fortimelyconstruction oftheSterlingplantbasedonstate-wide needsaswellascustomerneedsontheRochester system.Althoughconstruction costesti-matesinaninflationary economyhavegreatlyappreciated duetothedelaysincompletion dateoftheproject,itisouropinionthatthisplantrepre-sentsthebestandmosteconomicoptionformeetingelectricenergydemandsinNewYorkStateandtheRochester system.Wepetitioned thePSCinMay1978forrateincreases amounting toatotalof$48.7millioninadditional revenue,consisting ofan8.9percentgasrateincreaseanda17.8percentincreaseinelectricrates.Theproceeding isinitsfinalstagesandthePSCdecisionisexpectedtoberenderedinlateAprilwiththenewratestotakeeffectinMay.TheSeptember 1978saleofanadditional 1,250,000 sharesofcommonstockrealized$23.4millioninnewcapital.InDecember1978RG5Ecompleted theprivateplacement withinstitutional investors of$40millioninfirstmortgagebondsat9.5percentinterest.

Morethan18percentofholdersofcommonstockarenowparticipating intheCompany's Auto-maticDividendReinvestment Planascomparedwith11percentwhenthePlanwasinitiated in1974.During1978,theyinvestedmorethan$3.7millionin206,427newsharesofcommonstock.Wehaveconsistently expressed supportforthecreationofEmpireStatePowerResources, Inc.(ESPRI).Thisplanwouldhaveallowedpowercompanies inNewYorkStatetojoinincommonpowerplantlicensing, financing andplantopera-tion,yetsustaintheautonomyofthecompanies.

Theplanwouldhavebenefited customers throughlowergenerating coststhanwouldotherwise bepossible.

Theprojected savingstoRGREcustomers alonethroughtheyear1998wouldapproach$Ibillion.InFebruary1979,afterfiveyearsoflengthydeliberations, thePSCtookaninformalpollthatindicated thattheproposalwouldbedisapproved.

Wearestillawaitingtheformaldecision.

Theverdictisverydisappointing, andthehighercostsitwillproduceforthelong-suffering consumers cannotbejustified, inouropinion.Onceagain,thePSCreportedthatRG&Ehadthelowestnumberofcustomercomplaints percapitaofanypowercompanyinNewYorkState.Thesefiguresaresupported byourownconsumersurveysthatshowcustomers givetheCompanyveryhighmarksforthequalityandreliability ofitsservice.Thecreditgoestoourfineemployees.

Weanticipate modestincreases indemandforbothelectricity andnaturalgasin1979.Gassuppliesaresufficient andwewillcontinuetoexpandgasspaceheatingservicewhilebalancing knownsupplywithanticipated demand.Totalkilowatt-hoursalesofelectricity tocustomers areprojected toincrease3.1percent.Ourserviceareaisexpectedtorealizethisgrowthdespitetheadverseeconomic,factorsthathavesignificantly diminished loadgrowthinotherareasoftheState.Expenseswillcontinuetoincrease, withtaxesestimated togoupby7.7percent.Capitalexpendi-tureswillgoupto$115million,excluding AFDC.Althoughweretainamarkedlypositiveviewofthefutureinourservicearea,effortstoimproveperformance asautilityareregularly hamperedbyeventsandcircumstances largelyoutsideourcontrol.Thecostsassociated withvirtually everysegmentofourbusinesscontinuetorise,andinfla-tionarypressures willundoubtedly necessitate furtherincreases inourratesfornaturalgasandelectricity.

Thecostproblemsarecompounded byaregu-latoryenvironment thatfrustrates ourattemptstobuildthegenerating capacitythatwillberequiredifthereistobeeconomicgrowthinNewYorkState.Alongwithincreased taxes,theburdensofexces-siveregulation andextraordinary regulatory delaysarepassedontoourcustomers asincreased prices,andthisfurthercompounds theproblemsfacedbybusinesses andconsumers withinourservicearea.Theseproblemsaresoimportant thatwehavetakentheunusualstepofpreparing aspecialsectiontothisreportthatcanbefoundonpageeight.Wehopeyouwilltakethetimetoreadit.FrancisE.Drake,fr.ChairmanoftheBoardandChiefExecutive OfficerPaulW.BriggsPresident KeithW.AmishExecutive VicePresident March15,1979 ToShareholders:

Afteradisappointing yearin1977,commonstockearningsin1978rebounded to$2.46pershare.Thisrepresents anincreaseof34cents,or16percentmorethanthe1977earningsof$2.12pershare;asubstantial improvement, especially sincetherewere1.3millionadditional sharesoutstanding during1978.EarningscontinuetobeaffectedbytheweakeconomyoftheState,byinadequate raterelief,andbyincreasing costs,including thoseduetoinflation andgovernment regulation.

Althoughearningshaveimproved, theyarenotatthelevelwebelievetheyshouldbe.Ontheplusside,someencouragement canbetakenfromtheStategovernment's moreseriouseffortstoretainandattractbusinessandindustry.

Dividends paidpercommonsharefortheyeartotaled$1.41,12centsmorethanthe$1.29paidthepreviousyear.Additionally, athreepercentcommonstockdividendwaspaidinFebruary1979.

Thisisthe20thconsecutive yearinwhichastockdividendhasbeenpaid.Totalcustomerrevenuesfor1978were$340.3million,a12percentincreaseover1977customerrevenuesof$304.7million.Revenuefromelectricsalestootherutilities rose8.6percentin1978andtotaled$28.7million.Thegainresultedfromasustained strongmarketforRG8rE'scoal-fired elec-tricitythroughtheNewYorkPowerPooltoutilities thatwouldotherwise havetorelyonthemoreexpensive oil-fired electricgeneration.

Thesesalesbroughttotalrevenuesfortheyearto$369.0million,an11percentincreaseover1977.Kilowatt-hour salesofelectricity tocustomers increased 3.3percentfortheyear.Industrial kilo-watt-hour salesledgainswithasixpercentincreaseover1977,arelatively stronggrowth.Residential kilowatt-hour salesincreased 2.5percent.Naturalgassalesinthermswereup3.1percentover1977.Thegainisattributed primarily tocolderthannormalweatherandtheadditionofmorethan2200gasspaceheatingcustomers following the1977liftingofaNewYorkStatePublicServiceCommission (PSC)prohibition onadditional gasservice.Theperformance oftheGinnanuclearpowerplantwasexcellent.

Theplantwasavailable 81percentofthetimeduringtheyearandhadregaineditsmaximumdependable capacityof470,000kilowatts following theMay1978installation ofanewturbinerotor.Thusthenuclearpowerplanteconomically provided60percentoftheelectricity onourownsystemand,whencomparedwithanequivalent amountofenergygenerated byacoal-firedplant,savedourcustomers

$32millioninfuelcostsfortheyear.Operating expensesrose11.6percent,goingto$319.7millionin1978from$286.4millionin1977.Fuelexpense,including purchased electricity andrttnKeithW.AmishFrancisF,Drake,/r.PaulW.Briggsgas,wentup12.0percent,anincreaseof$15.9million.Employeewagesandbenefitsexpenseincreased 8.1percent,or$4.1millionover1977.Thetotalnumberofemployees, 2622,wasreducedbytwoovertheyearwhilethenumberofcustomers continued toincrease, resulting inimprovedproductivity.

Employeeovertimewaskepttoaminimum.Taxes,including Federalincometax,increased

$9.2millionover1977,or19.4percent.Capitalexpenditures for1978were$112.6million,excluding Allowance forFundsUsedDuringConstruction (AFDC).Thiswas15percentmorethanthe1977capitalexpenditure of$98.1million.Atotalof$38.7millionwasrequiredduring1978foradditional electricgenerating capacity.

Thisincluded$3.6millioncapitalinvestment inourproposedSterlingnuclearpowerplantproject,$12.2millionfora24percentshareofNiagaraMohawkPowerCorporation's Oswego~6oil-fired plant,-and

$22.9millionfor14percentofitsNineMilePoint~2nuclearplant.TheNiagaraMohawkplantshavebeenrescheduled tobeoperational in1980and1984respectively.

Theselateroperational dateswillnotaffecttheCompany's abilitytomeetprojected increased customerelectricdemandunlessweshouldexperience anincreaseinthepresentgrowthrateofelectricuse.Plansforaproposed1,150,000 kilowattnuclearpowerplantatSterling, NewYorkawaitreinstate-mentofacertification fromtheNewYorkStateBoardonElectricGeneration SitingandtheEnvi-ronment.Injanuary1978thisBoardgrantedaconstruction certificate fortheSterlingplantwithanoperational targetfortheyear1986.TheBoardsuspended thecertificate inMay1978andrequested furtherproofof"need"fortheunit.Basedonupdatedloadgrowthprojections that.showedlowerelectricloadgrowthintheStateasawhole,theSitingBoardfelttherewasaquestionastothenecessity fortheunitinthetimeframeorigi-nallyrequested.

ThefourpartnersintheSterlingL ElectrictoourKilowatt-Hour SalesCustomers byClassesmillions1500LIdeTotalElectricKWHSalesInMillionsYearTotal19785103197749381976480619754521197444081973454019724292197139821970380219693578iUusULUU1969707172737475767778GasThermSalestoourCustomers byClassesLI'TotalCasThermSalesInMillionsYearTotal1978433197742019764681975424197445419734351972469197144219704251969403meicral~LLJU'50InusialIJ'iIJUUOthert01969707172737475767778RC&Eengineers designedanuncommontypeolgaspipelinesupportinthisbridgethatcrossestheBargeCanal.Thesupportcablesareunderneath thepipeinsteadolabove.GasOperations SupplyAdequateRG&E'ssupplyofnaturalgas,undercontractwithConsolidated GasSupplyCorpora-tion,remainsadequate.

Deliveries ofliquefied naturalgas(LNG)fromAlgeriatooursuppliercontinueonschedule, adding15percenttothesupplier's capacity.

This,combinedwithincreasing yieldsfromthesupplier's Louisiana offshorewells,providesassurances foradequategasvolumesinmeetingexistingandprojected demands.NewGasServiceRG&Einstalled morethan1300gasservicelinestonewresidential, commercial andindustrial customers in1978.Including heatingsystemconversions, morethan2200gasspaceheatingcustomers wereaddedduring1978.Thisexpansion followedPublicServiceCommission approvalin1977oftheCompany's petitiontolifttheprohibition onaccepting neworaddi-tionalgasservice.Theadditional serviceshavehelpedslowthedeclineintotalgasdeliveries seenoverthelastseveralyearsthatresultedfromcustomerattrition andconservation.

RG&Eestimates thatmorethan3400spaceheatingcustomers willbeaddedin1979including newhomes,commercial establishments andheatingsystemconversions.

ThermBillingLiquefied naturalgas(LNG)hasahigherheatvalue(BTU'spercubicfoot)thanthedomesticgaswehavepreviously received.

WhenLNGismixedwithdomesticgas,asinthesupplier's deliverytoRG8E,thethermalvaluevaries.Forthisreason,RG&Ehaschangeditsgasbillingfromhundredsofcubicfeettotherms,onethermbeingonehundredthousandBTU's.StartinginMay1979,agascustomer's billwillbecalculated according totheaverageheatvalue(therms)usedduringthebillingmonth.Whilethisnewsystemshouldhavenoeffectontheamountofthecustomer's bill,itensuresthattheCompany's gasrevenueswillmoreaccurately reflecttheheatvalueofthegassold./%4~iNResearchandDevelopment In1978RC&Einvested$2.8millioninresearchanddevelopment projects.

Halfofthatamountwasdirectedtonation-wide utilityindustrysupported researchorganizations aswellastheresearcharmofNewYorkStateutilities, knownbytheacronymESEERCO.OnesuchESEERCOprogramhelpssupportthenuclearfusionexperiments attheUniversity ofRochester.

TheNewYorkStateEnergyResearchandDevelopment Authority directlyassessedRG&E$600,000forstategovernment spon-soredresearchanddevelopment projects.

Theotherhalfoftheresearchanddevelopment fundswasallocated toCompany-sponsored and-coordi-natedprojectssuchasthegasfurnacedemonstration programinwhichanumberofresidential gasfurnaceshavebeenmodifiedfortestpurposesinanattempttoimproveefficiencies.

Sofar,anaveragegassavingof17percenthasbeenachievedinthetesthomeswhilemaintaining comfortable heatinglevels.Abroad,nationalprogramtoencourage development ofnuclearsteamgeneration equipment andmaintenance improvements wasinitiated in1978andisco-sponsored byRC8E.Theresearchonanovelbackhoesafetyshutoffsystemthatwillpreventaccidental damagetounderground cableandpipelinehasproducedaprototype thatwillbefield-tested thisyear.InanotherresearchareaunderRG8Ecoordina-tion,datacollected fromseveralutilities wereanalyzedtodetermine spawninghabitsoffishalongthesouthernshoreline ofLakeOntario.Inall,RG&Edirectlysupported morethan40researchanddevelopment projectsin1978.Management Appointment JosephJ.HartmanwaselectedtothepositionofVicePresident, CasandTransportation bytheboardofdirectors effective December1,1978.Hesucceeded ElvinA.Skibinski whoretiredafter33yearsofservice.Mr.HartmanjoinedRC&Ein1946asaco-opstudentintheGasDepartment.

Heheldaseriesofengineering posi-tionsintheGasDepartment until1974whenhewasappointed Superin-tendentofGeneralMaintenance.

ElectricOperations Generation Overthepastfewyears,threeincidents ofbladefailuresinoneoftherowsofalowpressureturbinerotorattheGinnanuclearpowerplanthadreducedplantavailability-thepercentage oftimetheplantisinservice.In1976,forexample,theplant'savailability wasonly58percent.Atemporary modification totheturbinefollowing thethirdbladefailureallowedcontinued plantoperation, butonlyat86percentofcapacity.

RGAEworkedwiththemanufacturer inredesigning bladesforanewturbinerotortosolvetheproblem.Thenewrotorwasinstalled inMay1978andithasperformed verywell.Theplantisonceagainoperating economically andefficiently atfullcapacity, providing morethanhalfoftheelectricity fortheCompany's system.Duringtheseven-month periodfromthetimetherotorwasreplacedtotheendoftheyear,theGinnanuclearpowerplantrecordedaremarkable 98percentavailability.

Fortheentireyear,theplant'savailability wasanoteworthy 81percent.Forfurtherreliability, theoriginalrotorhasbeenrebuiltwiththeimprovedbladesandwasreplacedinthesecondlowpressureturbineunitduringthe1979annualrefueling, maintenance andinspection shut-down.Thedisplaced rotorwillberebuiltandkeptatthenuclearpowerFolfowing amajorredesignolbladeconfiguration, thisnew,80-tonlowpressureturbinerotorwasinstalled attheCinnanuclearpowerplant.plantasasparetosignificantly reduceshutdowntimeintheeventofanyfuture,unforeseen rotorproblem.Distribution lntheRochester

vicinity, asubstation wasconstructed tomeetelectricdemandatthenewmanufac-turingplantatRochester

Products, FuelSystemsDivisionofGeneralMotors.Anadditional overheadtrans-missionlinewasconstructed totheXeroxCorporation facilityinWebsterproviding greatercapacityforXeroxandotherareacustomers.

Aspartofthe115KVtransmission construction projectintheRochester area,amajorcircuitwasreconstructed inwesternMonroeCountythatincreased capacitytosuburbancustomers intheTownofGates,including theexpanding Apparatus DivisionofEastmanKodakCompanylocatedthere.RG8Econtinued itsconstruction programextending 34.5KVdistribu-tionfacilities intheGeneseeDistrict, southofRochester.

TheCanandaigua-FingerLakesDistrictexpanded115KVfacilities inmeetingsustained growthinitsarea.Anew12.5KVservicewasinstalled attherecentlycompleted VoplexplantinCanandaigua.

IntheLakeshore Districttotheeast,planscallfortheconstruction ofa115KVtransmission linealongtherecentlyacquiredright-of-way sectionoftheHojackLinerailroadtomeetgrowthinthatoutlyingdistrict.

Streetlighting modernization programsin1978resultedinmorethan2000olderincandescent lampsbeingreplacedwithhighpressuresodiumunitsinthenorthernpartoftheCityofRochester.

Thisproject,paidforbytheCity,increases lightingefficiency andenhancespublicsafety.Astreetlighting modernization programwascompleted intheVillageofMt.Morris,andanotherisunderwayintheVillageofWebster.Electricandgasfacilityrelocation onpublicpropertybecamealarger-than-normalundertaking in1978duetotheextensive activityinroadconstruction andhighwayimprovement.

The$7millionexpenseforthisworkmustultimately bebornebytheCompany's customers sincethereisonlyocca-sionalandveryminorreimbursement fromgovernment agenciesthatordertherelocations.

Thiselectrictransformer replacedaunitthatfailedinservicein 7978.Itisoneoltwotransformers ataninterconnection thatreduces345,000voltsto115,000voltsfortransmission intheRCgEsystem.

IntheLaboratory forLaserEnergetics oltf>eCollegeolEngineering andAppliedScienceattheUniversity ofRochester, experiments areconducted inanattempttoltarnessthermalenergyfromnuclearfusion.Powerfullaserbeamsarefocusedthroughmirrorsandconvergeonaminutehydrogenpelletinsideatargetclamber(photoinset).Theprojectissupportedin partbyRG&E,andtheexperiment mayonedayleadtoavirtually inexhaustible sourceoltherntafenergylorthegeneration olelectricity.

SomePlainTalki..t~,iRr27~o<"pi~.VfICjcLAss10015TAKh3.6SINGLESTATORTYPEDSSTYLE60~5IOC623G25 0WATTHOuR240VOLTSMETER3WIREkiiO ABCPaytotheorderotJOtNQ.PUSUDROCHESTER,raY.

GrossPay1978Date1978Electricity 1.7%~oaolA55555Tax26.7%Ga-3.0%Thecostoflivinghasgoneupdr'astically overtheyears,andweknowitwillcontinuetoriseuntflinflation, atleast,isbroughtundercontrol.But,it'snotjustthecostoflivingthat'sgoneup,it'sthecostofdoingbusiness, too.Theinflationary economyhasadversely affectedbusinessandindustryaswellastheindividual.

Despiteeffortstominimizeexpenses, therisingcostofdoingbusinesshasaffectedRG&E,particularly oncostsoverwhichtheCompanycanexertlittleornocontrol.Thisspecialsectionofthe1978annualreportisintendedtoportray,inplaintalk,therisingcostsandtheireffectonRG&E,itscustomers andshareholders.

Beforegettingintospecifics onthecostincreases, let'stakealookattheoverallimpactonRG&Ecustomers ingeneral.From1970to1978thecostofelectricity toRG&Ecustomers hadrisen84.5percent,andthecostofgaswentup109percent.Howhasthehighercostofelectricity andgasaffectedmostRG&Ecustomers?

Basedonwagefigurespublished bytheNewYorkStateDepart-mentofLabor,ourrecordsshowthatin19'70thegpicalRochester production workerpaid1.6percentofhisorOnthesubjectofrisingcosts,pressuregroupsandconsumeractivists oftensuggestthatutilities, likeRG&E,shouldholdthelineon"their"risingcostsandmaintainexistingratesorevenlowerthembyreducing"profits."

Well,thefactis,RG&Ehasnocontrolovermostofthecoststhatcomprise, therates.Andasfor"profits,"

therereallyaren'tanyprofitsinastrictsenseofthewordaswe'lpointoutlater.Let'stakealookatthecostsinRG&E'sbusiness.

Fuelexpenseconsumesthelargestportionoftherevenuedollar.Today40centsofeachrevenuedollargotopayforthefuelsusedinthegeneration ofelectricity, steam,andforthecostofnaturalgas.Overanine-year periodthroughtheendof1978,tliecostofcoalpertonmorethandoubledwhileoilandnaturalgashadtripledincost.Nuclearfuel,processed andreadyforuseinapowerplant,hadafourfoldcostincrease, yetitstillremainsthemosteconomical fuelforelectricgeneration asseenintheaccompanying chartthatcomparesfuelcostonaBTUorheatvaluebasis.FuelExpense(FuelcostspermillionBTU's)hergrossincomeforelectricity.

In1978,despitemorethanatenpercentincreaseinelectricusebytheaverageresidential

customer, thesameworkerstillpaidjust1.7percentofgrosspayforelectricity.

Ifthatworkerwasagasspaceheatingcustomer, heorshepaid3.1percentofgrossincomeforgasin1970,andonly3.0percentin1978.Inthemeantimethetaxbite(property, income,socialsecurityandsales)outofthatsamegrosspaywentfrom23.9to26.7percent.Mostpayhaskeptpacewiththeinflationary impactonprices.Eventhoughmoreactualdollarsareneededtopayforelectricity andgas,theseformsofenergyabsorbaboutthesameamountofgrossincomeastheydidnearlytenyearsago.Theproblemisthatgovernment taxesaretakinggreateramountsofthedevaluedgrosspaycheckdollars.We'ecertainly notsayingthatallofourcustomers haveincomesthathavekeptpacewithescalating inflation.

Theseniorcitizen,forexample,onlow,fixedincomeishavinganextremely difficult timemeetingthecontinually increasing costsofallessentials forliving,including heatandelectricity.

Theplightofaseniorcitizeninthesituation described aboveisaverycomplexsocialproblemthatstemsfromrampantinflation.

And,asasocialproblem,itisonethatshouldnotbeplaceduponanyonesegmentoftheeconomyoranyoneindustry, whetheritbearegulated naturalmonopolyornot.Recognizing thissocialproblem,weatRG&Ehaveexpressed oursupportforanenergystampprogramandhaveevenofferedtohelpdevelopsuch'plan.But,sofar,theauthorities havenotacceptedtPheoEer.Further,wehavecontended thatresidential'heat andelectricity arejustasessential toourcustomers asfood,andshouldbetax-exempt.

Inthatregard,theStatedidreducesalestaxonelectricity andgasbyonepercentin1978..50197078707870787078CoalOilGasNuclearC',nfl'miThemarketpriceoffuelsisbeyondtheinfluence ofRG&E'sprudentandaggressive purchasing procedures.

Risinginflation gradually boostedfuelprices.Thesinglemostdevastating factor,though,wasthe1973ArabOilEmbargothatnotonlycausedthepriceofoiltodoubleinayear,butalsoillustrated thattheUnitedStateshadbecomedangerously dependent onforeignoilsources.Thisdependence, combinedwiththerapidcostincreases>

producedtradedeficitsthathavesetiouslyerodedthevalueoftheAmericandollarandhavehelpedpromoteuncontrolled inflation.

It'saserioussituation andonethatisincreasingly agitatedbyaglutofself-defeating laws,regulations andtaxesenactedbythefederalandstategovernments.

itlppd~P,o>tho~Cpo~Moreimportantly, RG&Eemployees arequalified, dedi-catedandproductive peoplewhoareentitledtofairreturnfortheireR'orts.TheratioofRG&Ecustomers toemployees in1970was168toone.In1978therewere186customers foreachRG&Eemployee.

Thismeansthatouremployees haveincreased theirproductivity astheircontribution inthestruggleagainstinflation.

Productive, competent employees provideforthebestinterestoftheshareholder andthecustomer.

RG&Ewillcontinuetoexercisecontrolofwageandbenefitexpenses, andweareobserving thecurrentvolun-taryanti-infiationary guidelines.

a%kmRG&E'staxexpensehastripledsince1970goingfrom$19millionto$57millionin1978.And,the1978figuredoesn'tevenincludethe$15.5millioninsalestaxRG&Ehadtocollectfromcustomers intheirbillsfortheStateandlocalgovernments.

Asidefromthevisiblesalestax,"hidden"taxesinthecustomerbillsaccountformorethan15centsofeverydollarthecustomerpaystoRG&E.Whensalestaxesareincluded, thetypicalresidential customer's billismorethan22percenttax.Andthat'sacostofgovernment, notofenergy.TaxPortionof197tiCustomerBill-22.5%)(,-gliriSK~W~arvaucTaxisanotherexampleofexpensewhereRG&Ecanexerciselittleornocontrol.Ofcourse,itcouldbepointedoutthatpropertytaxesdomountupasweexpandfacili-tiessuchassubstations, transformers andpowerlines.But,evenherethereisnooption.Weareobligated tomeetgrowth,andarerequiredbyPSClawtoservetheinstantenergydemandsofcustomers regardless oftheamountscalledfor.Andjustlikeeveryotherpropertyowner,wepayhightaxratesoninfiatedvalues.TheeB'ectiscumulative.

P~DDOInadditiontotheexpensesjustdiscussed, sevenpercentofthe1978revenuedollarwasusedtopayformiscellaneous materials andservices.

Amongotheritemsthiscategoryincludesfeesassessedbyregulatory

agencies, expensesforregulatory compliance, legalcounsel,andbuildingandgroundsmaintenance.

Here,too,thereisreallylittlechoice.Wedo,however,requestbidswherewecanandlookforthebestpriceinthemarketplace.

30/40/50MVAElectricTransformer 10Expenseforemployeewagesandbenefitshasincreased 80percentsince1970,arelatively smallincreasecomparedtootheritemsmentioned.

ThisisanareawhereRG&Emayanddoesexercisecontrol-reasonable control.Andithastobereasonable iftheCompanyistoretaincompetent personnel andremaincompetitive inthelaborandprofessional employment market.Let'sfaceit,we'einahighlycomplex,technical business.

Loworinade-quatewageswouldproducenothingbutafalseeconomy.1970-$127,5001978-$278,000Percentage increase-118.0%%d AverageAnnualUsePerResidential ElectricCustomerKilowatt-HoursAverageAnnualUsePerResidential SpaceHeatingGasCustomerTherms'666 61666112$371SSS7176717761777765319697071727374757677781969707172737475767778'Adjusted fornormalized weatherbydegreedays.EarningsandDividends PerCommonShareinDollars0EarningsperCommonShare0CashDividends perCommonShare(Adjusted forStockDividends) 2.1223>32.262.121.81ts91.1S196919701971197219731974197519761977197812 L.0toservecustomers.

So,whenitcomesrightdowntoit,RG&E's"profit,"

ortheinterestcostofmoney,isacostofdoingbusmess,andit'scertainly oneoverwhichwehavelittlecontrol.Millions$120AnnualCapitalExpenditures inMillionsoiDollars,Excluding Allowance iorfundsUsedDuringConstruction lrrs10080604020019707172737475767778In1978,$112millionwereneededtocoverthecostofnewfacilities requiredtoservecustomers.

Although40percentofthatcapitalwasraisedinternally, theresthadtocomefromahighlycompetitive moneymarket.Thereisnoalternative.

Regardless ofmarketconditions wecannotandwouldnotelecttoignorenecessary additions toservecustomerenergyneeds.Tocompromise onimprovements andreplacements thatprotecttheenergysystemsistogambleonefficient andreliableservicetoourcustomers, andwewon'tdothat.Costofcapitalisamajorareawherewecanexerciselittleornocontrolotherthancontinuing toemployeffi-cientmethodsforraisingfundsinthecapitalmarketplace wherecostsarerisingrapidly.InMarch1979,forexample,wehadtoreplaceamaturing$16.7millionthreepercentinterestbondwithshort-term notesatmorethan11percentinterest.

Althoughthismayseemalittlestrangeatfirst,RG&E's"profits" areactu-allyanexpense.Our"pro5t"isnothingmorethantheamountthattheNewYorkStatePublicServiceCommis-Ision(PSC)allowsustopayforthemoneywehavetoborrowtobuildthefacilities neededtoservecustomers.

Putanotherway,weareallowedtoearna"rateofreturn"onthecapitalinvestedinplantusedtoservethepublic.TheratesofreturnaresetbythePSC,butareinnowayguaranteed.

Withouttheabilitytoaythecostof.Pmoneyininterestandshare-holderdividends wewouldnotbeabletoraisethecapitalnecessary tocontinueGasandelectriccompanies constitute themostcapital-intensive industryintheentireeconomy.Theaveragemanufacturing concern,forexample,invests75centsinplantforeachdollarofgrossincomewhileRG&Ehashadtoinvestmorethanthreedollarsforeachgrossincomedollar.Largeamountsofmoneyarerequiredtopayforfacilityexpansion, improvement andreplace-ment.Pricesformaterials andlaborhavegoneup,andsohasthecostofborrowing themoneytofinancethenewfacilities.

Forthemostpart,thesecostscannotbecontrolled byus.Justasinfiation hasdrivenupcostsinthemarketswherepeopleshop,ithasalsoaffectedthemarketswhereutihtiespurchasetheirhardwareandmoney.yw0DDRG&Ehasaresponsibility tosupplyelectricity, gasandsteamtoitscustomers atthemosteconomical prices.But,tryaswemay,wehavelittlecontrolovermostoftheexpensesincurredinfulfilling thisresponsibility.

Wehaveconsistently appliedsoundmanagement policiesandprin-ciplesinattempting tominimizetheamountofrateincreases whilemaintaining theCompanyasasoundinvestment andreliablesupplier.

It'sverydiscomforting torealizethatuncontrollable costshaveaccounted formorethan80percentofcustomercostincreasesince1970!Thecostofdoingbusiness, especially powercompanybusiness, ishigh,anditcontinues togohigher,drivenbyunbalanced federalandstatebudgets.Mostofthecostisinfuels,taxes,capitalexpenditures andthecostofmoney.And,partofthecostisaresultofheavyregula-tionbyalllayersofgovernment.

Wearenotsayingthatregulation isunnecessary.

Someofitisbeneficial.

But,likeeverything else,regulation hasaprice.Since1970,RG&E'sspendingforcapitalimprove-mentsjusttocomplywithregulatory requirements andlawsapproaches

$100million.Thisexpenseamountstoalmosta$20millionannualcosttocustomers.

Tothiswecanaddatleastanother$10millionayearinoperational expensetocomplywithvariousotherfederalandstateregulatory requirements.

Thus,averyconservative esti-mateoftheannualcostofgovernment regulation toourcustomers is$30million,averyrealpartoftherisingcostofenergy.Wehavetakenthisopportunity topresentastorytoyouourshareholders, andhopefully tomanyofourcustomers.

Itisnotauniquestorybecauseeachofyouisexperiencing thesamepressures, thesamecostincreases, thesameinflation, over-regulation andtaxes.But,becauseutilities aresometimes regardedbytheuninformed asunaffected bysuchpressures, wethoughtitimportant tospellouthowthesesamefactors,overwhichwehavelittleornocontrol,aredrivinguptheabso-lutecostofenergy.

SCAMROCHESTER GASANDELECTRICCORPORATION YearEndedDecember31Statement ofIncome(rhondsofool4

)19781977Operating Revenues(Note1)Electric..GasSteamElectricsalestootherutilities TotalOperating RevenuesOperating Expenses(Note1)Operation Electricandsteamfuels.Purchased electricity

.Purchased naturalgasOther..Maintenance Depreciation Taxes-local, stateandotherFederalincometax-current (Note3)..-deferred (Note3)TotalOperating ExpensesOperating IncomeOtherIncomeandDeductions Allowance forotherfundsusedduringconstruction (Note1)Other-net TotalOtherIncomeandDeductions IncomebeforeInterestChargesInterestChargesLong-term debt.Short-term debt..Other-net Allowance forborrowedfundsusedduringconstruction (Note1)TotalInterestCharges.NetIncomeDividends onPreferred andPreference Stock,atrequiredratesEarningsApplicable toCommonStockWeightedaveragenumberofsharesoutstanding ineachperiod,adjustedforstockdividends (000's).EarningsperCommonShare(Note1)CashDividends perCommonShare,adjustedforstockdividends (Note1)$202,631118,53119,110340,272,28,G763G8,94858,14019,33771,10965,68526,24G22,20645,9355,1665,875319,69949,2498,7054,4181312362,37225,5941,58841G(4,812)22,78639,586S,G78$33,90813,774$2.4G$1;41$179,940105,79719,004304,74126,403331,1445G,99313,G3562,08662,49422,37221,05343,8769612,89728G,3G744,7776,4731,3107,78352,56022,5421,319494(4,844)19,51133,0496,512$26,53712,474$2.12$1.29Statement OfRetainedEarningStr~~~..io.i~>>

Balanceatbeginning ofperiodAddNetincomeTotalDeductIssuancecostsofpreferred stock(Note4).Dividends oncapitalstockCumulative preferred stock,atrequiredrates(Note4).Preference stock(Note4)CommonstockCash(Note1)Stock(Note4)TotalBalanceatendofperiod1978$70,81939/86110,4053,5502,12819,2698,12033,0G7$77,3381977$67,81233,049100,8617016,4535916,0096,82030,042$70,819 Sourceof1978RevenueDollarinCentsUseof1978RevenueDollarinCentsElectricRevenueGasRevenueCostoffuels40stPurchased rlecrricgSteamrvefsPurchased lfecvicisy 19e554324Taxes6stDepreciation 15444ssaInterestonBonds&NotesElectricSalesSteamtoOtherUtilities RevenueWages&BenefitsMisc.Materials

&ServicesReinvested EarningsDividends (Com.Sst&Pfd.2a)Capitalization inMillionsofDollars400350212A250~2VAA2VA211.1150112.$ssay121.1220esAI19691970197119721973197419751976197719784long-Term oebf4commonsharehofders'qvisy 4prefevedrquisy13 RESROCHESTER GASANDELECTRICCORPORATION BalanceSheet(rhosackofoolhs)1978AtDecember311977ASSETSUtilityPlant,atoriginalcost(Note1)Electric..GasSteam.Less-Accumulated depreciation andamortization Construction workinprogressNetUtilityPlantInvestment insubsidiary, atequityCurrentAssetsCash(Note5)Accountsreceivable

.Materials andsupplies, ataveragecostFossilfuel.Construction andothersuppliesPrepayments TotalCurrentAssetsDeferredDebitsUnamortized debtexpenseDeferredfuelcost(Note1)Other(Note4).TotalDeferredDebitsTotalAssetsCAPITALIZATION ANDLIABILITIES Capitalization (Note4)Long-term debt.Preferred stock.Preference stockCommonshareholders'quity CommonstockRetainedearningsTotalcommonshareholders'quity

.TotalCapitalization CurrentLiabilities Short-term debt(Note5)Long-term debtduewithinoneyearAccountspayable.Taxesaccrued,including incometaxes.InterestaccruedPayrollaccrued.Other..TotalCurrentLiabilities DeferredCreditsandOtherLiabilities Accumulated deferredincometaxes(Notes1and3)Other..TotalDeferredCreditsandOtherLiabilities Commitments andOtherMatters(Note6)TotalCapitalization andLiabilities

..$669,104171,12017,735857,9592G1,47759G,482213,534810,0161,99611I77731,70012,G739,G431,1GO6G,9533,G205,3625,43914,421$893,386$384,30367,00028,000246,93877,338324,276803,57916,G7729,02111,3357,6G72,5961,0G6G8,3G218,3943,05121,445$893,386$G09,3871G2,94617,442789,775229,122560,653162,127722,7801,9476,61730,33210,7879,72492758,3873,348G,3385,57415,260$798,374$3G1,02267,00028,000212,53370,819283,352739,3749,00018,6354,6107,3552,38882542,81315,23395416,187$798,374 LK~iiPROCHESTER GASANDELECTRICCORPORATION YearEndedDecember31Statement OfChangeSinFinanCial POSitiOn<<rhsadso<<Do!4s)SourcesofFundsOperations NetincomePrincipal non-cashcharges(credits) toincomeDepreciation Amortization ofnuclearfuelDeferredfuelcostsDeferredincometaxes-net Allowance forfundsusedduringconstruction Other-net TotalfromOperations Financing Saleoflong-term debt.SaleofcommonstockSaleofpreference stockTotalfromFinancing TotalSourcesofFundsUsesofFundsUtilityplantPlantadditions

.Nuclearfueladditions

.Less:allowance forfundsusedduringconstruction NetAdditions toUtilityPlantDividends onpreferred stockDividends onpreference stockDividends oncommonstockReduction ofshort-term debt-net.Retirement oflong-term debtRedemption ofpreferred stock,including callpremiumCapitalstockexpenseExpenseofissuinglong-term debtOther-net

.Increase(decrease) inworkingcapital(excluding short-term debt)TotalUsesofFundsChangesinComponents ofWorkingCapitalIncrease(decrease) incurrentassetsCashAccountsreceivable Materials andsuppliesFossilfuel..Construction andothersuppliesPrepayments

.TotalIncrease(decrease) incurrentliabilities (excluding short-term debt)AccountspayableTaxes.AccruedinterestandpayrollLong-term debtduewithinoneyearOther-net TotalIncrease(decrease) inWorkingCapitalexcluding short-term debt1978$39,58G22,20615,74697G3,161(13,517)1,20469,36240,00027,18667,186$136,548$105,19120,87813,517112,5523,5502,12819,2699,00016,677902490(2,037)(25,983)$136/48$5,1GO1+681,88G(81)2338,5G610,386G,7255201G,67724134+49$(25,983)1977$33,04921,05314,386(2,886)2,675(11,317)75757,71750,00024,57928,000102,579$160,296$94,95814,45011,31798,0916,4535916,0099,05133327,7501678921,40685$160,296$188(3,474)(49)351281(2,703)4821,6511,234(G,000)(155)(2,788)$85 NotestoFinancial Statements Note1.SummaryofAccounting PoliciesGeneral.TheCompanyissubjecttoregulation bythePublicServiceCommission oftheStateofNewYork(PSC)withrespecttoitsratesforserviceandthemaintenance ofitsaccounting records.TheCompany's accounting policiesconformtogenerally acceptedaccounting principles asappliedtoNewYorkStatepublicutilities givingeffecttotherate-making andaccounting practices andpoliciesofthePSC.Adescription oftheCompany's principal accounting policiesfollows.UtilityPlantandDepreciation.

Thecostofadditions toutilityplantandreplacement ofretirement unitsofpropertyiscapitalized.

Costincludeslabor,material, andsimilaritemsaswellasindirectchargesforengineering, supervision, etc.TheCompanycapitalizes anallowance forfundsusedduringconstruction approximately equivalent tothecostofcapitaldevotedtoplantunderconstruction.

Replacement ofminoritemsofpropertyisincludedinmaintenance expenses.

Costsofdepreciable unitsofplantretiredareeliminated fromutilityplantaccounts, andsuchcosts,plusremovalexpenses, lesssalvage,arechargedtoaccumulated depreciation andamortization.

Depreciation inthefinancial statements isprovidedonastraight-line basisatratesbasedontheestimated usefullivesofproperty, whichhaveresultedinprovisions of3.0'nd3.1%perannum,ofaveragedepreciable propertyin1977and1978,respectively.

Estimated yearofcompletion Netmegawattcapability RGBE'sshare-megawatts

-percent...Totalestimated projectcostsRG&E'sshare.RGgE'sactualconstruction costs-1977

.-1978.puliioosofDollars)$252.60<$1,4414$1,354.7r$

r60.6201.8379.310.021.73.512.222.93.5O'Tobeconstructed andoperatedbyNiagaraMohawkPowerCorporation.

Tobeconstructed andoperatedbyRochester GasandElectricCorporation.

Construction costsexcludeallowance forfundsusedduringconstruction andcertainoverheadcoststobecapitalized.

rtrToratprojectcostsincfude$8.$millionforoilhandlingfacilities, ofwhichRG&Ehasnotagreeduponthepercentage participation, andexcludescommonfacilities.

rpTotatprojectcostsincfude$89.4millionfortheinitialnuclearfuelloadingandexcludescommon(aciliiies.

rproratprojectcostsinclude$114.7millionfortheinitialnuclearfuelloading.NuclearFuelandDecommissioning Costs.Thecostofnuclearfuelandestimated permanent storagecostsarechargedtooperating expenseonthebasisofthethermaloutputofthereactor.Thesecostsarechargedtocustomers throughbaseratesandthroughthefuelcostadjustment clause.Jointly-Owned Facilities.

Thefollowing tablesetsforththemajorelectricgeneration projectscurrently plannedwhichwilladdtotheCompany's presentgenerating capability.

Eachparticipant mustprovideitsownfinancing fortheseprojects.

OswegoNineMileFossilPointNuclearSlerlingUnit¹6rlrUnit¹2$Nuclear19801984198885010841150204150322241428DuetoaFederalgovernment policyadoptedin1977,theCompanyhaschangeditsnuclearfuelcostcomputation toreflectthecostsofpermanent storageofspentnuclearfuel.Prioryears'uclear fuelcostcomputations anticipated spentnuclearfuelwouldbereprocessed.

Cumulative prioryears'uel expenseswouldhavebeenincreased byapproximately S8.0millioniftheyhadbeendetermined onthebasisofcurrentcostestimates forpermanent storageofspentnuclearfuel,ratherthanonanestimated amountforreprocessing.

Ifthegovernment's permanent storagepolicyiscontinued, theCompanybelievesthatsuchamountwillbefullyallowable forrate-making purposes.

Decommissioning costs(coststotaketheplantoutofserviceinthefuture)fortheCompany's Ginnanuclearpowerplantcannotbeestimated atthistime.TheCompanybelievesthatthecostsofdecommissioning willbefullyallowable forrate-making purposes.

Allowance forFundsUsedDuringConstruction.

TheCompanycapitalizes anAllowance forFundsUsedDuringConstruction (AFDC)baseduponthenetcostofborrowedfundsforconstruction purposesandareasonable rateupontheCompany's otherfundswhensoused.TherateusedforthispurposewasBs/4%,whichbecameeffective inMay1976.Inaccordance withtheorderissuedbytheFederalEnergyRegulatory Commission, AFDCissegregated intotwocomponent partsandclassified intheStatement ofIncometodiscloseanAllowance forBorrowedFundsUsedDuringConstruction asacredittoInterestChargesandanAllowance forOtherFundsUsedDuringConstruction asapartofOtherIncome.InDecember1977,theCompanybegancomputing AFDConitsshareofNineMilePointNuclearUnit~2andOswegoFossilUnit~6atanaveragereducedrateof6.85%,whichisnetoftheincometaxeffectoftheinterestportionofAFDC.RatesandRevenue.Revenueisrecordedonthebasisofmetersreadduringthecalendaryear.Tariffsforelectricandsteamserviceincludefuelcostadjustment clauseswhichservetoadjustelectricandsteamratesfromtimetotimetoreflectchangesintheaveragecostsoffuelsusedinelectricandsteamgeneration fromtheaveragecostofsuchfuelsduringthebaseperiod.Tariffsforgasservicecontainacomparable clausetoadjustgasratesforchangesinthepriceofpurchased naturalgas.DeferredFuelCosts.Fuelcostswhicharerecoverable undertheelectric, gasandsteamcostadjustment clausesincludedinthetariffschedules oftheCompanyaredeferreduntiltheyarebilledtocustomers.

Areconciliation ofrecoverable gascostswithbilledgasrevenuesisdoneannuallyasofAugust31,andtheexcessordeficiency isrefundedtoorrecovered fromthecustomers duringasubsequent twelvemonthperiod.FederalIncorheTax.Forincometaxpurposes, depreciation iscomputedusingthemostliberalmethodspermitted.

Inaddition, certaincostscapitalized forfinancial reporting purposesaredeductedcurrently forincometaxpurposes.

Theresulting taxreductions areoffsetbyprovisions fordeferredincometaxesonlytotheextentorderedorpermitted byregulatory authorities.

The10%investment taxcreditrate,whichhadbeenscheduled toreturnto4%in1981,hasbeenmadepermanent bytheRevenueActof1978.Thepriorrateof4%isappliedtoreducethecurrenttaxprovision while,asrecommended bythePSC,normalized taxaccounting isfollowedintheapplication oftheremaining 6%.TheCompanyusestheseparateperiodapproachincalculating theinterimquarterly taxprovision.

PensionPlan.TheCompany's retirement planisnoncontributory andcoversallregularemployees.

Currentservicecostsarefundedannually.

Pastservicecostsarebeingamortized overa40yearperiod.Retirement planexpenditures fortheyears1977and1978were$9.2millionand$9.9million,respectively.

Theactuarially computedvalueofvestedbenefitsatDecember31,1978exceedstheassetsintheplanbyapproximately

$15million.EarningsandDividends PerShare.Earningsapplicable toeachshareofcommonstockarebasedontheweightedaveragenumberofsharesoutstanding duringtherespective years,adjustedforstockdividends.

Assumingthe1,250,000 sharesofcommonstockissuedonSeptember 27,1978wereoutstanding atthebeginning of1978andtheproceedswereappliedtoreducetheshorttermdebt,theearningspersharefor1978wouldhavebeen$2.36.Cashdividends persharearebasedonthesharesoutstanding atthetimedividends arepaid,adjustedforstockdividends.

Cashdividends pershareattheratesdeclaredineachperiodamountto$1.34for1977and$1.42for1978.Note2.Departmental Financial Information (thovsandsot oollarsiTheCompany's recordsaremaintained byoperating departments, inaccordance withPSCaccounting

policies, givingeffecttotherate-making process.Thefollowing istheoperating dataforeachoftheCompany's departments andnointerdepartmental adjustments arerequiredtoarriveattheoperating dataincludedintheStatement ofIncome.ElectricGasTotalOperating information-1978 Operating revenuesOperating

expenses, excluding provision forincometaxesPretaxoperating incomeProvision forincometaxes..Netoperating incomeOtherincome-net

.Interestcharges.Netincomeperstatement ofincomeOtherinformation Depreciation Nuclearfuelamortization Capitalexpenditures...

Investment information-December 31,1978Identifiable assets..AssetsutilizedforoverallCompanyoperations (a)Totalassetsperbalancesheet.....

$231,307181,42849,8799,244$40,635$16,98415,74G100,194$711,917$118,531107,87310,6581,966$8,692$4,64111,903$146,299$19,11019,357(247)(1G9)$(78)$581455$15,716$3G8,948308,65860,29011,04149,2491312322,786$39+86$22,20615,746112,552$873,93219,454$893,386Operating information-1977 Operating revenuesOperating

expenses, excluding provision forincometaxesPretaxoperating income..Provision forincometaxes.Netoperating incomeOtherincome-net

.InterestchargesNetincomeperstatement ofincomeOtherinformation Depreciation Nuclearfuelamortization Capitalexpenditures

..Investment in(ormation-December 31,1977Identifiable assets..AssetsutilizedforoverallCompanyoperations (a)Totalassetsperbalancesheet(a)Consistsprimarily ofcash,prepayments andunamortized debtexpense.$206,343165,85840,4854,041$36,444$15,33314,38690,722$626,464$105,79797,4658,332147$8,185$5,1406,943$141,130$19,00419,186(182)(330)$148$580426$16,619$331,144282,50948,6353,85844,7777,78319,511$33,049$21,05314,38698,091$784,21314,161$798,374 9iofPretaxAmountIncome$33,049Amount$39,586NetincomeFederalincometaxCurrent.De(erred9612,8973,858(222)5,1665,87511,041(513)(2,201)(2,501)(5,215)5,826$45,412Chargedtooperating expenseAmorl.o(deferredinvestment taxcredit.AFDCnetoftaxratedifference.....

Other..(1,460)(1,682)2,176$35,225IncludedinOtherIncomeActualFederalincometaxexpenseIncomebeforeFederalincometaxNote3.FederalIncomeTaxProvision tshousandsof Dollars)Thefollowing isareconciliation fortheyears1977and1978ofthedifference betweentheamountofFederalincometaxexpensereportedintheStatement ofIncomeandtheamountcomputedbymultiplying theincomebeforetaxbythestatutory taxrate.19781977%ofPrelaxIncomeComputedtaxexpenseIncreases (reductions) intaxresulting from:Excessoftaxdepreciation lessamountdeferredExpensescapitalized forfinancial statements including

interest, payrollandusetax,etcInvestment laxcreditPropertytaxesonbasisofdateoftaxablestatus.Costofremoval,lessnetamountdeferred..Revenuetaxes(deducted whenpaid)Miscellaneous items,netActualFederalincometaxexpense$21,797(3,525)(9,3G1)(4,955)224(724)2133237$5,82648.0(7.8)(20.6)(10.9).5(16)4.7.512.8$16,908(3,580)(7,765)(2,624)(254)(655)146$2,17648.0(10.2)(22.0)(7.4)(7)(19).46.2Asummaryofthedeferredamountschargedor(credited) toincomeisasfollows:Investment taxcreditClassli(edepreciation

.Fuelcosts.......................

Nuclear(uelamortization NuclearfuelstoragecostsFossilplantabandonment costs765KVTransmission systemabandonment costsOther.1978$6,G291,763(469)(142)(4,989)850(481)$3,1611977$2,0031,3791,386(362)(3,346)2,160(545)$2,G75Note4.Capitalization Long-Term DebtFirst32s/i3%3%4%54Yi4sjs5.36Yi6.789Ys10s/i9')e9YieBondsDueMar.1,1979...

Aug.15,1980

..lune1,1982...

Mar.1,1985...

Iuly1,1987...

Oct.15,1989

..Nov.15,1991

..Sept.15,1994

..May1,1996...

Sept.15,1997..luly1,1998...

Aug.15,1999

..Sept.1,2000Aug.1,1983lune15,2006

..Sept.15,2007..Dec.1,2003MortgagScricsLMN0R5TUVWXYZAABBCCDDLess:SeriesLduein1979TotalLong-Term Debt..(thousands)

Principal AmountDecember31,19781977$16,677$16,67712,00012,000G,000G,00010,00010,00015,00015,00012,00012,00015,00015,00016,00016,00018,00018,00020,00020,00030,00030,00030,00030,00030,00030,00029,66729,GG750,00050,00050,00050,00040,000400,344360,3441G,G77$383,G67$3G0,344CapitalStockPre(erred Stock(cumulative)-Par value$100;2,000,000 sharesauthorized:

44.104'/i4.104.954.557.5011SharesscrlcsOutstanding F120,000H80,000I60,000I50,000K60,000M100,000N200,0000670,000IThousands)

December31,19781977$12,000$12,0008,0008,0006,0006,0005,0005,0006,0006,00010,00010,00020,00020,000$67,000$G7,000Redemption (pershare)(a)105Atanytime101Atanytime101Atanytime102.50Atanytime102Atanytime102Before3/1/80108Be(ore6/1/79(b)Bondpremiumapplicable totheyears1977and1978is$677,702and$635,GG7,respectively.

Sinkingandimprovement fundrequirements aggregate

$333,540perannum.Suchrequirements maybemetbycertification ofadditional propertyorbydepositing cashwiththeTrustee.The1977and1978requirements weremetbycertification ofadditional property.

Preference Stock-Par value$1;5,000,000 sharesauthorized:

Series7.6ASharesOutstanding 280,000(Thousands}

December31,19781977Issued$28,000$28,00012/20/77DuringJanuary1985,theCompanymustoffertopurchaseonOctober1,1985alloftheoutstanding 7.6%SeriesApreference stockatapriceof$100pershare.Thesharesremaining outstanding aftersuchofferarecallableat$100pershareattheoptionoftheCompanyatanytimeafterDecember20,1987.Preference stockissubordinate topreferred stockbutisseniortocommonstock.CommonStock-Par value$5;25,000,000 sharesauthorized:

Per(thousands)

ShareSharesAmount11,366,111

$181,3016,82021,000508Outstanding, December31,19763%StockDividend.......

SaIeofStock...........

TRASOP>>Automatic DividendReinvestment Plan......

CapitalStockExpenseOutstanding, December31,19773%StockDividend.......SaleofStock...........

Automatic DividendReinvestment Plan......

CapitalStockExpenseOutstanding, December31,197820.00340,98421.001,000,000 20.9124,30018.31-20.94158,2363,071(167)212,5338,12023,43812,889,631 21.00386,68918.751,250,000 17.19-19.25206,4273,749(902)14,732,747

$246,938'TaxReduction ActStockOwnership PtanTheCompany's Certificate ofIncorporation wasamendedonJune1,1977toauthorize anadditional 10,000,000 sharesofcommonstock,parvalue$5pershare.AtDecember31,1978therewere415,797sharesofcommonstockreservedandunissuedundertheAutomatic DividendReinvestment Plan.Noothersharesofcommon,preferred orpreference stockarereservedforofficersandemployees orforoptions,warrants, conversions, andotherrights.Note5.CashandShort-Term DebtAtDecember31,1978,theCompanyhad$7millionintemporary cashinvestments.

Underinformalagreements withcertainbanks,theCompanyisexpectedtomaintainanaveragecompensating balanceof10percentofthelinesofcreditplusanadditional 10percentoftheprincipal amountofeachborrowing.

Undertheagreements, withdrawal ofthecompensating balancesisnotlegallyrestricted, andatDecember31,1978thebalancesamountedto$4.4million.Banklinesofcreditaggregated

$64millionandborrowings areatcurrentfloatingprimeinterestrates.The(a)Redeemable attheoptionoftheCompanyon30days'inimum notice,plusaccrueddividends inallcases.(b)Calledforredemption onDecember20,1977.TheissuancecostsrelatedtoSeries0werechargedtoretainedearnings, andthecallpremiumof$2,750,000 relatedtothisserieswasreportedasotherdeferreddebitsand,beginning inJanuary1978,isbeingamortized inaccordance withanorderfromthePSC.TheCompany's Certificate ofIncorporation wasamendedonJune1,1977toauthorize 4,000,000 additional sharesofcumulative preferred stock,havingaparvalueof$25pershare.Noneofthispreferred stockhasbeenissued.Outstanding short-term debtandaverageinterestrateatendofperiod:NotesPayabIeCommercial Paper.Maximumshort-term debtoutstanding duringtheperiod:NotesPayableCommercial Paper.Weightedaverageshort-term debtandinterestratesduringtheperiod:NotesPayableCommercial Paper.1978RatesAmount(Thousands)

$15,50015,9008.82%7,7697.849,4501977RatesAmount(Thousands) 7.00%$7,0006.632,00025,00026,5006.4210,9605.35~11,148Theaboveaverageswerebaseduponthedailybalancesandinterestratesineffectfortheperiodsduringwhichshort-term borrowings wereoutstanding andbeforegivingeffecttotheadditional interestcostresulting fromcompensating balances.

Note6.Commitments andOtherMattersTheCompany's capitalexpenditures programinvolvesanestimated expenditure of$115million,notincluding allowance forfundsusedduringconstruction, in1979andtheCompanyhasenteredintocertaincommitments forpurchaseofmaterials andequipment inconnection withsuchprogram.Operations oftheCompany's generating stationsaresubjecttovariousFederal,stateandlocalenvironmental standards.

UndertheCleanWaterAct,theCompanyisrequiredtoobtainpermitstodischarge pollutants intothewatersoftheUnitedStates.TheUnitedStatesEnvironmental Protection Agency(EPA)issuedNationalPollutant Discharge Elimination SystempermitsforalltheCompany's majorgenerating facilities, butanumberofconditions relatingtothermalandchemicaldischarge limitations werecontested bytheCompanyinadjudicatory hearingrequestssubmitted toEPA.TheCompany,theNewYorkStateDepartment ofEnvironmental Conservation (whichbecameapartytotheadjudicatory hearings) andEPAhavesettledthehearingrequestsasdescribed below.TheCompanyhasreachedagreement withtheregulatory agenciesonnon-thermal effluentlimitations andfinalpermitscontaining theseagreedlimitations havebeenissuedandarenowineffect.Construction oftreatment facilities isrequiredtoenableCompanycompliance withpermitlimitations fortwooftheCompany's generating stations.

Pendingcompletion ofthesefacilities, theregulatory agencieshaveagreedinanEnforcement Compliance ScheduleLettertoexercisetheirprosecutorial discretion torefrainfromprosecuting theCompanyforviolation ofcertaineffluentlimitation deadlines contained intheCleanWaterActsolongastheCompanyadherestoaspecified construction scheduleforthefacilities.

Construction ofthesetreatment facilities isexpectedtorequirecapitalexpenditures estimated at$10.5millionoverthenexttwoyears.Companyalsoissuescommercial paperatvariousdiscountrates,usuallymaturingwithin30-45days.Balancesandaverageinterestratesofshort-term borrowings asofDecember31fortheyearsindicated wereasfollows:20 TheCompanyhaspursuedresolution ofthecontested thermallimitations bysubmitting demonstrations inanefforttojustifylessstringent limitations forthreegenerating stations.

Thethermalconditions ofthepermitsremainstayedpendingresolution ofthethermalissueseitherthroughregulatory agencies'pproval ofthedemonstrations andlessstringent thermallimitations or,intheabsenceofsuchapproval, throughtheresumption oftheadjudicatory hearingprocess.Ifthedemonstrations andlessstringent thermallimitations arenotapprovedforanyofthethreefacilities, theCompanycouldberequiredtoinstallcoolingtowerswhichwouldinvolvecapitalexpenditures estimated at$53millionpIussignificant operating andmaintenance expenses.

TheCompanybelievesthatadditional expenditures andcostsmadenecessary byenvironmental regulations willbefullyallowable forrate-making purposes.

ThroughDecember31,1978,theCompanyhasexpendedapproximately

$28.4million(excluding larrd)withrespecttoitsinterestintheSterlingnuclearplant.TheCompanyestimates thatifitwererequiredtocancelallexistingcontracts relatingtotheconstruction ofthisproject,itcouldincurupto$6millionincancellation charges.TheCompanybelievesthat,ifitwererequiredtocanceltheproject,thePSCwouldpermitittoamortizeallexpenditures involvedoveraperiodofseveralyearsandtorecoverthoseexpenditures throughraterelief.OnDecember1,1978,thePSCruledthatthecaseinvolving the765KVtransmission facilitythattheCompanyhadplannedtoconstruct bedismissed.

TheCompanyhaspetitioned thePSCrequesting theamortization ofthe$2.1millioninexpenditures forthelineovera3yearperiod,andtoallowtheCompanytorecovertheunamortized coststhroughraterelief.Note7.InterimFinancial Information (Unaudited)

IntheopinionoftheCompany,thefollowing quarterly information includesalladjustments, consisting ofnormalrecurring adjustments, necessary forafairstatement oftheresultsofoperations forsuchperiods.Thevariations inoperations reportedonaquarterly basisarearesultoftheseasonalnatureoftheCompany's businessandtheavailability oftheCompany's Ginnanuclearplant.Earningspercommonsharehavebeenadjustedforstockdividends.

Note8.Replacement CostInformation (Unaudited)

Theimpactoftherateofinflation experienced inrecentyearshasresultedinreplacement costsofproductive capacitygreaterthanthehistorical costsofsuchassetsreportedintheCompany's financial statements.

Incompliance withreporting requirements, estimated replacement costinformation isdisclosed intheCompany's annualreporttotheSecurities andExchangeCommission onForm10-K.

ReportofIndependent Accountants TotheShareholders andBoardofDirectors ofRochester GasandElectricCorporation Inouropinion,theaccompanying balancesheetsandtherelatedstatements ofincome,retainedearnings, andofchangesinfinancial positionappearing onpages14through16presentfairlythefinancial positionofRochester GasandElectricCorporation atDecember31,1978and1977,andtheresultsofitsoperations andthechangesinitsfinancial positionfortheyearsthenended,inconformity withgenerally acceptedaccounting principles consistently applied.Ourexaminations ofthesestatements weremadeinaccordance withgenerally acceptedauditingstandards andaccordingly includedsuchtestsoftheaccounting recordsandsuchotherauditingprocedures asweconsidered necessary inthecircumstances.

1900LincolnFirstTowerRochester, NewYork14604January26,1979Operating revenues..Operating income...

Netincome.......

Earningsoncommonstock.........

Earningspercommonshare(indollars)5,6695,1758,490.38.37.63QuarterEnded(Thousands)

Dec.31,Sept.30,lune30,197819781978$92,312$73,665$86,9428,4669,52712,0097,088G,5969,909Mar.31,1978$116,02919,24715,99314,574Operating revenues..Operating income...

Netincome.......

Earningsoncommonstock.........

Earningspercommonshare(lndollars)Dec.31,1977$84,4589,395G,4444,657.35Seph30,1977$67,1997,4794,6193,044.24lune30,1977$74,13810,62G7,7756,200.51Mar.31,1977$105,34917,27714,21112,63G Management's Discussion andAnalysisoftheSummaryofOperations Thefollowing financial reviewexplainssignificant changesintheamountsofrevenuesandexpensesbetween1978/1977 andbetween1977/1976.

TheNotestoFinancial Statements onpage17ofthisreportcontainadditional relatedinformation.

Operating RevenuesChangesinOperating RevenuesIncreaseor(Decrease) fromPriorYear(Thousands ofDollars)ElectricDepartment 19781977GasDepartment 19781977SteamDepartment 19781977CustomerRevenues(Estimated) from:RateIncreases

..FuelCostAdjustment WeatherEffects.CustomerSalesOtherTotalChangeinCustomerRevenuesElectricSalestoOtherUtilities

.TotalChangeinOperating Revenues.$12,181G,4462213,48535822,6912.273$24,9G4$5,312410(82)3,G051379,3828,144$17,52G$2,5555,5823,259(289)1,627*12,734$12,734$2,68312,475(1,144)(7,631)(1,613)*4,770$4,770$-(23)3G7(314)76106$1,824(198)(997)(8)621$G21'Reflects aone-time$10gasheatingbillcreditintneaggregate amountofapproximately

$1.6millionthatwasappliedtoresidential customers inFebruary1977.ThecreditwasmadebytheCompanyonitsowninitiative inordertoalleviate theeconomicburdentocustomers whowerefacedwithrecordhighgasheatingbillscausedbythesevereweatherconditions inIanuary1977and,insomecases,withreducedincomeduetoplantshutdowns forcedbynaturalgascurtailments.

Revenuesfromelectricsalestootherutilities increased inboth1978and1977.Fluctuations inelectricsalestootherutilities andinpurchased electricity discussed underOperating Expensesbelowgenerally arerelatedtotheoutputandavailability ofelectricgeneration fromtheGinnanuclearplant.Operating ExpensesChangesinOperation andMaintenance ExpensesIncreaseor(Decrease)

(romPriorYearlrhousands orDottar019781977ElectricandSteamFuelsPurchased Electricity Purchased NaturalCasOtherOperation

..Maintenance

.$1,1475,7029,0233,1913,874$10,632(4,5GO)5,8944,8172,16GTotalChangeinOperation andMaintenance Expense$22,937$18,949The1977increaseinelectricandsteamfuelsexpensewasmainlyduetoanincreaseinelectricity generated in1977andanincreased fuelcostperkilowatt-hour generated bynuclearfuel.Purchased electricity expenseincreased in1978duetobothhighercostsandhigherkilowatt-hour purchases whilethedecreasein1977reflected mainlydecreased purchases nettedagainstarelatively modestincreaseinthecostperkilowatt-hour.

Purchased naturalgasexpenseincreased inboth1978and1977asaresultofhigherpipelineratesandincreased consumption duetocolderweatherin1978.Theincreaseinmaintenance expenseof$3.9millionin1978and$2.2millionin1977reflectsincreases inthecostoflaborandmaterialtorepairandmaintainexistingfacilities, andincreased activityintherepairandupkeepoftransmission anddistribution facilities.

ChangesinTaxesTaxes-local, stateandotherincreased

$2.1millionin1978principally duetohighergrossincometaxesbasedonincreased revenues.

The1977increaseof$3.4millionwasalsoduetohighergrossincometaxesaswellashigherpropertytaxesresulting fromtheadditionofnewplantandincreased propertytaxrates.TotalFederalincometaxesincreased

$3.7millionin1978afterdeclining

$1.8millionin1977.SeeNote3totheNotestoFinancial Statements foradetailedanalysis.

OtherStatement ofIncomeItemsTheincreaseinallowance forfundsusedduringconstruction of$2.2millionin1978and$3.8millionin1977wasduetoincreases inutilityplantexpenditures inbothperiods.SeeNote1totheNotestoFinancial Statements.

Other-other incomeanddeductions increased

$3.1millionduring1978principally duetoaddednon-operating Federalincometaxcredits.Interestonlongtermdebtincreased

$3.1millionin1978and$3.2millionin1977asaresultofadditional bondsissuedinDecember1978, September1977 andJune1976.

Dividends onpreferred andpreference stockdecreased

$.8millionin1978duetotherefunding inDecember1977 ofaseriesofpreferred stockwiththeproceedsfromthesaleofaseriesofpreference stockhavingalowerdividendrate.

RKPROCHESTER GASANDELECTRICCORPORATION YearEndedDecember31SummaryOfOPeratiOnS tthowanCkofnotlara)

Operating RevenuesElectric..GasSteam.1978$202,631118,53119,1101977$179,940105,79719,0041976$170,558101,02718,3831975$146,62982,47817,3371974a$127,56075,4631G,3211973$116,51264,63310,014Electricsalestootherutilities

.TotalOperating Revenues246,444219,344191,15925,49G14,69721,112304,74126,403340,27228,G76289,96818,259234,041212,271368,948331,144308,227271,940Operating ExpensesOperation Electricandsteamfuels...Purchased electricity

.Purchased naturalgasOther..Maintenance Depreciation Taxes-local, stateandotherFederalincometax-current

-deferred

.58,14019,33771,10965,G8526,24622,20645,9355,16G5,8755G,99313,G35G2,086G2,4942237221,05343,8769G12,89746,36118,19556,19257,G7720,20618,G2140,502(291)5,G564G,26812,21242,24750,G2919,70017,41436,1574,162113336,69312,07037,34244,35G17,9661G,49132,410(3,126)4,27725,6128,84129,92340,99915,88815,14529,9936,724915TotalOperating Expenses319,G9928G,3672G3,119229,922198,479174,040Operating Income49,24944,77745,10842,01835,56238,231OtherIncomeandDeductions Allowance forotherfundsusedduringconstruction Other-net

..8,7054,418G,4731,3104,G781,1282,3105371,128274670715TotalOtherIncomeandDeductions 13,1237,7835,8062,8471,798989IncomebeforeInterestCharges62+7252,56050,91444,8GS37,36039,220InterestChargesLong-term debt.Short-term debt..Other-net

.Allowance forborrowedfundsusedduringconstruction (4,812)(4,844)(2,853)(1,264)(613)(173)25+9422,54219,37816,96314,96513,7381/881,3191,0541,5G8',2551,24641G49424G1,227210103TotalInterestCharges22,78619,51117,82518,49416,81714,914NetIncome39,58633,04933,08926,37120,54324,306Dividends onPreferred andPreference Stock,atrequiredratesS,G78G,512G,2454,0543,5503,550EarningsApplicable toCommonStock$33,908$26,537$26,844$22,317$16,993$20,756Weightedaveragenumberofsharesoutstanding ineachperiod,adjustedforstockdividends (000's)EarningsperCommonShare13,774$2.4G12,474$2.1211,983$2.2410,98710,G28$2.03$1.599,753$2.12CashDividends perCommonShare,adjustedforstockdividends

$1.41$1.29$1.20$1.15$1.09*In1974,theCompanybegandeferring aportionofincreased fuelcoststotheperiodinwhichtherelatedrevenueswererecorded.

$1.0423 S~~~tCL~~~ROCHESTER GASANDELECTRICCORPORATION Condensed BalanceSheettth~dofoot4rs) 19781977AtDecember311976197519741973ASSETSUtilityPlant,atoriginalcostLess-Accumulated depreciation andamortization 2G1,477229,122198,778185,455167,645150,GOO$857,959$789,775$727,687$693,404$659,308$618,891Construction workinprogressNetutilityplant..596,482213,534810,01G560,653528,909507,949491,6634G8,291162,127120,70279,38139,32424,542722,780649,611587,330530,987492,833Investmcnt inSubsidiary, atequity1,99G1,9471,9111,8711,834CurrentAssetsDeferredDebits66,95314,42115,2608,1517,4508,2134,87458/8761,09053,79652,G7838,982TotalAssets$893,386$798,374$720,763$650,447$593,712$53G,689CAPITALIZATION ANDLIABILITIES Capitalization Long-term debt..Preferred stockPreference stock.Commonshareholders'quity CommonstockRetainedearnings.$384,30367,00028,00024G,93877+38$361,02267,00028,000212,53370,819$311,39592,000181,30167,812$267,31489,000173,58660,502$267,34867,000154,75853,5GB$237,38267,000148,56652,184Totalcommonshareholders'quity

.TotalCapitalization CurrentLiabilities DeferredCreditsandOtherLiabilities

.TotalCapitalization andLiabilities 324,276283,352249,113234,088208,326200,750803,57968,36221,445739,37442,81316,187652,50854,65213,603590,40251,7128,333542,67443,9527,086505,13229,0912,466$893,386$798,374$720,763$650,447$593,712$536,689Financial DataCapitalization Ratios(percent)

Long-term debtPreferred andpreference stockCommonshareholders'quity

.197847.811.840.4197748.812.938.3AtDecember31197647.714.138.2197545.315.139.6197449.312.338.4197347.013.339.7Total100.0100.0100.0100.0100.0100.0BookValueperCommonSharcAdjustedforStockDividends-Year EndInternalGeneration ofFunds(percent)

$22.01$21.34$20.89$19.69$19.55$18.9139.535.944.642.542.389.8RateofReturnOnAverageCommonEquity-YearEnd(percent)

Effective FederalIncomeTaxRate(percent)

Depreciation Rate-Electric

-GasInterestCoverages Beforefederalincometaxes(incld.AFDC)...(excld.AFDC)...Afterfederalincometaxes(incld.AFDC)....

(excld.AFDC)....

11.2212.83.092.792.652.162.431.9410.026.23.002.672.451.982.361.8911.1610.62.902.632.792.432.602.2410.1814.42.792.602.562.382.332.158.441.72.792.602.202.102.182.0811.3522.92.712.483.093.042.612.5824

~?~ROCHESTER GASANDELECTRICCORPORATION YearEndedDecember31ElectricDepartment ElectricRevenue(000's)Residential Commercial

.Industrial

.Other.Electricrevenuefromourcustomers Otherelectricutilities

..TotalelectricrevenueElectricExpense(000's)Fuelusedinelectricgeneration Purchased electricity Otheroperation Maintenance Depreciation Taxes-local, stateandotherElectricrevenuedeductions Operating IncomebeforeFederalIncomeTax.FederalincometaxOperatinIncomefromElectricOperations 000'sElectricOperating Ratio%%dElectricSales-KWH (000's)Residential Commercial

.Industrial

.Other.Electricsalestoourcustomers Otherelectricutilities

..TotalelectricsalesElectricCustomers atDecember31ResidentialCommercial

.Industrial

.Other.Totalelectriccustomers Electricity Generated andPurchased-KWH (000's)FossilNuclear..Hydro.PumpedstorageLessenergyforpumpingOther.Totalgenerated-Net Purchased TotalelectricenergyElectricGeneration Costs(000's)FossilNuclear..Hydro.Other.ElectricDepartment FuelFossil-TotalBTU(million)

-CentspermillionBTU.......

Nuclear-Total BTU(million)

-CentspermillionBTU.......SystemNetCapability-KW atDecember31FossilNuclear..Hydro.Other.Purchased Totalsystemnetcapability NetPeakLoad-KW..AnnualLoadFactor-Net

%1978$72,85458,98548,79222,000202,63128,G76231,30745,09319/3747,G0219,3051G,98333,108181+2849,8799,244$40,G3556.81,701,938 1,417,624 1,517,988 465,3735,102,923 1,445,391 6,548,314 251,64524,1371,3482,423279,5532,025,645 3,206,313 192,278133,287(189,453) 1,08G5/69,1561,579,8G3 6,949,019

$38,99525p5611,2295721,139,14G 144.2735,812,171 43.97443,000470,00047,00029,000339,0001,328,000 983,000G3.91977$64,98653,52041,78319,651179,94026,403206,34344,01013,63545,01116,33915,33331,530165,85840,4854,041$36,44457.71,660,425 1,392,023 1,431,855 454,0594,938,362 1,453,590 6,391,952 250,12124,0231,3532,328277,8252,272,182 3,018,305 222,391193,340(283,573) 8505,423,495 1,400,505 6,824,000

$40,55722,33011324423,862,599 13G.9237,822,209 38.04443,000470,00047,00029,000338,0001,327,000 987,000G2.01976$61,49850,79139,40218,867170,55818,259188,81734,24718,19540,93014,79613,86528,543150,57638,2413,102$35,13957.31,618,314 1,3GG,094 1,384,235 437,0974,805,740 1,187,942 5,993,682 249,17723,98313712.271276,8022,060,186 2,040,746 277,010118,716(180,317) 2,7974,319,1382,10G,904 6,426,042

$36,90113,48597311821,822,976 137.4223,837,620 25.69452,000470,00047,00029,000342,0001,340,000 934,00063.81975$53,90443,88433,24415,597146,62925,496172,12533,44212,21235,66214,28212I73125/69133,69838,4275,069$33,35855.51,530,421 1,294,816 1,284,940 411,1224,521,299 1,864,050 6,385,349 246,G1323,8741,3802,305274,17217317233,026,894 2G5,40198,743(148,180) 2,1984,976,779 1,888,091 6,864,870

$33,12014,1911,0306318,388,874 142.1833,128,47122.91452,000470,00047,00029,00035G,0001,354,000 925,000G1.71974$45,35437,90830,85813,440127,56014,697142,25725,73912,07032,17712,39011,97722;784117,13725,120(433)$25,55357.91,456,335 1,226,333 1,346,116 379,3794,408,163 1,182,902 5,591,065 244,06323,8271,3652,316271,5711,961,453 2,079,539 234,5G8131,311(192,311) 12,80G4,227,3G6 1,836,911 6,064,277

$30,3617,9801,08532120,911,993 117.0522,909,968 11.28452,000470,00047,00029,000347,0001,345,000 880,00063.31973$42,12534,38727,59712,403116,51221,112137,62419,4618,84128,37811,02911,02621,281100,01637,6087,235$30,37349.21,468,376 1,261,697 1,424,639 385,2434,539,955 2,269,G86 6,809,641 241,03223,4361,3601,995267,8231,8G9,079 3,395,564 243,58257,801(86/62)8,7765,488,440 1,709,420 7,197,860

$18,09910,3681,08312320,331,338 62.1236,683,359 18.62457,000420,00053,10042,500352,0001,324,600 922,00061.025 PK4SROCHESTER GASANDELECTRICCORPORATION YearEndedDecember31GasDepartment GasRevenue(000's)Residential Residential spaceheating

.Commercial Industrial

.Municipal andother.1978$5,09674,42520,53513,8914,5841977$4,82866,90018,05712,0143,9981976$4,42663,97416,84811,9003,8791975$3,96452,58413,5939,1673,1701974$3,80947,75812,5338,5832,7801973$3,62740,45310,4337,6482,472Totalgasrevenue118,531105,797101,02782,47875,46364,633GasExpense(000's)Purchased naturalgasOtheroperation

.Maintenance Depreciation Taxes-local, stateandother.71,10915,8105,7684,64110+4562,08615,0725,0785,14010,08956,19214,9214,5104,1949,72942,24713,3104,5004,1378,71537,34211,4924,7573,9787,93729,92311,4204,0433,6157,281Gasrevenuedeductions 107,87397,46589,54672,90965,50656,282Operating IncomebeforeFederalIncomeTax.Federalincometax10,6581,9668,33214711,4812,2129,5699149,9578,3511,221840Operating IncomefromGasOperations (000's)..$8,692$8,185$9,269$8,655$8,736$7,511GasOperating Ratio%78.277.774.972.871.070.2GasSales-Therms (000's)Residential Residential spaceheating

.Commercial

..Industrial

..Municipal 13,465255,95182,45163,70917,74813,833252,92377,75159,95615,97514,404275,582BG,40072,84718,59814,328249,22478,21765,76016,70514,903263,29084,87273,92616,69615,141245,36879,03978,13717,148Totalgassales433,324420,438467,831424,234453,687434,833GasCustomers atDecember31Residential

.Residential spaceheating

.Commercial

..Industrial

..Municipal 38,0I3154,36612,0927591,08439,977152,85611,26874698940,892153,58311,47575793641,437153,84811,39075695742,884151,15411,4787671,02445,958144,84711,303762865Totalgascustomers

.206/14205,836207,643208,388207,307203,735Gas-Therms (000's)Purchased forreforming andmixingPurchased forresale..Other.449,90413,178428,81110,1239,830478,9357,91123,160421,2527,01931,518438,4947,06330,834422,7186,535Totalgasavailable 463,082438,934496,676451,431477,075460,087Costofgaspertherm.15.26c14.43'1.37'0.19'.49'.13'otal DailyCapacity-Therms atDecember31Mixedgas.StraightnaturalgasTotaldailycapacityMaximumdailysendout-Therms 269,0004,164,000 4,164,000 4,164,000 3,895,000 4,164,000 4,164,000 4,164,000 4,164,000 3,183,678 3,578,468 3,497,861 3,041,070 410,844410,8443,871,448 3,762,672 4,282,292 4,173,516 3,192,631 2,985,392 DegreeDays(Customer Billing)FortheperiodPercent(warmer)colderthannormal7,0214.56,726(0.1)G,9051.66,211(7.2)G,8081.35,883(12.2) a~%~tCL4'R'OCHESTER GASANDELECTRICCORPORATION SteamOepartment 1978197119761975YearEndedDecember3119741973SteamRevenue(000's)Commercial

..Industrial

.Municipal andother.$6,08710,7322,291$6,35210,4552,197$6,4019,7992,183$5,6689,8621,807$5,4199,3961,506$3,6685,470876Totalsteamrevenue19,11019,00418,38317,33716,32110,014SteamExpense(000's)Fuelusedinsteamgeneration Otheroperation

.Maintenance Depreciation

.Taxes-local, stateandother.13,0472,2731.1735812,28212,9832,4119555802,25712,1141,82G9005G22,23012,8261,6579185462,07310,9546878195361,6896,1511,2018165041,431Steamrevenuedeductions 19,35G19,18617,63218,02014,68510,103Operating IncomebeforeFederalIncomeTax.Federalincometax(246)(182)751(683)1,636(89)(1GB)(330)51(688)363(43G)Operating IncomefromSteamOperations (000's).$(78)$148$700$5$1,273$347SteamOperating Ratio%SteamSales-lbs.

(000's)Commercial

.Industrial

.Municipal Totalsteamsales86.386.080.788.876.381.6898,904933,6091,041,415 980,3241,160,122 1,268,917 1,718+651,682,033 1,738,391 1,839,402 2,127,837 2,13G,794 346,031334,645367,553325,727334,463318,3232,963/002,950,287 3,147,359 3,145,453 3,622,422 3,724,034 SteamCustomers atDecember31Commercial

.Industrial

.Municipal Totalsteamcustomers 238703133925474323602717732380281773138929278314013027830410SteamProduced-lbs.

(000's)Producedbysteamdepartment.........

By-product steamfromelectricdepartment

.1,353,053 1,194,132 1,408,029 1,387,363 1,987,638 2,133,853 2,193,283 2,344,693 1,532,246 1,442,472 2,588,1202,613,321 Totalsteamproduced3,340,G91 3,327,985 3,601,312 3,732,056 4,'I20,366 4,055,793 SteamDepartment FuelTotalBTU(million)

CentspermillionBTU5,705,943 226.215,548,290 6,022,360 6,230,767 G,807,500 6,849,830 232.60203.35203.08196.3189.80RateIncreases GrantedClassofServiceFffcclive DaleofIncreaseAmountofRateofRaleofIncreaseRelurnonRelurnon(AnnualBasis)PercentRateBaseEquity(000's)IncreaseAulhorized Aulhorizcd ClassofServiceDaleofFilingPendingRequestsAmount(000's)PercentElectricGasSteamOctober25,1972October23,1974April20,1976November11,1977February18,1978April28,1972October23,1974April20,197GNovember11,1977February2,1978May11,1972 November12,1973April15,1975$10,15417,99211,00210,1863,0003,67G4,8544,9832,536G788975002,47511.5%'6.07.95.81.66.87.66.32.411.45.112.07.96%12.00%8.8313.199.3513.509.3112.809.3112.807.7712.008.4212.099.3513.509.3112.809.3112.80G.487.258.69ElectricMay26,1978GasMay26,1978$37,94617.8%10,7898.927 Directors KeithW.Amish*Executive VicePresident, Rochester CasandElectricCorporation PaulW.Briggs*President, Rochester CasandElectricCorporation JohnD.Cockcroft*

FormerChairmanoltheBoard,TheR.T.FrenchCompanyWilmotR.Craig/FormerChairmanoltheBoard,LincolnFirstBanksInc.E.KentDamontfVicePresident andSecretary, XeroxCorporation FrancisE.Drake,Jr.*ChairmanolthcBoardandChiefExecutive Oflicer,Rochester CasandElectricCorporation

'MemberoftheExecutive andfinancecommittee oftheBoardofDirectors J.WallaceEly*tChairmanoltheBoard,SecurityNewYorkStateCorporation WalterA.FallonChairmanoltheBoardandChiefExecutive Officer,EastmanKodakCompanyErnestJ.Howe*tgChairmanoltheExecutive andFinanceCommittee, Rochester CasandElectricCorporation tMemberoftheAuditCommittee oftheBoardofDirectors Ii/OfficersFrancisE.Drake,Jr.ChairmanolthcBoardandChiefExecutive OfficerAgc63,YearsofService,41PaulW.BriggsPresident Agc56,YearsolService,33 KeithW.AmishExecutive VicePresident Agc55,YearsofServicc,31 JosephJ.HartmanVicePresident, CasandTransportation Age54,YearsofScrvicc,32 JohnL.KennedyVicePresident, RatcSandCovcrnmcntal AffairsAge60,YearsofService,38JohnE.MaierVicePresident, EmployeeRelations Agc51,Yearsol5ervice,31 RichardJ.RudmanVicePresident, ElectricTransmission andDistribution Age51,YearsolService,33HarryG.SaddockVicePrcsidenr, ElectricSystemPlanningandOperation Age49,YearsolService,28MarioSilvestrone VicePresident, ConsumerServices, Corporate Communications andPurchasing Agc55,Yearsofservice,28 leonD.White,Jr.VicePresident, ElectricandStcamProdcctfon Age59,YearsolService,41DeanW.CapleSecretary andTreasurer Age55,Yearsofservice,30 FrancisA.Sullivan, Jr.Controller Age55,YearsofService,28 RobertW.BallAssistant Treasurer Age62,Yearsolservice,40 DavidC.Heiligman Assistant Secretary Age38,Yearsolservice,15RobertC.Henderson Assistant Conrroller Age38,YearsofService,1SStephenKowbaAssistant Controller Age59,Yearsofservice,28 JohnM.KuebelAuditorAge43,Yearsofservice,14DanielG.Kennedy*Partner,Nixon,Hargrave, DcvansttDoyleA.J.McMullenChairmanoltheExecutive

Comminee, CarlockInc.,andDirectoroltheparentcompany,ColtIndustries, Inc.PaulA.MillerFormerPresident, Rochester Institute olTechnology EdwardJ.NelsonFormerPresident, Rochester CasandElectricCorporarion WilliamS.Vaughn*tg FormerChairmanoltheBoard,EastmanKodakCompanyWilliamG.vonBergtChairmanoltheBoardandChiclExecutive Oificer,SybronCorporation tMemberoftheSalaryReviewCommittee oftheBoardofDirectors Rochester GasandElectricCorporation 89fastAvenueRochester, NewYork14649-MOTICE-THEATTACHEDFILESAREOFFICIALRECORDSOFTHEDIVISIONOFDOCUMENTCONTROL.THEYHAVEBEENCHARGEDTOYOUFORALIMITEDTIMEPERIODANDMUSTBERETURNEDTOTHERECORDSFACILITY, BRANCH016.PLEASEDONOTSENDDOCUMENTS CHARGEDOUTTHROUGHTHEMAIL.REMOVALOFANYPAGE(S)FROMDOCUMENTFORREPRODUCTION MUSTBEREFERREDTOFILEPERSONNEL.

RECORDSFACILITYBRANCH ContentsHighlights 1LettertoShareholders 2RGGEPeople4ElectricandGasOperations 10Management Changes13Financial Statements 14Management's Discussion andAnalysis27Financial andStatistical Information 28Directors and05cers33AbouttheCoverDuring1980RGGErananadvertising campaigntoinformcustomers andthecommunity aboutsomeoftheworkthatgoesonandaboutthepeoplewhodotheworkSixemployees representing across.sectionofRGGEoperations andserviceswerechosenassubjectsforthetelevision spotannouncements andtheprintadvertise.

ments,Hoonewrotewordsforthemtosay.Thewordsaretheirown,andtheyarepresented inthisreport.RG&EServiceArea/Business TheCompanysupplieselectric, gasandsteamservicewhollywithintheStateofHewYork,andisengagedintheproduction, transmission, distribution andsaleoftheseseniicesinaninecountyareacentering aroundtheCityofRochester.

TheCompany's temtory,whichhasapopulation ofapproximately 880,000,iswelldiversified amongresidential, commercial andindustrial consumers.

InadditiontotheCityofRochester, whichisthethirdlargestcityandamajorindustrial centerintheState,itincludesalargeandprosperous farmingarea.

RG&EPeople.YourNeighbors

'Ioothejob.

-MOTICE-THEATTACHEDFILESAREOFFICIALRECORDSOFTHEDIVISIONOFDOCUMENTCONTROL.THEYHAVEBEENCHARGEDTOYOUFORALltp1ITED TIMEPERIODANDMUSTBERETURNEDTOTHERECORDSFACILITYBRANCH016.PLEASEDONOTSENDDOCUMENTS CHARGEDOUTTHROUGHTHEMAIL.REMOVALOFANY~PAGE(sjFROMDOCUMENTFORREPRODUCTION MUSTBEREFERREDTOFILEPERSONNEL.

60R4Docket~C0el>+8ja<>>>>'>

DEADLINERETURNDATEDate~a)-)afDocument.

fifUUUTDRYifffifRifmllUITRIt 00KH':il.[

<DIDlgefuD+fIDr"7A,uttut)~RECORDSFACILITYBRANCH8>04~30313 ToShareholders:

~~OnOctober1,1980,FrancisE.Drake,Jr.retiredatthenormalretirement ageof65aftera43yearcareerwithRGGE,thelast13yearsofwhichheservedaschiefexecutive officer.PaulW.BriggswaselectedtosucceedMr.Drakeaschairmanoftheboardandchiefexecutive officer.KeithW.Amish,formerexecutive vice.president, waselectedtoreplaceMr.Biiggsaspresident, andbecamechiefoperating officer.LeonD.White,Jr.succeeded Mr.Amishasexecutive vice-president withresponsibility foroperations.

Inbringingaboutwhatweconsidertobeaninnovative management structure, weestablished twoseniorvice.president positions tocompleteafivemember,seniormanagement teamtoaddressthecomplexdecisions thathavetobemadeintheutilitybusinesstoday.HarryG.Saddockwaselectedseniorvice.president, financeandrates,andMarioSilvestrone waselectedseniorvice.president, generalservices.

Consolidation ofthesetwoareasofRGGE'soperations underseniorvie+presidents isintendedtoallowforbroadermanagement influence andparticipation inthepolicydecisionmakingprocesses andtoreinforce management communication channelsintheCompany.Severalpromotions andreassignments havebeenmadeamongotherofficersoftheCompany,andtheyaredetailedonpage13ofthisreportThesechangesweremadeprimarily toofferadvancedcross-training incriticalexecutive positions.

Weviewourredesignofseniormanagement structure asatimelystepaswemoveintothisdecade.Commonstockearningsin1980increased

$1.8million,orfivepercentover1979.Earningspershareofcommonstockroseamodestonepercent,goingfrom~2.08to$2.10.The1980per.share earningsreflecttheadditionofsome657,000weightedaveragesharesofcommonstockTotalcustomerrevenuesfor1980,excluding electricsalestootherutilities, showedasignificant18 percentincreaseoverthepreviousyear.However,revenuegrowthresulting fromincreased unitsa!esofelectricity andgaswassmalLWhenadjustedfortheinfluences ofrateincreases, fueladjustments andweather,"real"growthincustomerrevenueswaslessthanonepercentover1979.However,revenuesfromelectricsalestootherutilities throughtheNewYorkPowerPoolincreased 40percentover1979.Shareholders andcustomers alikebenefitfromthesesaleswhicharemademainlyfromourcoal.firedgenerating units.Thereisastrongdemandforcoal-firedgeneration asdownstate utilities reducegeneration fromtheirmoreexpensive oil.fired units.Expensesincreased in1980andinflation continues tobeamajorcontributing factor.Operating expensesrose21percentover1979.

Thecostoffuelsagainrosedramatically andnowcon.sumesalmosthalfofeachRGGErevenuedollar.Thecostoffossilfuelsalonewentup45percentin1980.Thetremendous upsurgeininterestcostsmadetheheavyfinancing requirements inourhighlycapital.intensive businessevenmoreburdensome.

Totalinterestcharges,excluding allowance forborrowedfundsusedduringconstruc-tion,rose17percentwhilepreferred stockdividends wentup34percent.Thesecosts,liketaxes,areexpensesoverwhichwehavelittlecontrol.Wherewecanexertsomedegreeofcontrolovercosts,weeconomize.

But,despitetheproblemswithcosts,wethinkwehavebeenabletoachieveatemporary workablebalanceamongthefinancial pressures, customerrequirements andthereasonable expectations ofshare.holders.TheminimalgrowthinRGGE's1980energysalesreflected theseverityoftherecession seeninthefirsthalfoftheyear,thingslookedalittlebetterduringthesecondhalf.Withregardtogrowth,weremainconfident abouttheoveralleconomicclimateinourserviceterritory.

MonroeCounty,wheremostofourcustomers arelocated,isconsidered oneofthestrongest centersofeconomicgrowthinNewYorkState.Whilethatgrowthdoesn'tcomparewiththehealthyadvancesseeninthe60's,itisstillverygoodasmeasuredagainstotherpartsoftheStateandtheNortheast ingeneral.EastmanKodakCompanyhasannounced plansforasizeableexpan-sionintheRochester area.Someotherindustries andbusinesses haveexpressed intentions toexpand,andseverallargerenovation andconstruction projectsareunderwayinmetropo!itan Rochester.

In1980,Rochester areacompanies addednearly6,000newjobs-twiceasmanyastheyearbefore.Morethan$537millionwasspentinplantexpansion,

$213millionmorethanwasspentbybusinessandindustryin1979.Theeconomicstabi!ityinourserviceareapresentsstrongresistance tothetypeoferosionthatisbeingfeltinotherpartsoftheStateandweremainoptimistic abouttheeconomicfutureofourlocale.InAugust1980 wepetitioned theNewYorkStatePublicSeniiceCommission (PSC)forelectric, gasandsteamrateincreases.

Therequestfollowedcloselyontheheelsof$48millioninrateincreases grantedamonthearlierinJuly.Unrelenting inflation, coupledwiththelengthy11 monthratehearingprocess,makerateincreaserequestsvirtually anannualrequirement.

Itisalsoessential forustophaserateincreaserequestswiththePSCpolicyofbasingthemsolelyonforecastdataforaone-yeartestperiod.TheJuly1980rateincreases, forexample,werebasedonforecasts fora12.monthperiodrunningthroughJuly1981.Therateincreases wearenowseekingwillbedecidedfortheperiodfromAugust1981 throughJuly1982.

Inthecurrentratecase,weareseekingnewratesthatwouldproduceanaddi.tional%1.9millioninannualelectricrevenues,

$7.8millioningasrevenuesandS3.6millioninsteamrevenues.

InJanuary1981 werequested atemporary increaseinelectricandgasratespendingtheJuly1981decision.

Wealsoaskedthatthesteamrateincreasebeputintoeffectimmediately.

Themovewasnecessitated bysoaringinterestrates,highercostsandaneedtoprotecttheCompany's securityratings.Thesteamrateswereapprovedandmadeeffective February18.

Thedecisiononthetemporary electricandgasrateswaspendingatthetimethisreportwenttopress.

AnnualReport1980fortheYearEndedDecember31Highlights 19801979XChangeGseof1980RevenueDollart)nCents)y4IIIIIIIIIElectricity tocustomers Kilowatt-hours

.RevenueElectricity tootherutilities Kilowatt.

hours.RevenueGasTherms.RevenueSteamPounds.Revenue5,186,423

$245,0051,620,929

$52,786434,492$181,0462,413,879

$23,5895,163,520

$219,3731,526,925

$37,804426,743$140,5272,792,170

$19,988Sales,RevenuesandEarnings(Thousands, ExceptPerShareAmounts),12640229(14)18Totaloperating revenues..Totaloperating expenses..$502,426$417,69220$442,894$365,57021Operating incomeNetincomeEarningsapplicable tocommonstock.Weightedaveragenumberofcommonstocksharesoutstanding

..Earningspercommonshare.........

Cashdividends percommonshare,adjustedforstockdividends........

Stockdividendpaid(SeeNote).......UtilityPlant(Thousands)

$59,532$43,652$52,122$39,56516,472$2.10$1.483%15,815$2.08$1.413%$34,725$32,9201410EarningsandDividends PerCommonSharethDo)hts)DEarningsporCommonShore(Adjutted forStockOhtdenrb)

DCoshDMdencbperCommonShore(Adjusted forStockDMdencb)2,11Capitalexpenditures, lessallowance forfundsusedduringconstruction

..NetutilityplantatDecember31.......

NumberofCustomers atDecember31ElectricGasSteamNumberofCommonStockShareholders atDecember31..$87,742$111,427$950,474$893,531(21)650,41648,5434285,470282,0991213,157209,6422271318(15)NumberofEmployees atDecember31.2,6912,6611Note:The22ndannualstockdividendwaspaidFebruary25,1981attherateofthreepercent.1976197719781979191640r/'le~Qoo95./>REIitlllNBRII IIOCKETFILECQPII8X04330313 RG&EPeople1]1Pr,cIj8mi-<<-az608mLucyWhiteTelephone SetvlceRepresentative RGGE'sTelephone ServiceCenteranswersnearlyahalf.millioncallsayear.LucyWhitegetsallkindsofcalls:servicetransfers, newcustomerconnections, poweroutages,gasleaks,complaints andrequestsforinformation.

"EverytimeIsay'goodmorning'havetobereadytohelpsomebodywithwhatever's ontheirmind."It'sLucy'sjobtohelpthecustomerpersonally whereshecanortogetthecallertotherightpartyforassistance orananswer.Lucyandothertelephone servicerepresentatives areindirectcontactwithRGGE'scomputersystemthroughdisplayconsoles.

Accountinformation onanyofRGGEshalf-millioncustomers isavailable inseconds.Still,onbusydays,callsI'r1~=]stackupasthe34servicerepresen.

tativestrytogivethecalleracompleteanswer."Everyday weansweralotofphonecalls.Wetrytopickupeachonewithinsixrings,butsometimes wefallbehind."Lucysaysthatthehardestcallsshegetsarethehighbillcomplaints.

Shetriestohelpthecustomerunderstand howtherisingcostofenergyforcesthebillsupevenwhenpeopleconserve.

"AttheendofthedayI'mtired.ButIlovepeopleandIlovehelpingthem."

~~Aspartoftheratecase,wearetryingtorecoverexpensesconnected withtheSterlingnuclearpowerplantproposal.

Wehadtoterminate thatprojectinJanuary1980aftertheStatereverseditsearliercertification forconstruction ofthe1,150megawattfacility.

WeareaskingthePSCforpermission toamortizetheexpenditures overafive.yearperiod.InJanuary1981 thePSCissueditsordercoveringthefirstphaseoftheSterlinghearings.

ItruledthatcostsincurredthroughJanuaiy1978 wereprudent.CompletedetailsofthecasemaybefoundinthisreportunderNotestoFinancial Statements.

Oneofourmainconcernstodayisthedelayintheconstruction ofNiagaraMohawkPowerCorporation's NineMilePoint~2nuclearpowerplantatOswego,NewYorkPreviously scheduled foroperation in1984,construction ofthe1,084megawattplanthasbeensetbackduetoanumberoffactors,including technical reassessments, regulatory mattersandadeclineinelectricloadgrowth.Theestimated totalcostoftheplanthasrisensubstantially asaresultofthedelaysandthecumulative adversePaulW.Bnggs,lett,KeithW.Amisheffectsofinflation.

Althoughourshareofthatplantisonly14percent,thecostincreases willcontinuetoexertpressureonourcapitalrequirements forseveralyears.Nowscheduled forlate1986operation, theNineMileplantwilladd152,000kilowatts ofbaseloadcapacity'noursystem.InApril1980weaskedthePSCforpermission toacquirePavilionNaturalGasCompany.Thatapprovalwasgrantedearlyin1981andtheacquisition tookeffectFebruary28thisyear.Thepurchasehasadded10,000gascustomers inthesouthwest portionofoursystemandisexpectedtoproduceadditional annualgasrevenuesof410million.Innotingthecomplexities oftheutilitybusiness, wecommendFrancisEDrake,Jr.forhisimmensecontributions toRGGEandtheindustryoverhis43-yearcareerwiththeCompany.Mr.Drakebecamechiefexecutive officein1967.Inflation hadnotyetbegunitsupwardspiral;weplanned,licensedandbuiltanuclearpowerplantwithoutharassment, delayorunnecessary highcosts;theOilEmbargowasstillsixyearsoff;wehadnothadagasrateincreasesince1949oranelectricincreasesince1958,andregulatory bodieswerereasonable intheirrequirements andsupportive intheirrulings.Thatwastheyear1967.Alltoofamiliararetheburdensome problemsofthefollowing years:doubledigitinflation, skyrocketing fuelcosts,asuccession ofnecessary rateincreases, avirtualstand.stillinthecrucialnuclearpoweroption,publicskepticism, mountingregulation andacropofanti-utility pressuregroupsclaimingtoworkinthepublicinterest.

FrankDrakemetthechallenges andissueshearnand,inourjudgment, broughtRGGEthroughanextremely difficult period,maintaining ourfinancial integrity andtraditionally highlevelsofservicetothecustomers andcommunity.

Hisresponsibilities wereheavyanddemandedthesuperiorleadership abilityhepossesses.

Theturbulent periodforRGGEandtheutilityindustryisfarfromover.Wehaveeveryconfidence, though,thatourteamofRGGEpeopleisuptothechallenges andgearedtomeetthefuture.Weexpecttomaintainasolid,progressive operation.

And,inregardtoemployees, thethemeofthisannualreportfocusesonthethoughtsofarepresentative sampleofourRGGEpeople.Sixemployees werefeaturedinatelevision andprintmediaadvertising campaigntoshowourcustomers andthecommunity thecaliberofpeoplewehaveandwhatthosepeoplethinkoftheirjobs.Thewordsoftheseemployees aretheirown.Wehopeyou'ltakethetimetosharetheirthoughtsinthefollowing pages.PaulW.BtiggsChairmanoftheBoardandChiefExecutive OAicerKeithW.AmishPresident andChiefOperating OfficerMarch18,1981

'%8ha5mRoaaeCxxia g')C))Q~QiQ.)iQg+QO]j'QQ~

Rz90RDennisRoseCustomerServiceRepresentative 0"Whenacustomercomesin,Imaynothavealltheanswersallthetime,butIalwaysgivehimanhonestanswer."DennisRoseseesortalkstomorethan20customers aday.Someconversations takeaslittleas20minutes,othersmayrunseveralhours."Everypersonisaspecialindividual withaspecialproblem,andyoutreatthemaccordingly."

Withinflation takingawayfromevery-one'sincome,alotofcustomers cometoDennistoworkoutspecialbill.payingarrangements.

Othersmaywantinformation onhowtouseenergymoreelflciently andcutdownontheirbills.Dennisandtheothercustomerservicerepresentatives bendoverbackwards tohelpwheretheycan.It'stheirjobtolistenandtohelp."Ireallyfeelgoodbeingabletosay'We'lbeabletoworksomething out.'henacustomerissincerely tryingtopaythebillbutishavingahardtime,weknockourselves outtomakeiteasierforhimorhertoworkoutspecialplans,toprovidewhateverhelpisneeded."Highenergybillsdon'tmakeanyonehappy,notevenRGGEemployees, likeDennis,whopaythefullpriceontheirownbills."It'snicetoseethemgoout-nothappyallthetime-butunder-standing."

%47GiEDKE0MHlcK65KKGfgQ NzeRarnQog@Cn54ooO:mBdP EdFlaniganGasConstruction andMaintenance Foreman"It'sourresponsibility tomakesurethegaskeepsflowingandthatserviceforcustomers isnotinterrupted."

WhenEdandhiscrewareworkingonagaslinethegasisstillflowing.Maintaining agassystemisatough,critical, oftenhazardous job.Butthat'swhatEdFlaniganhasbeendoingfor33years."Everyday RGGEmakesroutinesurveysthroughout ourservicearea.We'eabletodetectevensmallamountsofgasescapingintotheair."RGGEgasmaintenance peoplemonitorthegasdistribution systemonacontinuous basis.Anyproblemsthatarefoundaretakencareofimmediately.

"Ifacustomersmellsgaswegettherefasttomakesurethere'snophysicaldanger.Safetyisournumberoneconcern."

RGGEtellsitscustomers nottotakeanychances.They'etoldthatiftheythinktheysmellgastheyshouldgetoutofthehouseandcallRGB'Partofmyjobistorepairleaksorreplaceoldpipewithplasticorwrappedsteel.InthecaseofaGradeOne[highpriorityj situation, mymenandIwillworkallnightifwehaveto,togetthejobdoneright."Q/itIwII

'%%reMsCKEigQMGilBSGOKlGKCPJackDavisPowerController "ThePowerControlCenteristheheartofRGGE'selectrical system.Themapandcomputers helpmonitorthestatusofpowerplants,transmission lines,everymajorfacilityintheRochester area."Ifsomething goeswrong-sayapowerplantgoesoutofservice-ourjobistopreventbrownouts andserviceinterruptions eitherbycallingformorepowerfromRGGEplantsorbringingitinfromelsewhere."

'-c-el"We'elinkedwiththeNewYorkPowerPool.Everyfiveminuteswegetacompleteupdateonhowmuchpowerisbeingproduced, howmuchisavailable tous,andwhatitwouldcost.It'sthepowercontroller's jobtodecidewhentobringinelectricity fromthePowerPoolreserve."RightnowthePowerPoolhasenoughreserveelectricity toprotectourcustomers againstbrownouts andmajorserviceinterruptions ifwehaveaprobleminourownsystem."Thequestionbeingdebatediswhethertherewillbeenoughelectricity throughthe1980's.The~+treserveisshrinking andNewYorkStateofficials havemadethedecisiontobuildfewernewpowerplantsthanutilities throughout theStatefeeltheyneed."Ihavetowonderaboutwhat'sgoingtohappenfiveortenyearsfromnow.Istheregoingtobeenoughelectricity forpeakdemandperiods?IstheStatetakingtoomuchofarisk?I'mconcerned.

Ithinkit'ssome.thingeveryoneshouldthinkabout."

%0rj:KLIEG Gis~~RDM~.~~coaiQxzzEsfRIhF WaltRogalskiTroubleinan FirstChss"It'smyjobtorestorepowerasquickly,safelyanddependably asIpossiblycan.Iknowhowmuchdependsonit"E!ectiicity isasvitaltomodemlifeaswater.RGGEtroublemen, thefirst-line emergency team,makesurethatwhateverhappenstointerrupt electrical serviceisdealtwithimmediately.

They'especialists insolvingthetoughones."Ialwaystakethatextrafewminutestotest,check,andrecheckIhavetoomuchrespectforelectricity totiytotakeshortcuts."

"Igetalotofsatisfaction gettingpowerrestoredasfastaspossible.

Ithinkpeopleknowthejobwedoiscritical.

It'sgotitshazards,andtheyappreciate ourefforts.Thatgivesusagoodfeeling."

Workingconditions forRGBEtroublemen aregenerally harshandoftenhazardous.

Theyworkintraffic,highonapoleorunderthestreet,insubzeroweatherorsuddenstorms,andtheyworkwithhigh.voltageelectricenergy."Weworkunderabuddysystem.Wealldependoneachotherandknowhowcriticalitistodothejobright.Itmakesmeproudtobepartofateamlikethis."

'%Sxi6ElhsQhsltQmc0 mQn(Qqpx5cm~

QB7(XP(Xi'b+

WesBackusOperations Supervisor, GinnaNuclearPowerPlant"Ithinksomepeoplehavewrongideasaboutnuclearpower.It'satoughsubjecttounderstand, butIreallybelievethemoretheyknowaboutit,themorecomfortable they'feel."Thenuclearindustryhasthebestsafetyrecordofanyindus+.OneofWesBackus'obs istohelpmakesureeverysinglesafetyprocedure isstrictlyfollowedatalltimes."Inaverypractical sensetherejustaren'talotofalternatives tonuclearpoweravailable tousrightnow.Idon'tliketheideaofushavingtodependonforeigncountries forourenergy.""NuclearpowerplantssuchasGinnacontainmanysafeguards thatmakethepossibility ofradiation leakageextremely remote.Attheslightest indication ofdanger,wehavetheabilitytoshutdowntheplantimmediately.

"Iunderstand nuclearpowerandIfeelit'ssafe.InfactImovedmyfamilyfromBergentoabouttwomilesfromGinnatobeclosertomywork,andI'mstillgladIdid."

1980Operations ElectricOperations SalesTotalkilowatt.

hoursalesofelec.tricitytocustomers wereuponlyafrac-tionofapercentfrom1979dueprimarily totherecession andcustomerconserva.

tionmeasures.

Industrial kilowatt.

hourelectricsaleswereoffninetenthsofonepercentreflecting thesloweconomyandreversing atrendseenoverthelastseveralyearswhenindustrial salesledallclassesofelectriccustomers ingrowth.Kilowatt.

hourelectricsalestoresidential customers wereup1.2percentfrom1979,andcommercial kilowatthourelectricsalesrose1.4percent.Verymoderateelectricloadgrowthisprojected for1981.Onenotablebrightareainelectricsalesfor1980wasthesharp40percentincreaseinrevenuesfromelectricsalestootherutilities

-thesaleofexcesspowertoothercompanies throughtheNewYorkPowerPool.Thesesalesaremadepossiblemainlythroughtheexcel.lentavailability ofourGinnanuclearpowerplantwhichcanproducemorethanhalfofthetotalelectricenergyrequirements ofoursystem.Wereservethefulleconomyoftherelatively inex-pensivenuclear.generated powerforourowncustomers whilemakingexcesspowerfromourcoal-andoilfiredgener.atingunitsavailable forsaletootherutilities.

Revenuesfromtheseoutsidesalesbenefitbothshareholders andcustomers.

Oswego¹6NiagaraMohawkPowerCorporation's Oswego¹6oil-fired powerplantwentintocommercial operation inJuly1980.

Underajoint.ownership agreement RGGEowns24percentoftheplant'scapacity, or204,000kilowatts.

Construction beganontheOswego<<6plantpriortothe1973ArabOilEmbargothatspurredthedramaticriseinoilprices.ThisplantisahighlyeHicientoil.firedunitandtheavailability ofitspowerisimportant toRGGE,particularly asreplacement powerwhentheGinnanuclearpowerplantisoutofserviceforannualrefueling, maintenance andinspection periods.Atothertimeswesellourshareoftheenergytootherutilities, producing additional revenuesfortheCompanyandasavingforourowncustomers.

GinnaNuclearPowerTheGinnanuclearpowerplantcontinues toproveitselfasoneofthefinestoperating plantsinthenation.During1980,despitetwoplannedoutages,the470,000.kilowatt plantachievedanotable76percentavailability anddidnotexperience asingleforcedoutage.In1980theplant'seHicientoperation savedcustomers 432.4millioninfuelcostswhencom-paredwithanequivalent amountofcoal.firedenergy.Whencomparedwithwhatitwouldhavecosttoproducetheenergywithoilasafuel,theplantsaved$84.4millionin1980.TheGnderground Connection Deliver-ing34,500voltsofelectricity isnotaparticularly bigjobforapowercompanylikeRGGE;butwhenthatpowerisneeded1000feetbelowtheearth'ssur.facetheprojecttakesonadifferent complexion.

International SaltCompanywantedtoupgradeelectricserviceinitssaltminenearRetsof,NewYork,30milessouth.westofRochester.

Withalmost17squaremilesofexcavation 1000feetbelowground,the85.yearold saltmineisthelargestinthefreeworld.Electricity providespowerfortheminingoperations, andpropervoltagewasneededtoworktherichsaltveinthatgeologists sayextendsasfarwestasMichigan.

Thecomplicated projecttookthreeyearstocomplete, andRGGE'speopleplayedabigpart.Aboreholewassunk1000feetdown.Following elaborate preparations belowground,asix.ton,34,500voltpowercablewasfeddowntheholetoconnectthesurfaceswitch-gearwiththeminesubstation.

It'srarethatyouhearofacompanydrill.ingforelectricity, but,withRGGEsassistance, thisfirstunderground con.nectionofitskindinAmericawasmade,andRGGEisproviding thepower.GasOperations SalesSalesofnaturalgasinthermsincreased only1.8percentin1980.Althoughtherewasanadditionof6,427residential gasspaceheatingcustomers duringtheyear,residential gassalesinThesix.tonpowerableasitentersthemine.10 Thisgiganticwheelwaspartofaliftonanearlyshaftataninternational SaltCompanyminethatwasworkedfrom1906untilthe30's.Therelicwasbroughtbackintoservicetohelpthreada34,500voltelectriccabledowntoaminesubstation 1,000feetbelowtheground.Electricians installanelectrical grounding gridsurrounding theminelevelportionoftheunderground substation.

Left:Thisburstoflightfromatime.exposedphotoofafiberoptic cableshowslightasthetransmission medium.Right:Thefiberoptic telemetering consoleisadjustedbyanRGGEtechnician.

thermsdeclinedby2.7percentfromthepreviousyear.Itisapparentthatthecosteffectiveness ofenergy.efficient mea.suresthatRGGEhastraditionally promotedcontinues tohithometotheconsumer.

Efficiency andconservation measuresundertaken bycustomers havebeenoffsetting anysignificant growthingassalesthatmightotherwise beanticipated.

Infact,since1972,theaveragegasconsumption byresidential spaceheatingcustomers hasdroppedby24percent.However,gassalesinthermstoindustrial customers rose14.9percentover1979andareexpectedtocontinuetoriseatahealthypaceascompanies shiftoilloadstonaturalgas.Commercial customergassaleswentup2.5percent,mainlyduetotheadditionofcommercial spaceheatingloads.In1981itisestimated that5,500residential gasspaceheatingcustomers willbeaddedtothesystem,withgasmaintaining itsdecisivecostadvantages overheatingoil.Tenthousandgascustomers havebeenaddedtotheRGGEsystemthroughtheacquisition ofPavilionNaturalGasCompanyinFebruary1981.RGBEsgassupplyisadequatetomeetallprojected requirements.

ALightApproachFiberoptics

-themethodfortransmitting signalsanddatawithouttheuseofmetalcables-iscomingintoitsownasanadvancedtechnology; andRGGEisalreadyinvolved.

Theinitialapplication willinvolvelight-wavecommunication forthetelemeter-ingofnaturalgasdeliveries fromRGGEssupplierwherevolumesrunmorethan40billioncubicfeetayear.Thefiberoptic telemetering unitisvirtually immunefrominterference commoninexistingmetalliccables.Gastelemetering isonlythefirstofseveralapplications forfiberoptics envisioned byRGB'uture possibleapplications forfiberoptic technology includepowertransmission telemetry, powersystemcontrolandaudiotonecommunications thatpresently relyonconventional wire.cabletransmission.

11 ResearchandDevelopment In1980,RGGEspent~5.6milliononresearchanddevelopment.

Ofthatamount,$1.8millionwentintoRGGEsownresearchanddevelopment pro.gramswheretwoinparticular paidhand-somedividends in1980attheGinnanuclearpowerplant.Oneoftheearlynuclearpowerplantsinthiscountry,completed in1969,GinnaStationcontinues toperformremarkably welLTherehas,however,beensomeconcernwithindications ofcorrosion inthesteamgenerators ofsuchplants-thetwounitsthattransfertheheatfromtheprimaiynuclearfissionloopandproducethesteamtodrivethe470.megawattturbinegenerator.

Continuing

unabated, corrosive actioncouldulti-matelyresultinacostlyshutdownandequipment replacement.

RGGEhadbeenstudyingtheproblemforyears,andintheregularspringshut-downforrefueling in1980anRGGE-developed processforflushingthesteamgenerators ofcorrosive materials wasused.Encouraging resultswerenotedwhentheplantwasinspected inNovember.

Itappearsthatthedegreeofcorrosion hasbeensignificantly reduced.Onlythreegenerator tubesshoweddamage,whereas31hadtobepluggedinearly1980.ThisRGGEprocesswillbeusedduringeachrefueling

shutdown, possiblyeliminating anexpensive repairprojectintheyearstocome.Complementing thebreakthrough insteamgenerator

cleaning, RGGEisexperimenting withaprocessthatisexpectedtoallowrepairofdamagedtubesinthesteamgenerator withoutthepermanent lossofthetube'sfunctionthatnowresultsfromplugging.

Thenewsleevingprocessinsertsabimetallic tubesleeveupintoandabovethedamagedportionofatube.Thisisexpectedtomaintainsteamgenerator integrity andresultinyearsofcontinued service.ThusRGGEsownresearchanddevel-opmentprogramwillbepayingbigdivi.dendsforshareholders andcustomers, justasitdidafewyearsagowhenRGGEdeveloped themulti.frequency eddycurrenttestingsystemthatstreamlined steamgenerator tubetesting.12AnRGGEemployeetrainsintheCompany's steamgenerator mock.upforthejobofplacingmetalsleevesonworngenerator tubes.

Statement ofIncomeRRSandElcctrioOorporrrtion (Thousands ofDollars)Operating Revenues(Note1)Electric.Gas.....................

SteamElectricsalestootherutilities TotalOperating RevenuesOperating Expenses(Note1)Operation ElectricandsteamfuelsPurchased electricity.

Deferredfuel-electric andsteamPurchased naturalgas.Other.Naintenance Depreciation Taxes-local, stateandotherFederalincometax-current (Note2)-deferred (Note2)TotalOperating ExpensesOperating IncomeOtherIncomeandDeductions Allowance forotherfundsusedduringconstruction (Note1)Other,net

.TotalOtherIncomeandDeductions IncomebeforeInterestCharges.Year'Ended December311980S245,005181,04623,589449,64052,786502,42686,62223,796(6,911)127,75981,96032,04827,80056,98439312,443442,89459,53211,7104,77216,48276,0141979$219,373140,52719,988379,88837,804417,69262,10931,937(1,038)89,80472,26430,12923,70349,916(36)6,782365,57052,12211,4393,77415,21367,3351978$202,631118,53119,110340,27228,676368,94856,42619,3371,71471,10965,68526,24622,20645,9355,1665,875319,69949,2498,7054,41813,12362,372InterestChargeslangtermdebtShorttermdebt.Other,netAllowance forborrowedfundsusedduringconstruction (Note1)..TotalInterestChargesNetIncomeDividends onPreferred andPreference Stock,atrequiredratesEarningsApplicable toCommonStockWeightedaveragenumberofsharesoutstanding ineachperiod,adjustedforstockdividends (000's).EarningsperCommonShare(NoteI).CashDividends perCommonShare,adjustedforstockdividends (Note1)..34,1294,298755(6,820)32,36243,6528,927S34,72516,472S2.10S1.4829,0844,016441(5,771)27,77039,5656,645S32,92015,815~2.0825,5941,588416(4,812)22,78639,5865,678~33,90814,613$2.32Statement ofRetainedEarnings(ITtousands ofDollars)YearEndedDecember31198019791978Balanceatbeginning ofperiodAdd'etincome80,15543,65239,56539,586$77,338470,819TotalDeductDividends oncapitalstockCumulative preferred stock,atrequiredrates(Notes5and6)..Preference stock(Notes5and6)CommonstockCash(Note1)Stock(Note5)TotalBalanceatendofperiod123,8076,7992,12823,9107,00039,83783,970116,9034,5172,12822,1487,95536,748480,155110,4053,5502,12819,2698,12033,067S77,33814 HarryG.SaddockDavklC.Heiligman RobertC,HendersoJohnE.MaierDavklK.LaniakLeonD.White.Jr.JohnE.ArthurManagement Changes(Effective October1,1980)LeonD.White,Jr.,formerlyvice.president, electricandsteamproduction, waselectedexecutive vice.president oftheCompany,withresponsibility foroperations.

Mr.WhitejoinedRGGEin1937andhasservedinanumberofelectricandsteammanagement posi~tionsoverhis43-yearcareer.HarryG.Saddockwaselectedtothepositionofseniorvicepresident, financeandrates.Previously hewasvice.president, electnicsystemplanningandoperation.

Mr.Saddock,alicensedpro-fessional

engineer, joinedtheCompanyin1950andprogressed throughanum.berofmanagement positions intheelectricandelectricsystemplanningdepartments.

MaiioSilvestrone waselectedseniorvicepresident, generalservices.

Inaddi-tiontohispreviousresponsibilities asvicepresident, consumerservices, publicaffairsandpurchasing, heisadminister-ingemployeerelations andinformation systems.Mr.Silvestrone hadservedinvariousmanagement positions inthemarketing andsalesdepartments sincejoiningtheCompanyin1950.Heisalicensedprofessional engineerandholdsanMBA.fromtheUniveisityof Rochester.

JohnEArthurwasnamedvice.presi-dent,engineering andchiefengineer.

Mr.Arthur,whoseformerpositionwaschiefengineer, hasbeenwithRGGEsince1955andisalicensedprofessional engineer.

DavidK.Laniakbecamevice-president, electricsystemplanningandoperation, wherehewaspreviously superintendent.

Mr.LaniakcametotheCompanyin1954andheldanumberofpositions intheelectricmeterdepartment beforemovingtosystemplanning.

JohnE.Maier,formervice.president, employeerelations, waselectedvice.president, electricandsteamproduction.

Mr.Maierjoin~RGGE in1947andhasanM.BA.fromtheUniversity ofRochester.

DavidC.Heiligman waselectedtreasurer whileretaining hisformerpositionofassistant secretary.

HejoinedtheCompanyasanaccountant in1963andhasanM.BA.fromtheUniversity ofRochester.

RobertC.Henderson, formerassistant controller, waselectedvice-president, rates,effective December1,1980,replacing JohnLKennedywhoretiredafter40yearsofservice.Mr.Henderson joinedtheCompanyin1963asanaccountant.

HehasanM.BA.fromtheUniversity ofRochester.

DirectorChangesInJanuary1981,theboardofdirectors electedConstance M.Mitchell, ComeliusJ.MurphyandLeonD.White,Jr.asdirectors oftheCompany.Mrs.MitchellhasbeenactiveintheRochester social,civicandpolitical community formorethan25years.Sheiscommunity relations coordinator fortheProgramtoInterestStudentsinScienceandMathsponsored bytheIndustrial Management CouncilofRochester, NewYork,Inc.Mr.Murphyisagroupvice.president ofEastmanKodakCompanyandgeneralmanageroftheInternational Photo.graphicDivision.

Mr.WhiteisRGGE'sexecutive vice-president.

Mrs.Mitchell, Messrs.MurphyandWhitereplacedretiringboardmembersErnestJ.HoweandEdwardJ.Nelson,formerpresidents ofRochester GasandElectricCorporation, andWilliamS.Vaughn,formerchairmanoftheboardofEastmanKodakCompany.}constanceM.MitchetlComehusJ.MurphyLeonD.White,Jr.13 Statement ofChangesinFinancial PositionRESandElectricCorporation (ihousands ofDollars)YearEndedDecember31198019791978SourcesofFundsOperations Netincome.Principal noncashcharges(credits) toincomeDepreciation Amoritzation ofnuclearfuelDeferredfuelcostDeferredincometaxes,netAllowance forfundsusedduringconstruction Other,net27,80020,789(4,813)6,927(18,530)2,45223,70317,126(4,755)2,596(17,210)1,96322@0615,7469763,161(13,517)1,204S43,652S39,565S39,586,TotalfromOperations Financing SaleoflongtermdebtSaleofcommonstockSaleofpreferred stock~sfromshorttermdebt,netTotalfromFinancing TotalSourcesofFunds...GsesofFundsGtilityplantPlantadditions.

Nuclearfueladditions

.Less:Allowance forfundsusedduringconstruction

.NetAdditions toGtilityPhnt.Dividends onpreferred stockDividends onpreference stockDividends oncommonstockReduction ofshorttermdebt,net.Retirement oflongtermdebtCapitalstockexpenseDiscountandexpenseofissuinglongtermdebt.Other,net.increase(decrease) inworkingcapital(excluding shorttermdebt)TotalGsesofFundsChangesinComponents ofWorkingCapitalIncrease(decrease) incurrentassetsCashAccountsreceivable, net.Materials andsuppliesFossilfuelConstruction andothersuppliesPrepayments Total.Increase(decrease) incurrentliabilities (excluding shorttermdebt)AccountspayableTaxesAccruedinterestandpayroll.LongtermdebtduewithinoneyearOther,netTotal.Increase(decrease) inworkingcapital(excluding shorttermdebt)..78,27755,00025,25725,000105.257S183,534S97,6008,67218,53087,7426,7992,12823,91024,7001,3438583,89632,158S183,534S1,30017,9746,2741,4705927,0777491,7451,574(12,000)2,851(5,081)S32,15862,98810,0006,08325,00050,00091,083S154,071S109,65618,98117,210111,4274,5172,12822,14812,000544635(683)1,355S154,071(8,852)5,985(56)1,11790(1,716)3,207(2,881)1,113(4,677)167(3,071)69,36240,00027,18667,186S136,548S105,19120,87813,517112,5523,5502,12819,2699,00016,677902490(2,037)(25,983)S136,5485,1601,3681,886(81)2338,566103866,72552016,67724134,549S(25,983)16 BalanceSheet(Thousands ofDollars)ASSETSUtilityPlant,atoriginalcost(Note1)ElectricGasSteam.Less:Accumulated depreciation andamortization Construction workinprogressNetUtilityPlantAtDecember311980849,946193,86318,1901,061,999 337,215724,784225,690950.4741979S728,686182,04618,064928,796295,328633,468260,063893,531Investment inSubsidiary, atequity.CurrentAssetsCashAccountsreceivable, netofallowance fordoubtfulaccounts:

1980-$1,387;1979-$1,247.Materials andsupplies, ataveragecostFossilfuelConstruction andothersuppliesPrepayments TotalCurrentAssetsDeferredDebitsUnamortized debtexpense..Deferredfuelcost(Note1)OtherTotalDeferredDebitsTotalAssets.CAPITAUZATION ANDLIABILITIES Capitalization Longtermdebt(Note 4).Preferred stockredeemable atoptionofCompany(Note 5)Preferred stocksubjecttomandatory redemption (Note6).Preference stocksubjecttomandatory redemption (Note6)Commonshareholders'quity Commonstock(Note5)RetainedearningsTotalCommonShareholders'quity.

TotalCapitalization.

CurrentLiabi!itiesShorttermdebt(Note7).LongtermdebtduewithinoneyearAccountspayableTaxesaccrued,including incometaxes.interestaccrued.Payrollaccrued.OtherTotalCurrentLiabilities DeferredCreditsandOtherUabilities Accumulated deferredincometaxes(Notes1and2)OtherTotalDeferredCreditsandOtherLiabilities Commitments andOtherMatters(Note9)TotalCapitalization andLiabilities

..1,9684,22555,65918,89112,2301,30992,3144,51114,69711,41630,624S1,075,380 437,12467,00050,00028,000291,34683,970375,316957,44025,30032,97710.1999,9592,9914,08485,51028,0704,36032,430S1,075,380 2,0622,92537,68512,61710,7601,25065,2373,91710,0928,01122,020$82,850'382,16267,00025,00028,000260,43280,155340,587842,74950,00012,00032,2288,4548,4272,9491,233115,29120,5024,30824,810$982,85015

'NotestoFinancial Statements Note1.SummaryofAccounting PoliciesGeneral.TheCompanyissubjecttoregulation bythePublicServiceCommission oftheStateofNewYork(PSC)underNewYorkstatutesandbytheFederalEnergyRegulatory Commission (FERC)asalicenseeandpublicutilityundertheFederalPowerAct.IheCompany's accounting policiesconformtogenerally acceptedaccounting principles asappliedtoNewYorkStatepublicutilities givingeffecttotherate-maMng andaccounting practices andpoliciesofthePSC.Adescription oftheCompany's principal accounting policiesfollows.GtilityPlantandDepreciation.

Thecostofadditions toutilityplantandrephcement ofretirement unitsofpropertyiscapitalized.

Costindudeslabor,material, andsimihritemsaswellasindirectchargesforengineering, supervision, etc.TheCompanycapitalizes anallowance forfundsusedduringconstruction approximately equivalent tothecostofcapitaldevotedtophntunderconstruction.

Replacement ofminoritemsofpropertyisincludedinmaintenance expenses.

Costsofdepreciable unitsofplantretiredareeliminated fromutilityplantaccounts, andsuchcosts,plusremovalexpenses, lesssalvage,arechargedtoaccumuhted depreciation andamortization.

Depreciation inthefinancial statements isprovidedonastraightlinebasisatratesbasedontheestimated usefullivesofproperty, whichhaveresultedinprovisions of3.1Xperannumofaveragedepreciable propertyin1980,1979and1978.NuclearFuelandDecommissioning Costs.'Ihecostofnuclearfuelandestimated permanent storagecostsofspentnuclearfuelarechargedtooperating expenseonthebasisofthethermaloutputofthereactor.Thesecostsarechargedtocustomers throughbaseratesandthefuelcostadjustment clause.DuetoaFederalgovernment policyadoptedin1977,theCompanychangeditsnuclearfuelcostcomputation toreflectthecostsofpermanent storageofspentnuclearfuel.Prioryears'uclear fuelcostcomputations hadanticipated thatspentnuclearfuelwouldbereprocessed.

Cumulative prioryears'uel expenseswouldhavebeenincreased byapproximately SI5.9millioniftheyhadbeendetermined onthebasisofcurrentcostestimates forpermanent storageofspentnuclearfuel,ratherthanonanestimated amountforreprocessing.

IntheCompany's mostrecentlyconcluded electricratefiling,thePSCpermitted theamortization andrecoveryofapproximately

$12millionofsuchadditional coststhroughratesovera10yearperiod,commencing inAugust1980.Decommissioning costs(coststotaketheplantoutofserviceinthefuture)fortheCompany's Ginnanuclearpowerplantareestimated bytheCompanytobe$37millionin1979dollarswithdecommissioning expectedtocommenceintheyear2006.InAugust1980,theCompanybeganaccruingthesecostsovertheremaining lifeofthefacilityataninitialrateof$3.1millionperyear.TheseaccrualsareincludedinbaseratespursuanttothePSCorderreferredtopreviously.

Allowance forFundsGsedDuringConstruction.

TheCompanycapitalizes anAllowance forFundsGsedDuringConstruction (AFDC)baseduponthenetcostofborrowedfundsforconstruction purposesandareasonable rateupontheCompany's otherfundswhensoused.Theratesusedforthispurposewere10.5X,9.5Xand8.75Xin1980,1979and1978,respectively.

AsofJanuary1981,therateis113X.Inaccordance withanorderissuedbytheFERC,AFDCissegregated intotwocomponents andclassified intheStatement ofIncomeasAllowance forBorrowedFundsGsedDuringConstruction, anoffsettoInterestCharges,andAllowance forOtherFundsGsedDuringConstruction, apartofOtherIncome.SinceDecember1977,theCompanyhascomputedAFDConitsshareoftheNiagaraMohawkPowerCorporation NneNilePointNuclearGnit<<2andOswegoFossilGnit."6,untilitsJuly1980in.servicedate,atanaveragereducedratewhichisnetoftheincometaxeffectoftheinterestportionofAFDC.SnceMay1979,thistreatment hasalsobeenappliedtotheCompany's investment initsSterlingnuclearunit.Theratesfor1980,1979and1978were8.0X,7.51Xand6.85X,respectively.

RatesandRevenue.Revenueisrecordedonthebasisofmetersreadduringthecalendaryear.Tariffsforelectricandsteamserviceincludefuelcostadjustment clauses,whichservetoadjustelectricandsteamratesmonthlytoreflectchangesintheaveragecostoffuelsusedinelectricandsteamgeneration fromtheaveragecostofsuchfuelsduringthebaseperiod.Tariffsforgasservicecontainacomparable chusetoadjustgasratesforchangesinthepriceofpurchased naturalgas.DeferredFuelCosts.Fuelcostswhicharerecoverable undertheelectric, gasandsteamcostadjustment chusesincludedinthetariffschedules oftheCompanyaredeferreduntiltheyarebilledtocustomers.

Areconciliation ofrecoverable gascostswithbilledgasrevenuesisdoneannuallyasofAugust31,andtheexcessordeficiency isrefundedtoorrecovered fromthecustomers duringasubsequent twelvemonthperiod.FederalIncomeTax.Forincometaxpurposes, depreciation iscomputedusingthemostliberalmethodspermitted.

Inaddition, certaincostscapitalized forfinancial reporting purposesaredeductedcurrently forincometaxpurposes.

Theresulting taxreductions areoffsetbyprovisions fordeferredincometaxesonlytotheextentorderedorpermitted byregulatory authorities.

TheIOXinvestment taxcreditrate,whichhadbeenscheduled toreturnto4Xin1981,hasbeenmadepermanent bytheRevenueActof1978.Thepriorrateof4Xisappliedtoreducethecurrenttaxprovision while,asrecommended bythePSC,normalized taxaccounting isfollowedintheapplication oftheremaining 6X.TheCompanyusestheseparateperiodapproachincalculating theinterimquarterly taxprovision.

PensionPlan.TheCompany's retirement planisnoncontributory andcoversallregularemployees.

Expenditures madebytheCompanytotheretirement phnfortheyears1980,1979and1978were$11.4million,~10.6millionandS.9million,respectively, whichincludesamortization for:pastservicecostsover40years,changesintheplanover30years,andexperience gainsorlossesover15years.Theactuarial methodsandtheaccounting policy17 Actuarial presentvalueofaccumuhted phnbenefits:

VestedNonvested S107,486S99gZO8,8851,677SI16,371SI00,897Marketvalueofassetsavailable forbenefits..S94,499S80,082(a)MostrearitavaihbledataIheactuarially assumedrateofreturnontheplaninvestments, usedindetermining theactuarial presentvalueofaccumulated planbenefits, was6Xforallyearsshown.Theincreasein1980ofusedtodetermine Companyexpenditures werethesameeachyear.Acomparison ofaccumulated planbenefitsandplannetassetsispresented below.(Thousands)

January119791980(a)thepresentvalueofplanbenefitsreflectsanincreaseinbenefitstoretiredparticipants andachangeinactuarial assumptions regarding theprovision foranciihrybenefitsandtheapplication oftheERISAmaximumtoallbenefits.

EarningsandDividends PerShare.Earningsapplicable toeachshareofcommonstockarebasedontheweightedaveragenumberofsharesoutstanding duringtherespective years,adjustedforstockdividends.

Assumingthe1,500,000 sharesofcommonstockissuedonNovember19,1980wereoutstanding atthebeginning of1980andtheproceedswereappliedtoreducetheshorttermdebt,theearningspersharefor1980wouldhavebeen~2.02,comparedwiththereportedamountof0.10.Cashdividends pershare,asshownonpage14,arebasedonthesharesoutstanding atthetimedividends arepaid,adjustedforstockdividends.

Cashdividends pershareattheratesdeclaredineachperiodwere$1.49for1980,~1.46for1979and41.42for1978.Note2.FederalIncomeTaxes(Thousands ofDollars)'Theprovision forFederalincometaxesisdistributed betweenoperating expenseandotherincomebaseduponthetreatment ofthevariouscomponents oftheprovision intheratemakingprocess.Atrightisasummaryofincometaxexpenseforthethreemostrecentyears.Thefollowing isarecondliation ofthedifference betweentheamountofFederalincometaxexpensereportedintheStatement ofIncomeandtheamountcomputedbymu!Iiplying theincomebeforetaxbythestatutory taxrate.Chargedtooperating expenseCurrentDeferred.................

Total.............

Creditedtootherincome:CurrentDeferred.............

Total..198019791978393S(36)S5,166123436,7825,8751?8366,74611,041(393)(321)(2&1)(5,516)(4,186)(?714)(5,909)(4,507)(5,215)TotaIFederalincometaxexpense

..S6,927S2~9S5926198019791978%of%ofPretaxPretaxAmountincomeAmountIncome%ofPretaxAmountIncomeNetincomeAdd:Federalincometaxexpense.~43,6526,927S39,5652,239$39,5865,826incomebeforeFederalincometax.ComputedtaxexpenseIncreases (decreases) intaxresulting from:Excessoftaxdepredation lessamountdeferredExpensescapitalized forIinanchlreporting

purposes, indudinginterest, payrollandusetax,etc.Investment taxcreditpropertytaxes onbasisofdateoftaxablestatusRevenuetaxes(deducted whenpaid).Miscellaneous items,net.TotalFederalIncometaxexpenseAsummaryofthedeferredamountschargedor(credited) toincomeisasfoihws:(11,232)(458)(1,310)866296(22.2)(10,763)(25.7)(9)(579)(14)(2.6)(698)(1.7)1.7381.9.6(1,187)(2.8)(9,361)(20.6)(4,955)(10.9)2?A.52,1334.7(487)(1.1)S6,92713.7S2,2395.4S5,826I?8S50,579S45,412S23,26646.0S19,23046.0S21,7974IM(4,501)(8.9)(4,145)(9.9)(3,525)(7.8)Investment taxcreditClasslifedepredation Fuelcosts...............

Nuclearfuelstoragecosts.Sterlingabandonment Other.1980S(458)2,4462,195(2,808)4,6568961979(222)?076?108(2,672)1,3061978s6,6291,763(469)(4,989)227TotalS6,927S2,596S3,161AtDecember31,1980,theCompanyhadapproximately

$21.6millionofinvestment taxcreditsforbothfinancial reporting andtaxpurposesthatareavailable tobecamedforward.Suchcredits,ifnotutilizedbeforehand, willexpireasfollows:1985-$938,000;1986-S12,490,000; and1987-S8,142,000.

Fortaxpurposes, theCompanyhasanetoperating losscarryforward of$11,966,000 avaihb!ethrough1987,arisingprimarily fromtheabandonment oftheSterlingnuclearplant.18 Note3.Oepartrnental Financial Information (Thousands ofDollars)IheCompany's recordsaremaintained byoperating departments, inaccordance withPSCaccounting

policies, givingefFecttotherate-maMng process.Thefollowing istheoperating dataforeachoftheCompany's departments andnointerdepartmental adjustments arerequiredtoarriveattheoperating dataincludedintheStatement ofIncome.ElectricGasSteamTotalOperating information

-1980Operating revenues.

Operating

expenses, exdudingprovision forincometaxesS297,791237,142S181,046170,546S23,589S502,42622370430,058Pretaxoperating income.Provision forincometaxesNetoperating income.Otherincome.net.Interestcharges.Netincomeperstatement ofincome.60,64910,500131972,36811,169131035712,836s49,480S9,190S86259,53216,4823236243,652Otherinformation Depredation

.Nuclearfuelamortization

.Capitalexpenditures

.Investment information

-December31,1980Identifiable assets.AssetsutilizedforoverallCompanyoperations (a).TotalassetsperbalancesheetS21,859S20,789S75,080s5837s>>,966S870,603S176335604S27,80020,789696S87,742S16,439S1,063/77 12,003S1,075,380 Operating information

-1979Operating revenues.

Operating

expenses, exdudingprovision forincometaxes.Pretaxoperating income.Provision forincometaxesNetoperating income..Otherincome,net.interestcharges.Netincomeperstatement ofincome.~257,177>140,527SI9,988S417,692209~129,64519,896358,82447,89410,8829258,8685,6001314(168)6,746~42294>9~S26052,1221531327,770s39,565Otherinformation Depredation

.Nuclearfuelamortization

.Capitalexpenditures

.........................

Investment information

-December31,1979klentifiable assets.AssetsutilizedforoverallCompanyoperations (a).TotalassetsperbalancesheetS18,224S17,126S97,5774g$8SI3Sl34S789432$166,274591416sI6,41523,70317,126>>1,427S972,52110,329S982850Operating information

-1978Operating revenues.

Operating

expenses, exdudingprovision forincometaxes.S231307S>>8,531S19,>>0S368,948181,428107,87319357308,658Pretaxoperating income.Povtsionforincometaxes49@799,24410,6581,966(247)60390(169)11,041Netoperating incomeOtherincome,net.Interestcharges.Netincomeperstatement ofincome.S40,635S8,692S(78)49,24913,12322,786s39,586Otherinformation Depreciation

.Nudearfuelamoization

.Capita!expenditures

.investment information

-December31,1978IdentTableassets.AssetsutilizedforoverallCompanyoperations (a)Totalassetsperbalancesheet(a)Consistsprimarily ofcash,prepayments andunamortized debtexpense.sle,984S15,746Sioo,i94S711,917S>>,903sI46&9581455S15,716s22,206S15,746S112,552S873,93219,454S893~

Note4.LongTermDebtFirstMortgageBondsSenesDue(Thousands)

Principal AmountDecember31198019792Y4M3YsH3Ys04~8R5S4'/zT4Ye(15.3V6'/iW6.7X8Y9YeZ10NAA9i/4.BB8%CC9'/zDD6'hEE10.95FFAug.15,1980...June1,1982....

Mar.1,1985

....July1,1987.....

Oct.15,1989

...Nov.15,1991

...Sept.15,1994...May1,1996.....

Sept.15,1997...July1,1998.....

Aug.15,1999...Sept.1,2000....Aug.1,1983....June15,2006...

Sept.15,2007...Dec.1~2003....Aug.1,2009....Feb.15.2005...S6,O0O10,00015,00012,00015,00016,00018,00020,00030,00030,00030,00029,66750,00050,00040,00010,00055.000S12,0006,00010,00015,00012,00015,00016,00018,00020,00030,00030,00030,00029,66750,00050,00040,00010,000436,667393,667Add:Bondpremium,netofdiscount..Less:Duewithinoneyear

...........

45749512,000TotalLongTermDebt...S437,124S382,162TheMortgageprovidessecurityforthebondsthroughafirstlienonsubstantially allthepropertyownedbytheCompany(exceptcashandaccountsreceivable).

Sinkingandimprovement fundrequirements aggregate S333,540perannum.Suchrequirements maybemetbycertification ofadditional propertyorbydepositing cashwiththeTrustee.The1980and1979requirements weremetbycertification ofadditional property.

TheSeriesEEFirstMortgageBondsequaltheprincipal amountofandprovideforallpaymentsofprincipal, premiumandinterestcorresponding tothePollution ControlRevenueBonds,SeriesA(Rochester GasandElectricCorporation Projects) issuedbytheNewYorkStateEnergyResearchandDevelopment Authority throughaparticipation agreement withtheCompany.TheSeriesEEbondsaresubjecttoamandatory sinkingfundbeginning August1,2000andeachAugust1thereafter.

Nineannualdepositsaggregating

~3.2millionwillbemadetothesinkingfund,withthebalanceofR.8millionprincipal amountofthebondsbecomingdueAugust1,2009.TheSeriesFFbondsaresubjecttoamandatory sinkingfundof~2.8millionannuallybeginning February15,1986andeachFebruary15thereafter, withthenoncumulative optiontodoublethepaymentinanyyearuptoamaximumof5years.TheCompany's maturities forthenextfiveyearsare8millionin1982forSeriesN,$29.7millionin1983forSeriesAAand410millionin1985forSeriesO.Note5.CapitalStockType,byOrderofSenioriParSharesSharesValueAuthorized Outstandin Preferred Stock(cumuhtive)

...........

41002,000,000 1,170,000 (a)Preferred Stock(cumuhtive)

...........

25Preference Stock1CommonStock..........

5(a)SeeNote6formandatory redemption.

(b)Redeemable attheoptionoftheCompanyon30daysminimumnotice,p!usaccrueddMdendsinailcases.S12,0008,0006,0005,0006,00010,00020,0004F120,0004.10H80,0004Yi6O',OOO4.10J50,0004.95K60,0004.55M100,0007.50H200,000S12,0008,0006,0005,0006,00010,00020,000670,000$67,000S67,000105Atanytime101Atanytime101Atanytime102.5Atanytime102Atanytime101Atanytime106Before6/1/82Preferred Stock,notsubjecttomandatory redemption:

(Thousands)

SharesDecember31Redemption SeriesOutstandin 19801979(rshare)(b)CommonStock:PerShareShares(Thousands)

AmountOutstanding, January1,1978.3XStockDividendSaledStockAutomatic DividendReinvestment Phn.CapitalStockExpenseOutstanding, December31,1978.3%StockDividendAutomatic DividendReinvestment Phn.~p'apital StockExpenseOutstanding, December31,1979.3%StockDividendSaleofStockAutomatic DMdendReinvestment PhnCapitalStockExpenseOutstanding, December31~1980.'TaxReduction ActStockOwnership PlanS2L0018.7517.19-19.25 18.001481-1725 15.8615.0013.251350-14.25 1?889,631386,6891g50,000206,42714,732,747 441,983309,74770/8415,554381 466,6461,500,000 388,03817,909,545 8,12023,4383,749(902)246,9387,9554,9671,116(544)260,4327,00019,8755~2(1,343)S291~6AtDecember31,1980therewere318,012sharesofcommonstockreservedandunissuedundertheAutomatic DividendReinvestment Plan.Noothersharesofcommon,preferred or20preference stockarereservedforoHicersoremployees, orforoptions,warrants, conversions, orotherrights.

Note6.Preferred andPreference StockSubjecttoMandatory Redemption TheCompanyisobligated toredeemsharesofpreferred stockasfollows:(Thousands)

SharesDecember31Redemption SeriesOutstandin 19801979(rshare)Redemption SeriesValue1985(Thousands) 1984TheCompany's maximumredemption requirements through1985areasfollows:Preferred StockP250,000S25,000~25,000108.60Before9/1/84(a)1084Q25000025,000110.84Before9/1/85(a)Preferred Preferred Preference PS10008,125Q1008,125A10028,000S8,125500,000450,000$25,000Preference Stock7.6A280,000$28,000~28,000(b)(a)Commencing onSeptember 1,1984forSeriesPandonSeptember 1,1985forSeriesQandoneachSeptember 1,thereafter, theCompanymustredeem8,125sharesat4100persharebymeansofasinkingfundprovision withthenoncumulative optiontoredeemnotmorethan8,125additional sharesonthesameterms.IntheeventtheCompanyshouldbe~44350S8,125inarrearsinthesinkingfundrequirement, theCompanymaynotredeemorpaydividends onanystocksubordinate tothepmferiedstock(b)DuringJanuary1985,theCompanymustoffertopurchaseonOctober1,1985ailoftheoutstanding 7.6%SeriesAPreference StockatapriceofSI00pershare.Thesharesremaining outstanding aftersuchofferarecaihbleat$100pershareattheoptionoftheCompanyatanytimeafterDecember20,1987.Note7.ShortTermDebtAtDecember31,1980and1979,theCompanyhadshorttermnotesoutstanding of$10millionand$25million,respectively, andcommercial paperoutstanding of4153millionand$25million,respectively.

Theweightedaverageinterestratesfor1980were14.53Xforshorttermnotesand12.24Xforcommercial paper,andfor1979were13.75Xforshorttermnotesand11.50Xforcommercial paper.TheCompanyhadestablished banklinesofcredittotaling~80millionattheendoftheyear.SinceJanuary1,1979,theCompanyhasmaintained itslinesofcreditbypaymentofcommit.mentfeesbasedonapercentage offloatingprimerates.Priortothatdate,thelinesofcreditweremaintained throughtheuseofcompensating balancearrangements.

Commitment feespaidin1980and1979were4552/96and$280178,respectively.

Note8.jointly&wned Facilities Thefo!lowingtablesetsforththejointlyawned electricgenerating projectsinwhichtheCompanyispartidpating.

Eachparticipant mustprovideitsownfinancing fortheNneMilePointunitintheprocessofconstruction andforanyadditions totheOswegounit.OswegoHineivtile FossilPointNuclearGnit<<6Gnit<<2(I)(2)(3)(1)(3)TheCompany's shareofdirectexpensesassociated withtheOswegounitisincludedintheappropriate operating expensesintheStatement ofIncome.Netmegawattcapacity......RGGEsshare-megawatts...

-percent.....Yearofcompletion..........

Totalestimated projectcosts...........

RGGEsshare.RGGEsactualconstruction costs-1979-1980ExpendedbyRGGEinprioryears......

Accumulated depredation (Commenced in1980)..S10.06.045.5S61.5(4)4113.0s(1.2)8501,084204152241419801986(Millions ofDollars)s24162(5)3523S23.718.870.5(1)Constructed andoperatedbyYiagaraivtohavA<

PowerCorpomtion.

(2)inaccordance withanorderissuedbythePSC,theCompanydeferredailincomeandexpensesassociated withthisunituntiltheplantwasaddedtoratebaseinJuly1980formtemakingpurposes.

(3)Construction costsexcludeallowance forfundsusedduringconstruction andcertainoverheadcoststobecapitalized.

(4)itisanticipated thatmodifications willbemadetotheexistingplanttoincreaseopemtingeHidencyorreliability.

Costsassociated withthesemodifications arenotincluded.

(5)lhepresentcostestimateexcludescommonfacilities, butincludes$116.2millionforinitialnuclearfuelloading.

Note9.Commitments andOtherMattersTheCompany's capitalexpenditures programinvolvesanestimated expenditure of4131.1millionin1981,notincluding allowance forfundsusedduringconstruction, andtheCompanyhasentemlintocertaincommitments forpurchaseofmaterials andequipment inconnection withsuchprogram.Operations oftheCompany's generating stationsaresubjecttovariousFederal,stateandlocalenvironmental standards.

UndertheCleanWaterAct,theCompanyhasobtainedpermitstodischarge pollutants intothewaterbodiesadjoining itsfacilities.

TheUnitedStatesEnvironmental Protection Agency(EPA) issuedNationalPollutant Discharge Elimination SystempermitsforalltheCompany's majorgenerating facilities, butanumberofconditions relatingtothermalandchemicaldischarge limitations werecontested bytheCompanyinadjudicatory hearingrequestssubmitted toEPA.TheCompany,theNewYorkStateDepartment ofEnvironmental Conservation "NYSDEC'which becameapartytotheadjudicatory hearings) andEPAhavesettledthehearingrequestsasdescribed be!ow.TheCompanyhasreachedagreement withtheregulatory agenciesonnonthermaleNuentlimitations andfinalpermitscontaining theseagreedlimitations havebeenissuedandarenowcontinuing ineffect,pendingfinalactionbyNYSDEConapplica-tionstorenewthesepermits.Construction oftreatment facilities requiredforCompanycompliance withpermitlimitations attwooftheCompany's generating stationswascompleted in1980.Construction costsofthesetwofacilities totaledS11.9million.TheCompanyhaspursuedresolution ofthecontested thermallimitations bysubmitting demonstrations inanefforttojustifylessstringent limitations forthreegenerating stations.

Thethermalconditions ofthepermitsremainstayedpendingresolution ofthethermalissueseitherthroughregulatory agencies'pproval ofthedemonstrations andlessstringent thermallimitations or,intheabsenceofsuchapproval, throughtheresumption oftheadjudicatory hearingprocess.Ifthedemonstrations andlessstringent thermallimitations arenotapprovedforanyofthethreefacilities, theCompanycouldberequiredtoinstallcoolingtowerswhichwouldinvolvecapitalexpenditures estimated atR7millionplussignificant operating andmaintenance expenses.

TheNationalPollutant Discharge Elimination Systempermitsissuedin1978expiredonMarch30,1980.TheCompanyappliedtoNYSDECforrenewalofthesepermits.NYSDEChasextendedtheCompany's edstingpermitsuntilfinalactionistakenonthependingrenewalapplications.

TheCompanybelievesthatadditional expenditures andcostsmadenecessary byenvironmental regulations willbefullyallowable forratemakingpurposes.

Inthemid1970's,theCompanyand threeotherNewYorkStateutilities agreedtoshareinthecostofaproposednuclear.poweredelectricgenerating plantwhichtheCompanywouldlicense,build,andoperateforthegroupatSterling, CayugaCounty,NewYorkOutputoftheplantwastohavebeensharedinthesameproportions; theCompany's sharewas28KAlthoughstateandfederalauthorizations forconstruction wereobtained, theStatesitingagencyultimately revokeditsauthorization andthefederalconstruction permitwasalsowithdrawn.

Theparticipating utilities electednottoappealthosedecisions, buttoterminate theprojectAtDecember31,1980,theCompany's netinvestment intheplantissummarized asfollows(inthousands ofdollars):

Construction costsLess:Estimated taxeffectofabandonment

............

$37,300.11,800$m,mTheCompany's shareoftheestimated contracttermination costswouldbeS7million,priortotaxsavings.TheCompanyandthethreeotherutilities participating intheSterlingprojecthavepetitioned thePSCforpermission toamortizetheirinvestment intheplantasacostofserviceoveraperiodoftimetobedetermined ineachparticipant's currently pendingratecase.Proceedings werecommenced bythePSCin1980toexaminethecostsincurredbythepetitioners, todetermine theirprudenceandtodecidetherequestforamortization oftheextraordinary propertylossinrates.Theproceeding wasinitially dividedintotwophases:PhaseItoresolvecertaingeneralprinciples andphaseIItoconductamoredetailedexamination ofindividual costitems.APhaseI-AwaslateraddedbytheCommis.siontoconsideraproposalthattheparticipants notrecoverthroughratesthecarryingchargesontheunamortized investment andtoconsider"anyotherissueofultimateresponsibility forSterlingcosts".PhaseIwasconcluded withanOpinionandOrderdatedJanuary6,1981,whichprovided, inpart,thatthecategories ofexpenditures incurredfortheprojectuptoJanuary11, 1978wereprudentinprinciple.

Asaresult,PhaseIIoftheproceedings hasbeenexpandedtoconductanexamination oftheprudenceofcategories ofexpenditure afterJanuary11,1978,alongwithamoredetailedexamination ofindividual costitems.TheOpinion,however,didstatethatwithregardtotheprudenceofcategories ofexpenditures betweenJanuaiy11 andMay4,1978,thePSCStaffandintervenors willhavetheburdenofgoingforwardinshowinganycategorytobeimprudent.

TheCompanybelievesthatalloftheexpenditures incurredontheSterlingprojecthavebeenreasonable andprudent,andtherefore willultimately berecovered throughrates.'The Companyalsobelievesthatdecisions ofthePSCsupporttheCompany's requestforanappropriate canyingchargeontheunamortized investment.

Theutilities participating intheSterlingprojectreceivedanorderdatedFebruary19,1980fromthePSC,inwhichitwasordered"(T)hatthepetitioners beallowedtocontinue, untilsuchtimeasamortization commences toberecovered inrates,toaccrueandaccumulate anallowance forfundsusedduringconstruction withrespecttoprojectcosts."Theinvestment of$373million mentioned aboveincludesS2.5millioninAFDCaccruedduring1980pursuanttothisorder.Withrespecttoasimilarcontinuation ofAFDCundertheaccounting procedures prescribed bytheFERC,authorization bytheFERCisnecessary.

Suchactionwasrequested onMarch7,1980.I1ieFERChasnotactedonthematter.IftheFERCdoesnotauthorize continuation ofaccrualandaccumuhtion ofAFDContheSterlingprojectandifalternative regulatory reliefequivalent theretoisnotgrantedbytheFERC,thentheparticipants willnotbepermitted toincludeinfinancial reports,basedontheFERCSystemofAccounts, theAFDCaccruedontheirinvestment subsequent totheeffective dateofthediscontinuance oftheproject.However,onthebasisofthePSCorderofFebruary19,1980,theparticipants wouldcontinuetoaccrueandaccumulate suchAFDCforPSCreguhtoiy purposesandforpurposesoffinancial reportsbasedonPSCaccounting.

Legalactionshavebeeninstituted againsttheCompanyseeking$34.5millionincompensatory andWmillioninpunitivedamagesforallegedpersonalinjuriesasaresultofexposuretoradiation attheCompany's Ginnanuclearpowerplantin1974.TheCompanyhasnotcompleted itsinvestigation oftheplaintiffs'llegations anditcannotnowpredicttheoutcomeoftheseactions,norcanitpredictwhetheranyadditional similaractionsmightbecorn.menced.Based,however,onitsinvestigation todate,theCompanydoesnotbelievethephintiffs willprevailonthemerits,anditintendstocontesttheseclaimsvigorously.

TheCompanyisfullyinsuredforthetotalcompensatory damagesthataresoughtintheseactions,anditsinsurerhasadvisedtheCompanythatitwillfullydefendallclaims.However,theinsurerhasdischimed anyobligation forthepaymentofanypunitivedamageswhichmaybeassessedagainsttheCompany.Thereisprecedent inNewYorkStatethatitiscontrarytopublicpolicyforaninsurance carriertopaypunitivedamagesassessedagainstitsinsured,butitisunclearwhetherthatprecedent wouldapplytothenuclearliability insurance involvedintheseactions.TheCompanyintendstocontestthedisclaimer ofcoverageforpunitivedamages.Anadditional legalactionhasbeenbroughtbytheplaintiffs inthoseactions.T1iisactionseekstorecover~10millionincompensatory damagesandS13millioninpunitivedamagesforvariousallegedwrongsarisingoutofaCompanyinteroffice memorandum advisingitsfacilitysupervisors thatnoneoftheplaintiffs shouldbepermitted ontheCompany's property.

Theseclaimsarenotcoveredbyinsurance, andtheCompanywilldefendthemvigorously.

OnJanuary19,1981,thePSCapprovedthemergeroftheCompanyandPavilionNaturalGasCompany(Pavilion).

ItisexpectedthatthemergerwilltakeplaceonFebruary28,1981,atwhichtimetheCompanywillissueupto98,006additional sharesofcommonstockinexchangeforthecommonstockofPavilion.

Themergerwillbeaccounted forasapoolingofinterests.

Hadthemergeroccurredin1980,theeffectsonreportedoperating

revenues, netincomeandearningspersharewouldhavebeenimmaterial.

ReportofIndependent Accountants TotheShareholders andBoardofDirectors ofRochester GasandElectricCorporation Inouropinion,theaccompanying bahncesheetsandtherelatedstatements ofincome,retainedearnings, andofchangesinfinancial positionappearing onpages14through16presentfairlythefiinancial'position ofRochester GasandHectricCorporation atDecember31,1980and1979,andtheresultsofitsoperations andthechangesinitsfinancial positionforeachofthethreeyearsintheperiodendedDecember31,1980,inconformity withgenerally acceptedaccounting principles consistently applied.Ourexaminations ofthesestatements weremadeinaccordance withgenerally acceptedauditingstandards andaccordingly includedsuchtestsoftheaccounting recordsandsuchotherauditingprocedures asweconsidered necessary inthecircumstances.

1900LincolnFirstTowerRochester, NewYork14604January30,1981 Supplemental Information Concerning theEffectsofInflation Theestimates oftheeffectofinflation ontheoperations oftheCompany,assetforthbelow,werepreparedonbasesprescribed bytheFinancial Accounting Standards Board(FASB)Statement No.33,"Financial Reporting andChangingPrices."Thisstatement requiresadjustments tohistorical coststoestimatetheeffectsthatgeneralinflation (Constant Dollar)andchangesinspecificprices(CurrentCost)havehadontheCompany's resultsofoperations.

Thesedataarenotintendedassubstitutes forearningsreportedonahistorical costbasis.Theyoffersomeperspective oftheapproximate effectsofinflation ratherthanaprecisemeasurement oftheseeffects.UtilityPlant.Estimated utilityplant,primarily consisting ofplantinserviceandconstruction workinprogress, wasdetermined forconstantdollarsbyapplyingtheConsumerPriceIndexforAllUrbanConsumers (CPI.U)tothehistorical costofutilityplant.Ihecurrentcostestimates weremeasuredbyapplyingtheHandy.WhitmanIndexofPublicUtilityConstruction Coststothehistorical costofutilityplant.Currentcostisanestimateofthecostofcurrently replacing existingplant.Theresulting adjusteddataforplantundereitheroftheabovemethodsisnotnecessarily indicative oftheCompany's futurecapitalrequirements becausetheactualreplacement ofexistingplantwilltakeplaceovermanyyearsandisnotlikelytobeareproduction ofpresently existingplant.Ihedifference betweencurrentcostandtheconstantdollardataresultsfromspecificpricesofplantincreasing ataratedifferent fromtherateofgeneralinflation.

Accumulated Depreciation.

Iheaccumulated provision fordepreciation forconstantdollarsandcurrentcostwasdeveloped byapplying, foreachclassofplant,thesamepercentage relationship thatexistedbetweengrossplantandaccumulated provision fordepreciation onahistorical basistotherespective adjustedplantdata.Depreciation Expense.Depreciation expenseforbothmethodswasdetermined byapplyingtheCompany's depreciation ratestotherespective indexedplantamounts.Reduction ofUtilityPlanttoNetRecoverable Cost.1heregulatory processlimitstheCompanytotherecoveryofthehistorical costofserviceinitsrates.'Iherefore, anyexcessofthevalueofutiTityplantunderconstantdollarsorcurrentcostmustbereducedtothenetrecoverable cost,whichishistorical cost.Iheamountofthisexcessthataccruedasaresultofinflation inthecurrentyearmustbereducedtonetrecoverable cost.GainFromtheDeclineofPurchasing PowerofNetAmountsOwed.TheCompany,byholdingassetssuchasreceivables, prepay.ments,andinventory, suffersalossofpurchasing powerduringperiodsofinflation becausetheamountofcashreceivedinthefuturefortheseitemswillpurchaseless.Conversely, byholdingmonetaryliabilities, primarily longtermdebt,theCompanybenefitsbecausethepaymentinthefuturewillbemadewithnominaldollarshavinglesspurchasing power.TheCompanyhassignificant amountsoflongtermdebtoutstanding whichwillbepaidbackindollarshavinglesspurchasing powerand,therefore, forpurposesofthesecalculations, hasanetgainfromholdingmonetaryliabilities inexcessofmonetaryassets.Increaseinprovision fordepreciation Increaseingeneralpricelevellessincreaseinspecificprices.......Reduction ofutilityplanttonetrecoverable cost............

Gainfromthedeclineinpurchasing powerofnetamountsowed.....Totalerosionofshareholders'quity duetoinflation......

430,192'41,63578,18139,62427,114(66,725)(66,725)>41,&$8~41,648OtherItems.AsallowedbyFASBStatement No.33,itemsintheincomestatement, otherthandepreciation expense,werenotadjusted.

Thecostoffuelusedinelectriproduction andthecostofgassoldwerenotadjustedbecausetheeffectonearningswasnotmaterialduetotherelatively shortturnoverperiodbetweentheincurrence ofthesecostsandtheirrecoverythroughthefueladjustment clause.Iheregulatoiy processlimitstheamountofdepreciation expenseindudedintheCompany's revenueallowance andlimitsutilityplantinratebasetooriginalcostSuchamountsproducecashflowswhichareinadequate toreplacesuchpropertyinthefutureorpreservethepurchasing powerofcommonequitycapitalpreviously invested.

Whilethiseffectispartially mitigated bythebenefitderivedformhavinglongtermdebt,theCompanyhasanetpurchasing powerlosswhichisexperienced bythecommonstockshareholder andcanonlybeovercomeasaresultofadequateraterelief.However,theCompanyexpectsthatitwillbeabletoestablish rateswhichwillcovertheincreased costsofnewplantwhensuchcostsareincurred.

Federalincometaxpolicyignorestheeffectsofinflation inmeasuring taxableincome.Higherdepreciation expenseunderconstantdollarandcurrentcostaccounting isnottaxdeductible.

Therefore, theCompany's effective Federalincometaxrate,whenadjustedforinflation, is48.8percentunderconstantdollarand86.4percentundercurrentcostfor1980,eachofwhichexceedsitsreportedeffective taxrateof22.7percent.Theerosionofshareholders'quity duetochangingpricesissummarized intermsofgeneralinflation andintermsofchangesinspecificprices,asfollows:lnTermsofInTermsofGeneralChangesinInThousands ofAverage1980DollarsInflation SpecificPrices Statement ofIncomefromContinuing Operations AdjustedforChangingPricesFortheYearEndedDecember31,1980(Thousands ofDollars)Operating revenuesConstantDolhrCurrentCostHistorical AverageAverageCost1980Dolhis1980Dollars~502,426~502,4264502,426Operating expenseMaintenance expenseDepreciation expenseTaxexpense-local,stateandother.Incometaxexpense.InterestexpenseOtherincomeanddeductions

-net.313,22632,04827,80056,98412,83639,182(23,302)313,22632,04857,99256,98412,83639,182(23,302)313,22632,04869,43556,98412,83639,182(23,302)NetincomeDividends onpreferred andpreference stockEarnings(loss)applicable tocommonstockChangeinnetassetsduring1980duetoincreaseinspecificpricesLess:Increaseingeneralpricelevel..Netchangeduring1980.Reduction ofutilityplanttonetrecoverable costGainfromdeclineinpurchasing powerofnetamountsowed458,774488,966500,40943,65213,4602,0178,9278,9278,927~34,725~4,533"~(6,910)~193,984" 233,608(39,624)~(78,181)

(27,114)S66,725$66,725'Earnings applicable tocommonstockonaconstantdolhrbasiswouldhavebeenalossofS73,648ifthereduction ofutilityphnttonetrecoverable costhadbeeninctudei"AtDecember31,1980,currentcostofutilitypropertynetofaccumulated depredation wasS2,10?868,whilerehtedhistorical costornetrecoverable costwasS950,474.

Five.YearComparison ofSelectedFinancial DataAdjustedforChangingPrices(InThousands ofAverage1980Doihis)YearEndedDecember3119801979197819771976Operating revenuesAsreported.

Inaverage1980dollars

.Historical costinformation adjustedforgeneralinflation Earningsapplicable tocommonstock'arnings percommonshare,adjustedforstockdividends'et assetsatyearendatnetrecoverable costCurrentcostinformation Lossapplicable tocommonstock'.Losspercommonshare,adjustedforstockdividends'..........

ExcessofincreaseingeneralpriceleveloverincreaseinspeciTicpricesafterreduction tonetrecoverable costNetassetsatyearcndatnetrecoverable costGeneralinformation Gainfromdeclineinpurchasing powerofnetamountsowed.....

Cashdividends percommonshare,adjustedforstockdividends Asreported.

Inaverage1980dollarsMarketpricepercommonshareatyearwnd Asreported.

InDecember1980dollars.AverageconsumerpriceindexDecemberconsumerpriceindex'Excludes thereduction ofutilityphnttonetrecoverable cost.4,533$.28358,61310,279~.65365,772(6,910)(3,080)~(19)66,738358,61380,450365,77266,72573,855S1.411.601.68~12.2512.25246.9258.4~14.8816.72217.4229.9$18.0022.92195.4202.9$502,426$417,692$368,948502,426474371466,189$331,144450,465S1.221.66~21.1329.33181.5186.1$308,227446@42>1.131.64$19.8829.46170.5174.3 InterimFinancial Data$KSandBectrtoCorporation IntheopinionoftheCompany,thefollowing quarterly information includesalladjustments, consisting ofnormalrecumngadjust.ments,necessary forafairstatement oftheresultsofoperations forsuchperiods.Thevariations inoperations reportedonaquarterly basisarearesultoftheseasonalnatureoftheCompany's businessandtheavailability oftheCompany's Ginnanuclearplant.Earningspercommonsharehavebeenadjustedforstockdividends.

Operating Revenues(Thousands)

EaminPerOperating NetEamingsOn CommonFhare IncomeIncomeCommonStock(indollars)December31,1980September 30,1980June30.1980

.March31,1980.December31,1979September 30,1979June30,1979March31,1979.December31,1978September 30,1978June30,1978March31,1978

.$141,344102,130105,395153,557108,24383,010105,766120,6739231273,66586,942116,029812,77414,26812,23320,25711,2798,24414,26518,3348,4669,52712,00919,247S8,1599,3359,14117,0177,1945,21110,93916,2207,0886,5969,90915,993s5,5256,9567,18415,0605,2373,3629,52014,8015,6695,1758,49014,574S.32.42.44.9332.21.603635.591.03CommonStockandDividends 198019791978Earningsperweightedaverageshare...........

Numberofshares(000's)WeightedaverageProformaweightedaverageafterstockdividendpaidinfollowing year(Seebelow)...

ActualnumberatDecember31..............

Numberofshareholders.

Pricerange(SalesonHewYorkStockExchange)

.1stquarter2ndquarter.3rdquarter.4thquarter.Cashdividends paid1stquarter2ndquarter.3rdquarter.4thquarter..Stockdividendpaid(Seebelow)...............

2.1016,47216,96617,91050,416HighLow15>/411'/415'/411%14s/413s/4.13r/s11'hS.37.37.37.383%$2.0815,815$23214,613$363637373%.3536363X16,28915,05115,55514,73348,54348,148HighLowHighLow18%1P/421r/t17'/e17'5%18/s17s/s171619/e181614r/t18M16thThe22ndannualstockdividendwaspaidbytheCompanyonFebruary25,1981attherateof3%.Theforegoing CommonStockpriceshavenotbeenadjustedforsubsequent 3%stockdividends paidinFebruary1978,1979,1980and1981.TheCompanyhaspaidcashdividends quarterly onitsCommonStockwithoutinterruption sinceitbecamepubliclyheldin1949.TheCompanyintendstocontinuethepracticeofpayingcashdiVidends quarterly andwillconsiderthepaymentofastockdiVidendannually, althoughtherecanbenoassurance astothedeclaration offuturedividends sincetheynecessarily willbedependent upontheCompany's futureearnings, itsfinancial requirements andotherfactors.IntheeventtheCompanyshouldbeinarrearsintheredemption ofitsSeriesPorSeriesQPreferred Stockpursuanttothesinkingfundprovision ofsuchseries,theCompan'ymaynotpurchaseorotherwise acquireforvalue,orpaydividends on,anysharesofitsCommonStockFortheyears1978and1979cashdiVidends paidwere100KtaxableforFederalincometaxpurposes.

TheCompanyestimates thatcashdividends paidduring1980willbe100Xnontaxable.

26 Management's Discussion andAnalysisofFinancial Condition andResultsofOperations Duringthethreeyears1978through1980,theCompanyhasexperienced theeffectsofhighinflation, recordsettinginterestrates,andimperfections inherentintheregulatory ratemakingprocess.Theirimpactisevidentthroughout thestatements ofincomeandbalancesheetsshownonpages14and15.Theeffectsofinflation arefurthersetforthinthesupplemental information onpages24and25.AlthoughtheCompanyisnotconvinced thesetrendsarepermanent, therehasbeenagradualerosionofthelongtermfundamental financial strengthoftheCompanywhichhistori.callyhasprovidedacertaindegreeofflexibility inlongtermplan.ning.Ihislossofflexibility becomesapparentthroughthereduction incashflowasaresultoftheincreases insuchworkingcapitalitemsasaccountsreceivable andfuelinventories.

lheCompany's financial flexibility hasalsobeenconstrained bythenecessity tocommittomajorconstruction projectstomeettheanticipated energyneedsofourcustomers.

Plannedincreases inelectricgenerating capacityrequirelongtermcapitalcommit.ments,suchasNineMilePointGnit2,anuclearunitbeingbuiltbyNiagaraMohawkPowerCorporation inwhichtheCompanyhasa14Xinterest, nowscheduled forcommercial operation inlate1986.Also,asignificant portionoftheCompany's capitalexpendi.tureprogramiscomprised ofgovernment mandatedmodifications andadditions toexistingplantandequipment.

Atpresent,theCompanyanticipates that30Xto40Koftheaddi.tionalfundsitrequireswillbegenerated internally.

Thebalancewillhavetobeobtainedthroughthesaleofsecurities andshorttermborrowing.

TheCompany's abilitytoobtainfinancing dependsonreceiving regulatory approvals forrateincreases adequatetomaintaintheCompany's financial soundness.

Regulatory policiesregarding bothcashflowitemsandratesofearningshaverestricted theCompany's abilitytointernally generateappropriate amountsofcashtofinanceitsgrowingconstruction programandhaverestricted itsabilitytosecurefinancing atadvantageous rates.Thesepolicies, togetherwiththeeffectsofinflation andthehighcostsofborrowing, haverequiredtheCompanytobecomemoreaggressive inseekingapprovals forrateincreases.

I)tisisevidenced bytheshortperiodoftimebetweentheJuly18,1980PSCdecisioninthelastproceeding andtheAugust27,1980filingoftheCompany's currentproceeding.

lnJanuaiy1981 itbecameclearthattheCompanyhadunder.estimated thedurationandmagnitude ofthecurrentdownturninthebusinesscycleasreflected initsprojection ofrateyearfinancing costsinthecurrentrateproceeding.

Thus,theCompanyamendeditsinitialpermanent requesttoreflectanincreaseintherequested rateofreturnonratebasefrom10.95%to11.35%.Also,theCompanyappliedfortemporaiy electricandgasrateincreases, tobeeffective onoraboutMarch1,1981,ofapproximately

$30millionand$5million,respectively, basedonforecasted salesvolumesforthetwelvemonthsendedJuly31,1982.TheCompanyhaspresented evidenceintheproceeding that,ifthetemporary rateincreases arenotpermitted, theCompanywillfaceaseriousriskofhavingtheratingofitsiirstmortgagebondsloweredwhenitnextsellssuchbonds.TheCompany's requestforan18Kincreaseinsteamrates($3.6millionperyear)wasapprovedbythePSCandtheratesbecameeffective February18,1981.IheCompanyisunabletopredicttheamountofthependingincreases, ifany,thatwillbeallowedbythePSC.Ihefollowing financial reviewidentifles thecausesofsignificant changesintheamountsofrevenuesandexpenses, comparing 1980to1979and1979to1978.TheNotestoFinancial Statements onpages17to23ofthisreportcontainadditional relatedinformation.

ChangesInOperating RevenuesIncreaseor(Decrease) fromPriorYear(Ihousands ofDollars)ElectricDepartment 19801979GasDepartment 19801979SteamDepart'ment 19801979CustomerRevenues(Estimated) from:RateInaeases.FuelCostAdjustment

.WeatherEffects.CustomerConsumption.

Other$21,878$10,464$8,232$1,9462,3172,76430,43620,986(27)(61)(1,452)(735)6072,8422,671(526)857733632325$2,3163,441(279)(2,042)165$1,757(24)(1,013)158TotalChangeinCustomerRevenues...

ElectricSalestoOtherGtilities

.TotalChangeinOperating Revenues.

25,63216,74240,51921,9963,60187814,9829,128$40,614$25,870$40,519$21,996$3,601$878RevenuesfromelectricsalestootherutiTities increased inboth1980and1979.Fluctuations inelectricsalestootherutilities, andinpurchased electricity discussed below,generally arerelatedtotheavaihbility ofelectricgeneration fromtheGinnanuclearplant.ElectricandSteamFuels..Purchased Bectricity.....

Purchased NaturalGas...OtherOperation.

Mantenance

$18,640(8,141)37,9559,6961,919$2,93112,60018,6956,5793,883TotalChangeInOperation andMaintenance Expense.......

$60,069$44,688Ihe1980increaseinelectricandsteamfuelsexpensewasmainlyduetoanincreaseinelectricity generated in1980andanincreased fuelcostperkilowatt.

hourgenerated.

ChangesInOperation andMaintenance ExpensesIncreaseor(Decrease) fromPriorYear(Thousands ofDollars)19801979Purchased electricity expensedecreased in1980duemainlytothehigh76%availability oftheGinnanuclearpowerplantandanincreaseinsystemnetgenerating capacityoccasioned bythestartupofOswegoGnit6.Purchased electricity increased in1979duetobothhighercostsandhigherkilowatt.

hourpurchases.

Purchased naturalgasexpenseincreased in1980and1979asaresultofhigherpipelineratesandin1980alsoincreased duetoamodestincreaseinconsumption inthenonresidential sector.Otheroperation expenseincreased in1980andin1979largelyasaresultofhigherwagesandemployeebenefitcosts.Taxes-local,stateandotherincreased in1980andin1979principally duetotheincreased grossincometaxrateandincreased revenues.

The1980increasealsoreflectstaxesonOswegoGnit6whichwerecapitalized duringitsconstruction andarenowbeingexpensed.

ChangesinFederalincometaxesareexplained inNote2totheNotestoFinancial Statements.

27 The1980increaseinallowance forfundsusedduringconstruction of$13millionwasduetotheincreased ratesappliedduringtheperiod,theeffectofwhichwasreducedbylowerutilityplantexpenditures andbythetransferoftheCompany's shareoftheOswegoUnit6oil-fired generating p!antfromconstruction workinprogresstoutiTityplant.The1979increaseof~3.7millioninallowance forfundsusedduringconstruction wasduetoincreased ratesappliedduringtheperiodandtoincreased utilityplantexpenditures.

Interestonlongtermdebtincreased in1980andin1979asaresultofadditional bondsissuedinFebruaryandMay1980,August1979andDecember1978.Shortterminterestratesandborrowing levelsfor1980and1979wereapproximately equal.'The S2.4millionincreaseinthe1979interestonshorttermdebtresultedfromhigherinterestratesandanincreaseof$14.6millionintheaverageamountofshorttermdebtoutstanding.

DMdendsonpreferred andpreference stockincreased

~2.3millionin1980and~1.0millionin1979becauseofadditional preferred stockissuedinAugust1980andJuly1979.SelectedFinancial DataSummaiyofOperations (Thousands ofDollars)YearEndedDeceinber 31198019791978197719761975Operating RevenuesElectric.GasSteamS245,005$219@73$202,631$179,940$170,558181,046140,527118,531105,797101,02723,58919,98819,11019,00418&3$146,62982,47817/37Electricsalestootherutilities

..449,64052,786379,88837,804340,27228,676304,74126,403289,96818,259246,44425,496TotalOperating Revenues502,426417,692368,948331,144308,227271,940Operating ExpensesOperation Electricandsteamfuels......Purchased eiectricity.........

Purchased naturalgas.......Other.Maintenance Depreciation Taxes-local, stateandother....

Federalincometax-current....

-deferred...

79,71123,796127,75981,96032,04827,80056,98439312,44361,07131,93789,80472,26430,12923,70349,916(36)6,78258,14019/3771,10965,68526/4622/0645,9355,1665,87556,99313,63562,08662,4942237221,05343,8769612,8974636118,19556,19257,67720/0618,62140,502(291)5,65646,2681231242,24750,62919,70017,41436,1574,1621,133TotalOperating ExpensesOperating IncomeOtherIncomeandDeductions Allowance forotherfundsusedduringconstruction

.Other,net.442,89459,53211,7104,772365,570319,699286f67263,119229,92252,12249,24944,77745,10842,01811,4398,7056,4734,67823103,7744,41813101,128537TotalOtherIncomeandDeductions

....16,48215,21313,1237,7835,8062,847IncomebeforeInterestCharges...

76,0146733562/725256050,91444,865InterestChargesLongtermdebt Shortterm debt.Other,net.Allowance forborrowedfundsusedduringconstruction

.34,1294.29875529,084-4,01644125,59422,54219@7816,9631~1+191,0541,5684164942461~7(6,820)(5,771)(4,812)(4,844)(2,853)(1,264)TotalInterestCharges..32,36227,77022,78619,51117,82518,494NetIncome43,652Dividends onPreferred andPreference Stock,atrequiredrates.8,92739,56539,58633,04933,08926,3716,6455,6786,5126,2454,054EarningsApplicable toCommonStock......S34,725$32,920$33,908426,537426,844S22,317Weightedaveragenumberofsharesoutstanding ineachperiod,adjustedforstockdividends (000's).EarningsperCommonShare...............

16,472$2.1015,81514,61313,23412,71311,656S2.08>2.32~2.00~2.11~1.91CashDividends perCommonShare.adjustedforstockdividends

.s1.48SI.41SI.22$1.08 SelectedFinancial Data(Continued)

Condensed BalanceSheet(Thousands ofDo!lars)AtDecember31198019791978f9771976f975ASSETSGtilityPlant,atoriginalcost............

Less-Accumulated depreciation andamortization

.Construction workinprogress...

S1,061,999

$928,796$857,959$789,775$727,687$693,404337,215295/28261,477229,122198,778185,455724,784633,468596,482560,653528,909507,949225,690260,063213,534162,127120,70279,381Netutilityplant.Investment inSubsidiary, atequity..CurrentAssetsDeferredDebits950,4741,96892,31430,624893,5312,06265~722,020810,0161,99666,95314,421722,7801,9475838715,260649,6111,91161,0908,151587,3301,87153,7967,450TotalAssets.CAPITALIZATION ANDLIABILITIES Capitalization LongtermdebtPreferred stocksubjecttomandatory redemption Preferred stockredeemable atoptionofCompanyPreference stocksubjecttomandatory redemption Commonshareholders'quity Commonstock.RetainedearningsTotalcommonshareholders'quity...

437,124$382,162$384f03$361,022S311f95$267,31450,00067,00028,000291,34683,97025,00067,00028,000260,43280,15592,00089,00067,00028,000246,93877/3867,00028,000212,53370,819181/01173,58667,81260,502375,316340,587324,276283/52249,113234,088S1,075,380

$982,850$893~6$798,374$720,763$650,447TotalCapitalization

...........

CurrentUabilities DeferredCreditsandOtherLiabilities

..957,44085,51032,430842,749803,579739@74652,508590,402115,29168/6242,81354,65251,71224,81021,44516,18713,6038,333TotalCapitalization andLiabilities...

$1,075,380

$982,850$893,386$798,374$720,763S650,447Financial DataAtDecember311980f97919781977f976f975Capitalization Ratios(percent)

Longtermdebt Preferred andpreference stock..Commonshareholders'quity...

TotalBookValueperCommonShareAdjustedforStockDividends

-YearEnd...............

RateofReturnOnAverageCommonEquity-YearEnd(percent)

Effective FederalIncomeTaxRate(percent)

...Depreciation Rate-Electric................

-Gas...................

InterestCoverages Beforefederalincometaxes(incld.AFDC)...(excld.AFDC)...Afterfederalincometaxes(incklAFDC).....

(excld.AFDC)....45.715.139.2100.0S20.969.8613.73.092.862.331.862.111.649.8511.2210.0211.16'0.185.412.86.2I0.614.43.103.093.002.902.792.792.792.672.632.602.251.732.181.672.652.162.431.942.451.982.361.892.792.432.602.242.562.382.332.1545.447.848.847.745.314.211.812.914.115.140.440.438338.239.6100.0100.0100.0100.0100.0$21.26$20.75$20.12$19.47$18.5629 ElectricDepartment ElectricRevenue(000's)Residential.

Commercial

.industrial Other.YearEndedDecember311980S88,08370,40760,37326,1421979478,14063,10454,40423,7251978~72,85458,98548,79222,0001977>64,98653,52041,78319,6511976461,49850,79139,40218,8671975S53,90443,88433,24415,597Hectricrevenuefromourcustomers

..Otherelectricutilities TotalelectricrevenueElectricExpense(000's)Fuelusedinelectricgeneration

..Purchased electricity.

Otheroperation.

Maintenance Depreciation

.Taxes-local,stateandother....

Hectricrevenuedeductions

.Operating IncomebeforeFederalIncomeTax.....Federalincometaxincludinulatoallowance 0eratfnIncomefromElectric0erations(000's)ElectricOperating Ratio%.ElectricSales-KWH (000's)Residential

.Commercial Industrial

.OtherHectricsalestoourcustomers Otherelectricutilities Totalelectricsales.ElectricCustomers atDecember31Residential

.Commercial industrial

.OtherTotalelectriccustomers Electricity Generated andPurchased

-KWH(000's)Fossil.Nuclear.Hydro.PumpedstorageLessenergyforpumping.OtherTotalgenerated

-NetPurchased

,.TotalelectricenerElectricGeneration Costs(000's)Fossil.NuclearOther.245,00552,786297,79163,43023,79664,13924,40421,85939,514237,14260,64911,169S49,48059.01,730,213 1,424,283 1,564,952 466,9755,186.423 1,620.929 6,807,352 257,22724,5241,3882,331285,4702,301,288',081,572 179,335122,809(191,044) 9,3895,503,349 1,758,608 7,261,957 S62,55439,7131,355518219,37337,804257,17746,99931,93754,27722,67518,22335,172209,28347,8945,60004?29460.61,710,090 1,404,931 1,579,364 469,1355,163,520 1,526,925 6,690,445 254,09724,2341,3942,37428?0991,956,599 2,945,721 210,353151,911(217,758)

"17,2575,064,083 2,051,568 7,115,651 S42,11629,9431,233813202,63128,676231.30745,09319,33747,60219,30516,98333,108181.42849,8799,244~40,6351,701,938 1,417,624 1,517,988465,3735,102,923 1,445,391 6,548,314 251,64524,1371,3482,423279,5532,025,645 3,206,313 192,278133,287(189,453) 1,0865,369,156 1,579,863 6,949,019

$38,99525,5611,22957179,94026,403206,34344,01013,63545,01116,33915,33331,530165,85840,4854,041>36,44457.71,660,425 1,392,023 1,431,855 454,0594,938,362 1,453,590 6,391,952 250,12124,0231,3532,328277,8252,272,182 3,018,305 22?391193,340(283,573) 8505,423,495 1,400,505 6,824,000

$40,55722,3301,13244170,55818,259188,81734,24718,19540,93014,79613,86528,543150,57638,2413,102435,13957.31,618,314 1,366,094 1,384,235 437,0974,805,740 1,187,942 5,993,682 249,17723,9831,3712,271276,8022,060,186 2,040,746 277,010118,716(180,317) 2,7974,319,138 2,106,904 6,426,042 S36,90113,485973118146,62925,496172,12533,44212,21235,66214,28212,73125,369133,69838,4275,069433,35855.51,530,421 1,294,816 1,284,940 411.1224,521,299 1,864,050 6,385.349 246,61323,8741,3802,305274,1721,731,723 3,026,894 265,40198,743(148,180) 2,1984,976,779 1,888,091 6,864,870

$33,12014,1911,03063HectricDepartment FuelFossil-TotalBTG(million)

.-CentspermillionBTG

..Nuclear-TotalBTG(million).....

-CentsrmillionBTG..24,610,400 205.31..33,878,804 61.3620,874,198 152.1831,897,513 53.8121,139,146 144.2735,812,171 43.9723,862,599 136.9237,822,209 38.0421,822,976 137.4223,837,620 25.6918@88,874 142.1833,128,471 22.91SystemNetCapability

-KWatDecember31Fossil.NuclearOther.Purchased Totalsternnetcabili637,000470,00047,00029,000357,0001,540,000 443,000470,00047,00029,000359,0001,348,000 443,000470,00047,00029,000339,0001,328,000 443,000470,00047,00029,000338,0001,327,000 452,000470,00047,00029,000342,0001,340,000 45?000470,00047,00029,000356,0001,354,000 NetPeakLoad-KW.1,003,000 AnnualLoadFactor-Net%...................

64.0'Exdudes79,274,000 IOVHoftestperiodgeneration atOswegoGnit6.950,00067.1983,00063.9987,00062.0934,00063.8925,00061.730

'GasDepartment RL~~iiandHect'orpomthn GasRevenue(000's)Residential.

Residential spaceheating

.Commercial Industrial

.Municipal andotherTotalgasrevenueYearEndedDecember31]980S6,444105,37133,87927,3797,973181,04619795,55385,26925,65318,6575,395140,5271978~5,09674,42520,53513,8914,584118,531197744,82866,90018,05712,0143,998105,79719764,42663,97416,84811,9003,879101,02719753,96452,58413,5939,1673,17082,478GasExpense(000's)Purchased naturalgasOtheroperation.

Maintenance

.......Depreciation Taxes-local,stateandother..Gasrevenuedeductions Operating IncomebeforeFederalIncomeTax...Federalincometax.127,75916,5466.3095,33814,594170,54610,5001,31089,80416,5196,2464,88912,187129,64510,8821,31471,10915,8105,7684,64110,545107,87310,6581,96662,08615,0725,0785,14010,08997,4658,33214756,19214,9214,5104,1949,72989,54611,4812,21242,247]33]04,5004,1378,71572,9099,569914Operating IncomefromGasOperations (000's)S9,1909,5688,6928,1859,2698,655GasOperating Ratio%GasSales-Therms(000's)Residential

.Residential spaceheating Commercial

.Industrial Municipal.

Totalgassales.GasCustomers atDecember31Residential..........

Residential spaceheating Commercial

.Industrial Municipal.

Totalgascustomers Gas-Therms(000's)Purchased forreforming andmixing..Purchased forresaleOther.Totalgasavailable.

Costofgaspertherm.TotalDailyCapacity-ThermsatDecember31MixedgasStraightnaturalgas.Totaldailycapacity83.213,257240,27385,29175,82919,842434,49232,479165,55613,281846995213,157458,69718,392477,08926.34C3,660,000 3,660,000'0.1 13,149247/8983,24865,99516,962426,74335,258159,91612,60082]1,047209,642436,95616,388453~20.63C4,164,000 4,164,000 78.213,465255,95182,45163,70917,748433,32438,013154/6612,0927591,084206/14449,90413,178463,08215.26C4,164,000 4,164,000 77.713,833252,92377,75159,95615,975420,43839,977152,85611,268746989205,836428,81110,123438,934]4.43C4,164,000 4,164,000 74.914,404275,58286,40072,84718,598467,83140,892153,58311,475757936207,6439,830478,9357,911496,67611.37C4,164,000 4,164,000 72.814,328249,22478,21765,76016,705424,23441,437153,84811,390756957208~823,160421,2527,019451,43110.19C269,0003,895,000 4,164,000 Maximumdailysendout-Therms...............

3,274,740 DegreeDays(Customer Billing)Fortheperiod.......................

6,833Percent(warmer)colderthannormal...........

1.43,380,670 6,981433,183,678 7,0214.53,578,468 3,497,861 6,7266,905(0.1)].63,041,070 6,211(72)'Hewmethodfordetermining dailycapacity, basedoncurrentnetworkanalysis, reflectsthemaximumdemandwhichthetransmission systemcanacceptwithoutaddiciency.

31 SteamDepartment YearEndedDecember31198019791978197719761975SteamRevenue(000's)Commercial lndustrial

.Municipal andotherTotalsteamrevenueS6,9151,4,2222,45223,589$5,873S6,087S6f52S6,401S5,66811,83310,73210,4559,7999,8622,2822,2912,1972,1831,80719,98819,11019,00418,38317,337SteamExpense(000's)Fuelusedinsteamgeneration

..Otheroperation.

Maintenance Depreciation

.Taxes-local,stateandother...16,2811,2751,3356032,87614,0721,4681,2085912/5713,04712,98312,11412,8262,2732,4111,8261,6571,17395590091858158056254623822,2572,2302,073Steamrevenuedeductions.

Operating IncomebeforeFederalIncomeTax..Federalincometax22,3701,21935719,89619/5619,18617,63218,02092(246)(182)751(683)(168)(168)(330)51(688)Operating IncomefromSteamOperations (000's)..S862260S(78)S148S700S5SteamOperating Ratio%.SteamSales-Lbs.

(000's)Commercial Industrial Municipal Totalsteamsales80.1678,2251,487,176 248,4782,413,879 83.886386.080.7789/64898,904933,6091,041,415 980,3241,682,780 1,718,565 1,682,033 1,738,391 1,839,402 320,026346,031334,645367,553325,7272,792,170 2,963,500 2,950,287 3,147,359 3,145,453 SteamCustomers atDecember31Commercial Industrial

.Municipal.

Totalsteamcustomers

.186612427122170273182387031339254743236027177323802817731SteamProduced-Lbs.(000's)Producedbysteamdepartment...........

By.productsteamfromelectricdepartment

.Totalsteamproduced.

SteamDepartment FuelTotalBTG(million)

CentspermillionBTG.1,376,153 1,395,995 2,772,148 4,658,641 357.431,3913451353,0531,194,132 1,408,029 1P87W31,736,744 1,987,638 2,133,853 2,193,283 2~4,6933,127,989 3,340,691 3,327,985 3,601,312 3,732,056 5378,4545,705,943 5,548,290 6,022,360 6,230,767 271.28226.21232.60203.35203.08RateIncreases GrantedClassofSaviceAmountofIncreaseAuthorized Effective (AnnualBasis)PercentDateofIncrease(0(Xys)IncreaseRateBaseulPendingRequestsClassofSeNiceDateofFilingAmount(Ops)PercentElectricGasSteamApril20,1976Hovember11,1977february18,1978lvtay2,1979July26,1980April20,1976Hovember11,1977 February2,1978hhy2,1979July26,1980April15,1975December15,1979February18,1981Sl1,002IO,I863,00017,69938,4004,9832,5366788,1099,6402,4752,8953,5507.9%5.81.68.215.96.32.4.66.65.112.015.018.29.35%I3.50%9.31I?809.3112.809.8913AO10.3213.809.3513.509.3112.809.3112.809.8913.4010.3213.80Electric'ugust 27,1980S61,900I9.1%Gas"August27,19807/$03.0'OnJanuary16,1981,theCompanyfiledarequestforpermission toadopttemporary rateincreases forelectricandgasservice.ThisrequestwouldIncrease1981electricrevenuesbyapproximately SI2millionand1981gasrevenuesbyapproximately S1.7million.32 Directors TheodoreJ.AltierJ'hairman oftheBoardandTreasurer, AMer6SonsShoes,Inc.KeithW.Amish'resident andChiefOperating Officer,Rochester GasandElectricCorporation PaulW.Brigg'v'hairman oftheBoardandChiefExecutive Officer,Rochester GasandElectricCorporation WilmotRCiaigfFormerairmanoftheBoard,LIncolnFirstBanksInc.E.KentDamon'trav'icePresident andSecretary, XeroxCorporation FrancisE.Drake,Jr.'t4ChairmanoftheExecutive andFinanceCommittee, Rochester GasandElectricCorporation J.WallaceEIy*tChairmanoftheBoard,SecurityNewYorkStateCorporation WalterA.Fallon/ChairmanoftheBoardandChiefExecutive Officer,EastmanKodakCompanyDanielG.Kennedy'etired Partner,Nixon,Margrave, Devans6DoyleTheodoreLLevinsonf President andChiefExecutive Officer,StarSupamarkets, Inc.PaulA.MicrPmfessor, Rochester Institute ofTechnology Constance

¹MitchellCommunity Relations Coordinator, Industria!

Management CouncilofRochester, NewYork,Inc.ComeliusJ.MurphyGroupVicePresident andGeneralManager,EastmanKodakCompanyWilliamG.vonBerg'trav'hairman oftheBoardandChiefExecutive Officer,SybronCorporation LeonD.White,Jr.Executive VicePresident, Rochester GasandElectricCorporation

'MemberoftheExecutive andFinanceCommittee oftheBoardofDirectors memberoftheAuditCommittee oftheBoardofDirectors memberoftheSahryReviewCommittee oftheBoardofDirectors v'MemberoftheNominating Committee oftheBoardofDirectors OfficersPaulW.BriggsChairmanoftheBoardandChiefExecutive OIficerAge58,YearsofService,35KelthW.AmishPresident andChiefOperating OfficerAge57,YearsofSavice,33 LeonD.White,Jr.Executive Vicepresident Age61,YearsofService,43 HanyG.SaddockSeniorVicePresident, FinanceandRatesAge51,YearsofService,30MarloSilvestrone SeniorVicePresident, GeneralServicesAge57,YearsofService,30 JohnEArthurVicePresident andChiefEngineerAge51,YearsofSavice,25JosephJ.HartmanVice.President, GasandTransportation Age56,YearsofService,34RobertCHenderson VicePresident, RatesAge40,YearsofSavice,17DavidK.LaniakVicePresident, EiectricSystemPhnningandOperation Age45,YearsofSavice,26JohnEMaierVicepresident, EhctricandSteamProduction Age53,YearsofService,33 RichardJ.RudmanVicePresident, ElectricTransmission andDistribution Age53,YearsofSavlce,35 DeanW.CapleSecretary Age57,YearsofSavice,32 DavidC.Heiligman Treasurer andAssistant SeaetaryAge40,YearsofSavice,17FrancisA.Sullivan, Jr.Controller Age57,YearsofSavice,30 RobertW.BallAssistant Treasurer Age64,YearsofSavlce,42 StephenKowbaAssistant Controller Age61,YearsofSavioe,30John¹KuebelAuditorAge45,YearsofService,16Shareholder Inquiries Communications regarding stocktransferrequirements, lostcertificates ordividendpaymentsmaybedirectedtoLincolnFirstBank,NA.Otherinquiries shouldbedirectedtoD.W.Caple,Secretary attheCompany.TheCompanywillprovide,withoutcharge,acopyoftheAnnualReportonForm10.KfiledwiththeSecurities andExchangeCommission withrespecttofiscalyear1980,uponwrittenrequestofany shareholder addressed totheSecretary.

Principal Orrce89EastAvenueRochester, NevYork14649(716)546-2700Financial ContactManyG.SaddockSeniorVicePresident, FinanceandRatesAnnualMeetingMay20,1981AtRochester, NewYorkNewYorkStockExchangeSymbolRochester GasandElectricCorporation CommonStock-RGS TransferandDividendDisbursing AgentLIncolnFirstBank,NA,StockTransferDepartment PostOfficeBox1250Rochester, NevYork14603Registrar SecurityTiustCompanyofRochester OneEastAvenueRochester, NewYork14638Co-transfer AgentMorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015Coregistrar TheChaseManhattan Bank,NAOneChaseManhattan PhzaNewYork,NewYork10015 AgentforAutomatic DividendReinvestment PlanLincolnFirstBank,NA.Automatic DividendReinvestment SavicePostOfficeBox1507Rochester, NewYork14603BondTrusteeandPayingAgentBankersTrustCompanyPostOfficeBox318ChurchStreetStationNevYok,NewYork1001533 Rochester GasandHectricCorporation P=-=89EastAvenue Rochester, NewYork14649:US-'NUCLEARREGULATORY COltTS.")i{f9'IRECTOR

".OF~k'ICE Ok'NUCLEAR REACTORREGS.kD18'1'~,-.SERVICES BRANC)i,DDC>ADhl'ViASHZkiGiOP, DCZ'OPS5BulkRaYeUSPostagePaidgRochester, NY~PermitNo.709