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{{#Wiki_filter: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.
{{#Wiki_filter:Annual Report.for year ended December 31, 1978 Contents Highlights 2 Letter to Shareholders 3 Electric Operations 5 Gas Operations 6 Research and Development 6 The Rising Cost of Doing Business 8 Financial Statements 14 Management's Discussion and Analysis of the Summary of Operations 22 Financial and Statistical Information 23 Directors 28 Officers (inside back cover)Shareholder Inquiries Communications regarding stock transfer requirements, lost certificates or dividend payments may be directed to Lincoln First Bank, N.A.Other inquiries should be directed to D.W.Caplc, Secretary and Treasurer at the Company.The Company will provide, without charge, a copy of the Annual Rcport on Form10-K filed with the Securities and Exchange Commission with respect to fiscal year 1970, upon written request of any shareholder addressed lo the Secretary.
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.......,
Principal 0 (gee 89 East Avenue Rochester, New York 14649 (716)546-2700 Financial Contact Paul W.Briggs President Annual Meeting May 16, 1979 At Rochester, New York New York Stock Excltange Symbol Rochester Cas and Electric Corporation Common Stock-RCS Transfer and Dividend Disbursing Agent Lincoln First Bank, N.A.Stock Transfer Department Post Office Box 1250 Rochester, New York 14603 Registrar Security Trust Company of Rochester One East Avenue Rochester, New York 14630 Co-transfer Agent Morgan Guaranty Trust Company of New York 30 West Broadway New York, New York10015 Co-registrar The Chase Manhattan Bank, NA.One Chase Manhattan Plaza New York, New York10015 Agent for Automatic Dividend Reinvestment Plan Lincoln First Bank, N.A.Automatic Dividend Reinvestment Service Post Office Box 1507 Rochester, New York 14603 Bond Trustee and Paying Agent Bankers Trust Company Post Office Box 310 Church Street Station New York, New York10015 a'cs-2@0 t P After-~oqtevoveiP V9040901(o't Highlights 1978 1977%Change Common Stock Earnings per weighted average share.Number of shares (000's)Weighted average Pro forma weighted average after stock dividend paid in following year (See Note)Actual number at December 31 Number of shareholders Price range (Sales on New York Stock Exchange)1st quarter.2nd quarter 3rd quarter.4th quarter.......,..Cash dividends paid (100/s taxable)1st quarter.2nd quarter..3rd quarter.4th quarter.Stock dividend paid (See Note)Sales and Revenues Electricity to customers Kilowatt-hours (000's).Revenue (000's)Electricity to other utilities Kilowatt-hours (000's).Revenue (000's)Gas Therms (000's)Revenue (000's)Steam Pounds (000's)Revenue (000's)Total revenues Operating Expenses (000's)Electric and steam fuels Purchased electricity Purchased natural gas.Wages and benefits..Depreciation Taxes-local, state and other Federal income taxes charged to operations Other expenses Total operating expenses Capital Expenditures, less allowance for funds used during construction (000's)Net Utility Plant at December 31 (000's)Number of Employees$2A6 13,774 14,187 14,733 48,148 High Low 21 y2 17r/s 18t/s 17s/s 19'/s 18 18'/4 1GYz$.35.35.3G.36 3%5,102,923$202,631 1,445,391$28,G7G 433024$118531 2,963,500$19,110$368,948$58,140 19,337 71,109 54,390 22,206 45,935 11,041 37,541$319,699$112,552$810,01G 2,622$2.12 12,474 12,848 12,890 44,135 High Low 20%17s/s 20s/s 18 21'/4 19'/s 21/s 19'.32.32.35.35 3%4,938,3G2$179,940 1,453,590$2G,403 420,438$105,797 2,950,287$19,004$331,144$56,993 13,635 62,086 50,318 21,053 43,876 3,858 34,548$28G,3G7$98,091$722,780 2,624 10 10 14 9 2 42 15 8 5 5 186 9 12 15 12 3 13 3 12 Note: The 20th annual stock dividend was paid February 23, 1979 at the rate ol three percent.
..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
project subsequently advised the Siting Board that the operational date for the plant could be extended to 1988 if the updated growth estimates proved to be accurate.RG8tE continues to pursue the authorization for timely construction of the Sterling plant based on state-wide needs as well as customer needs on the Rochester system.Although construction cost esti-mates in an inflationary economy have greatly appreciated due to the delays in completion date of the project, it is our opinion that this plant repre-sents the best and most economic option for meeting electric energy demands in New York State and the Rochester system.We petitioned the PSC in May 1978 for rate increases amounting to a total of$48.7 million in additional revenue, consisting of an 8.9 percent gas rate increase and a 17.8 percent increase in electric rates.The proceeding is in its final stages and the PSC decision is expected to be rendered in late April with the new rates to take effect in May.The September 1978 sale of an additional 1,250,000 shares of common stock realized$23.4 million in new capital.In December 1978 RG5E completed the private placement with institutional investors of$40 million in first mortgage bonds at 9.5 percent interest.More than 18 percent of holders of common stock are now participating in the Company's Auto-matic Dividend Reinvestment Plan as compared with 11 percent when the Plan was initiated in 1974.During 1978, they invested more than$3.7 million in 206,427 new shares of common stock.We have consistently expressed support for the creation of Empire State Power Resources, Inc.(ESPRI).This plan would have allowed power companies in New York State to join in common power plant licensing, financing and plant opera-tion, yet sustain the autonomy of the companies.
$2A613,77414,18714,73348,148HighLow21y217r/s18t/s17s/s19'/s1818'/41GYz$.35.35.3G.363%5,102,923
The plan would have benefited customers through lower generating costs than would otherwise be possible.The projected savings to RGRE customers alone through the year 1998 would approach$I billion.In February 1979, after five years of lengthy deliberations, the PSC took an informal poll that indicated that the proposal would be disapproved.
$202,6311,445,391
We are still awaiting the formal decision.The verdict is very disappointing, and the higher costs it will produce for the long-suffering consumers cannot be justified, in our opinion.Once again, the PSC reported that RG&E had the lowest number of customer complaints per capita of any power company in New York State.These figures are supported by our own consumer surveys that show customers give the Company very high marks for the quality and reliability of its service.The credit goes to our fine employees.
$28,G7G433024$1185312,963,500
We anticipate modest increases in demand for both electricity and natural gas in 1979.Gas supplies are sufficient and we will continue to expand gas space heating service while balancing known supply with anticipated demand.Total kilowatt-hour sales of electricity to customers are projected to increase 3.1 percent.Our service area is expected to realize this growth despite the adverse economic , factors that have significantly diminished load growth in other areas of the State.Expenses will continue to increase, with taxes estimated to go up by 7.7 percent.Capital expendi-tures will go up to$115 million, excluding AFDC.Although we retain a markedly positive view of the future in our service area, efforts to improve performance as a utility are regularly hampered by events and circumstances largely outside our control.The costs associated with virtually every segment of our business continue to rise, and infla-tionary pressures will undoubtedly necessitate further increases in our rates for natural gas and electricity.
$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
The cost problems are compounded by a regu-latory environment that frustrates our attempts to build the generating capacity that will be required if there is to be economic growth in New York State.Along with increased taxes, the burdens of exces-sive regulation and extraordinary regulatory delays are passed on to our customers as increased prices, and this further compounds the problems faced by businesses and consumers within our service area.These problems are so important that we have taken the unusual step of preparing a special section to this report that can be found on page eight.We hope you will take the time to read it.Francis E.Drake, fr.Chairman of the Board and Chief Executive Officer Paul W.Briggs President Keith W.Amish Executive Vice President March 15, 1979 To Shareholders:
$179,9401,453,590
After a disappointing year in 1977, common stock earnings in 1978 rebounded to$2.46 per share.This represents an increase of 34 cents, or 16 percent more than the 1977 earnings of$2.12 per share;a substantial improvement, especially since there were 1.3 million additional shares outstanding during 1978.Earnings continue to be affected by the weak economy of the State, by inadequate rate relief, and by increasing costs, including those due to inflation and government regulation.
$2G,403420,438$105,7972,950,287
Although earnings have improved, they are not at the level we believe they should be.On the plus side, some encouragement can be taken from the State government's more serious efforts to retain and attract business and industry.Dividends paid per common share for the year totaled$1.41,12 cents more than the$1.29 paid the previous year.Additionally, a three percent common stock dividend was paid in February1979.
$19,004$331,144$56,99313,63562,08650,31821,05343,8763,85834,548$28G,3G7$98,091$722,7802,6241010149242158551869121512313312Note:The20thannualstockdividendwaspaidFebruary23,1979attherateolthreepercent.
This is the 20th consecutive year in which a stock dividend has been paid.Total customer revenues for 1978 were$340.3 million, a 12 percent increase over 1977 customer revenues of$304.7 million.Revenue from electric sales to other utilities rose 8.6 percent in 1978 and totaled$28.7 million.The gain resulted from a sustained strong market for RG8r E's coal-fired elec-tricity through the New York Power Pool to utilities that would otherwise have to rely on the more expensive oil-fired electric generation.
projectsubsequently advisedtheSitingBoardthattheoperational datefortheplantcouldbeextendedto1988iftheupdatedgrowthestimates provedtobeaccurate.
These sales brought total revenues for the year to$369.0 million, an 11 percent increase over 1977.Kilowatt-hour sales of electricity to customers increased 3.3 percent for the year.Industrial kilo-watt-hour sales led gains with a six percent increase over 1977, a relatively strong growth.Residential kilowatt-hour sales increased 2.5 percent.Natural gas sales in therms were up 3.1 percent over 1977.The gain is attributed primarily to colder than normal weather and the addition of more than 2200 gas space heating customers following the 1977 lifting of a New York State Public Service Commission (PSC)prohibition on additional gas service.The performance of the Ginna nuclear power plant was excellent.
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.
The plant was available 81 percent of the time during the year and had regained its maximum dependable capacity of 470,000 kilowatts following the May1978 installation of a new turbine rotor.Thus the nuclear power plant economically provided 60 percent of the electricity on our own system and, when compared with an equivalent amount of energy generated by a coal-fired plant, saved our customers$32 million in fuel costs for the year.Operating expenses rose 11.6 percent, going to$31 9.7 million in 1978 from$286.4 million in 1977.Fuel expense, including purchased electricity and r tt n Keith W.Amish Francis F, Drake,/r.Paul W.Briggs gas, went up 12.0 percent, an increase of$15.9 million.Employee wages and benefits expense increased 8.1 percent, or$4.1 million over 1977.The total number of employees, 2622, was reduced by two over the year while the number of customers continued to increase, resulting in improved productivity.
Morethan18percentofholdersofcommonstockarenowparticipating intheCompany's Auto-maticDividendReinvestment Planascomparedwith11percentwhenthePlanwasinitiated in1974.During1978,theyinvestedmorethan$3.7millionin206,427newsharesofcommonstock.Wehaveconsistently expressed supportforthecreationofEmpireStatePowerResources, Inc.(ESPRI).Thisplanwouldhaveallowedpowercompanies inNewYorkStatetojoinincommonpowerplantlicensing, financing andplantopera-tion,yetsustaintheautonomyofthecompanies.
Employee overtime was kept to a minimum.Taxes, including Federal income tax, increased$9.2 million over 1977, or 19.4 percent.Capital expenditures for 1978 were$112.6 million, excluding Allowance for Funds Used During Construction (AFDC).This was 15 percent more than the 1977 capital expenditure of$98.1 million.A total of$38.7 million was required during 1978 for additional electric generating capacity.This included$3.6 million capital investment in our proposed Sterling nuclear power plant project,$12.2 million for a 24 percent share of Niagara Mohawk Power Corporation's Oswego~6 oil-fired plant,-and
Theplanwouldhavebenefited customers throughlowergenerating coststhanwouldotherwise bepossible.
$22.9 million for 14 percent of its Nine Mile Point~2 nuclear plant.The Niagara Mohawk plants have been rescheduled to be operational in 1980 and 1984 respectively.
Theprojected savingstoRGREcustomers alonethroughtheyear1998wouldapproach$Ibillion.InFebruary1979,afterfiveyearsoflengthydeliberations, thePSCtookaninformalpollthatindicated thattheproposalwouldbedisapproved.
These later operational dates will not affect the Company's ability to meet projected increased customer electric demand unless we should experience an increase in the present growth rate of electric use.Plans for a proposed 1,150,000 kilowatt nuclear power plant at Sterling, New York await reinstate-ment of a certification from the New York State Board on Electric Generation Siting and the Envi-ronment.In january 1978 this Board granted a construction certificate for the Sterling plant with an operational target for the year 1986.The Board suspended the certificate in May 1978 and requested further proof of"need" for the unit.Based on updated load growth projections that.showed lower electric load growth in the State as a whole, the Siting Board felt there was a question as to the necessity for the unit in the time frame origi-nally requested.
Wearestillawaitingtheformaldecision.
The four partners in the Sterling L Electric to our Kilowatt-Hour Sales Customers by Classes m illions 1500 L Ide Total Electric KWH Sales In Millions Year Total 1978 5103 1977 4938 1976 4806 1975 4521 1974 4408 1973 4540 1972 4292 1971 3982 1970 3802 1969 3578 iU us UL U U 1969 70 71 72 73 74 75 76 77 78 Gas Therm Sales to our Customers by Classes LI'Total Cas Therm Sales In Millions Year Total 1978 433 1977 420 1976 468 1975 424 1974 454 1973 435 1972 469 1971 442 1970 425 1969 403 meicral~LL JU'50 In us ial IJ'iIJUU Other t 0 196 9 70 71 72 73 74 75 76 77 78 RC&E engineers designed an uncommon type ol gas pipeline support in this bridge that crosses the Barge Canal.The support cables are underneath the pipe instead ol above.Gas Operations Supply Adequate RG&E's supply of natural gas, under contract with Consolidated Gas Supply Corpora-tion, remains adequate.Deliveries of liquefied natural gas (LNG)from Algeria to our supplier continue on schedule, adding 15 percent to the supplier's capacity.This, combined with increasing yields from the supplier's Louisiana offshore wells, provides assurances for adequate gas volumes in meeting existing and projected demands.New Gas Service RG&E installed more than 1300 gas service lines to new residential, commercial and industrial customers in 1978.Including heating system conversions, more than 2200 gas space heating customers were added during 1978.This expansion followed Public Service Commission approval in 1977 of the Company's petition to lift the prohibition on accepting new or addi-tional gas service.The additional services have helped slow the decline in total gas deliveries seen over the last several years that resulted from customer attrition and conservation.
Theverdictisverydisappointing, andthehighercostsitwillproduceforthelong-suffering consumers cannotbejustified, inouropinion.Onceagain,thePSCreportedthatRG&Ehadthelowestnumberofcustomercomplaints percapitaofanypowercompanyinNewYorkState.Thesefiguresaresupported byourownconsumersurveysthatshowcustomers givetheCompanyveryhighmarksforthequalityandreliability ofitsservice.Thecreditgoestoourfineemployees.
RG&E estimates that more than 3400 space heating customers will be added in 1979 including new homes, commercial establishments and heating system conversions.
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.
Therm Billing Liquefied natural gas (LNG)has a higher heat value (BTU's per cubic foot)than the domestic gas we have previously received.When LNG is mixed with domestic gas, as in the supplier's delivery to RG8 E, the thermal value varies.For this reason, RG&E has changed its gas billing from hundreds of cubic feet to therms, one therm being one hundred thousand BTU's.Starting in May 1979, a gas customer's bill will be calculated according to the average heat value (therms)used during the billing month.While this new system should have no effect on the amount of the customer's bill, it ensures that the Company's gas revenues will more accurately reflect the heat value of the gas sold./%4~i N Research and Development In1978 RC&E invested$2.8 million in research and development projects.Half of that amount was directed to nation-wide utility industry supported research organizations as well as the research arm of New York State utilities, known by the acronym ESEERCO.One such ESEERCO program helps support the nuclear fusion experiments at the University of Rochester.
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:
The New York State Energy Research and Development Authority directly assessed RG&E$600,000 for state government spon-sored research and development projects.The other half of the research and development funds was allocated to Company-sponsored and-coordi-nated projects such as the gas furnace demonstration program in which a number of residential gas furnaces have been modified for test purposes in an attempt to improve efficiencies.
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.
So far, an average gas saving of 17 percent has been achieved in the test homes while maintaining comfortable heating levels.A broad, national program to encourage development of nuclear steam generation equipment and maintenance improvements was initiated in 1978 and is co-sponsored by RC8 E.The research on a novel backhoe safety shutoff system that will prevent accidental damage to underground cable and pipeline has produced a prototype that will be field-tested this year.In another research area under RG8 E coordina-tion, data collected from several utilities were analyzed to determine spawning habits of fish along the southern shoreline of Lake Ontario.In all, RG&E directly supported more than 40 research and development projects in 1978.Management Appointment Joseph J.Hartman was elected to the position of Vice President, Cas and Transportation by the board of directors effective December 1, 1978.He succeeded Elvin A.Skibinski who retired after 33 years of service.Mr.Hartman joined RC&E in1946 as a co-op student in the Gas Department.
Althoughearningshaveimproved, theyarenotatthelevelwebelievetheyshouldbe.Ontheplusside,someencouragement canbetakenfromtheStategovernment's moreseriouseffortstoretainandattractbusinessandindustry.
He held a series of engineering posi-tions in the Gas Department until 1974 when he was appointed Superin-tendent of General Maintenance.
Dividends paidpercommonsharefortheyeartotaled$1.41,12centsmorethanthe$1.29paidthepreviousyear.Additionally, athreepercentcommonstockdividendwaspaidinFebruary1979.
Electric Operations Generation Over the past few years, three incidents of blade failures in one of the rows of a low pressure turbine rotor at the Ginna nuclear power plant had reduced plant availability-the percentage of time the plant is in service.In 1976, for example, the plant's availability was only 58 percent.A temporary modification to the turbine following the third blade failure allowed continued plant operation, but only at 86 percent of capacity.RGAE worked with the manufacturer in redesigning blades for a new turbine rotor to solve the problem.The new rotor was installed in May 1978 and it has performed very well.The plant is once again operating economically and efficiently at full capacity, providing more than half of the electricity for the Company's system.During the seven-month period from the time the rotor was replaced to the end of the year, the Ginna nuclear power plant recorded a remarkable 98 percent availability.
Thisisthe20thconsecutive yearinwhichastockdividendhasbeenpaid.Totalcustomerrevenuesfor1978were$340.3million,a12percentincreaseover1977customerrevenuesof$304.7million.Revenuefromelectricsalestootherutilities rose8.6percentin1978andtotaled$28.7million.Thegainresultedfromasustained strongmarketforRG8rE'scoal-fired elec-tricitythroughtheNewYorkPowerPooltoutilities thatwouldotherwise havetorelyonthemoreexpensive oil-fired electricgeneration.
For the entire year, the plant's availability was a noteworthy 81 percent.For further reliability, the original rotor has been rebuilt with the improved blades and was replaced in the second low pressure turbine unit during the 1979 annual refueling, maintenance and inspection shut-down.The displaced rotor will be rebuilt and kept at the nuclear power Folfowing a major redesign ol blade configuration, this new, 80-ton low pressure turbine rotor was installed at the Cinna nuclear power plant.plant as a spare to significantly reduce shutdown time in the event of any future, unforeseen rotor problem.Distribution ln the Rochester vicinity, a substation was constructed to meet electric demand at the new manufac-turing plant at Rochester Products, Fuel Systems Division of General Motors.An additional overhead trans-mission line was constructed to the Xerox Corporation facility in Webster providing greater capacity for Xerox and other area customers.
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.
As part of the115 KV transmission construction project in the Rochester area, a major circuit was reconstructed in western Monroe County that increased capacity to suburban customers in the Town of Gates, including the expanding Apparatus Division of Eastman Kodak Company located there.RG8 E continued its construction program extending 34.5 KV distribu-tion facilities in the Genesee District, south of Rochester.
Theplantwasavailable 81percentofthetimeduringtheyearandhadregaineditsmaximumdependable capacityof470,000kilowatts following theMay1978installation ofanewturbinerotor.Thusthenuclearpowerplanteconomically provided60percentoftheelectricity onourownsystemand,whencomparedwithanequivalent amountofenergygenerated byacoal-firedplant,savedourcustomers
The Canandaigua-Finger Lakes District expanded 115 KV facilities in meeting sustained growth in its area.A new 12.5 KV service was installed at the recently completed Voplex plant in Canandaigua.
$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.
In the Lakeshore District to the east, plans call for the construction of a 115 KV transmission line along the recently acquired right-of-way section of the Hojack Line railroad to meet growth in that outlying district.Streetlighting modernization programs in 1978 resulted in more than 2000 older incandescent lamps being replaced with high pressure sodium units in the northern part of the City of Rochester.
Employeeovertimewaskepttoaminimum.Taxes,including Federalincometax,increased
This project, paid for by the City, increases lighting efficiency and enhances public safety.A streetlighting modernization program was completed in the Village of Mt.Morris, and another is underway in the Village of Webster.Electric and gas facility relocation on public property became a larger-than-normal undertaking in 1978 due to the extensive activity in road construction and highway improvement.
$9.2millionover1977,or19.4percent.Capitalexpenditures for1978were$112.6million,excluding Allowance forFundsUsedDuringConstruction (AFDC).Thiswas15percentmorethanthe1977capitalexpenditure of$98.1million.Atotalof$38.7millionwasrequiredduring1978foradditional electricgenerating capacity.
The$7 million expense for this work must ultimately be borne by the Company's customers since there is only occa-sional and very minor reimbursement from government agencies that order the relocations.
Thisincluded$3.6millioncapitalinvestment inourproposedSterlingnuclearpowerplantproject,$12.2millionfora24percentshareofNiagaraMohawkPowerCorporation's Oswego~6oil-fired plant,-and
This electric transformer replaced a unit that failedinservicein 7978.Itis oneoltwo transformers at an interconnection that reduces 345,000 volts to 115,000 volts for transmission in the RCg E system.
$22.9millionfor14percentofitsNineMilePoint~2nuclearplant.TheNiagaraMohawkplantshavebeenrescheduled tobeoperational in1980and1984respectively.
In the Laboratory for Laser Energetics ol tf>e College ol Engineering and Applied Science at the University of Rochester, experiments are conducted in an attempt to ltarness thermal energy from nuclear fusion.Powerful laser beams are focused through mirrors and converge on a minute hydrogen pellet inside a target clamber (photo inset).The project is supportedin part by RG&E, and the experiment may one day lead to a virtually inexhaustible source ol therntaf energy lor the generation ol electricity.
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.
Some Plain Talk i..t~, i Rr 27~o<"pi~.V f I C j cLAss 100 15 TA Kh 3.6 SINGLE STATOR TYPE DS STYLE 60~5IOC623G25 0 WATTHOuR 240 VOLTS METER 3 WIRE kiiO ABC Pay to the order ot JOtN Q.PUSUD ROCHESTER,raY.
ThefourpartnersintheSterlingL ElectrictoourKilowatt-Hour SalesCustomers byClassesmillions1500LIdeTotalElectricKWHSalesInMillionsYearTotal19785103197749381976480619754521197444081973454019724292197139821970380219693578iUusULUU1969707172737475767778GasThermSalestoourCustomers byClassesLI'TotalCasThermSalesInMillionsYearTotal1978433197742019764681975424197445419734351972469197144219704251969403meicral~LLJU'50InusialIJ'iIJUUOthert01969707172737475767778RC&Eengineers designedanuncommontypeolgaspipelinesupportinthisbridgethatcrossestheBargeCanal.Thesupportcablesareunderneath thepipeinsteadolabove.GasOperations SupplyAdequateRG&E'ssupplyofnaturalgas,undercontractwithConsolidated GasSupplyCorpora-tion,remainsadequate.
Gross Pay 1978 Date 1978 Electricity 1.7%~oaolA 55555 Tax 26.7%Ga-3.0%The cost of living has gone up dr'astically over the years, and we know it will continue to rise untfl inflation, at least, is brought under control.But, it's not just the cost of living that's gone up, it's the cost of doing business, too.The inflationary economy has adversely affected business and industry as well as the individual.
Deliveries ofliquefied naturalgas(LNG)fromAlgeriatooursuppliercontinueonschedule, adding15percenttothesupplier's capacity.
Despite efforts to minimize expenses, the rising cost of doing business has affected RG&E, particularly on costs over which the Company can exert little or no control.This special section of the 1978 annual report is intended to portray, in plain talk, the rising costs and their effect on RG&E, its customers and shareholders.
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.
Before getting into specifics on the cost increases, let's take a look at the overall impact on RG&E customers in general.From 1970 to 1978 the cost of electricity to RG&E customers had risen 84.5 percent, and the cost of gas went up 109 percent.How has the higher cost of electricity and gas affected most RG&E customers?
RG&Eestimates thatmorethan3400spaceheatingcustomers willbeaddedin1979including newhomes,commercial establishments andheatingsystemconversions.
Based on wage figures published by the New York State Depart-ment of Labor, our records show that in 19'70 the gpical Rochester production worker paid 1.6 percent of his or On the subject of rising costs, pressure groups and consumer activists often suggest that utilities, like RG&E, should hold the line on"their" rising costs and maintain existing rates or even lower them by reducing"profits." Well, the fact is, RG&E has no control over most of the costs that comprise, the rates.And as for"profits," there really aren't any profits in a strict sense of the word as we'l point out later.Let's take a look at the costs in RG&E's business.Fuel expense consumes the largest portion of the revenue dollar.Today 40 cents of each revenue dollar go to pay for the fuels used in the generation of electricity, steam, and for the cost of natural gas.Over a nine-year period through the end of 1978, tlie cost of coal per ton more than doubled while oil and natural gas had tripled in cost.Nuclear fuel, processed and ready for use in a power plant, had a fourfold cost increase, yet it still remains the most economical fuel for electric generation as seen in the accompanying chart that compares fuel cost on a BTU or heat value basis.Fuel Expense (Fuel costs per million BTU's)her gross income for electricity.
ThermBillingLiquefied naturalgas(LNG)hasahigherheatvalue(BTU'spercubicfoot)thanthedomesticgaswehavepreviously received.
In 1978, despite more than a ten percent increase in electric use by the average residential customer, the same worker still paid just 1.7 percent of gross pay for electricity.
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.
If that worker was a gas space heating customer, he or she paid 3.1 percent of gross income for gas in 1970, and only 3.0 percent in 1978.In the meantime the tax bite (property, income, social security and sales)out of that same gross pay went from 23.9 to 26.7 percent.Most pay has kept pace with the inflationary impact on prices.Even though more actual dollars are needed to pay for electricity and gas, these forms of energy absorb about the same amount of gross income as they did nearly ten years ago.The problem is that government taxes are taking greater amounts of the devalued gross paycheck dollars.We'e certainly not saying that all of our customers have incomes that have kept pace with escalating inflation.
Halfofthatamountwasdirectedtonation-wide utilityindustrysupported researchorganizations aswellastheresearcharmofNewYorkStateutilities, knownbytheacronymESEERCO.OnesuchESEERCOprogramhelpssupportthenuclearfusionexperiments attheUniversity ofRochester.
The senior citizen, for example, on low, fixed income is having an extremely difficult time meeting the continually increasing costs of all essentials for living, including heat and electricity.
TheNewYorkStateEnergyResearchandDevelopment Authority directlyassessedRG&E$600,000forstategovernment spon-soredresearchanddevelopment projects.
The plight of a senior citizen in the situation described above is a very complex social problem that stems from rampant inflation.
Theotherhalfoftheresearchanddevelopment fundswasallocated toCompany-sponsored and-coordi-natedprojectssuchasthegasfurnacedemonstration programinwhichanumberofresidential gasfurnaceshavebeenmodifiedfortestpurposesinanattempttoimproveefficiencies.
And, as a social problem, it is one that should not be placed upon any one segment of the economy or any one industry, whether it be a regulated natural monopoly or not.Recognizing this social problem, we at RG&E have expressed our support for an energy stamp program and have even offered to help develop such'plan.But, so far, the authorities have not accepted tPhe oEer.Further, we have contended that residential'heat and electricity are just as essential to our customers as food, and should be tax-exempt.
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.
In that regard, the State did reduce sales tax on electricity and gas by one percent in 1978..50 1970 78 70 78 70 78 70 78 Coal Oil Gas Nuclear C', nfl'mi The market price of fuels is beyond the influence of RG&E's prudent and aggressive purchasing procedures.
Heheldaseriesofengineering posi-tionsintheGasDepartment until1974whenhewasappointed Superin-tendentofGeneralMaintenance.
Rising inflation gradually boosted fuel prices.The single most devastating factor, though, was the 1973 Arab Oil Embargo that not only caused the price of oil to double in a year, but also illustrated that the United States had become dangerously dependent on foreign oil sources.This dependence, combined with the rapid cost increases>
ElectricOperations Generation Overthepastfewyears,threeincidents ofbladefailuresinoneoftherowsofalowpressureturbinerotorattheGinnanuclearpowerplanthadreducedplantavailability-thepercentage oftimetheplantisinservice.In1976,forexample,theplant'savailability wasonly58percent.Atemporary modification totheturbinefollowing thethirdbladefailureallowedcontinued plantoperation, butonlyat86percentofcapacity.
produced trade deficits that have set iously eroded the value of the American dollar and have helped promote uncontrolled inflation.
RGAEworkedwiththemanufacturer inredesigning bladesforanewturbinerotortosolvetheproblem.Thenewrotorwasinstalled inMay1978andithasperformed verywell.Theplantisonceagainoperating economically andefficiently atfullcapacity, providing morethanhalfoftheelectricity fortheCompany's system.Duringtheseven-month periodfromthetimetherotorwasreplacedtotheendoftheyear,theGinnanuclearpowerplantrecordedaremarkable 98percentavailability.
It's a serious situation and one that is increasingly agitated by a glut of self-defeating laws, regulations and taxes enacted by the federal and state governments.
Fortheentireyear,theplant'savailability wasanoteworthy 81percent.Forfurtherreliability, theoriginalrotorhasbeenrebuiltwiththeimprovedbladesandwasreplacedinthesecondlowpressureturbineunitduringthe1979annualrefueling, maintenance andinspection shut-down.Thedisplaced rotorwillberebuiltandkeptatthenuclearpowerFolfowing amajorredesignolbladeconfiguration, thisnew,80-tonlowpressureturbinerotorwasinstalled attheCinnanuclearpowerplant.plantasasparetosignificantly reduceshutdowntimeintheeventofanyfuture,unforeseen rotorproblem.Distribution lntheRochester
itlp pd~P,o>t h o~Cp o~More importantly, RG&E employees are qualified, dedi-cated and productive people who are entitled to fair return for their eR'orts.The ratio of RG&E customers to employees in 1970 was 168 to one.In 1978 there were 186 customers for each RG&E employee.This means that our employees have increased their productivity as their contribution in the struggle against inflation.
: vicinity, asubstation wasconstructed tomeetelectricdemandatthenewmanufac-turingplantatRochester
Productive, competent employees provide for the best interest of the shareholder and the customer.RG&E will continue to exercise control of wage and benefit expenses, and we are observing the current volun-tary anti-infiationary guidelines.
: Products, FuelSystemsDivisionofGeneralMotors.Anadditional overheadtrans-missionlinewasconstructed totheXeroxCorporation facilityinWebsterproviding greatercapacityforXeroxandotherareacustomers.
a%km RG&E's tax expense has tripled since 1970 going from$19 million to$57 million in 1978.And, the 1978 figure doesn't even include the$15.5 million in sales tax RG&E had to collect from customers in their bills for the State and local governments.
Aspartofthe115KVtransmission construction projectintheRochester area,amajorcircuitwasreconstructed inwesternMonroeCountythatincreased capacitytosuburbancustomers intheTownofGates,including theexpanding Apparatus DivisionofEastmanKodakCompanylocatedthere.RG8Econtinued itsconstruction programextending 34.5KVdistribu-tionfacilities intheGeneseeDistrict, southofRochester.
Aside from the visible sales tax,"hidden" taxes in the customer bills account for more than 15 cents of every dollar the customer pays to RG&E.When sales taxes are included, the typical residential customer's bill is more than 22 percent tax.And that's a cost of government, not of energy.Tax Portion of 197ti Customer Bill-22.5%)(,-gl i r i SK~W~a rvauc Tax is another example of expense where RG&E can exercise little or no control.Of course, it could be pointed out that property taxes do mount up as we expand facili-ties such as substations, transformers and power lines.But, even here there is no option.We are obligated to meet growth, and are required by PSC law to serve the instant energy demands of customers regardless of the amounts called for.And just like every other property owner, we pay high tax rates on infiated values.The eB'ect is cumulative.
TheCanandaigua-FingerLakesDistrictexpanded115KVfacilities inmeetingsustained growthinitsarea.Anew12.5KVservicewasinstalled attherecentlycompleted VoplexplantinCanandaigua.
P~D D O In addition to the expenses just discussed, seven percent of the 1978 revenue dollar was used to pay for miscellaneous materials and services.Among other items this category includes fees assessed by regulatory agencies, expenses for regulatory compliance, legal counsel, and building and grounds maintenance.
IntheLakeshore Districttotheeast,planscallfortheconstruction ofa115KVtransmission linealongtherecentlyacquiredright-of-way sectionoftheHojackLinerailroadtomeetgrowthinthatoutlyingdistrict.
Here, too, there is really little choice.We do, however, request bids where we can and look for the best price in the marketplace.
Streetlighting modernization programsin1978resultedinmorethan2000olderincandescent lampsbeingreplacedwithhighpressuresodiumunitsinthenorthernpartoftheCityofRochester.
30/40/50 MVA Electric Transformer 10 Expense for employee wages and benefits has increased 80 percent since 1970, a relatively small increase compared to other items mentioned.
Thisproject,paidforbytheCity,increases lightingefficiency andenhancespublicsafety.Astreetlighting modernization programwascompleted intheVillageofMt.Morris,andanotherisunderwayintheVillageofWebster.Electricandgasfacilityrelocation onpublicpropertybecamealarger-than-normalundertaking in1978duetotheextensive activityinroadconstruction andhighwayimprovement.
This is an area where RG&E may and does exercise control-reasonable control.And it has to be reasonable if the Company is to retain competent personnel and remain competitive in the labor and professional employment market.Let's face it, we'e in a highly complex, technical business.Low or inade-quate wages would produce nothing but a false economy.1970-$127,500 1978-$278,000 Percentage increase-118.0%%d Average Annual Use Per Residential Electric Customer Kilowat t-Hours Average Annual Use Per Residential Space Heating Gas Customer Therms'666 6166 6112$371 SSS7 1767 1776 1777 7653 1969 70 71 72 73 74 75 76 77 78 1969 70 71 72 73 74 75 76 77 78'Adjusted for normalized weather by degree days.Earnings and Dividends Per Common Share in Dollars 0 Earnings per Common Share 0 Cash Dividends per Common Share (Adjusted for Stock Dividends) 2.12 23>3 2.26 2.12 1.81 ts9 1.1S 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 12 L.0 to serve customers.
The$7millionexpenseforthisworkmustultimately bebornebytheCompany's customers sincethereisonlyocca-sionalandveryminorreimbursement fromgovernment agenciesthatordertherelocations.
So, when it comes right down to it, RG&E's"profit," or the interest cost of money, is a cost of doing busmess, and it's certainly one over which we have little control.Millions$120 Annual Capital Expenditures in Millions oi Dollars, Excluding Allowance ior funds Used During Construction lrrs 100 80 60 40 20 0 1970 71 72 73 74 75 76 77 78 In 1978,$112 million were needed to cover the cost of new facilities required to serve customers.
Thiselectrictransformer replacedaunitthatfailedinservicein 7978.Itisoneoltwotransformers ataninterconnection thatreduces345,000voltsto115,000voltsfortransmission intheRCgEsystem.
Although 40 percent of that capital was raised internally, the rest had to come from a highly competitive money market.There is no alternative.
IntheLaboratory forLaserEnergetics oltf>eCollegeolEngineering andAppliedScienceattheUniversity ofRochester, experiments areconducted inanattempttoltarnessthermalenergyfromnuclearfusion.Powerfullaserbeamsarefocusedthroughmirrorsandconvergeonaminutehydrogenpelletinsideatargetclamber(photoinset).Theprojectissupportedin partbyRG&E,andtheexperiment mayonedayleadtoavirtually inexhaustible sourceoltherntafenergylorthegeneration olelectricity.
Regardless of market conditions we cannot and would not elect to ignore necessary additions to serve customer energy needs.To compromise on improvements and replacements that protect the energy systems is to gamble on efficient and reliable service to our customers, and we won't do that.Cost of capital is a major area where we can exercise little or no control other than continuing to employ effi-cient methods for raising funds in the capital marketplace where costs are rising rapidly.In March 1979, for example, we had to replace a maturing$16.7 million three percent interest bond with short-term notes at more than 11 percent interest.Although this may seem a little strange at first, RG&E's"profits" are actu-ally an expense.Our"pro5t" is nothing more than the amount that the New York State Public Service Commis-I sion (PSC)allows us to pay for the money we have to borrow to build the facilities needed to serve customers.
SomePlainTalki..t~,iRr27~o<"pi~.VfICjcLAss10015TAKh3.6SINGLESTATORTYPEDSSTYLE60~5IOC623G25 0WATTHOuR240VOLTSMETER3WIREkiiO ABCPaytotheorderotJOtNQ.PUSUDROCHESTER,raY.
Put another way, we are allowed to earn a"rate of return" on the capital invested in plant used to serve the public.The rates of return are set by the PSC, but are in no way guaranteed.
GrossPay1978Date1978Electricity 1.7%~oaolA55555Tax26.7%Ga-3.0%Thecostoflivinghasgoneupdr'astically overtheyears,andweknowitwillcontinuetoriseuntflinflation, atleast,isbroughtundercontrol.But,it'snotjustthecostoflivingthat'sgoneup,it'sthecostofdoingbusiness, too.Theinflationary economyhasadversely affectedbusinessandindustryaswellastheindividual.
Without the ability to ay the cost of.P money in interest and share-holder dividends we would not be able to raise the capital necessary to continue Gas and electric companies constitute the most capital-intensive industry in the entire economy.The average manufacturing concern, for example, invests 75 cents in plant for each dollar of gross income while RG&E has had to invest more than three dollars for each gross income dollar.Large amounts of money are required to pay for facility expansion, improvement and replace-ment.Prices for materials and labor have gone up, and so has the cost of borrowing the money to finance the new facilities.
Despiteeffortstominimizeexpenses, therisingcostofdoingbusinesshasaffectedRG&E,particularly oncostsoverwhichtheCompanycanexertlittleornocontrol.Thisspecialsectionofthe1978annualreportisintendedtoportray,inplaintalk,therisingcostsandtheireffectonRG&E,itscustomers andshareholders.
For the most part, these costs cannot be controlled by us.Just as infiation has driven up costs in the markets where people shop, it has also affected the markets where utihties purchase their hardware and money.y w 0 D D R G&E has a responsibility to supply electricity, gas and steam to its customers at the most economical prices.But, try as we may, we have little control over most of the expenses incurred in fulfilling this responsibility.
Beforegettingintospecifics onthecostincreases, let'stakealookattheoverallimpactonRG&Ecustomers ingeneral.From1970to1978thecostofelectricity toRG&Ecustomers hadrisen84.5percent,andthecostofgaswentup109percent.Howhasthehighercostofelectricity andgasaffectedmostRG&Ecustomers?
We have consistently applied sound management policies and prin-ciples in attempting to minimize the amount of rate increases while maintaining the Company as a sound investment and reliable supplier.It's very discomforting to realize that uncontrollable costs have accounted for more than 80 percent of customer cost increase since 1970!The cost of doing business, especially power company business, is high, and it continues to go higher, driven by unbalanced federal and state budgets.Most of the cost is in fuels, taxes, capital expenditures and the cost of money.And, part of the cost is a result of heavy regula-tion by all layers of government.
Basedonwagefigurespublished bytheNewYorkStateDepart-mentofLabor,ourrecordsshowthatin19'70thegpicalRochester production workerpaid1.6percentofhisorOnthesubjectofrisingcosts,pressuregroupsandconsumeractivists oftensuggestthatutilities, likeRG&E,shouldholdthelineon"their"risingcostsandmaintainexistingratesorevenlowerthembyreducing"profits."
We are not saying that regulation is unnecessary.
Well,thefactis,RG&Ehasnocontrolovermostofthecoststhatcomprise, therates.Andasfor"profits,"
Some of it is beneficial.
therereallyaren'tanyprofitsinastrictsenseofthewordaswe'lpointoutlater.Let'stakealookatthecostsinRG&E'sbusiness.
But, like everything else, regulation has a price.Since 1970, RG&E's spending for capital improve-ments just to comply with regulatory requirements and laws approaches
Fuelexpenseconsumesthelargestportionoftherevenuedollar.Today40centsofeachrevenuedollargotopayforthefuelsusedinthegeneration ofelectricity, steam,andforthecostofnaturalgas.Overanine-year periodthroughtheendof1978,tliecostofcoalpertonmorethandoubledwhileoilandnaturalgashadtripledincost.Nuclearfuel,processed andreadyforuseinapowerplant,hadafourfoldcostincrease, yetitstillremainsthemosteconomical fuelforelectricgeneration asseenintheaccompanying chartthatcomparesfuelcostonaBTUorheatvaluebasis.FuelExpense(FuelcostspermillionBTU's)hergrossincomeforelectricity.
$100 million.This expense amounts to almost a$20 million annual cost to customers.
In1978,despitemorethanatenpercentincreaseinelectricusebytheaverageresidential
To this we can add at least another$10 million a year in operational expense to comply with various other federal and state regulatory requirements.
: customer, thesameworkerstillpaidjust1.7percentofgrosspayforelectricity.
Thus, a very conservative esti-mate of the annual cost of government regulation to our customers is$30 million, a very real part of the rising cost of energy.We have taken this opportunity to present a story to you our shareholders, and hopefully to many of our customers.
Ifthatworkerwasagasspaceheatingcustomer, heorshepaid3.1percentofgrossincomeforgasin1970,andonly3.0percentin1978.Inthemeantimethetaxbite(property, income,socialsecurityandsales)outofthatsamegrosspaywentfrom23.9to26.7percent.Mostpayhaskeptpacewiththeinflationary impactonprices.Eventhoughmoreactualdollarsareneededtopayforelectricity andgas,theseformsofenergyabsorbaboutthesameamountofgrossincomeastheydidnearlytenyearsago.Theproblemisthatgovernment taxesaretakinggreateramountsofthedevaluedgrosspaycheckdollars.We'ecertainly notsayingthatallofourcustomers haveincomesthathavekeptpacewithescalating inflation.
It is not a unique story because each of you is experiencing the same pressures, the same cost increases, the same inflation, over-regulation and taxes.But, because utilities are sometimes regarded by the uninformed as unaffected by such pressures, we thought it important to spell out how these same factors, over which we have little or no control, are driving up the abso-lute cost of energy.
Theseniorcitizen,forexample,onlow,fixedincomeishavinganextremely difficult timemeetingthecontinually increasing costsofallessentials forliving,including heatandelectricity.
SCAM ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Statement of Income (rho ndsofool4)1978 1977 Operating Revenues (Note1)Electric..Gas Steam Electric sales to other utilities Total Operating Revenues Operating Expenses (Note1)Operation Electric and steam fuels.Purchased electricity
Theplightofaseniorcitizeninthesituation described aboveisaverycomplexsocialproblemthatstemsfromrampantinflation.
.Purchased natural gas Other..Maintenance Depreciation Taxes-local, state and other Federal income tax-current (Note 3)..-deferred (Note 3)Total Operating Expenses Operating Income Other Income and Deductions Allowance for other funds used during construction (Note 1)Other-net Total Other Income and Deductions Income before Interest Charges Interest Charges Long-term debt.Short-term debt..Other-net Allowance for borrowed funds used during construction (Note 1)Total Interest Charges.Net Income Dividends on Preferred and Preference Stock, at required rates Earnings Applicable to Common Stock Weighted average number of shares outstanding in each period, adjusted for stock dividends (000's).Earnings per Common Share (Note 1)Cash Dividends per Common Share, adjusted for stock dividends (Note 1)$202,631 118,531 19,110 340,272 , 28,G76 3G8,948 58,140 19,337 71,109 65,685 26,24G 22,206 45,935 5,166 5,875 319,699 49,249 8,705 4,418 13123 62,372 25,594 1,588 41G (4,812)22,786 39,586 S,G78$33,908 13,774$2.4G$1;41$179,940 105,797 19,004 304,741 26,403 331,144 5G,993 13,G35 62,086 62,494 22,372 21,053 43,876 961 2,897 28G,3G7 44,777 6,473 1,310 7,783 52,560 22,542 1,319 494 (4,844)19,511 33,049 6,512$26,537 12,474$2.12$1.29 Statement Of Retained EarningS tr~~~..io.i~>>
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.
Balance at beginning of period Add Net income Total Deduct Issuance costs of preferred stock (Note 4).Dividends on capital stock Cumulative preferred stock, at required rates (Note 4).Preference stock (Note 4)Common stock Cash (Note 1)Stock (Note 4)Total Balance at end of period 1978$70,819 39/86 110,405 3,550 2,128 19,269 8,120 33,0G7$77,338 1977$67,812 33,049 100,861 701 6,453 59 16,009 6,820 30,042$70,819 Source of 1978 Revenue Dollar in Cents Use of 1978 Revenue Dollar in Cents Electric Revenue Gas Revenue Cost of fuels 40st Purchased rlecrric g Steam rvefs Purchased lfecvicisy 19e 554 324 Taxes 6st Depreciation 154 44 ssa Interest on Bonds&Notes Electric Sales Steam to Other Utilities Revenue Wages&Benefits Misc.Materials&Services Reinvested Earnings Dividends (Com.Sst&Pfd.2a)Capitalization in Millions of Dollars 400 350 212A 250~2VA A 2VA 211.1 150 112.$ssay 121.1 220 esAI 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 4 long-Term oebf 4 common sharehofders'qvisy 4 prefeved rquisy 13 RES ROCHESTER GAS AND ELECTRIC CORPORATION Balance Sheet (rho sa ckofoolh s)1978 At December 31 1977 ASSETS Utility Plant, at original cost (Note1)Electric..Gas Steam.Less-Accumulated depreciation and amortization Construction work in progress Net Utility Plant Investment in subsidiary, at equity Current Assets Cash (Note 5)Accounts receivable
Inthatregard,theStatedidreducesalestaxonelectricity andgasbyonepercentin1978..50197078707870787078CoalOilGasNuclearC',nfl'miThemarketpriceoffuelsisbeyondtheinfluence ofRG&E'sprudentandaggressive purchasing procedures.
.Materials and supplies, at average cost Fossil fuel.Construction and other supplies Prepayments Total Current Assets Deferred Debits Unamortized debt expense Deferred fuel cost (Note 1)Other (Note 4).Total Deferred Debits Total Assets CAPITALIZATION AND LIABILITIES Capitalization (Note 4)Long-term debt.Preferred stock.Preference stock Common shareholders'quity Common stock Retained earnings Total common shareholders'quity
Risinginflation gradually boostedfuelprices.Thesinglemostdevastating factor,though,wasthe1973ArabOilEmbargothatnotonlycausedthepriceofoiltodoubleinayear,butalsoillustrated thattheUnitedStateshadbecomedangerously dependent onforeignoilsources.Thisdependence, combinedwiththerapidcostincreases>
.Total Capitalization Current Liabilities Short-term debt (Note 5)Long-term debt due within one year Accounts payable.Taxes accrued, including income taxes.Interest accrued Payroll accrued.Other..Total Current Liabilities Deferred Credits and Other Liabilities Accumulated deferred income taxes (Notes 1 and 3)Other..Total Deferred Credits and Other Liabilities Commitments and Other Matters (Note 6)Total Capitalization and Liabilities
producedtradedeficitsthathavesetiouslyerodedthevalueoftheAmericandollarandhavehelpedpromoteuncontrolled inflation.
..$669,104 171,120 17,735 857,959 2G1,477 59G,482 213,534 810,016 1,996 11I777 31,700 12,G73 9,G43 1,1 GO 6G,953 3,G20 5,362 5,439 14,421$893,386$384,303 67,000 28,000 246,938 77,338 324,276 803,579 16,G77 29,021 11,335 7,6G7 2,596 1,0G6 G8,3G2 18,394 3,051 21,445$893,386$G09,387 1G2,946 17,442 789,775 229,122 560,653 162,127 722,780 1,947 6,617 30,332 10,787 9,724 927 58,387 3,348 G,338 5,574 15,260$798,374$3G1,022 67,000 28,000 212,533 70,819 283,352 739,374 9,000 18,635 4,610 7,355 2,388 825 42,813 15,233 954 16,187$798,374 LK~iiP ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Statement Of ChangeS in FinanCial POSitiOn<<rh sa dso<<Do!4 s)Sources of Funds Operations Net income Principal non-cash charges (credits)to income Depreciation Amortization of nuclear fuel Deferred fuel costs Deferred income taxes-net Allowance for funds used during construction Other-net Total from Operations Financing Sale of long-term debt.Sale of common stock Sale of preference stock Total from Financing Total Sources of Funds Uses of Funds Utility plant Plant additions.Nuclear fuel additions.Less: allowance for funds used during construction Net Additions to Utility Plant Dividends on preferred stock Dividends on preference stock Dividends on common stock Reduction of short-term debt-net.Retirement of long-term debt Redemption of preferred stock, including call premium Capital stock expense Expense of issuing long-term debt Other-net.Increase (decrease) in working capital (excluding short-term debt)Total Uses of Funds Changes in Components of Working Capital Increase (decrease) in current assets Cash Accounts receivable Materials and supplies Fossil fuel..Construction and other supplies Prepayments
It'saserioussituation andonethatisincreasingly agitatedbyaglutofself-defeating laws,regulations andtaxesenactedbythefederalandstategovernments.
.Total Increase (decrease) in current liabilities (excluding short-term debt)Accounts payable Taxes.Accrued interest and payroll Long-term debt due within one year Other-net Total Increase (decrease) in Working Capital excluding short-term debt 1978$39,58G 22,206 15,746 97G 3,161 (13,517)1,204 69,362 40,000 27,186 67,186$136,548$105,191 20,878 13,517 112,552 3,550 2,128 19,269 9,000 16,677 902 490 (2,037)(25,983)$136/48$5,1 GO 1+68 1,88G (81)233 8,5G6 10,386 G,725 520 1G,677 241 34+49$(25,983)1977$33,049 21,053 14,386 (2,886)2,675 (11,317)757 57,717 50,000 24,579 28,000 102,579$160,296$94,958 14,450 11,317 98,091 6,453 59 16,009 9,051 333 27,750 167 892 1,406 85$160,296$188 (3,474)(49)351 281 (2,703)482 1,651 1,234 (G,000)(155)(2,788)$85 Notes to Financial Statements Note 1.Summary of Accounting Policies General.The Company is subject to regulation by the Public Service Commission of the State of New York (PSC)with respect to its rates for service and the maintenance of its accounting records.The Company's accounting policies conform to generally accepted accounting principles as applied to New York State public utilities giving effect to the rate-making and accounting practices and policies of the PSC.A description of the Company's principal accounting policies follows.Utility Plant and Depreciation.
itlppd~P,o>tho~Cpo~Moreimportantly, RG&Eemployees arequalified, dedi-catedandproductive peoplewhoareentitledtofairreturnfortheireR'orts.TheratioofRG&Ecustomers toemployees in1970was168toone.In1978therewere186customers foreachRG&Eemployee.
The cost of additions to utility plant and replacement of retirement units of property is capitalized.
Thismeansthatouremployees haveincreased theirproductivity astheircontribution inthestruggleagainstinflation.
Cost includes labor, material, and similar items as well as indirect charges for engineering, supervision, etc.The Company capitalizes an allowance for funds used during construction approximately equivalent to the cost of capital devoted to plant under construction.
Productive, competent employees provideforthebestinterestoftheshareholder andthecustomer.
Replacement of minor items of property is included in maintenance expenses.Costs of depreciable units of plant retired are eliminated from utility plant accounts, and such costs, plus removal expenses, less salvage, are charged to accumulated depreciation and amortization.
RG&Ewillcontinuetoexercisecontrolofwageandbenefitexpenses, andweareobserving thecurrentvolun-taryanti-infiationary guidelines.
Depreciation in the financial statements is provided on a straight-line basis at rates based on the estimated useful lives of property, which have resulted in provisions of 3.0'nd 3.1%per annum, of average depreciable property in 1977 and 1978, respectively.
a%kmRG&E'staxexpensehastripledsince1970goingfrom$19millionto$57millionin1978.And,the1978figuredoesn'tevenincludethe$15.5millioninsalestaxRG&Ehadtocollectfromcustomers intheirbillsfortheStateandlocalgovernments.
Estimated year of completion Net megawatt capability RGB E's share-megawatts-percent...Total estimated project costs RG&E's share.RGg E's actual construction costs-1977
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.
.-1978.p uliioos of Dollars)$252.60<$1,441 4$1,354.7r$r 60.6 201.8 379.3 10.0 21.7 3.5 12.2 22.9 3.5 O'To be constructed and operated by Niagara Mohawk Power Corporation.
P~DDOInadditiontotheexpensesjustdiscussed, sevenpercentofthe1978revenuedollarwasusedtopayformiscellaneous materials andservices.
To be constructed and operated by Rochester Gas and Electric Corporation.
Amongotheritemsthiscategoryincludesfeesassessedbyregulatory
Construction costs exclude allowance for funds used during construction and certain overhead costs to be capitalized.
: agencies, expensesforregulatory compliance, legalcounsel,andbuildingandgroundsmaintenance.
rtrTorat project costs incfude$8.$million for oil handling facilities, of which RG&E has not agreed upon the percentage participation, and excludes common facilities.
Here,too,thereisreallylittlechoice.Wedo,however,requestbidswherewecanandlookforthebestpriceinthemarketplace.
rpTotat project costs incfude$89.4 million for the initial nuclear fuel loading and excludes common (aciliiies.
30/40/50MVAElectricTransformer 10Expenseforemployeewagesandbenefitshasincreased 80percentsince1970,arelatively smallincreasecomparedtootheritemsmentioned.
rprorat project costs include$114.7 million for the initial nuclear fuel loading.Nuclear Fuel and Decommissioning Costs.The cost of nuclear fuel and estimated permanent storage costs are charged to operating expense on the basis of the thermal output of the reactor.These costs are charged to customers through base rates and through the fuel cost adjustment clause.Jointly-Owned Facilities.
ThisisanareawhereRG&Emayanddoesexercisecontrol-reasonable control.Andithastobereasonable iftheCompanyistoretaincompetent personnel andremaincompetitive inthelaborandprofessional employment market.Let'sfaceit,we'einahighlycomplex,technical business.
The following table sets forth the major electric generation projects currently planned which will add to the Company's present generating capability.
Loworinade-quatewageswouldproducenothingbutafalseeconomy.1970-$127,5001978-$278,000Percentage increase-118.0%%d AverageAnnualUsePerResidential ElectricCustomerKilowatt-HoursAverageAnnualUsePerResidential SpaceHeatingGasCustomerTherms'666 61666112$371SSS7176717761777765319697071727374757677781969707172737475767778'Adjusted fornormalized weatherbydegreedays.EarningsandDividends PerCommonShareinDollars0EarningsperCommonShare0CashDividends perCommonShare(Adjusted forStockDividends) 2.1223>32.262.121.81ts91.1S196919701971197219731974197519761977197812 L.0toservecustomers.
Each participant must provide its own financing for these projects.Oswego Nine Mile Fossil Point Nuclear Slerling Unit&#xb9;6rlr Unit&#xb9;2$Nuclear 1980 1984 1988 850 1084 1150 204 150 322 24 14 28 Due to a Federal government policy adopted in 1977, the Company has changed its nuclear fuel cost computation to reflect the costs of permanent storage of spent nuclear fuel.Prior years'uclear fuel cost computations anticipated spent nuclear fuel would be reprocessed.
So,whenitcomesrightdowntoit,RG&E's"profit,"
Cumulative prior years'uel expenses would have been increased by approximately S8.0 million if they had been determined on the basis of current cost estimates for permanent storage of spent nuclear fuel, rather than on an estimated amount for reprocessing.
ortheinterestcostofmoney,isacostofdoingbusmess,andit'scertainly oneoverwhichwehavelittlecontrol.Millions$120AnnualCapitalExpenditures inMillionsoiDollars,Excluding Allowance iorfundsUsedDuringConstruction lrrs10080604020019707172737475767778In1978,$112millionwereneededtocoverthecostofnewfacilities requiredtoservecustomers.
If the government's permanent storage policy is continued, the Company believes that such amount will be fully allowable for rate-making purposes.Decommissioning costs (costs to take the plant out of service in the future)for the Company's Ginna nuclear power plant cannot be estimated at this time.The Company believes that the costs of decommissioning will be fully allowable for rate-making purposes.Allowance for Funds Used During Construction.
Although40percentofthatcapitalwasraisedinternally, theresthadtocomefromahighlycompetitive moneymarket.Thereisnoalternative.
The Company capitalizes an Allowance for Funds Used During Construction (AFDC)based upon the net cost of borrowed funds for construction purposes and a reasonable rate upon the Company's other funds when so used.The rate used for this purpose was Bs/4%, which became effective in May1976.In accordance with the order issued by the Federal Energy Regulatory Commission, AFDC is segregated into two component parts and classified in the Statement of Income to disclose an Allowance for Borrowed Funds Used During Construction as a credit to Interest Charges and an Allowance for Other Funds Used During Construction as a part of Other Income.In December 1977, the Company began computing AFDC on its share of Nine Mile Point Nuclear Unit~2 and Oswego Fossil Unit~6 at an average reduced rate of 6.85%, which is net of the income tax effect of the interest portion of AFDC.Rates and Revenue.Revenue is recorded on the basis of meters read during the calendar year.Tariffs for electric and steam service include fuel cost adjustment clauses which serve to adjust electric and steam rates from time to time to reflect changes in the average costs of fuels used in electric and steam generation from the average cost of such fuels during the base period.Tariffs for gas service contain a comparable clause to adjust gas rates for changes in the price of purchased natural gas.Deferred Fuel Costs.Fuel costs which are recoverable under the electric, gas and steam cost adjustment clauses included in the tariff schedules of the Company are deferred until they are billed to customers.
Regardless ofmarketconditions wecannotandwouldnotelecttoignorenecessary additions toservecustomerenergyneeds.Tocompromise onimprovements andreplacements thatprotecttheenergysystemsistogambleonefficient andreliableservicetoourcustomers, andwewon'tdothat.Costofcapitalisamajorareawherewecanexerciselittleornocontrolotherthancontinuing toemployeffi-cientmethodsforraisingfundsinthecapitalmarketplace wherecostsarerisingrapidly.InMarch1979,forexample,wehadtoreplaceamaturing$16.7millionthreepercentinterestbondwithshort-term notesatmorethan11percentinterest.
A reconciliation of recoverable gas costs with billed gas revenues is done annually as of August 31, and the excess or deficiency is refunded to or recovered from the customers during a subsequent twelve month period.Federal Incorhe Tax.For income tax purposes, depreciation is computed using the most liberal methods permitted.
Althoughthismayseemalittlestrangeatfirst,RG&E's"profits" areactu-allyanexpense.Our"pro5t"isnothingmorethantheamountthattheNewYorkStatePublicServiceCommis-Ision(PSC)allowsustopayforthemoneywehavetoborrowtobuildthefacilities neededtoservecustomers.
In addition, certain costs capitalized for financial reporting purposes are deducted currently for income tax purposes.The resulting tax reductions are offset by provisions for deferred income taxes only to the extent ordered or permitted by regulatory authorities.
Putanotherway,weareallowedtoearna"rateofreturn"onthecapitalinvestedinplantusedtoservethepublic.TheratesofreturnaresetbythePSC,butareinnowayguaranteed.
The 10%investment tax credit rate, which had been scheduled to return to 4%in 1981, has been made permanent by the Revenue Act of 1978.The prior rate of 4%is applied to reduce the current tax provision while, as recommended by the PSC, normalized tax accounting is followed in the application of the remaining 6%.The Company uses the separate period approach in calculating the interim quarterly tax provision.
Withouttheabilitytoaythecostof.Pmoneyininterestandshare-holderdividends wewouldnotbeabletoraisethecapitalnecessary tocontinueGasandelectriccompanies constitute themostcapital-intensive industryintheentireeconomy.Theaveragemanufacturing concern,forexample,invests75centsinplantforeachdollarofgrossincomewhileRG&Ehashadtoinvestmorethanthreedollarsforeachgrossincomedollar.Largeamountsofmoneyarerequiredtopayforfacilityexpansion, improvement andreplace-ment.Pricesformaterials andlaborhavegoneup,andsohasthecostofborrowing themoneytofinancethenewfacilities.
Pension Plan.The Company's retirement plan is noncontributory and covers all regular employees.
Forthemostpart,thesecostscannotbecontrolled byus.Justasinfiation hasdrivenupcostsinthemarketswherepeopleshop,ithasalsoaffectedthemarketswhereutihtiespurchasetheirhardwareandmoney.yw0DDRG&Ehasaresponsibility tosupplyelectricity, gasandsteamtoitscustomers atthemosteconomical prices.But,tryaswemay,wehavelittlecontrolovermostoftheexpensesincurredinfulfilling thisresponsibility.
Current service costs are funded annually.Past service costs are being amortized over a 40 year period.Retirement plan expenditures for the years 1977 and 1978 were$9.2 million and$9.9 million, respectively.
Wehaveconsistently appliedsoundmanagement policiesandprin-ciplesinattempting tominimizetheamountofrateincreases whilemaintaining theCompanyasasoundinvestment andreliablesupplier.
The actuarially computed value of vested benefits at December 31, 1978 exceeds the assets in the plan by approximately
It'sverydiscomforting torealizethatuncontrollable costshaveaccounted formorethan80percentofcustomercostincreasesince1970!Thecostofdoingbusiness, especially powercompanybusiness, ishigh,anditcontinues togohigher,drivenbyunbalanced federalandstatebudgets.Mostofthecostisinfuels,taxes,capitalexpenditures andthecostofmoney.And,partofthecostisaresultofheavyregula-tionbyalllayersofgovernment.
$15 million.Earnings and Dividends Per Share.Earnings applicable to each share of common stock are based on the weighted average number of shares outstanding during the respective years, adjusted for stock dividends.
Wearenotsayingthatregulation isunnecessary.
Assuming the1,250,000 shares of common stock issued on September 27,1978 were outstanding at the beginning of 1978 and the proceeds were applied to reduce the short term debt, the earnings per share for 1978 would have been$2.36.Cash dividends per share are based on the shares outstanding at the time dividends are paid, adjusted for stock dividends.
Someofitisbeneficial.
Cash dividends per share at the rates declared in each period amount to$1.34 for 1977 and$1.42 for 1978.Note 2.Departmental Financial Information (thovsandsot oollarsi The Company's records are maintained by operating departments, in accordance with PSC accounting policies, giving effect to the rate-making process.The following is the operating data for each of the Company's departments and no interdepartmental adjustments are required to arrive at the operating data included in the Statement of Income.Electric Gas Total Operating information-1978 Operating revenues Operating expenses, excluding provision for income taxes Pretax operating income Provision for income taxes..Net operating income Other income-net
But,likeeverything else,regulation hasaprice.Since1970,RG&E'sspendingforcapitalimprove-mentsjusttocomplywithregulatory requirements andlawsapproaches
.Interest charges.Net income per statement of income Other information Depreciation Nuclear fuel amortization Capital expenditures...
$100million.Thisexpenseamountstoalmosta$20millionannualcosttocustomers.
Investment information-December 31, 1978 Identifiable assets..Assets utilized for overall Company operations (a)Total assets per balance sheet.....
Tothiswecanaddatleastanother$10millionayearinoperational expensetocomplywithvariousotherfederalandstateregulatory requirements.
$231,307 181,428 49,879 9,244$40,635$16,984 15,74G 100,194$711,91 7$118,531 107,873 10,658 1,966$8,692$4,641 11,903$146,299$19,110 19,357 (247)(1G9)$(78)$581 455$15,716$3G8,948 308,658 60,290 11,041 49,249 13123 22,786$39+86$22,206 15,746 112,552$873,932 19,454$893,386 Operating information-1977 Operating revenues Operating expenses, excluding provision for income taxes Pretax operating income..Provision for income taxes.Net operating income Other income-net
Thus,averyconservative esti-mateoftheannualcostofgovernment regulation toourcustomers is$30million,averyrealpartoftherisingcostofenergy.Wehavetakenthisopportunity topresentastorytoyouourshareholders, andhopefully tomanyofourcustomers.
.Interest charges Net income per statement of income Other information Depreciation Nuclear fuel amortization Capital expenditures
Itisnotauniquestorybecauseeachofyouisexperiencing thesamepressures, thesamecostincreases, thesameinflation, over-regulation andtaxes.But,becauseutilities aresometimes regardedbytheuninformed asunaffected bysuchpressures, wethoughtitimportant tospellouthowthesesamefactors,overwhichwehavelittleornocontrol,aredrivinguptheabso-lutecostofenergy.
..Investment in(ormation-December 31, 1977 Identifiable assets..Assets utilized for overall Company operations (a)Total assets per balance sheet (a)Consists primarily of cash, prepayments and unamortized debt expense.$206,343 165,858 40,485 4,041$36,444$15,333 14,386 90,722$626,464$105,797 97,465 8,332 147$8,185$5,1 40 6,943$141,130$19,004 19,186 (182)(330)$148$580 426$16,619$331,144 282,509 48,635 3,858 44,777 7,783 19,511$33,049$21,053 14,386 98,091$784,213 14,161$798,374 9i of Pretax Amount Income$33,049 Amount$39,586 Net income Federal income tax Current.De(erred 961 2,897 3,858 (222)5,1 66 5,875 11,041 (513)(2,201)(2,501)(5,215)5,826$45,412 Charged to operating expense Amorl.o(deferred investment tax credit.AFDC net of tax rate difference.....
SCAMROCHESTER GASANDELECTRICCORPORATION YearEndedDecember31Statement ofIncome(rhondsofool4
Other..(1,460)(1,682)2,1 76$35,225 Included in Other Income Actual Federal income tax expense Income before Federal income tax Note 3.Federal Income Tax Provision tshousandsof Dollars)The following is a reconciliation for the years 1977 and 1978 of the difference between the amount of Federal income tax expense reported in the Statement of Income and the amount computed by multiplying the income before tax by the statutory tax rate.1978 1977%of Prelax Income Computed tax expense Increases (reductions) in tax resulting from: Excess of tax depreciation less amount deferred Expenses capitalized for financial statements including interest, payroll and use tax, etc Investment lax credit Property taxes on basis of date of taxable status.Cost of removal, less net amount deferred..Revenue taxes (deducted when paid)Miscellaneous items, net Actual Federal income tax expense$21,797 (3,525)(9,3G1)(4,955)224 (724)2133 237$5,826 48.0 (7.8)(20.6)(10.9).5 (1 6)4.7.5 12.8$16,908 (3,580)(7,765)(2,624)(254)(655)146$2,176 48.0 (10.2)(22.0)(7.4)(7)(1 9).4 6.2 A summary of the deferred amounts charged or (credited) to income is as follows: Investment tax credit Class li(e depreciation
)19781977Operating Revenues(Note1)Electric..GasSteamElectricsalestootherutilities TotalOperating RevenuesOperating Expenses(Note1)Operation Electricandsteamfuels.Purchased electricity
.Fuel costs.......................
.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~>>
Nuclear (uel amortization Nuclear fuel storage costs Fossil plant abandonment costs 765 KV Transmission system abandonment costs Other.1978$6,G29 1,763 (469)(142)(4,989)850 (481)$3,161 1977$2,003 1,379 1,386 (362)(3,346)2,160 (545)$2,G75 Note 4.Capitalization Long-Term Debt First 3 2s/i 3%3%4%5 4Yi 4sjs 5.3 6Yi 6.7 8 9Ys 10s/i 9')e 9Yi e Bonds Due Mar.1,1979...
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$114.7millionfortheinitialnuclearfuelloading.NuclearFuelandDecommissioning Costs.Thecostofnuclearfuelandestimated permanent storagecostsarechargedtooperating expenseonthebasisofthethermaloutputofthereactor.Thesecostsarechargedtocustomers throughbaseratesandthroughthefuelcostadjustment clause.Jointly-Owned Facilities.
Thefollowing tablesetsforththemajorelectricgeneration projectscurrently plannedwhichwilladdtotheCompany's presentgenerating capability.
Eachparticipant mustprovideitsownfinancing fortheseprojects.
OswegoNineMileFossilPointNuclearSlerlingUnit&#xb9;6rlrUnit&#xb9;2$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
Aug.15,1980
..lune1,1982...
..lune1,1982...
Line 183: Line 129:
..Nov.15,1991
..Nov.15,1991
..Sept.15,1994
..Sept.15,1994
..May1,1996...
..May 1,1996...Sept.15, 1997..luly1,1998...
Sept.15,1997..luly1,1998...
Aug.15,1999
Aug.15,1999
..Sept.1,2000Aug.1,1983lune15,2006
..Sept.1, 2000 Aug.1, 1983 lune15,2006
..Sept.15,2007..Dec.1,2003MortgagScricsLMN0R5TUVWXYZAABBCCDDLess:SeriesLduein1979TotalLong-Term Debt..(thousands)
..Sept.15, 2007..Dec.1, 2003 Mortgag Scrics L M N 0 R 5 T U V W X Y Z AA BB CC DD Less: Series L due in 1979 Total Long-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:
Principal Amount December 31, 1978 1977$16,677$16,677 12,000 12,000 G,000 G,000 10,000 10,000 15,000 15,000 12,000 12,000 15,000 15,000 16,000 16,000 18,000 18,000 20,000 20,000 30,000 30,000 30,000 30,000 30,000 30,000 29,667 29,GG7 50,000 50,000 50,000 50,000 40,000 400,344 360,344 1G,G77$383,G67$3G0,344 Capital Stock Pre(erred Stock (cumulative)-Par value$100;2,000,000 shares authorized:
44.104'/i4.104.954.557.5011SharesscrlcsOutstanding F120,000H80,000I60,000I50,000K60,000M100,000N200,0000670,000IThousands)
4 4.10 4'/i 4.10 4.95 4.55 7.50 11 Shares scrlcs Outstanding F 120,000 H 80,000 I 60,000 I 50,000 K 60,000 M 100,000 N 200,000 0 670,000 I Thousands)
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.
December 31, 1978 1977$12,000$12,000 8,000 8,000 6,000 6,000 5,000 5,000 6,000 6,000 10,000 10,000 20,000 20,000$67,000$G7,000 Redemption (per share)(a)105 At any time 101 At any time 101 At any time 102.50 At any time 102 At any time 102 Before 3/1/80 108 Be(ore 6/1/79 (b)Bond premium applicable to the years 1977 and 1978 is$677,702 and$635,GG7, respectively.
Sinkingandimprovement fundrequirements aggregate
Sinking and improvement fund requirements aggregate$333,540 per annum.Such requirements may be met by certification of additional property or by depositing cash with the Trustee.The 1977 and 1978 requirements were met by certification of additional property.
$333,540perannum.Suchrequirements maybemetbycertification ofadditional propertyorbydepositing cashwiththeTrustee.The1977and1978requirements weremetbycertification ofadditional property.
Preference Stock-Par value$1;5,000,000 shares authorized:
Preference Stock-Par value$1;5,000,000 sharesauthorized:
Series 7.6 A Shares Outstanding 280,000 (Thousands}
Series7.6ASharesOutstanding 280,000(Thousands}
December 31, 1978 1977 Issued$28,000$28,000 12/20/77 During January 1985, the Company must offer to purchase on October 1, 1985 all of the outstanding 7.6%Series A preference stock at a price of$100 per share.The shares remaining outstanding after such offer are callable at$100 per share at the option of the Company at any time after December 20,1987.Preference stock is subordinate to preferred stock but is senior to common stock.Common Stock-Par value$5;25,000,000 shares authorized:
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)
Per(thousands)
Share Shares Amount 11,366,111
ShareSharesAmount11,366,111
$181,301 6,820 21,000 508 Outstanding, December 31, 1976 3%Stock Dividend.......
$181,3016,82021,000508Outstanding, December31,19763%StockDividend.......
SaIe of Stock...........
SaIeofStock...........
TRASOP>>Automatic Dividend Reinvestment Plan......
TRASOP>>Automatic DividendReinvestment Plan......
Capital Stock Expense Outstanding, December 31, 1977 3%Stock Dividend.......Sale of Stock...........
CapitalStockExpenseOutstanding, December31,19773%StockDividend.......SaleofStock...........
Automatic Dividend Reinvestment Plan......
Automatic DividendReinvestment Plan......
Capital Stock Expense Outstanding, December 31, 1978 20.00 340,984 21.00 1,000,000 20.91 24,300 18.31-20.94 158,236 3,071 (167)212,533 8,120 23,438 12,889,631 21.00 386,689 18.75 1,250,000 17.19-19.25 206,427 3,749 (902)14,732,747
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'Tax Reduction Act Stock Ownership Ptan The Company's Certificate of Incorporation was amended on June 1, 1977 to authorize an additional 10,000,000 shares of common stock, par value$5 per share.At December 31, 1978 there were 415,797 shares of common stock reserved and unissued under the Automatic Dividend Reinvestment Plan.No other shares of common, preferred or preference stock are reserved for officers and employees or for options, warrants, conversions, and other rights.Note 5.Cash and Short-Term Debt At December 31, 1978, the Company had$7 million in temporary cash investments.
$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.
Under informal agreements with certain banks, the Company is expected to maintain an average compensating balance of 10 percent of the lines of credit plus an additional 10 percent of the principal amount of each borrowing.
Underinformalagreements withcertainbanks,theCompanyisexpectedtomaintainanaveragecompensating balanceof10percentofthelinesofcreditplusanadditional 10percentoftheprincipal amountofeachborrowing.
Under the agreements, withdrawal of the compensating balances is not legally restricted, and at December 31, 1978 the balances amounted to$4.4 million.Bank lines of credit aggregated
Undertheagreements, withdrawal ofthecompensating balancesisnotlegallyrestricted, andatDecember31,1978thebalancesamountedto$4.4million.Banklinesofcreditaggregated
$64 million and borrowings are at current floating prime interest rates.The (a)Redeemable at the option of the Company on 30 days'inimum notice, plus accrued dividends in all cases.(b)Called for redemption on December 20,1977.The issuance costs related to Series 0 were charged to retained earnings, and the call premium of$2,750,000 related to this series was reported as other deferred debits and, beginning in January 1978, is being amortized in accordance with an order from the PSC.The Company's Certificate of Incorporation was amended on June 1, 1977 to authorize 4,000,000 additional shares of cumulative preferred stock, having a par value of$25 per share.None of this preferred stock has been issued.Outstanding short-term debt and average interest rate at end of period: Notes PayabIe Commercial Paper.Maximum short-term debt outstanding during the period: Notes Payable Commercial Paper.Weighted average short-term debt and interest rates during the period: Notes Payable Commercial Paper.1978 Rates Amount (Thousands)
$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)
$15,500 15,900 8.82%7,769 7.84 9,450 1977 Rates Amount (Thousands) 7.00%$7,000 6.63 2,000 25,000 26,500 6.42 10,960 5.35~11,1 48 The above averages were based upon the daily balances and interest rates in effect for the periods during which short-term borrowings were outstanding and before giving effect to the additional interest cost resulting from compensating balances.Note 6.Commitments and Other Matters The Company's capital expenditures program involves an estimated expenditure of$115 million, not including allowance for funds used during construction, in 1979 and the Company has entered into certain commitments for purchase of materials and equipment in connection with such program.Operations of the Company's generating stations are subject to various Federal, state and local environmental standards.
$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.
Under the Clean Water Act, the Company is required to obtain permits to discharge pollutants into the waters of the United States.The United States Environmental Protection Agency (EPA)issued National Pollutant Discharge Elimination System permits for all the Company's major generating facilities, but a number of conditions relating to thermal and chemical discharge limitations were contested by the Company in adjudicatory hearing requests submitted to EPA.The Company, the New York State Department of Environmental Conservation (which became a party to the adjudicatory hearings)and EPA have settled the hearing requests as described below.The Company has reached agreement with the regulatory agencies on non-thermal effluent limitations and final permits containing these agreed limitations have been issued and are now in effect.Construction of treatment facilities is required to enable Company compliance with permit limitations for two of the Company's generating stations.Pending completion of these facilities, the regulatory agencies have agreed in an Enforcement Compliance Schedule Letter to exercise their prosecutorial discretion to refrain from prosecuting the Company for violation of certain effluent limitation deadlines contained in the Clean Water Act so long as the Company adheres to a specified construction schedule for the facilities.
Note6.Commitments andOtherMattersTheCompany's capitalexpenditures programinvolvesanestimated expenditure of$115million,notincluding allowance forfundsusedduringconstruction, in1979andtheCompanyhasenteredintocertaincommitments forpurchaseofmaterials andequipment inconnection withsuchprogram.Operations oftheCompany's generating stationsaresubjecttovariousFederal,stateandlocalenvironmental standards.
Construction of these treatment facilities is expected to require capital expenditures estimated at$10.5 million over the next two years.Company also issues commercial paper at various discount rates, usually maturing within 30-45 days.Balances and average interest rates of short-term borrowings as of December 31 for the years indicated were as follows: 20 The Company has pursued resolution of the contested thermal limitations by submitting demonstrations in an effort to justify less stringent limitations for three generating stations.The thermal conditions of the permits remain stayed pending resolution of the thermal issues either through regulatory agencies'pproval of the demonstrations and less stringent thermal limitations or, in the absence of such approval, through the resumption of the adjudicatory hearing process.If the demonstrations and less stringent thermal limitations are not approved for any of the three facilities, the Company could be required to install cooling towers which would involve capital expenditures estimated at$53 million pIus significant operating and maintenance expenses.The Company believes that additional expenditures and costs made necessary by environmental regulations will be fully allowable for rate-making purposes.Through December 31,1978, the Company has expended approximately
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.
$28.4 million (excluding larrd)with respect to its interest in the Sterling nuclear plant.The Company estimates that if it were required to cancel all existing contracts relating to the construction of this project, it could incur up to$6 million in cancellation charges.The Company believes that, if it were required to cancel the project, the PSC would permit it to amortize all expenditures involved over a period of several years and to recover those expenditures through rate relief.On December 1,1978, the PSC ruled that the case involving the 765 KV transmission facility that the Company had planned to construct be dismissed.
Pendingcompletion ofthesefacilities, theregulatory agencieshaveagreedinanEnforcement Compliance ScheduleLettertoexercisetheirprosecutorial discretion torefrainfromprosecuting theCompanyforviolation ofcertaineffluentlimitation deadlines contained intheCleanWaterActsolongastheCompanyadherestoaspecified construction scheduleforthefacilities.
The Company has petitioned the PSC requesting the amortization of the$2.1 million in expenditures for the line over a 3 year period, and to allow the Company to recover the unamortized costs through rate relief.Note 7.Interim Financial Information (Unaudited)
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.
In the opinion of the Company, the following quarterly information includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results of operations for such periods.The variations in operations reported on a quarterly basis are a result of the seasonal nature of the Company's business and the availability of the Company's Ginna nuclear plant.Earnings per common share have been adjusted for stock dividends.
Thethermalconditions ofthepermitsremainstayedpendingresolution ofthethermalissueseitherthroughregulatory agencies'pproval ofthedemonstrations andlessstringent thermallimitations or,intheabsenceofsuchapproval, throughtheresumption oftheadjudicatory hearingprocess.Ifthedemonstrations andlessstringent thermallimitations arenotapprovedforanyofthethreefacilities, theCompanycouldberequiredtoinstallcoolingtowerswhichwouldinvolvecapitalexpenditures estimated at$53millionpIussignificant operating andmaintenance expenses.
Note 8.Replacement Cost Information (Unaudited)
TheCompanybelievesthatadditional expenditures andcostsmadenecessary byenvironmental regulations willbefullyallowable forrate-making purposes.
The impact of the rate of inflation experienced in recent years has resulted in replacement costs of productive capacity greater than the historical costs of such assets reported in the Company's financial statements.
ThroughDecember31,1978,theCompanyhasexpendedapproximately
In compliance with reporting requirements, estimated replacement cost information is disclosed in the Company's annual report to the Securities and Exchange Commission on Form10-K.Report of Independent Accountants To the Shareholders and Board of Directors of Rochester Gas and Electric Corporation In our opinion, the accompanying balance sheets and the related statements of income, retained earnings, and of changes in financial position appearing on pages 14 through 16 present fairly the financial position of Rochester Gas and Electric Corporation at December 31, 1978 and 1977, and the results of its operations and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles consistently applied.Our examinations of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
$28.4million(excluding larrd)withrespecttoitsinterestintheSterlingnuclearplant.TheCompanyestimates thatifitwererequiredtocancelallexistingcontracts relatingtotheconstruction ofthisproject,itcouldincurupto$6millionincancellation charges.TheCompanybelievesthat,ifitwererequiredtocanceltheproject,thePSCwouldpermitittoamortizeallexpenditures involvedoveraperiodofseveralyearsandtorecoverthoseexpenditures throughraterelief.OnDecember1,1978,thePSCruledthatthecaseinvolving the765KVtransmission facilitythattheCompanyhadplannedtoconstruct bedismissed.
1900 Lincoln First Tower Rochester, New York 14604 January 26, 1979 Operating revenues..Operating income...Net income.......
TheCompanyhaspetitioned thePSCrequesting theamortization ofthe$2.1millioninexpenditures forthelineovera3yearperiod,andtoallowtheCompanytorecovertheunamortized coststhroughraterelief.Note7.InterimFinancial Information (Unaudited)
Earnings on common stock.........
IntheopinionoftheCompany,thefollowing quarterly information includesalladjustments, consisting ofnormalrecurring adjustments, necessary forafairstatement oftheresultsofoperations forsuchperiods.Thevariations inoperations reportedonaquarterly basisarearesultoftheseasonalnatureoftheCompany's businessandtheavailability oftheCompany's Ginnanuclearplant.Earningspercommonsharehavebeenadjustedforstockdividends.
Earnings per common share (in dollars)5,669 5,1 75 8,490.38.37.63 Quarter Ended (Thousands)
Note8.Replacement CostInformation (Unaudited)
Dec.31, Sept.30, lune 30, 1978 1978 1978$92,312$73,665$86,942 8,466 9,527 12,009 7,088 G,596 9,909 Mar.31, 1978$116,029 19,247 15,993 14,574 Operating revenues..Operating income...Net income.......
Theimpactoftherateofinflation experienced inrecentyearshasresultedinreplacement costsofproductive capacitygreaterthanthehistorical costsofsuchassetsreportedintheCompany's financial statements.
Earnings on common stock.........
Incompliance withreporting requirements, estimated replacement costinformation isdisclosed intheCompany's annualreporttotheSecurities andExchangeCommission onForm10-K.
Earnings per common share (ln dollars)Dec.31, 1977$84,458 9,395 G,444 4,657.35 Seph 30, 1977$67,199 7,479 4,61 9 3,044.24 lune 30, 1977$74,138 10,62G 7,775 6,200.51 Mar.31, 1977$105,349 17,277 14,211 12,63G Management's Discussion and Analysis of the Summary of Operations The following financial review explains significant changes in the amounts of revenues and expenses between 1978/1977 and between1977/1976.
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.
The Notes to Financial Statements on page17 of this report contain additional related information.
1900LincolnFirstTowerRochester, NewYork14604January26,1979Operating revenues..Operating income...
Operating Revenues Changes in Operating Revenues Increase or (Decrease) from Prior Year (Thousands of Dollars)Electric Department 1978 1977 Gas Department 1978 1977 Steam Department 1978 1977 Customer Revenues (Estimated) from: Rate Increases..Fuel Cost Adjustment Weather Effects.Customer Sales Other Total Change in Customer Revenues Electric Sales to Other Utilities.Total Change in Operating Revenues.$12,181 G,446 221 3,485 358 22,691 2.273$24,9G4$5,312 410 (82)3,G05 137 9,382 8,1 44$17,52G$2,555 5,582 3,259 (289)1,627*12,734$12,734$2,683 12,475 (1,1 44)(7,631)(1,613)*4,770$4,770$-(23)3G7 (314)76 106$1,824 (198)(997)(8)621$G21'Reflects a one-time$10 gas heating bill credit in tne aggregate amount of approximately
Netincome.......
$1.6 million that was applied to residential customers in February 1977.The credit was made by the Company on its own initiative in order to alleviate the economic burden to customers who were faced with record high gas heating bills caused by the severe weather conditions in Ianuary 1977 and, in some cases, with reduced income due to plant shutdowns forced by natural gas cur tailments.
Earningsoncommonstock.........
Revenues from electric sales to other utilities increased in both1978 and 1977.Fluctuations in electric sales to other utilities and in purchased electricity discussed under Operating Expenses below generally are related to the output and availability of electric generation from the Ginna nuclear plant.Operating Expenses Changes in Operation and Maintenance Expenses Increase or (Decrease)(rom Prior Year lrhousands or Dottar0 1978 1977 Electric and Steam Fuels Purchased Electricity Purchased Natural Cas Other Operation..Maintenance
Earningspercommonshare(indollars)5,6695,1758,490.38.37.63QuarterEnded(Thousands)
.$1,147 5,702 9,023 3,1 91 3,874$10,632 (4,5GO)5,894 4,817 2,16G Total Change in Operation and Maintenance Expense$22,937$18,949 The 1977 increase in electric and steam fuels expense was mainly due to an increase in electricity generated in 1977 and an increased fuel cost per kilowatt-hour generated by nuclear fuel.Purchased electricity expense increased in 1978 due to both higher costs and higher kilowatt-hour purchases while the decrease in 1977 reflected mainly decreased purchases netted against a relatively modest increase in the cost per kilowatt-hour.
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...
Purchased natural gas expense increased in both 1978 and 1977 as a result of higher pipeline rates and increased consumption due to colder weather in 1978.The increase in maintenance expense of$3.9 million in 1978 and$2.2 million in 1977 reflects increases in the cost of labor and material to repair and maintain existing facilities, and increased activity in the repair and upkeep of transmission and distribution facilities.
Netincome.......
Changes in Taxes Taxes-local, state and other increased$2.1 million in 1978 principally due to higher gross income taxes based on increased revenues.The 1977 increase of$3.4 million was also due to higher gross income taxes as well as higher property taxes resulting from the addition of new plant and increased property tax rates.Total Federal income taxes increased$3.7 million in 1978 after declining$1.8 million in 1977.See Note 3 to the Notes to Financial Statements for a detailed analysis.Other Statement of Income Items The increase in allowance for funds used during construction of$2.2 million in 1978 and$3.8 million in 1977 was due to increases in utility plant expenditures in both periods.See Note1 to the Notes to Financial Statements.
Earningsoncommonstock.........
Other-other income and deductions increased$3.1 million during 1978 principally due to added non-operating Federal income tax credits.Interest on long term debt increased$3.1 million in 1978 and$3.2 million in 1977 as a result of additional bonds issued in December1978, September1977 and June1976.Dividends on preferred and preference stock decreased$.8 million in1978 due to the refunding in December1977 of a series of preferred stock with the proceeds from the sale of a series of preference stock having a lower dividend rate.
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.
RKP ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Summary Of OPeratiOnS tthowanCkofnotlara)
TheNotestoFinancial Statements onpage17ofthisreportcontainadditional relatedinformation.
Operating Revenues Electric..Gas Steam.1978$202,631 118,531 19,110 1977$179,940 105,797 19,004 1976$170,558 101,027 18,383 1975$146,629 82,478 17,337 1974a$127,560 75,463 1G,321 1973$116,512 64,633 10,014 Electric sales to other utilities.Total Operating Revenues 246,444 219,344 191,159 25,49G 14,697 21,112 304,741 26,403 340,272 28,G76 289,968 18,259 234,041 212,271 368,948 331,144 308,227 271,940 Operating Expenses Operation Electric and steam fuels...Purchased electricity
Operating RevenuesChangesinOperating RevenuesIncreaseor(Decrease) fromPriorYear(Thousands ofDollars)ElectricDepartment 19781977GasDepartment 19781977SteamDepartment 19781977CustomerRevenues(Estimated) from:RateIncreases
.Purchased natural gas Other..Maintenance Depreciation Taxes-local, state and other Federal income tax-current-deferred.58,140 19,337 71,109 65,G85 26,246 22,206 45,935 5,16G 5,875 5G,993 13,G35 G2,086 G2,494 22 372 21,053 43,876 9G1 2,897 46,361 18,195 56,192 57,G77 20,206 18,G21 40,502 (291)5,G56 4G,268 12,212 42,247 50,G29 19,700 17,414 36,157 4,162 1 133 36,693 12,070 37,342 44,35G 17,966 1G,491 32,410 (3,126)4,277 25,612 8,841 29,923 40,999 15,888 15,145 29,993 6,724 915 Total Operating Expenses 319,G99 28G,367 2G3,119 229,922 198,479 174,040 Operating Income 49,249 44,777 45,108 42,018 35,562 38,231 Other Income and Deductions Allowance for other funds used during construction Other-net..8,705 4,418 G,473 1,310 4,G78 1,128 2,310 537 1,128 274 670 715 Total Other Income and Deductions 13,123 7,783 5,806 2,847 1,798 989 Income before Interest Charges 62+72 52,560 50,914 44,8GS 37,360 39,220 Interest Charges Long-term debt.Short-term debt..Other-net.Allowance for borrowed funds used during construction (4,812)(4,844)(2,853)(1,264)(613)(173)25+94 22,542 19,378 16,963 14,965 13,738 1/88 1,319 1,054 1,5G8',255 1,246 41G 494 24G 1,227 210 103 Total Interest Charges 22,786 19,511 17,825 18,494 16,817 14,914 Net Income 39,586 33,049 33,089 26,371 20,543 24,306 Dividends on Preferred and Preference Stock, at required rates S,G78 G,512 G,245 4,054 3,550 3,550 Earnings Applicable to Common Stock$33,908$26,537$26,844$22,317$16,993$20,756 Weighted average number of shares outstanding in each period, adjusted for stock dividends (000's)Earnings per Common Share 13,774$2.4G 12,474$2.12 11,983$2.24 10,987 10,G28$2.03$1.59 9,753$2.12 Cash Dividends per Common Share, adjusted for stock dividends$1.41$1.29$1.20$1.15$1.09*In1974, the Company began deferring a portion of increased fuel costs to the period in which the related revenues were recorded.$1.04 23 S~~~tCL~~~ROCHESTER GAS AND ELECTRIC CORPORATION Condensed Balance Sheet tth~d ofoot4rs)1978 1977 At December 31 1976 1975 1974 1973 ASSETS Utility Plant, at original cost Less-Accumulated depreciation and amortization 2G1,477 229,122 198,778 185,455 167,645 150,GOO$857,959$789,775$727,687$693,404$659,308$618,891 Construction work in progress Net utility plant..596,482 213,534 810,01G 560,653 528,909 507,949 491,663 4G8,291 162,127 120,702 79,381 39,324 24,542 722,780 649,611 587,330 530,987 492,833 Investmcnt in Subsidiary, at equity 1,99G 1,947 1,911 1,871 1,834 Current Assets Deferred Debits 66,953 14,421 15,260 8,151 7,450 8,213 4,874 58/87 61,090 53,796 52,G78 38,982 Total Assets$893,386$798,374$720,763$650,447$593,712$53G,689 CAPITALIZATION AND LIABILITIES Capitalization Long-term debt..Preferred stock Preference stock.Common shareholders'quity Common stock Retained earnings.$384,303 67,000 28,000 24G,938 77+38$361,022 67,000 28,000 212,533 70,819$311,395 92,000 181,301 67,812$267,314 89,000 173,586 60,502$267,348 67,000 154,758 53,5GB$237,382 67,000 148,566 52,184 Total common shareholders'quity
..FuelCostAdjustment WeatherEffects.CustomerSalesOtherTotalChangeinCustomerRevenuesElectricSalestoOtherUtilities
.Total Capitalization Current Liabilities Deferred Credits and Other Liabilities
.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
.Total Capitalization and Liabilities 324,276 283,352 249,113 234,088 208,326 200,750 803,579 68,362 21,445 739,374 42,813 16,187 652,508 54,652 13,603 590,402 51,712 8,333 542,674 43,952 7,086 505,132 29,091 2,466$893,386$798,374$720,763$650,447$593,712$536,689 Financial Data Capitalization Ratios (percent)Long-term debt Preferred and preference stock Common shareholders'quity
$1.6millionthatwasappliedtoresidential customers inFebruary1977.ThecreditwasmadebytheCompanyonitsowninitiative inordertoalleviate theeconomicburdentocustomers whowerefacedwithrecordhighgasheatingbillscausedbythesevereweatherconditions inIanuary1977and,insomecases,withreducedincomeduetoplantshutdowns forcedbynaturalgascurtailments.
.1978 47.8 11.8 40.4 1977 48.8 12.9 38.3 At December 31 1976 47.7 14.1 38.2 1975 45.3 15.1 39.6 1974 49.3 12.3 38.4 1973 47.0 13.3 39.7 Total 100.0 100.0 100.0 100.0 100.0 100.0 Book Value per Common Sharc Adjusted for Stock Dividends-Year End Internal Generation of Funds (percent)$22.01$21.34$20.89$19.69$19.55$18.91 39.5 35.9 44.6 42.5 42.3 89.8 Rate of Return On Average Common Equity-Year End (percent)Effective Federal Income Tax Rate (percent)Depreciation Rate-Electric-Gas Interest Coverages Before federal income taxes (incld.AFDC)...(excld.AFDC)...After federal income taxes (incld.AFDC)....(excld.AFDC)....11.22 12.8 3.09 2.79 2.65 2.16 2.43 1.94 10.02 6.2 3.00 2.67 2.45 1.98 2.36 1.89 11.16 10.6 2.90 2.63 2.79 2.43 2.60 2.24 10.18 14.4 2.79 2.60 2.56 2.38 2.33 2.15 8.44 1.7 2.79 2.60 2.20 2.10 2.18 2.08 11.35 22.9 2.71 2.48 3.09 3.04 2.61 2.58 24
Revenuesfromelectricsalestootherutilities increased inboth1978and1977.Fluctuations inelectricsalestootherutilities andinpurchased electricity discussed underOperating Expensesbelowgenerally arerelatedtotheoutputandavailability ofelectricgeneration fromtheGinnanuclearplant.Operating ExpensesChangesinOperation andMaintenance ExpensesIncreaseor(Decrease)
~?~ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Electric Department Electric Revenue (000's)Residential Commercial
(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
.Industrial
.Other.Electricrevenuefromourcustomers Otherelectricutilities
.Other.Electric revenue from our customers Other electric utilities..Total electric revenue Electric Expense (000's)Fuelused in electric generation Purchased electricity Other operation Maintenance Depreciation Taxes-local, state and other Electric revenue deductions Operating Income before Federal Income Tax.Federal income tax Operatin Income from Electric Operations 000's Electric Operating Ratio%%d Electric Sales-KWH (000's)Residential Commercial
..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
.Industrial
.Other.Electricsalestoourcustomers Otherelectricutilities
.Other.Electric sales to our customers Other electric utilities..Total electric sales Electric Customers at December 31 Resid ential Commercial
..TotalelectricsalesElectricCustomers atDecember31ResidentialCommercial
.Industrial
.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)
.Other.Total electric customers Electricity Generated and Purchased-KWH (000's)Fossil Nuclear..Hydro.Pumped storage Less energy for pumping Other.Total generated-Net Purchased Total electric energy Electric Generation Costs (000's)Fossil Nuclear..Hydro.Other.Electric Department Fuel Fossil-Total BTU (million)-Cents per million BTU.......
-CentspermillionBTU.......
Nuclear-Total BTU (million)-Cents per million BTU.......System Net Capability-KW at December 31 Fossil Nuclear..Hydro.Other.Purchased Total system net capability Net Peak Load-KW..Annual Load Factor-Net
Nuclear-Total BTU(million)
%1978$72,854 58,985 48,792 22,000 202,631 28,G76 231,307 45,093 19/37 47,G02 19,305 1G,983 33,108 181+28 49,879 9,244$40,G35 56.8 1,701,938 1,417,624 1,517,988 465,373 5,102,923 1,445,391 6,548,314 251,645 24,137 1,348 2,423 279,553 2,025,645 3,206,313 192,278 133,287 (189,453)1,08G 5/69,156 1,579,8G3 6,949,019$38,995 25p561 1,229 57 21,139,14G 144.27 35,812,171 43.97 443,000 470,000 47,000 29,000 339,000 1,328,000 983,000 G3.9 1977$64,986 53,520 41,783 19,651 179,940 26,403 206,343 44,010 13,635 45,011 16,339 15,333 31,530 165,858 40,485 4,041$36,444 57.7 1,660,425 1,392,023 1,431,855 454,059 4,938,362 1,453,590 6,391,952 250,121 24,023 1,353 2,328 277,825 2,272,182 3,018,305 222,391 193,340 (283,573)850 5,423,495 1,400,505 6,824,000$40,557 22,330 1132 44 23,862,599 13G.92 37,822,209 38.04 443,000 470,000 47,000 29,000 338,000 1,327,000 987,000 G2.0 1976$61,498 50,791 39,402 18,867 170,558 18,259 188,817 34,247 18,195 40,930 14,796 13,865 28,543 150,576 38,241 3,102$35,139 57.3 1,618,314 1,3GG,094 1,384,235 437,097 4,805,740 1,187,942 5,993,682 249,177 23,983 1 371 2.271 276,802 2,060,186 2,040,746 277,010 118,716 (180,317)2,797 4,319,1 38 2,10G,904 6,426,042$36,901 13,485 973 118 21,822,976 137.42 23,837,620 25.69 452,000 470,000 47,000 29,000 342,000 1,340,000 934,000 63.8 1975$53,904 43,884 33,244 15,597 146,629 25,496 172,125 33,442 12,212 35,662 14,282 12I731 25/69 133,698 38,427 5,069$33,358 55.5 1,530,421 1,294,816 1,284,940 411,122 4,521,299 1,864,050 6,385,349 246,G13 23,874 1,380 2,305 274,172 1 731 723 3,026,894 2G5,401 98,743 (148,180)2,198 4,976,779 1,888,091 6,864,870$33,120 14,191 1,030 63 18,388,874 142.18 33,1 28,471 22.91 452,000 470,000 47,000 29,000 35G,000 1,354,000 925,000 G1.7 1974$45,354 37,908 30,858 13,440 127,560 14,697 142,257 25,739 12,070 32,177 12,390 11,977 22;784 117,137 25,120 (433)$25,553 57.9 1,456,335 1,226,333 1,346,116 379,379 4,408,163 1,182,902 5,591,065 244,063 23,827 1,365 2,316 271,571 1,961,453 2,079,539 234,5G8 131,311 (192,311)12,80G 4,227,3G6 1,836,911 6,064,277$30,361 7,980 1,085 321 20,911,993 117.05 22,909,968 11.28 452,000 470,000 47,000 29,000 347,000 1,345,000 880,000 63.3 1973$42,125 34,387 27,597 12,403 116,512 21,112 137,624 19,461 8,841 28,378 11,029 11,026 21,281 100,016 37,608 7,235$30,373 49.2 1,468,376 1,261,697 1,424,639 385,243 4,539,955 2,269,G86 6,809,641 241,032 23,436 1,360 1,995 267,823 1,8G9,079 3,395,564 243,582 57,801 (86/62)8,776 5,488,440 1,709,420 7,197,860$18,099 10,368 1,083 123 20,331,338 62.12 36,683,359 18.62 457,000 420,000 53,100 42,500 352,000 1,324,600 922,000 61.0 25 PK4S ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Gas Department Gas Revenue (000's)Residential Residential spaceheating
-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
.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
.Municipal and other.1978$5,096 74,425 20,535 13,891 4,584 1977$4,828 66,900 18,057 12,014 3,998 1976$4,426 63,974 16,848 11,900 3,879 1975$3,964 52,584 13,593 9,167 3,170 1974$3,809 47,758 12,533 8,583 2,780 1973$3,627 40,453 10,433 7,648 2,472 Total gas revenue 118,531 105,797 101,027 82,478 75,463 64,633 Gas Expense (000's)Purchased natural gas Other operation.Maintenance Depreciation Taxes-local, state and other.71,109 15,810 5,768 4,641 10+45 62,086 15,072 5,078 5,140 10,089 56,192 14,921 4,510 4,194 9,729 42,247 13,310 4,500 4,137 8,715 37,342 11,492 4,757 3,978 7,937 29,923 11,420 4,043 3,615 7,281 Gas revenue deductions 107,873 97,465 89,546 72,909 65,506 56,282 Operating Income before Federal Income Tax.Federal income tax 10,658 1,966 8,332 147 11,481 2,212 9,569 914 9,957 8,351 1,221 840 Operating Income from Gas Operations (000's)..$8,692$8,185$9,269$8,655$8,736$7,511 Gas Operating Ratio%78.2 77.7 74.9 72.8 71.0 70.2 Gas Sales-Therms (000's)Residential Residential spaceheating
.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
.Commercial
..Industrial
..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
..Municipal 13,465 255,951 82,451 63,709 17,748 13,833 252,923 77,751 59,956 15,975 14,404 275,582 BG,400 72,847 18,598 14,328 249,224 78,217 65,760 16,705 14,903 263,290 84,872 73,926 16,696 15,141 245,368 79,039 78,137 17,148 Total gas sales 433,324 420,438 467,831 424,234 453,687 434,833 Gas Customers at December 31 Residential
.Residential spaceheating
.Residential spaceheating
.Commercial
.Commercial
..Industrial
..Industrial
..Municipal 38,0I3154,36612,0927591,08439,977152,85611,26874698940,892153,58311,47575793641,437153,84811,39075695742,884151,15411,4787671,02445,958144,84711,303762865Totalgascustomers
..Municipal 38,0 I3 154,366 12,092 759 1,084 39,977 152,856 11,268 746 989 40,892 153,583 11,475 757 936 41,437 153,848 11,390 756 957 42,884 151,154 11,478 767 1,024 45,958 144,847 11,303 762 865 Total gas customers.206/14 205,836 207,643 208,388 207,307 203,735 Gas-Therms (000's)Purchased for reforming and mixing Purchased for resale..Other.449,904 13,178 428,811 10,123 9,830 478,935 7,911 23,160 421,252 7,019 31,518 438,494 7,063 30,834 422,718 6,535 Total gas available 463,082 438,934 496,676 451,431 477,075 460,087 Cost of gas per therm.15.26c 14.43'1.37'0.19'.49'.13'otal Daily Capacity-Therms at December 31 Mixed gas.Straight natural gas Total daily capacity Maximum daily sendout-Therms 269,000 4,164,000 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 3,041,070 410,844 410,844 3,871,448 3,762,672 4,282,292 4,173,516 3,192,631 2,985,392 Degree Days (Customer Billing)For the period Percent (warmer)colder than normal 7,021 4.5 6,726 (0.1)G,905 1.6 6,211 (7.2)G,808 1.3 5,883 (12.2) a~%~tCL4'R'OCHESTER GAS AND ELECTRIC CORPORATION Steam Oepartment 1978 1971 1976 1975 Year Ended December 31 1974 1973 Steam Revenue (000's)Commercial
.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
..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
.Municipal and other.$6,087 10,732 2,291$6,352 10,455 2,197$6,401 9,799 2,183$5,668 9,862 1,807$5,419 9,396 1,506$3,668 5,470 876 Total steam revenue 19,110 19,004 18,383 17,337 16,321 10,014 Steam Expense (000's)Fuel used in steam generation Other operation.Maintenance Depreciation
.Maintenance Depreciation
.Taxes-local, state and other.13,047 2,273 1.173 581 2,282 12,983 2,411 955 580 2,257 12,114 1,82G 900 5G2 2,230 12,826 1,657 918 546 2,073 10,954 687 819 536 1,689 6,151 1,201 816 504 1,431 Steam revenue deductions 19,35G 19,186 17,632 18,020 14,685 10,103 Operating Income before Federal Income Tax.Federal income tax (246)(182)751 (683)1,636 (89)(1GB)(330)51 (688)363 (43G)Operating Income from Steam Operations (000's).$(78)$148$700$5$1,273$347 Steam Operating Ratio%Steam Sales-lbs.
.Taxes-local, stateandother.13,0472,2731.1735812,28212,9832,4119555802,25712,1141,82G9005G22,23012,8261,6579185462,07310,9546878195361,6896,1511,2018165041,431Steamrevenuedeductions 19,35G19,18617,63218,02014,68510,103Operating IncomebeforeFederalIncomeTax.Federalincometax(246)(182)751(683)1,636(89)(1GB)(330)51(688)363(43G)Operating IncomefromSteamOperations (000's).$(78)$148$700$5$1,273$347SteamOperating Ratio%SteamSales-lbs.
(000's)Commercial
(000's)Commercial
.Industrial
.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
.Municipal Total steam sales 86.3 86.0 80.7 88.8 76.3 81.6 898,904 933,609 1,041,415 980,324 1,160,122 1,268,917 1,718+65 1,682,033 1,738,391 1,839,402 2,127,837 2,13G,794 346,031 334,645 367,553 325,727 334,463 318,323 2,963/00 2,950,287 3,147,359 3,145,453 3,622,422 3,724,034 Steam Customers at December 31 Commercial
.Industrial
.Industrial
.Municipal Totalsteamcustomers 238703133925474323602717732380281773138929278314013027830410SteamProduced-lbs.
.Municipal Total steam customers 238 70 31 339 254 74 32 360 271 77 32 380 281 77 31 389 292 78 31 401 302 78 30 410 Steam Produced-lbs.
(000's)Producedbysteamdepartment.........
(000's)Produced by steam department.........
By-product steamfromelectricdepartment
By-product steam from electric department
.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)
.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 2,588,1 20 2,613,321 Total steam produced 3,340,G91 3,327,985 3,601,312 3,732,056 4,'I20,366 4,055,793 Steam Department Fuel Total BTU (million)Cents per million BTU 5,705,943 226.21 5,548,290 6,022,360 6,230,767 G,807,500 6,849,830 232.60 203.35 203.08 196.31 89.80 Rate Increases Granted Class of Service Fffcclive Dale of Increase Amount of Rate of Rale of Increase Relurn on Relurn on (Annual Basis)Percent Rate Base Equity (000's)Increase Aulhorized Aulhorizcd Class of Service Dale of Filing Pending Requests Amount (000's)Percent Electric Gas Steam October 25, 1972 October 23, 1974 April 20, 1976 November 11, 1977 February 18, 1978 April 28, 1972 October 23, 1974 April 20, 197G November 11, 1977 February 2, 1978 May11,1972 November 12, 1973 April 15, 1975$10,154 17,992 11,002 10,186 3,000 3,67G 4,854 4,983 2,536 G78 897 500 2,475 11.5%'6.0 7.9 5.8 1.6 6.8 7.6 6.3 2.4 11.4 5.1 12.0 7.96%12.00%8.83 13.19 9.35 13.50 9.31 12.80 9.31 12.80 7.77 12.00 8.42 12.09 9.35 13.50 9.31 12.80 9.31 12.80 G.48 7.25 8.69 Electric May 26, 1978 Gas May 26, 1978$37,946 17.8%10,789 8.9 27 Directors Keith W.Amish*Executive Vice President, Rochester Cas and Electric Corporation Paul W.Briggs*President, Rochester Cas and Electric Corporation John D.Cockcroft*
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*
Former Chairman ol the Board, The R.T.French Company Wilmot R.Craig/Former Chairman ol the Board, Lincoln First Banks Inc.E.Kent Damontf Vice President and Secretary, Xerox Corporation Francis E.Drake, Jr.*Chairman ol thc Board and Chief Executive Oflicer, Rochester Cas and Electric Corporation
FormerChairmanoltheBoard,TheR.T.FrenchCompanyWilmotR.Craig/FormerChairmanoltheBoard,LincolnFirstBanksInc.E.KentDamontfVicePresident andSecretary, XeroxCorporation FrancisE.Drake,Jr.*ChairmanolthcBoardandChiefExecutive Oflicer,Rochester CasandElectricCorporation
'Member of the Executive and finance committee of the Board of Directors J.Wallace Ely*t Chairman ol the Board, Security New York State Corporation Walter A.Fallon Chairman ol the Board and Chief Executive Officer, Eastman Kodak Company Ernest J.Howe*tg Chairman ol the Executive and Finance Committee, Rochester Cas and Electric Corporation tMember of the Audit Committee of the Board of Directors I i/Officers Francis E.Drake, Jr.Chairman ol thc Board and Chief Executive Officer Agc 63, Years of Service, 41 Paul W.Briggs President Agc56, YearsolService,33 Keith W.Amish Executive Vice President Agc55, YearsofServicc,31 Joseph J.Hartman Vice President, Cas and Transportation Age54, Years ofScrvicc,32 John L.Kennedy Vice President, RatcS and Covcrnmcntal Affairs Age 60, Years of Service, 38 John E.Maier Vice President, Employee Relations Agc51, Years ol5ervice,31 Richard J.Rudman Vice President, Electric Transmission and Distribution Age 51, Years ol Service, 33 Harry G.Saddock Vice Prcsidenr, Electric System Planning and Operation Age 49, Years ol Service, 28 Mario Silvestrone Vice President, Consumer Services, Corporate Communications and Purchasing Agc55, Years of service,28 leon D.White, Jr.Vice President, Electric and Stcam Prodcctfon Age 59, Years ol Service, 41 Dean W.Caple Secretary and Treasurer Age55, Years of service,30 Francis A.Sullivan, Jr.Controller Age55, Years of Service,28 Robert W.Ball Assistant Treasurer Age 62, Years olservice,40 David C.Heiligman Assistant Secretary Age 38, Years ol service, 15 Robert C.Henderson Assistant Conrroller Age38, Years of Service, 1S Stephen Kowba Assistant Controller Age59, Years of service,28 John M.Kuebel Auditor Age 43, Years of service, 14 Daniel G.Kennedy*Partner, Nixon, Hargrave, Dcvans tt Doyle A.J.McMullen Chairman ol the Executive Comminee, Carlock Inc., and Director ol the parent company, Colt Industries, Inc.Paul A.Miller Former President, Rochester Institute ol Technology Edward J.Nelson Former President, Rochester Cas and Electric Corporarion William S.Vaughn*tg Former Chairman ol the Board, Eastman Kodak Company William G.vonBergt Chairman ol the Board and Chicl Executive Oificer, Sybron Corporation tMember of the Salary Review Committee of the Board of Directors Rochester Gas and Electric Corporation 89 fast Avenue Rochester, New York 14649-MOTICE-THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL.THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY, BRANCH 016.PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL.REMOVAL OF ANY PAGE(S)FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.
'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
RECORDS FACILITY BRANCH Contents Highlights 1 Letter to Shareholders 2 RGGE People 4 Electric and Gas Operations 10 Management Changes 13 Financial Statements 14 Management's Discussion and Analysis 27 Financial and Statistical Information 28 Directors and 05cers 33 About the Cover During 1980 RGGE ran an advertising campaign to inform customers and the community about some of the work that goes on and about the people who do the work Six employees representing a cross.section of RGGE operations and services were chosen as subjects for the television spot announcements and the print advertise.
: 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.
ments, Ho one wrote words for them to say.The words are their own, and they are presented in this report.RG&E Service Area/Business The Company supplies electric, gas and steam service wholly within the State of Hew York, and is engaged in the production, transmission, distribution and sale of these seniices in a nine county area centering around the City of Rochester.
RECORDSFACILITYBRANCH ContentsHighlights 1LettertoShareholders 2RGGEPeople4ElectricandGasOperations 10Management Changes13Financial Statements 14Management's Discussion andAnalysis27Financial andStatistical Information 28Directors and05cers33AbouttheCoverDuring1980RGGErananadvertising campaigntoinformcustomers andthecommunity aboutsomeoftheworkthatgoesonandaboutthepeoplewhodotheworkSixemployees representing across.sectionofRGGEoperations andserviceswerechosenassubjectsforthetelevision spotannouncements andtheprintadvertise.
The Company's temtory, which has a population of approximately 880,000, is well diversified among residential, commercial and industrial consumers.
ments,Hoonewrotewordsforthemtosay.Thewordsaretheirown,andtheyarepresented inthisreport.RG&EServiceArea/Business TheCompanysupplieselectric, gasandsteamservicewhollywithintheStateofHewYork,andisengagedintheproduction, transmission, distribution andsaleoftheseseniicesinaninecountyareacentering aroundtheCityofRochester.
In addition to the City of Rochester, which is the third largest city and a major industrial center in the State, it includes a large and prosperous farming area.
TheCompany's temtory,whichhasapopulation ofapproximately 880,000,iswelldiversified amongresidential, commercial andindustrial consumers.
RG&E People.Your Neighbors'I oothejob.-MOTICE-THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL.THEY HAVE BEEN CHARGED TO YOU FOR A Lltp1ITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY BRANCH 016.PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL.REMOVAL OF ANY~PAGE(sj FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.
InadditiontotheCityofRochester, whichisthethirdlargestcityandamajorindustrial centerintheState,itincludesalargeandprosperous farmingarea.
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RG&EPeople.YourNeighbors
<DID lgefuD+f I Dr" 7A ,uttut)~RECORDS FACILITY BRANCH 8>04~30313 To Shareholders:
'Ioothejob.
~~On October 1, 1980, Francis E.Drake, Jr.retired at the normal retirement age of 65 after a 43 year career with RGGE, the last13 years of which he served as chief executive officer.Paul W.Briggs was elected to succeed Mr.Drake as chairman of the board and chief executive officer.Keith W.Amish, former executive vice.president, was elected to replace Mr.Biiggs as president, and became chief operating officer.Leon D.White, Jr.succeeded Mr.Amish as executive vice-president with responsibility for operations.
-MOTICE-THEATTACHEDFILESAREOFFICIALRECORDSOFTHEDIVISIONOFDOCUMENTCONTROL.THEYHAVEBEENCHARGEDTOYOUFORALltp1ITED TIMEPERIODANDMUSTBERETURNEDTOTHERECORDSFACILITYBRANCH016.PLEASEDONOTSENDDOCUMENTS CHARGEDOUTTHROUGHTHEMAIL.REMOVALOFANY~PAGE(sjFROMDOCUMENTFORREPRODUCTION MUSTBEREFERREDTOFILEPERSONNEL.
In bringing about what we consider to be an innovative management structure, we established two senior vice.president positions to complete a five member, senior management team to address the complex decisions that have to be made in the utility business today.Harry G.Saddock was elected senior vice.president, finance and rates, and Mario Silvestrone was elected senior vice.president, general services.Consolidation of these two areas of RGGE's operations under senior vie+presidents is intended to allow for broader management influence and participation in the policy decision making processes and to reinforce management communication channels in the Company.Several promotions and reassignments have been made among other officers of the Company, and they are detailed on page 13 of this report These changes were made primarily to offer advanced cross-training in critical executive positions.
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We view our redesign of senior management structure as a timely step as we move into this decade.Common stock earnings in 1980 increased$1.8 million, or five percent over 1979.Earnings per share of common stock rose a modest one percent, going from~2.08 to$2.10.The 1980 per.share earnings reflect the addition of some 657,000 weighted average shares of common stock Total customer revenues for 1980, excluding electric sales to other utilities, showed a significant18 percent increase over the previous year.However, revenue growth resulting from increased unit sa!es of electricity and gas was smalL When adjusted for the influences of rate increases, fuel adjustments and weather,"real" growth in customer revenues was less than one percent over 1979.However, revenues from electric sales to other utilities through the New York Power Pool increased 40 percent over 1979.Shareholders and customers alike benefit from these sales which are made mainly from our coal.fired generating units.There is a strong demand for coal-fired generation as downstate utilities reduce generation from their more expensive oil.fired units.Expenses increased in 1980 and inflation continues to be a major contributing factor.Operating expenses rose 21 percent over1979.The cost of fuels again rose dramatically and now con.sumes almost half of each RGGE revenue dollar.The cost of fossil fuels alone went up 45 percent in 1980.The tremendous upsurge in interest costs made the heavy financing requirements in our highly capital.intensive business even more burdensome.
DEADLINERETURNDATEDate~a)-)afDocument.
Total interest charges, excluding allowance for borrowed funds used during construc-tion, rose 17 percent while preferred stock dividends went up 34 percent.These costs, like taxes, are expenses over which we have little control.Where we can exert some degree of control over costs, we economize.
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But, despite the problems with costs, we think we have been able to achieve a temporary workable balance among the financial pressures, customer requirements and the reasonable expectations of share.holders.The minimal growth in RGGE's 1980 energy sales reflected the severity of the recession seen in the first half of the year, things looked a little better during the second half.With regard to growth, we remain confident about the overall economic climate in our service territory.
<DIDlgefuD+fIDr"7A,uttut)~RECORDSFACILITYBRANCH8>04~30313 ToShareholders:
Monroe County, where most of our customers are located, is considered one of the strongest centers of economic growth in New York State.While that growth doesn't compare with the healthy advances seen in the 60's, it is still very good as measured against other parts of the State and the Northeast in general.Eastman Kodak Company has announced plans for a sizeable expan-sion in the Rochester area.Some other industries and businesses have expressed intentions to expand, and several large renovation and construction projects are underway in metropo!itan Rochester.
~~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.
In1980, Rochester area companies added nearly 6,000 new jobs-twice as many as the year before.More than$537 million was spent in plant expansion,$213 million more than was spent by business and industry in 1979.The economic stabi!ity in our service area presents strong resistance to the type of erosion that is being felt in other parts of the State and we remain optimistic about the economic future of our locale.In August1980 we petitioned the New York State Public Seniice Commission (PSC)for electric, gas and steam rate increases.
Inbringingaboutwhatweconsidertobeaninnovative management structure, weestablished twoseniorvice.president positions tocompleteafivemember,seniormanagement teamtoaddressthecomplexdecisions thathavetobemadeintheutilitybusinesstoday.HarryG.Saddockwaselectedseniorvice.president, financeandrates,andMarioSilvestrone waselectedseniorvice.president, generalservices.
The request followed closely on the heels of$48 million in rate increases granted a month earlier in July.Unrelenting inflation, coupled with the lengthy11 month rate hearing process, make rate increase requests virtually an annual requirement.
Consolidation ofthesetwoareasofRGGE'soperations underseniorvie+presidents isintendedtoallowforbroadermanagement influence andparticipation inthepolicydecisionmakingprocesses andtoreinforce management communication channelsintheCompany.Severalpromotions andreassignments havebeenmadeamongotherofficersoftheCompany,andtheyaredetailedonpage13ofthisreportThesechangesweremadeprimarily toofferadvancedcross-training incriticalexecutive positions.
It is also essential for us to phase rate increase requests with the PSC policy of basing them solely on forecast data for a one-year test period.The July1980 rate increases, for example, were based on forecasts for a 12.month period running through July 1981.The rate increases we are now seeking will be decided for the period from August1981 through July1982.In the current rate case, we are seeking new rates that would produce an addi.tional%1.9 million in annual electric revenues,$7.8 million in gas revenues and S3.6 million in steam revenues.In January1981 we requested a temporary increase in electric and gas rates pending the July1981 decision.We also asked that the steam rate increase be put into effect immediately.
Weviewourredesignofseniormanagement structure asatimelystepaswemoveintothisdecade.Commonstockearningsin1980increased
The move was necessitated by soaring interest rates, higher costs and a need to protect the Company's security ratings.The steam rates were approved and made effective February18.
$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.
The decision on the temporary electric and gas rates was pending at the time this report went to press.
Thecostoffuelsagainrosedramatically andnowcon.sumesalmosthalfofeachRGGErevenuedollar.Thecostoffossilfuelsalonewentup45percentin1980.Thetremendous upsurgeininterestcostsmadetheheavyfinancing requirements inourhighlycapital.intensive businessevenmoreburdensome.
Annual Report 1980 for the Year Ended December 31 Highlights 1980 1979 X Change Gse of 1980 Revenue Dollar t)n Cents)y4 I I I I I I I I I Electricity to customers Kilowatt-hours
Totalinterestcharges,excluding allowance forborrowedfundsusedduringconstruc-tion,rose17percentwhilepreferred stockdividends wentup34percent.Thesecosts,liketaxes,areexpensesoverwhichwehavelittlecontrol.Wherewecanexertsomedegreeofcontrolovercosts,weeconomize.
.Revenue Electricity to other utilities Kilowatt.hours.Revenue Gas Therms.Revenue Steam Pounds.Revenue 5,186,423$245,005 1,620,929$52,786 434,492$181,046 2,413,879$23,589 5,163,520$219,373 1,526,925$37,804 426,743$140,527 2,792,170$19,988 Sales, Revenues and Earnings (Thousands, Except Per Share Amounts), 12 6 40 2 29 (14)18 Total operating revenues..Total operating expenses..$502,426$417,692 20$442,894$365,570 21 Operating income Net income Earnings applicable to common stock.Weighted average number of common stock shares outstanding
But,despitetheproblemswithcosts,wethinkwehavebeenabletoachieveatemporary workablebalanceamongthefinancial pressures, customerrequirements andthereasonable expectations ofshare.holders.TheminimalgrowthinRGGE's1980energysalesreflected theseverityoftherecession seeninthefirsthalfoftheyear,thingslookedalittlebetterduringthesecondhalf.Withregardtogrowth,weremainconfident abouttheoveralleconomicclimateinourserviceterritory.
..Earnings per common share.........
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.
Cash dividends per common share, adjusted for stock dividends........
In1980,Rochester areacompanies addednearly6,000newjobs-twiceasmanyastheyearbefore.Morethan$537millionwasspentinplantexpansion,
Stock dividend paid (See Note).......Utility Plant (Thousands)
$213millionmorethanwasspentbybusinessandindustryin1979.Theeconomicstabi!ityinourserviceareapresentsstrongresistance tothetypeoferosionthatisbeingfeltinotherpartsoftheStateandweremainoptimistic abouttheeconomicfutureofourlocale.InAugust1980 wepetitioned theNewYorkStatePublicSeniiceCommission (PSC)forelectric, gasandsteamrateincreases.
$59,532$43,652$52,122$39,565 16,472$2.10$1.48 3%15,815$2.08$1.41 3%$34,725$32,920 14 10 Earnings and Dividends Per Common Share th Do)hts)D Earnings por Common Shore (Adjutted for Stock Ohtdenrb)D Cosh DMdencb per Common Shore (Adjusted for Stock DMdencb)2,11 Capital expenditures, less allowance for funds used during construction
Therequestfollowedcloselyontheheelsof$48millioninrateincreases grantedamonthearlierinJuly.Unrelenting inflation, coupledwiththelengthy11 monthratehearingprocess,makerateincreaserequestsvirtually anannualrequirement.
..Net utility plant at December 31.......Number of Customers at December 31 Electric Gas Steam Number of Common Stock Shareholders at December 31..$87,742$111,427$950,474$893,531 (21)6 50,416 48,543 4 285,470 282,099 1 213,157 209,642 2 271 318 (15)Number of Employees at December 31.2,691 2,661 1 Note: The 22nd annual stock dividend was paid February 25, 1981 at the rate of three percent.1976 1977 1978 1979 1916 40 r/'l e~Qoo9 5./>REIitlllNBRII IIOCKET FILE CQPII 8 X04330313 RG&E People 1]1 P r, c Ij8mi-<<-az608m Lucy White Telephone Setvlce Representative RGGE's Telephone Service Center answers nearly a half.million calls a year.Lucy White gets all kinds of calls: service transfers, new customer connections, power outages, gas leaks, complaints and requests for information."Every time I say'good morning'have to be ready to help somebody with whatever's on their mind." It's Lucy's job to help the customer personally where she can or to get the caller to the right party for assistance or an answer.Lucy and other telephone service representatives are in direct contact with RGGE's computer system through display consoles.Account information on any of RGGEs half-million customers is available in seconds.Still, on busy days, calls I'r 1~=]stack up as the 34 service represen.tatives try to give the caller a complete answer."Everyday we answer a lot of phone calls.We try to pick up each one within six rings, but sometimes we fall behind." Lucy says that the hardest calls she gets are the high bill complaints.
Itisalsoessential forustophaserateincreaserequestswiththePSCpolicyofbasingthemsolelyonforecastdataforaone-yeartestperiod.TheJuly1980rateincreases, forexample,werebasedonforecasts fora12.monthperiodrunningthroughJuly1981.Therateincreases wearenowseekingwillbedecidedfortheperiodfromAugust1981 throughJuly1982.
She tries to help the customer understand how the rising cost of energy forces the bills up even when people conserve."At the end of the day I'm tired.But I love people and I love helping them."  
Inthecurrentratecase,weareseekingnewratesthatwouldproduceanaddi.tional%1.9millioninannualelectricrevenues,
~~As part of the rate case, we are trying to recover expenses connected with the Sterling nuclear power plant proposal.We had to terminate that project in January 1980 after the State reversed its earlier certification for construction of the 1,150 megawatt facility.We are asking the PSC for permission to amortize the expenditures over a five.year period.In January1981 the PSC issued its order covering the first phase of the Sterling hearings.It ruled that costs incurred through Januaiy1978 were prudent.Complete details of the case may be found in this report under Notes to Financial Statements.
$7.8millioningasrevenuesandS3.6millioninsteamrevenues.
One of our main concerns today is the delay in the construction of Niagara Mohawk Power Corporation's Nine Mile Point~2 nuclear power plant at Oswego, New York Previously scheduled for operation in 1984, construction of the 1,084 megawatt plant has been set back due to a number of factors, including technical reassessments, regulatory matters and a decline in electric load growth.The estimated total cost of the plant has risen substantially as a result of the delays and the cumulative adverse Paul W.Bnggs, lett, Keith W.Amish effects of inflation.
InJanuary1981 werequested atemporary increaseinelectricandgasratespendingtheJuly1981decision.
Although our share of that plant is only14 percent, the cost increases will continue to exert pressure on our capital requirements for several years.Now scheduled for late 1986 operation, the Nine Mile plant will add 152,000 kilowatts of base load capacity'n our system.In April 1980 we asked the PSC for permission to acquire Pavilion Natural Gas Company.That approval was granted early in 1981 and the acquisition took effect February 28 this year.The purchase has added 10,000 gas customers in the southwest portion of our system and is expected to produce additional annual gas revenues of 410 million.In noting the complexities of the utility business, we commend Francis E Drake, Jr.for his immense contributions to RGGE and the industry over his 43-year career with the Company.Mr.Drake became chief executive office in 1967.Inflation had not yet begun its upward spiral;we planned, licensed and built a nuclear power plant without harassment, delay or unnecessary high costs;the Oil Embargo was still six years off;we had not had a gas rate increase since 1949 or an electric increase since 1958, and regulatory bodies were reasonable in their requirements and supportive in their rulings.That was the year 1967.All too familiar are the burdensome problems of the following years: double digit inflation, skyrocketing fuel costs, a succession of necessary rate increases, a virtual stand.still in the crucial nuclear power option, public skepticism, mounting regulation and a crop of anti-utility pressure groups claiming to work in the public interest.Frank Drake met the challenges and issues hearn and, in our judgment, brought RGGE through an extremely difficult period, maintaining our financial integrity and traditionally high levels of service to the customers and community.
Wealsoaskedthatthesteamrateincreasebeputintoeffectimmediately.
His responsibilities were heavy and demanded the superior leadership ability he possesses.
Themovewasnecessitated bysoaringinterestrates,highercostsandaneedtoprotecttheCompany's securityratings.Thesteamrateswereapprovedandmadeeffective February18.
The turbulent period for RGGE and the utility industry is far from over.We have every confidence, though, that our team of RGGE people is up to the challenges and geared to meet the future.We expect to maintain a solid, progressive operation.
Thedecisiononthetemporary electricandgasrateswaspendingatthetimethisreportwenttopress.
And, in regard to employees, the theme of this annual report focuses on the thoughts of a representative sample of our RGGE people.Six employees were featured in a television and print media advertising campaign to show our customers and the community the caliber of people we have and what those people think of their jobs.The words of these employees are their own.We hope you'l take the time to share their thoughts in the following pages.Paul W.Btiggs Chairman of the Board and Chief Executive OAicer Keith W.Amish President and Chief Operating Officer March 18,1981  
AnnualReport1980fortheYearEndedDecember31Highlights 19801979XChangeGseof1980RevenueDollart)nCents)y4IIIIIIIIIElectricity tocustomers Kilowatt-hours
'%8ha5mRoaaeCxxia g')C))Q~QiQ.)i Qg+QO]j'QQ~
.RevenueElectricity tootherutilities Kilowatt.
Rz9 0 R Dennis Rose Customer Service Representative 0"When a customer comes in, I may not have all the answers all the time, but I always give him an honest answer." Dennis Rose sees or talks to more than 20 customers a day.Some conversations take as little as 20 minutes, others may run several hours."Every person is a special individual with a special problem, and you treat them accordingly." With inflation taking away from every-one's income, a lot of customers come to Dennis to work out special bill.paying arrangements.
hours.RevenueGasTherms.RevenueSteamPounds.Revenue5,186,423
Others may want information on how to use energy more elflciently and cut down on their bills.Dennis and the other customer service representatives bend over backwards to help where they can.It's their job to listen and to help."I really feel good being able to say'We'l be able to work something out.'hen a customer is sincerely trying to pay the bill but is having a hard time, we knock ourselves out to make it easier for him or her to work out special plans, to provide whatever help is needed." High energy bills don't make anyone happy, not even RGGE employees, like Dennis, who pay the full price on their own bills."It's nice to see them go out-not happy all the time-but under-standing."  
$245,0051,620,929
%47GiEDKE0MHlcK65KKGfgQ NzeRarn Qog@Cn54ooO:mBdP Ed Flanigan Gas Construction and Maintenance Foreman"It's our responsibility to make sure the gas keeps flowing and that service for customers is not interrupted." When Ed and his crew are working on a gas line the gas is still flowing.Maintaining a gas system is a tough, critical, often hazardous job.But that's what Ed Flanigan has been doing for 33 years."Everyday RGGE makes routine surveys throughout our service area.We'e able to detect even small amounts of gas escaping into the air." RGGE gas maintenance people monitor the gas distribution system on a continuous basis.Any problems that are found are taken care of immediately."If a customer smells gas we get there fast to make sure there's no physical danger.Safety is our number one concern." RGGE tells its customers not to take any chances.They'e told that if they think they smell gas they should get out of the house and call RGB'Part of my job is to repair leaks or replace old pipe with plastic or wrapped steel.In the case of a Grade One[high priorityj situation, my men and I will work all night if we have to, to get the job done right." Q/it I wI I
$52,786434,492$181,0462,413,879
'%%reMs CKEigQM GilBS GOKl GKCP Jack Davis Power Controller"The Power Control Center is the heart of RGGE's electrical system.The map and computers help monitor the status of power plants, transmission lines, every major facility in the Rochester area."If something goes wrong-say a power plant goes out of service-our job is to prevent brownouts and service interruptions either by calling for more power from RGGE plants or bringing it in from elsewhere."'-c-el"We'e linked with the New York Power Pool.Every five minutes we get a complete update on how much power is being produced, how much is available to us, and what it would cost.It's the power controller's job to decide when to bring in electricity from the Power Pool reserve."Right now the Power Pool has enough reserve electricity to protect our customers against brownouts and major service interruptions if we have a problem in our own system." The question being debated is whether there will be enough electricity through the 1980's.The~+t reserve is shrinking and New York State officials have made the decision to build fewer new power plants than utilities throughout the State feel they need."I have to wonder about what's going to happen five or ten years from now.Is there going to be enough electricity for peak demand periods?Is the State taking too much of a risk?I'm concerned.
$23,5895,163,520
I think it's some.thing everyone should think about."  
$219,3731,526,925
%0rj:KLIEG Gis~~RDM~.~~coaiQxzzEsfRIhF Walt Rogalski Troubleinan First Chss"It's my job to restore power as quickly, safely and dependably as I possibly can.I know how much depends on it" E!ectiicity is as vital to modem life as water.RGGE troublemen, the first-line emergency team, make sure that whatever happens to interrupt electrical service is dealt with immediately.
$37,804426,743$140,5272,792,170
They'e specialists in solving the tough ones."I always take that extra few minutes to test, check, and recheck I have too much respect for electricity to tiy to take shortcuts.""I get a lot of satisfaction getting power restored as fast as possible.I think people know the job we do is critical.It's got its hazards, and they appreciate our efforts.That gives us a good feeling." Working conditions for RGBE troublemen are generally harsh and often hazardous.
$19,988Sales,RevenuesandEarnings(Thousands, ExceptPerShareAmounts),12640229(14)18Totaloperating revenues..Totaloperating expenses..$502,426$417,69220$442,894$365,57021Operating incomeNetincomeEarningsapplicable tocommonstock.Weightedaveragenumberofcommonstocksharesoutstanding
They work in traffic, high on a pole or under the street, in subzero weather or sudden storms, and they work with high.voltage electric energy."We work under a buddy system.We all depend on each other and know how critical it is to do the job right.It makes me proud to be part of a team like this."  
..Earningspercommonshare.........
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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  
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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."  
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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.
Wes Backus Operations Supervisor, Ginna Nuclear Power Plant"I think some people have wrong ideas about nuclear power.It's a tough subject to understand, but I really believe the more they know about it, the more comfortable they'feel." The nuclear industry has the best safety record of any indus+.One of Wes Backus'obs is to help make sure every single safety procedure is strictly followed at all times."In a very practical sense there just aren't a lot of alternatives to nuclear power available to us right now.I don't like the idea of us having to depend on foreign countries for our energy.""Nuclear power plants such as Ginna contain many safeguards that make the possibility of radiation leakage extremely remote.At the slightest indication of danger, we have the ability to shut down the plant immediately."I understand nuclear power and I feel it's safe.In fact I moved my family from Bergen to about two miles from Ginna to be closer to my work, and I'm still glad I did."
"Iunderstand nuclearpowerandIfeelit'ssafe.InfactImovedmyfamilyfromBergentoabouttwomilesfromGinnatobeclosertomywork,andI'mstillgladIdid."
1980 Operations Electric Operations Sales Total kilowatt.hour sales of elec.tricity to customers were up only a frac-tion of a percent from 1979 due primarily to the recession and customer conserva.tion measures.Industrial kilowatt.hour electric sales were off nine tenths of one percent reflecting the slow economy and reversing a trend seen over the last several years when industrial sales led all classes of electric customers in growth.Kilowatt.hour electric sales to residential customers were up 1.2 percent from 1979, and commercial kilowatt hour electric sales rose 1.4 percent.Very moderate electric load growth is projected for 1981.One notable bright area in electric sales for 1980 was the sharp 40 percent increase in revenues from electric sales to other utilities-the sale of excess power to other companies through the New York Power Pool.These sales are made possible mainly through the excel.lent availability of our Ginna nuclear power plant which can produce more than half of the total electric energy requirements of our system.We reserve the full economy of the relatively inex-pensive nuclear.generated power for our own customers while making excess power from our coal-and oil fired gener.ating units available for sale to other utilities.
1980Operations ElectricOperations SalesTotalkilowatt.
Revenues from these outside sales benefit both shareholders and customers.
hoursalesofelec.tricitytocustomers wereuponlyafrac-tionofapercentfrom1979dueprimarily totherecession andcustomerconserva.
Oswego&#xb9;6 Niagara Mohawk Power Corporation's Oswego&#xb9;6 oil-fired power plant went into commercial operation in July1980.Under a joint.ownership agreement RGGE owns 24 percent of the plant's capacity, or 204,000 kilowatts.
tionmeasures.
Construction began on the Oswego<<6 plant prior to the 1973 Arab Oil Embargo that spurred the dramatic rise in oil prices.This plant is a highly eHicient oil.fired unit and the availability of its power is important to RGGE, particularly as replacement power when the Ginna nuclear power plant is out of service for annual refueling, maintenance and inspection periods.At other times we sell our share of the energy to other utilities, producing additional revenues for the Company and a saving for our own customers.
Industrial kilowatt.
Ginna Nuclear Power The Ginna nuclear power plant continues to prove itself as one of the finest operating plants in the nation.During 1980, despite two planned outages, the 470,000.kilowatt plant achieved a notable 76 percent availability and did not experience a single forced outage.In 1980 the plant's eHicient operation saved customers 432.4 million in fuel costs when com-pared with an equivalent amount of coal.fired energy.When compared with what it would have cost to produce the energy with oil as a fuel, the plant saved$84.4 million in 1980.The Gnderground Connection Deliver-ing 34,500 volts of electricity is not a particularly big job for a power company like RGGE;but when that power is needed 1000 feet below the earth's sur.face the project takes on a different complexion.
hourelectricsaleswereoffninetenthsofonepercentreflecting thesloweconomyandreversing atrendseenoverthelastseveralyearswhenindustrial salesledallclassesofelectriccustomers ingrowth.Kilowatt.
International Salt Company wanted to upgrade electric service in its salt mine near Retsof, New York, 30 miles south.west of Rochester.
hourelectricsalestoresidential customers wereup1.2percentfrom1979,andcommercial kilowatthourelectricsalesrose1.4percent.Verymoderateelectricloadgrowthisprojected for1981.Onenotablebrightareainelectricsalesfor1980wasthesharp40percentincreaseinrevenuesfromelectricsalestootherutilities
With almost17 square miles of excavation 1000 feet below ground, the 85.yearold salt mine is the largest in the free world.Electricity pro vides power for the mining operations, and proper voltage was needed to work the rich salt vein that geologists say extends as far west as Michigan.The complicated project took three years to complete, and RGGE's people played a big part.A borehole was sunk 1000 feet down.Following elaborate preparations below ground, a six.ton, 34,500 volt power cable was fed down the hole to connect the surface switch-gear with the mine substation.
-thesaleofexcesspowertoothercompanies throughtheNewYorkPowerPool.Thesesalesaremadepossiblemainlythroughtheexcel.lentavailability ofourGinnanuclearpowerplantwhichcanproducemorethanhalfofthetotalelectricenergyrequirements ofoursystem.Wereservethefulleconomyoftherelatively inex-pensivenuclear.generated powerforourowncustomers whilemakingexcesspowerfromourcoal-andoilfiredgener.atingunitsavailable forsaletootherutilities.
It's rare that you hear of a company drill.ing for electricity, but, with RGGEs assistance, this first underground con.nection of its kind in America was made, and RGGE is providing the power.Gas Operations Sales Sales of natural gas in therms increased only1.8 percent in 1980.Although there was an addition of 6,427 residential gas space heating customers during the year, residential gas sales in The six.ton power able as it enters the mine.10 This gigantic wheel was part of a lifton an early shaft at an international Salt Company mine that was worked from 1906 until the 30's.The relic was brought back into service to help thread a 34,500 volt electric cable down to a mine substation 1,000 feet below the ground.Electricians install an electrical grounding grid surrounding the mine level portion of the underground substation.
Revenuesfromtheseoutsidesalesbenefitbothshareholders andcustomers.
Left: This burst of light from a time.exposed photo of a fiberoptic cable shows light as the transmission medium.Right: The fiberoptic telemetering console is adjusted by an RGGE technician.
Oswego&#xb9;6NiagaraMohawkPowerCorporation's Oswego&#xb9;6oil-fired powerplantwentintocommercial operation inJuly1980.
therms declined by 2.7 percent from the previous year.It is apparent that the cost effectiveness of energy.efficient mea.sures that RGGE has traditionally promoted continues to hit home to the consumer.Efficiency and conservation measures undertaken by customers have been offsetting any significant growth in gas sales that might otherwise be anticipated.
Underajoint.ownership agreement RGGEowns24percentoftheplant'scapacity, or204,000kilowatts.
In fact, since 1972, the average gas consumption by residential space heating customers has dropped by 24 percent.However, gas sales in therms to industrial customers rose 14.9 percent over 1979 and are expected to continue to rise at a healthy pace as companies shift oil loads to natural gas.Commercial customer gas sales went up 2.5 percent, mainly due to the addition of commercial space heating loads.In1981 it is estimated that 5,500 residential gas space heating customers will be added to the system, with gas maintaining its decisive cost advantages over heating oil.Ten thousand gas customers have been added to the RGGE system through the acquisition of Pavilion Natural Gas Company in February 1981.RGBEs gas supply is adequate to meet all projected requirements.
Construction beganontheOswego<<6plantpriortothe1973ArabOilEmbargothatspurredthedramaticriseinoilprices.ThisplantisahighlyeHicientoil.firedunitandtheavailability ofitspowerisimportant toRGGE,particularly asreplacement powerwhentheGinnanuclearpowerplantisoutofserviceforannualrefueling, maintenance andinspection periods.Atothertimeswesellourshareoftheenergytootherutilities, producing additional revenuesfortheCompanyandasavingforourowncustomers.
A Light Approach Fiberoptics
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.
-the method for transmitting signals and data without the use of metal cables-is coming into its own as an advanced technology; and RGGE is already involved.The initial application will involve light-wave communication for the telemeter-ing of natural gas deliveries from RGGEs supplier where volumes run more than 40 billion cubic feet a year.The fiberoptic telemetering unit is virtually immune from interference common in existing metallic cables.Gas telemetering is only the first of several applications for fiberoptics envisioned by RGB'uture possible applications for fiberoptic technology include power transmission telemetry, power system control and audio tone communications that presently rely on conventional wire.cable transmission.
International SaltCompanywantedtoupgradeelectricserviceinitssaltminenearRetsof,NewYork,30milessouth.westofRochester.
11 Research and Development In 1980, RGGE spent~5.6 million on research and development.
Withalmost17squaremilesofexcavation 1000feetbelowground,the85.yearold saltmineisthelargestinthefreeworld.Electricity providespowerfortheminingoperations, andpropervoltagewasneededtoworktherichsaltveinthatgeologists sayextendsasfarwestasMichigan.
Of that amount,$1.8 million went into RGGEs own research and development pro.grams where two in particular paid hand-some dividends in 1980 at the Ginna nuclear power plant.One of the early nuclear power plants in this country, completed in1969, Ginna Station continues to perform remarkably welL There has, however, been some concern with indications of corrosion in the steam generators of such plants-the two units that transfer the heat from the primaiy nuclear fission loop and produce the steam to drive the 470.megawatt turbine generator.
Thecomplicated projecttookthreeyearstocomplete, andRGGE'speopleplayedabigpart.Aboreholewassunk1000feetdown.Following elaborate preparations belowground,asix.ton,34,500voltpowercablewasfeddowntheholetoconnectthesurfaceswitch-gearwiththeminesubstation.
Continuing unabated, corrosive action could ulti-mately result in a costly shutdown and equipment replacement.
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.
RGGE had been studying the problem for years, and in the regular spring shut-down for refueling in 1980 an RGGE-developed process for flushing the steam generators of corrosive materials was used.Encouraging results were noted when the plant was inspected in November.It appears that the degree of corrosion has been significantly reduced.Only three generator tubes showed damage, whereas 31 had to be plugged in early 1980.This RGGE process will be used during each refueling shutdown, possibly eliminating an expensive repair project in the years to come.Complementing the breakthrough in steam generator cleaning, RGGE is experimenting with a process that is expected to allow repair of damaged tubes in the steam generator without the permanent loss of the tube's function that now results from plugging.The new sleeving process inserts a bimetallic tube sleeve up into and above the damaged portion of a tube.This is expected to maintain steam generator integrity and result in years of continued service.Thus RGGEs own research and devel-opment program will be paying big divi.dends for shareholders and customers, just as itdid a fewyears ago when RGGE developed the multi.frequency eddy current testing system that streamlined steam generator tube testing.12 An RGGE employee trains in the Company's steam generator mock.up for the job of placing metal sleeves on worn generator tubes.
Left:Thisburstoflightfromatime.exposedphotoofafiberoptic cableshowslightasthetransmission medium.Right:Thefiberoptic telemetering consoleisadjustedbyanRGGEtechnician.
Statement of Income RRS and Elcctrio Oorporrrtion (Thousands of Dollars)Operating Revenues (Note 1)Electric.Gas.....................
thermsdeclinedby2.7percentfromthepreviousyear.Itisapparentthatthecosteffectiveness ofenergy.efficient mea.suresthatRGGEhastraditionally promotedcontinues tohithometotheconsumer.
Steam Electric sales to other utilities Total Operating Revenues Operating Expenses (Note 1)Operation Electric and steam fuels Purchased electricity.
Efficiency andconservation measuresundertaken bycustomers havebeenoffsetting anysignificant growthingassalesthatmightotherwise beanticipated.
Deferred fuel-electric and steam Purchased natural gas.Other.Naintenance Depreciation Taxes-local, state and other Federal income tax-current (Note 2)-deferred (Note 2)Total Operating Expenses Operating Income Other Income and Deductions Allowance for other funds used during construction (Note 1)Other,net.Total Other Income and Deductions Income before Interest Charges.Year'Ended December 31 1980 S 245,005 181,046 23,589 449,640 52,786 502,426 86,622 23,796 (6,911)127,759 81,960 32,048 27,800 56,984 393 12,443 442,894 59,532 1 1,710 4,772 16,482 76,014 1979$219,373 140,527 19,988 379,888 37,804 417,692 62,109 31,937 (1,038)89,804 72,264 30,129 23,703 49,916 (36)6,782 365,570 52,122 11,439 3,774 15,213 67,335 1978$202,631 118,531 19,110 340,272 28,676 368,948 56,426 19,337 1,714 71,109 65,685 26,246 22,206 45,935 5,166 5,875 319,699 49,249 8,705 4,418 13,123 62,372 Interest Charges lang term debt Short term debt.Other, net Allowance for borrowed funds used during construction (Note 1)..Total Interest Charges Net Income Dividends on Preferred and Preference Stock, at required rates Earnings Applicable to Common Stock Weighted average number of shares outstanding in each period, adjusted for stock dividends (000's).Earnings per Common Share (Note I).Cash Dividends per Common Share, adjusted for stock dividends (Note 1)..34,129 4,298 755 (6,820)32, 362 43,652 8,927 S 34,725 16,472 S2.10 S1.48 29,084 4,016 441 (5,771)27,770 39,565 6,645 S 32,920 15,815~2.08 25,594 1,588 416 (4,812)22,786 39,586 5,678~33,908 14,613$2.32 Statement of Retained Earnings (ITtousands of Dollars)Year Ended December 31 1980 1979 1978 Balance at beginning of period Add'et income 80,155 43,652 39,565 39,586$77,338 4 70,819 Total Deduct Dividends on capital stock Cumulative preferred stock, at required rates (Notes 5 and 6)..Preference stock (Notes 5 and 6)Common stock Cash (Note 1)Stock (Note 5)Total Balance at end of period 123,807 6,799 2,128 23,910 7,000 39,837 83,970 116,903 4,517 2,128 22,148 7,955 36,748 4 80,155 110,405 3,550 2,128 19,269 8,120 33,067 S 77,338 14 Harry G.Saddock Davkl C.Heiligman Robert C, Henderso John E.Maier DavklK.Laniak Leon D.White.Jr.John E.Arthur Management Changes (Effective October 1, 1980)Leon D.White, Jr., formerly vice.president, electric and steam production, was elected executive vice.president of the Company, with responsibility for operations.
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.
Mr.White joined RGGE in 1937 and has served in a number of electric and steam management posi~tions over his 43-year career.Harry G.Saddock was elected to the position of senior vice president, finance and rates.Previously he was vice.president, electnic system planning and operation.
ALightApproachFiberoptics
Mr.Saddock, a licensed pro-fessional engineer, joined the Company in 1950 and progressed through a num.ber of management positions in the electric and electric system planning departments.
-themethodfortransmitting signalsanddatawithouttheuseofmetalcables-iscomingintoitsownasanadvancedtechnology; andRGGEisalreadyinvolved.
Maiio Silvestrone was elected senior vice president, general services.In addi-tion to his previous responsibilities as vice president, consumer services, public affairs and purchasing, he is administer-ing employee relations and information systems.Mr.Silvestrone had served in various management positions in the marketing and sales departments since joining the Company in 1950.He is a licensed professional engineer and holds an MBA.from the Univeisityof Rochester.
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.
John E Arthur was named vice.presi-dent, engineering and chief engineer.Mr.Arthur, whose former position was chief engineer, has been with RGGE since 1955 and is a licensed professional engineer.David K.Laniak became vice-president, electric system planning and operation, where he was previously superintendent.
11 ResearchandDevelopment In1980,RGGEspent~5.6milliononresearchanddevelopment.
Mr.Laniak came to the Company in 1954 and held a number of positions in the electric meter department before moving to system planning.John E.Maier, former vice.president, employee relations, was elected vice.president, electric and steam production.
Ofthatamount,$1.8millionwentintoRGGEsownresearchanddevelopment pro.gramswheretwoinparticular paidhand-somedividends in1980attheGinnanuclearpowerplant.Oneoftheearlynuclearpowerplantsinthiscountry,completed in1969,GinnaStationcontinues toperformremarkably welLTherehas,however,beensomeconcernwithindications ofcorrosion inthesteamgenerators ofsuchplants-thetwounitsthattransfertheheatfromtheprimaiynuclearfissionloopandproducethesteamtodrivethe470.megawattturbinegenerator.
Mr.Maier join~RGGE in 1947 and has an M.BA.from the University of Rochester.
Continuing
David C.Heiligman was elected treasurer while retaining his former position of assistant secretary.
: unabated, corrosive actioncouldulti-matelyresultinacostlyshutdownandequipment replacement.
He joined the Company as an accountant in 1963 and has an M.BA.from the University of Rochester.
RGGEhadbeenstudyingtheproblemforyears,andintheregularspringshut-downforrefueling in1980anRGGE-developed processforflushingthesteamgenerators ofcorrosive materials wasused.Encouraging resultswerenotedwhentheplantwasinspected inNovember.
Robert C.Henderson, former assistant controller, was elected vice-president, rates, effective December 1, 1980, replacing John L Kennedy who retired after 40 years of service.Mr.Henderson joined the Company in 1963 as an accountant.
Itappearsthatthedegreeofcorrosion hasbeensignificantly reduced.Onlythreegenerator tubesshoweddamage,whereas31hadtobepluggedinearly1980.ThisRGGEprocesswillbeusedduringeachrefueling
He has an M.BA.from the University of Rochester.
: shutdown, possiblyeliminating anexpensive repairprojectintheyearstocome.Complementing thebreakthrough insteamgenerator
Director Changes In January 1981, the board of directors elected Constance M.Mitchell, Comelius J.Murphy and Leon D.White, Jr.as directors of the Company.Mrs.Mitchell has been active in the Rochester social, civic and political community for more than 25 years.She is community relations coordinator for the Program to Interest Students in Science and Math sponsored by the Industrial Management Council of Rochester, New York, Inc.Mr.Murphy is a group vice.president of Eastman Kodak Company and general manager of the International Photo.graphic Division.Mr.White is RGGE's executive vice-president.
: cleaning, RGGEisexperimenting withaprocessthatisexpectedtoallowrepairofdamagedtubesinthesteamgenerator withoutthepermanent lossofthetube'sfunctionthatnowresultsfromplugging.
Mrs.Mitchell, Messrs.Murphy and White replaced retiring board members Ernest J.Howe and Edward J.Nelson, former presidents of Rochester Gas and Electric Corporation, and William S.Vaughn, former chairman of the board of Eastman Kodak Company.}c onstance M.Mitchetl Comehus J.Murphy Leon D.White, Jr.13 Statement of Changes in Financial Position RES and Electric Corporation (ihousands of Dollars)Year Ended December 31 1980 1979 1978 Sources of Funds Operations Net income.Principal noncash charges (credits)to income Depreciation Amoritzation of nuclear fuel Deferred fuel cost Deferred income taxes, net Allowance for funds used during construction Other, net 27,800 20,789 (4,813)6,927 (18,530)2,452 23,703 17,126 (4,755)2,596 (17,210)1,963 22@06 15,746 976 3,161 (13,517)1,204 S 43,652 S 39,565 S 39,586 , Total from Operations Financing Sale of long term debt Sale of common stock Sale of preferred stock~s from short term debt, net Total from Financing Total Sources of Funds...Gses of Funds Gtility plant Plant additions.
Thenewsleevingprocessinsertsabimetallic tubesleeveupintoandabovethedamagedportionofatube.Thisisexpectedtomaintainsteamgenerator integrity andresultinyearsofcontinued service.ThusRGGEsownresearchanddevel-opmentprogramwillbepayingbigdivi.dendsforshareholders andcustomers, justasitdidafewyearsagowhenRGGEdeveloped themulti.frequency eddycurrenttestingsystemthatstreamlined steamgenerator tubetesting.12AnRGGEemployeetrainsintheCompany's steamgenerator mock.upforthejobofplacingmetalsleevesonworngenerator tubes.
Nuclear fuel additions.Less: Allowance for funds used during construction
Statement ofIncomeRRSandElcctrioOorporrrtion (Thousands ofDollars)Operating Revenues(Note1)Electric.Gas.....................
.Net Additions to Gtility Phnt.Dividends on preferred stock Dividends on preference stock Dividends on common stock Reduction of short term debt, net.Retirement of long term debt Capital stock expense Discount and expense of issuing long term debt.Other, net.increase (decrease) in working capital (excluding short term debt)Total Gses of Funds Changes in Components of Working Capital Increase (decrease) in current assets Cash Accounts receivable, net.Materials and supplies Fossil fuel Construction and other supplies Prepayments Total.Increase (decrease) in current liabilities (excluding short term debt)Accounts payable Taxes Accrued interest and payroll.Long term debt due within one year Other, net Total.Increase (decrease) in working capital (excluding short term debt)..78,277 55,000 25,257 25,000 105.257 S 183,534 S 97,600 8,672 18,530 87,742 6,799 2,128 23,910 24,700 1,343 858 3,896 32,158 S 183,534 S 1,300 17,974 6,274 1,470 59 27,077 749 1,745 1,574 (12,000)2,851 (5,081)S 32,158 62,988 10,000 6,083 25,000 50,000 91,083 S154,071 S109,656 18,981 17,210 111,427 4,517 2,128 22,148 12,000 544 635 (683)1,355 S 154,071 (8,852)5,985 (56)1,117 90 (1,716)3,207 (2,881)1,113 (4,677)167 (3,071)69,362 40,000 27,186 67,186 S136,548 S105,191 20,878 13,517 112,552 3,550 2,128 19,269 9,000 16,677 902 490 (2,037)(25,983)S 136,548 5,160 1,368 1,886 (81)233 8,566 10386 6,725 520 16,677 241 34,549 S (25,983)16 Balance Sheet (Thousands of Dollars)ASSETS Utility Plant, at original cost (Note 1)Electric Gas Steam.Less: Accumulated depreciation and amortization Construction work in progress Net Utility Plant At December 31 1980 849,946 193,863 18,190 1,061,999 337,215 724,784 225,690 950.474 1979 S728,686 182,046 18,064 928,796 295,328 633,468 260,063 893,531 Investment in Subsidiary, at equity.Current Assets Cash Accounts receivable, net of allowance for doubtful accounts: 1980-$1,387;1979-$1,247.Materials and supplies, at average cost Fossil fuel Construction and other supplies P repayments Total Current Assets Deferred Debits Unamortized debt expense..Deferred fuel cost (Note 1)Other Total Deferred Debits Total Assets.CAPITAUZATION AND LIABILITIES Capitalization Long term debt(Note 4).Preferred stock redeemable at option of Company(Note 5)Preferred stock subject to mandatory redemption (Note 6).Preference stock subject to mandatory redemption (Note 6)Common shareholders'quity Common stock (Note 5)Retained earnings Total Common Shareholders'quity.
SteamElectricsalestootherutilities TotalOperating RevenuesOperating Expenses(Note1)Operation ElectricandsteamfuelsPurchased electricity.
Total Capitalization.
Deferredfuel-electric andsteamPurchased naturalgas.Other.Naintenance Depreciation Taxes-local, stateandotherFederalincometax-current (Note2)-deferred (Note2)TotalOperating ExpensesOperating IncomeOtherIncomeandDeductions Allowance forotherfundsusedduringconstruction (Note1)Other,net
Current Liabi!ities Short term debt (Note 7).Long term debt due within one year Accounts payable Taxes accrued, including income taxes.interest accrued.Payroll accrued.Other Total Current Liabilities Deferred Credits and Other Uabilities Accumulated deferred income taxes (Notes 1 and 2)Other Total Deferred Credits and Other Liabilities Commitments and Other Matters (Note 9)Total Capitalization and Liabilities
.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.
..1,968 4,225 55,659 18,891 12,230 1,309 92,314 4,511 14,697 11,416 30,624 S 1,075,380 437,124 67,000 50,000 28,000 291,346 83,970 375,316 957,440 25,300 32,977 10.199 9,959 2,991 4,084 85,510 28,070 4,360 32,430 S 1,075,380 2,062 2,925 37,685 12,617 10,760 1,250 65,237 3,917 10,092 8,011 22,020$82,850'382,162 67,000 25,000 28,000 260,432 80,155 340,587 842,749 50,000 12,000 32,228 8,454 8,427 2,949 1,233 115,291 20,502 4,308 24,810$982,850 15
Mr.WhitejoinedRGGEin1937andhasservedinanumberofelectricandsteammanagement posi~tionsoverhis43-yearcareer.HarryG.Saddockwaselectedtothepositionofseniorvicepresident, financeandrates.Previously hewasvice.president, electnicsystemplanningandoperation.
'Notes to Financial Statements Note 1.Summary of Accounting Policies General.The Company is subject to regulation by the Public Service Commission of the State of New York (PSC)under New York statutes and by the Federal Energy Regulatory Commission (FERC)as a licensee and public utility under the Federal Power Act.Ihe Company's accounting policies conform to generally accepted accounting principles as applied to New York State public utilities giving effect to the rate-maMng and accounting practices and policies of the PSC.A description of the Company's principal accounting policies follows.Gtility Plant and Depreciation.
Mr.Saddock,alicensedpro-fessional
The cost of additions to utility plant and rephcement of retirement units of property is capitalized.
: engineer, joinedtheCompanyin1950andprogressed throughanum.berofmanagement positions intheelectricandelectricsystemplanningdepartments.
Cost indudes labor, material, and simihr items as well as indirect charges for engineering, supervision, etc.The Company capitalizes an allowance for funds used during construction approximately equivalent to the cost of capital devoted to phnt under construction.
MaiioSilvestrone waselectedseniorvicepresident, generalservices.
Replacement of minor items of property is included in maintenance expenses.Costs of depreciable units of plant retired are eliminated from utility plant accounts, and such costs, plus removal expenses, less salvage, are charged to accumuhted depreciation and amortization.
Inaddi-tiontohispreviousresponsibilities asvicepresident, consumerservices, publicaffairsandpurchasing, heisadminister-ingemployeerelations andinformation systems.Mr.Silvestrone hadservedinvariousmanagement positions inthemarketing andsalesdepartments sincejoiningtheCompanyin1950.Heisalicensedprofessional engineerandholdsanMBA.fromtheUniveisityof Rochester.
Depreciation in the financial statements is provided on a straight line basis at rates based on the estimated useful lives of property, which have resulted in provisions of 3.1X per annum of average depreciable property in 1980, 1979 and 1978.Nuclear Fuel and Decommissioning Costs.'Ihe cost of nuclear fuel and estimated permanent storage costs of spent nuclear fuel are charged to operating expense on the basis of the thermal output of the reactor.These costs are charged to customers through base rates and the fuel cost adjustment clause.Due to a Federal government policy adopted in 1977, the Company changed its nuclear fuel cost computation to reflect the costs of permanent storage of spent nuclear fuel.Prior years'uclear fuel cost computations had anticipated that spent nuclear fuel would be reprocessed.
JohnEArthurwasnamedvice.presi-dent,engineering andchiefengineer.
Cumulative prior years'uel expenses would have been increased by approximately SI5.9 million if they had been determined on the basis of current cost estimates for permanent storage of spent nuclear fuel, rather than on an estimated amount for reprocessing.
Mr.Arthur,whoseformerpositionwaschiefengineer, hasbeenwithRGGEsince1955andisalicensedprofessional engineer.
In the Company's most recently concluded electric rate filing, the PSC permitted the amortization and recovery of approximately
DavidK.Laniakbecamevice-president, electricsystemplanningandoperation, wherehewaspreviously superintendent.
$12 million of such additional costs through rates over a 10 year period, commencing in August 1980.Decommissioning costs (costs to take the plant out of service in the future)for the Company's Ginna nuclear power plant are estimated by the Company to be$37 million in 1979 dollars with decommissioning expected to commence in the year 2006.In August 1980, the Company began accruing these costs over the remaining life of the facility at an initial rate of$3.1 million per year.These accruals are included in base rates pursuant to the PSC order referred to previously.
Mr.LaniakcametotheCompanyin1954andheldanumberofpositions intheelectricmeterdepartment beforemovingtosystemplanning.
Allowance for Funds Gsed During Construction.
JohnE.Maier,formervice.president, employeerelations, waselectedvice.president, electricandsteamproduction.
The Company capitalizes an Allowance for Funds Gsed During Construction (AFDC)based upon the net cost of borrowed funds for construction purposes and a reasonable rate upon the Company's other funds when so used.The rates used for this purpose were 10.5X, 9.5X and 8.75X in 1980, 1979 and 1978, respectively.
Mr.Maierjoin~RGGE in1947andhasanM.BA.fromtheUniversity ofRochester.
As of January 1981, the rate is 113X.In accordance with an order issued by the FERC, AFDC is segregated into two components and classified in the Statement of Income as Allowance for Borrowed Funds Gsed During Construction, an offset to Interest Charges, and Allowance for Other Funds Gsed During Construction, a part of Other Income.Since December 1977, the Company has computed AFDC on its share of the Niagara Mohawk Power Corporation Nne Nile Point Nuclear Gnit<<2 and Oswego Fossil Gnit."6, until its July 1980 in.service date, at an average reduced rate which is net of the income tax effect of the interest portion of AFDC.Snce May 1979, this treatment has also been applied to the Company's investment in its Sterling nuclear unit.The rates for 1980, 1979 and 1978 were 8.0X, 7.51X and 6.85X, respectively.
DavidC.Heiligman waselectedtreasurer whileretaining hisformerpositionofassistant secretary.
Rates and Revenue.Revenue is recorded on the basis of meters read during the calendar year.Tariffs for electric and steam service include fuel cost adjustment clauses, which serve to adjust electric and steam rates monthly to reflect changes in the average cost of fuels used in electric and steam generation from the average cost of such fuels during the base period.Tariffs for gas service contain a comparable chuse to adjust gas rates for changes in the price of purchased natural gas.Deferred Fuel Costs.Fuel costs which are recoverable under the electric, gas and steam cost adjustment chuses included in the tariff schedules of the Company are deferred until they are billed to customers.
HejoinedtheCompanyasanaccountant in1963andhasanM.BA.fromtheUniversity ofRochester.
A reconciliation of recoverable gas costs with billed gas revenues is done annually as of August 31, and the excess or deficiency is refunded to or recovered from the customers during a subsequent twelve month period.Federal Income Tax.For income tax purposes, depreciation is computed using the most liberal methods permitted.
RobertC.Henderson, formerassistant controller, waselectedvice-president, rates,effective December1,1980,replacing JohnLKennedywhoretiredafter40yearsofservice.Mr.Henderson joinedtheCompanyin1963asanaccountant.
In addition, certain costs capitalized for financial reporting purposes are deducted currently for income tax purposes.The resulting tax reductions are offset by provisions for deferred income taxes only to the extent ordered or permitted by regulatory authorities.
HehasanM.BA.fromtheUniversity ofRochester.
The I OX investment tax credit rate, which had been scheduled to return to 4X in 1981, has been made permanent by the Revenue Act of 1978.The prior rate of 4X is applied to reduce the current tax provision while, as recommended by the PSC, normalized tax accounting is followed in the application of the remaining 6X.The Company uses the separate period approach in calculating the interim quarterly tax provision.
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.
Pension Plan.The Company's retirement plan is noncontributory and covers all regular employees.
Mr.WhiteisRGGE'sexecutive vice-president.
Expenditures made by the Company to the retirement phn for the years 1980, 1979 and 1978 were$11.4 million,~10.6 million and S.9 million, respectively, which includes amortization for: past service costs over 40 years, changes in the plan over 30 years, and experience gains or losses over 15 years.The actuarial methods and the accounting policy 17 Actuarial present value of accumuhted phn benefits: Vested Nonvested S107,486 S 99gZO 8,885 1,677 SI 16,371 SI 00,897 Market value of assets available for benefits..S 94,499 S 80,082 (a)Most rearit avaihble data Ihe actuarially assumed rate of return on the plan investments, used in determining the actuarial present value of accumulated plan benefits, was 6X for all years shown.The increase in 1980 of used to determine Company expenditures were the same each year.A comparison of accumulated plan benefits and plan net assets is presented below.(Thousands)
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.
January 1 1979 1980 (a)the present value of plan benefits reflects an increase in benefits to retired participants and a change in actuarial assumptions regarding the provision for anciihry benefits and the application of the ERISA maximum to all benefits.Earnings and Dividends Per Share.Earnings applicable to each share of common stock are based on the weighted average number of shares outstanding during the respective years, adjusted for stock dividends.
Nuclearfueladditions
Assuming the 1,500,000 shares of common stock issued on November 19, 1980 were outstanding at the beginning of 1980 and the proceeds were applied to reduce the short term debt, the earnings per share for 1980 would have been~2.02, compared with the reported amount of 0.10.Cash dividends per share, as shown on page 14, are based on the shares outstanding at the time dividends are paid, adjusted for stock dividends.
.Less:Allowance forfundsusedduringconstruction
Cash dividends per share at the rates declared in each period were$1.49 for 1980,~1.46 for 1979 and 41.42 for 1978.Note 2.Federal Income Taxes (Thousands of Dollars)'The provision for Federal income taxes is distributed between operating expense and other income based upon the treatment of the various components of the provision in the rate making process.At right is a summary of income tax expense for the three most recent years.The following is a recondliation of the difference between the amount of Federal income tax expense reported in the Statement of Income and the amount computed by mu!Iiplying the income before tax by the statutory tax rate.Charged to operating expense Current Deferred.................
.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.............
Total.............
Creditedtootherincome:CurrentDeferred.............
Credited to other income: Current Deferred.............
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
Total..1980 1979 1978 393 S (36)S 5,166 12343 6,782 5,875 1?836 6,746 11,041 (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
..S 6,927 S 2~9 S 5926 1980 1979 1978%of%of Pretax Pretax Amount income Amount Income%of Pretax Amount Income Net income Add: Federal income tax expense.~43,652 6,927 S39,565 2,239$39,586 5,826 income before Federal income tax.Computed tax expense Increases (decreases) in tax resulting from: Excess of tax depredation less amount deferred Expenses capitalized for Iinanchl reporting purposes, induding interest, payroll and use tax, etc.Investment tax credit propertytaxes onbasis of date of taxable status Revenue taxes (deducted when paid).Miscellaneous items, net.Total Federal Income tax expense A summary of the deferred amounts charged or (credited) to income is as foihws: (11,232)(458)(1,310)866 296 (22.2)(10,763)(25.7)(9)(579)(14)(2.6)(698)(1.7)1.7 381.9.6 (1,187)(2.8)(9,361)(20.6)(4,955)(10.9)2?A.5 2,133 4.7 (487)(1.1)S 6,927 13.7 S 2,239 5.4 S 5,826 I?8 S50,579 S45,412 S23,266 46.0 S19,230 46.0 S21,797 4IM (4,501)(8.9)(4,145)(9.9)(3,525)(7.8)Investment tax credit Class life depredation Fuel costs...............
: 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...............
Nuclear fuel storage costs.Sterling abandonment Other.1980 S (458)2,446 2,195 (2,808)4,656 896 1979 (222)?076?108 (2,672)1,306 1978 s 6,629 1,763 (469)(4,989)227 Total S 6,927 S 2,596 S 3,161 At December 31, 1980, the Company had approximately
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
$21.6 million of investment tax credits for both financial reporting and tax purposes that are available to be camed forward.Such credits, if not utilized beforehand, will expire as follows: 1985-$938,000;1986-S12,490,000; and 1987-S8,142,000.
$21.6millionofinvestment taxcreditsforbothfinancial reporting andtaxpurposesthatareavailable tobecamedforward.Suchcredits,ifnotutilizedbeforehand, willexpireasfollows:1985-$938,000;1986-S12,490,000; and1987-S8,142,000.
For tax purposes, the Company has a net operating loss carryforward of$11,966,000 avaihb!e through 1987, arising primarily from the abandonment of the Sterling nuclear plant.18 Note 3.Oepartrnental Financial Information (Thousands of Dollars)Ihe Company's records are maintained by operating departments, in accordance with PSC accounting policies, giving efFect to the rate-maMng process.The following is the operating data for each of the Company's departments and no interdepartmental adjustments are required to arrive at the operating data included in the Statement of Income.Electric Gas Steam Total Operating information
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
-1980 Operating revenues.Operating expenses, exduding provision for income taxes S297,791 237,142 S181,046 170,546 S23,589 S 502,426 22370 430,058 Pretax operating income.Provision for income taxes Net operating income.Other income.net.Interest charges.Net income per statement of income.60,649 10,500 1319 72,368 11,169 1310 357 12,836 s 49,480 S 9,190 S 862 59,532 16,482 32362 43,652 Other information Depredation
: policies, givingefFecttotherate-maMng process.Thefollowing istheoperating dataforeachoftheCompany's departments andnointerdepartmental adjustments arerequiredtoarriveattheoperating dataincludedintheStatement ofIncome.ElectricGasSteamTotalOperating information
.Nuclear fuel amortization
-1980Operating revenues.
.Capital expenditures
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
.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
-December 31, 1980 Identifiable assets.Assets utilized for overall Company operations (a).Total assets per balance sheet S 21,859 S 20,789 S 75,080 s 5837 s>>,966 S870,603 S1 76335 604 S 27,800 20,789 696 S 87,742 S16,439 S1,063/77 12,003 S1,075,380 Operating information
-1979Operating revenues.
-1979 Operating revenues.Operating expenses, exduding provision for income taxes.Pretax operating income.Provision for income taxes Net operating income..Other income, net.interest charges.Net income per statement of income.~257,177>140,527 SI9,988 S417,692 209~129,645 19,896 358,824 47,894 10,882 92 58,868 5,600 1314 (168)6,746~42294>9~S 260 52,122 15313 27,770 s 39,565 Other information Depredation
Operating
.Nuclear fuel amortization
: 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
.Capital expenditures
.Nuclearfuelamortization
.Capitalexpenditures
.........................
.........................
Investment information
Investment information
-December31,1979klentifiable assets.AssetsutilizedforoverallCompanyoperations (a).TotalassetsperbalancesheetS18,224S17,126S97,5774g$8SI3Sl34S789432$166,274591416sI6,41523,70317,126>>1,427S972,52110,329S982850Operating information
-December 31, 1979 klentifiable assets.Assets utilized for overall Company operations (a).Total assets per balance sheet S 18,224 S 17,126 S 97,577 4g$8 S I3Sl34 S789432$166,274 591 416 sI6,415 23,703 17,126>>1,427 S 972,521 10,329 S 982850 Operating information
-1978Operating revenues.
-1978 Operating revenues.Operating expenses, exduding provision for income taxes.S231307 S>>8,531 S19,>>0 S368,948 181,428 107,873 19357 308,658 Pretax operating income.Povtsion for income taxes 49@79 9,244 10,658 1,966 (247)60390 (169)11,041 Net operating income Other income, net.Interest charges.Net income per statement of income.S 40,635 S 8,692 S (78)49,249 13,123 22,786 s 39,586 Other information Depreciation
Operating
.Nudear fuel amoization
: 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
.Capita!expenditures
.investment information
.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~
-December 31, 1978 Ident Table assets.Assets utilized for overall Company operations (a)Total assets per balance sheet (a)Consists primarily of cash, prepayments and unamortized debt expense.s le,984 S 15,746 Sioo,i94 S711,917 S>>,903 sI46&9 581 455 S15,716 s 22,206 S 15,746 S112,552 S873,932 19,454 S893~
Note4.LongTermDebtFirstMortgageBondsSenesDue(Thousands)
Note 4.Long Term Debt First Mortgage Bonds Senes Due (Thousands)
Principal AmountDecember31198019792Y4M3YsH3Ys04~8R5S4'/zT4Ye(15.3V6'/iW6.7X8Y9YeZ10NAA9i/4.BB8%CC9'/zDD6'hEE10.95FFAug.15,1980...June1,1982....
Principal Amount December 31 1980 1979 2Y4 M 3Ys H 3Ys 0 4~8 R 5 S 4'/z T 4Ye (1 5.3 V 6'/i W 6.7 X 8 Y 9Ye Z 10N AA 9i/4.BB 8%CC 9'/z DD 6'h EE 10.95 FF Aug.15, 1980...June 1,1982....
Mar.1,1985
Mar.1,1985
....July1,1987.....
....July 1, 1987.....Oct.15,1989
Oct.15,1989
...Nov.15,1991
...Nov.15,1991
...Sept.15,1994...May1,1996.....
...Sept.15, 1994...May1,1996.....
Sept.15,1997...July1,1998.....
Sept.15, 1997...July 1, 1998.....Aug.15, 1999...Sept.1, 2000....Aug.1, 1983....June 15,2006...
Aug.15,1999...Sept.1,2000....Aug.1,1983....June15,2006...
Sept.15, 2007...Dec.1~2003....Aug.1,2009....Feb.15.2005...S 6,O0O 10,000 15,000 12,000 15,000 16,000 18,000 20,000 30,000 30,000 30,000 29,667 50,000 50,000 40,000 10,000 55.000 S 12,000 6,000 10,000 15,000 12,000 15,000 16,000 18,000 20,000 30,000 30,000 30,000 29,667 50,000 50,000 40,000 10,000 436,667 393,667 Add: Bond premium, net of discount..Less:Duewithinoneyear
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).
457 495 12,000 Total Long Term Debt...S437,124 S382,162 The Mortgage provides security for the bonds through a first lien on substantially all the property owned by the Company (except cash and accounts receivable).
Sinkingandimprovement fundrequirements aggregate S333,540perannum.Suchrequirements maybemetbycertification ofadditional propertyorbydepositing cashwiththeTrustee.The1980and1979requirements weremetbycertification ofadditional property.
Sinking and improvement fund requirements aggregate S333,540 per annum.Such requirements may be met by certification of additional property or by depositing cash with the Trustee.The 1980 and 1979 requirements were met by certification of additional property.The Series EE First Mortgage Bonds equal the principal amount of and provide for all payments of principal, premium and interest corresponding to the Pollution Control Revenue Bonds, Series A (Rochester Gas and Electric Corporation Projects)issued by the New York State Energy Research and Development Authority through a participation agreement with the Company.The Series EE bonds are subject to a mandatory sinking fund beginning August 1, 2000 and each August 1 thereafter.
TheSeriesEEFirstMortgageBondsequaltheprincipal amountofandprovideforallpaymentsofprincipal, premiumandinterestcorresponding tothePollution ControlRevenueBonds,SeriesA(Rochester GasandElectricCorporation Projects) issuedbytheNewYorkStateEnergyResearchandDevelopment Authority throughaparticipation agreement withtheCompany.TheSeriesEEbondsaresubjecttoamandatory sinkingfundbeginning August1,2000andeachAugust1thereafter.
Nine annual deposits aggregating
Nineannualdepositsaggregating
~3.2 million will be made to the sinking fund, with the balance of R.8 million principal amount of the bonds becoming due August 1, 2009.The Series FF bonds are subject to a mandatory sinking fund of~2.8 million annually beginning February 15, 1986 and each February 15 thereafter, with the noncumulative option to double the payment in any year up to a maximum of 5 years.The Company's maturities for the next five years are 8 million in 1982 for Series N,$29.7 million in 1983 for Series AA and 410 million in 1985 for Series O.Note 5.Capital Stock Type, by Order of Seniori Par Shares Shares Value Authorized Outstandin Preferred Stock (cumuhtive)
~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)
4100 2,000,000 1,170,000 (a)Preferred Stock (cumuhtive)
...........
...........
25Preference Stock1CommonStock..........
25 Preference Stock 1 Common Stock..........
5(a)SeeNote6formandatory redemption.
5 (a)See Note 6 for mandatory redemption.(b)Redeemable at the option of the Company on 30 days minimum notice, p!us accrued dMdends in ail cases.S12,000 8,000 6,000 5,000 6,000 10,000 20,000 4 F 120,000 4.10 H 80,000 4Y i 6O',OOO 4.10 J 50,000 4.95 K 60,000 4.55 M 100,000 7.50 H 200,000 S12,000 8,000 6,000 5,000 6,000 10,000 20,000 670,000$67,000 S67,000 105 At any time 101 At anytime 101 At anytime 102.5 At anytime 102 At anytime 101 At anytime 106 Before 6/1/82 Preferred Stock, not subject to mandatory redemption: (Thousands)
(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:
Shares December 31 Redemption Series Outstandin 1980 1979 (r share)(b)Common Stock: Per Share Shares (Thousands)
(Thousands)
Amount Outstanding, January 1, 1978.3X Stock Dividend Sale d Stock Automatic Dividend Reinvestment Phn.Capital Stock Expense Outstanding, December 31, 1978.3%Stock Dividend Automatic Dividend Reinvestment Phn.~p'apital Stock Expense Outstanding, December 31, 1979.3%Stock Dividend Sale of Stock Automatic DMdend Reinvestment Phn Capital Stock Expense Outstanding, December 31~1980.'Tax Reduction Act Stock Ownership Plan S2L00 18.75 17.19-19.25 18.00 1481-1725 15.86 15.00 13.25 1350-14.25 1?889,631 386,689 1g50,000 206,427 14,732,747 441,983 309,747 70/84 15,554381 466,646 1,500,000 388,038 17,909,545 8,120 23,438 3,749 (902)246,938 7,955 4,967 1,116 (544)260,432 7,000 19,875 5~2 (1,343)S291~6 At December 31, 1980 there were 318,01 2 shares of common stock reserved and unissued under the Automatic Dividend Reinvestment Plan.No other shares of common, preferred or 20 preference stock are reserved for oHicers or employees, or for options, warrants, conversions, or other rights.
SharesDecember31Redemption SeriesOutstandin 19801979(rshare)(b)CommonStock:PerShareShares(Thousands)
Note 6.Preferred and Preference Stock Subject to Mandatory Redemption The Company is obligated to redeem shares of preferred stock as follows: (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.
Shares December 31 Redemption Series Outstandin 1980 1979 (r share)Redemption Series Value 1985 (Thousands) 1984 The Company's maximum redemption requirements through 1985are as follows: Preferred Stock P 250,000 S25,000~25,000 108.60 Before 9/1/84 (a)1084 Q 250000 25,000 110.84 Before 9/1/85 (a)Preferred Preferred Preference P S100 0 8,125 Q 100 8,125 A 100 28,000 S8,125 500,000 450,000$25,000 Preference Stock 7.6 A 280,000$28,000~28,000 (b)(a)Commencing on September 1, 1984 for Series P and on September 1, 1985 for Series Q and on each September 1, thereafter, the Company must redeem 8,125 shares at 4100 per share by means of a sinking fund provision with the noncumulative option to redeem not more than 8,125 additional shares on the same terms.In the event the Company should be~44350 S8,125 in arrears in the sinking fund requirement, the Company may not redeem or pay dividends on any stock subordinate to the pmferied stock (b)During January 1985, the Company must offer to purchase on October 1, 1985 ail of the outstanding 7.6%Series A Preference Stock at a price of SI00 per share.The shares remaining outstanding after such offer are caihble at$100 per share at the option of the Company at any time after December 20, 1987.Note 7.Short Term Debt At December 31, 1980 and 1979, the Company had short term notes outstanding of$10 million and$25 million, respectively, and commercial paper outstanding of 4153 million and$25 million, respectively.
Note6.Preferred andPreference StockSubjecttoMandatory Redemption TheCompanyisobligated toredeemsharesofpreferred stockasfollows:(Thousands)
The weighted average interest rates for 1980 were 14.53X for short term notes and 12.24X for commercial pa per, and for 1979 were 13.75X for short term notes and 11.50X for commercial paper.The Company had established bank lines of credit totaling~80 million at the end of the year.Since January 1,1979, the Company has maintained its lines of credit by payment of commit.ment fees based on a percentage of floating prime rates.Prior to that date, the lines of credit were maintained through the use of compensating balance arrangements.
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.
Commitment fees paid in 1980 and 1979 were 4552/96 and$280178, respectively.
Theweightedaverageinterestratesfor1980were14.53Xforshorttermnotesand12.24Xforcommercial paper,andfor1979were13.75Xforshorttermnotesand11.50Xforcommercial paper.TheCompanyhadestablished banklinesofcredittotaling~80millionattheendoftheyear.SinceJanuary1,1979,theCompanyhasmaintained itslinesofcreditbypaymentofcommit.mentfeesbasedonapercentage offloatingprimerates.Priortothatdate,thelinesofcreditweremaintained throughtheuseofcompensating balancearrangements.
Note 8.jointly&wned Facilities The fo!lowing table sets forth the jointlyawned electric generating projects in which the Company is partidpating.
Commitment feespaidin1980and1979were4552/96and$280178,respectively.
Each participant must provide its own financing for the Nne Mile Point unit in the process of construction and for any additions to the Oswego unit.Oswego Hineivtile Fossil Point Nuclear Gnit<<6 Gnit<<2 (I)(2)(3)(1)(3)The Company's share of direct expenses associated with the Oswego unit is included in the appropriate operating expenses in the Statement of Income.Net megawatt capacity......RGGEs share-megawatts...
Note8.jointly&wned Facilities Thefo!lowingtablesetsforththejointlyawned electricgenerating projectsinwhichtheCompanyispartidpating.
-percent.....Year of completion..........
Eachparticipant mustprovideitsownfinancing fortheNneMilePointunitintheprocessofconstruction andforanyadditions totheOswegounit.OswegoHineivtile FossilPointNuclearGnit<<6Gnit<<2(I)(2)(3)(1)(3)TheCompany's shareofdirectexpensesassociated withtheOswegounitisincludedintheappropriate operating expensesintheStatement ofIncome.Netmegawattcapacity......RGGEsshare-megawatts...
Total estimated project costs...........
-percent.....Yearofcompletion..........
RGGEs share.RGGEs actual construction costs-1979-1980 Expended by RGGE in prior years......
Totalestimated projectcosts...........
Accumulated depredation (Commenced in 1980)..S 10.0 6.0 45.5 S 61.5(4)4113.0 s (1.2)850 1,084 204 152 24 14 1980 1986 (Millions of Dollars)s24162 (5)3523 S 23.7 18.8 70.5 (1)Constructed and operated by Yiagara ivtohavA<Power Corpomtion.
RGGEsshare.RGGEsactualconstruction costs-1979-1980ExpendedbyRGGEinprioryears......
(2)inaccordance with an order issued by the PSC, the Company deferred ail income and expenses associated with this unit until the plant was added to rate base in July 1980 for mte making purposes.(3)Construction costs exclude allowance for funds used during construction and certain overhead costs to be capitalized.
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<
(4)it is anticipated that modifications will be made to the existing plant to increase opemting eHidency or reliability.
PowerCorpomtion.
Costs associated with these modifications are not included.(5)lhe present cost estimate excludes common facilities, but includes$116.2 million for initial nuclear fuel loading.
(2)inaccordance withanorderissuedbythePSC,theCompanydeferredailincomeandexpensesassociated withthisunituntiltheplantwasaddedtoratebaseinJuly1980formtemakingpurposes.
Note 9.Commitments and Other Matters The Company's capital expenditures program involves an estimated expenditure of 4131.1 million in 1981, not including allowance for funds used during construction, and the Company has enteml into certain commitments for purchase of materials and equipment in connection with such program.Operations of the Company's generating stations are subject to various Federal, state and local environmental standards.
(3)Construction costsexcludeallowance forfundsusedduringconstruction andcertainoverheadcoststobecapitalized.
Under the Clean Water Act, the Company has obtained permits to discharge pollutants into the water bodies adjoining its facilities.
(4)itisanticipated thatmodifications willbemadetotheexistingplanttoincreaseopemtingeHidencyorreliability.
The United States Environmental Protection Agency(EPA) issued National Pollutant Discharge Elimination System permits for all the Company's major generating facilities, but a number of conditions relating to thermal and chemical discharge limitations were contested by the Company in adjudicatory hearing requests submitted to EPA.The Company, the New York State Department of Environmental Conservation"NYSDEC'which became a party to the adjudicatory hearings)and EPA have settled the hearing requests as described be!ow.The Company has reached agreement with the regulatory agencies on non thermal eNuent limitations and final permits containing these agreed limitations have been issued and are now continuing in effect, pending final action by NYSDEC on applica-tions to renew these permits.Construction of treatment facilities required for Company compliance with permit limitations at two of the Company's generating stations was completed in 1980.Construction costs of these two facilities totaled S11.9 million.The Company has pursued resolution of the contested thermal limitations by submitting demonstrations in an effort to justify less stringent limitations for three generating stations.The thermal conditions of the permits remain stayed pending resolution of the thermal issues either through regulatory agencies'pproval of the demonstrations and less stringent thermal limitations or, in the absence of such approval, through the resumption of the adjudicatory hearing process.If the demonstrations and less stringent thermal limitations are not approved for any of the three facilities, the Company could be required to install cooling towers which would involve capital expenditures estimated at R7 million plus significant operating and maintenance expenses.The National Pollutant Discharge Elimination System permits issued in 1978 expired on March 30, 1980.The Company applied to NYSDEC for renewal of these permits.NYSDEC has extended the Company's edsting permits until final action is taken on the pending renewal applications.
Costsassociated withthesemodifications arenotincluded.
The Company believes that additional expenditures and costs made necessary by environmental regulations will be fully allowable for rate making purposes.In the mid 1970's, the Companyand three other New York State utilities agreed to share in the cost of a proposed nuclear.powered electric generating plant which the Company would license, build, and operate for the group at Sterling, Cayuga County, New York Output of the plant was to have been shared in the same proportions; the Company's share was 28K Although state and federal authorizations for construction were obtained, the State siting agency ultimately revoked its authorization and the federal construction permit was also withdrawn.
(5)lhepresentcostestimateexcludescommonfacilities, butincludes$116.2millionforinitialnuclearfuelloading.
The participating utilities elected not to appeal those decisions, but to terminate the project At December 31, 1980, the Company's net investment in the plant is summarized as follows (in thousands of dollars): Construction costs Less: Estimated tax effect of abandonment
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.
$37,300.11,800$m,m The Company's share of the estimated contract termination costs would be S7 million, prior to tax savings.The Company and the three other utilities participating in the Sterling project have petitioned the PSC for permission to amortize their investment in the plant as a cost of service over a period of time to be determined in each participant's currently pending rate case.Proceedings were commenced by the PSC in 1980 to examine the costs incurred by the petitioners, to determine their prudence and to decide the request for amortization of the extraordinary property loss in rates.The proceeding was initially divided into two phases: Phase I to resolve certain general principles and phase II to conduct a more detailed examination of individual cost items.A Phase I-A was later added by the Commis.sion to consider a proposal that the participants not recover through rates the carrying charges on the unamortized investment and to consider"any other issue of ultimate responsibility for Sterling costs".Phase I was concluded with an Opinion and Order dated January 6, 1981, which provided, in part, that the categories ofexpenditures incurred for the project up to January11, 1978 were prudent in principle.
Asaresult,PhaseIIoftheproceedings hasbeenexpandedtoconductanexamination oftheprudenceofcategories ofexpenditure afterJanuary11,1978,alongwithamoredetailedexamination ofindividual costitems.TheOpinion,however,didstatethatwithregardtotheprudenceofcategories ofexpenditures betweenJanuaiy11 andMay4,1978,thePSCStaffandintervenors willhavetheburdenofgoingforwardinshowinganycategorytobeimprudent.
As a result, Phase II of the proceedings has been expanded to conduct an examination of the prudence of categories of expenditure after January 11, 1978, along with a more detailed examination of individual cost items.The Opinion, however, did state that with regard to the prudence of categories of expenditures between Januaiy11 and May 4, 1978, the PSC Staff and intervenors will have the burden of going forward in showing any category to be imprudent.
TheCompanybelievesthatalloftheexpenditures incurredontheSterlingprojecthavebeenreasonable andprudent,andtherefore willultimately berecovered throughrates.'The Companyalsobelievesthatdecisions ofthePSCsupporttheCompany's requestforanappropriate canyingchargeontheunamortized investment.
The Company believes that all of the expenditures incurred on the Sterling project have been reasonable and prudent, and therefore will ultimately be recovered through rates.'The Company also believes that decisions of the PSC support the Company's request for an appropriate canying charge on the unamortized 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.
The utilities participating in the Sterling project received an order dated February 19, 1980 from the PSC, in which it was ordered"(T)hat the petitioners be allowed to continue, until such time as amortization commences to be recovered in rates, to accrue and accumulate an allowance for funds used during construction with respect to project costs." The investment of$373 million mentioned above includes S2.5 million in AFDC accrued during 1980 pursuant to this order.With respect to a similar continuation of AFDC under the accounting procedures prescribed by the FERC, authorization by the FERC is necessary.
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.
Such action was requested on March 7, 1980.I1ie FERC has not acted on the matter.If the FERC does not authorize continuation of accrual and accumuhtion of AFDC on the Sterling project and if alternative regulatory relief equivalent thereto is not granted by the FERC, then the participants will not be permitted to include in financial reports, based on the FERC System of Accounts, the AFDC accrued on their investment subsequent to the effective date of the discontinuance of the project.However, on the basis of the PSC order of February 19, 1980, the participants would continue to accrue and accumulate such AFDC for PSC reguhtoiy purposes and for purposes of financial reports based on PSC accounting.
Legalactionshavebeeninstituted againsttheCompanyseeking$34.5millionincompensatory andWmillioninpunitivedamagesforallegedpersonalinjuriesasaresultofexposuretoradiation attheCompany's Ginnanuclearpowerplantin1974.TheCompanyhasnotcompleted itsinvestigation oftheplaintiffs'llegations anditcannotnowpredicttheoutcomeoftheseactions,norcanitpredictwhetheranyadditional similaractionsmightbecorn.menced.Based,however,onitsinvestigation todate,theCompanydoesnotbelievethephintiffs willprevailonthemerits,anditintendstocontesttheseclaimsvigorously.
Legal actions have been instituted against the Company seeking$34.5 million in compensatory and W million in punitive damages for alleged personal injuries as a result of exposure to radiation at the Company's Ginna nuclear power plant in 1974.The Company has not completed its investigation of the plaintiffs'llegations and it cannot now predict the outcome of these actions, nor can it predict whether any additional similar actions might be corn.menced.Based, however, on its investigation to date, the Company does not believe the phintiffs will prevail on the merits, and it intends to contest these claims vigorously.
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.
The Company is fully insured for the total compensatory damages that are sought in these actions, and its insurer has advised the Company that it will fully defend all claims.However, the insurer has dischimed any obligation for the payment of any punitive damages which may be assessed against the Company.There is precedent in New York State that it is contrary to public policy for an insurance carrier to pay punitive damages assessed against its insured, but it is unclear whether that precedent would apply to the nuclear liability insurance involved in these actions.The Company intends to contest the disclaimer of coverage for punitive damages.An additional legal action has been brought by the plaintiffs in those actions.T1iis action seeks to recover~10 million in compensatory damages and S13 million in punitive damages for various alleged wrongs arising out of a Company interoffice memorandum advising its facility supervisors that none of the plaintiffs should be permitted on the Company's property.These claims are not covered by insurance, and the Company will defend them vigorously.
Theseclaimsarenotcoveredbyinsurance, andtheCompanywilldefendthemvigorously.
On January 19, 1981, the PSC approved the merger of the Company and Pavilion Natural Gas Company (Pavilion).
OnJanuary19,1981,thePSCapprovedthemergeroftheCompanyandPavilionNaturalGasCompany(Pavilion).
It is expected that the merger will take place on February 28, 1981, at which time the Company will issue up to 98,006 additional shares of common stock in exchange for the common stock of Pavilion.The merger will be accounted for as a pooling of interests.
ItisexpectedthatthemergerwilltakeplaceonFebruary28,1981,atwhichtimetheCompanywillissueupto98,006additional sharesofcommonstockinexchangeforthecommonstockofPavilion.
Had the merger occurred in 1980, the effects on reported operating revenues, net income and earnings per share would have been immaterial.
Themergerwillbeaccounted forasapoolingofinterests.
Report of Independent Accountants To the Shareholders and Board of Directors of Rochester Gas and Electric Corporation In our opinion, the accompanying bahnce sheets and the related statements of income, retained earnings, and of changes in financial position appearing on pages 14 through 16 present fairly the fiinancial'position of Rochester Gas and Hectric Corporation at December 31, 1980 and 1979, and the results of its operations and the changes in its financial position for each of the three years in the period ended December 31, 1980, in conformity with generally accepted accounting principles consistently applied.Our examinations of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
Hadthemergeroccurredin1980,theeffectsonreportedoperating
1900 Lincoln First Tower Rochester, New York 14604 January 30, 1981 Supplemental Information Concerning the Effects of Inflation The estimates of the effect of inflation on the operations of the Company, as set forth below, were prepared on bases prescribed by the Financial Accounting Standards Board (FASB)Statement No.33,"Financial Reporting and Changing Prices." This statement requires adjustments to historical costs to estimate the effects that general inflation (Constant Dollar)and changes in specific prices (Current Cost)have had on the Company's results of operations.
: revenues, netincomeandearningspersharewouldhavebeenimmaterial.
These data are not intended as substitutes for earnings reported on a historical cost basis.They offer some perspective of the approximate effects of inflation rather than a precise measurement of these effects.Utility Plant.Estimated utility plant, primarily consisting of plant in service and construction work in progress, was determined for constant dollars by applying the Consumer Price Index for All Urban Consumers (CPI.U)to the historical cost of utility plant.Ihe current cost estimates were measured by applying the Handy.Whitman Index of Public Utility Construction Costs to the historical cost of utility plant.Current cost is an estimate of the cost of currently replacing existing plant.The resulting adjusted data for plant under either of the above methods is not necessarily indicative of the Company's future capital requirements because the actual replacement of existing plant will take place over many years and is not likely to be a reproduction of presently existing plant.Ihe difference between current cost and the constant dollar data results from specific prices of plant increasing at a rate different from the rate of general inflation.
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.
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............
Ihe accumulated provision for depreciation for constant dollars and current cost was developed by applying, for each class of plant, the same percentage relationship that existed between gross plant and accumulated provision for depreciation on a historical basis to the respective adjusted plant data.Depreciation Expense.Depreciation expense for both methods was determined by applying the Company's depreciation rates to the respective indexed plant amounts.Reduction of Utility Plant to Net Recoverable Cost.1he regulatory process limits the Company to the recovery of the historical cost of service in its rates.'Iherefore, any excess of the value of utiTity plant under constant dollars or current cost must be reduced to the net recoverable cost, which is historical cost.Ihe amount of this excess that accrued as a result of inflation in the current year must be reduced to net recoverable cost.Gain From the Decline of Purchasing Power of Net Amounts Owed.The Company, by holding assets such as receivables, prepay.ments, and inventory, suffers a loss of purchasing power during periods of inflation because the amount of cash received in the future for these items will purchase less.Conversely, by holding monetary liabilities, primarily long term debt, the Company benefits because the payment in the future will be made with nominal dollars having less purchasing power.The Company has significant amounts of long term debt outstanding which will be paid back in dollars having less purchasing power and, therefore, for purposes of these calculations, has a net gain from holding monetary liabilities in excess of monetary assets.Increase in provision for depreciation Increase in general price level less increase in specific prices.......Reduction of utility plant to net recoverable cost............
Gainfromthedeclineinpurchasing powerofnetamountsowed.....Totalerosionofshareholders'quity duetoinflation......
Gain from the decline in purchasing power of net amounts owed.....Total erosion of shareholders'quity due to inflation......
430,192'41,63578,18139,62427,114(66,725)(66,725)>41,&$8~41,648OtherItems.AsallowedbyFASBStatement No.33,itemsintheincomestatement, otherthandepreciation expense,werenotadjusted.
430,192'41,635 78,181 39,624 27,114 (66,725)(66,725)>41,&$8~41,648 Other Items.As allowed by FASB Statement No.33, items in the income statement, other than depreciation expense, were not adjusted.The cost of fuel used in electri production and the cost of gas sold were not adjusted because the effect on earnings was not material due to the relatively short turnover period between the incurrence of these costs and their recovery through the fuel adjustment clause.Ihe regulatoiy process limits the amount of depreciation expense induded in the Company's revenue allowance and limits utility plant in rate base to original cost Such amounts produce cash flows which are inadequate to replace such property in the future or preserve the purchasing power of common equity capital previously invested.While this effect is partially mitigated by the benefit derived form having long term debt, the Company has a net purchasing power loss which is experienced by the common stock shareholder and can only be overcome as a result of adequate rate relief.However, the Company expects that it will be able to establish rates which will cover the increased costs of new plant when such costs are incurred.Federal income tax policy ignores the effects of inflation in measuring taxable income.Higher depreciation expense under constant dollar and current cost accounting is not tax deductible.
Thecostoffuelusedinelectriproduction andthecostofgassoldwerenotadjustedbecausetheeffectonearningswasnotmaterialduetotherelatively shortturnoverperiodbetweentheincurrence ofthesecostsandtheirrecoverythroughthefueladjustment clause.Iheregulatoiy processlimitstheamountofdepreciation expenseindudedintheCompany's revenueallowance andlimitsutilityplantinratebasetooriginalcostSuchamountsproducecashflowswhichareinadequate toreplacesuchpropertyinthefutureorpreservethepurchasing powerofcommonequitycapitalpreviously invested.
Therefore, the Company's effective Federal income tax rate, when adjusted for inflation, is 48.8 percent under constant dollar and 86.4 percent under current cost for 1980, each of which exceeds its reported effective tax rate of 22.7 percent.The erosion of shareholders'quity due to changing prices is summarized in terms of general inflation and in terms of changes in specific prices, as follows: ln Terms of In Terms of General Changes in In Thousands of Average 1980 Dollars Inflation Specific Prices Statement of Income from Continuing Operations Adjusted for Changing Prices For the Year Ended December 31, 1980 (Thousands of Dollars)Operating revenues Constant Dolhr Current Cost Historical Average Average Cost 1980 Dolhis 1980 Dollars~502,426~502,426 4502,426 Operating expense Maintenance expense Depreciation expense Tax expense-local, state and other.Income tax expense.Interest expense Other income and deductions
Whilethiseffectispartially mitigated bythebenefitderivedformhavinglongtermdebt,theCompanyhasanetpurchasing powerlosswhichisexperienced bythecommonstockshareholder andcanonlybeovercomeasaresultofadequateraterelief.However,theCompanyexpectsthatitwillbeabletoestablish rateswhichwillcovertheincreased costsofnewplantwhensuchcostsareincurred.
-net.313,226 32,048 27,800 56,984 12,836 39,182 (23,302)313,226 32,048 57,992 56,984 12,836 39,182 (23,302)313,226 32,048 69,435 56,984 12,836 39,182 (23,302)Net income Dividends on preferred and preference stock Earnings (loss)applicable to common stock Change in net assets during 1980 due to increase in specific prices Less: Increase in general price level..Net change during 1980.Reduction of utility plant to net recoverable cost Gain from decline in purchasing power of net amounts owed 458,774 488,966 500,409 43,652 13,460 2,017 8,927 8,927 8,927~34,725~4,533"~(6,910)~193,984" 233,608 (39,624)~(78,181)(27,114)S 66,725$66,725'Earnings applicable to common stock on a constant dolhr basis would have been a loss of S73,648 if the reduction of utility phnt to net recoverable cost had been inctudei"At December 31, 1980, current cost of utility property net of accumulated depredation was S2,10?868, while rehted historical cost or net recoverable cost was S950,474.Five.Year Comparison of Selected Financial Data Adjusted for Changing Prices (In Thousands of Average 1980 Doihis)Year Ended December 31 1980 1979 1978 1977 1976 Operating revenues As reported.In average 1980dollars
Federalincometaxpolicyignorestheeffectsofinflation inmeasuring taxableincome.Higherdepreciation expenseunderconstantdollarandcurrentcostaccounting isnottaxdeductible.
.Historical cost information adjusted for general inflation Earnings applicable to common stock'arnings per common share, adjusted for stock dividends'et assets at yearend at net recoverable cost Current cost information Loss applicable to common stock'.Loss per common share, adjusted for stock dividends'..........
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
Excess of increase in general price level over increase in speciTic prices after reduction to net recoverable cost Net assets at yearcnd at net recoverable cost General information Gain from decline in purchasing power of net amounts owed.....Cash dividends per common share, adjusted for stock dividends As reported.In average 1980 dollars Market price per common share atyearwnd As reported.In December 1980 dollars.Average consumer price index December consumer price index'Excludes the reduction of utility phnt to net recoverable cost.4,533$.28 358,613 10,279~.65 365,772 (6,910)(3,080)~(19)66,738 358,613 80,450 365,772 66,725 73,855 S 1.41 1.60 1.68~12.25 12.25 246.9 258.4~14.88 16.72 217.4 229.9$18.00 22.92 195.4 202.9$502,426$417,692$368,948 502,426 474371 466,189$331,144 450,465 S 1.22 1.66~21.13 29.33 181.5 186.1$308,227 446@42>1.13 1.64$19.88 29.46 170.5 174.3 Interim Financial Data$KS and Bectrto Corporation In the opinion of the Company, the following quarterly information includes all adjustments, consisting of normal recumng adjust.ments, necessary for a fair statement of the results of operations for such periods.The variations in operations reported on a quarterly basis are a result of the seasonal nature of the Company's business and the availability of the Company's Ginna nuclear plant.Earnings per common share have been adjusted for stock dividends.
-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)
Operating Revenues (Thousands)
(27,114)S66,725$66,725'Earnings applicable tocommonstockonaconstantdolhrbasiswouldhavebeenalossofS73,648ifthereduction ofutilityphnttonetrecoverable costhadbeeninctudei"AtDecember31,1980,currentcostofutilitypropertynetofaccumulated depredation wasS2,10?868,whilerehtedhistorical costornetrecoverable costwasS950,474.
Eamin Per Operating Net EamingsOn CommonFhare Income Income Common Stock (in dollars)December 31, 1980 September 30, 1980 June30.1980
Five.YearComparison ofSelectedFinancial DataAdjustedforChangingPrices(InThousands ofAverage1980Doihis)YearEndedDecember3119801979197819771976Operating revenuesAsreported.
.March 31, 1980.December 31, 1979 September 30, 1979 June 30, 1979 March 31, 1979.December 31, 1978 September 30, 1978 June 30, 1978 March31,1978
Inaverage1980dollars
.$141,344 102,130 105,395 153,557 108,243 83,010 105,766 120,673 92312 73,665 86,942 116,029 812,774 14,268 12,233 20,257 11,279 8,244 14,265 18,334 8,466 9,527 12,009 19,247 S 8,159 9,335 9,141 17,017 7,194 5,211 10,939 16,220 7,088 6,596 9,909 15,993 s 5,525 6,956 7,184 15,060 5,237 3,362 9,520 14,801 5,669 5,175 8,490 14,574 S.32.42.44.93 32.21.60 36 35.59 1.03 Common Stock and Dividends 1980 1979 1978 Earnings per weighted average share...........
.Historical costinformation adjustedforgeneralinflation Earningsapplicable tocommonstock'arnings percommonshare,adjustedforstockdividends'et assetsatyearendatnetrecoverable costCurrentcostinformation Lossapplicable tocommonstock'.Losspercommonshare,adjustedforstockdividends'..........
Number of shares (000's)Weighted average Pro forma weighted average after stock dividend paid in following year (See below)...Actual number at December 31..............
ExcessofincreaseingeneralpriceleveloverincreaseinspeciTicpricesafterreduction tonetrecoverable costNetassetsatyearcndatnetrecoverable costGeneralinformation Gainfromdeclineinpurchasing powerofnetamountsowed.....
Number of shareholders.
Cashdividends percommonshare,adjustedforstockdividends Asreported.
Price range (Sales on Hew York Stock Exchange).1st quarter 2nd quarter.3rd quarter.4th quarter.Cash dividends paid 1st quarter 2nd quarter.3rd quarter.4th quarter..Stock dividend paid (See below)...............
Inaverage1980dollarsMarketpricepercommonshareatyearwnd Asreported.
2.10 16,472 16,966 17,910 50,416 High Low 15>/4 11'/4 15'/4 11%14s/4 13s/4.13r/s 11'h S.37.37.37.38 3%$2.08 15,815$232 14,613$36 36 37 37 3%.35 36 36 3X 16,289 15,051 15,555 14,733 48,543 48,148 High Low High Low 18%1P/4 21 r/t 17'/e 17'5%18/s 17s/s 17 16 19/e 18 16 14r/t 18M 16th The 22nd annual stock dividend was paid by the Company on February 25, 1981 at the rate of 3%.The foregoing Common Stock prices have not been adjusted for subsequent 3%stock dividends paid in February 1978, 1979, 1980 and 1981.The Company has paid cash dividends quarterly on its Common Stock without interruption since it became publicly held in 1949.The Company intends to continue the practice of paying cash diVidends quarterly and will consider the payment of a stock diVidend annually, although there can be no assurance as to the declaration of future dividends since they necessarily will be dependent upon the Company's future earnings, its financial requirements and other factors.In the event the Company should be in arrears in the redemption of its Series P or Series Q Preferred Stock pursuant to the sinking fund provision of such series, the Compan'y may not purchase or otherwise acquire for value, or pay dividends on, any shares of its Common Stock For the years 1978 and 1979 cash diVidends paid were 100K taxable for Federal income tax purposes.The Company estimates that cash dividends paid during 1980 will be 100X nontaxable.
InDecember1980dollars.AverageconsumerpriceindexDecemberconsumerpriceindex'Excludes thereduction ofutilityphnttonetrecoverable cost.4,533$.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.
26 Management's Discussion and Analysis of Financial Condition and Results of Operations During the three years 1978 through 1980, the Company has experienced the effects of high inflation, record setting interest rates, and imperfections inherent in the regulatory rate making process.Their impact is evident throughout the statements of income and balance sheets shown on pages 14 and 15.The effects of inflation are further set forth in the supplemental information on pages 24 and 25.Although the Company is not convinced these trends are permanent, there has been a gradual erosion of the long term fundamental financial strength of the Company which histori.cally has provided a certain degree of flexibility in long term plan.ning.Ihis loss of flexibility becomes apparent through the reduction in cash flow as a result of the increases in such working capital items as accounts receivable and fuel inventories.
Operating Revenues(Thousands)
lhe Company's financial flexibility has also been constrained by the necessity to commit to major construction projects to meet the anticipated energy needs of our customers.
EaminPerOperating NetEamingsOn CommonFhare IncomeIncomeCommonStock(indollars)December31,1980September 30,1980June30.1980
Planned increases in electric generating ca pacity require long term capital commit.ments, such as Nine Mile Point Gnit 2, a nuclear unit being built by Niagara Mohawk Power Corporation in which the Company has a 14X interest, now scheduled for commercial operation in late 1986.Also, a significant portion of the Company's capital expendi.ture program is comprised of government mandated modifications and additions to existing plant and equipment.
.March31,1980.December31,1979September 30,1979June30,1979March31,1979.December31,1978September 30,1978June30,1978March31,1978
At present, the Company anticipates that 30X to 40K of the addi.tional funds it requires will be generated internally.
.$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...........
The balance will have to be obtained through the sale of securities and short term borrowing.
Numberofshares(000's)WeightedaverageProformaweightedaverageafterstockdividendpaidinfollowing year(Seebelow)...
The Company's ability to obtain financing depends on receiving regulatory approvals for rate increases adequate to maintain the Company's financial soundness.
ActualnumberatDecember31..............
Regulatory policies regarding both cash flow items and rates of earnings have restricted the Company's ability to internally generate appropriate amounts of cash to finance its growing construction program and have restricted its ability to secure financing at advantageous rates.These policies, together with the effects of inflation and the high costs of borrowing, have required the Company to become more aggressive in seeking approvals for rate increases.
Numberofshareholders.
I)tis is evidenced by the short period of time between the July 18, 1980 PSC decision in the last proceeding and the August 27, 1980 filing of the Company's current proceeding.
Pricerange(SalesonHewYorkStockExchange)
ln Januaiy1981 it became clear that the Company had under.estimated the duration and magnitude of the current downturn in the business cycle as reflected in its projection of rate year financing costs in the current rate proceeding.
.1stquarter2ndquarter.3rdquarter.4thquarter.Cashdividends paid1stquarter2ndquarter.3rdquarter.4thquarter..Stockdividendpaid(Seebelow)...............
Thus, the Company amended its initial permanent request to reflect an increase in the requested rate of return on rate base from 10.95%to 11.35%.Also, the Company applied for temporaiy electric and gas rate increases, to be effective on or about March 1, 1981, of approximately
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.
$30 million and$5 million, respectively, based on forecasted sales volumes for the twelve months ended July 31, 1982.The Company has presented evidence in the proceeding that, if the temporary rate increases are not permitted, the Company will face a serious risk of having the rating of its iirst mortgage bonds lowered when it next sells such bonds.The Company's request for an 18K increase in steam rates ($3.6 million per year)was approved by the PSC and the rates became effective February 18, 1981.Ihe Company is unable to predict the amount of the pending increases, if any, that will be allowed by the PSC.Ihe following financial review identifles the causes of significant changes in the amounts of revenues and expenses, comparing 1980 to 1979 and 1979 to 1978.The Notes to Financial Statements on pages 17 to 23 of this report contain additional related information.
TheCompanyestimates thatcashdividends paidduring1980willbe100Xnontaxable.
Changes In Operating Revenues Increase or (Decrease) from Prior Year (Ihousands of Dollars)Electric Department 1980 1979 Gas Department 1980 1979 Steam Depart'ment 1980 1979 Customer Revenues (Estimated) from: Rate Inaeases.Fuel Cost Adjustment
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.
.Weather Effects.Customer Consumption.
lheCompany's financial flexibility hasalsobeenconstrained bythenecessity tocommittomajorconstruction projectstomeettheanticipated energyneedsofourcustomers.
Other$21,878$10,464$8,232$1,946 2,317 2,764 30,436 20,986 (27)(61)(1,452)(735)607 2,842 2,671 (526)857 733 632 325$2,316 3,441 (279)(2,042)165$1,757 (24)(1,013)158 Total Change in Customer Revenues...
Plannedincreases inelectricgenerating capacityrequirelongtermcapitalcommit.ments,suchasNineMilePointGnit2,anuclearunitbeingbuiltbyNiagaraMohawkPowerCorporation inwhichtheCompanyhasa14Xinterest, nowscheduled forcommercial operation inlate1986.Also,asignificant portionoftheCompany's capitalexpendi.tureprogramiscomprised ofgovernment mandatedmodifications andadditions toexistingplantandequipment.
Electric Sales to Other Gtilities.TotalChangeinOperating Revenues.25,632 16,742 40,519 21,996 3,601 878 14,982 9,128$40,614$25,870$40,519$21,996$3,601$878 Revenues from electric sales to other utiTities increased in both 1980 and 1979.Fluctuations in electric sales to other utilities, and in purchased electricity discussed below, generally are related to the avaihbility of electric generation from the Ginna nuclear plant.Electric and Steam Fuels..Purchased Bectricity.....
Atpresent,theCompanyanticipates that30Xto40Koftheaddi.tionalfundsitrequireswillbegenerated internally.
Purchased Natural Gas...Other Operation.
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
Mantenance
$18,640(8,141)37,9559,6961,919$2,93112,60018,6956,5793,883TotalChangeInOperation andMaintenance Expense.......
$18,640 (8,141)37,955 9,696 1,919$2,931 12,600 18,695 6,579 3,883 Total Change In Operation and Maintenance Expense.......
$60,069$44,688Ihe1980increaseinelectricandsteamfuelsexpensewasmainlyduetoanincreaseinelectricity generated in1980andanincreased fuelcostperkilowatt.
$60,069$44,688 Ihe 1980 increase in electric and steam fuels expense was mainly due to an increase in electricity generated in 1980 and an increased fuel cost per kilowatt.hour generated.
hourgenerated.
Changes In Operation and Maintenance Expenses Increase or (Decrease) from Prior Year (Thousands of Dollars)1980 1979 Purchased electricity expense decreased in 1980 due mainly to the high 76%availability of the Ginna nuclear power plant and an increase in system net generating capacity occasioned by the start up of Oswego Gnit 6.Purchased electricity increased in 1979 due to both higher costs and higher kilowatt.hour purchases.
ChangesInOperation andMaintenance ExpensesIncreaseor(Decrease) fromPriorYear(Thousands ofDollars)19801979Purchased electricity expensedecreased in1980duemainlytothehigh76%availability oftheGinnanuclearpowerplantandanincreaseinsystemnetgenerating capacityoccasioned bythestartupofOswegoGnit6.Purchased electricity increased in1979duetobothhighercostsandhigherkilowatt.
Purchased natural gas expense increased in 1980 and 1979 as a result of higher pipeline rates and in 1980 also increased due to a modest increase in consumption in the nonresidential sector.Other operation expense increased in 1980 and in 1979 largely as a result of higher wages and employee benefit costs.Taxes-local, state and other increased in 1980 and in 1979 principally due to the increased gross income tax rate and increased revenues.The 1980 increase also reflects taxes on Oswego Gnit 6 which were capitalized during its construction and are now being expensed.Changes in Federal income taxes are explained in Note 2 to the Notes to Financial Statements.
hourpurchases.
27 The 1980 increase in allowance for funds used during construction of$13 million was due to the increased rates applied during the period, the effect of which was reduced by lower utility plant expenditures and by the transfer of the Company's share of the Oswego Unit 6 oil-fired generating p!ant from construction work in progress to utiTity plant.The 1979 increase of~3.7 million in allowance for funds used during construction was due to increased rates applied during the period and to increased utility plant expenditures.
Purchased naturalgasexpenseincreased in1980and1979asaresultofhigherpipelineratesandin1980alsoincreased duetoamodestincreaseinconsumption inthenonresidential sector.Otheroperation expenseincreased in1980andin1979largelyasaresultofhigherwagesandemployeebenefitcosts.Taxes-local,stateandotherincreased in1980andin1979principally duetotheincreased grossincometaxrateandincreased revenues.
Interest on long term debt increased in 1980 and in 1979 as a result of additional bonds issued in February and May 1980, August 1979 and December 1978.Short term interest rates and borrowing levels for 1980 and 1979 were approximately equal.'The S2.4 million increase in the 1979 interest on short term debt resulted from higher interest rates and an increase of$14.6 million in the average amount of short term debt outstanding.
The1980increasealsoreflectstaxesonOswegoGnit6whichwerecapitalized duringitsconstruction andarenowbeingexpensed.
DMdends on preferred and preference stock increased~2.3 million in 1980 and~1.0 million in 1979 because of additional preferred stock issued in August 1980 and July 1979.Selected Financial Data Summaiy of Operations (Thousands of Dollars)Year Ended Deceinber 31 1980 1979 1978 1977 1976 1975 Operating Revenues Electric.Gas Steam S245,005$219@73$202,631$179,940$170,558 181,046 140,527 118,531 105,797 101,027 23,589 19,988 19,110 19,004 18&3$146,629 82,478 17/37 Electric sales to other utilities..449,640 52,786 379,888 37,804 340,272 28,676 304,741 26,403 289,968 18,259 246,444 25,496 Total Operating Revenues 502,426 417,692 368,948 331,144 308,227 271,940 Operating Expenses Operation Electric and steam fuels......Purchased eiectricity.........
ChangesinFederalincometaxesareexplained inNote2totheNotestoFinancial Statements.
Purchased natural gas.......Other.Maintenance Depreciation Taxes-local, state and other....Federal income tax-current....
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...
-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
79,711 23,796 127,759 81,960 32,048 27,800 56,984 393 12,443 61,071 31,937 89,804 72,264 30,129 23,703 49,916 (36)6,782 58,140 19/37 71,109 65,685 26/46 22/06 45,935 5,166 5,875 56,993 13,635 62,086 62,494 22372 21,053 43,876 961 2,897 46361 18,195 56,192 57,677 20/06 18,621 40,502 (291)5,656 46,268 12312 42,247 50,629 19,700 17,414 36,157 4,162 1,133 Total Operating Expenses Operating Income Other Income and Deductions Allowance for other funds used during construction
.Other,net.442,89459,53211,7104,772365,570319,699286f67263,119229,92252,12249,24944,77745,10842,01811,4398,7056,4734,67823103,7744,41813101,128537TotalOtherIncomeandDeductions
.Other, net.442,894 59,532 11,710 4,772 365,570 319,699 286 f67 263,119 229,922 52,122 49,249 44,777 45,108 42,018 11,439 8,705 6,473 4,678 2310 3,774 4,418 1310 1,128 537 Total Other Income and Deductions
....16,48215,21313,1237,7835,8062,847IncomebeforeInterestCharges...
....16,482 15,213 13,123 7,783 5,806 2,847 Income before Interest Charges...
76,0146733562/725256050,91444,865InterestChargesLongtermdebt Shortterm debt.Other,net.Allowance forborrowedfundsusedduringconstruction
76,014 67335 62/72 52560 50,914 44,865 Interest Charges Longtermdebt Shortterm debt.Other, net.Allowance for borrowed funds used during construction
.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...............
.34,129 4.298 755 29,084-4,016 441 25,594 22,542 19@78 16,963 1~1+19 1,054 1,568 416 494 246 1~7 (6,820)(5,771)(4,812)(4,844)(2,853)(1,264)Total Interest Charges..32,362 27,770 22,786 19,511 17,825 18,494 Net Income 43,652 Dividends on Preferred and Preference Stock, at required rates.8,927 39,565 39,586 33,049 33,089 26,371 6,645 5,678 6,512 6,245 4,054 Earnings Applicable to Common Stock......S 34,725$32,920$33,908 4 26,537 4 26,844 S 22,317 Weighted average number ofshares outstanding in each period, adjusted for stock dividends (000's).Earnings per Common Share...............
16,472$2.1015,81514,61313,23412,71311,656S2.08>2.32~2.00~2.11~1.91CashDividends perCommonShare.adjustedforstockdividends
16,472$2.10 15,815 14,613 13,234 12,713 11,656 S2.08>2.32~2.00~2.11~1.91 Cash Dividends per Common Share.adjusted for stock dividends.s 1.48 SI.41 SI.22$1.08 Selected Financial Data (Continued)
.s1.48SI.41SI.22$1.08 SelectedFinancial Data(Continued)
Condensed Balance Sheet (Thousands of Do!lars)At December 31 1980 1979 1978 f977 1976 f975 ASSETS Gtility Plant, at original cost............
Condensed BalanceSheet(Thousands ofDo!lars)AtDecember31198019791978f9771976f975ASSETSGtilityPlant,atoriginalcost............
Less-Accumulated depreciation and amortization
Less-Accumulated depreciation andamortization
.Construction work in progress...
.Construction workinprogress...
S1,061,999
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...
$928,796$857,959$789,775$727,687$693,404 337,215 295/28 261,477 229,122 198,778 185,455 724,784 633,468 596,482 560,653 528,909 507,949 225,690 260,063 213,534 162,127 120,702 79,381 Net utility plant.Investment in Subsidiary, at equity..Current Assets Deferred Debits 950,474 1,968 92,314 30,624 893,531 2,062 65~7 22,020 810,016 1,996 66,953 14,421 722,780 1,947 58387 15,260 649,611 1,911 61,090 8,151 587,330 1,871 53,796 7,450 Total Assets.CAPITALIZATION AND LIABILITIES Capitalization Long term debt Preferred stock subject to mandatory redemption Preferred stock redeemable at option of Company Preference stock subject to mandatory redemption Common shareholders'quity Common stock.Retained earnings Total common shareholders'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
437,124$382,162$384 f03$361,022 S311 f95$267,314 50,000 67,000 28,000 291,346 83,970 25,000 67,000 28,000 260,432 80,155 92,000 89,000 67,000 28,000 246,938 77/38 67,000 28,000 212,533 70,819 181/01 173,586 67,812 60,502 375,316 340,587 324,276 283/52 249,113 234,088 S1,075,380
$982,850$893~6$798,374$720,763$650,447TotalCapitalization
$982,850$893~6$798,374$720,763$650,447 Total Capitalization
...........
...........
CurrentUabilities DeferredCreditsandOtherLiabilities
Current Uabilities Deferred Credits and Other Liabilities
..957,44085,51032,430842,749803,579739@74652,508590,402115,29168/6242,81354,65251,71224,81021,44516,18713,6038,333TotalCapitalization andLiabilities...
..957,440 85,510 32,430 842,749 803,579 739@74 652,508 590,402 115,291 68/62 42,813 54,652 51,712 24,810 21,445 16,187 13,603 8,333 Total Capitalization and Liabilities...
$1,075,380
$1,075,380$982,850$893,386$798,374$720,763 S650,447 Financial Data At December 31 1980 f979 1978 1977 f976 f975 Capitalization Ratios (percent)Longtermdebt Preferred and preference stock..Common shareholders'quity...
$982,850$893,386$798,374$720,763S650,447Financial DataAtDecember311980f97919781977f976f975Capitalization Ratios(percent)
Total Book Value per Common Share Adjusted for StockDividends
Longtermdebt Preferred andpreference stock..Commonshareholders'quity...
TotalBookValueperCommonShareAdjustedforStockDividends
-YearEnd...............
-YearEnd...............
RateofReturnOnAverageCommonEquity-YearEnd(percent)
Rate of Return On Average Common Equity-Year End (percent)Effective Federal Income Tax Rate (percent)...Depreciation Rate-Electric................
Effective FederalIncomeTaxRate(percent)
...Depreciation Rate-Electric................
-Gas...................
-Gas...................
InterestCoverages Beforefederalincometaxes(incld.AFDC)...(excld.AFDC)...Afterfederalincometaxes(incklAFDC).....
Interest Coverages Before federal income taxes (incld.AFDC)...(excld.AFDC)...After federal income taxes (inckl AFDC).....(excld.AFDC)....45.7 15.1 39.2 100.0 S20.96 9.86 13.7 3.09 2.86 2.33 1.86 2.11 1.64 9.85 11.22 10.02 11.16'0.18 5.4 12.8 6.2 I 0.6 14.4 3.10 3.09 3.00 2.90 2.79 2.79 2.79 2.67 2.63 2.60 2.25 1.73 2.18 1.67 2.65 2.16 2.43 1.94 2.45 1.98 2.36 1.89 2.79 2.43 2.60 2.24 2.56 2.38 2.33 2.15 45.4 47.8 48.8 47.7 45.3 14.2 11.8 12.9 14.1 15.1 40.4 40.4 383 38.2 39.6 100.0 100.0 100.0 100.0 100.0$21.26$20.75$20.12$19.47$18.56 29 Electric Department Electric Revenue (000's)Residential.
(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
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
.industrial Other.Year Ended December 31 1980 S 88,083 70,407 60,373 26,142 1979 4 78,140 63,104 54,404 23,725 1978~72,854 58,985 48,792 22,000 1977>64,986 53,520 41,783 19,651 1976 4 61,498 50,791 39,402 18,867 1975 S 53,904 43,884 33,244 15,597 Hectric revenue from our customers..Other electric utilities Total electric revenue Electric Expense (000's)Fuel used in electric generation
..Otherelectricutilities TotalelectricrevenueElectricExpense(000's)Fuelusedinelectricgeneration
..Purchased electricity.
..Purchased electricity.
Otheroperation.
Other operation.
Maintenance Depreciation
Maintenance Depreciation
.Taxes-local,stateandother....
.Taxes-local, state and other....Hectric revenue deductions
Hectricrevenuedeductions
.Operating Income before Federal Income Tax.....Federal income tax includin ulato allowance 0 eratfn Income from Electric 0 erations (000's)Electric Operating Ratio%.Electric Sales-KWH (000's)Residential
.Operating IncomebeforeFederalIncomeTax.....Federalincometaxincludinulatoallowance 0eratfnIncomefromElectric0erations(000's)ElectricOperating Ratio%.ElectricSales-KWH (000's)Residential
.Commercial Industrial
.Commercial Industrial
.OtherHectricsalestoourcustomers Otherelectricutilities Totalelectricsales.ElectricCustomers atDecember31Residential
.Other Hectric sales to our customers Other electric utilities Total electric sales.Electric Customers at December 31 Residential
.Commercial industrial
.Commercial industrial
.OtherTotalelectriccustomers Electricity Generated andPurchased
.Other Total electric customers Electricity Generated and Purchased-KWH (000's)Fossil.Nuclear.Hydro.Pumped storage Less energy for pumping.Other Total generated-Net Purchased ,.Total electric ener Electric Generation Costs (000's)Fossil.Nuclear Other.245,005 52,786 297,791 63,430 23,796 64,139 24,404 21,859 39,514 237,142 60,649 11,169 S 49,480 59.0 1,730,213 1,424,283 1,564,952 466,975 5,186.423 1,620.929 6,807,352 257,227 24,524 1,388 2,331 285,470 2,301,288',081,572 179,335 122,809 (191,044)9,389 5,503,349 1,758,608 7,261,957 S62,554 39,713 1,355 518 219,373 37,804 257,177 46,999 31,937 54,277 22,675 18,223 35,172 209,283 47,894 5,600 0 4?294 60.6 1,710,090 1,404,931 1,579,364 469,135 5,163,520 1,526,925 6,690,445 254,097 24,234 1,394 2,374 28?099 1,956,599 2,945,721 210,353 151,911 (217,758)"17,257 5,064,083 2,051,568 7,115,651 S42,116 29,943 1,233 813 202,631 28,676 231.307 45,093 19,337 47,602 19,305 16,983 33,108 181.428 49,879 9,244~40,635 1,701,938 1,417,624 1,51 7,988 465,373 5,102,923 1,445,391 6,548,314 251,645 24,137 1,348 2,423 279,553 2,025,645 3,206,313 192,278 133,287 (189,453)1,086 5,369,156 1,579,863 6,949,019$38,995 25,561 1,229 57 179,940 26,403 206,343 44,010 13,635 45,011 16,339 15,333 31,530 165,858 40,485 4,041>36,444 57.7 1,660,425 1,392,023 1,431,855 454,059 4,938,362 1,453,590 6,391,952 250,121 24,023 1,353 2,328 277,825 2,272,182 3,018,305 22?391 193,340 (283,573)850 5,423,495 1,400,505 6,824,000$40,557 22,330 1,132 44 170,558 18,259 188,817 34,247 18,195 40,930 14,796 13,865 28,543 150,576 38,241 3,102 4 35,139 57.3 1,618,314 1,366,094 1,384,235 437,097 4,805,740 1,187,942 5,993,682 249,177 23,983 1,371 2,271 276,802 2,060,186 2,040,746 277,010 118,716 (180,317)2,797 4,319,138 2,106,904 6,426,042 S36,901 13,485 973 118 146,629 25,496 172,125 33,442 12,212 35,662 14,282 12,731 25,369 133,698 38,427 5,069 4 33,358 55.5 1,530,421 1,294,816 1,284,940 411.122 4,521,299 1,864,050 6,385.349 246,613 23,874 1,380 2,305 274,172 1,731,723 3,026,894 265,401 98,743 (148,180)2,198 4,976,779 1,888,091 6,864,870$33,120 14,191 1,030 63 Hectric Department Fuel Fossil-Total BTG (million).-CentspermillionBTG
-KWH(000's)Fossil.Nuclear.Hydro.PumpedstorageLessenergyforpumping.OtherTotalgenerated
..Nuclear-Total BTG (million).....
-NetPurchased
-Cents r million BTG..24,610,400 205.31..33,878,804 61.36 20,874,198 152.18 31,897,513 53.81 21,139,146 144.27 35,812,171 43.97 23,862,599 136.92 37,822,209 38.04 21,822,976 137.42 23,837,620 25.69 18@88,874 142.18 33,128,471 22.91 System Net Capability
,.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)
-KW at December 31 Fossil.Nuclear Other.Purchased Total s tern net ca bili 637,000 470,000 47,000 29,000 357,000 1,540,000 443,000 470,000 47,000 29,000 359,000 1,348,000 443,000 470,000 47,000 29,000 339,000 1,328,000 443,000 470,000 47,000 29,000 338,000 1,327,000 452,000 470,000 47,000 29,000 342,000 1,340,000 45?000 470,000 47,000 29,000 356,000 1,354,000 Net Peak Load-KW.1,003,000 Annual Load Factor-Net%...................
"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
64.0'Exdudes 79,274,000 IOVH of test period generation at Oswego Gnit 6.950,000 67.1 983,000 63.9 987,000 62.0 934,000 63.8 925,000 61.7 30
$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
'Gas Department RL~~ii and Hect'orpomthn Gas Revenue (000's)Residential.
$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
Residential spaceheating
.Commercial Industrial
.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.
.Municipal and other Total gas revenue Year Ended December 31]980 S 6,444 105,371 33,879 27,379 7,973 181,046 1979 5,553 85,269 25,653 18,657 5,395 140,527 1978~5,096 74,425 20,535 13,891 4,584 118,531 1977 4 4,828 66,900 18,057 12,014 3,998 105,797 1976 4,426 63,974 16,848 11,900 3,879 101,027 1975 3,964 52,584 13,593 9,167 3,170 82,478 Gas Expense (000's)Purchased natural gas Other operation.
Maintenance
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
.......Depreciation Taxes-local, state and other..Gas revenue deductions Operating Income before Federal Income Tax...Federal income tax.127,759 16,546 6.309 5,338 14,594 170,546 10,500 1,310 89,804 16,519 6,246 4,889 12,187 129,645 10,882 1,314 71,109 15,810 5,768 4,641 10,545 107,873 10,658 1,966 62,086 15,072 5,078 5,140 10,089 97,465 8,332 147 56,192 14,921 4,510 4,194 9,729 89,546 11,481 2,212 42,247]33]0 4,500 4,137 8,715 72,909 9,569 914 Operating Income from Gas Operations (000's)S 9,190 9,568 8,692 8,185 9,269 8,655 Gas Operating Ratio%Gas Sales-Therms (000's)Residential
.Residential spaceheating Commercial
.Residential spaceheating Commercial
.Industrial Municipal.
.Industrial Municipal.
Totalgassales.GasCustomers atDecember31Residential..........
Total gas sales.Gas Customers at December 31 Residential..........
Residential spaceheating Commercial
Residential spaceheating Commercial
.Industrial Municipal.
.Industrial Municipal.
Totalgascustomers Gas-Therms(000's)Purchased forreforming andmixing..Purchased forresaleOther.Totalgasavailable.
Total gas customers Gas-Therms (000's)Purchased for reforming and mixing..Purchased for resale Other.Total gas available.
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...............
Cost of gas per therm.Total Daily Capacity-Therms at December 31 Mixed gas Straight natural gas.Total daily capacity 83.2 13,257 240,273 85,291 75,829 19,842 434,492 32,479 165,556 13,281 846 995 213,157 458,697 18,392 477,089 26.34C 3,660,000 3,660,000'0.1 13,149 247/89 83,248 65,995 16,962 426,743 35,258 159,916 12,600 82]1,047 209,642 436,956 16,388 453~20.63C 4,164,000 4,164,000 78.2 13,465 255,951 82,451 63,709 17,748 433,324 38,013 154/66 12,092 759 1,084 206/14 449,904 13,178 463,082 15.26C 4,164,000 4,164,000 77.7 13,833 252,923 77,751 59,956 15,975 420,438 39,977 152,856 11,268 746 989 205,836 428,811 10,123 438,934]4.43C 4,164,000 4,164,000 74.9 14,404 275,582 86,400 72,847 18,598 467,831 40,892 153,583 11,475 757 936 207,643 9,830 478,935 7,911 496,676 11.37C 4,164,000 4,164,000 72.8 14,328 249,224 78,217 65,760 16,705 424,234 41,437 153,848 11,390 756 957 208~8 23,160 421,252 7,019 451,431 10.19C 269,000 3,895,000 4,164,000 Maximum daily sendout-Therms...............
3,274,740 DegreeDays(Customer Billing)Fortheperiod.......................
3,274,740 Degree Days (Customer Billing)For the period.......................
6,833Percent(warmer)colderthannormal...........
6,833 Percent (warmer)colder than normal...........
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.
1.4 3,380,670 6,981 43 3,183,678 7,021 4.5 3,578,468 3,497,861 6,726 6,905 (0.1)].6 3,041,070 6,211 (72)'Hew method for determining daily capacity, based on current network analysis, reflects the maximum demand which the transmission system can accept without a ddiciency.
31 SteamDepartment YearEndedDecember31198019791978197719761975SteamRevenue(000's)Commercial lndustrial
31 Steam Department Year Ended December 31 1980 1979 1978 1977 1976 1975 Steam Revenue (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
.Municipal and other Total steam revenue S 6,915 1,4,222 2,452 23,589$5,873 S 6,087 S 6 f52 S 6,401 S 5,668 11,833 10,732 10,455 9,799 9,862 2,282 2,291 2,197 2,183 1,807 19,988 19,110 19,004 18,383 17,337 Steam Expense (000's)Fuel used in steam generation
..Otheroperation.
..Other operation.
Maintenance Depreciation
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.
.Taxes-local, state and other...16,281 1,275 1,335 603 2,876 14,072 1,468 1,208 591 2/57 13,047 12,983 12,114 12,826 2,273 2,411 1,826 1,657 1,173 955 900 918 581 580 562 546 2382 2,257 2,230 2,073 Steam revenue deductions.
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.
Operating Income before Federal Income Tax..Federal income tax 22,370 1,219 357 19,896 19/56 19,186 17,632 18,020 92 (246)(182)751 (683)(168)(168)(330)51 (688)Operating Income from Steam Operations (000's)..S 862 260 S (78)S 148 S 700 S 5 Steam Operating Ratio%.Steam Sales-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
(000's)Commercial Industrial Municipal Total steam sales 80.1 678,225 1,487,176 248,478 2,413,879 83.8 863 86.0 80.7 789/64 898,904 933,609 1,041,415 980,324 1,682,780 1,718,565 1,682,033 1,738,391 1,839,402 320,026 346,031 334,645 367,553 325,727 2,792,170 2,963,500 2,950,287 3,147,359 3,145,453 Steam Customers at December 31 Commercial Industrial
.Municipal.
.Municipal.
Totalsteamcustomers
Total steam customers.186 61 24 271 221 70 27 318 238 70 31 339 254 74 32 360 271 77 32 380 281 77 31 Steam Produced-Lbs.(000's)Produced by steam department...........
.186612427122170273182387031339254743236027177323802817731SteamProduced-Lbs.(000's)Producedbysteamdepartment...........
By.product steam from electric department
By.productsteamfromelectricdepartment
.Total steam produced.Steam Department Fuel Total BTG (million)Cents per million BTG.1,376,153 1,395,995 2,772,148 4,658,641 357.43 1,391345 1 353,053 1,194,132 1,408,029 1P87W3 1,736,744 1,987,638 2,133,853 2,193,283 2~4,693 3,127,989 3,340,691 3,327,985 3,601,312 3,732,056 5378,454 5,705,943 5,548,290 6,022,360 6,230,767 271.28 226.21 232.60 203.35 203.08 Rate Increases Granted Class of Savice Amount of Increase Authorized Effective (Annual Basis)Percent Date of Increase (0(Xys)Increase Rate Base ul Pending Requests Class of SeNice Date of Filing Amount (Ops)Percent Electric Gas Steam April 20, 1976 Hovember 11,1977 february 18, 1978 lvtay 2, 1979 July 26, 1980 April 20, 1976 Hovember11,1977 February 2, 1978 hhy 2, 1979 July 26, 1980 April 15, 1975 December 15, 1979 February 18, 1981 Sl 1,002 IO,I86 3,000 17,699 38,400 4,983 2,536 678 8,109 9,640 2,475 2,895 3,550 7.9%5.8 1.6 8.2 15.9 6.3 2.4.6 6.6 5.1 12.0 15.0 18.2 9.35%I3.50%9.31 I?80 9.31 12.80 9.89 13AO 10.32 13.80 9.35 13.50 9.31 12.80 9.31 12.80 9.89 13.40 10.32 13.80 Electric'ugust 27, 1980 S61,900 I9.1%Gas" August 27, 1980 7/$0 3.0'On January 16, 1981, the Company filed a request for permission to adopt temporary rate increases for electric and gas service.This request would Increase 1981 electric revenues by approximately SI2 million and 1981 gas revenues by approximately S1.7 million.32 Directors Theodore J.Altier J'hairman of the Board and Treasurer, AMer 6 Sons Shoes, Inc.Keith W.Amish'resident and Chief Operating Officer, Rochester Gas and Electric Corporation Paul W.Brig g'v'hairman of the Board and Chief Executive Officer, Rochester Gas and Electric Corporation Wilmot R Ciaigf Former airman of the Board, LIncoln First Banks Inc.E.Kent Damon'trav'icePresident and Secretary, Xerox Corporation Francis E.Drake, Jr.'t4 Chairman of the Executive and Finance Committee, Rochester Gas and Electric Corporation J.Wallace EIy*t Chairman of the Board, Security New York State Corporation Walter A.Fallon/Chairman of the Board and Chief Executive Officer, Eastman Kodak Company Daniel G.Kennedy'etired Partner, Nixon, Margrave, Devans 6 Doyle Theodore L Levinsonf President and Chief Executive Officer, Star Supamarkets, Inc.Paul A.Micr Pmfessor, Rochester Institute of Technology Constance&#xb9;Mitchell Community Relations Coordinator, Industria!
.Totalsteamproduced.
Management Council of Rochester, New York, Inc.Comelius J.Murphy Group Vice President and General Manager, Eastman Kodak Company William G.vonBerg'trav'hairman of the Board and Chief Executive Officer, Sybron Corporation Leon D.White, Jr.Executive Vice President, Rochester Gas and Electric Corporation
SteamDepartment FuelTotalBTG(million)
'Member of the Executive and Finance Committee of the Board of Directors member of the Audit Committee of the Board of Directors member of the Sahry Review Committee of the Board of Directors v'Member of the Nominating Committee of the Board of Directors Officers Paul W.Brig gs Chairman of the Board and Chief Executive OIficer Age 58, Years of Service, 35 Kelth W.Amish President and Chief Operating Officer Age 57, Years of Savice,33 Leon D.White, Jr.Executive Vicepresident Age 61, Years of Service,43 Hany G.Saddock Senior Vice President, Finance and Rates Age 51, Years of Service, 30 Marlo Silvestrone Senior Vice President, General Services Age 57, Years of Service,30 John E Arthur Vice President and Chief Engineer Age 51, Years of Savice, 25 Joseph J.Hartman Vice.President, Gas and Transportation Age 56, Years of Service, 34 Robert C Henderson Vice President, Rates Age 40, Years of Savice, 17 David K.Laniak Vice President, Eiectric System Phnning and Operation Age 45, Years of Savice, 26 John E Maier Vicepresident, Ehctric and Steam Production Age 53, Years of Service,33 Richard J.Rudman Vice President, Electric Transmission and Distribution Age 53, Years of Savlce,35 Dean W.Caple Secretary Age 57, Years of Savice,32 David C.Heiligman Treasurer and Assistant Seaetary Age 40, Years of Savice, 17 Francis A.Sullivan, Jr.Controller Age 57, Years of Savice,30 Robert W.Ball Assistant Treasurer Age 64, Years of Savlce,42 Stephen Kowba Assistant Controller Age 61, Years of Savioe, 30 John&#xb9;Kuebel Auditor Age 45, Years of Service, 16 Shareholder Inquiries Communications regarding stock transfer requirements, lost certificates or dividend payments may be directed to Lincoln First Bank, NA.Other inquiries should be directed to D.W.Caple, Secretary at the Company.The Company will provide, without charge, a copy of the Annual Report on Form 10.K filed with the Securities and Exchange Commission with respect to fiscal year 1980, uponwrittenrequestofany shareholder addressed to the Secretary.
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
Principal Orrce 89 East Avenue Rochester, Nev York 14649 (716)546-2700 Financial Contact Many G.Saddock Senior Vice President, Finance and Rates Annual Meeting May 20, 1981 At Rochester, New York New York Stock Exchange Symbol Rochester Gas and Electric Corporation Common Stock-RGS Transfer and Dividend Disbursing Agent LIncoln First Bank, NA, Stock Transfer Department Post Office Box 1250 Rochester, Nev York 14603 Registrar Security Tiust Company of Rochester One East Avenue Rochester, New York 14638 Co-transfer Agent Morgan Guaranty Trust Company of New York 30 West Broadway New York, New York 10015 Co registrar The Chase Manhattan Bank, NA One Chase Manhattan Phza New York, New York10015 Agent for Automatic Dividend Reinvestment Plan Lincoln First Bank, NA.Automatic Dividend Reinvestment Savice Post Office Box 1507 Rochester, New York 14603 Bond Trustee and Paying Agent Bankers Trust Company Post Office Box 318 Church Street Station Nev Yok, New York 10015 33 Rochester Gas and Hectric Corporation P=-=89EastAvenue Rochester, New York 14649: U S-'NUCLEAR REGULATORY COltTS.")i{f9'IRECTOR
&#xb9;MitchellCommunity Relations Coordinator, Industria!
".OF~k'ICE Ok'NUCLEAR REACTOR REGS.k D18'1'~,-.SERVICES BRANC)i, DDC>ADhl'ViASHZkiGiOP, DC Z'OPS5 Bulk RaYe US Postage Paid g Rochester, NY~Permit No.709}}
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,30John&#xb9;KuebelAuditorAge45,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}}

Revision as of 14:40, 7 July 2018

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

Annual Report.for year ended December 31, 1978 Contents Highlights 2 Letter to Shareholders 3 Electric Operations 5 Gas Operations 6 Research and Development 6 The Rising Cost of Doing Business 8 Financial Statements 14 Management's Discussion and Analysis of the Summary of Operations 22 Financial and Statistical Information 23 Directors 28 Officers (inside back cover)Shareholder Inquiries Communications regarding stock transfer requirements, lost certificates or dividend payments may be directed to Lincoln First Bank, N.A.Other inquiries should be directed to D.W.Caplc, Secretary and Treasurer at the Company.The Company will provide, without charge, a copy of the Annual Rcport on Form10-K filed with the Securities and Exchange Commission with respect to fiscal year 1970, upon written request of any shareholder addressed lo the Secretary.

Principal 0 (gee 89 East Avenue Rochester, New York 14649 (716)546-2700 Financial Contact Paul W.Briggs President Annual Meeting May 16, 1979 At Rochester, New York New York Stock Excltange Symbol Rochester Cas and Electric Corporation Common Stock-RCS Transfer and Dividend Disbursing Agent Lincoln First Bank, N.A.Stock Transfer Department Post Office Box 1250 Rochester, New York 14603 Registrar Security Trust Company of Rochester One East Avenue Rochester, New York 14630 Co-transfer Agent Morgan Guaranty Trust Company of New York 30 West Broadway New York, New York10015 Co-registrar The Chase Manhattan Bank, NA.One Chase Manhattan Plaza New York, New York10015 Agent for Automatic Dividend Reinvestment Plan Lincoln First Bank, N.A.Automatic Dividend Reinvestment Service Post Office Box 1507 Rochester, New York 14603 Bond Trustee and Paying Agent Bankers Trust Company Post Office Box 310 Church Street Station New York, New York10015 a'cs-2@0 t P After-~oqtevoveiP V9040901(o't Highlights 1978 1977%Change Common Stock Earnings per weighted average share.Number of shares (000's)Weighted average Pro forma weighted average after stock dividend paid in following year (See Note)Actual number at December 31 Number of shareholders Price range (Sales on New York Stock Exchange)1st quarter.2nd quarter 3rd quarter.4th quarter.......,..Cash dividends paid (100/s taxable)1st quarter.2nd quarter..3rd quarter.4th quarter.Stock dividend paid (See Note)Sales and Revenues Electricity to customers Kilowatt-hours (000's).Revenue (000's)Electricity to other utilities Kilowatt-hours (000's).Revenue (000's)Gas Therms (000's)Revenue (000's)Steam Pounds (000's)Revenue (000's)Total revenues Operating Expenses (000's)Electric and steam fuels Purchased electricity Purchased natural gas.Wages and benefits..Depreciation Taxes-local, state and other Federal income taxes charged to operations Other expenses Total operating expenses Capital Expenditures, less allowance for funds used during construction (000's)Net Utility Plant at December 31 (000's)Number of Employees$2A6 13,774 14,187 14,733 48,148 High Low 21 y2 17r/s 18t/s 17s/s 19'/s 18 18'/4 1GYz$.35.35.3G.36 3%5,102,923$202,631 1,445,391$28,G7G 433024$118531 2,963,500$19,110$368,948$58,140 19,337 71,109 54,390 22,206 45,935 11,041 37,541$319,699$112,552$810,01G 2,622$2.12 12,474 12,848 12,890 44,135 High Low 20%17s/s 20s/s 18 21'/4 19'/s 21/s 19'.32.32.35.35 3%4,938,3G2$179,940 1,453,590$2G,403 420,438$105,797 2,950,287$19,004$331,144$56,993 13,635 62,086 50,318 21,053 43,876 3,858 34,548$28G,3G7$98,091$722,780 2,624 10 10 14 9 2 42 15 8 5 5 186 9 12 15 12 3 13 3 12 Note: The 20th annual stock dividend was paid February 23, 1979 at the rate ol three percent.

project subsequently advised the Siting Board that the operational date for the plant could be extended to 1988 if the updated growth estimates proved to be accurate.RG8tE continues to pursue the authorization for timely construction of the Sterling plant based on state-wide needs as well as customer needs on the Rochester system.Although construction cost esti-mates in an inflationary economy have greatly appreciated due to the delays in completion date of the project, it is our opinion that this plant repre-sents the best and most economic option for meeting electric energy demands in New York State and the Rochester system.We petitioned the PSC in May 1978 for rate increases amounting to a total of$48.7 million in additional revenue, consisting of an 8.9 percent gas rate increase and a 17.8 percent increase in electric rates.The proceeding is in its final stages and the PSC decision is expected to be rendered in late April with the new rates to take effect in May.The September 1978 sale of an additional 1,250,000 shares of common stock realized$23.4 million in new capital.In December 1978 RG5E completed the private placement with institutional investors of$40 million in first mortgage bonds at 9.5 percent interest.More than 18 percent of holders of common stock are now participating in the Company's Auto-matic Dividend Reinvestment Plan as compared with 11 percent when the Plan was initiated in 1974.During 1978, they invested more than$3.7 million in 206,427 new shares of common stock.We have consistently expressed support for the creation of Empire State Power Resources, Inc.(ESPRI).This plan would have allowed power companies in New York State to join in common power plant licensing, financing and plant opera-tion, yet sustain the autonomy of the companies.

The plan would have benefited customers through lower generating costs than would otherwise be possible.The projected savings to RGRE customers alone through the year 1998 would approach$I billion.In February 1979, after five years of lengthy deliberations, the PSC took an informal poll that indicated that the proposal would be disapproved.

We are still awaiting the formal decision.The verdict is very disappointing, and the higher costs it will produce for the long-suffering consumers cannot be justified, in our opinion.Once again, the PSC reported that RG&E had the lowest number of customer complaints per capita of any power company in New York State.These figures are supported by our own consumer surveys that show customers give the Company very high marks for the quality and reliability of its service.The credit goes to our fine employees.

We anticipate modest increases in demand for both electricity and natural gas in 1979.Gas supplies are sufficient and we will continue to expand gas space heating service while balancing known supply with anticipated demand.Total kilowatt-hour sales of electricity to customers are projected to increase 3.1 percent.Our service area is expected to realize this growth despite the adverse economic , factors that have significantly diminished load growth in other areas of the State.Expenses will continue to increase, with taxes estimated to go up by 7.7 percent.Capital expendi-tures will go up to$115 million, excluding AFDC.Although we retain a markedly positive view of the future in our service area, efforts to improve performance as a utility are regularly hampered by events and circumstances largely outside our control.The costs associated with virtually every segment of our business continue to rise, and infla-tionary pressures will undoubtedly necessitate further increases in our rates for natural gas and electricity.

The cost problems are compounded by a regu-latory environment that frustrates our attempts to build the generating capacity that will be required if there is to be economic growth in New York State.Along with increased taxes, the burdens of exces-sive regulation and extraordinary regulatory delays are passed on to our customers as increased prices, and this further compounds the problems faced by businesses and consumers within our service area.These problems are so important that we have taken the unusual step of preparing a special section to this report that can be found on page eight.We hope you will take the time to read it.Francis E.Drake, fr.Chairman of the Board and Chief Executive Officer Paul W.Briggs President Keith W.Amish Executive Vice President March 15, 1979 To Shareholders:

After a disappointing year in 1977, common stock earnings in 1978 rebounded to$2.46 per share.This represents an increase of 34 cents, or 16 percent more than the 1977 earnings of$2.12 per share;a substantial improvement, especially since there were 1.3 million additional shares outstanding during 1978.Earnings continue to be affected by the weak economy of the State, by inadequate rate relief, and by increasing costs, including those due to inflation and government regulation.

Although earnings have improved, they are not at the level we believe they should be.On the plus side, some encouragement can be taken from the State government's more serious efforts to retain and attract business and industry.Dividends paid per common share for the year totaled$1.41,12 cents more than the$1.29 paid the previous year.Additionally, a three percent common stock dividend was paid in February1979.

This is the 20th consecutive year in which a stock dividend has been paid.Total customer revenues for 1978 were$340.3 million, a 12 percent increase over 1977 customer revenues of$304.7 million.Revenue from electric sales to other utilities rose 8.6 percent in 1978 and totaled$28.7 million.The gain resulted from a sustained strong market for RG8r E's coal-fired elec-tricity through the New York Power Pool to utilities that would otherwise have to rely on the more expensive oil-fired electric generation.

These sales brought total revenues for the year to$369.0 million, an 11 percent increase over 1977.Kilowatt-hour sales of electricity to customers increased 3.3 percent for the year.Industrial kilo-watt-hour sales led gains with a six percent increase over 1977, a relatively strong growth.Residential kilowatt-hour sales increased 2.5 percent.Natural gas sales in therms were up 3.1 percent over 1977.The gain is attributed primarily to colder than normal weather and the addition of more than 2200 gas space heating customers following the 1977 lifting of a New York State Public Service Commission (PSC)prohibition on additional gas service.The performance of the Ginna nuclear power plant was excellent.

The plant was available 81 percent of the time during the year and had regained its maximum dependable capacity of 470,000 kilowatts following the May1978 installation of a new turbine rotor.Thus the nuclear power plant economically provided 60 percent of the electricity on our own system and, when compared with an equivalent amount of energy generated by a coal-fired plant, saved our customers$32 million in fuel costs for the year.Operating expenses rose 11.6 percent, going to$31 9.7 million in 1978 from$286.4 million in 1977.Fuel expense, including purchased electricity and r tt n Keith W.Amish Francis F, Drake,/r.Paul W.Briggs gas, went up 12.0 percent, an increase of$15.9 million.Employee wages and benefits expense increased 8.1 percent, or$4.1 million over 1977.The total number of employees, 2622, was reduced by two over the year while the number of customers continued to increase, resulting in improved productivity.

Employee overtime was kept to a minimum.Taxes, including Federal income tax, increased$9.2 million over 1977, or 19.4 percent.Capital expenditures for 1978 were$112.6 million, excluding Allowance for Funds Used During Construction (AFDC).This was 15 percent more than the 1977 capital expenditure of$98.1 million.A total of$38.7 million was required during 1978 for additional electric generating capacity.This included$3.6 million capital investment in our proposed Sterling nuclear power plant project,$12.2 million for a 24 percent share of Niagara Mohawk Power Corporation's Oswego~6 oil-fired plant,-and

$22.9 million for 14 percent of its Nine Mile Point~2 nuclear plant.The Niagara Mohawk plants have been rescheduled to be operational in 1980 and 1984 respectively.

These later operational dates will not affect the Company's ability to meet projected increased customer electric demand unless we should experience an increase in the present growth rate of electric use.Plans for a proposed 1,150,000 kilowatt nuclear power plant at Sterling, New York await reinstate-ment of a certification from the New York State Board on Electric Generation Siting and the Envi-ronment.In january 1978 this Board granted a construction certificate for the Sterling plant with an operational target for the year 1986.The Board suspended the certificate in May 1978 and requested further proof of"need" for the unit.Based on updated load growth projections that.showed lower electric load growth in the State as a whole, the Siting Board felt there was a question as to the necessity for the unit in the time frame origi-nally requested.

The four partners in the Sterling L Electric to our Kilowatt-Hour Sales Customers by Classes m illions 1500 L Ide Total Electric KWH Sales In Millions Year Total 1978 5103 1977 4938 1976 4806 1975 4521 1974 4408 1973 4540 1972 4292 1971 3982 1970 3802 1969 3578 iU us UL U U 1969 70 71 72 73 74 75 76 77 78 Gas Therm Sales to our Customers by Classes LI'Total Cas Therm Sales In Millions Year Total 1978 433 1977 420 1976 468 1975 424 1974 454 1973 435 1972 469 1971 442 1970 425 1969 403 meicral~LL JU'50 In us ial IJ'iIJUU Other t 0 196 9 70 71 72 73 74 75 76 77 78 RC&E engineers designed an uncommon type ol gas pipeline support in this bridge that crosses the Barge Canal.The support cables are underneath the pipe instead ol above.Gas Operations Supply Adequate RG&E's supply of natural gas, under contract with Consolidated Gas Supply Corpora-tion, remains adequate.Deliveries of liquefied natural gas (LNG)from Algeria to our supplier continue on schedule, adding 15 percent to the supplier's capacity.This, combined with increasing yields from the supplier's Louisiana offshore wells, provides assurances for adequate gas volumes in meeting existing and projected demands.New Gas Service RG&E installed more than 1300 gas service lines to new residential, commercial and industrial customers in 1978.Including heating system conversions, more than 2200 gas space heating customers were added during 1978.This expansion followed Public Service Commission approval in 1977 of the Company's petition to lift the prohibition on accepting new or addi-tional gas service.The additional services have helped slow the decline in total gas deliveries seen over the last several years that resulted from customer attrition and conservation.

RG&E estimates that more than 3400 space heating customers will be added in 1979 including new homes, commercial establishments and heating system conversions.

Therm Billing Liquefied natural gas (LNG)has a higher heat value (BTU's per cubic foot)than the domestic gas we have previously received.When LNG is mixed with domestic gas, as in the supplier's delivery to RG8 E, the thermal value varies.For this reason, RG&E has changed its gas billing from hundreds of cubic feet to therms, one therm being one hundred thousand BTU's.Starting in May 1979, a gas customer's bill will be calculated according to the average heat value (therms)used during the billing month.While this new system should have no effect on the amount of the customer's bill, it ensures that the Company's gas revenues will more accurately reflect the heat value of the gas sold./%4~i N Research and Development In1978 RC&E invested$2.8 million in research and development projects.Half of that amount was directed to nation-wide utility industry supported research organizations as well as the research arm of New York State utilities, known by the acronym ESEERCO.One such ESEERCO program helps support the nuclear fusion experiments at the University of Rochester.

The New York State Energy Research and Development Authority directly assessed RG&E$600,000 for state government spon-sored research and development projects.The other half of the research and development funds was allocated to Company-sponsored and-coordi-nated projects such as the gas furnace demonstration program in which a number of residential gas furnaces have been modified for test purposes in an attempt to improve efficiencies.

So far, an average gas saving of 17 percent has been achieved in the test homes while maintaining comfortable heating levels.A broad, national program to encourage development of nuclear steam generation equipment and maintenance improvements was initiated in 1978 and is co-sponsored by RC8 E.The research on a novel backhoe safety shutoff system that will prevent accidental damage to underground cable and pipeline has produced a prototype that will be field-tested this year.In another research area under RG8 E coordina-tion, data collected from several utilities were analyzed to determine spawning habits of fish along the southern shoreline of Lake Ontario.In all, RG&E directly supported more than 40 research and development projects in 1978.Management Appointment Joseph J.Hartman was elected to the position of Vice President, Cas and Transportation by the board of directors effective December 1, 1978.He succeeded Elvin A.Skibinski who retired after 33 years of service.Mr.Hartman joined RC&E in1946 as a co-op student in the Gas Department.

He held a series of engineering posi-tions in the Gas Department until 1974 when he was appointed Superin-tendent of General Maintenance.

Electric Operations Generation Over the past few years, three incidents of blade failures in one of the rows of a low pressure turbine rotor at the Ginna nuclear power plant had reduced plant availability-the percentage of time the plant is in service.In 1976, for example, the plant's availability was only 58 percent.A temporary modification to the turbine following the third blade failure allowed continued plant operation, but only at 86 percent of capacity.RGAE worked with the manufacturer in redesigning blades for a new turbine rotor to solve the problem.The new rotor was installed in May 1978 and it has performed very well.The plant is once again operating economically and efficiently at full capacity, providing more than half of the electricity for the Company's system.During the seven-month period from the time the rotor was replaced to the end of the year, the Ginna nuclear power plant recorded a remarkable 98 percent availability.

For the entire year, the plant's availability was a noteworthy 81 percent.For further reliability, the original rotor has been rebuilt with the improved blades and was replaced in the second low pressure turbine unit during the 1979 annual refueling, maintenance and inspection shut-down.The displaced rotor will be rebuilt and kept at the nuclear power Folfowing a major redesign ol blade configuration, this new, 80-ton low pressure turbine rotor was installed at the Cinna nuclear power plant.plant as a spare to significantly reduce shutdown time in the event of any future, unforeseen rotor problem.Distribution ln the Rochester vicinity, a substation was constructed to meet electric demand at the new manufac-turing plant at Rochester Products, Fuel Systems Division of General Motors.An additional overhead trans-mission line was constructed to the Xerox Corporation facility in Webster providing greater capacity for Xerox and other area customers.

As part of the115 KV transmission construction project in the Rochester area, a major circuit was reconstructed in western Monroe County that increased capacity to suburban customers in the Town of Gates, including the expanding Apparatus Division of Eastman Kodak Company located there.RG8 E continued its construction program extending 34.5 KV distribu-tion facilities in the Genesee District, south of Rochester.

The Canandaigua-Finger Lakes District expanded 115 KV facilities in meeting sustained growth in its area.A new 12.5 KV service was installed at the recently completed Voplex plant in Canandaigua.

In the Lakeshore District to the east, plans call for the construction of a 115 KV transmission line along the recently acquired right-of-way section of the Hojack Line railroad to meet growth in that outlying district.Streetlighting modernization programs in 1978 resulted in more than 2000 older incandescent lamps being replaced with high pressure sodium units in the northern part of the City of Rochester.

This project, paid for by the City, increases lighting efficiency and enhances public safety.A streetlighting modernization program was completed in the Village of Mt.Morris, and another is underway in the Village of Webster.Electric and gas facility relocation on public property became a larger-than-normal undertaking in 1978 due to the extensive activity in road construction and highway improvement.

The$7 million expense for this work must ultimately be borne by the Company's customers since there is only occa-sional and very minor reimbursement from government agencies that order the relocations.

This electric transformer replaced a unit that failedinservicein 7978.Itis oneoltwo transformers at an interconnection that reduces 345,000 volts to 115,000 volts for transmission in the RCg E system.

In the Laboratory for Laser Energetics ol tf>e College ol Engineering and Applied Science at the University of Rochester, experiments are conducted in an attempt to ltarness thermal energy from nuclear fusion.Powerful laser beams are focused through mirrors and converge on a minute hydrogen pellet inside a target clamber (photo inset).The project is supportedin part by RG&E, and the experiment may one day lead to a virtually inexhaustible source ol therntaf energy lor the generation ol electricity.

Some Plain Talk i..t~, i Rr 27~o<"pi~.V f I C j cLAss 100 15 TA Kh 3.6 SINGLE STATOR TYPE DS STYLE 60~5IOC623G25 0 WATTHOuR 240 VOLTS METER 3 WIRE kiiO ABC Pay to the order ot JOtN Q.PUSUD ROCHESTER,raY.

Gross Pay 1978 Date 1978 Electricity 1.7%~oaolA 55555 Tax 26.7%Ga-3.0%The cost of living has gone up dr'astically over the years, and we know it will continue to rise untfl inflation, at least, is brought under control.But, it's not just the cost of living that's gone up, it's the cost of doing business, too.The inflationary economy has adversely affected business and industry as well as the individual.

Despite efforts to minimize expenses, the rising cost of doing business has affected RG&E, particularly on costs over which the Company can exert little or no control.This special section of the 1978 annual report is intended to portray, in plain talk, the rising costs and their effect on RG&E, its customers and shareholders.

Before getting into specifics on the cost increases, let's take a look at the overall impact on RG&E customers in general.From 1970 to 1978 the cost of electricity to RG&E customers had risen 84.5 percent, and the cost of gas went up 109 percent.How has the higher cost of electricity and gas affected most RG&E customers?

Based on wage figures published by the New York State Depart-ment of Labor, our records show that in 19'70 the gpical Rochester production worker paid 1.6 percent of his or On the subject of rising costs, pressure groups and consumer activists often suggest that utilities, like RG&E, should hold the line on"their" rising costs and maintain existing rates or even lower them by reducing"profits." Well, the fact is, RG&E has no control over most of the costs that comprise, the rates.And as for"profits," there really aren't any profits in a strict sense of the word as we'l point out later.Let's take a look at the costs in RG&E's business.Fuel expense consumes the largest portion of the revenue dollar.Today 40 cents of each revenue dollar go to pay for the fuels used in the generation of electricity, steam, and for the cost of natural gas.Over a nine-year period through the end of 1978, tlie cost of coal per ton more than doubled while oil and natural gas had tripled in cost.Nuclear fuel, processed and ready for use in a power plant, had a fourfold cost increase, yet it still remains the most economical fuel for electric generation as seen in the accompanying chart that compares fuel cost on a BTU or heat value basis.Fuel Expense (Fuel costs per million BTU's)her gross income for electricity.

In 1978, despite more than a ten percent increase in electric use by the average residential customer, the same worker still paid just 1.7 percent of gross pay for electricity.

If that worker was a gas space heating customer, he or she paid 3.1 percent of gross income for gas in 1970, and only 3.0 percent in 1978.In the meantime the tax bite (property, income, social security and sales)out of that same gross pay went from 23.9 to 26.7 percent.Most pay has kept pace with the inflationary impact on prices.Even though more actual dollars are needed to pay for electricity and gas, these forms of energy absorb about the same amount of gross income as they did nearly ten years ago.The problem is that government taxes are taking greater amounts of the devalued gross paycheck dollars.We'e certainly not saying that all of our customers have incomes that have kept pace with escalating inflation.

The senior citizen, for example, on low, fixed income is having an extremely difficult time meeting the continually increasing costs of all essentials for living, including heat and electricity.

The plight of a senior citizen in the situation described above is a very complex social problem that stems from rampant inflation.

And, as a social problem, it is one that should not be placed upon any one segment of the economy or any one industry, whether it be a regulated natural monopoly or not.Recognizing this social problem, we at RG&E have expressed our support for an energy stamp program and have even offered to help develop such'plan.But, so far, the authorities have not accepted tPhe oEer.Further, we have contended that residential'heat and electricity are just as essential to our customers as food, and should be tax-exempt.

In that regard, the State did reduce sales tax on electricity and gas by one percent in 1978..50 1970 78 70 78 70 78 70 78 Coal Oil Gas Nuclear C', nfl'mi The market price of fuels is beyond the influence of RG&E's prudent and aggressive purchasing procedures.

Rising inflation gradually boosted fuel prices.The single most devastating factor, though, was the 1973 Arab Oil Embargo that not only caused the price of oil to double in a year, but also illustrated that the United States had become dangerously dependent on foreign oil sources.This dependence, combined with the rapid cost increases>

produced trade deficits that have set iously eroded the value of the American dollar and have helped promote uncontrolled inflation.

It's a serious situation and one that is increasingly agitated by a glut of self-defeating laws, regulations and taxes enacted by the federal and state governments.

itlp pd~P,o>t h o~Cp o~More importantly, RG&E employees are qualified, dedi-cated and productive people who are entitled to fair return for their eR'orts.The ratio of RG&E customers to employees in 1970 was 168 to one.In 1978 there were 186 customers for each RG&E employee.This means that our employees have increased their productivity as their contribution in the struggle against inflation.

Productive, competent employees provide for the best interest of the shareholder and the customer.RG&E will continue to exercise control of wage and benefit expenses, and we are observing the current volun-tary anti-infiationary guidelines.

a%km RG&E's tax expense has tripled since 1970 going from$19 million to$57 million in 1978.And, the 1978 figure doesn't even include the$15.5 million in sales tax RG&E had to collect from customers in their bills for the State and local governments.

Aside from the visible sales tax,"hidden" taxes in the customer bills account for more than 15 cents of every dollar the customer pays to RG&E.When sales taxes are included, the typical residential customer's bill is more than 22 percent tax.And that's a cost of government, not of energy.Tax Portion of 197ti Customer Bill-22.5%)(,-gl i r i SK~W~a rvauc Tax is another example of expense where RG&E can exercise little or no control.Of course, it could be pointed out that property taxes do mount up as we expand facili-ties such as substations, transformers and power lines.But, even here there is no option.We are obligated to meet growth, and are required by PSC law to serve the instant energy demands of customers regardless of the amounts called for.And just like every other property owner, we pay high tax rates on infiated values.The eB'ect is cumulative.

P~D D O In addition to the expenses just discussed, seven percent of the 1978 revenue dollar was used to pay for miscellaneous materials and services.Among other items this category includes fees assessed by regulatory agencies, expenses for regulatory compliance, legal counsel, and building and grounds maintenance.

Here, too, there is really little choice.We do, however, request bids where we can and look for the best price in the marketplace.

30/40/50 MVA Electric Transformer 10 Expense for employee wages and benefits has increased 80 percent since 1970, a relatively small increase compared to other items mentioned.

This is an area where RG&E may and does exercise control-reasonable control.And it has to be reasonable if the Company is to retain competent personnel and remain competitive in the labor and professional employment market.Let's face it, we'e in a highly complex, technical business.Low or inade-quate wages would produce nothing but a false economy.1970-$127,500 1978-$278,000 Percentage increase-118.0%%d Average Annual Use Per Residential Electric Customer Kilowat t-Hours Average Annual Use Per Residential Space Heating Gas Customer Therms'666 6166 6112$371 SSS7 1767 1776 1777 7653 1969 70 71 72 73 74 75 76 77 78 1969 70 71 72 73 74 75 76 77 78'Adjusted for normalized weather by degree days.Earnings and Dividends Per Common Share in Dollars 0 Earnings per Common Share 0 Cash Dividends per Common Share (Adjusted for Stock Dividends) 2.12 23>3 2.26 2.12 1.81 ts9 1.1S 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 12 L.0 to serve customers.

So, when it comes right down to it, RG&E's"profit," or the interest cost of money, is a cost of doing busmess, and it's certainly one over which we have little control.Millions$120 Annual Capital Expenditures in Millions oi Dollars, Excluding Allowance ior funds Used During Construction lrrs 100 80 60 40 20 0 1970 71 72 73 74 75 76 77 78 In 1978,$112 million were needed to cover the cost of new facilities required to serve customers.

Although 40 percent of that capital was raised internally, the rest had to come from a highly competitive money market.There is no alternative.

Regardless of market conditions we cannot and would not elect to ignore necessary additions to serve customer energy needs.To compromise on improvements and replacements that protect the energy systems is to gamble on efficient and reliable service to our customers, and we won't do that.Cost of capital is a major area where we can exercise little or no control other than continuing to employ effi-cient methods for raising funds in the capital marketplace where costs are rising rapidly.In March 1979, for example, we had to replace a maturing$16.7 million three percent interest bond with short-term notes at more than 11 percent interest.Although this may seem a little strange at first, RG&E's"profits" are actu-ally an expense.Our"pro5t" is nothing more than the amount that the New York State Public Service Commis-I sion (PSC)allows us to pay for the money we have to borrow to build the facilities needed to serve customers.

Put another way, we are allowed to earn a"rate of return" on the capital invested in plant used to serve the public.The rates of return are set by the PSC, but are in no way guaranteed.

Without the ability to ay the cost of.P money in interest and share-holder dividends we would not be able to raise the capital necessary to continue Gas and electric companies constitute the most capital-intensive industry in the entire economy.The average manufacturing concern, for example, invests 75 cents in plant for each dollar of gross income while RG&E has had to invest more than three dollars for each gross income dollar.Large amounts of money are required to pay for facility expansion, improvement and replace-ment.Prices for materials and labor have gone up, and so has the cost of borrowing the money to finance the new facilities.

For the most part, these costs cannot be controlled by us.Just as infiation has driven up costs in the markets where people shop, it has also affected the markets where utihties purchase their hardware and money.y w 0 D D R G&E has a responsibility to supply electricity, gas and steam to its customers at the most economical prices.But, try as we may, we have little control over most of the expenses incurred in fulfilling this responsibility.

We have consistently applied sound management policies and prin-ciples in attempting to minimize the amount of rate increases while maintaining the Company as a sound investment and reliable supplier.It's very discomforting to realize that uncontrollable costs have accounted for more than 80 percent of customer cost increase since 1970!The cost of doing business, especially power company business, is high, and it continues to go higher, driven by unbalanced federal and state budgets.Most of the cost is in fuels, taxes, capital expenditures and the cost of money.And, part of the cost is a result of heavy regula-tion by all layers of government.

We are not saying that regulation is unnecessary.

Some of it is beneficial.

But, like everything else, regulation has a price.Since 1970, RG&E's spending for capital improve-ments just to comply with regulatory requirements and laws approaches

$100 million.This expense amounts to almost a$20 million annual cost to customers.

To this we can add at least another$10 million a year in operational expense to comply with various other federal and state regulatory requirements.

Thus, a very conservative esti-mate of the annual cost of government regulation to our customers is$30 million, a very real part of the rising cost of energy.We have taken this opportunity to present a story to you our shareholders, and hopefully to many of our customers.

It is not a unique story because each of you is experiencing the same pressures, the same cost increases, the same inflation, over-regulation and taxes.But, because utilities are sometimes regarded by the uninformed as unaffected by such pressures, we thought it important to spell out how these same factors, over which we have little or no control, are driving up the abso-lute cost of energy.

SCAM ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Statement of Income (rho ndsofool4)1978 1977 Operating Revenues (Note1)Electric..Gas Steam Electric sales to other utilities Total Operating Revenues Operating Expenses (Note1)Operation Electric and steam fuels.Purchased electricity

.Purchased natural gas Other..Maintenance Depreciation Taxes-local, state and other Federal income tax-current (Note 3)..-deferred (Note 3)Total Operating Expenses Operating Income Other Income and Deductions Allowance for other funds used during construction (Note 1)Other-net Total Other Income and Deductions Income before Interest Charges Interest Charges Long-term debt.Short-term debt..Other-net Allowance for borrowed funds used during construction (Note 1)Total Interest Charges.Net Income Dividends on Preferred and Preference Stock, at required rates Earnings Applicable to Common Stock Weighted average number of shares outstanding in each period, adjusted for stock dividends (000's).Earnings per Common Share (Note 1)Cash Dividends per Common Share, adjusted for stock dividends (Note 1)$202,631 118,531 19,110 340,272 , 28,G76 3G8,948 58,140 19,337 71,109 65,685 26,24G 22,206 45,935 5,166 5,875 319,699 49,249 8,705 4,418 13123 62,372 25,594 1,588 41G (4,812)22,786 39,586 S,G78$33,908 13,774$2.4G$1;41$179,940 105,797 19,004 304,741 26,403 331,144 5G,993 13,G35 62,086 62,494 22,372 21,053 43,876 961 2,897 28G,3G7 44,777 6,473 1,310 7,783 52,560 22,542 1,319 494 (4,844)19,511 33,049 6,512$26,537 12,474$2.12$1.29 Statement Of Retained EarningS tr~~~..io.i~>>

Balance at beginning of period Add Net income Total Deduct Issuance costs of preferred stock (Note 4).Dividends on capital stock Cumulative preferred stock, at required rates (Note 4).Preference stock (Note 4)Common stock Cash (Note 1)Stock (Note 4)Total Balance at end of period 1978$70,819 39/86 110,405 3,550 2,128 19,269 8,120 33,0G7$77,338 1977$67,812 33,049 100,861 701 6,453 59 16,009 6,820 30,042$70,819 Source of 1978 Revenue Dollar in Cents Use of 1978 Revenue Dollar in Cents Electric Revenue Gas Revenue Cost of fuels 40st Purchased rlecrric g Steam rvefs Purchased lfecvicisy 19e 554 324 Taxes 6st Depreciation 154 44 ssa Interest on Bonds&Notes Electric Sales Steam to Other Utilities Revenue Wages&Benefits Misc.Materials&Services Reinvested Earnings Dividends (Com.Sst&Pfd.2a)Capitalization in Millions of Dollars 400 350 212A 250~2VA A 2VA 211.1 150 112.$ssay 121.1 220 esAI 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 4 long-Term oebf 4 common sharehofders'qvisy 4 prefeved rquisy 13 RES ROCHESTER GAS AND ELECTRIC CORPORATION Balance Sheet (rho sa ckofoolh s)1978 At December 31 1977 ASSETS Utility Plant, at original cost (Note1)Electric..Gas Steam.Less-Accumulated depreciation and amortization Construction work in progress Net Utility Plant Investment in subsidiary, at equity Current Assets Cash (Note 5)Accounts receivable

.Materials and supplies, at average cost Fossil fuel.Construction and other supplies Prepayments Total Current Assets Deferred Debits Unamortized debt expense Deferred fuel cost (Note 1)Other (Note 4).Total Deferred Debits Total Assets CAPITALIZATION AND LIABILITIES Capitalization (Note 4)Long-term debt.Preferred stock.Preference stock Common shareholders'quity Common stock Retained earnings Total common shareholders'quity

.Total Capitalization Current Liabilities Short-term debt (Note 5)Long-term debt due within one year Accounts payable.Taxes accrued, including income taxes.Interest accrued Payroll accrued.Other..Total Current Liabilities Deferred Credits and Other Liabilities Accumulated deferred income taxes (Notes 1 and 3)Other..Total Deferred Credits and Other Liabilities Commitments and Other Matters (Note 6)Total Capitalization and Liabilities

..$669,104 171,120 17,735 857,959 2G1,477 59G,482 213,534 810,016 1,996 11I777 31,700 12,G73 9,G43 1,1 GO 6G,953 3,G20 5,362 5,439 14,421$893,386$384,303 67,000 28,000 246,938 77,338 324,276 803,579 16,G77 29,021 11,335 7,6G7 2,596 1,0G6 G8,3G2 18,394 3,051 21,445$893,386$G09,387 1G2,946 17,442 789,775 229,122 560,653 162,127 722,780 1,947 6,617 30,332 10,787 9,724 927 58,387 3,348 G,338 5,574 15,260$798,374$3G1,022 67,000 28,000 212,533 70,819 283,352 739,374 9,000 18,635 4,610 7,355 2,388 825 42,813 15,233 954 16,187$798,374 LK~iiP ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Statement Of ChangeS in FinanCial POSitiOn<<rh sa dso<<Do!4 s)Sources of Funds Operations Net income Principal non-cash charges (credits)to income Depreciation Amortization of nuclear fuel Deferred fuel costs Deferred income taxes-net Allowance for funds used during construction Other-net Total from Operations Financing Sale of long-term debt.Sale of common stock Sale of preference stock Total from Financing Total Sources of Funds Uses of Funds Utility plant Plant additions.Nuclear fuel additions.Less: allowance for funds used during construction Net Additions to Utility Plant Dividends on preferred stock Dividends on preference stock Dividends on common stock Reduction of short-term debt-net.Retirement of long-term debt Redemption of preferred stock, including call premium Capital stock expense Expense of issuing long-term debt Other-net.Increase (decrease) in working capital (excluding short-term debt)Total Uses of Funds Changes in Components of Working Capital Increase (decrease) in current assets Cash Accounts receivable Materials and supplies Fossil fuel..Construction and other supplies Prepayments

.Total Increase (decrease) in current liabilities (excluding short-term debt)Accounts payable Taxes.Accrued interest and payroll Long-term debt due within one year Other-net Total Increase (decrease) in Working Capital excluding short-term debt 1978$39,58G 22,206 15,746 97G 3,161 (13,517)1,204 69,362 40,000 27,186 67,186$136,548$105,191 20,878 13,517 112,552 3,550 2,128 19,269 9,000 16,677 902 490 (2,037)(25,983)$136/48$5,1 GO 1+68 1,88G (81)233 8,5G6 10,386 G,725 520 1G,677 241 34+49$(25,983)1977$33,049 21,053 14,386 (2,886)2,675 (11,317)757 57,717 50,000 24,579 28,000 102,579$160,296$94,958 14,450 11,317 98,091 6,453 59 16,009 9,051 333 27,750 167 892 1,406 85$160,296$188 (3,474)(49)351 281 (2,703)482 1,651 1,234 (G,000)(155)(2,788)$85 Notes to Financial Statements Note 1.Summary of Accounting Policies General.The Company is subject to regulation by the Public Service Commission of the State of New York (PSC)with respect to its rates for service and the maintenance of its accounting records.The Company's accounting policies conform to generally accepted accounting principles as applied to New York State public utilities giving effect to the rate-making and accounting practices and policies of the PSC.A description of the Company's principal accounting policies follows.Utility Plant and Depreciation.

The cost of additions to utility plant and replacement of retirement units of property is capitalized.

Cost includes labor, material, and similar items as well as indirect charges for engineering, supervision, etc.The Company capitalizes an allowance for funds used during construction approximately equivalent to the cost of capital devoted to plant under construction.

Replacement of minor items of property is included in maintenance expenses.Costs of depreciable units of plant retired are eliminated from utility plant accounts, and such costs, plus removal expenses, less salvage, are charged to accumulated depreciation and amortization.

Depreciation in the financial statements is provided on a straight-line basis at rates based on the estimated useful lives of property, which have resulted in provisions of 3.0'nd 3.1%per annum, of average depreciable property in 1977 and 1978, respectively.

Estimated year of completion Net megawatt capability RGB E's share-megawatts-percent...Total estimated project costs RG&E's share.RGg E's actual construction costs-1977

.-1978.p uliioos of Dollars)$252.60<$1,441 4$1,354.7r$r 60.6 201.8 379.3 10.0 21.7 3.5 12.2 22.9 3.5 O'To be constructed and operated by Niagara Mohawk Power Corporation.

To be constructed and operated by Rochester Gas and Electric Corporation.

Construction costs exclude allowance for funds used during construction and certain overhead costs to be capitalized.

rtrTorat project costs incfude$8.$million for oil handling facilities, of which RG&E has not agreed upon the percentage participation, and excludes common facilities.

rpTotat project costs incfude$89.4 million for the initial nuclear fuel loading and excludes common (aciliiies.

rprorat project costs include$114.7 million for the initial nuclear fuel loading.Nuclear Fuel and Decommissioning Costs.The cost of nuclear fuel and estimated permanent storage costs are charged to operating expense on the basis of the thermal output of the reactor.These costs are charged to customers through base rates and through the fuel cost adjustment clause.Jointly-Owned Facilities.

The following table sets forth the major electric generation projects currently planned which will add to the Company's present generating capability.

Each participant must provide its own financing for these projects.Oswego Nine Mile Fossil Point Nuclear Slerling Unit¹6rlr Unit¹2$Nuclear 1980 1984 1988 850 1084 1150 204 150 322 24 14 28 Due to a Federal government policy adopted in 1977, the Company has changed its nuclear fuel cost computation to reflect the costs of permanent storage of spent nuclear fuel.Prior years'uclear fuel cost computations anticipated spent nuclear fuel would be reprocessed.

Cumulative prior years'uel expenses would have been increased by approximately S8.0 million if they had been determined on the basis of current cost estimates for permanent storage of spent nuclear fuel, rather than on an estimated amount for reprocessing.

If the government's permanent storage policy is continued, the Company believes that such amount will be fully allowable for rate-making purposes.Decommissioning costs (costs to take the plant out of service in the future)for the Company's Ginna nuclear power plant cannot be estimated at this time.The Company believes that the costs of decommissioning will be fully allowable for rate-making purposes.Allowance for Funds Used During Construction.

The Company capitalizes an Allowance for Funds Used During Construction (AFDC)based upon the net cost of borrowed funds for construction purposes and a reasonable rate upon the Company's other funds when so used.The rate used for this purpose was Bs/4%, which became effective in May1976.In accordance with the order issued by the Federal Energy Regulatory Commission, AFDC is segregated into two component parts and classified in the Statement of Income to disclose an Allowance for Borrowed Funds Used During Construction as a credit to Interest Charges and an Allowance for Other Funds Used During Construction as a part of Other Income.In December 1977, the Company began computing AFDC on its share of Nine Mile Point Nuclear Unit~2 and Oswego Fossil Unit~6 at an average reduced rate of 6.85%, which is net of the income tax effect of the interest portion of AFDC.Rates and Revenue.Revenue is recorded on the basis of meters read during the calendar year.Tariffs for electric and steam service include fuel cost adjustment clauses which serve to adjust electric and steam rates from time to time to reflect changes in the average costs of fuels used in electric and steam generation from the average cost of such fuels during the base period.Tariffs for gas service contain a comparable clause to adjust gas rates for changes in the price of purchased natural gas.Deferred Fuel Costs.Fuel costs which are recoverable under the electric, gas and steam cost adjustment clauses included in the tariff schedules of the Company are deferred until they are billed to customers.

A reconciliation of recoverable gas costs with billed gas revenues is done annually as of August 31, and the excess or deficiency is refunded to or recovered from the customers during a subsequent twelve month period.Federal Incorhe Tax.For income tax purposes, depreciation is computed using the most liberal methods permitted.

In addition, certain costs capitalized for financial reporting purposes are deducted currently for income tax purposes.The resulting tax reductions are offset by provisions for deferred income taxes only to the extent ordered or permitted by regulatory authorities.

The 10%investment tax credit rate, which had been scheduled to return to 4%in 1981, has been made permanent by the Revenue Act of 1978.The prior rate of 4%is applied to reduce the current tax provision while, as recommended by the PSC, normalized tax accounting is followed in the application of the remaining 6%.The Company uses the separate period approach in calculating the interim quarterly tax provision.

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

Current service costs are funded annually.Past service costs are being amortized over a 40 year period.Retirement plan expenditures for the years 1977 and 1978 were$9.2 million and$9.9 million, respectively.

The actuarially computed value of vested benefits at December 31, 1978 exceeds the assets in the plan by approximately

$15 million.Earnings and Dividends Per Share.Earnings applicable to each share of common stock are based on the weighted average number of shares outstanding during the respective years, adjusted for stock dividends.

Assuming the1,250,000 shares of common stock issued on September 27,1978 were outstanding at the beginning of 1978 and the proceeds were applied to reduce the short term debt, the earnings per share for 1978 would have been$2.36.Cash dividends per share are based on the shares outstanding at the time dividends are paid, adjusted for stock dividends.

Cash dividends per share at the rates declared in each period amount to$1.34 for 1977 and$1.42 for 1978.Note 2.Departmental Financial Information (thovsandsot oollarsi The Company's records are maintained by operating departments, in accordance with PSC accounting policies, giving effect to the rate-making process.The following is the operating data for each of the Company's departments and no interdepartmental adjustments are required to arrive at the operating data included in the Statement of Income.Electric Gas Total Operating information-1978 Operating revenues Operating expenses, excluding provision for income taxes Pretax operating income Provision for income taxes..Net operating income Other income-net

.Interest charges.Net income per statement of income Other information Depreciation Nuclear fuel amortization Capital expenditures...

Investment information-December 31, 1978 Identifiable assets..Assets utilized for overall Company operations (a)Total assets per balance sheet.....

$231,307 181,428 49,879 9,244$40,635$16,984 15,74G 100,194$711,91 7$118,531 107,873 10,658 1,966$8,692$4,641 11,903$146,299$19,110 19,357 (247)(1G9)$(78)$581 455$15,716$3G8,948 308,658 60,290 11,041 49,249 13123 22,786$39+86$22,206 15,746 112,552$873,932 19,454$893,386 Operating information-1977 Operating revenues Operating expenses, excluding provision for income taxes Pretax operating income..Provision for income taxes.Net operating income Other income-net

.Interest charges Net income per statement of income Other information Depreciation Nuclear fuel amortization Capital expenditures

..Investment in(ormation-December 31, 1977 Identifiable assets..Assets utilized for overall Company operations (a)Total assets per balance sheet (a)Consists primarily of cash, prepayments and unamortized debt expense.$206,343 165,858 40,485 4,041$36,444$15,333 14,386 90,722$626,464$105,797 97,465 8,332 147$8,185$5,1 40 6,943$141,130$19,004 19,186 (182)(330)$148$580 426$16,619$331,144 282,509 48,635 3,858 44,777 7,783 19,511$33,049$21,053 14,386 98,091$784,213 14,161$798,374 9i of Pretax Amount Income$33,049 Amount$39,586 Net income Federal income tax Current.De(erred 961 2,897 3,858 (222)5,1 66 5,875 11,041 (513)(2,201)(2,501)(5,215)5,826$45,412 Charged to operating expense Amorl.o(deferred investment tax credit.AFDC net of tax rate difference.....

Other..(1,460)(1,682)2,1 76$35,225 Included in Other Income Actual Federal income tax expense Income before Federal income tax Note 3.Federal Income Tax Provision tshousandsof Dollars)The following is a reconciliation for the years 1977 and 1978 of the difference between the amount of Federal income tax expense reported in the Statement of Income and the amount computed by multiplying the income before tax by the statutory tax rate.1978 1977%of Prelax Income Computed tax expense Increases (reductions) in tax resulting from: Excess of tax depreciation less amount deferred Expenses capitalized for financial statements including interest, payroll and use tax, etc Investment lax credit Property taxes on basis of date of taxable status.Cost of removal, less net amount deferred..Revenue taxes (deducted when paid)Miscellaneous items, net Actual Federal income tax expense$21,797 (3,525)(9,3G1)(4,955)224 (724)2133 237$5,826 48.0 (7.8)(20.6)(10.9).5 (1 6)4.7.5 12.8$16,908 (3,580)(7,765)(2,624)(254)(655)146$2,176 48.0 (10.2)(22.0)(7.4)(7)(1 9).4 6.2 A summary of the deferred amounts charged or (credited) to income is as follows: Investment tax credit Class li(e depreciation

.Fuel costs.......................

Nuclear (uel amortization Nuclear fuel storage costs Fossil plant abandonment costs 765 KV Transmission system abandonment costs Other.1978$6,G29 1,763 (469)(142)(4,989)850 (481)$3,161 1977$2,003 1,379 1,386 (362)(3,346)2,160 (545)$2,G75 Note 4.Capitalization Long-Term Debt First 3 2s/i 3%3%4%5 4Yi 4sjs 5.3 6Yi 6.7 8 9Ys 10s/i 9')e 9Yi e Bonds Due Mar.1,1979...

Aug.15,1980

..lune1,1982...

Mar.1,1985...

Iuly1,1987...

Oct.15,1989

..Nov.15,1991

..Sept.15,1994

..May 1,1996...Sept.15, 1997..luly1,1998...

Aug.15,1999

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

..Sept.15, 2007..Dec.1, 2003 Mortgag Scrics L M N 0 R 5 T U V W X Y Z AA BB CC DD Less: Series L due in 1979 Total Long-Term Debt..(thousands)

Principal Amount December 31, 1978 1977$16,677$16,677 12,000 12,000 G,000 G,000 10,000 10,000 15,000 15,000 12,000 12,000 15,000 15,000 16,000 16,000 18,000 18,000 20,000 20,000 30,000 30,000 30,000 30,000 30,000 30,000 29,667 29,GG7 50,000 50,000 50,000 50,000 40,000 400,344 360,344 1G,G77$383,G67$3G0,344 Capital Stock Pre(erred Stock (cumulative)-Par value$100;2,000,000 shares authorized:

4 4.10 4'/i 4.10 4.95 4.55 7.50 11 Shares scrlcs Outstanding F 120,000 H 80,000 I 60,000 I 50,000 K 60,000 M 100,000 N 200,000 0 670,000 I Thousands)

December 31, 1978 1977$12,000$12,000 8,000 8,000 6,000 6,000 5,000 5,000 6,000 6,000 10,000 10,000 20,000 20,000$67,000$G7,000 Redemption (per share)(a)105 At any time 101 At any time 101 At any time 102.50 At any time 102 At any time 102 Before 3/1/80 108 Be(ore 6/1/79 (b)Bond premium applicable to the years 1977 and 1978 is$677,702 and$635,GG7, respectively.

Sinking and improvement fund requirements aggregate$333,540 per annum.Such requirements may be met by certification of additional property or by depositing cash with the Trustee.The 1977 and 1978 requirements were met by certification of additional property.

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

Series 7.6 A Shares Outstanding 280,000 (Thousands}

December 31, 1978 1977 Issued$28,000$28,000 12/20/77 During January 1985, the Company must offer to purchase on October 1, 1985 all of the outstanding 7.6%Series A preference stock at a price of$100 per share.The shares remaining outstanding after such offer are callable at$100 per share at the option of the Company at any time after December 20,1987.Preference stock is subordinate to preferred stock but is senior to common stock.Common Stock-Par value$5;25,000,000 shares authorized:

Per (thousands)

Share Shares Amount 11,366,111

$181,301 6,820 21,000 508 Outstanding, December 31, 1976 3%Stock Dividend.......

SaIe of Stock...........

TRASOP>>Automatic Dividend Reinvestment Plan......

Capital Stock Expense Outstanding, December 31, 1977 3%Stock Dividend.......Sale of Stock...........

Automatic Dividend Reinvestment Plan......

Capital Stock Expense Outstanding, December 31, 1978 20.00 340,984 21.00 1,000,000 20.91 24,300 18.31-20.94 158,236 3,071 (167)212,533 8,120 23,438 12,889,631 21.00 386,689 18.75 1,250,000 17.19-19.25 206,427 3,749 (902)14,732,747

$246,938'Tax Reduction Act Stock Ownership Ptan The Company's Certificate of Incorporation was amended on June 1, 1977 to authorize an additional 10,000,000 shares of common stock, par value$5 per share.At December 31, 1978 there were 415,797 shares of common stock reserved and unissued under the Automatic Dividend Reinvestment Plan.No other shares of common, preferred or preference stock are reserved for officers and employees or for options, warrants, conversions, and other rights.Note 5.Cash and Short-Term Debt At December 31, 1978, the Company had$7 million in temporary cash investments.

Under informal agreements with certain banks, the Company is expected to maintain an average compensating balance of 10 percent of the lines of credit plus an additional 10 percent of the principal amount of each borrowing.

Under the agreements, withdrawal of the compensating balances is not legally restricted, and at December 31, 1978 the balances amounted to$4.4 million.Bank lines of credit aggregated

$64 million and borrowings are at current floating prime interest rates.The (a)Redeemable at the option of the Company on 30 days'inimum notice, plus accrued dividends in all cases.(b)Called for redemption on December 20,1977.The issuance costs related to Series 0 were charged to retained earnings, and the call premium of$2,750,000 related to this series was reported as other deferred debits and, beginning in January 1978, is being amortized in accordance with an order from the PSC.The Company's Certificate of Incorporation was amended on June 1, 1977 to authorize 4,000,000 additional shares of cumulative preferred stock, having a par value of$25 per share.None of this preferred stock has been issued.Outstanding short-term debt and average interest rate at end of period: Notes PayabIe Commercial Paper.Maximum short-term debt outstanding during the period: Notes Payable Commercial Paper.Weighted average short-term debt and interest rates during the period: Notes Payable Commercial Paper.1978 Rates Amount (Thousands)

$15,500 15,900 8.82%7,769 7.84 9,450 1977 Rates Amount (Thousands) 7.00%$7,000 6.63 2,000 25,000 26,500 6.42 10,960 5.35~11,1 48 The above averages were based upon the daily balances and interest rates in effect for the periods during which short-term borrowings were outstanding and before giving effect to the additional interest cost resulting from compensating balances.Note 6.Commitments and Other Matters The Company's capital expenditures program involves an estimated expenditure of$115 million, not including allowance for funds used during construction, in 1979 and the Company has entered into certain commitments for purchase of materials and equipment in connection with such program.Operations of the Company's generating stations are subject to various Federal, state and local environmental standards.

Under the Clean Water Act, the Company is required to obtain permits to discharge pollutants into the waters of the United States.The United States Environmental Protection Agency (EPA)issued National Pollutant Discharge Elimination System permits for all the Company's major generating facilities, but a number of conditions relating to thermal and chemical discharge limitations were contested by the Company in adjudicatory hearing requests submitted to EPA.The Company, the New York State Department of Environmental Conservation (which became a party to the adjudicatory hearings)and EPA have settled the hearing requests as described below.The Company has reached agreement with the regulatory agencies on non-thermal effluent limitations and final permits containing these agreed limitations have been issued and are now in effect.Construction of treatment facilities is required to enable Company compliance with permit limitations for two of the Company's generating stations.Pending completion of these facilities, the regulatory agencies have agreed in an Enforcement Compliance Schedule Letter to exercise their prosecutorial discretion to refrain from prosecuting the Company for violation of certain effluent limitation deadlines contained in the Clean Water Act so long as the Company adheres to a specified construction schedule for the facilities.

Construction of these treatment facilities is expected to require capital expenditures estimated at$10.5 million over the next two years.Company also issues commercial paper at various discount rates, usually maturing within 30-45 days.Balances and average interest rates of short-term borrowings as of December 31 for the years indicated were as follows: 20 The Company has pursued resolution of the contested thermal limitations by submitting demonstrations in an effort to justify less stringent limitations for three generating stations.The thermal conditions of the permits remain stayed pending resolution of the thermal issues either through regulatory agencies'pproval of the demonstrations and less stringent thermal limitations or, in the absence of such approval, through the resumption of the adjudicatory hearing process.If the demonstrations and less stringent thermal limitations are not approved for any of the three facilities, the Company could be required to install cooling towers which would involve capital expenditures estimated at$53 million pIus significant operating and maintenance expenses.The Company believes that additional expenditures and costs made necessary by environmental regulations will be fully allowable for rate-making purposes.Through December 31,1978, the Company has expended approximately

$28.4 million (excluding larrd)with respect to its interest in the Sterling nuclear plant.The Company estimates that if it were required to cancel all existing contracts relating to the construction of this project, it could incur up to$6 million in cancellation charges.The Company believes that, if it were required to cancel the project, the PSC would permit it to amortize all expenditures involved over a period of several years and to recover those expenditures through rate relief.On December 1,1978, the PSC ruled that the case involving the 765 KV transmission facility that the Company had planned to construct be dismissed.

The Company has petitioned the PSC requesting the amortization of the$2.1 million in expenditures for the line over a 3 year period, and to allow the Company to recover the unamortized costs through rate relief.Note 7.Interim Financial Information (Unaudited)

In the opinion of the Company, the following quarterly information includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results of operations for such periods.The variations in operations reported on a quarterly basis are a result of the seasonal nature of the Company's business and the availability of the Company's Ginna nuclear plant.Earnings per common share have been adjusted for stock dividends.

Note 8.Replacement Cost Information (Unaudited)

The impact of the rate of inflation experienced in recent years has resulted in replacement costs of productive capacity greater than the historical costs of such assets reported in the Company's financial statements.

In compliance with reporting requirements, estimated replacement cost information is disclosed in the Company's annual report to the Securities and Exchange Commission on Form10-K.Report of Independent Accountants To the Shareholders and Board of Directors of Rochester Gas and Electric Corporation In our opinion, the accompanying balance sheets and the related statements of income, retained earnings, and of changes in financial position appearing on pages 14 through 16 present fairly the financial position of Rochester Gas and Electric Corporation at December 31, 1978 and 1977, and the results of its operations and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles consistently applied.Our examinations of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

1900 Lincoln First Tower Rochester, New York 14604 January 26, 1979 Operating revenues..Operating income...Net income.......

Earnings on common stock.........

Earnings per common share (in dollars)5,669 5,1 75 8,490.38.37.63 Quarter Ended (Thousands)

Dec.31, Sept.30, lune 30, 1978 1978 1978$92,312$73,665$86,942 8,466 9,527 12,009 7,088 G,596 9,909 Mar.31, 1978$116,029 19,247 15,993 14,574 Operating revenues..Operating income...Net income.......

Earnings on common stock.........

Earnings per common share (ln dollars)Dec.31, 1977$84,458 9,395 G,444 4,657.35 Seph 30, 1977$67,199 7,479 4,61 9 3,044.24 lune 30, 1977$74,138 10,62G 7,775 6,200.51 Mar.31, 1977$105,349 17,277 14,211 12,63G Management's Discussion and Analysis of the Summary of Operations The following financial review explains significant changes in the amounts of revenues and expenses between 1978/1977 and between1977/1976.

The Notes to Financial Statements on page17 of this report contain additional related information.

Operating Revenues Changes in Operating Revenues Increase or (Decrease) from Prior Year (Thousands of Dollars)Electric Department 1978 1977 Gas Department 1978 1977 Steam Department 1978 1977 Customer Revenues (Estimated) from: Rate Increases..Fuel Cost Adjustment Weather Effects.Customer Sales Other Total Change in Customer Revenues Electric Sales to Other Utilities.Total Change in Operating Revenues.$12,181 G,446 221 3,485 358 22,691 2.273$24,9G4$5,312 410 (82)3,G05 137 9,382 8,1 44$17,52G$2,555 5,582 3,259 (289)1,627*12,734$12,734$2,683 12,475 (1,1 44)(7,631)(1,613)*4,770$4,770$-(23)3G7 (314)76 106$1,824 (198)(997)(8)621$G21'Reflects a one-time$10 gas heating bill credit in tne aggregate amount of approximately

$1.6 million that was applied to residential customers in February 1977.The credit was made by the Company on its own initiative in order to alleviate the economic burden to customers who were faced with record high gas heating bills caused by the severe weather conditions in Ianuary 1977 and, in some cases, with reduced income due to plant shutdowns forced by natural gas cur tailments.

Revenues from electric sales to other utilities increased in both1978 and 1977.Fluctuations in electric sales to other utilities and in purchased electricity discussed under Operating Expenses below generally are related to the output and availability of electric generation from the Ginna nuclear plant.Operating Expenses Changes in Operation and Maintenance Expenses Increase or (Decrease)(rom Prior Year lrhousands or Dottar0 1978 1977 Electric and Steam Fuels Purchased Electricity Purchased Natural Cas Other Operation..Maintenance

.$1,147 5,702 9,023 3,1 91 3,874$10,632 (4,5GO)5,894 4,817 2,16G Total Change in Operation and Maintenance Expense$22,937$18,949 The 1977 increase in electric and steam fuels expense was mainly due to an increase in electricity generated in 1977 and an increased fuel cost per kilowatt-hour generated by nuclear fuel.Purchased electricity expense increased in 1978 due to both higher costs and higher kilowatt-hour purchases while the decrease in 1977 reflected mainly decreased purchases netted against a relatively modest increase in the cost per kilowatt-hour.

Purchased natural gas expense increased in both 1978 and 1977 as a result of higher pipeline rates and increased consumption due to colder weather in 1978.The increase in maintenance expense of$3.9 million in 1978 and$2.2 million in 1977 reflects increases in the cost of labor and material to repair and maintain existing facilities, and increased activity in the repair and upkeep of transmission and distribution facilities.

Changes in Taxes Taxes-local, state and other increased$2.1 million in 1978 principally due to higher gross income taxes based on increased revenues.The 1977 increase of$3.4 million was also due to higher gross income taxes as well as higher property taxes resulting from the addition of new plant and increased property tax rates.Total Federal income taxes increased$3.7 million in 1978 after declining$1.8 million in 1977.See Note 3 to the Notes to Financial Statements for a detailed analysis.Other Statement of Income Items The increase in allowance for funds used during construction of$2.2 million in 1978 and$3.8 million in 1977 was due to increases in utility plant expenditures in both periods.See Note1 to the Notes to Financial Statements.

Other-other income and deductions increased$3.1 million during 1978 principally due to added non-operating Federal income tax credits.Interest on long term debt increased$3.1 million in 1978 and$3.2 million in 1977 as a result of additional bonds issued in December1978, September1977 and June1976.Dividends on preferred and preference stock decreased$.8 million in1978 due to the refunding in December1977 of a series of preferred stock with the proceeds from the sale of a series of preference stock having a lower dividend rate.

RKP ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Summary Of OPeratiOnS tthowanCkofnotlara)

Operating Revenues Electric..Gas Steam.1978$202,631 118,531 19,110 1977$179,940 105,797 19,004 1976$170,558 101,027 18,383 1975$146,629 82,478 17,337 1974a$127,560 75,463 1G,321 1973$116,512 64,633 10,014 Electric sales to other utilities.Total Operating Revenues 246,444 219,344 191,159 25,49G 14,697 21,112 304,741 26,403 340,272 28,G76 289,968 18,259 234,041 212,271 368,948 331,144 308,227 271,940 Operating Expenses Operation Electric and steam fuels...Purchased electricity

.Purchased natural gas Other..Maintenance Depreciation Taxes-local, state and other Federal income tax-current-deferred.58,140 19,337 71,109 65,G85 26,246 22,206 45,935 5,16G 5,875 5G,993 13,G35 G2,086 G2,494 22 372 21,053 43,876 9G1 2,897 46,361 18,195 56,192 57,G77 20,206 18,G21 40,502 (291)5,G56 4G,268 12,212 42,247 50,G29 19,700 17,414 36,157 4,162 1 133 36,693 12,070 37,342 44,35G 17,966 1G,491 32,410 (3,126)4,277 25,612 8,841 29,923 40,999 15,888 15,145 29,993 6,724 915 Total Operating Expenses 319,G99 28G,367 2G3,119 229,922 198,479 174,040 Operating Income 49,249 44,777 45,108 42,018 35,562 38,231 Other Income and Deductions Allowance for other funds used during construction Other-net..8,705 4,418 G,473 1,310 4,G78 1,128 2,310 537 1,128 274 670 715 Total Other Income and Deductions 13,123 7,783 5,806 2,847 1,798 989 Income before Interest Charges 62+72 52,560 50,914 44,8GS 37,360 39,220 Interest Charges Long-term debt.Short-term debt..Other-net.Allowance for borrowed funds used during construction (4,812)(4,844)(2,853)(1,264)(613)(173)25+94 22,542 19,378 16,963 14,965 13,738 1/88 1,319 1,054 1,5G8',255 1,246 41G 494 24G 1,227 210 103 Total Interest Charges 22,786 19,511 17,825 18,494 16,817 14,914 Net Income 39,586 33,049 33,089 26,371 20,543 24,306 Dividends on Preferred and Preference Stock, at required rates S,G78 G,512 G,245 4,054 3,550 3,550 Earnings Applicable to Common Stock$33,908$26,537$26,844$22,317$16,993$20,756 Weighted average number of shares outstanding in each period, adjusted for stock dividends (000's)Earnings per Common Share 13,774$2.4G 12,474$2.12 11,983$2.24 10,987 10,G28$2.03$1.59 9,753$2.12 Cash Dividends per Common Share, adjusted for stock dividends$1.41$1.29$1.20$1.15$1.09*In1974, the Company began deferring a portion of increased fuel costs to the period in which the related revenues were recorded.$1.04 23 S~~~tCL~~~ROCHESTER GAS AND ELECTRIC CORPORATION Condensed Balance Sheet tth~d ofoot4rs)1978 1977 At December 31 1976 1975 1974 1973 ASSETS Utility Plant, at original cost Less-Accumulated depreciation and amortization 2G1,477 229,122 198,778 185,455 167,645 150,GOO$857,959$789,775$727,687$693,404$659,308$618,891 Construction work in progress Net utility plant..596,482 213,534 810,01G 560,653 528,909 507,949 491,663 4G8,291 162,127 120,702 79,381 39,324 24,542 722,780 649,611 587,330 530,987 492,833 Investmcnt in Subsidiary, at equity 1,99G 1,947 1,911 1,871 1,834 Current Assets Deferred Debits 66,953 14,421 15,260 8,151 7,450 8,213 4,874 58/87 61,090 53,796 52,G78 38,982 Total Assets$893,386$798,374$720,763$650,447$593,712$53G,689 CAPITALIZATION AND LIABILITIES Capitalization Long-term debt..Preferred stock Preference stock.Common shareholders'quity Common stock Retained earnings.$384,303 67,000 28,000 24G,938 77+38$361,022 67,000 28,000 212,533 70,819$311,395 92,000 181,301 67,812$267,314 89,000 173,586 60,502$267,348 67,000 154,758 53,5GB$237,382 67,000 148,566 52,184 Total common shareholders'quity

.Total Capitalization Current Liabilities Deferred Credits and Other Liabilities

.Total Capitalization and Liabilities 324,276 283,352 249,113 234,088 208,326 200,750 803,579 68,362 21,445 739,374 42,813 16,187 652,508 54,652 13,603 590,402 51,712 8,333 542,674 43,952 7,086 505,132 29,091 2,466$893,386$798,374$720,763$650,447$593,712$536,689 Financial Data Capitalization Ratios (percent)Long-term debt Preferred and preference stock Common shareholders'quity

.1978 47.8 11.8 40.4 1977 48.8 12.9 38.3 At December 31 1976 47.7 14.1 38.2 1975 45.3 15.1 39.6 1974 49.3 12.3 38.4 1973 47.0 13.3 39.7 Total 100.0 100.0 100.0 100.0 100.0 100.0 Book Value per Common Sharc Adjusted for Stock Dividends-Year End Internal Generation of Funds (percent)$22.01$21.34$20.89$19.69$19.55$18.91 39.5 35.9 44.6 42.5 42.3 89.8 Rate of Return On Average Common Equity-Year End (percent)Effective Federal Income Tax Rate (percent)Depreciation Rate-Electric-Gas Interest Coverages Before federal income taxes (incld.AFDC)...(excld.AFDC)...After federal income taxes (incld.AFDC)....(excld.AFDC)....11.22 12.8 3.09 2.79 2.65 2.16 2.43 1.94 10.02 6.2 3.00 2.67 2.45 1.98 2.36 1.89 11.16 10.6 2.90 2.63 2.79 2.43 2.60 2.24 10.18 14.4 2.79 2.60 2.56 2.38 2.33 2.15 8.44 1.7 2.79 2.60 2.20 2.10 2.18 2.08 11.35 22.9 2.71 2.48 3.09 3.04 2.61 2.58 24

~?~ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Electric Department Electric Revenue (000's)Residential Commercial

.Industrial

.Other.Electric revenue from our customers Other electric utilities..Total electric revenue Electric Expense (000's)Fuelused in electric generation Purchased electricity Other operation Maintenance Depreciation Taxes-local, state and other Electric revenue deductions Operating Income before Federal Income Tax.Federal income tax Operatin Income from Electric Operations 000's Electric Operating Ratio%%d Electric Sales-KWH (000's)Residential Commercial

.Industrial

.Other.Electric sales to our customers Other electric utilities..Total electric sales Electric Customers at December 31 Resid ential Commercial

.Industrial

.Other.Total electric customers Electricity Generated and Purchased-KWH (000's)Fossil Nuclear..Hydro.Pumped storage Less energy for pumping Other.Total generated-Net Purchased Total electric energy Electric Generation Costs (000's)Fossil Nuclear..Hydro.Other.Electric Department Fuel Fossil-Total BTU (million)-Cents per million BTU.......

Nuclear-Total BTU (million)-Cents per million BTU.......System Net Capability-KW at December 31 Fossil Nuclear..Hydro.Other.Purchased Total system net capability Net Peak Load-KW..Annual Load Factor-Net

%1978$72,854 58,985 48,792 22,000 202,631 28,G76 231,307 45,093 19/37 47,G02 19,305 1G,983 33,108 181+28 49,879 9,244$40,G35 56.8 1,701,938 1,417,624 1,517,988 465,373 5,102,923 1,445,391 6,548,314 251,645 24,137 1,348 2,423 279,553 2,025,645 3,206,313 192,278 133,287 (189,453)1,08G 5/69,156 1,579,8G3 6,949,019$38,995 25p561 1,229 57 21,139,14G 144.27 35,812,171 43.97 443,000 470,000 47,000 29,000 339,000 1,328,000 983,000 G3.9 1977$64,986 53,520 41,783 19,651 179,940 26,403 206,343 44,010 13,635 45,011 16,339 15,333 31,530 165,858 40,485 4,041$36,444 57.7 1,660,425 1,392,023 1,431,855 454,059 4,938,362 1,453,590 6,391,952 250,121 24,023 1,353 2,328 277,825 2,272,182 3,018,305 222,391 193,340 (283,573)850 5,423,495 1,400,505 6,824,000$40,557 22,330 1132 44 23,862,599 13G.92 37,822,209 38.04 443,000 470,000 47,000 29,000 338,000 1,327,000 987,000 G2.0 1976$61,498 50,791 39,402 18,867 170,558 18,259 188,817 34,247 18,195 40,930 14,796 13,865 28,543 150,576 38,241 3,102$35,139 57.3 1,618,314 1,3GG,094 1,384,235 437,097 4,805,740 1,187,942 5,993,682 249,177 23,983 1 371 2.271 276,802 2,060,186 2,040,746 277,010 118,716 (180,317)2,797 4,319,1 38 2,10G,904 6,426,042$36,901 13,485 973 118 21,822,976 137.42 23,837,620 25.69 452,000 470,000 47,000 29,000 342,000 1,340,000 934,000 63.8 1975$53,904 43,884 33,244 15,597 146,629 25,496 172,125 33,442 12,212 35,662 14,282 12I731 25/69 133,698 38,427 5,069$33,358 55.5 1,530,421 1,294,816 1,284,940 411,122 4,521,299 1,864,050 6,385,349 246,G13 23,874 1,380 2,305 274,172 1 731 723 3,026,894 2G5,401 98,743 (148,180)2,198 4,976,779 1,888,091 6,864,870$33,120 14,191 1,030 63 18,388,874 142.18 33,1 28,471 22.91 452,000 470,000 47,000 29,000 35G,000 1,354,000 925,000 G1.7 1974$45,354 37,908 30,858 13,440 127,560 14,697 142,257 25,739 12,070 32,177 12,390 11,977 22;784 117,137 25,120 (433)$25,553 57.9 1,456,335 1,226,333 1,346,116 379,379 4,408,163 1,182,902 5,591,065 244,063 23,827 1,365 2,316 271,571 1,961,453 2,079,539 234,5G8 131,311 (192,311)12,80G 4,227,3G6 1,836,911 6,064,277$30,361 7,980 1,085 321 20,911,993 117.05 22,909,968 11.28 452,000 470,000 47,000 29,000 347,000 1,345,000 880,000 63.3 1973$42,125 34,387 27,597 12,403 116,512 21,112 137,624 19,461 8,841 28,378 11,029 11,026 21,281 100,016 37,608 7,235$30,373 49.2 1,468,376 1,261,697 1,424,639 385,243 4,539,955 2,269,G86 6,809,641 241,032 23,436 1,360 1,995 267,823 1,8G9,079 3,395,564 243,582 57,801 (86/62)8,776 5,488,440 1,709,420 7,197,860$18,099 10,368 1,083 123 20,331,338 62.12 36,683,359 18.62 457,000 420,000 53,100 42,500 352,000 1,324,600 922,000 61.0 25 PK4S ROCHESTER GAS AND ELECTRIC CORPORATION Year Ended December 31 Gas Department Gas Revenue (000's)Residential Residential spaceheating

.Commercial Industrial

.Municipal and other.1978$5,096 74,425 20,535 13,891 4,584 1977$4,828 66,900 18,057 12,014 3,998 1976$4,426 63,974 16,848 11,900 3,879 1975$3,964 52,584 13,593 9,167 3,170 1974$3,809 47,758 12,533 8,583 2,780 1973$3,627 40,453 10,433 7,648 2,472 Total gas revenue 118,531 105,797 101,027 82,478 75,463 64,633 Gas Expense (000's)Purchased natural gas Other operation.Maintenance Depreciation Taxes-local, state and other.71,109 15,810 5,768 4,641 10+45 62,086 15,072 5,078 5,140 10,089 56,192 14,921 4,510 4,194 9,729 42,247 13,310 4,500 4,137 8,715 37,342 11,492 4,757 3,978 7,937 29,923 11,420 4,043 3,615 7,281 Gas revenue deductions 107,873 97,465 89,546 72,909 65,506 56,282 Operating Income before Federal Income Tax.Federal income tax 10,658 1,966 8,332 147 11,481 2,212 9,569 914 9,957 8,351 1,221 840 Operating Income from Gas Operations (000's)..$8,692$8,185$9,269$8,655$8,736$7,511 Gas Operating Ratio%78.2 77.7 74.9 72.8 71.0 70.2 Gas Sales-Therms (000's)Residential Residential spaceheating

.Commercial

..Industrial

..Municipal 13,465 255,951 82,451 63,709 17,748 13,833 252,923 77,751 59,956 15,975 14,404 275,582 BG,400 72,847 18,598 14,328 249,224 78,217 65,760 16,705 14,903 263,290 84,872 73,926 16,696 15,141 245,368 79,039 78,137 17,148 Total gas sales 433,324 420,438 467,831 424,234 453,687 434,833 Gas Customers at December 31 Residential

.Residential spaceheating

.Commercial

..Industrial

..Municipal 38,0 I3 154,366 12,092 759 1,084 39,977 152,856 11,268 746 989 40,892 153,583 11,475 757 936 41,437 153,848 11,390 756 957 42,884 151,154 11,478 767 1,024 45,958 144,847 11,303 762 865 Total gas customers.206/14 205,836 207,643 208,388 207,307 203,735 Gas-Therms (000's)Purchased for reforming and mixing Purchased for resale..Other.449,904 13,178 428,811 10,123 9,830 478,935 7,911 23,160 421,252 7,019 31,518 438,494 7,063 30,834 422,718 6,535 Total gas available 463,082 438,934 496,676 451,431 477,075 460,087 Cost of gas per therm.15.26c 14.43'1.37'0.19'.49'.13'otal Daily Capacity-Therms at December 31 Mixed gas.Straight natural gas Total daily capacity Maximum daily sendout-Therms 269,000 4,164,000 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 3,041,070 410,844 410,844 3,871,448 3,762,672 4,282,292 4,173,516 3,192,631 2,985,392 Degree Days (Customer Billing)For the period Percent (warmer)colder than normal 7,021 4.5 6,726 (0.1)G,905 1.6 6,211 (7.2)G,808 1.3 5,883 (12.2) a~%~tCL4'R'OCHESTER GAS AND ELECTRIC CORPORATION Steam Oepartment 1978 1971 1976 1975 Year Ended December 31 1974 1973 Steam Revenue (000's)Commercial

..Industrial

.Municipal and other.$6,087 10,732 2,291$6,352 10,455 2,197$6,401 9,799 2,183$5,668 9,862 1,807$5,419 9,396 1,506$3,668 5,470 876 Total steam revenue 19,110 19,004 18,383 17,337 16,321 10,014 Steam Expense (000's)Fuel used in steam generation Other operation.Maintenance Depreciation

.Taxes-local, state and other.13,047 2,273 1.173 581 2,282 12,983 2,411 955 580 2,257 12,114 1,82G 900 5G2 2,230 12,826 1,657 918 546 2,073 10,954 687 819 536 1,689 6,151 1,201 816 504 1,431 Steam revenue deductions 19,35G 19,186 17,632 18,020 14,685 10,103 Operating Income before Federal Income Tax.Federal income tax (246)(182)751 (683)1,636 (89)(1GB)(330)51 (688)363 (43G)Operating Income from Steam Operations (000's).$(78)$148$700$5$1,273$347 Steam Operating Ratio%Steam Sales-lbs.

(000's)Commercial

.Industrial

.Municipal Total steam sales 86.3 86.0 80.7 88.8 76.3 81.6 898,904 933,609 1,041,415 980,324 1,160,122 1,268,917 1,718+65 1,682,033 1,738,391 1,839,402 2,127,837 2,13G,794 346,031 334,645 367,553 325,727 334,463 318,323 2,963/00 2,950,287 3,147,359 3,145,453 3,622,422 3,724,034 Steam Customers at December 31 Commercial

.Industrial

.Municipal Total steam customers 238 70 31 339 254 74 32 360 271 77 32 380 281 77 31 389 292 78 31 401 302 78 30 410 Steam Produced-lbs.

(000's)Produced by steam department.........

By-product steam from electric department

.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 2,588,1 20 2,613,321 Total steam produced 3,340,G91 3,327,985 3,601,312 3,732,056 4,'I20,366 4,055,793 Steam Department Fuel Total BTU (million)Cents per million BTU 5,705,943 226.21 5,548,290 6,022,360 6,230,767 G,807,500 6,849,830 232.60 203.35 203.08 196.31 89.80 Rate Increases Granted Class of Service Fffcclive Dale of Increase Amount of Rate of Rale of Increase Relurn on Relurn on (Annual Basis)Percent Rate Base Equity (000's)Increase Aulhorized Aulhorizcd Class of Service Dale of Filing Pending Requests Amount (000's)Percent Electric Gas Steam October 25, 1972 October 23, 1974 April 20, 1976 November 11, 1977 February 18, 1978 April 28, 1972 October 23, 1974 April 20, 197G November 11, 1977 February 2, 1978 May11,1972 November 12, 1973 April 15, 1975$10,154 17,992 11,002 10,186 3,000 3,67G 4,854 4,983 2,536 G78 897 500 2,475 11.5%'6.0 7.9 5.8 1.6 6.8 7.6 6.3 2.4 11.4 5.1 12.0 7.96%12.00%8.83 13.19 9.35 13.50 9.31 12.80 9.31 12.80 7.77 12.00 8.42 12.09 9.35 13.50 9.31 12.80 9.31 12.80 G.48 7.25 8.69 Electric May 26, 1978 Gas May 26, 1978$37,946 17.8%10,789 8.9 27 Directors Keith W.Amish*Executive Vice President, Rochester Cas and Electric Corporation Paul W.Briggs*President, Rochester Cas and Electric Corporation John D.Cockcroft*

Former Chairman ol the Board, The R.T.French Company Wilmot R.Craig/Former Chairman ol the Board, Lincoln First Banks Inc.E.Kent Damontf Vice President and Secretary, Xerox Corporation Francis E.Drake, Jr.*Chairman ol thc Board and Chief Executive Oflicer, Rochester Cas and Electric Corporation

'Member of the Executive and finance committee of the Board of Directors J.Wallace Ely*t Chairman ol the Board, Security New York State Corporation Walter A.Fallon Chairman ol the Board and Chief Executive Officer, Eastman Kodak Company Ernest J.Howe*tg Chairman ol the Executive and Finance Committee, Rochester Cas and Electric Corporation tMember of the Audit Committee of the Board of Directors I i/Officers Francis E.Drake, Jr.Chairman ol thc Board and Chief Executive Officer Agc 63, Years of Service, 41 Paul W.Briggs President Agc56, YearsolService,33 Keith W.Amish Executive Vice President Agc55, YearsofServicc,31 Joseph J.Hartman Vice President, Cas and Transportation Age54, Years ofScrvicc,32 John L.Kennedy Vice President, RatcS and Covcrnmcntal Affairs Age 60, Years of Service, 38 John E.Maier Vice President, Employee Relations Agc51, Years ol5ervice,31 Richard J.Rudman Vice President, Electric Transmission and Distribution Age 51, Years ol Service, 33 Harry G.Saddock Vice Prcsidenr, Electric System Planning and Operation Age 49, Years ol Service, 28 Mario Silvestrone Vice President, Consumer Services, Corporate Communications and Purchasing Agc55, Years of service,28 leon D.White, Jr.Vice President, Electric and Stcam Prodcctfon Age 59, Years ol Service, 41 Dean W.Caple Secretary and Treasurer Age55, Years of service,30 Francis A.Sullivan, Jr.Controller Age55, Years of Service,28 Robert W.Ball Assistant Treasurer Age 62, Years olservice,40 David C.Heiligman Assistant Secretary Age 38, Years ol service, 15 Robert C.Henderson Assistant Conrroller Age38, Years of Service, 1S Stephen Kowba Assistant Controller Age59, Years of service,28 John M.Kuebel Auditor Age 43, Years of service, 14 Daniel G.Kennedy*Partner, Nixon, Hargrave, Dcvans tt Doyle A.J.McMullen Chairman ol the Executive Comminee, Carlock Inc., and Director ol the parent company, Colt Industries, Inc.Paul A.Miller Former President, Rochester Institute ol Technology Edward J.Nelson Former President, Rochester Cas and Electric Corporarion William S.Vaughn*tg Former Chairman ol the Board, Eastman Kodak Company William G.vonBergt Chairman ol the Board and Chicl Executive Oificer, Sybron Corporation tMember of the Salary Review Committee of the Board of Directors Rochester Gas and Electric Corporation 89 fast Avenue Rochester, New York 14649-MOTICE-THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL.THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY, BRANCH 016.PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL.REMOVAL OF ANY PAGE(S)FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.

RECORDS FACILITY BRANCH Contents Highlights 1 Letter to Shareholders 2 RGGE People 4 Electric and Gas Operations 10 Management Changes 13 Financial Statements 14 Management's Discussion and Analysis 27 Financial and Statistical Information 28 Directors and 05cers 33 About the Cover During 1980 RGGE ran an advertising campaign to inform customers and the community about some of the work that goes on and about the people who do the work Six employees representing a cross.section of RGGE operations and services were chosen as subjects for the television spot announcements and the print advertise.

ments, Ho one wrote words for them to say.The words are their own, and they are presented in this report.RG&E Service Area/Business The Company supplies electric, gas and steam service wholly within the State of Hew York, and is engaged in the production, transmission, distribution and sale of these seniices in a nine county area centering around the City of Rochester.

The Company's temtory, which has a population of approximately 880,000, is well diversified among residential, commercial and industrial consumers.

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

RG&E People.Your Neighbors'I oothejob.-MOTICE-THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL.THEY HAVE BEEN CHARGED TO YOU FOR A Lltp1ITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY BRANCH 016.PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL.REMOVAL OF ANY~PAGE(sj FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.

60 R4 Docket~C0el>+8 ja<>>>>'>DEADLINE RETURN DATE Date~a)-)af Document.f if UUUT DR Y if f f if R if mllUITRIt 00KH':il.[

<DID lgefuD+f I Dr" 7A ,uttut)~RECORDS FACILITY BRANCH 8>04~30313 To Shareholders:

~~On October 1, 1980, Francis E.Drake, Jr.retired at the normal retirement age of 65 after a 43 year career with RGGE, the last13 years of which he served as chief executive officer.Paul W.Briggs was elected to succeed Mr.Drake as chairman of the board and chief executive officer.Keith W.Amish, former executive vice.president, was elected to replace Mr.Biiggs as president, and became chief operating officer.Leon D.White, Jr.succeeded Mr.Amish as executive vice-president with responsibility for operations.

In bringing about what we consider to be an innovative management structure, we established two senior vice.president positions to complete a five member, senior management team to address the complex decisions that have to be made in the utility business today.Harry G.Saddock was elected senior vice.president, finance and rates, and Mario Silvestrone was elected senior vice.president, general services.Consolidation of these two areas of RGGE's operations under senior vie+presidents is intended to allow for broader management influence and participation in the policy decision making processes and to reinforce management communication channels in the Company.Several promotions and reassignments have been made among other officers of the Company, and they are detailed on page 13 of this report These changes were made primarily to offer advanced cross-training in critical executive positions.

We view our redesign of senior management structure as a timely step as we move into this decade.Common stock earnings in 1980 increased$1.8 million, or five percent over 1979.Earnings per share of common stock rose a modest one percent, going from~2.08 to$2.10.The 1980 per.share earnings reflect the addition of some 657,000 weighted average shares of common stock Total customer revenues for 1980, excluding electric sales to other utilities, showed a significant18 percent increase over the previous year.However, revenue growth resulting from increased unit sa!es of electricity and gas was smalL When adjusted for the influences of rate increases, fuel adjustments and weather,"real" growth in customer revenues was less than one percent over 1979.However, revenues from electric sales to other utilities through the New York Power Pool increased 40 percent over 1979.Shareholders and customers alike benefit from these sales which are made mainly from our coal.fired generating units.There is a strong demand for coal-fired generation as downstate utilities reduce generation from their more expensive oil.fired units.Expenses increased in 1980 and inflation continues to be a major contributing factor.Operating expenses rose 21 percent over1979.The cost of fuels again rose dramatically and now con.sumes almost half of each RGGE revenue dollar.The cost of fossil fuels alone went up 45 percent in 1980.The tremendous upsurge in interest costs made the heavy financing requirements in our highly capital.intensive business even more burdensome.

Total interest charges, excluding allowance for borrowed funds used during construc-tion, rose 17 percent while preferred stock dividends went up 34 percent.These costs, like taxes, are expenses over which we have little control.Where we can exert some degree of control over costs, we economize.

But, despite the problems with costs, we think we have been able to achieve a temporary workable balance among the financial pressures, customer requirements and the reasonable expectations of share.holders.The minimal growth in RGGE's 1980 energy sales reflected the severity of the recession seen in the first half of the year, things looked a little better during the second half.With regard to growth, we remain confident about the overall economic climate in our service territory.

Monroe County, where most of our customers are located, is considered one of the strongest centers of economic growth in New York State.While that growth doesn't compare with the healthy advances seen in the 60's, it is still very good as measured against other parts of the State and the Northeast in general.Eastman Kodak Company has announced plans for a sizeable expan-sion in the Rochester area.Some other industries and businesses have expressed intentions to expand, and several large renovation and construction projects are underway in metropo!itan Rochester.

In1980, Rochester area companies added nearly 6,000 new jobs-twice as many as the year before.More than$537 million was spent in plant expansion,$213 million more than was spent by business and industry in 1979.The economic stabi!ity in our service area presents strong resistance to the type of erosion that is being felt in other parts of the State and we remain optimistic about the economic future of our locale.In August1980 we petitioned the New York State Public Seniice Commission (PSC)for electric, gas and steam rate increases.

The request followed closely on the heels of$48 million in rate increases granted a month earlier in July.Unrelenting inflation, coupled with the lengthy11 month rate hearing process, make rate increase requests virtually an annual requirement.

It is also essential for us to phase rate increase requests with the PSC policy of basing them solely on forecast data for a one-year test period.The July1980 rate increases, for example, were based on forecasts for a 12.month period running through July 1981.The rate increases we are now seeking will be decided for the period from August1981 through July1982.In the current rate case, we are seeking new rates that would produce an addi.tional%1.9 million in annual electric revenues,$7.8 million in gas revenues and S3.6 million in steam revenues.In January1981 we requested a temporary increase in electric and gas rates pending the July1981 decision.We also asked that the steam rate increase be put into effect immediately.

The move was necessitated by soaring interest rates, higher costs and a need to protect the Company's security ratings.The steam rates were approved and made effective February18.

The decision on the temporary electric and gas rates was pending at the time this report went to press.

Annual Report 1980 for the Year Ended December 31 Highlights 1980 1979 X Change Gse of 1980 Revenue Dollar t)n Cents)y4 I I I I I I I I I Electricity to customers Kilowatt-hours

.Revenue Electricity to other utilities Kilowatt.hours.Revenue Gas Therms.Revenue Steam Pounds.Revenue 5,186,423$245,005 1,620,929$52,786 434,492$181,046 2,413,879$23,589 5,163,520$219,373 1,526,925$37,804 426,743$140,527 2,792,170$19,988 Sales, Revenues and Earnings (Thousands, Except Per Share Amounts), 12 6 40 2 29 (14)18 Total operating revenues..Total operating expenses..$502,426$417,692 20$442,894$365,570 21 Operating income Net income Earnings applicable to common stock.Weighted average number of common stock shares outstanding

..Earnings per common share.........

Cash dividends per common share, adjusted for stock dividends........

Stock dividend paid (See Note).......Utility Plant (Thousands)

$59,532$43,652$52,122$39,565 16,472$2.10$1.48 3%15,815$2.08$1.41 3%$34,725$32,920 14 10 Earnings and Dividends Per Common Share th Do)hts)D Earnings por Common Shore (Adjutted for Stock Ohtdenrb)D Cosh DMdencb per Common Shore (Adjusted for Stock DMdencb)2,11 Capital expenditures, less allowance for funds used during construction

..Net utility plant at December 31.......Number of Customers at December 31 Electric Gas Steam Number of Common Stock Shareholders at December 31..$87,742$111,427$950,474$893,531 (21)6 50,416 48,543 4 285,470 282,099 1 213,157 209,642 2 271 318 (15)Number of Employees at December 31.2,691 2,661 1 Note: The 22nd annual stock dividend was paid February 25, 1981 at the rate of three percent.1976 1977 1978 1979 1916 40 r/'l e~Qoo9 5./>REIitlllNBRII IIOCKET FILE CQPII 8 X04330313 RG&E People 1]1 P r, c Ij8mi-<<-az608m Lucy White Telephone Setvlce Representative RGGE's Telephone Service Center answers nearly a half.million calls a year.Lucy White gets all kinds of calls: service transfers, new customer connections, power outages, gas leaks, complaints and requests for information."Every time I say'good morning'have to be ready to help somebody with whatever's on their mind." It's Lucy's job to help the customer personally where she can or to get the caller to the right party for assistance or an answer.Lucy and other telephone service representatives are in direct contact with RGGE's computer system through display consoles.Account information on any of RGGEs half-million customers is available in seconds.Still, on busy days, calls I'r 1~=]stack up as the 34 service represen.tatives try to give the caller a complete answer."Everyday we answer a lot of phone calls.We try to pick up each one within six rings, but sometimes we fall behind." Lucy says that the hardest calls she gets are the high bill complaints.

She tries to help the customer understand how the rising cost of energy forces the bills up even when people conserve."At the end of the day I'm tired.But I love people and I love helping them."

~~As part of the rate case, we are trying to recover expenses connected with the Sterling nuclear power plant proposal.We had to terminate that project in January 1980 after the State reversed its earlier certification for construction of the 1,150 megawatt facility.We are asking the PSC for permission to amortize the expenditures over a five.year period.In January1981 the PSC issued its order covering the first phase of the Sterling hearings.It ruled that costs incurred through Januaiy1978 were prudent.Complete details of the case may be found in this report under Notes to Financial Statements.

One of our main concerns today is the delay in the construction of Niagara Mohawk Power Corporation's Nine Mile Point~2 nuclear power plant at Oswego, New York Previously scheduled for operation in 1984, construction of the 1,084 megawatt plant has been set back due to a number of factors, including technical reassessments, regulatory matters and a decline in electric load growth.The estimated total cost of the plant has risen substantially as a result of the delays and the cumulative adverse Paul W.Bnggs, lett, Keith W.Amish effects of inflation.

Although our share of that plant is only14 percent, the cost increases will continue to exert pressure on our capital requirements for several years.Now scheduled for late 1986 operation, the Nine Mile plant will add 152,000 kilowatts of base load capacity'n our system.In April 1980 we asked the PSC for permission to acquire Pavilion Natural Gas Company.That approval was granted early in 1981 and the acquisition took effect February 28 this year.The purchase has added 10,000 gas customers in the southwest portion of our system and is expected to produce additional annual gas revenues of 410 million.In noting the complexities of the utility business, we commend Francis E Drake, Jr.for his immense contributions to RGGE and the industry over his 43-year career with the Company.Mr.Drake became chief executive office in 1967.Inflation had not yet begun its upward spiral;we planned, licensed and built a nuclear power plant without harassment, delay or unnecessary high costs;the Oil Embargo was still six years off;we had not had a gas rate increase since 1949 or an electric increase since 1958, and regulatory bodies were reasonable in their requirements and supportive in their rulings.That was the year 1967.All too familiar are the burdensome problems of the following years: double digit inflation, skyrocketing fuel costs, a succession of necessary rate increases, a virtual stand.still in the crucial nuclear power option, public skepticism, mounting regulation and a crop of anti-utility pressure groups claiming to work in the public interest.Frank Drake met the challenges and issues hearn and, in our judgment, brought RGGE through an extremely difficult period, maintaining our financial integrity and traditionally high levels of service to the customers and community.

His responsibilities were heavy and demanded the superior leadership ability he possesses.

The turbulent period for RGGE and the utility industry is far from over.We have every confidence, though, that our team of RGGE people is up to the challenges and geared to meet the future.We expect to maintain a solid, progressive operation.

And, in regard to employees, the theme of this annual report focuses on the thoughts of a representative sample of our RGGE people.Six employees were featured in a television and print media advertising campaign to show our customers and the community the caliber of people we have and what those people think of their jobs.The words of these employees are their own.We hope you'l take the time to share their thoughts in the following pages.Paul W.Btiggs Chairman of the Board and Chief Executive OAicer Keith W.Amish President and Chief Operating Officer March 18,1981

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

Rz9 0 R Dennis Rose Customer Service Representative 0"When a customer comes in, I may not have all the answers all the time, but I always give him an honest answer." Dennis Rose sees or talks to more than 20 customers a day.Some conversations take as little as 20 minutes, others may run several hours."Every person is a special individual with a special problem, and you treat them accordingly." With inflation taking away from every-one's income, a lot of customers come to Dennis to work out special bill.paying arrangements.

Others may want information on how to use energy more elflciently and cut down on their bills.Dennis and the other customer service representatives bend over backwards to help where they can.It's their job to listen and to help."I really feel good being able to say'We'l be able to work something out.'hen a customer is sincerely trying to pay the bill but is having a hard time, we knock ourselves out to make it easier for him or her to work out special plans, to provide whatever help is needed." High energy bills don't make anyone happy, not even RGGE employees, like Dennis, who pay the full price on their own bills."It's nice to see them go out-not happy all the time-but under-standing."

%47GiEDKE0MHlcK65KKGfgQ NzeRarn Qog@Cn54ooO:mBdP Ed Flanigan Gas Construction and Maintenance Foreman"It's our responsibility to make sure the gas keeps flowing and that service for customers is not interrupted." When Ed and his crew are working on a gas line the gas is still flowing.Maintaining a gas system is a tough, critical, often hazardous job.But that's what Ed Flanigan has been doing for 33 years."Everyday RGGE makes routine surveys throughout our service area.We'e able to detect even small amounts of gas escaping into the air." RGGE gas maintenance people monitor the gas distribution system on a continuous basis.Any problems that are found are taken care of immediately."If a customer smells gas we get there fast to make sure there's no physical danger.Safety is our number one concern." RGGE tells its customers not to take any chances.They'e told that if they think they smell gas they should get out of the house and call RGB'Part of my job is to repair leaks or replace old pipe with plastic or wrapped steel.In the case of a Grade One[high priorityj situation, my men and I will work all night if we have to, to get the job done right." Q/it I wI I

'%%reMs CKEigQM GilBS GOKl GKCP Jack Davis Power Controller"The Power Control Center is the heart of RGGE's electrical system.The map and computers help monitor the status of power plants, transmission lines, every major facility in the Rochester area."If something goes wrong-say a power plant goes out of service-our job is to prevent brownouts and service interruptions either by calling for more power from RGGE plants or bringing it in from elsewhere."'-c-el"We'e linked with the New York Power Pool.Every five minutes we get a complete update on how much power is being produced, how much is available to us, and what it would cost.It's the power controller's job to decide when to bring in electricity from the Power Pool reserve."Right now the Power Pool has enough reserve electricity to protect our customers against brownouts and major service interruptions if we have a problem in our own system." The question being debated is whether there will be enough electricity through the 1980's.The~+t reserve is shrinking and New York State officials have made the decision to build fewer new power plants than utilities throughout the State feel they need."I have to wonder about what's going to happen five or ten years from now.Is there going to be enough electricity for peak demand periods?Is the State taking too much of a risk?I'm concerned.

I think it's some.thing everyone should think about."

%0rj:KLIEG Gis~~RDM~.~~coaiQxzzEsfRIhF Walt Rogalski Troubleinan First Chss"It's my job to restore power as quickly, safely and dependably as I possibly can.I know how much depends on it" E!ectiicity is as vital to modem life as water.RGGE troublemen, the first-line emergency team, make sure that whatever happens to interrupt electrical service is dealt with immediately.

They'e specialists in solving the tough ones."I always take that extra few minutes to test, check, and recheck I have too much respect for electricity to tiy to take shortcuts.""I get a lot of satisfaction getting power restored as fast as possible.I think people know the job we do is critical.It's got its hazards, and they appreciate our efforts.That gives us a good feeling." Working conditions for RGBE troublemen are generally harsh and often hazardous.

They work in traffic, high on a pole or under the street, in subzero weather or sudden storms, and they work with high.voltage electric energy."We work under a buddy system.We all depend on each other and know how critical it is to do the job right.It makes me proud to be part of a team like this."

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Wes Backus Operations Supervisor, Ginna Nuclear Power Plant"I think some people have wrong ideas about nuclear power.It's a tough subject to understand, but I really believe the more they know about it, the more comfortable they'feel." The nuclear industry has the best safety record of any indus+.One of Wes Backus'obs is to help make sure every single safety procedure is strictly followed at all times."In a very practical sense there just aren't a lot of alternatives to nuclear power available to us right now.I don't like the idea of us having to depend on foreign countries for our energy.""Nuclear power plants such as Ginna contain many safeguards that make the possibility of radiation leakage extremely remote.At the slightest indication of danger, we have the ability to shut down the plant immediately."I understand nuclear power and I feel it's safe.In fact I moved my family from Bergen to about two miles from Ginna to be closer to my work, and I'm still glad I did."

1980 Operations Electric Operations Sales Total kilowatt.hour sales of elec.tricity to customers were up only a frac-tion of a percent from 1979 due primarily to the recession and customer conserva.tion measures.Industrial kilowatt.hour electric sales were off nine tenths of one percent reflecting the slow economy and reversing a trend seen over the last several years when industrial sales led all classes of electric customers in growth.Kilowatt.hour electric sales to residential customers were up 1.2 percent from 1979, and commercial kilowatt hour electric sales rose 1.4 percent.Very moderate electric load growth is projected for 1981.One notable bright area in electric sales for 1980 was the sharp 40 percent increase in revenues from electric sales to other utilities-the sale of excess power to other companies through the New York Power Pool.These sales are made possible mainly through the excel.lent availability of our Ginna nuclear power plant which can produce more than half of the total electric energy requirements of our system.We reserve the full economy of the relatively inex-pensive nuclear.generated power for our own customers while making excess power from our coal-and oil fired gener.ating units available for sale to other utilities.

Revenues from these outside sales benefit both shareholders and customers.

Oswego¹6 Niagara Mohawk Power Corporation's Oswego¹6 oil-fired power plant went into commercial operation in July1980.Under a joint.ownership agreement RGGE owns 24 percent of the plant's capacity, or 204,000 kilowatts.

Construction began on the Oswego<<6 plant prior to the 1973 Arab Oil Embargo that spurred the dramatic rise in oil prices.This plant is a highly eHicient oil.fired unit and the availability of its power is important to RGGE, particularly as replacement power when the Ginna nuclear power plant is out of service for annual refueling, maintenance and inspection periods.At other times we sell our share of the energy to other utilities, producing additional revenues for the Company and a saving for our own customers.

Ginna Nuclear Power The Ginna nuclear power plant continues to prove itself as one of the finest operating plants in the nation.During 1980, despite two planned outages, the 470,000.kilowatt plant achieved a notable 76 percent availability and did not experience a single forced outage.In 1980 the plant's eHicient operation saved customers 432.4 million in fuel costs when com-pared with an equivalent amount of coal.fired energy.When compared with what it would have cost to produce the energy with oil as a fuel, the plant saved$84.4 million in 1980.The Gnderground Connection Deliver-ing 34,500 volts of electricity is not a particularly big job for a power company like RGGE;but when that power is needed 1000 feet below the earth's sur.face the project takes on a different complexion.

International Salt Company wanted to upgrade electric service in its salt mine near Retsof, New York, 30 miles south.west of Rochester.

With almost17 square miles of excavation 1000 feet below ground, the 85.yearold salt mine is the largest in the free world.Electricity pro vides power for the mining operations, and proper voltage was needed to work the rich salt vein that geologists say extends as far west as Michigan.The complicated project took three years to complete, and RGGE's people played a big part.A borehole was sunk 1000 feet down.Following elaborate preparations below ground, a six.ton, 34,500 volt power cable was fed down the hole to connect the surface switch-gear with the mine substation.

It's rare that you hear of a company drill.ing for electricity, but, with RGGEs assistance, this first underground con.nection of its kind in America was made, and RGGE is providing the power.Gas Operations Sales Sales of natural gas in therms increased only1.8 percent in 1980.Although there was an addition of 6,427 residential gas space heating customers during the year, residential gas sales in The six.ton power able as it enters the mine.10 This gigantic wheel was part of a lifton an early shaft at an international Salt Company mine that was worked from 1906 until the 30's.The relic was brought back into service to help thread a 34,500 volt electric cable down to a mine substation 1,000 feet below the ground.Electricians install an electrical grounding grid surrounding the mine level portion of the underground substation.

Left: This burst of light from a time.exposed photo of a fiberoptic cable shows light as the transmission medium.Right: The fiberoptic telemetering console is adjusted by an RGGE technician.

therms declined by 2.7 percent from the previous year.It is apparent that the cost effectiveness of energy.efficient mea.sures that RGGE has traditionally promoted continues to hit home to the consumer.Efficiency and conservation measures undertaken by customers have been offsetting any significant growth in gas sales that might otherwise be anticipated.

In fact, since 1972, the average gas consumption by residential space heating customers has dropped by 24 percent.However, gas sales in therms to industrial customers rose 14.9 percent over 1979 and are expected to continue to rise at a healthy pace as companies shift oil loads to natural gas.Commercial customer gas sales went up 2.5 percent, mainly due to the addition of commercial space heating loads.In1981 it is estimated that 5,500 residential gas space heating customers will be added to the system, with gas maintaining its decisive cost advantages over heating oil.Ten thousand gas customers have been added to the RGGE system through the acquisition of Pavilion Natural Gas Company in February 1981.RGBEs gas supply is adequate to meet all projected requirements.

A Light Approach Fiberoptics

-the method for transmitting signals and data without the use of metal cables-is coming into its own as an advanced technology; and RGGE is already involved.The initial application will involve light-wave communication for the telemeter-ing of natural gas deliveries from RGGEs supplier where volumes run more than 40 billion cubic feet a year.The fiberoptic telemetering unit is virtually immune from interference common in existing metallic cables.Gas telemetering is only the first of several applications for fiberoptics envisioned by RGB'uture possible applications for fiberoptic technology include power transmission telemetry, power system control and audio tone communications that presently rely on conventional wire.cable transmission.

11 Research and Development In 1980, RGGE spent~5.6 million on research and development.

Of that amount,$1.8 million went into RGGEs own research and development pro.grams where two in particular paid hand-some dividends in 1980 at the Ginna nuclear power plant.One of the early nuclear power plants in this country, completed in1969, Ginna Station continues to perform remarkably welL There has, however, been some concern with indications of corrosion in the steam generators of such plants-the two units that transfer the heat from the primaiy nuclear fission loop and produce the steam to drive the 470.megawatt turbine generator.

Continuing unabated, corrosive action could ulti-mately result in a costly shutdown and equipment replacement.

RGGE had been studying the problem for years, and in the regular spring shut-down for refueling in 1980 an RGGE-developed process for flushing the steam generators of corrosive materials was used.Encouraging results were noted when the plant was inspected in November.It appears that the degree of corrosion has been significantly reduced.Only three generator tubes showed damage, whereas 31 had to be plugged in early 1980.This RGGE process will be used during each refueling shutdown, possibly eliminating an expensive repair project in the years to come.Complementing the breakthrough in steam generator cleaning, RGGE is experimenting with a process that is expected to allow repair of damaged tubes in the steam generator without the permanent loss of the tube's function that now results from plugging.The new sleeving process inserts a bimetallic tube sleeve up into and above the damaged portion of a tube.This is expected to maintain steam generator integrity and result in years of continued service.Thus RGGEs own research and devel-opment program will be paying big divi.dends for shareholders and customers, just as itdid a fewyears ago when RGGE developed the multi.frequency eddy current testing system that streamlined steam generator tube testing.12 An RGGE employee trains in the Company's steam generator mock.up for the job of placing metal sleeves on worn generator tubes.

Statement of Income RRS and Elcctrio Oorporrrtion (Thousands of Dollars)Operating Revenues (Note 1)Electric.Gas.....................

Steam Electric sales to other utilities Total Operating Revenues Operating Expenses (Note 1)Operation Electric and steam fuels Purchased electricity.

Deferred fuel-electric and steam Purchased natural gas.Other.Naintenance Depreciation Taxes-local, state and other Federal income tax-current (Note 2)-deferred (Note 2)Total Operating Expenses Operating Income Other Income and Deductions Allowance for other funds used during construction (Note 1)Other,net.Total Other Income and Deductions Income before Interest Charges.Year'Ended December 31 1980 S 245,005 181,046 23,589 449,640 52,786 502,426 86,622 23,796 (6,911)127,759 81,960 32,048 27,800 56,984 393 12,443 442,894 59,532 1 1,710 4,772 16,482 76,014 1979$219,373 140,527 19,988 379,888 37,804 417,692 62,109 31,937 (1,038)89,804 72,264 30,129 23,703 49,916 (36)6,782 365,570 52,122 11,439 3,774 15,213 67,335 1978$202,631 118,531 19,110 340,272 28,676 368,948 56,426 19,337 1,714 71,109 65,685 26,246 22,206 45,935 5,166 5,875 319,699 49,249 8,705 4,418 13,123 62,372 Interest Charges lang term debt Short term debt.Other, net Allowance for borrowed funds used during construction (Note 1)..Total Interest Charges Net Income Dividends on Preferred and Preference Stock, at required rates Earnings Applicable to Common Stock Weighted average number of shares outstanding in each period, adjusted for stock dividends (000's).Earnings per Common Share (Note I).Cash Dividends per Common Share, adjusted for stock dividends (Note 1)..34,129 4,298 755 (6,820)32, 362 43,652 8,927 S 34,725 16,472 S2.10 S1.48 29,084 4,016 441 (5,771)27,770 39,565 6,645 S 32,920 15,815~2.08 25,594 1,588 416 (4,812)22,786 39,586 5,678~33,908 14,613$2.32 Statement of Retained Earnings (ITtousands of Dollars)Year Ended December 31 1980 1979 1978 Balance at beginning of period Add'et income 80,155 43,652 39,565 39,586$77,338 4 70,819 Total Deduct Dividends on capital stock Cumulative preferred stock, at required rates (Notes 5 and 6)..Preference stock (Notes 5 and 6)Common stock Cash (Note 1)Stock (Note 5)Total Balance at end of period 123,807 6,799 2,128 23,910 7,000 39,837 83,970 116,903 4,517 2,128 22,148 7,955 36,748 4 80,155 110,405 3,550 2,128 19,269 8,120 33,067 S 77,338 14 Harry G.Saddock Davkl C.Heiligman Robert C, Henderso John E.Maier DavklK.Laniak Leon D.White.Jr.John E.Arthur Management Changes (Effective October 1, 1980)Leon D.White, Jr., formerly vice.president, electric and steam production, was elected executive vice.president of the Company, with responsibility for operations.

Mr.White joined RGGE in 1937 and has served in a number of electric and steam management posi~tions over his 43-year career.Harry G.Saddock was elected to the position of senior vice president, finance and rates.Previously he was vice.president, electnic system planning and operation.

Mr.Saddock, a licensed pro-fessional engineer, joined the Company in 1950 and progressed through a num.ber of management positions in the electric and electric system planning departments.

Maiio Silvestrone was elected senior vice president, general services.In addi-tion to his previous responsibilities as vice president, consumer services, public affairs and purchasing, he is administer-ing employee relations and information systems.Mr.Silvestrone had served in various management positions in the marketing and sales departments since joining the Company in 1950.He is a licensed professional engineer and holds an MBA.from the Univeisityof Rochester.

John E Arthur was named vice.presi-dent, engineering and chief engineer.Mr.Arthur, whose former position was chief engineer, has been with RGGE since 1955 and is a licensed professional engineer.David K.Laniak became vice-president, electric system planning and operation, where he was previously superintendent.

Mr.Laniak came to the Company in 1954 and held a number of positions in the electric meter department before moving to system planning.John E.Maier, former vice.president, employee relations, was elected vice.president, electric and steam production.

Mr.Maier join~RGGE in 1947 and has an M.BA.from the University of Rochester.

David C.Heiligman was elected treasurer while retaining his former position of assistant secretary.

He joined the Company as an accountant in 1963 and has an M.BA.from the University of Rochester.

Robert C.Henderson, former assistant controller, was elected vice-president, rates, effective December 1, 1980, replacing John L Kennedy who retired after 40 years of service.Mr.Henderson joined the Company in 1963 as an accountant.

He has an M.BA.from the University of Rochester.

Director Changes In January 1981, the board of directors elected Constance M.Mitchell, Comelius J.Murphy and Leon D.White, Jr.as directors of the Company.Mrs.Mitchell has been active in the Rochester social, civic and political community for more than 25 years.She is community relations coordinator for the Program to Interest Students in Science and Math sponsored by the Industrial Management Council of Rochester, New York, Inc.Mr.Murphy is a group vice.president of Eastman Kodak Company and general manager of the International Photo.graphic Division.Mr.White is RGGE's executive vice-president.

Mrs.Mitchell, Messrs.Murphy and White replaced retiring board members Ernest J.Howe and Edward J.Nelson, former presidents of Rochester Gas and Electric Corporation, and William S.Vaughn, former chairman of the board of Eastman Kodak Company.}c onstance M.Mitchetl Comehus J.Murphy Leon D.White, Jr.13 Statement of Changes in Financial Position RES and Electric Corporation (ihousands of Dollars)Year Ended December 31 1980 1979 1978 Sources of Funds Operations Net income.Principal noncash charges (credits)to income Depreciation Amoritzation of nuclear fuel Deferred fuel cost Deferred income taxes, net Allowance for funds used during construction Other, net 27,800 20,789 (4,813)6,927 (18,530)2,452 23,703 17,126 (4,755)2,596 (17,210)1,963 22@06 15,746 976 3,161 (13,517)1,204 S 43,652 S 39,565 S 39,586 , Total from Operations Financing Sale of long term debt Sale of common stock Sale of preferred stock~s from short term debt, net Total from Financing Total Sources of Funds...Gses of Funds Gtility plant Plant additions.

Nuclear fuel additions.Less: Allowance for funds used during construction

.Net Additions to Gtility Phnt.Dividends on preferred stock Dividends on preference stock Dividends on common stock Reduction of short term debt, net.Retirement of long term debt Capital stock expense Discount and expense of issuing long term debt.Other, net.increase (decrease) in working capital (excluding short term debt)Total Gses of Funds Changes in Components of Working Capital Increase (decrease) in current assets Cash Accounts receivable, net.Materials and supplies Fossil fuel Construction and other supplies Prepayments Total.Increase (decrease) in current liabilities (excluding short term debt)Accounts payable Taxes Accrued interest and payroll.Long term debt due within one year Other, net Total.Increase (decrease) in working capital (excluding short term debt)..78,277 55,000 25,257 25,000 105.257 S 183,534 S 97,600 8,672 18,530 87,742 6,799 2,128 23,910 24,700 1,343 858 3,896 32,158 S 183,534 S 1,300 17,974 6,274 1,470 59 27,077 749 1,745 1,574 (12,000)2,851 (5,081)S 32,158 62,988 10,000 6,083 25,000 50,000 91,083 S154,071 S109,656 18,981 17,210 111,427 4,517 2,128 22,148 12,000 544 635 (683)1,355 S 154,071 (8,852)5,985 (56)1,117 90 (1,716)3,207 (2,881)1,113 (4,677)167 (3,071)69,362 40,000 27,186 67,186 S136,548 S105,191 20,878 13,517 112,552 3,550 2,128 19,269 9,000 16,677 902 490 (2,037)(25,983)S 136,548 5,160 1,368 1,886 (81)233 8,566 10386 6,725 520 16,677 241 34,549 S (25,983)16 Balance Sheet (Thousands of Dollars)ASSETS Utility Plant, at original cost (Note 1)Electric Gas Steam.Less: Accumulated depreciation and amortization Construction work in progress Net Utility Plant At December 31 1980 849,946 193,863 18,190 1,061,999 337,215 724,784 225,690 950.474 1979 S728,686 182,046 18,064 928,796 295,328 633,468 260,063 893,531 Investment in Subsidiary, at equity.Current Assets Cash Accounts receivable, net of allowance for doubtful accounts: 1980-$1,387;1979-$1,247.Materials and supplies, at average cost Fossil fuel Construction and other supplies P repayments Total Current Assets Deferred Debits Unamortized debt expense..Deferred fuel cost (Note 1)Other Total Deferred Debits Total Assets.CAPITAUZATION AND LIABILITIES Capitalization Long term debt(Note 4).Preferred stock redeemable at option of Company(Note 5)Preferred stock subject to mandatory redemption (Note 6).Preference stock subject to mandatory redemption (Note 6)Common shareholders'quity Common stock (Note 5)Retained earnings Total Common Shareholders'quity.

Total Capitalization.

Current Liabi!ities Short term debt (Note 7).Long term debt due within one year Accounts payable Taxes accrued, including income taxes.interest accrued.Payroll accrued.Other Total Current Liabilities Deferred Credits and Other Uabilities Accumulated deferred income taxes (Notes 1 and 2)Other Total Deferred Credits and Other Liabilities Commitments and Other Matters (Note 9)Total Capitalization and Liabilities

..1,968 4,225 55,659 18,891 12,230 1,309 92,314 4,511 14,697 11,416 30,624 S 1,075,380 437,124 67,000 50,000 28,000 291,346 83,970 375,316 957,440 25,300 32,977 10.199 9,959 2,991 4,084 85,510 28,070 4,360 32,430 S 1,075,380 2,062 2,925 37,685 12,617 10,760 1,250 65,237 3,917 10,092 8,011 22,020$82,850'382,162 67,000 25,000 28,000 260,432 80,155 340,587 842,749 50,000 12,000 32,228 8,454 8,427 2,949 1,233 115,291 20,502 4,308 24,810$982,850 15

'Notes to Financial Statements Note 1.Summary of Accounting Policies General.The Company is subject to regulation by the Public Service Commission of the State of New York (PSC)under New York statutes and by the Federal Energy Regulatory Commission (FERC)as a licensee and public utility under the Federal Power Act.Ihe Company's accounting policies conform to generally accepted accounting principles as applied to New York State public utilities giving effect to the rate-maMng and accounting practices and policies of the PSC.A description of the Company's principal accounting policies follows.Gtility Plant and Depreciation.

The cost of additions to utility plant and rephcement of retirement units of property is capitalized.

Cost indudes labor, material, and simihr items as well as indirect charges for engineering, supervision, etc.The Company capitalizes an allowance for funds used during construction approximately equivalent to the cost of capital devoted to phnt under construction.

Replacement of minor items of property is included in maintenance expenses.Costs of depreciable units of plant retired are eliminated from utility plant accounts, and such costs, plus removal expenses, less salvage, are charged to accumuhted depreciation and amortization.

Depreciation in the financial statements is provided on a straight line basis at rates based on the estimated useful lives of property, which have resulted in provisions of 3.1X per annum of average depreciable property in 1980, 1979 and 1978.Nuclear Fuel and Decommissioning Costs.'Ihe cost of nuclear fuel and estimated permanent storage costs of spent nuclear fuel are charged to operating expense on the basis of the thermal output of the reactor.These costs are charged to customers through base rates and the fuel cost adjustment clause.Due to a Federal government policy adopted in 1977, the Company changed its nuclear fuel cost computation to reflect the costs of permanent storage of spent nuclear fuel.Prior years'uclear fuel cost computations had anticipated that spent nuclear fuel would be reprocessed.

Cumulative prior years'uel expenses would have been increased by approximately SI5.9 million if they had been determined on the basis of current cost estimates for permanent storage of spent nuclear fuel, rather than on an estimated amount for reprocessing.

In the Company's most recently concluded electric rate filing, the PSC permitted the amortization and recovery of approximately

$12 million of such additional costs through rates over a 10 year period, commencing in August 1980.Decommissioning costs (costs to take the plant out of service in the future)for the Company's Ginna nuclear power plant are estimated by the Company to be$37 million in 1979 dollars with decommissioning expected to commence in the year 2006.In August 1980, the Company began accruing these costs over the remaining life of the facility at an initial rate of$3.1 million per year.These accruals are included in base rates pursuant to the PSC order referred to previously.

Allowance for Funds Gsed During Construction.

The Company capitalizes an Allowance for Funds Gsed During Construction (AFDC)based upon the net cost of borrowed funds for construction purposes and a reasonable rate upon the Company's other funds when so used.The rates used for this purpose were 10.5X, 9.5X and 8.75X in 1980, 1979 and 1978, respectively.

As of January 1981, the rate is 113X.In accordance with an order issued by the FERC, AFDC is segregated into two components and classified in the Statement of Income as Allowance for Borrowed Funds Gsed During Construction, an offset to Interest Charges, and Allowance for Other Funds Gsed During Construction, a part of Other Income.Since December 1977, the Company has computed AFDC on its share of the Niagara Mohawk Power Corporation Nne Nile Point Nuclear Gnit<<2 and Oswego Fossil Gnit."6, until its July 1980 in.service date, at an average reduced rate which is net of the income tax effect of the interest portion of AFDC.Snce May 1979, this treatment has also been applied to the Company's investment in its Sterling nuclear unit.The rates for 1980, 1979 and 1978 were 8.0X, 7.51X and 6.85X, respectively.

Rates and Revenue.Revenue is recorded on the basis of meters read during the calendar year.Tariffs for electric and steam service include fuel cost adjustment clauses, which serve to adjust electric and steam rates monthly to reflect changes in the average cost of fuels used in electric and steam generation from the average cost of such fuels during the base period.Tariffs for gas service contain a comparable chuse to adjust gas rates for changes in the price of purchased natural gas.Deferred Fuel Costs.Fuel costs which are recoverable under the electric, gas and steam cost adjustment chuses included in the tariff schedules of the Company are deferred until they are billed to customers.

A reconciliation of recoverable gas costs with billed gas revenues is done annually as of August 31, and the excess or deficiency is refunded to or recovered from the customers during a subsequent twelve month period.Federal Income Tax.For income tax purposes, depreciation is computed using the most liberal methods permitted.

In addition, certain costs capitalized for financial reporting purposes are deducted currently for income tax purposes.The resulting tax reductions are offset by provisions for deferred income taxes only to the extent ordered or permitted by regulatory authorities.

The I OX investment tax credit rate, which had been scheduled to return to 4X in 1981, has been made permanent by the Revenue Act of 1978.The prior rate of 4X is applied to reduce the current tax provision while, as recommended by the PSC, normalized tax accounting is followed in the application of the remaining 6X.The Company uses the separate period approach in calculating the interim quarterly tax provision.

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

Expenditures made by the Company to the retirement phn for the years 1980, 1979 and 1978 were$11.4 million,~10.6 million and S.9 million, respectively, which includes amortization for: past service costs over 40 years, changes in the plan over 30 years, and experience gains or losses over 15 years.The actuarial methods and the accounting policy 17 Actuarial present value of accumuhted phn benefits: Vested Nonvested S107,486 S 99gZO 8,885 1,677 SI 16,371 SI 00,897 Market value of assets available for benefits..S 94,499 S 80,082 (a)Most rearit avaihble data Ihe actuarially assumed rate of return on the plan investments, used in determining the actuarial present value of accumulated plan benefits, was 6X for all years shown.The increase in 1980 of used to determine Company expenditures were the same each year.A comparison of accumulated plan benefits and plan net assets is presented below.(Thousands)

January 1 1979 1980 (a)the present value of plan benefits reflects an increase in benefits to retired participants and a change in actuarial assumptions regarding the provision for anciihry benefits and the application of the ERISA maximum to all benefits.Earnings and Dividends Per Share.Earnings applicable to each share of common stock are based on the weighted average number of shares outstanding during the respective years, adjusted for stock dividends.

Assuming the 1,500,000 shares of common stock issued on November 19, 1980 were outstanding at the beginning of 1980 and the proceeds were applied to reduce the short term debt, the earnings per share for 1980 would have been~2.02, compared with the reported amount of 0.10.Cash dividends per share, as shown on page 14, are based on the shares outstanding at the time dividends are paid, adjusted for stock dividends.

Cash dividends per share at the rates declared in each period were$1.49 for 1980,~1.46 for 1979 and 41.42 for 1978.Note 2.Federal Income Taxes (Thousands of Dollars)'The provision for Federal income taxes is distributed between operating expense and other income based upon the treatment of the various components of the provision in the rate making process.At right is a summary of income tax expense for the three most recent years.The following is a recondliation of the difference between the amount of Federal income tax expense reported in the Statement of Income and the amount computed by mu!Iiplying the income before tax by the statutory tax rate.Charged to operating expense Current Deferred.................

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

Credited to other income: Current Deferred.............

Total..1980 1979 1978 393 S (36)S 5,166 12343 6,782 5,875 1?836 6,746 11,041 (393)(321)(2&1)(5,516)(4,186)(?714)(5,909)(4,507)(5,215)TotaIFederalincometaxexpense

..S 6,927 S 2~9 S 5926 1980 1979 1978%of%of Pretax Pretax Amount income Amount Income%of Pretax Amount Income Net income Add: Federal income tax expense.~43,652 6,927 S39,565 2,239$39,586 5,826 income before Federal income tax.Computed tax expense Increases (decreases) in tax resulting from: Excess of tax depredation less amount deferred Expenses capitalized for Iinanchl reporting purposes, induding interest, payroll and use tax, etc.Investment tax credit propertytaxes onbasis of date of taxable status Revenue taxes (deducted when paid).Miscellaneous items, net.Total Federal Income tax expense A summary of the deferred amounts charged or (credited) to income is as foihws: (11,232)(458)(1,310)866 296 (22.2)(10,763)(25.7)(9)(579)(14)(2.6)(698)(1.7)1.7 381.9.6 (1,187)(2.8)(9,361)(20.6)(4,955)(10.9)2?A.5 2,133 4.7 (487)(1.1)S 6,927 13.7 S 2,239 5.4 S 5,826 I?8 S50,579 S45,412 S23,266 46.0 S19,230 46.0 S21,797 4IM (4,501)(8.9)(4,145)(9.9)(3,525)(7.8)Investment tax credit Class life depredation Fuel costs...............

Nuclear fuel storage costs.Sterling abandonment Other.1980 S (458)2,446 2,195 (2,808)4,656 896 1979 (222)?076?108 (2,672)1,306 1978 s 6,629 1,763 (469)(4,989)227 Total S 6,927 S 2,596 S 3,161 At December 31, 1980, the Company had approximately

$21.6 million of investment tax credits for both financial reporting and tax purposes that are available to be camed forward.Such credits, if not utilized beforehand, will expire as follows: 1985-$938,000;1986-S12,490,000; and 1987-S8,142,000.

For tax purposes, the Company has a net operating loss carryforward of$11,966,000 avaihb!e through 1987, arising primarily from the abandonment of the Sterling nuclear plant.18 Note 3.Oepartrnental Financial Information (Thousands of Dollars)Ihe Company's records are maintained by operating departments, in accordance with PSC accounting policies, giving efFect to the rate-maMng process.The following is the operating data for each of the Company's departments and no interdepartmental adjustments are required to arrive at the operating data included in the Statement of Income.Electric Gas Steam Total Operating information

-1980 Operating revenues.Operating expenses, exduding provision for income taxes S297,791 237,142 S181,046 170,546 S23,589 S 502,426 22370 430,058 Pretax operating income.Provision for income taxes Net operating income.Other income.net.Interest charges.Net income per statement of income.60,649 10,500 1319 72,368 11,169 1310 357 12,836 s 49,480 S 9,190 S 862 59,532 16,482 32362 43,652 Other information Depredation

.Nuclear fuel amortization

.Capital expenditures

.Investment information

-December 31, 1980 Identifiable assets.Assets utilized for overall Company operations (a).Total assets per balance sheet S 21,859 S 20,789 S 75,080 s 5837 s>>,966 S870,603 S1 76335 604 S 27,800 20,789 696 S 87,742 S16,439 S1,063/77 12,003 S1,075,380 Operating information

-1979 Operating revenues.Operating expenses, exduding provision for income taxes.Pretax operating income.Provision for income taxes Net operating income..Other income, net.interest charges.Net income per statement of income.~257,177>140,527 SI9,988 S417,692 209~129,645 19,896 358,824 47,894 10,882 92 58,868 5,600 1314 (168)6,746~42294>9~S 260 52,122 15313 27,770 s 39,565 Other information Depredation

.Nuclear fuel amortization

.Capital expenditures

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

Investment information

-December 31, 1979 klentifiable assets.Assets utilized for overall Company operations (a).Total assets per balance sheet S 18,224 S 17,126 S 97,577 4g$8 S I3Sl34 S789432$166,274 591 416 sI6,415 23,703 17,126>>1,427 S 972,521 10,329 S 982850 Operating information

-1978 Operating revenues.Operating expenses, exduding provision for income taxes.S231307 S>>8,531 S19,>>0 S368,948 181,428 107,873 19357 308,658 Pretax operating income.Povtsion for income taxes 49@79 9,244 10,658 1,966 (247)60390 (169)11,041 Net operating income Other income, net.Interest charges.Net income per statement of income.S 40,635 S 8,692 S (78)49,249 13,123 22,786 s 39,586 Other information Depreciation

.Nudear fuel amoization

.Capita!expenditures

.investment information

-December 31, 1978 Ident Table assets.Assets utilized for overall Company operations (a)Total assets per balance sheet (a)Consists primarily of cash, prepayments and unamortized debt expense.s le,984 S 15,746 Sioo,i94 S711,917 S>>,903 sI46&9 581 455 S15,716 s 22,206 S 15,746 S112,552 S873,932 19,454 S893~

Note 4.Long Term Debt First Mortgage Bonds Senes Due (Thousands)

Principal Amount December 31 1980 1979 2Y4 M 3Ys H 3Ys 0 4~8 R 5 S 4'/z T 4Ye (1 5.3 V 6'/i W 6.7 X 8 Y 9Ye Z 10N AA 9i/4.BB 8%CC 9'/z DD 6'h EE 10.95 FF Aug.15, 1980...June 1,1982....

Mar.1,1985

....July 1, 1987.....Oct.15,1989

...Nov.15,1991

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

Sept.15, 1997...July 1, 1998.....Aug.15, 1999...Sept.1, 2000....Aug.1, 1983....June 15,2006...

Sept.15, 2007...Dec.1~2003....Aug.1,2009....Feb.15.2005...S 6,O0O 10,000 15,000 12,000 15,000 16,000 18,000 20,000 30,000 30,000 30,000 29,667 50,000 50,000 40,000 10,000 55.000 S 12,000 6,000 10,000 15,000 12,000 15,000 16,000 18,000 20,000 30,000 30,000 30,000 29,667 50,000 50,000 40,000 10,000 436,667 393,667 Add: Bond premium, net of discount..Less:Duewithinoneyear

...........

457 495 12,000 Total Long Term Debt...S437,124 S382,162 The Mortgage provides security for the bonds through a first lien on substantially all the property owned by the Company (except cash and accounts receivable).

Sinking and improvement fund requirements aggregate S333,540 per annum.Such requirements may be met by certification of additional property or by depositing cash with the Trustee.The 1980 and 1979 requirements were met by certification of additional property.The Series EE First Mortgage Bonds equal the principal amount of and provide for all payments of principal, premium and interest corresponding to the Pollution Control Revenue Bonds, Series A (Rochester Gas and Electric Corporation Projects)issued by the New York State Energy Research and Development Authority through a participation agreement with the Company.The Series EE bonds are subject to a mandatory sinking fund beginning August 1, 2000 and each August 1 thereafter.

Nine annual deposits aggregating

~3.2 million will be made to the sinking fund, with the balance of R.8 million principal amount of the bonds becoming due August 1, 2009.The Series FF bonds are subject to a mandatory sinking fund of~2.8 million annually beginning February 15, 1986 and each February 15 thereafter, with the noncumulative option to double the payment in any year up to a maximum of 5 years.The Company's maturities for the next five years are 8 million in 1982 for Series N,$29.7 million in 1983 for Series AA and 410 million in 1985 for Series O.Note 5.Capital Stock Type, by Order of Seniori Par Shares Shares Value Authorized Outstandin Preferred Stock (cumuhtive)

...........

4100 2,000,000 1,170,000 (a)Preferred Stock (cumuhtive)

...........

25 Preference Stock 1 Common Stock..........

5 (a)See Note 6 for mandatory redemption.(b)Redeemable at the option of the Company on 30 days minimum notice, p!us accrued dMdends in ail cases.S12,000 8,000 6,000 5,000 6,000 10,000 20,000 4 F 120,000 4.10 H 80,000 4Y i 6O',OOO 4.10 J 50,000 4.95 K 60,000 4.55 M 100,000 7.50 H 200,000 S12,000 8,000 6,000 5,000 6,000 10,000 20,000 670,000$67,000 S67,000 105 At any time 101 At anytime 101 At anytime 102.5 At anytime 102 At anytime 101 At anytime 106 Before 6/1/82 Preferred Stock, not subject to mandatory redemption: (Thousands)

Shares December 31 Redemption Series Outstandin 1980 1979 (r share)(b)Common Stock: Per Share Shares (Thousands)

Amount Outstanding, January 1, 1978.3X Stock Dividend Sale d Stock Automatic Dividend Reinvestment Phn.Capital Stock Expense Outstanding, December 31, 1978.3%Stock Dividend Automatic Dividend Reinvestment Phn.~p'apital Stock Expense Outstanding, December 31, 1979.3%Stock Dividend Sale of Stock Automatic DMdend Reinvestment Phn Capital Stock Expense Outstanding, December 31~1980.'Tax Reduction Act Stock Ownership Plan S2L00 18.75 17.19-19.25 18.00 1481-1725 15.86 15.00 13.25 1350-14.25 1?889,631 386,689 1g50,000 206,427 14,732,747 441,983 309,747 70/84 15,554381 466,646 1,500,000 388,038 17,909,545 8,120 23,438 3,749 (902)246,938 7,955 4,967 1,116 (544)260,432 7,000 19,875 5~2 (1,343)S291~6 At December 31, 1980 there were 318,01 2 shares of common stock reserved and unissued under the Automatic Dividend Reinvestment Plan.No other shares of common, preferred or 20 preference stock are reserved for oHicers or employees, or for options, warrants, conversions, or other rights.

Note 6.Preferred and Preference Stock Subject to Mandatory Redemption The Company is obligated to redeem shares of preferred stock as follows: (Thousands)

Shares December 31 Redemption Series Outstandin 1980 1979 (r share)Redemption Series Value 1985 (Thousands) 1984 The Company's maximum redemption requirements through 1985are as follows: Preferred Stock P 250,000 S25,000~25,000 108.60 Before 9/1/84 (a)1084 Q 250000 25,000 110.84 Before 9/1/85 (a)Preferred Preferred Preference P S100 0 8,125 Q 100 8,125 A 100 28,000 S8,125 500,000 450,000$25,000 Preference Stock 7.6 A 280,000$28,000~28,000 (b)(a)Commencing on September 1, 1984 for Series P and on September 1, 1985 for Series Q and on each September 1, thereafter, the Company must redeem 8,125 shares at 4100 per share by means of a sinking fund provision with the noncumulative option to redeem not more than 8,125 additional shares on the same terms.In the event the Company should be~44350 S8,125 in arrears in the sinking fund requirement, the Company may not redeem or pay dividends on any stock subordinate to the pmferied stock (b)During January 1985, the Company must offer to purchase on October 1, 1985 ail of the outstanding 7.6%Series A Preference Stock at a price of SI00 per share.The shares remaining outstanding after such offer are caihble at$100 per share at the option of the Company at any time after December 20, 1987.Note 7.Short Term Debt At December 31, 1980 and 1979, the Company had short term notes outstanding of$10 million and$25 million, respectively, and commercial paper outstanding of 4153 million and$25 million, respectively.

The weighted average interest rates for 1980 were 14.53X for short term notes and 12.24X for commercial pa per, and for 1979 were 13.75X for short term notes and 11.50X for commercial paper.The Company had established bank lines of credit totaling~80 million at the end of the year.Since January 1,1979, the Company has maintained its lines of credit by payment of commit.ment fees based on a percentage of floating prime rates.Prior to that date, the lines of credit were maintained through the use of compensating balance arrangements.

Commitment fees paid in 1980 and 1979 were 4552/96 and$280178, respectively.

Note 8.jointly&wned Facilities The fo!lowing table sets forth the jointlyawned electric generating projects in which the Company is partidpating.

Each participant must provide its own financing for the Nne Mile Point unit in the process of construction and for any additions to the Oswego unit.Oswego Hineivtile Fossil Point Nuclear Gnit<<6 Gnit<<2 (I)(2)(3)(1)(3)The Company's share of direct expenses associated with the Oswego unit is included in the appropriate operating expenses in the Statement of Income.Net megawatt capacity......RGGEs share-megawatts...

-percent.....Year of completion..........

Total estimated project costs...........

RGGEs share.RGGEs actual construction costs-1979-1980 Expended by RGGE in prior years......

Accumulated depredation (Commenced in 1980)..S 10.0 6.0 45.5 S 61.5(4)4113.0 s (1.2)850 1,084 204 152 24 14 1980 1986 (Millions of Dollars)s24162 (5)3523 S 23.7 18.8 70.5 (1)Constructed and operated by Yiagara ivtohavA<Power Corpomtion.

(2)inaccordance with an order issued by the PSC, the Company deferred ail income and expenses associated with this unit until the plant was added to rate base in July 1980 for mte making purposes.(3)Construction costs exclude allowance for funds used during construction and certain overhead costs to be capitalized.

(4)it is anticipated that modifications will be made to the existing plant to increase opemting eHidency or reliability.

Costs associated with these modifications are not included.(5)lhe present cost estimate excludes common facilities, but includes$116.2 million for initial nuclear fuel loading.

Note 9.Commitments and Other Matters The Company's capital expenditures program involves an estimated expenditure of 4131.1 million in 1981, not including allowance for funds used during construction, and the Company has enteml into certain commitments for purchase of materials and equipment in connection with such program.Operations of the Company's generating stations are subject to various Federal, state and local environmental standards.

Under the Clean Water Act, the Company has obtained permits to discharge pollutants into the water bodies adjoining its facilities.

The United States Environmental Protection Agency(EPA) issued National Pollutant Discharge Elimination System permits for all the Company's major generating facilities, but a number of conditions relating to thermal and chemical discharge limitations were contested by the Company in adjudicatory hearing requests submitted to EPA.The Company, the New York State Department of Environmental Conservation"NYSDEC'which became a party to the adjudicatory hearings)and EPA have settled the hearing requests as described be!ow.The Company has reached agreement with the regulatory agencies on non thermal eNuent limitations and final permits containing these agreed limitations have been issued and are now continuing in effect, pending final action by NYSDEC on applica-tions to renew these permits.Construction of treatment facilities required for Company compliance with permit limitations at two of the Company's generating stations was completed in 1980.Construction costs of these two facilities totaled S11.9 million.The Company has pursued resolution of the contested thermal limitations by submitting demonstrations in an effort to justify less stringent limitations for three generating stations.The thermal conditions of the permits remain stayed pending resolution of the thermal issues either through regulatory agencies'pproval of the demonstrations and less stringent thermal limitations or, in the absence of such approval, through the resumption of the adjudicatory hearing process.If the demonstrations and less stringent thermal limitations are not approved for any of the three facilities, the Company could be required to install cooling towers which would involve capital expenditures estimated at R7 million plus significant operating and maintenance expenses.The National Pollutant Discharge Elimination System permits issued in 1978 expired on March 30, 1980.The Company applied to NYSDEC for renewal of these permits.NYSDEC has extended the Company's edsting permits until final action is taken on the pending renewal applications.

The Company believes that additional expenditures and costs made necessary by environmental regulations will be fully allowable for rate making purposes.In the mid 1970's, the Companyand three other New York State utilities agreed to share in the cost of a proposed nuclear.powered electric generating plant which the Company would license, build, and operate for the group at Sterling, Cayuga County, New York Output of the plant was to have been shared in the same proportions; the Company's share was 28K Although state and federal authorizations for construction were obtained, the State siting agency ultimately revoked its authorization and the federal construction permit was also withdrawn.

The participating utilities elected not to appeal those decisions, but to terminate the project At December 31, 1980, the Company's net investment in the plant is summarized as follows (in thousands of dollars): Construction costs Less: Estimated tax effect of abandonment

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

$37,300.11,800$m,m The Company's share of the estimated contract termination costs would be S7 million, prior to tax savings.The Company and the three other utilities participating in the Sterling project have petitioned the PSC for permission to amortize their investment in the plant as a cost of service over a period of time to be determined in each participant's currently pending rate case.Proceedings were commenced by the PSC in 1980 to examine the costs incurred by the petitioners, to determine their prudence and to decide the request for amortization of the extraordinary property loss in rates.The proceeding was initially divided into two phases: Phase I to resolve certain general principles and phase II to conduct a more detailed examination of individual cost items.A Phase I-A was later added by the Commis.sion to consider a proposal that the participants not recover through rates the carrying charges on the unamortized investment and to consider"any other issue of ultimate responsibility for Sterling costs".Phase I was concluded with an Opinion and Order dated January 6, 1981, which provided, in part, that the categories ofexpenditures incurred for the project up to January11, 1978 were prudent in principle.

As a result, Phase II of the proceedings has been expanded to conduct an examination of the prudence of categories of expenditure after January 11, 1978, along with a more detailed examination of individual cost items.The Opinion, however, did state that with regard to the prudence of categories of expenditures between Januaiy11 and May 4, 1978, the PSC Staff and intervenors will have the burden of going forward in showing any category to be imprudent.

The Company believes that all of the expenditures incurred on the Sterling project have been reasonable and prudent, and therefore will ultimately be recovered through rates.'The Company also believes that decisions of the PSC support the Company's request for an appropriate canying charge on the unamortized investment.

The utilities participating in the Sterling project received an order dated February 19, 1980 from the PSC, in which it was ordered"(T)hat the petitioners be allowed to continue, until such time as amortization commences to be recovered in rates, to accrue and accumulate an allowance for funds used during construction with respect to project costs." The investment of$373 million mentioned above includes S2.5 million in AFDC accrued during 1980 pursuant to this order.With respect to a similar continuation of AFDC under the accounting procedures prescribed by the FERC, authorization by the FERC is necessary.

Such action was requested on March 7, 1980.I1ie FERC has not acted on the matter.If the FERC does not authorize continuation of accrual and accumuhtion of AFDC on the Sterling project and if alternative regulatory relief equivalent thereto is not granted by the FERC, then the participants will not be permitted to include in financial reports, based on the FERC System of Accounts, the AFDC accrued on their investment subsequent to the effective date of the discontinuance of the project.However, on the basis of the PSC order of February 19, 1980, the participants would continue to accrue and accumulate such AFDC for PSC reguhtoiy purposes and for purposes of financial reports based on PSC accounting.

Legal actions have been instituted against the Company seeking$34.5 million in compensatory and W million in punitive damages for alleged personal injuries as a result of exposure to radiation at the Company's Ginna nuclear power plant in 1974.The Company has not completed its investigation of the plaintiffs'llegations and it cannot now predict the outcome of these actions, nor can it predict whether any additional similar actions might be corn.menced.Based, however, on its investigation to date, the Company does not believe the phintiffs will prevail on the merits, and it intends to contest these claims vigorously.

The Company is fully insured for the total compensatory damages that are sought in these actions, and its insurer has advised the Company that it will fully defend all claims.However, the insurer has dischimed any obligation for the payment of any punitive damages which may be assessed against the Company.There is precedent in New York State that it is contrary to public policy for an insurance carrier to pay punitive damages assessed against its insured, but it is unclear whether that precedent would apply to the nuclear liability insurance involved in these actions.The Company intends to contest the disclaimer of coverage for punitive damages.An additional legal action has been brought by the plaintiffs in those actions.T1iis action seeks to recover~10 million in compensatory damages and S13 million in punitive damages for various alleged wrongs arising out of a Company interoffice memorandum advising its facility supervisors that none of the plaintiffs should be permitted on the Company's property.These claims are not covered by insurance, and the Company will defend them vigorously.

On January 19, 1981, the PSC approved the merger of the Company and Pavilion Natural Gas Company (Pavilion).

It is expected that the merger will take place on February 28, 1981, at which time the Company will issue up to 98,006 additional shares of common stock in exchange for the common stock of Pavilion.The merger will be accounted for as a pooling of interests.

Had the merger occurred in 1980, the effects on reported operating revenues, net income and earnings per share would have been immaterial.

Report of Independent Accountants To the Shareholders and Board of Directors of Rochester Gas and Electric Corporation In our opinion, the accompanying bahnce sheets and the related statements of income, retained earnings, and of changes in financial position appearing on pages 14 through 16 present fairly the fiinancial'position of Rochester Gas and Hectric Corporation at December 31, 1980 and 1979, and the results of its operations and the changes in its financial position for each of the three years in the period ended December 31, 1980, in conformity with generally accepted accounting principles consistently applied.Our examinations of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

1900 Lincoln First Tower Rochester, New York 14604 January 30, 1981 Supplemental Information Concerning the Effects of Inflation The estimates of the effect of inflation on the operations of the Company, as set forth below, were prepared on bases prescribed by the Financial Accounting Standards Board (FASB)Statement No.33,"Financial Reporting and Changing Prices." This statement requires adjustments to historical costs to estimate the effects that general inflation (Constant Dollar)and changes in specific prices (Current Cost)have had on the Company's results of operations.

These data are not intended as substitutes for earnings reported on a historical cost basis.They offer some perspective of the approximate effects of inflation rather than a precise measurement of these effects.Utility Plant.Estimated utility plant, primarily consisting of plant in service and construction work in progress, was determined for constant dollars by applying the Consumer Price Index for All Urban Consumers (CPI.U)to the historical cost of utility plant.Ihe current cost estimates were measured by applying the Handy.Whitman Index of Public Utility Construction Costs to the historical cost of utility plant.Current cost is an estimate of the cost of currently replacing existing plant.The resulting adjusted data for plant under either of the above methods is not necessarily indicative of the Company's future capital requirements because the actual replacement of existing plant will take place over many years and is not likely to be a reproduction of presently existing plant.Ihe difference between current cost and the constant dollar data results from specific prices of plant increasing at a rate different from the rate of general inflation.

Accumulated Depreciation.

Ihe accumulated provision for depreciation for constant dollars and current cost was developed by applying, for each class of plant, the same percentage relationship that existed between gross plant and accumulated provision for depreciation on a historical basis to the respective adjusted plant data.Depreciation Expense.Depreciation expense for both methods was determined by applying the Company's depreciation rates to the respective indexed plant amounts.Reduction of Utility Plant to Net Recoverable Cost.1he regulatory process limits the Company to the recovery of the historical cost of service in its rates.'Iherefore, any excess of the value of utiTity plant under constant dollars or current cost must be reduced to the net recoverable cost, which is historical cost.Ihe amount of this excess that accrued as a result of inflation in the current year must be reduced to net recoverable cost.Gain From the Decline of Purchasing Power of Net Amounts Owed.The Company, by holding assets such as receivables, prepay.ments, and inventory, suffers a loss of purchasing power during periods of inflation because the amount of cash received in the future for these items will purchase less.Conversely, by holding monetary liabilities, primarily long term debt, the Company benefits because the payment in the future will be made with nominal dollars having less purchasing power.The Company has significant amounts of long term debt outstanding which will be paid back in dollars having less purchasing power and, therefore, for purposes of these calculations, has a net gain from holding monetary liabilities in excess of monetary assets.Increase in provision for depreciation Increase in general price level less increase in specific prices.......Reduction of utility plant to net recoverable cost............

Gain from the decline in purchasing power of net amounts owed.....Total erosion of shareholders'quity due to inflation......

430,192'41,635 78,181 39,624 27,114 (66,725)(66,725)>41,&$8~41,648 Other Items.As allowed by FASB Statement No.33, items in the income statement, other than depreciation expense, were not adjusted.The cost of fuel used in electri production and the cost of gas sold were not adjusted because the effect on earnings was not material due to the relatively short turnover period between the incurrence of these costs and their recovery through the fuel adjustment clause.Ihe regulatoiy process limits the amount of depreciation expense induded in the Company's revenue allowance and limits utility plant in rate base to original cost Such amounts produce cash flows which are inadequate to replace such property in the future or preserve the purchasing power of common equity capital previously invested.While this effect is partially mitigated by the benefit derived form having long term debt, the Company has a net purchasing power loss which is experienced by the common stock shareholder and can only be overcome as a result of adequate rate relief.However, the Company expects that it will be able to establish rates which will cover the increased costs of new plant when such costs are incurred.Federal income tax policy ignores the effects of inflation in measuring taxable income.Higher depreciation expense under constant dollar and current cost accounting is not tax deductible.

Therefore, the Company's effective Federal income tax rate, when adjusted for inflation, is 48.8 percent under constant dollar and 86.4 percent under current cost for 1980, each of which exceeds its reported effective tax rate of 22.7 percent.The erosion of shareholders'quity due to changing prices is summarized in terms of general inflation and in terms of changes in specific prices, as follows: ln Terms of In Terms of General Changes in In Thousands of Average 1980 Dollars Inflation Specific Prices Statement of Income from Continuing Operations Adjusted for Changing Prices For the Year Ended December 31, 1980 (Thousands of Dollars)Operating revenues Constant Dolhr Current Cost Historical Average Average Cost 1980 Dolhis 1980 Dollars~502,426~502,426 4502,426 Operating expense Maintenance expense Depreciation expense Tax expense-local, state and other.Income tax expense.Interest expense Other income and deductions

-net.313,226 32,048 27,800 56,984 12,836 39,182 (23,302)313,226 32,048 57,992 56,984 12,836 39,182 (23,302)313,226 32,048 69,435 56,984 12,836 39,182 (23,302)Net income Dividends on preferred and preference stock Earnings (loss)applicable to common stock Change in net assets during 1980 due to increase in specific prices Less: Increase in general price level..Net change during 1980.Reduction of utility plant to net recoverable cost Gain from decline in purchasing power of net amounts owed 458,774 488,966 500,409 43,652 13,460 2,017 8,927 8,927 8,927~34,725~4,533"~(6,910)~193,984" 233,608 (39,624)~(78,181)(27,114)S 66,725$66,725'Earnings applicable to common stock on a constant dolhr basis would have been a loss of S73,648 if the reduction of utility phnt to net recoverable cost had been inctudei"At December 31, 1980, current cost of utility property net of accumulated depredation was S2,10?868, while rehted historical cost or net recoverable cost was S950,474.Five.Year Comparison of Selected Financial Data Adjusted for Changing Prices (In Thousands of Average 1980 Doihis)Year Ended December 31 1980 1979 1978 1977 1976 Operating revenues As reported.In average 1980dollars

.Historical cost information adjusted for general inflation Earnings applicable to common stock'arnings per common share, adjusted for stock dividends'et assets at yearend at net recoverable cost Current cost information Loss applicable to common stock'.Loss per common share, adjusted for stock dividends'..........

Excess of increase in general price level over increase in speciTic prices after reduction to net recoverable cost Net assets at yearcnd at net recoverable cost General information Gain from decline in purchasing power of net amounts owed.....Cash dividends per common share, adjusted for stock dividends As reported.In average 1980 dollars Market price per common share atyearwnd As reported.In December 1980 dollars.Average consumer price index December consumer price index'Excludes the reduction of utility phnt to net recoverable cost.4,533$.28 358,613 10,279~.65 365,772 (6,910)(3,080)~(19)66,738 358,613 80,450 365,772 66,725 73,855 S 1.41 1.60 1.68~12.25 12.25 246.9 258.4~14.88 16.72 217.4 229.9$18.00 22.92 195.4 202.9$502,426$417,692$368,948 502,426 474371 466,189$331,144 450,465 S 1.22 1.66~21.13 29.33 181.5 186.1$308,227 446@42>1.13 1.64$19.88 29.46 170.5 174.3 Interim Financial Data$KS and Bectrto Corporation In the opinion of the Company, the following quarterly information includes all adjustments, consisting of normal recumng adjust.ments, necessary for a fair statement of the results of operations for such periods.The variations in operations reported on a quarterly basis are a result of the seasonal nature of the Company's business and the availability of the Company's Ginna nuclear plant.Earnings per common share have been adjusted for stock dividends.

Operating Revenues (Thousands)

Eamin Per Operating Net EamingsOn CommonFhare Income Income Common Stock (in dollars)December 31, 1980 September 30, 1980 June30.1980

.March 31, 1980.December 31, 1979 September 30, 1979 June 30, 1979 March 31, 1979.December 31, 1978 September 30, 1978 June 30, 1978 March31,1978

.$141,344 102,130 105,395 153,557 108,243 83,010 105,766 120,673 92312 73,665 86,942 116,029 812,774 14,268 12,233 20,257 11,279 8,244 14,265 18,334 8,466 9,527 12,009 19,247 S 8,159 9,335 9,141 17,017 7,194 5,211 10,939 16,220 7,088 6,596 9,909 15,993 s 5,525 6,956 7,184 15,060 5,237 3,362 9,520 14,801 5,669 5,175 8,490 14,574 S.32.42.44.93 32.21.60 36 35.59 1.03 Common Stock and Dividends 1980 1979 1978 Earnings per weighted average share...........

Number of shares (000's)Weighted average Pro forma weighted average after stock dividend paid in following year (See below)...Actual number at December 31..............

Number of shareholders.

Price range (Sales on Hew York Stock Exchange).1st quarter 2nd quarter.3rd quarter.4th quarter.Cash dividends paid 1st quarter 2nd quarter.3rd quarter.4th quarter..Stock dividend paid (See below)...............

2.10 16,472 16,966 17,910 50,416 High Low 15>/4 11'/4 15'/4 11%14s/4 13s/4.13r/s 11'h S.37.37.37.38 3%$2.08 15,815$232 14,613$36 36 37 37 3%.35 36 36 3X 16,289 15,051 15,555 14,733 48,543 48,148 High Low High Low 18%1P/4 21 r/t 17'/e 17'5%18/s 17s/s 17 16 19/e 18 16 14r/t 18M 16th The 22nd annual stock dividend was paid by the Company on February 25, 1981 at the rate of 3%.The foregoing Common Stock prices have not been adjusted for subsequent 3%stock dividends paid in February 1978, 1979, 1980 and 1981.The Company has paid cash dividends quarterly on its Common Stock without interruption since it became publicly held in 1949.The Company intends to continue the practice of paying cash diVidends quarterly and will consider the payment of a stock diVidend annually, although there can be no assurance as to the declaration of future dividends since they necessarily will be dependent upon the Company's future earnings, its financial requirements and other factors.In the event the Company should be in arrears in the redemption of its Series P or Series Q Preferred Stock pursuant to the sinking fund provision of such series, the Compan'y may not purchase or otherwise acquire for value, or pay dividends on, any shares of its Common Stock For the years 1978 and 1979 cash diVidends paid were 100K taxable for Federal income tax purposes.The Company estimates that cash dividends paid during 1980 will be 100X nontaxable.

26 Management's Discussion and Analysis of Financial Condition and Results of Operations During the three years 1978 through 1980, the Company has experienced the effects of high inflation, record setting interest rates, and imperfections inherent in the regulatory rate making process.Their impact is evident throughout the statements of income and balance sheets shown on pages 14 and 15.The effects of inflation are further set forth in the supplemental information on pages 24 and 25.Although the Company is not convinced these trends are permanent, there has been a gradual erosion of the long term fundamental financial strength of the Company which histori.cally has provided a certain degree of flexibility in long term plan.ning.Ihis loss of flexibility becomes apparent through the reduction in cash flow as a result of the increases in such working capital items as accounts receivable and fuel inventories.

lhe Company's financial flexibility has also been constrained by the necessity to commit to major construction projects to meet the anticipated energy needs of our customers.

Planned increases in electric generating ca pacity require long term capital commit.ments, such as Nine Mile Point Gnit 2, a nuclear unit being built by Niagara Mohawk Power Corporation in which the Company has a 14X interest, now scheduled for commercial operation in late 1986.Also, a significant portion of the Company's capital expendi.ture program is comprised of government mandated modifications and additions to existing plant and equipment.

At present, the Company anticipates that 30X to 40K of the addi.tional funds it requires will be generated internally.

The balance will have to be obtained through the sale of securities and short term borrowing.

The Company's ability to obtain financing depends on receiving regulatory approvals for rate increases adequate to maintain the Company's financial soundness.

Regulatory policies regarding both cash flow items and rates of earnings have restricted the Company's ability to internally generate appropriate amounts of cash to finance its growing construction program and have restricted its ability to secure financing at advantageous rates.These policies, together with the effects of inflation and the high costs of borrowing, have required the Company to become more aggressive in seeking approvals for rate increases.

I)tis is evidenced by the short period of time between the July 18, 1980 PSC decision in the last proceeding and the August 27, 1980 filing of the Company's current proceeding.

ln Januaiy1981 it became clear that the Company had under.estimated the duration and magnitude of the current downturn in the business cycle as reflected in its projection of rate year financing costs in the current rate proceeding.

Thus, the Company amended its initial permanent request to reflect an increase in the requested rate of return on rate base from 10.95%to 11.35%.Also, the Company applied for temporaiy electric and gas rate increases, to be effective on or about March 1, 1981, of approximately

$30 million and$5 million, respectively, based on forecasted sales volumes for the twelve months ended July 31, 1982.The Company has presented evidence in the proceeding that, if the temporary rate increases are not permitted, the Company will face a serious risk of having the rating of its iirst mortgage bonds lowered when it next sells such bonds.The Company's request for an 18K increase in steam rates ($3.6 million per year)was approved by the PSC and the rates became effective February 18, 1981.Ihe Company is unable to predict the amount of the pending increases, if any, that will be allowed by the PSC.Ihe following financial review identifles the causes of significant changes in the amounts of revenues and expenses, comparing 1980 to 1979 and 1979 to 1978.The Notes to Financial Statements on pages 17 to 23 of this report contain additional related information.

Changes In Operating Revenues Increase or (Decrease) from Prior Year (Ihousands of Dollars)Electric Department 1980 1979 Gas Department 1980 1979 Steam Depart'ment 1980 1979 Customer Revenues (Estimated) from: Rate Inaeases.Fuel Cost Adjustment

.Weather Effects.Customer Consumption.

Other$21,878$10,464$8,232$1,946 2,317 2,764 30,436 20,986 (27)(61)(1,452)(735)607 2,842 2,671 (526)857 733 632 325$2,316 3,441 (279)(2,042)165$1,757 (24)(1,013)158 Total Change in Customer Revenues...

Electric Sales to Other Gtilities.TotalChangeinOperating Revenues.25,632 16,742 40,519 21,996 3,601 878 14,982 9,128$40,614$25,870$40,519$21,996$3,601$878 Revenues from electric sales to other utiTities increased in both 1980 and 1979.Fluctuations in electric sales to other utilities, and in purchased electricity discussed below, generally are related to the avaihbility of electric generation from the Ginna nuclear plant.Electric and Steam Fuels..Purchased Bectricity.....

Purchased Natural Gas...Other Operation.

Mantenance

$18,640 (8,141)37,955 9,696 1,919$2,931 12,600 18,695 6,579 3,883 Total Change In Operation and Maintenance Expense.......

$60,069$44,688 Ihe 1980 increase in electric and steam fuels expense was mainly due to an increase in electricity generated in 1980 and an increased fuel cost per kilowatt.hour generated.

Changes In Operation and Maintenance Expenses Increase or (Decrease) from Prior Year (Thousands of Dollars)1980 1979 Purchased electricity expense decreased in 1980 due mainly to the high 76%availability of the Ginna nuclear power plant and an increase in system net generating capacity occasioned by the start up of Oswego Gnit 6.Purchased electricity increased in 1979 due to both higher costs and higher kilowatt.hour purchases.

Purchased natural gas expense increased in 1980 and 1979 as a result of higher pipeline rates and in 1980 also increased due to a modest increase in consumption in the nonresidential sector.Other operation expense increased in 1980 and in 1979 largely as a result of higher wages and employee benefit costs.Taxes-local, state and other increased in 1980 and in 1979 principally due to the increased gross income tax rate and increased revenues.The 1980 increase also reflects taxes on Oswego Gnit 6 which were capitalized during its construction and are now being expensed.Changes in Federal income taxes are explained in Note 2 to the Notes to Financial Statements.

27 The 1980 increase in allowance for funds used during construction of$13 million was due to the increased rates applied during the period, the effect of which was reduced by lower utility plant expenditures and by the transfer of the Company's share of the Oswego Unit 6 oil-fired generating p!ant from construction work in progress to utiTity plant.The 1979 increase of~3.7 million in allowance for funds used during construction was due to increased rates applied during the period and to increased utility plant expenditures.

Interest on long term debt increased in 1980 and in 1979 as a result of additional bonds issued in February and May 1980, August 1979 and December 1978.Short term interest rates and borrowing levels for 1980 and 1979 were approximately equal.'The S2.4 million increase in the 1979 interest on short term debt resulted from higher interest rates and an increase of$14.6 million in the average amount of short term debt outstanding.

DMdends on preferred and preference stock increased~2.3 million in 1980 and~1.0 million in 1979 because of additional preferred stock issued in August 1980 and July 1979.Selected Financial Data Summaiy of Operations (Thousands of Dollars)Year Ended Deceinber 31 1980 1979 1978 1977 1976 1975 Operating Revenues Electric.Gas Steam S245,005$219@73$202,631$179,940$170,558 181,046 140,527 118,531 105,797 101,027 23,589 19,988 19,110 19,004 18&3$146,629 82,478 17/37 Electric sales to other utilities..449,640 52,786 379,888 37,804 340,272 28,676 304,741 26,403 289,968 18,259 246,444 25,496 Total Operating Revenues 502,426 417,692 368,948 331,144 308,227 271,940 Operating Expenses Operation Electric and steam fuels......Purchased eiectricity.........

Purchased natural gas.......Other.Maintenance Depreciation Taxes-local, state and other....Federal income tax-current....

-deferred...

79,711 23,796 127,759 81,960 32,048 27,800 56,984 393 12,443 61,071 31,937 89,804 72,264 30,129 23,703 49,916 (36)6,782 58,140 19/37 71,109 65,685 26/46 22/06 45,935 5,166 5,875 56,993 13,635 62,086 62,494 22372 21,053 43,876 961 2,897 46361 18,195 56,192 57,677 20/06 18,621 40,502 (291)5,656 46,268 12312 42,247 50,629 19,700 17,414 36,157 4,162 1,133 Total Operating Expenses Operating Income Other Income and Deductions Allowance for other funds used during construction

.Other, net.442,894 59,532 11,710 4,772 365,570 319,699 286 f67 263,119 229,922 52,122 49,249 44,777 45,108 42,018 11,439 8,705 6,473 4,678 2310 3,774 4,418 1310 1,128 537 Total Other Income and Deductions

....16,482 15,213 13,123 7,783 5,806 2,847 Income before Interest Charges...

76,014 67335 62/72 52560 50,914 44,865 Interest Charges Longtermdebt Shortterm debt.Other, net.Allowance for borrowed funds used during construction

.34,129 4.298 755 29,084-4,016 441 25,594 22,542 19@78 16,963 1~1+19 1,054 1,568 416 494 246 1~7 (6,820)(5,771)(4,812)(4,844)(2,853)(1,264)Total Interest Charges..32,362 27,770 22,786 19,511 17,825 18,494 Net Income 43,652 Dividends on Preferred and Preference Stock, at required rates.8,927 39,565 39,586 33,049 33,089 26,371 6,645 5,678 6,512 6,245 4,054 Earnings Applicable to Common Stock......S 34,725$32,920$33,908 4 26,537 4 26,844 S 22,317 Weighted average number ofshares outstanding in each period, adjusted for stock dividends (000's).Earnings per Common Share...............

16,472$2.10 15,815 14,613 13,234 12,713 11,656 S2.08>2.32~2.00~2.11~1.91 Cash Dividends per Common Share.adjusted for stock dividends.s 1.48 SI.41 SI.22$1.08 Selected Financial Data (Continued)

Condensed Balance Sheet (Thousands of Do!lars)At December 31 1980 1979 1978 f977 1976 f975 ASSETS Gtility Plant, at original cost............

Less-Accumulated depreciation and amortization

.Construction work in progress...

S1,061,999

$928,796$857,959$789,775$727,687$693,404 337,215 295/28 261,477 229,122 198,778 185,455 724,784 633,468 596,482 560,653 528,909 507,949 225,690 260,063 213,534 162,127 120,702 79,381 Net utility plant.Investment in Subsidiary, at equity..Current Assets Deferred Debits 950,474 1,968 92,314 30,624 893,531 2,062 65~7 22,020 810,016 1,996 66,953 14,421 722,780 1,947 58387 15,260 649,611 1,911 61,090 8,151 587,330 1,871 53,796 7,450 Total Assets.CAPITALIZATION AND LIABILITIES Capitalization Long term debt Preferred stock subject to mandatory redemption Preferred stock redeemable at option of Company Preference stock subject to mandatory redemption Common shareholders'quity Common stock.Retained earnings Total common shareholders'quity...

437,124$382,162$384 f03$361,022 S311 f95$267,314 50,000 67,000 28,000 291,346 83,970 25,000 67,000 28,000 260,432 80,155 92,000 89,000 67,000 28,000 246,938 77/38 67,000 28,000 212,533 70,819 181/01 173,586 67,812 60,502 375,316 340,587 324,276 283/52 249,113 234,088 S1,075,380

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

...........

Current Uabilities Deferred Credits and Other Liabilities

..957,440 85,510 32,430 842,749 803,579 739@74 652,508 590,402 115,291 68/62 42,813 54,652 51,712 24,810 21,445 16,187 13,603 8,333 Total Capitalization and Liabilities...

$1,075,380$982,850$893,386$798,374$720,763 S650,447 Financial Data At December 31 1980 f979 1978 1977 f976 f975 Capitalization Ratios (percent)Longtermdebt Preferred and preference stock..Common shareholders'quity...

Total Book Value per Common Share Adjusted for StockDividends

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

Rate of Return On Average Common Equity-Year End (percent)Effective Federal Income Tax Rate (percent)...Depreciation Rate-Electric................

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

Interest Coverages Before federal income taxes (incld.AFDC)...(excld.AFDC)...After federal income taxes (inckl AFDC).....(excld.AFDC)....45.7 15.1 39.2 100.0 S20.96 9.86 13.7 3.09 2.86 2.33 1.86 2.11 1.64 9.85 11.22 10.02 11.16'0.18 5.4 12.8 6.2 I 0.6 14.4 3.10 3.09 3.00 2.90 2.79 2.79 2.79 2.67 2.63 2.60 2.25 1.73 2.18 1.67 2.65 2.16 2.43 1.94 2.45 1.98 2.36 1.89 2.79 2.43 2.60 2.24 2.56 2.38 2.33 2.15 45.4 47.8 48.8 47.7 45.3 14.2 11.8 12.9 14.1 15.1 40.4 40.4 383 38.2 39.6 100.0 100.0 100.0 100.0 100.0$21.26$20.75$20.12$19.47$18.56 29 Electric Department Electric Revenue (000's)Residential.

Commercial

.industrial Other.Year Ended December 31 1980 S 88,083 70,407 60,373 26,142 1979 4 78,140 63,104 54,404 23,725 1978~72,854 58,985 48,792 22,000 1977>64,986 53,520 41,783 19,651 1976 4 61,498 50,791 39,402 18,867 1975 S 53,904 43,884 33,244 15,597 Hectric revenue from our customers..Other electric utilities Total electric revenue Electric Expense (000's)Fuel used in electric generation

..Purchased electricity.

Other operation.

Maintenance Depreciation

.Taxes-local, state and other....Hectric revenue deductions

.Operating Income before Federal Income Tax.....Federal income tax includin ulato allowance 0 eratfn Income from Electric 0 erations (000's)Electric Operating Ratio%.Electric Sales-KWH (000's)Residential

.Commercial Industrial

.Other Hectric sales to our customers Other electric utilities Total electric sales.Electric Customers at December 31 Residential

.Commercial industrial

.Other Total electric customers Electricity Generated and Purchased-KWH (000's)Fossil.Nuclear.Hydro.Pumped storage Less energy for pumping.Other Total generated-Net Purchased ,.Total electric ener Electric Generation Costs (000's)Fossil.Nuclear Other.245,005 52,786 297,791 63,430 23,796 64,139 24,404 21,859 39,514 237,142 60,649 11,169 S 49,480 59.0 1,730,213 1,424,283 1,564,952 466,975 5,186.423 1,620.929 6,807,352 257,227 24,524 1,388 2,331 285,470 2,301,288',081,572 179,335 122,809 (191,044)9,389 5,503,349 1,758,608 7,261,957 S62,554 39,713 1,355 518 219,373 37,804 257,177 46,999 31,937 54,277 22,675 18,223 35,172 209,283 47,894 5,600 0 4?294 60.6 1,710,090 1,404,931 1,579,364 469,135 5,163,520 1,526,925 6,690,445 254,097 24,234 1,394 2,374 28?099 1,956,599 2,945,721 210,353 151,911 (217,758)"17,257 5,064,083 2,051,568 7,115,651 S42,116 29,943 1,233 813 202,631 28,676 231.307 45,093 19,337 47,602 19,305 16,983 33,108 181.428 49,879 9,244~40,635 1,701,938 1,417,624 1,51 7,988 465,373 5,102,923 1,445,391 6,548,314 251,645 24,137 1,348 2,423 279,553 2,025,645 3,206,313 192,278 133,287 (189,453)1,086 5,369,156 1,579,863 6,949,019$38,995 25,561 1,229 57 179,940 26,403 206,343 44,010 13,635 45,011 16,339 15,333 31,530 165,858 40,485 4,041>36,444 57.7 1,660,425 1,392,023 1,431,855 454,059 4,938,362 1,453,590 6,391,952 250,121 24,023 1,353 2,328 277,825 2,272,182 3,018,305 22?391 193,340 (283,573)850 5,423,495 1,400,505 6,824,000$40,557 22,330 1,132 44 170,558 18,259 188,817 34,247 18,195 40,930 14,796 13,865 28,543 150,576 38,241 3,102 4 35,139 57.3 1,618,314 1,366,094 1,384,235 437,097 4,805,740 1,187,942 5,993,682 249,177 23,983 1,371 2,271 276,802 2,060,186 2,040,746 277,010 118,716 (180,317)2,797 4,319,138 2,106,904 6,426,042 S36,901 13,485 973 118 146,629 25,496 172,125 33,442 12,212 35,662 14,282 12,731 25,369 133,698 38,427 5,069 4 33,358 55.5 1,530,421 1,294,816 1,284,940 411.122 4,521,299 1,864,050 6,385.349 246,613 23,874 1,380 2,305 274,172 1,731,723 3,026,894 265,401 98,743 (148,180)2,198 4,976,779 1,888,091 6,864,870$33,120 14,191 1,030 63 Hectric Department Fuel Fossil-Total BTG (million).-CentspermillionBTG

..Nuclear-Total BTG (million).....

-Cents r million BTG..24,610,400 205.31..33,878,804 61.36 20,874,198 152.18 31,897,513 53.81 21,139,146 144.27 35,812,171 43.97 23,862,599 136.92 37,822,209 38.04 21,822,976 137.42 23,837,620 25.69 18@88,874 142.18 33,128,471 22.91 System Net Capability

-KW at December 31 Fossil.Nuclear Other.Purchased Total s tern net ca bili 637,000 470,000 47,000 29,000 357,000 1,540,000 443,000 470,000 47,000 29,000 359,000 1,348,000 443,000 470,000 47,000 29,000 339,000 1,328,000 443,000 470,000 47,000 29,000 338,000 1,327,000 452,000 470,000 47,000 29,000 342,000 1,340,000 45?000 470,000 47,000 29,000 356,000 1,354,000 Net Peak Load-KW.1,003,000 Annual Load Factor-Net%...................

64.0'Exdudes 79,274,000 IOVH of test period generation at Oswego Gnit 6.950,000 67.1 983,000 63.9 987,000 62.0 934,000 63.8 925,000 61.7 30

'Gas Department RL~~ii and Hect'orpomthn Gas Revenue (000's)Residential.

Residential spaceheating

.Commercial Industrial

.Municipal and other Total gas revenue Year Ended December 31]980 S 6,444 105,371 33,879 27,379 7,973 181,046 1979 5,553 85,269 25,653 18,657 5,395 140,527 1978~5,096 74,425 20,535 13,891 4,584 118,531 1977 4 4,828 66,900 18,057 12,014 3,998 105,797 1976 4,426 63,974 16,848 11,900 3,879 101,027 1975 3,964 52,584 13,593 9,167 3,170 82,478 Gas Expense (000's)Purchased natural gas Other operation.

Maintenance

.......Depreciation Taxes-local, state and other..Gas revenue deductions Operating Income before Federal Income Tax...Federal income tax.127,759 16,546 6.309 5,338 14,594 170,546 10,500 1,310 89,804 16,519 6,246 4,889 12,187 129,645 10,882 1,314 71,109 15,810 5,768 4,641 10,545 107,873 10,658 1,966 62,086 15,072 5,078 5,140 10,089 97,465 8,332 147 56,192 14,921 4,510 4,194 9,729 89,546 11,481 2,212 42,247]33]0 4,500 4,137 8,715 72,909 9,569 914 Operating Income from Gas Operations (000's)S 9,190 9,568 8,692 8,185 9,269 8,655 Gas Operating Ratio%Gas Sales-Therms (000's)Residential

.Residential spaceheating Commercial

.Industrial Municipal.

Total gas sales.Gas Customers at December 31 Residential..........

Residential spaceheating Commercial

.Industrial Municipal.

Total gas customers Gas-Therms (000's)Purchased for reforming and mixing..Purchased for resale Other.Total gas available.

Cost of gas per therm.Total Daily Capacity-Therms at December 31 Mixed gas Straight natural gas.Total daily capacity 83.2 13,257 240,273 85,291 75,829 19,842 434,492 32,479 165,556 13,281 846 995 213,157 458,697 18,392 477,089 26.34C 3,660,000 3,660,000'0.1 13,149 247/89 83,248 65,995 16,962 426,743 35,258 159,916 12,600 82]1,047 209,642 436,956 16,388 453~20.63C 4,164,000 4,164,000 78.2 13,465 255,951 82,451 63,709 17,748 433,324 38,013 154/66 12,092 759 1,084 206/14 449,904 13,178 463,082 15.26C 4,164,000 4,164,000 77.7 13,833 252,923 77,751 59,956 15,975 420,438 39,977 152,856 11,268 746 989 205,836 428,811 10,123 438,934]4.43C 4,164,000 4,164,000 74.9 14,404 275,582 86,400 72,847 18,598 467,831 40,892 153,583 11,475 757 936 207,643 9,830 478,935 7,911 496,676 11.37C 4,164,000 4,164,000 72.8 14,328 249,224 78,217 65,760 16,705 424,234 41,437 153,848 11,390 756 957 208~8 23,160 421,252 7,019 451,431 10.19C 269,000 3,895,000 4,164,000 Maximum daily sendout-Therms...............

3,274,740 Degree Days (Customer Billing)For the period.......................

6,833 Percent (warmer)colder than normal...........

1.4 3,380,670 6,981 43 3,183,678 7,021 4.5 3,578,468 3,497,861 6,726 6,905 (0.1)].6 3,041,070 6,211 (72)'Hew method for determining daily capacity, based on current network analysis, reflects the maximum demand which the transmission system can accept without a ddiciency.

31 Steam Department Year Ended December 31 1980 1979 1978 1977 1976 1975 Steam Revenue (000's)Commercial lndustrial

.Municipal and other Total steam revenue S 6,915 1,4,222 2,452 23,589$5,873 S 6,087 S 6 f52 S 6,401 S 5,668 11,833 10,732 10,455 9,799 9,862 2,282 2,291 2,197 2,183 1,807 19,988 19,110 19,004 18,383 17,337 Steam Expense (000's)Fuel used in steam generation

..Other operation.

Maintenance Depreciation

.Taxes-local, state and other...16,281 1,275 1,335 603 2,876 14,072 1,468 1,208 591 2/57 13,047 12,983 12,114 12,826 2,273 2,411 1,826 1,657 1,173 955 900 918 581 580 562 546 2382 2,257 2,230 2,073 Steam revenue deductions.

Operating Income before Federal Income Tax..Federal income tax 22,370 1,219 357 19,896 19/56 19,186 17,632 18,020 92 (246)(182)751 (683)(168)(168)(330)51 (688)Operating Income from Steam Operations (000's)..S 862 260 S (78)S 148 S 700 S 5 Steam Operating Ratio%.Steam Sales-Lbs.

(000's)Commercial Industrial Municipal Total steam sales 80.1 678,225 1,487,176 248,478 2,413,879 83.8 863 86.0 80.7 789/64 898,904 933,609 1,041,415 980,324 1,682,780 1,718,565 1,682,033 1,738,391 1,839,402 320,026 346,031 334,645 367,553 325,727 2,792,170 2,963,500 2,950,287 3,147,359 3,145,453 Steam Customers at December 31 Commercial Industrial

.Municipal.

Total steam customers.186 61 24 271 221 70 27 318 238 70 31 339 254 74 32 360 271 77 32 380 281 77 31 Steam Produced-Lbs.(000's)Produced by steam department...........

By.product steam from electric department

.Total steam produced.Steam Department Fuel Total BTG (million)Cents per million BTG.1,376,153 1,395,995 2,772,148 4,658,641 357.43 1,391345 1 353,053 1,194,132 1,408,029 1P87W3 1,736,744 1,987,638 2,133,853 2,193,283 2~4,693 3,127,989 3,340,691 3,327,985 3,601,312 3,732,056 5378,454 5,705,943 5,548,290 6,022,360 6,230,767 271.28 226.21 232.60 203.35 203.08 Rate Increases Granted Class of Savice Amount of Increase Authorized Effective (Annual Basis)Percent Date of Increase (0(Xys)Increase Rate Base ul Pending Requests Class of SeNice Date of Filing Amount (Ops)Percent Electric Gas Steam April 20, 1976 Hovember 11,1977 february 18, 1978 lvtay 2, 1979 July 26, 1980 April 20, 1976 Hovember11,1977 February 2, 1978 hhy 2, 1979 July 26, 1980 April 15, 1975 December 15, 1979 February 18, 1981 Sl 1,002 IO,I86 3,000 17,699 38,400 4,983 2,536 678 8,109 9,640 2,475 2,895 3,550 7.9%5.8 1.6 8.2 15.9 6.3 2.4.6 6.6 5.1 12.0 15.0 18.2 9.35%I3.50%9.31 I?80 9.31 12.80 9.89 13AO 10.32 13.80 9.35 13.50 9.31 12.80 9.31 12.80 9.89 13.40 10.32 13.80 Electric'ugust 27, 1980 S61,900 I9.1%Gas" August 27, 1980 7/$0 3.0'On January 16, 1981, the Company filed a request for permission to adopt temporary rate increases for electric and gas service.This request would Increase 1981 electric revenues by approximately SI2 million and 1981 gas revenues by approximately S1.7 million.32 Directors Theodore J.Altier J'hairman of the Board and Treasurer, AMer 6 Sons Shoes, Inc.Keith W.Amish'resident and Chief Operating Officer, Rochester Gas and Electric Corporation Paul W.Brig g'v'hairman of the Board and Chief Executive Officer, Rochester Gas and Electric Corporation Wilmot R Ciaigf Former airman of the Board, LIncoln First Banks Inc.E.Kent Damon'trav'icePresident and Secretary, Xerox Corporation Francis E.Drake, Jr.'t4 Chairman of the Executive and Finance Committee, Rochester Gas and Electric Corporation J.Wallace EIy*t Chairman of the Board, Security New York State Corporation Walter A.Fallon/Chairman of the Board and Chief Executive Officer, Eastman Kodak Company Daniel G.Kennedy'etired Partner, Nixon, Margrave, Devans 6 Doyle Theodore L Levinsonf President and Chief Executive Officer, Star Supamarkets, Inc.Paul A.Micr Pmfessor, Rochester Institute of Technology Constance¹Mitchell Community Relations Coordinator, Industria!

Management Council of Rochester, New York, Inc.Comelius J.Murphy Group Vice President and General Manager, Eastman Kodak Company William G.vonBerg'trav'hairman of the Board and Chief Executive Officer, Sybron Corporation Leon D.White, Jr.Executive Vice President, Rochester Gas and Electric Corporation

'Member of the Executive and Finance Committee of the Board of Directors member of the Audit Committee of the Board of Directors member of the Sahry Review Committee of the Board of Directors v'Member of the Nominating Committee of the Board of Directors Officers Paul W.Brig gs Chairman of the Board and Chief Executive OIficer Age 58, Years of Service, 35 Kelth W.Amish President and Chief Operating Officer Age 57, Years of Savice,33 Leon D.White, Jr.Executive Vicepresident Age 61, Years of Service,43 Hany G.Saddock Senior Vice President, Finance and Rates Age 51, Years of Service, 30 Marlo Silvestrone Senior Vice President, General Services Age 57, Years of Service,30 John E Arthur Vice President and Chief Engineer Age 51, Years of Savice, 25 Joseph J.Hartman Vice.President, Gas and Transportation Age 56, Years of Service, 34 Robert C Henderson Vice President, Rates Age 40, Years of Savice, 17 David K.Laniak Vice President, Eiectric System Phnning and Operation Age 45, Years of Savice, 26 John E Maier Vicepresident, Ehctric and Steam Production Age 53, Years of Service,33 Richard J.Rudman Vice President, Electric Transmission and Distribution Age 53, Years of Savlce,35 Dean W.Caple Secretary Age 57, Years of Savice,32 David C.Heiligman Treasurer and Assistant Seaetary Age 40, Years of Savice, 17 Francis A.Sullivan, Jr.Controller Age 57, Years of Savice,30 Robert W.Ball Assistant Treasurer Age 64, Years of Savlce,42 Stephen Kowba Assistant Controller Age 61, Years of Savioe, 30 John¹Kuebel Auditor Age 45, Years of Service, 16 Shareholder Inquiries Communications regarding stock transfer requirements, lost certificates or dividend payments may be directed to Lincoln First Bank, NA.Other inquiries should be directed to D.W.Caple, Secretary at the Company.The Company will provide, without charge, a copy of the Annual Report on Form 10.K filed with the Securities and Exchange Commission with respect to fiscal year 1980, uponwrittenrequestofany shareholder addressed to the Secretary.

Principal Orrce 89 East Avenue Rochester, Nev York 14649 (716)546-2700 Financial Contact Many G.Saddock Senior Vice President, Finance and Rates Annual Meeting May 20, 1981 At Rochester, New York New York Stock Exchange Symbol Rochester Gas and Electric Corporation Common Stock-RGS Transfer and Dividend Disbursing Agent LIncoln First Bank, NA, Stock Transfer Department Post Office Box 1250 Rochester, Nev York 14603 Registrar Security Tiust Company of Rochester One East Avenue Rochester, New York 14638 Co-transfer Agent Morgan Guaranty Trust Company of New York 30 West Broadway New York, New York 10015 Co registrar The Chase Manhattan Bank, NA One Chase Manhattan Phza New York, New York10015 Agent for Automatic Dividend Reinvestment Plan Lincoln First Bank, NA.Automatic Dividend Reinvestment Savice Post Office Box 1507 Rochester, New York 14603 Bond Trustee and Paying Agent Bankers Trust Company Post Office Box 318 Church Street Station Nev Yok, New York 10015 33 Rochester Gas and Hectric Corporation P=-=89EastAvenue Rochester, New York 14649: U S-'NUCLEAR REGULATORY COltTS.")i{f9'IRECTOR

".OF~k'ICE Ok'NUCLEAR REACTOR REGS.k D18'1'~,-.SERVICES BRANC)i, DDC>ADhl'ViASHZkiGiOP, DC Z'OPS5 Bulk RaYe US Postage Paid g Rochester, NY~Permit No.709

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