ML17261A110

Annual Rept 1978.

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

Text

AnnualReport.foryearendedDecember31,1978ContentsHighlights2LettertoShareholders3ElectricOperations5GasOperations6ResearchandDevelopment6TheRisingCostofDoingBusiness8FinancialStatements14Management'sDiscussionandAnalysisoftheSummaryofOperations22FinancialandStatisticalInformation23Directors28Officers(insidebackcover)ShareholderInquiriesCommunicationsregardingstocktransferrequirements,lostcertificatesordividendpaymentsmaybedirectedtoLincolnFirstBank,N.A.OtherinquiriesshouldbedirectedtoD.W.Caplc,SecretaryandTreasurerattheCompany.TheCompanywillprovide,withoutcharge,acopyoftheAnnualRcportonForm10-KfiledwiththeSecuritiesandExchangeCommissionwithrespecttofiscalyear1970,uponwrittenrequestofanyshareholderaddressedlotheSecretary.Principal0(gee89EastAvenueRochester,NewYork14649(716)546-2700FinancialContactPaulW.BriggsPresidentAnnualMeetingMay16,1979AtRochester,NewYorkNewYorkStockExcltangeSymbolRochesterCasandElectricCorporationCommonStock-RCSTransferandDividendDisbursingAgentLincolnFirstBank,N.A.StockTransferDepartmentPostOfficeBox1250Rochester,NewYork14603RegistrarSecurityTrustCompanyofRochesterOneEastAvenueRochester,NewYork14630Co-transferAgentMorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015Co-registrarTheChaseManhattanBank,NA.OneChaseManhattanPlazaNewYork,NewYork10015AgentforAutomaticDividendReinvestmentPlanLincolnFirstBank,N.A.AutomaticDividendReinvestmentServicePostOfficeBox1507Rochester,NewYork14603BondTrusteeandPayingAgentBankersTrustCompanyPostOfficeBox310ChurchStreetStationNewYork,NewYork10015a'cs-2@0tPAfter-~oqtevoveiPV9040901(o't Highlights19781977%ChangeCommonStockEarningsperweightedaverageshare.Numberofshares(000's)WeightedaverageProformaweightedaverageafterstockdividendpaidinfollowingyear(SeeNote)ActualnumberatDecember31NumberofshareholdersPricerange(SalesonNewYorkStockExchange)1stquarter.2ndquarter3rdquarter.4thquarter.......,..Cashdividendspaid(100/staxable)1stquarter.2ndquarter..3rdquarter.4thquarter.Stockdividendpaid(SeeNote)SalesandRevenuesElectricitytocustomersKilowatt-hours(000's).Revenue(000's)ElectricitytootherutilitiesKilowatt-hours(000's).Revenue(000's)GasTherms(000's)Revenue(000's)SteamPounds(000's)Revenue(000's)TotalrevenuesOperatingExpenses(000's)ElectricandsteamfuelsPurchasedelectricityPurchasednaturalgas.Wagesandbenefits..DepreciationTaxes-local,stateandotherFederalincometaxeschargedtooperationsOtherexpensesTotaloperatingexpensesCapitalExpenditures,lessallowanceforfundsusedduringconstruction(000's)NetUtilityPlantatDecember31(000's)NumberofEmployees$2A613,77414,18714,73348,148HighLow21y217r/s18t/s17s/s19'/s1818'/41GYz$.35.35.3G.363%5,102,923$202,6311,445,391$28,G7G433024$1185312,963,500$19,110$368,948$58,14019,33771,10954,39022,20645,93511,04137,541$319,699$112,552$810,01G2,622$2.1212,47412,84812,89044,135HighLow20%17s/s20s/s1821'/419'/s21/s19'.32.32.35.353%4,938,3G2$179,9401,453,590$2G,403420,438$105,7972,950,287$19,004$331,144$56,99313,63562,08650,31821,05343,8763,85834,548$28G,3G7$98,091$722,7802,6241010149242158551869121512313312Note:The20thannualstockdividendwaspaidFebruary23,1979attherateolthreepercent.

projectsubsequentlyadvisedtheSitingBoardthattheoperationaldatefortheplantcouldbeextendedto1988iftheupdatedgrowthestimatesprovedtobeaccurate.RG8tEcontinuestopursuetheauthorizationfortimelyconstructionoftheSterlingplantbasedonstate-wideneedsaswellascustomerneedsontheRochestersystem.Althoughconstructioncostesti-matesinaninflationaryeconomyhavegreatlyappreciatedduetothedelaysincompletiondateoftheproject,itisouropinionthatthisplantrepre-sentsthebestandmosteconomicoptionformeetingelectricenergydemandsinNewYorkStateandtheRochestersystem.WepetitionedthePSCinMay1978forrateincreasesamountingtoatotalof$48.7millioninadditionalrevenue,consistingofan8.9percentgasrateincreaseanda17.8percentincreaseinelectricrates.TheproceedingisinitsfinalstagesandthePSCdecisionisexpectedtoberenderedinlateAprilwiththenewratestotakeeffectinMay.TheSeptember1978saleofanadditional1,250,000sharesofcommonstockrealized$23.4millioninnewcapital.InDecember1978RG5Ecompletedtheprivateplacementwithinstitutionalinvestorsof$40millioninfirstmortgagebondsat9.5percentinterest.Morethan18percentofholdersofcommonstockarenowparticipatingintheCompany'sAuto-maticDividendReinvestmentPlanascomparedwith11percentwhenthePlanwasinitiatedin1974.During1978,theyinvestedmorethan$3.7millionin206,427newsharesofcommonstock.WehaveconsistentlyexpressedsupportforthecreationofEmpireStatePowerResources,Inc.(ESPRI).ThisplanwouldhaveallowedpowercompaniesinNewYorkStatetojoinincommonpowerplantlicensing,financingandplantopera-tion,yetsustaintheautonomyofthecompanies.Theplanwouldhavebenefitedcustomersthroughlowergeneratingcoststhanwouldotherwisebepossible.TheprojectedsavingstoRGREcustomersalonethroughtheyear1998wouldapproach$Ibillion.InFebruary1979,afterfiveyearsoflengthydeliberations,thePSCtookaninformalpollthatindicatedthattheproposalwouldbedisapproved.Wearestillawaitingtheformaldecision.Theverdictisverydisappointing,andthehighercostsitwillproduceforthelong-sufferingconsumerscannotbejustified,inouropinion.Onceagain,thePSCreportedthatRG&EhadthelowestnumberofcustomercomplaintspercapitaofanypowercompanyinNewYorkState.ThesefiguresaresupportedbyourownconsumersurveysthatshowcustomersgivetheCompanyveryhighmarksforthequalityandreliabilityofitsservice.Thecreditgoestoourfineemployees.Weanticipatemodestincreasesindemandforbothelectricityandnaturalgasin1979.Gassuppliesaresufficientandwewillcontinuetoexpandgasspaceheatingservicewhilebalancingknownsupplywithanticipateddemand.Totalkilowatt-hoursalesofelectricitytocustomersareprojectedtoincrease3.1percent.Ourserviceareaisexpectedtorealizethisgrowthdespitetheadverseeconomic,factorsthathavesignificantlydiminishedloadgrowthinotherareasoftheState.Expenseswillcontinuetoincrease,withtaxesestimatedtogoupby7.7percent.Capitalexpendi-tureswillgoupto$115million,excludingAFDC.Althoughweretainamarkedlypositiveviewofthefutureinourservicearea,effortstoimproveperformanceasautilityareregularlyhamperedbyeventsandcircumstanceslargelyoutsideourcontrol.Thecostsassociatedwithvirtuallyeverysegmentofourbusinesscontinuetorise,andinfla-tionarypressureswillundoubtedlynecessitatefurtherincreasesinourratesfornaturalgasandelectricity.Thecostproblemsarecompoundedbyaregu-latoryenvironmentthatfrustratesourattemptstobuildthegeneratingcapacitythatwillberequiredifthereistobeeconomicgrowthinNewYorkState.Alongwithincreasedtaxes,theburdensofexces-siveregulationandextraordinaryregulatorydelaysarepassedontoourcustomersasincreasedprices,andthisfurthercompoundstheproblemsfacedbybusinessesandconsumerswithinourservicearea.Theseproblemsaresoimportantthatwehavetakentheunusualstepofpreparingaspecialsectiontothisreportthatcanbefoundonpageeight.Wehopeyouwilltakethetimetoreadit.FrancisE.Drake,fr.ChairmanoftheBoardandChiefExecutiveOfficerPaulW.BriggsPresidentKeithW.AmishExecutiveVicePresidentMarch15,1979 ToShareholders:Afteradisappointingyearin1977,commonstockearningsin1978reboundedto$2.46pershare.Thisrepresentsanincreaseof34cents,or16percentmorethanthe1977earningsof$2.12pershare;asubstantialimprovement,especiallysincetherewere1.3millionadditionalsharesoutstandingduring1978.EarningscontinuetobeaffectedbytheweakeconomyoftheState,byinadequateraterelief,andbyincreasingcosts,includingthoseduetoinflationandgovernmentregulation.Althoughearningshaveimproved,theyarenotatthelevelwebelievetheyshouldbe.Ontheplusside,someencouragementcanbetakenfromtheStategovernment'smoreseriouseffortstoretainandattractbusinessandindustry.Dividendspaidpercommonsharefortheyeartotaled$1.41,12centsmorethanthe$1.29paidthepreviousyear.Additionally,athreepercentcommonstockdividendwaspaidinFebruary1979.Thisisthe20thconsecutiveyearinwhichastockdividendhasbeenpaid.Totalcustomerrevenuesfor1978were$340.3million,a12percentincreaseover1977customerrevenuesof$304.7million.Revenuefromelectricsalestootherutilitiesrose8.6percentin1978andtotaled$28.7million.ThegainresultedfromasustainedstrongmarketforRG8rE'scoal-firedelec-tricitythroughtheNewYorkPowerPooltoutilitiesthatwouldotherwisehavetorelyonthemoreexpensiveoil-firedelectricgeneration.Thesesalesbroughttotalrevenuesfortheyearto$369.0million,an11percentincreaseover1977.Kilowatt-hoursalesofelectricitytocustomersincreased3.3percentfortheyear.Industrialkilo-watt-hoursalesledgainswithasixpercentincreaseover1977,arelativelystronggrowth.Residentialkilowatt-hoursalesincreased2.5percent.Naturalgassalesinthermswereup3.1percentover1977.Thegainisattributedprimarilytocolderthannormalweatherandtheadditionofmorethan2200gasspaceheatingcustomersfollowingthe1977liftingofaNewYorkStatePublicServiceCommission(PSC)prohibitiononadditionalgasservice.TheperformanceoftheGinnanuclearpowerplantwasexcellent.Theplantwasavailable81percentofthetimeduringtheyearandhadregaineditsmaximumdependablecapacityof470,000kilowattsfollowingtheMay1978installationofanewturbinerotor.Thusthenuclearpowerplanteconomicallyprovided60percentoftheelectricityonourownsystemand,whencomparedwithanequivalentamountofenergygeneratedbyacoal-firedplant,savedourcustomers$32millioninfuelcostsfortheyear.Operatingexpensesrose11.6percent,goingto$319.7millionin1978from$286.4millionin1977.Fuelexpense,includingpurchasedelectricityandrttnKeithW.AmishFrancisF,Drake,/r.PaulW.Briggsgas,wentup12.0percent,anincreaseof$15.9million.Employeewagesandbenefitsexpenseincreased8.1percent,or$4.1millionover1977.Thetotalnumberofemployees,2622,wasreducedbytwoovertheyearwhilethenumberofcustomerscontinuedtoincrease,resultinginimprovedproductivity.Employeeovertimewaskepttoaminimum.Taxes,includingFederalincometax,increased$9.2millionover1977,or19.4percent.Capitalexpendituresfor1978were$112.6million,excludingAllowanceforFundsUsedDuringConstruction(AFDC).Thiswas15percentmorethanthe1977capitalexpenditureof$98.1million.Atotalof$38.7millionwasrequiredduring1978foradditionalelectricgeneratingcapacity.Thisincluded$3.6millioncapitalinvestmentinourproposedSterlingnuclearpowerplantproject,$12.2millionfora24percentshareofNiagaraMohawkPowerCorporation'sOswego~6oil-firedplant,-and$22.9millionfor14percentofitsNineMilePoint~2nuclearplant.TheNiagaraMohawkplantshavebeenrescheduledtobeoperationalin1980and1984respectively.TheselateroperationaldateswillnotaffecttheCompany'sabilitytomeetprojectedincreasedcustomerelectricdemandunlessweshouldexperienceanincreaseinthepresentgrowthrateofelectricuse.Plansforaproposed1,150,000kilowattnuclearpowerplantatSterling,NewYorkawaitreinstate-mentofacertificationfromtheNewYorkStateBoardonElectricGenerationSitingandtheEnvi-ronment.Injanuary1978thisBoardgrantedaconstructioncertificatefortheSterlingplantwithanoperationaltargetfortheyear1986.TheBoardsuspendedthecertificateinMay1978andrequestedfurtherproofof"need"fortheunit.Basedonupdatedloadgrowthprojectionsthat.showedlowerelectricloadgrowthintheStateasawhole,theSitingBoardfelttherewasaquestionastothenecessityfortheunitinthetimeframeorigi-nallyrequested.ThefourpartnersintheSterlingL ElectrictoourKilowatt-HourSalesCustomersbyClassesmillions1500LIdeTotalElectricKWHSalesInMillionsYearTotal19785103197749381976480619754521197444081973454019724292197139821970380219693578iUusULUU1969707172737475767778GasThermSalestoourCustomersbyClassesLI'TotalCasThermSalesInMillionsYearTotal1978433197742019764681975424197445419734351972469197144219704251969403meicral~LLJU'50InusialIJ'iIJUUOthert01969707172737475767778RC&EengineersdesignedanuncommontypeolgaspipelinesupportinthisbridgethatcrossestheBargeCanal.Thesupportcablesareunderneaththepipeinsteadolabove.GasOperationsSupplyAdequateRG&E'ssupplyofnaturalgas,undercontractwithConsolidatedGasSupplyCorpora-tion,remainsadequate.Deliveriesofliquefiednaturalgas(LNG)fromAlgeriatooursuppliercontinueonschedule,adding15percenttothesupplier'scapacity.This,combinedwithincreasingyieldsfromthesupplier'sLouisianaoffshorewells,providesassurancesforadequategasvolumesinmeetingexistingandprojecteddemands.NewGasServiceRG&Einstalledmorethan1300gasservicelinestonewresidential,commercialandindustrialcustomersin1978.Includingheatingsystemconversions,morethan2200gasspaceheatingcustomerswereaddedduring1978.ThisexpansionfollowedPublicServiceCommissionapprovalin1977oftheCompany'spetitiontolifttheprohibitiononacceptingneworaddi-tionalgasservice.Theadditionalserviceshavehelpedslowthedeclineintotalgasdeliveriesseenoverthelastseveralyearsthatresultedfromcustomerattritionandconservation.RG&Eestimatesthatmorethan3400spaceheatingcustomerswillbeaddedin1979includingnewhomes,commercialestablishmentsandheatingsystemconversions.ThermBillingLiquefiednaturalgas(LNG)hasahigherheatvalue(BTU'spercubicfoot)thanthedomesticgaswehavepreviouslyreceived.WhenLNGismixedwithdomesticgas,asinthesupplier'sdeliverytoRG8E,thethermalvaluevaries.Forthisreason,RG&Ehaschangeditsgasbillingfromhundredsofcubicfeettotherms,onethermbeingonehundredthousandBTU's.StartinginMay1979,agascustomer'sbillwillbecalculatedaccordingtotheaverageheatvalue(therms)usedduringthebillingmonth.Whilethisnewsystemshouldhavenoeffectontheamountofthecustomer'sbill,itensuresthattheCompany'sgasrevenueswillmoreaccuratelyreflecttheheatvalueofthegassold./%4~iNResearchandDevelopmentIn1978RC&Einvested$2.8millioninresearchanddevelopmentprojects.Halfofthatamountwasdirectedtonation-wideutilityindustrysupportedresearchorganizationsaswellastheresearcharmofNewYorkStateutilities,knownbytheacronymESEERCO.OnesuchESEERCOprogramhelpssupportthenuclearfusionexperimentsattheUniversityofRochester.TheNewYorkStateEnergyResearchandDevelopmentAuthoritydirectlyassessedRG&E$600,000forstategovernmentspon-soredresearchanddevelopmentprojects.TheotherhalfoftheresearchanddevelopmentfundswasallocatedtoCompany-sponsoredand-coordi-natedprojectssuchasthegasfurnacedemonstrationprograminwhichanumberofresidentialgasfurnaceshavebeenmodifiedfortestpurposesinanattempttoimproveefficiencies.Sofar,anaveragegassavingof17percenthasbeenachievedinthetesthomeswhilemaintainingcomfortableheatinglevels.Abroad,nationalprogramtoencouragedevelopmentofnuclearsteamgenerationequipmentandmaintenanceimprovementswasinitiatedin1978andisco-sponsoredbyRC8E.Theresearchonanovelbackhoesafetyshutoffsystemthatwillpreventaccidentaldamagetoundergroundcableandpipelinehasproducedaprototypethatwillbefield-testedthisyear.InanotherresearchareaunderRG8Ecoordina-tion,datacollectedfromseveralutilitieswereanalyzedtodeterminespawninghabitsoffishalongthesouthernshorelineofLakeOntario.Inall,RG&Edirectlysupportedmorethan40researchanddevelopmentprojectsin1978.ManagementAppointmentJosephJ.HartmanwaselectedtothepositionofVicePresident,CasandTransportationbytheboardofdirectorseffectiveDecember1,1978.HesucceededElvinA.Skibinskiwhoretiredafter33yearsofservice.Mr.HartmanjoinedRC&Ein1946asaco-opstudentintheGasDepartment.Heheldaseriesofengineeringposi-tionsintheGasDepartmentuntil1974whenhewasappointedSuperin-tendentofGeneralMaintenance.

ElectricOperationsGenerationOverthepastfewyears,threeincidentsofbladefailuresinoneoftherowsofalowpressureturbinerotorattheGinnanuclearpowerplanthadreducedplantavailability-thepercentageoftimetheplantisinservice.In1976,forexample,theplant'savailabilitywasonly58percent.Atemporarymodificationtotheturbinefollowingthethirdbladefailureallowedcontinuedplantoperation,butonlyat86percentofcapacity.RGAEworkedwiththemanufacturerinredesigningbladesforanewturbinerotortosolvetheproblem.ThenewrotorwasinstalledinMay1978andithasperformedverywell.Theplantisonceagainoperatingeconomicallyandefficientlyatfullcapacity,providingmorethanhalfoftheelectricityfortheCompany'ssystem.Duringtheseven-monthperiodfromthetimetherotorwasreplacedtotheendoftheyear,theGinnanuclearpowerplantrecordedaremarkable98percentavailability.Fortheentireyear,theplant'savailabilitywasanoteworthy81percent.Forfurtherreliability,theoriginalrotorhasbeenrebuiltwiththeimprovedbladesandwasreplacedinthesecondlowpressureturbineunitduringthe1979annualrefueling,maintenanceandinspectionshut-down.ThedisplacedrotorwillberebuiltandkeptatthenuclearpowerFolfowingamajorredesignolbladeconfiguration,thisnew,80-tonlowpressureturbinerotorwasinstalledattheCinnanuclearpowerplant.plantasasparetosignificantlyreduceshutdowntimeintheeventofanyfuture,unforeseenrotorproblem.DistributionlntheRochestervicinity,asubstationwasconstructedtomeetelectricdemandatthenewmanufac-turingplantatRochesterProducts,FuelSystemsDivisionofGeneralMotors.Anadditionaloverheadtrans-missionlinewasconstructedtotheXeroxCorporationfacilityinWebsterprovidinggreatercapacityforXeroxandotherareacustomers.Aspartofthe115KVtransmissionconstructionprojectintheRochesterarea,amajorcircuitwasreconstructedinwesternMonroeCountythatincreasedcapacitytosuburbancustomersintheTownofGates,includingtheexpandingApparatusDivisionofEastmanKodakCompanylocatedthere.RG8Econtinueditsconstructionprogramextending34.5KVdistribu-tionfacilitiesintheGeneseeDistrict,southofRochester.TheCanandaigua-FingerLakesDistrictexpanded115KVfacilitiesinmeetingsustainedgrowthinitsarea.Anew12.5KVservicewasinstalledattherecentlycompletedVoplexplantinCanandaigua.IntheLakeshoreDistricttotheeast,planscallfortheconstructionofa115KVtransmissionlinealongtherecentlyacquiredright-of-waysectionoftheHojackLinerailroadtomeetgrowthinthatoutlyingdistrict.Streetlightingmodernizationprogramsin1978resultedinmorethan2000olderincandescentlampsbeingreplacedwithhighpressuresodiumunitsinthenorthernpartoftheCityofRochester.Thisproject,paidforbytheCity,increaseslightingefficiencyandenhancespublicsafety.AstreetlightingmodernizationprogramwascompletedintheVillageofMt.Morris,andanotherisunderwayintheVillageofWebster.Electricandgasfacilityrelocationonpublicpropertybecamealarger-than-normalundertakingin1978duetotheextensiveactivityinroadconstructionandhighwayimprovement.The$7millionexpenseforthisworkmustultimatelybebornebytheCompany'scustomerssincethereisonlyocca-sionalandveryminorreimbursementfromgovernmentagenciesthatordertherelocations.Thiselectrictransformerreplacedaunitthatfailedinservicein7978.Itisoneoltwotransformersataninterconnectionthatreduces345,000voltsto115,000voltsfortransmissionintheRCgEsystem.

IntheLaboratoryforLaserEnergeticsoltf>eCollegeolEngineeringandAppliedScienceattheUniversityofRochester,experimentsareconductedinanattempttoltarnessthermalenergyfromnuclearfusion.Powerfullaserbeamsarefocusedthroughmirrorsandconvergeonaminutehydrogenpelletinsideatargetclamber(photoinset).TheprojectissupportedinpartbyRG&E,andtheexperimentmayonedayleadtoavirtuallyinexhaustiblesourceoltherntafenergylorthegenerationolelectricity.

SomePlainTalki..t~,iRr27~o<"pi~.VfICjcLAss10015TAKh3.6SINGLESTATORTYPEDSSTYLE60~5IOC623G250WATTHOuR240VOLTSMETER3WIREkiiO ABCPaytotheorderotJOtNQ.PUSUDROCHESTER,raY.GrossPay1978Date1978Electricity1.7%~oaolA55555Tax26.7%Ga-3.0%Thecostoflivinghasgoneupdr'asticallyovertheyears,andweknowitwillcontinuetoriseuntflinflation,atleast,isbroughtundercontrol.But,it'snotjustthecostoflivingthat'sgoneup,it'sthecostofdoingbusiness,too.Theinflationaryeconomyhasadverselyaffectedbusinessandindustryaswellastheindividual.Despiteeffortstominimizeexpenses,therisingcostofdoingbusinesshasaffectedRG&E,particularlyoncostsoverwhichtheCompanycanexertlittleornocontrol.Thisspecialsectionofthe1978annualreportisintendedtoportray,inplaintalk,therisingcostsandtheireffectonRG&E,itscustomersandshareholders.Beforegettingintospecificsonthecostincreases,let'stakealookattheoverallimpactonRG&Ecustomersingeneral.From1970to1978thecostofelectricitytoRG&Ecustomershadrisen84.5percent,andthecostofgaswentup109percent.HowhasthehighercostofelectricityandgasaffectedmostRG&Ecustomers?BasedonwagefigurespublishedbytheNewYorkStateDepart-mentofLabor,ourrecordsshowthatin19'70thegpicalRochesterproductionworkerpaid1.6percentofhisorOnthesubjectofrisingcosts,pressuregroupsandconsumeractivistsoftensuggestthatutilities,likeRG&E,shouldholdthelineon"their"risingcostsandmaintainexistingratesorevenlowerthembyreducing"profits."Well,thefactis,RG&Ehasnocontrolovermostofthecoststhatcomprise,therates.Andasfor"profits,"therereallyaren'tanyprofitsinastrictsenseofthewordaswe'lpointoutlater.Let'stakealookatthecostsinRG&E'sbusiness.Fuelexpenseconsumesthelargestportionoftherevenuedollar.Today40centsofeachrevenuedollargotopayforthefuelsusedinthegenerationofelectricity,steam,andforthecostofnaturalgas.Overanine-yearperiodthroughtheendof1978,tliecostofcoalpertonmorethandoubledwhileoilandnaturalgashadtripledincost.Nuclearfuel,processedandreadyforuseinapowerplant,hadafourfoldcostincrease,yetitstillremainsthemosteconomicalfuelforelectricgenerationasseenintheaccompanyingchartthatcomparesfuelcostonaBTUorheatvaluebasis.FuelExpense(FuelcostspermillionBTU's)hergrossincomeforelectricity.In1978,despitemorethanatenpercentincreaseinelectricusebytheaverageresidentialcustomer,thesameworkerstillpaidjust1.7percentofgrosspayforelectricity.Ifthatworkerwasagasspaceheatingcustomer,heorshepaid3.1percentofgrossincomeforgasin1970,andonly3.0percentin1978.Inthemeantimethetaxbite(property,income,socialsecurityandsales)outofthatsamegrosspaywentfrom23.9to26.7percent.Mostpayhaskeptpacewiththeinflationaryimpactonprices.Eventhoughmoreactualdollarsareneededtopayforelectricityandgas,theseformsofenergyabsorbaboutthesameamountofgrossincomeastheydidnearlytenyearsago.Theproblemisthatgovernmenttaxesaretakinggreateramountsofthedevaluedgrosspaycheckdollars.We'ecertainlynotsayingthatallofourcustomershaveincomesthathavekeptpacewithescalatinginflation.Theseniorcitizen,forexample,onlow,fixedincomeishavinganextremelydifficulttimemeetingthecontinuallyincreasingcostsofallessentialsforliving,includingheatandelectricity.Theplightofaseniorcitizeninthesituationdescribedaboveisaverycomplexsocialproblemthatstemsfromrampantinflation.And,asasocialproblem,itisonethatshouldnotbeplaceduponanyonesegmentoftheeconomyoranyoneindustry,whetheritbearegulatednaturalmonopolyornot.Recognizingthissocialproblem,weatRG&Ehaveexpressedoursupportforanenergystampprogramandhaveevenofferedtohelpdevelopsuch'plan.But,sofar,theauthoritieshavenotacceptedtPheoEer.Further,wehavecontendedthatresidential'heatandelectricityarejustasessentialtoourcustomersasfood,andshouldbetax-exempt.Inthatregard,theStatedidreducesalestaxonelectricityandgasbyonepercentin1978..50197078707870787078CoalOilGasNuclearC',nfl'miThemarketpriceoffuelsisbeyondtheinfluenceofRG&E'sprudentandaggressivepurchasingprocedures.Risinginflationgraduallyboostedfuelprices.Thesinglemostdevastatingfactor,though,wasthe1973ArabOilEmbargothatnotonlycausedthepriceofoiltodoubleinayear,butalsoillustratedthattheUnitedStateshadbecomedangerouslydependentonforeignoilsources.Thisdependence,combinedwiththerapidcostincreases>producedtradedeficitsthathavesetiouslyerodedthevalueoftheAmericandollarandhavehelpedpromoteuncontrolledinflation.It'saserioussituationandonethatisincreasinglyagitatedbyaglutofself-defeatinglaws,regulationsandtaxesenactedbythefederalandstategovernments.

itlppd~P,o>tho~Cpo~Moreimportantly,RG&Eemployeesarequalified,dedi-catedandproductivepeoplewhoareentitledtofairreturnfortheireR'orts.TheratioofRG&Ecustomerstoemployeesin1970was168toone.In1978therewere186customersforeachRG&Eemployee.Thismeansthatouremployeeshaveincreasedtheirproductivityastheircontributioninthestruggleagainstinflation.Productive,competentemployeesprovideforthebestinterestoftheshareholderandthecustomer.RG&Ewillcontinuetoexercisecontrolofwageandbenefitexpenses,andweareobservingthecurrentvolun-taryanti-infiationaryguidelines.a%kmRG&E'staxexpensehastripledsince1970goingfrom$19millionto$57millionin1978.And,the1978figuredoesn'tevenincludethe$15.5millioninsalestaxRG&EhadtocollectfromcustomersintheirbillsfortheStateandlocalgovernments.Asidefromthevisiblesalestax,"hidden"taxesinthecustomerbillsaccountformorethan15centsofeverydollarthecustomerpaystoRG&E.Whensalestaxesareincluded,thetypicalresidentialcustomer'sbillismorethan22percenttax.Andthat'sacostofgovernment,notofenergy.TaxPortionof197tiCustomerBill-22.5%)(,-gliriSK~W~arvaucTaxisanotherexampleofexpensewhereRG&Ecanexerciselittleornocontrol.Ofcourse,itcouldbepointedoutthatpropertytaxesdomountupasweexpandfacili-tiessuchassubstations,transformersandpowerlines.But,evenherethereisnooption.Weareobligatedtomeetgrowth,andarerequiredbyPSClawtoservetheinstantenergydemandsofcustomersregardlessoftheamountscalledfor.Andjustlikeeveryotherpropertyowner,wepayhightaxratesoninfiatedvalues.TheeB'ectiscumulative.P~DDOInadditiontotheexpensesjustdiscussed,sevenpercentofthe1978revenuedollarwasusedtopayformiscellaneousmaterialsandservices.Amongotheritemsthiscategoryincludesfeesassessedbyregulatoryagencies,expensesforregulatorycompliance,legalcounsel,andbuildingandgroundsmaintenance.Here,too,thereisreallylittlechoice.Wedo,however,requestbidswherewecanandlookforthebestpriceinthemarketplace.30/40/50MVAElectricTransformer10Expenseforemployeewagesandbenefitshasincreased80percentsince1970,arelativelysmallincreasecomparedtootheritemsmentioned.ThisisanareawhereRG&Emayanddoesexercisecontrol-reasonablecontrol.AndithastobereasonableiftheCompanyistoretaincompetentpersonnelandremaincompetitiveinthelaborandprofessionalemploymentmarket.Let'sfaceit,we'einahighlycomplex,technicalbusiness.Loworinade-quatewageswouldproducenothingbutafalseeconomy.1970-$127,5001978-$278,000Percentageincrease-118.0%%d AverageAnnualUsePerResidentialElectricCustomerKilowatt-HoursAverageAnnualUsePerResidentialSpaceHeatingGasCustomerTherms'66661666112$371SSS7176717761777765319697071727374757677781969707172737475767778'Adjustedfornormalizedweatherbydegreedays.EarningsandDividendsPerCommonShareinDollars0EarningsperCommonShare0CashDividendsperCommonShare(AdjustedforStockDividends)2.1223>32.262.121.81ts91.1S196919701971197219731974197519761977197812 L.0toservecustomers.So,whenitcomesrightdowntoit,RG&E's"profit,"ortheinterestcostofmoney,isacostofdoingbusmess,andit'scertainlyoneoverwhichwehavelittlecontrol.Millions$120AnnualCapitalExpendituresinMillionsoiDollars,ExcludingAllowanceiorfundsUsedDuringConstructionlrrs10080604020019707172737475767778In1978,$112millionwereneededtocoverthecostofnewfacilitiesrequiredtoservecustomers.Although40percentofthatcapitalwasraisedinternally,theresthadtocomefromahighlycompetitivemoneymarket.Thereisnoalternative.Regardlessofmarketconditionswecannotandwouldnotelecttoignorenecessaryadditionstoservecustomerenergyneeds.Tocompromiseonimprovementsandreplacementsthatprotecttheenergysystemsistogambleonefficientandreliableservicetoourcustomers,andwewon'tdothat.Costofcapitalisamajorareawherewecanexerciselittleornocontrolotherthancontinuingtoemployeffi-cientmethodsforraisingfundsinthecapitalmarketplacewherecostsarerisingrapidly.InMarch1979,forexample,wehadtoreplaceamaturing$16.7millionthreepercentinterestbondwithshort-termnotesatmorethan11percentinterest.Althoughthismayseemalittlestrangeatfirst,RG&E's"profits"areactu-allyanexpense.Our"pro5t"isnothingmorethantheamountthattheNewYorkStatePublicServiceCommis-Ision(PSC)allowsustopayforthemoneywehavetoborrowtobuildthefacilitiesneededtoservecustomers.Putanotherway,weareallowedtoearna"rateofreturn"onthecapitalinvestedinplantusedtoservethepublic.TheratesofreturnaresetbythePSC,butareinnowayguaranteed.Withouttheabilitytoaythecostof.Pmoneyininterestandshare-holderdividendswewouldnotbeabletoraisethecapitalnecessarytocontinueGasandelectriccompaniesconstitutethemostcapital-intensiveindustryintheentireeconomy.Theaveragemanufacturingconcern,forexample,invests75centsinplantforeachdollarofgrossincomewhileRG&Ehashadtoinvestmorethanthreedollarsforeachgrossincomedollar.Largeamountsofmoneyarerequiredtopayforfacilityexpansion,improvementandreplace-ment.Pricesformaterialsandlaborhavegoneup,andsohasthecostofborrowingthemoneytofinancethenewfacilities.Forthemostpart,thesecostscannotbecontrolledbyus.Justasinfiationhasdrivenupcostsinthemarketswherepeopleshop,ithasalsoaffectedthemarketswhereutihtiespurchasetheirhardwareandmoney.yw0DDRG&Ehasaresponsibilitytosupplyelectricity,gasandsteamtoitscustomersatthemosteconomicalprices.But,tryaswemay,wehavelittlecontrolovermostoftheexpensesincurredinfulfillingthisresponsibility.Wehaveconsistentlyappliedsoundmanagementpoliciesandprin-ciplesinattemptingtominimizetheamountofrateincreaseswhilemaintainingtheCompanyasasoundinvestmentandreliablesupplier.It'sverydiscomfortingtorealizethatuncontrollablecostshaveaccountedformorethan80percentofcustomercostincreasesince1970!Thecostofdoingbusiness,especiallypowercompanybusiness,ishigh,anditcontinuestogohigher,drivenbyunbalancedfederalandstatebudgets.Mostofthecostisinfuels,taxes,capitalexpendituresandthecostofmoney.And,partofthecostisaresultofheavyregula-tionbyalllayersofgovernment.Wearenotsayingthatregulationisunnecessary.Someofitisbeneficial.But,likeeverythingelse,regulationhasaprice.Since1970,RG&E'sspendingforcapitalimprove-mentsjusttocomplywithregulatoryrequirementsandlawsapproaches$100million.Thisexpenseamountstoalmosta$20millionannualcosttocustomers.Tothiswecanaddatleastanother$10millionayearinoperationalexpensetocomplywithvariousotherfederalandstateregulatoryrequirements.Thus,averyconservativeesti-mateoftheannualcostofgovernmentregulationtoourcustomersis$30million,averyrealpartoftherisingcostofenergy.Wehavetakenthisopportunitytopresentastorytoyouourshareholders,andhopefullytomanyofourcustomers.Itisnotauniquestorybecauseeachofyouisexperiencingthesamepressures,thesamecostincreases,thesameinflation,over-regulationandtaxes.But,becauseutilitiesaresometimesregardedbytheuninformedasunaffectedbysuchpressures,wethoughtitimportanttospellouthowthesesamefactors,overwhichwehavelittleornocontrol,aredrivinguptheabso-lutecostofenergy.

SCAMROCHESTERGASANDELECTRICCORPORATIONYearEndedDecember31StatementofIncome(rhondsofool4)19781977OperatingRevenues(Note1)Electric..GasSteamElectricsalestootherutilitiesTotalOperatingRevenuesOperatingExpenses(Note1)OperationElectricandsteamfuels.Purchasedelectricity.PurchasednaturalgasOther..MaintenanceDepreciationTaxes-local,stateandotherFederalincometax-current(Note3)..-deferred(Note3)TotalOperatingExpensesOperatingIncomeOtherIncomeandDeductionsAllowanceforotherfundsusedduringconstruction(Note1)Other-netTotalOtherIncomeandDeductionsIncomebeforeInterestChargesInterestChargesLong-termdebt.Short-termdebt..Other-netAllowanceforborrowedfundsusedduringconstruction(Note1)TotalInterestCharges.NetIncomeDividendsonPreferredandPreferenceStock,atrequiredratesEarningsApplicabletoCommonStockWeightedaveragenumberofsharesoutstandingineachperiod,adjustedforstockdividends(000's).EarningsperCommonShare(Note1)CashDividendsperCommonShare,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$1.29StatementOfRetainedEarningStr~~~..io.i~>>BalanceatbeginningofperiodAddNetincomeTotalDeductIssuancecostsofpreferredstock(Note4).DividendsoncapitalstockCumulativepreferredstock,atrequiredrates(Note4).Preferencestock(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$70,819 Sourceof1978RevenueDollarinCentsUseof1978RevenueDollarinCentsElectricRevenueGasRevenueCostoffuels40stPurchasedrlecrricgSteamrvefsPurchasedlfecvicisy19e554324Taxes6stDepreciation15444ssaInterestonBonds&NotesElectricSalesSteamtoOtherUtilitiesRevenueWages&BenefitsMisc.Materials&ServicesReinvestedEarningsDividends(Com.Sst&Pfd.2a)CapitalizationinMillionsofDollars400350212A250~2VAA2VA211.1150112.$ssay121.1220esAI19691970197119721973197419751976197719784long-Termoebf4commonsharehofders'qvisy4prefevedrquisy13 RESROCHESTERGASANDELECTRICCORPORATIONBalanceSheet(rhosackofoolhs)1978AtDecember311977ASSETSUtilityPlant,atoriginalcost(Note1)Electric..GasSteam.Less-AccumulateddepreciationandamortizationConstructionworkinprogressNetUtilityPlantInvestmentinsubsidiary,atequityCurrentAssetsCash(Note5)Accountsreceivable.Materialsandsupplies,ataveragecostFossilfuel.ConstructionandothersuppliesPrepaymentsTotalCurrentAssetsDeferredDebitsUnamortizeddebtexpenseDeferredfuelcost(Note1)Other(Note4).TotalDeferredDebitsTotalAssetsCAPITALIZATIONANDLIABILITIESCapitalization(Note4)Long-termdebt.Preferredstock.PreferencestockCommonshareholders'quityCommonstockRetainedearningsTotalcommonshareholders'quity.TotalCapitalizationCurrentLiabilitiesShort-termdebt(Note5)Long-termdebtduewithinoneyearAccountspayable.Taxesaccrued,includingincometaxes.InterestaccruedPayrollaccrued.Other..TotalCurrentLiabilitiesDeferredCreditsandOtherLiabilitiesAccumulateddeferredincometaxes(Notes1and3)Other..TotalDeferredCreditsandOtherLiabilitiesCommitmentsandOtherMatters(Note6)TotalCapitalizationandLiabilities..$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~iiPROCHESTERGASANDELECTRICCORPORATIONYearEndedDecember31StatementOfChangeSinFinanCialPOSitiOn<<rhsadso<<Do!4s)SourcesofFundsOperationsNetincomePrincipalnon-cashcharges(credits)toincomeDepreciationAmortizationofnuclearfuelDeferredfuelcostsDeferredincometaxes-netAllowanceforfundsusedduringconstructionOther-netTotalfromOperationsFinancingSaleoflong-termdebt.SaleofcommonstockSaleofpreferencestockTotalfromFinancingTotalSourcesofFundsUsesofFundsUtilityplantPlantadditions.Nuclearfueladditions.Less:allowanceforfundsusedduringconstructionNetAdditionstoUtilityPlantDividendsonpreferredstockDividendsonpreferencestockDividendsoncommonstockReductionofshort-termdebt-net.Retirementoflong-termdebtRedemptionofpreferredstock,includingcallpremiumCapitalstockexpenseExpenseofissuinglong-termdebtOther-net.Increase(decrease)inworkingcapital(excludingshort-termdebt)TotalUsesofFundsChangesinComponentsofWorkingCapitalIncrease(decrease)incurrentassetsCashAccountsreceivableMaterialsandsuppliesFossilfuel..ConstructionandothersuppliesPrepayments.TotalIncrease(decrease)incurrentliabilities(excludingshort-termdebt)AccountspayableTaxes.AccruedinterestandpayrollLong-termdebtduewithinoneyearOther-netTotalIncrease(decrease)inWorkingCapitalexcludingshort-termdebt1978$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 NotestoFinancialStatementsNote1.SummaryofAccountingPoliciesGeneral.TheCompanyissubjecttoregulationbythePublicServiceCommissionoftheStateofNewYork(PSC)withrespecttoitsratesforserviceandthemaintenanceofitsaccountingrecords.TheCompany'saccountingpoliciesconformtogenerallyacceptedaccountingprinciplesasappliedtoNewYorkStatepublicutilitiesgivingeffecttotherate-makingandaccountingpracticesandpoliciesofthePSC.AdescriptionoftheCompany'sprincipalaccountingpoliciesfollows.UtilityPlantandDepreciation.Thecostofadditionstoutilityplantandreplacementofretirementunitsofpropertyiscapitalized.Costincludeslabor,material,andsimilaritemsaswellasindirectchargesforengineering,supervision,etc.TheCompanycapitalizesanallowanceforfundsusedduringconstructionapproximatelyequivalenttothecostofcapitaldevotedtoplantunderconstruction.Replacementofminoritemsofpropertyisincludedinmaintenanceexpenses.Costsofdepreciableunitsofplantretiredareeliminatedfromutilityplantaccounts,andsuchcosts,plusremovalexpenses,lesssalvage,arechargedtoaccumulateddepreciationandamortization.Depreciationinthefinancialstatementsisprovidedonastraight-linebasisatratesbasedontheestimatedusefullivesofproperty,whichhaveresultedinprovisionsof3.0'nd3.1%perannum,ofaveragedepreciablepropertyin1977and1978,respectively.EstimatedyearofcompletionNetmegawattcapabilityRGBE'sshare-megawatts-percent...TotalestimatedprojectcostsRG&E'sshare.RGgE'sactualconstructioncosts-1977.-1978.puliioosofDollars)$252.60<$1,4414$1,354.7r$r60.6201.8379.310.021.73.512.222.93.5O'TobeconstructedandoperatedbyNiagaraMohawkPowerCorporation.TobeconstructedandoperatedbyRochesterGasandElectricCorporation.Constructioncostsexcludeallowanceforfundsusedduringconstructionandcertainoverheadcoststobecapitalized.rtrToratprojectcostsincfude$8.$millionforoilhandlingfacilities,ofwhichRG&Ehasnotagreeduponthepercentageparticipation,andexcludescommonfacilities.rpTotatprojectcostsincfude$89.4millionfortheinitialnuclearfuelloadingandexcludescommon(aciliiies.rproratprojectcostsinclude$114.7millionfortheinitialnuclearfuelloading.NuclearFuelandDecommissioningCosts.Thecostofnuclearfuelandestimatedpermanentstoragecostsarechargedtooperatingexpenseonthebasisofthethermaloutputofthereactor.Thesecostsarechargedtocustomersthroughbaseratesandthroughthefuelcostadjustmentclause.Jointly-OwnedFacilities.ThefollowingtablesetsforththemajorelectricgenerationprojectscurrentlyplannedwhichwilladdtotheCompany'spresentgeneratingcapability.Eachparticipantmustprovideitsownfinancingfortheseprojects.OswegoNineMileFossilPointNuclearSlerlingUnit¹6rlrUnit¹2$Nuclear19801984198885010841150204150322241428DuetoaFederalgovernmentpolicyadoptedin1977,theCompanyhaschangeditsnuclearfuelcostcomputationtoreflectthecostsofpermanentstorageofspentnuclearfuel.Prioryears'uclearfuelcostcomputationsanticipatedspentnuclearfuelwouldbereprocessed.Cumulativeprioryears'uelexpenseswouldhavebeenincreasedbyapproximatelyS8.0millioniftheyhadbeendeterminedonthebasisofcurrentcostestimatesforpermanentstorageofspentnuclearfuel,ratherthanonanestimatedamountforreprocessing.Ifthegovernment'spermanentstoragepolicyiscontinued,theCompanybelievesthatsuchamountwillbefullyallowableforrate-makingpurposes.Decommissioningcosts(coststotaketheplantoutofserviceinthefuture)fortheCompany'sGinnanuclearpowerplantcannotbeestimatedatthistime.TheCompanybelievesthatthecostsofdecommissioningwillbefullyallowableforrate-makingpurposes.AllowanceforFundsUsedDuringConstruction.TheCompanycapitalizesanAllowanceforFundsUsedDuringConstruction(AFDC)baseduponthenetcostofborrowedfundsforconstructionpurposesandareasonablerateupontheCompany'sotherfundswhensoused.TherateusedforthispurposewasBs/4%,whichbecameeffectiveinMay1976.InaccordancewiththeorderissuedbytheFederalEnergyRegulatoryCommission,AFDCissegregatedintotwocomponentpartsandclassifiedintheStatementofIncometodiscloseanAllowanceforBorrowedFundsUsedDuringConstructionasacredittoInterestChargesandanAllowanceforOtherFundsUsedDuringConstructionasapartofOtherIncome.InDecember1977,theCompanybegancomputingAFDConitsshareofNineMilePointNuclearUnit~2andOswegoFossilUnit~6atanaveragereducedrateof6.85%,whichisnetoftheincometaxeffectoftheinterestportionofAFDC.RatesandRevenue.Revenueisrecordedonthebasisofmetersreadduringthecalendaryear.Tariffsforelectricandsteamserviceincludefuelcostadjustmentclauseswhichservetoadjustelectricandsteamratesfromtimetotimetoreflectchangesintheaveragecostsoffuelsusedinelectricandsteamgenerationfromtheaveragecostofsuchfuelsduringthebaseperiod.Tariffsforgasservicecontainacomparableclausetoadjustgasratesforchangesinthepriceofpurchasednaturalgas.DeferredFuelCosts.Fuelcostswhicharerecoverableundertheelectric,gasandsteamcostadjustmentclausesincludedinthetariffschedulesoftheCompanyaredeferreduntiltheyarebilledtocustomers.AreconciliationofrecoverablegascostswithbilledgasrevenuesisdoneannuallyasofAugust31,andtheexcessordeficiencyisrefundedtoorrecoveredfromthecustomersduringasubsequenttwelvemonthperiod.FederalIncorheTax.Forincometaxpurposes,depreciationiscomputedusingthemostliberalmethodspermitted.Inaddition,certaincostscapitalizedforfinancialreportingpurposesaredeductedcurrentlyforincometaxpurposes.Theresultingtaxreductionsareoffsetbyprovisionsfordeferredincometaxesonlytotheextentorderedorpermittedbyregulatoryauthorities.

The10%investmenttaxcreditrate,whichhadbeenscheduledtoreturnto4%in1981,hasbeenmadepermanentbytheRevenueActof1978.Thepriorrateof4%isappliedtoreducethecurrenttaxprovisionwhile,asrecommendedbythePSC,normalizedtaxaccountingisfollowedintheapplicationoftheremaining6%.TheCompanyusestheseparateperiodapproachincalculatingtheinterimquarterlytaxprovision.PensionPlan.TheCompany'sretirementplanisnoncontributoryandcoversallregularemployees.Currentservicecostsarefundedannually.Pastservicecostsarebeingamortizedovera40yearperiod.Retirementplanexpendituresfortheyears1977and1978were$9.2millionand$9.9million,respectively.TheactuariallycomputedvalueofvestedbenefitsatDecember31,1978exceedstheassetsintheplanbyapproximately$15million.EarningsandDividendsPerShare.Earningsapplicabletoeachshareofcommonstockarebasedontheweightedaveragenumberofsharesoutstandingduringtherespectiveyears,adjustedforstockdividends.Assumingthe1,250,000sharesofcommonstockissuedonSeptember27,1978wereoutstandingatthebeginningof1978andtheproceedswereappliedtoreducetheshorttermdebt,theearningspersharefor1978wouldhavebeen$2.36.Cashdividendspersharearebasedonthesharesoutstandingatthetimedividendsarepaid,adjustedforstockdividends.Cashdividendspershareattheratesdeclaredineachperiodamountto$1.34for1977and$1.42for1978.Note2.DepartmentalFinancialInformation(thovsandsotoollarsiTheCompany'srecordsaremaintainedbyoperatingdepartments,inaccordancewithPSCaccountingpolicies,givingeffecttotherate-makingprocess.ThefollowingistheoperatingdataforeachoftheCompany'sdepartmentsandnointerdepartmentaladjustmentsarerequiredtoarriveattheoperatingdataincludedintheStatementofIncome.ElectricGasTotalOperatinginformation-1978OperatingrevenuesOperatingexpenses,excludingprovisionforincometaxesPretaxoperatingincomeProvisionforincometaxes..NetoperatingincomeOtherincome-net.Interestcharges.NetincomeperstatementofincomeOtherinformationDepreciationNuclearfuelamortizationCapitalexpenditures...Investmentinformation-December31,1978Identifiableassets..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$893,386Operatinginformation-1977OperatingrevenuesOperatingexpenses,excludingprovisionforincometaxesPretaxoperatingincome..Provisionforincometaxes.NetoperatingincomeOtherincome-net.InterestchargesNetincomeperstatementofincomeOtherinformationDepreciationNuclearfuelamortizationCapitalexpenditures..Investmentin(ormation-December31,1977Identifiableassets..AssetsutilizedforoverallCompanyoperations(a)Totalassetsperbalancesheet(a)Consistsprimarilyofcash,prepaymentsandunamortizeddebtexpense.$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$45,412ChargedtooperatingexpenseAmorl.o(deferredinvestmenttaxcredit.AFDCnetoftaxratedifference.....Other..(1,460)(1,682)2,176$35,225IncludedinOtherIncomeActualFederalincometaxexpenseIncomebeforeFederalincometaxNote3.FederalIncomeTaxProvisiontshousandsofDollars)Thefollowingisareconciliationfortheyears1977and1978ofthedifferencebetweentheamountofFederalincometaxexpensereportedintheStatementofIncomeandtheamountcomputedbymultiplyingtheincomebeforetaxbythestatutorytaxrate.19781977%ofPrelaxIncomeComputedtaxexpenseIncreases(reductions)intaxresultingfrom:ExcessoftaxdepreciationlessamountdeferredExpensescapitalizedforfinancialstatementsincludinginterest,payrollandusetax,etcInvestmentlaxcreditPropertytaxesonbasisofdateoftaxablestatus.Costofremoval,lessnetamountdeferred..Revenuetaxes(deductedwhenpaid)Miscellaneousitems,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:InvestmenttaxcreditClassli(edepreciation.Fuelcosts.......................Nuclear(uelamortizationNuclearfuelstoragecostsFossilplantabandonmentcosts765KVTransmissionsystemabandonmentcostsOther.1978$6,G291,763(469)(142)(4,989)850(481)$3,1611977$2,0031,3791,386(362)(3,346)2,160(545)$2,G75Note4.CapitalizationLong-TermDebtFirst32s/i3%3%4%54Yi4sjs5.36Yi6.789Ys10s/i9')e9YieBondsDueMar.1,1979...Aug.15,1980..lune1,1982...Mar.1,1985...Iuly1,1987...Oct.15,1989..Nov.15,1991..Sept.15,1994..May1,1996...Sept.15,1997..luly1,1998...Aug.15,1999..Sept.1,2000Aug.1,1983lune15,2006..Sept.15,2007..Dec.1,2003MortgagScricsLMN0R5TUVWXYZAABBCCDDLess:SeriesLduein1979TotalLong-TermDebt..(thousands)PrincipalAmountDecember31,19781977$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(erredStock(cumulative)-Parvalue$100;2,000,000sharesauthorized:44.104'/i4.104.954.557.5011SharesscrlcsOutstandingF120,000H80,000I60,000I50,000K60,000M100,000N200,0000670,000IThousands)December31,19781977$12,000$12,0008,0008,0006,0006,0005,0005,0006,0006,00010,00010,00020,00020,000$67,000$G7,000Redemption(pershare)(a)105Atanytime101Atanytime101Atanytime102.50Atanytime102Atanytime102Before3/1/80108Be(ore6/1/79(b)Bondpremiumapplicabletotheyears1977and1978is$677,702and$635,GG7,respectively.Sinkingandimprovementfundrequirementsaggregate$333,540perannum.SuchrequirementsmaybemetbycertificationofadditionalpropertyorbydepositingcashwiththeTrustee.The1977and1978requirementsweremetbycertificationofadditionalproperty.

PreferenceStock-Parvalue$1;5,000,000sharesauthorized:Series7.6ASharesOutstanding280,000(Thousands}December31,19781977Issued$28,000$28,00012/20/77DuringJanuary1985,theCompanymustoffertopurchaseonOctober1,1985alloftheoutstanding7.6%SeriesApreferencestockatapriceof$100pershare.Thesharesremainingoutstandingaftersuchofferarecallableat$100pershareattheoptionoftheCompanyatanytimeafterDecember20,1987.Preferencestockissubordinatetopreferredstockbutisseniortocommonstock.CommonStock-Parvalue$5;25,000,000sharesauthorized:Per(thousands)ShareSharesAmount11,366,111$181,3016,82021,000508Outstanding,December31,19763%StockDividend.......SaIeofStock...........TRASOP>>AutomaticDividendReinvestmentPlan......CapitalStockExpenseOutstanding,December31,19773%StockDividend.......SaleofStock...........AutomaticDividendReinvestmentPlan......CapitalStockExpenseOutstanding,December31,197820.00340,98421.001,000,00020.9124,30018.31-20.94158,2363,071(167)212,5338,12023,43812,889,63121.00386,68918.751,250,00017.19-19.25206,4273,749(902)14,732,747$246,938'TaxReductionActStockOwnershipPtanTheCompany'sCertificateofIncorporationwasamendedonJune1,1977toauthorizeanadditional10,000,000sharesofcommonstock,parvalue$5pershare.AtDecember31,1978therewere415,797sharesofcommonstockreservedandunissuedundertheAutomaticDividendReinvestmentPlan.Noothersharesofcommon,preferredorpreferencestockarereservedforofficersandemployeesorforoptions,warrants,conversions,andotherrights.Note5.CashandShort-TermDebtAtDecember31,1978,theCompanyhad$7millionintemporarycashinvestments.Underinformalagreementswithcertainbanks,theCompanyisexpectedtomaintainanaveragecompensatingbalanceof10percentofthelinesofcreditplusanadditional10percentoftheprincipalamountofeachborrowing.Undertheagreements,withdrawalofthecompensatingbalancesisnotlegallyrestricted,andatDecember31,1978thebalancesamountedto$4.4million.Banklinesofcreditaggregated$64millionandborrowingsareatcurrentfloatingprimeinterestrates.The(a)RedeemableattheoptionoftheCompanyon30days'inimumnotice,plusaccrueddividendsinallcases.(b)CalledforredemptiononDecember20,1977.TheissuancecostsrelatedtoSeries0werechargedtoretainedearnings,andthecallpremiumof$2,750,000relatedtothisserieswasreportedasotherdeferreddebitsand,beginninginJanuary1978,isbeingamortizedinaccordancewithanorderfromthePSC.TheCompany'sCertificateofIncorporationwasamendedonJune1,1977toauthorize4,000,000additionalsharesofcumulativepreferredstock,havingaparvalueof$25pershare.Noneofthispreferredstockhasbeenissued.Outstandingshort-termdebtandaverageinterestrateatendofperiod:NotesPayabIeCommercialPaper.Maximumshort-termdebtoutstandingduringtheperiod:NotesPayableCommercialPaper.Weightedaverageshort-termdebtandinterestratesduringtheperiod:NotesPayableCommercialPaper.1978RatesAmount(Thousands)$15,50015,9008.82%7,7697.849,4501977RatesAmount(Thousands)7.00%$7,0006.632,00025,00026,5006.4210,9605.35~11,148Theaboveaverageswerebaseduponthedailybalancesandinterestratesineffectfortheperiodsduringwhichshort-termborrowingswereoutstandingandbeforegivingeffecttotheadditionalinterestcostresultingfromcompensatingbalances.Note6.CommitmentsandOtherMattersTheCompany'scapitalexpendituresprograminvolvesanestimatedexpenditureof$115million,notincludingallowanceforfundsusedduringconstruction,in1979andtheCompanyhasenteredintocertaincommitmentsforpurchaseofmaterialsandequipmentinconnectionwithsuchprogram.OperationsoftheCompany'sgeneratingstationsaresubjecttovariousFederal,stateandlocalenvironmentalstandards.UndertheCleanWaterAct,theCompanyisrequiredtoobtainpermitstodischargepollutantsintothewatersoftheUnitedStates.TheUnitedStatesEnvironmentalProtectionAgency(EPA)issuedNationalPollutantDischargeEliminationSystempermitsforalltheCompany'smajorgeneratingfacilities,butanumberofconditionsrelatingtothermalandchemicaldischargelimitationswerecontestedbytheCompanyinadjudicatoryhearingrequestssubmittedtoEPA.TheCompany,theNewYorkStateDepartmentofEnvironmentalConservation(whichbecameapartytotheadjudicatoryhearings)andEPAhavesettledthehearingrequestsasdescribedbelow.TheCompanyhasreachedagreementwiththeregulatoryagenciesonnon-thermaleffluentlimitationsandfinalpermitscontainingtheseagreedlimitationshavebeenissuedandarenowineffect.ConstructionoftreatmentfacilitiesisrequiredtoenableCompanycompliancewithpermitlimitationsfortwooftheCompany'sgeneratingstations.Pendingcompletionofthesefacilities,theregulatoryagencieshaveagreedinanEnforcementComplianceScheduleLettertoexercisetheirprosecutorialdiscretiontorefrainfromprosecutingtheCompanyforviolationofcertaineffluentlimitationdeadlinescontainedintheCleanWaterActsolongastheCompanyadherestoaspecifiedconstructionscheduleforthefacilities.Constructionofthesetreatmentfacilitiesisexpectedtorequirecapitalexpendituresestimatedat$10.5millionoverthenexttwoyears.Companyalsoissuescommercialpaperatvariousdiscountrates,usuallymaturingwithin30-45days.Balancesandaverageinterestratesofshort-termborrowingsasofDecember31fortheyearsindicatedwereasfollows:20 TheCompanyhaspursuedresolutionofthecontestedthermallimitationsbysubmittingdemonstrationsinanefforttojustifylessstringentlimitationsforthreegeneratingstations.Thethermalconditionsofthepermitsremainstayedpendingresolutionofthethermalissueseitherthroughregulatoryagencies'pprovalofthedemonstrationsandlessstringentthermallimitationsor,intheabsenceofsuchapproval,throughtheresumptionoftheadjudicatoryhearingprocess.Ifthedemonstrationsandlessstringentthermallimitationsarenotapprovedforanyofthethreefacilities,theCompanycouldberequiredtoinstallcoolingtowerswhichwouldinvolvecapitalexpendituresestimatedat$53millionpIussignificantoperatingandmaintenanceexpenses.TheCompanybelievesthatadditionalexpendituresandcostsmadenecessarybyenvironmentalregulationswillbefullyallowableforrate-makingpurposes.ThroughDecember31,1978,theCompanyhasexpendedapproximately$28.4million(excludinglarrd)withrespecttoitsinterestintheSterlingnuclearplant.TheCompanyestimatesthatifitwererequiredtocancelallexistingcontractsrelatingtotheconstructionofthisproject,itcouldincurupto$6millionincancellationcharges.TheCompanybelievesthat,ifitwererequiredtocanceltheproject,thePSCwouldpermitittoamortizeallexpendituresinvolvedoveraperiodofseveralyearsandtorecoverthoseexpendituresthroughraterelief.OnDecember1,1978,thePSCruledthatthecaseinvolvingthe765KVtransmissionfacilitythattheCompanyhadplannedtoconstructbedismissed.TheCompanyhaspetitionedthePSCrequestingtheamortizationofthe$2.1millioninexpendituresforthelineovera3yearperiod,andtoallowtheCompanytorecovertheunamortizedcoststhroughraterelief.Note7.InterimFinancialInformation(Unaudited)IntheopinionoftheCompany,thefollowingquarterlyinformationincludesalladjustments,consistingofnormalrecurringadjustments,necessaryforafairstatementoftheresultsofoperationsforsuchperiods.ThevariationsinoperationsreportedonaquarterlybasisarearesultoftheseasonalnatureoftheCompany'sbusinessandtheavailabilityoftheCompany'sGinnanuclearplant.Earningspercommonsharehavebeenadjustedforstockdividends.Note8.ReplacementCostInformation(Unaudited)TheimpactoftherateofinflationexperiencedinrecentyearshasresultedinreplacementcostsofproductivecapacitygreaterthanthehistoricalcostsofsuchassetsreportedintheCompany'sfinancialstatements.Incompliancewithreportingrequirements,estimatedreplacementcostinformationisdisclosedintheCompany'sannualreporttotheSecuritiesandExchangeCommissiononForm10-K.ReportofIndependentAccountantsTotheShareholdersandBoardofDirectorsofRochesterGasandElectricCorporationInouropinion,theaccompanyingbalancesheetsandtherelatedstatementsofincome,retainedearnings,andofchangesinfinancialpositionappearingonpages14through16presentfairlythefinancialpositionofRochesterGasandElectricCorporationatDecember31,1978and1977,andtheresultsofitsoperationsandthechangesinitsfinancialpositionfortheyearsthenended,inconformitywithgenerallyacceptedaccountingprinciplesconsistentlyapplied.Ourexaminationsofthesestatementsweremadeinaccordancewithgenerallyacceptedauditingstandardsandaccordinglyincludedsuchtestsoftheaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.1900LincolnFirstTowerRochester,NewYork14604January26,1979Operatingrevenues..Operatingincome...Netincome.......Earningsoncommonstock.........Earningspercommonshare(indollars)5,6695,1758,490.38.37.63QuarterEnded(Thousands)Dec.31,Sept.30,lune30,197819781978$92,312$73,665$86,9428,4669,52712,0097,088G,5969,909Mar.31,1978$116,02919,24715,99314,574Operatingrevenues..Operatingincome...Netincome.......Earningsoncommonstock.........Earningspercommonshare(lndollars)Dec.31,1977$84,4589,395G,4444,657.35Seph30,1977$67,1997,4794,6193,044.24lune30,1977$74,13810,62G7,7756,200.51Mar.31,1977$105,34917,27714,21112,63G Management'sDiscussionandAnalysisoftheSummaryofOperationsThefollowingfinancialreviewexplainssignificantchangesintheamountsofrevenuesandexpensesbetween1978/1977andbetween1977/1976.TheNotestoFinancialStatementsonpage17ofthisreportcontainadditionalrelatedinformation.OperatingRevenuesChangesinOperatingRevenuesIncreaseor(Decrease)fromPriorYear(ThousandsofDollars)ElectricDepartment19781977GasDepartment19781977SteamDepartment19781977CustomerRevenues(Estimated)from:RateIncreases..FuelCostAdjustmentWeatherEffects.CustomerSalesOtherTotalChangeinCustomerRevenuesElectricSalestoOtherUtilities.TotalChangeinOperatingRevenues.$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'Reflectsaone-time$10gasheatingbillcreditintneaggregateamountofapproximately$1.6millionthatwasappliedtoresidentialcustomersinFebruary1977.ThecreditwasmadebytheCompanyonitsowninitiativeinordertoalleviatetheeconomicburdentocustomerswhowerefacedwithrecordhighgasheatingbillscausedbythesevereweatherconditionsinIanuary1977and,insomecases,withreducedincomeduetoplantshutdownsforcedbynaturalgascurtailments.Revenuesfromelectricsalestootherutilitiesincreasedinboth1978and1977.FluctuationsinelectricsalestootherutilitiesandinpurchasedelectricitydiscussedunderOperatingExpensesbelowgenerallyarerelatedtotheoutputandavailabilityofelectricgenerationfromtheGinnanuclearplant.OperatingExpensesChangesinOperationandMaintenanceExpensesIncreaseor(Decrease)(romPriorYearlrhousandsorDottar019781977ElectricandSteamFuelsPurchasedElectricityPurchasedNaturalCasOtherOperation..Maintenance.$1,1475,7029,0233,1913,874$10,632(4,5GO)5,8944,8172,16GTotalChangeinOperationandMaintenanceExpense$22,937$18,949The1977increaseinelectricandsteamfuelsexpensewasmainlyduetoanincreaseinelectricitygeneratedin1977andanincreasedfuelcostperkilowatt-hourgeneratedbynuclearfuel.Purchasedelectricityexpenseincreasedin1978duetobothhighercostsandhigherkilowatt-hourpurchaseswhilethedecreasein1977reflectedmainlydecreasedpurchasesnettedagainstarelativelymodestincreaseinthecostperkilowatt-hour.Purchasednaturalgasexpenseincreasedinboth1978and1977asaresultofhigherpipelineratesandincreasedconsumptionduetocolderweatherin1978.Theincreaseinmaintenanceexpenseof$3.9millionin1978and$2.2millionin1977reflectsincreasesinthecostoflaborandmaterialtorepairandmaintainexistingfacilities,andincreasedactivityintherepairandupkeepoftransmissionanddistributionfacilities.ChangesinTaxesTaxes-local,stateandotherincreased$2.1millionin1978principallyduetohighergrossincometaxesbasedonincreasedrevenues.The1977increaseof$3.4millionwasalsoduetohighergrossincometaxesaswellashigherpropertytaxesresultingfromtheadditionofnewplantandincreasedpropertytaxrates.TotalFederalincometaxesincreased$3.7millionin1978afterdeclining$1.8millionin1977.SeeNote3totheNotestoFinancialStatementsforadetailedanalysis.OtherStatementofIncomeItemsTheincreaseinallowanceforfundsusedduringconstructionof$2.2millionin1978and$3.8millionin1977wasduetoincreasesinutilityplantexpendituresinbothperiods.SeeNote1totheNotestoFinancialStatements.Other-otherincomeanddeductionsincreased$3.1millionduring1978principallyduetoaddednon-operatingFederalincometaxcredits.Interestonlongtermdebtincreased$3.1millionin1978and$3.2millionin1977asaresultofadditionalbondsissuedinDecember1978,September1977andJune1976.Dividendsonpreferredandpreferencestockdecreased$.8millionin1978duetotherefundinginDecember1977ofaseriesofpreferredstockwiththeproceedsfromthesaleofaseriesofpreferencestockhavingalowerdividendrate.

RKPROCHESTERGASANDELECTRICCORPORATIONYearEndedDecember31SummaryOfOPeratiOnStthowanCkofnotlara)OperatingRevenuesElectric..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.TotalOperatingRevenues246,444219,344191,15925,49G14,69721,112304,74126,403340,27228,G76289,96818,259234,041212,271368,948331,144308,227271,940OperatingExpensesOperationElectricandsteamfuels...Purchasedelectricity.PurchasednaturalgasOther..MaintenanceDepreciationTaxes-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)4,27725,6128,84129,92340,99915,88815,14529,9936,724915TotalOperatingExpenses319,G9928G,3672G3,119229,922198,479174,040OperatingIncome49,24944,77745,10842,01835,56238,231OtherIncomeandDeductionsAllowanceforotherfundsusedduringconstructionOther-net..8,7054,418G,4731,3104,G781,1282,3105371,128274670715TotalOtherIncomeandDeductions13,1237,7835,8062,8471,798989IncomebeforeInterestCharges62+7252,56050,91444,8GS37,36039,220InterestChargesLong-termdebt.Short-termdebt..Other-net.Allowanceforborrowedfundsusedduringconstruction(4,812)(4,844)(2,853)(1,264)(613)(173)25+9422,54219,37816,96314,96513,7381/881,3191,0541,5G8',2551,24641G49424G1,227210103TotalInterestCharges22,78619,51117,82518,49416,81714,914NetIncome39,58633,04933,08926,37120,54324,306DividendsonPreferredandPreferenceStock,atrequiredratesS,G78G,512G,2454,0543,5503,550EarningsApplicabletoCommonStock$33,908$26,537$26,844$22,317$16,993$20,756Weightedaveragenumberofsharesoutstandingineachperiod,adjustedforstockdividends(000's)EarningsperCommonShare13,774$2.4G12,474$2.1211,983$2.2410,98710,G28$2.03$1.599,753$2.12CashDividendsperCommonShare,adjustedforstockdividends$1.41$1.29$1.20$1.15$1.09*In1974,theCompanybegandeferringaportionofincreasedfuelcoststotheperiodinwhichtherelatedrevenueswererecorded.$1.0423 S~~~tCL~~~ROCHESTERGASANDELECTRICCORPORATIONCondensedBalanceSheettth~dofoot4rs)19781977AtDecember311976197519741973ASSETSUtilityPlant,atoriginalcostLess-Accumulateddepreciationandamortization2G1,477229,122198,778185,455167,645150,GOO$857,959$789,775$727,687$693,404$659,308$618,891ConstructionworkinprogressNetutilityplant..596,482213,534810,01G560,653528,909507,949491,6634G8,291162,127120,70279,38139,32424,542722,780649,611587,330530,987492,833InvestmcntinSubsidiary,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,689CAPITALIZATIONANDLIABILITIESCapitalizationLong-termdebt..PreferredstockPreferencestock.Commonshareholders'quityCommonstockRetainedearnings.$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.TotalCapitalizationCurrentLiabilitiesDeferredCreditsandOtherLiabilities.TotalCapitalizationandLiabilities324,276283,352249,113234,088208,326200,750803,57968,36221,445739,37442,81316,187652,50854,65213,603590,40251,7128,333542,67443,9527,086505,13229,0912,466$893,386$798,374$720,763$650,447$593,712$536,689FinancialDataCapitalizationRatios(percent)Long-termdebtPreferredandpreferencestockCommonshareholders'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-YearEndInternalGenerationofFunds(percent)$22.01$21.34$20.89$19.69$19.55$18.9139.535.944.642.542.389.8RateofReturnOnAverageCommonEquity-YearEnd(percent)EffectiveFederalIncomeTaxRate(percent)DepreciationRate-Electric-GasInterestCoveragesBeforefederalincometaxes(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

~?~ROCHESTERGASANDELECTRICCORPORATIONYearEndedDecember31ElectricDepartmentElectricRevenue(000's)ResidentialCommercial.Industrial.Other.ElectricrevenuefromourcustomersOtherelectricutilities..TotalelectricrevenueElectricExpense(000's)FuelusedinelectricgenerationPurchasedelectricityOtheroperationMaintenanceDepreciationTaxes-local,stateandotherElectricrevenuedeductionsOperatingIncomebeforeFederalIncomeTax.FederalincometaxOperatinIncomefromElectricOperations000'sElectricOperatingRatio%%dElectricSales-KWH(000's)ResidentialCommercial.Industrial.Other.ElectricsalestoourcustomersOtherelectricutilities..TotalelectricsalesElectricCustomersatDecember31ResidentialCommercial.Industrial.Other.TotalelectriccustomersElectricityGeneratedandPurchased-KWH(000's)FossilNuclear..Hydro.PumpedstorageLessenergyforpumpingOther.Totalgenerated-NetPurchasedTotalelectricenergyElectricGenerationCosts(000's)FossilNuclear..Hydro.Other.ElectricDepartmentFuelFossil-TotalBTU(million)-CentspermillionBTU.......Nuclear-TotalBTU(million)-CentspermillionBTU.......SystemNetCapability-KWatDecember31FossilNuclear..Hydro.Other.PurchasedTotalsystemnetcapabilityNetPeakLoad-KW..AnnualLoadFactor-Net%1978$72,85458,98548,79222,000202,63128,G76231,30745,09319/3747,G0219,3051G,98333,108181+2849,8799,244$40,G3556.81,701,9381,417,6241,517,988465,3735,102,9231,445,3916,548,314251,64524,1371,3482,423279,5532,025,6453,206,313192,278133,287(189,453)1,08G5/69,1561,579,8G36,949,019$38,99525p5611,2295721,139,14G144.2735,812,17143.97443,000470,00047,00029,000339,0001,328,000983,000G3.91977$64,98653,52041,78319,651179,94026,403206,34344,01013,63545,01116,33915,33331,530165,85840,4854,041$36,44457.71,660,4251,392,0231,431,855454,0594,938,3621,453,5906,391,952250,12124,0231,3532,328277,8252,272,1823,018,305222,391193,340(283,573)8505,423,4951,400,5056,824,000$40,55722,33011324423,862,59913G.9237,822,20938.04443,000470,00047,00029,000338,0001,327,000987,000G2.01976$61,49850,79139,40218,867170,55818,259188,81734,24718,19540,93014,79613,86528,543150,57638,2413,102$35,13957.31,618,3141,3GG,0941,384,235437,0974,805,7401,187,9425,993,682249,17723,98313712.271276,8022,060,1862,040,746277,010118,716(180,317)2,7974,319,1382,10G,9046,426,042$36,90113,48597311821,822,976137.4223,837,62025.69452,000470,00047,00029,000342,0001,340,000934,00063.81975$53,90443,88433,24415,597146,62925,496172,12533,44212,21235,66214,28212I73125/69133,69838,4275,069$33,35855.51,530,4211,294,8161,284,940411,1224,521,2991,864,0506,385,349246,G1323,8741,3802,305274,17217317233,026,8942G5,40198,743(148,180)2,1984,976,7791,888,0916,864,870$33,12014,1911,0306318,388,874142.1833,128,47122.91452,000470,00047,00029,00035G,0001,354,000925,000G1.71974$45,35437,90830,85813,440127,56014,697142,25725,73912,07032,17712,39011,97722;784117,13725,120(433)$25,55357.91,456,3351,226,3331,346,116379,3794,408,1631,182,9025,591,065244,06323,8271,3652,316271,5711,961,4532,079,539234,5G8131,311(192,311)12,80G4,227,3G61,836,9116,064,277$30,3617,9801,08532120,911,993117.0522,909,96811.28452,000470,00047,00029,000347,0001,345,000880,00063.31973$42,12534,38727,59712,403116,51221,112137,62419,4618,84128,37811,02911,02621,281100,01637,6087,235$30,37349.21,468,3761,261,6971,424,639385,2434,539,9552,269,G866,809,641241,03223,4361,3601,995267,8231,8G9,0793,395,564243,58257,801(86/62)8,7765,488,4401,709,4207,197,860$18,09910,3681,08312320,331,33862.1236,683,35918.62457,000420,00053,10042,500352,0001,324,600922,00061.025 PK4SROCHESTERGASANDELECTRICCORPORATIONYearEndedDecember31GasDepartmentGasRevenue(000's)ResidentialResidentialspaceheating.CommercialIndustrial.Municipalandother.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)PurchasednaturalgasOtheroperation.MaintenanceDepreciationTaxes-local,stateandother.71,10915,8105,7684,64110+4562,08615,0725,0785,14010,08956,19214,9214,5104,1949,72942,24713,3104,5004,1378,71537,34211,4924,7573,9787,93729,92311,4204,0433,6157,281Gasrevenuedeductions107,87397,46589,54672,90965,50656,282OperatingIncomebeforeFederalIncomeTax.Federalincometax10,6581,9668,33214711,4812,2129,5699149,9578,3511,221840OperatingIncomefromGasOperations(000's)..$8,692$8,185$9,269$8,655$8,736$7,511GasOperatingRatio%78.277.774.972.871.070.2GasSales-Therms(000's)ResidentialResidentialspaceheating.Commercial..Industrial..Municipal13,465255,95182,45163,70917,74813,833252,92377,75159,95615,97514,404275,582BG,40072,84718,59814,328249,22478,21765,76016,70514,903263,29084,87273,92616,69615,141245,36879,03978,13717,148Totalgassales433,324420,438467,831424,234453,687434,833GasCustomersatDecember31Residential.Residentialspaceheating.Commercial..Industrial..Municipal38,0I3154,36612,0927591,08439,977152,85611,26874698940,892153,58311,47575793641,437153,84811,39075695742,884151,15411,4787671,02445,958144,84711,303762865Totalgascustomers.206/14205,836207,643208,388207,307203,735Gas-Therms(000's)PurchasedforreformingandmixingPurchasedforresale..Other.449,90413,178428,81110,1239,830478,9357,91123,160421,2527,01931,518438,4947,06330,834422,7186,535Totalgasavailable463,082438,934496,676451,431477,075460,087Costofgaspertherm.15.26c14.43'1.37'0.19'.49'.13'otalDailyCapacity-ThermsatDecember31Mixedgas.StraightnaturalgasTotaldailycapacityMaximumdailysendout-Therms269,0004,164,0004,164,0004,164,0003,895,0004,164,0004,164,0004,164,0004,164,0003,183,6783,578,4683,497,8613,041,070410,844410,8443,871,4483,762,6724,282,2924,173,5163,192,6312,985,392DegreeDays(CustomerBilling)FortheperiodPercent(warmer)colderthannormal7,0214.56,726(0.1)G,9051.66,211(7.2)G,8081.35,883(12.2) a~%~tCL4'R'OCHESTERGASANDELECTRICCORPORATIONSteamOepartment1978197119761975YearEndedDecember3119741973SteamRevenue(000's)Commercial..Industrial.Municipalandother.$6,08710,7322,291$6,35210,4552,197$6,4019,7992,183$5,6689,8621,807$5,4199,3961,506$3,6685,470876Totalsteamrevenue19,11019,00418,38317,33716,32110,014SteamExpense(000's)FuelusedinsteamgenerationOtheroperation.MaintenanceDepreciation.Taxes-local,stateandother.13,0472,2731.1735812,28212,9832,4119555802,25712,1141,82G9005G22,23012,8261,6579185462,07310,9546878195361,6896,1511,2018165041,431Steamrevenuedeductions19,35G19,18617,63218,02014,68510,103OperatingIncomebeforeFederalIncomeTax.Federalincometax(246)(182)751(683)1,636(89)(1GB)(330)51(688)363(43G)OperatingIncomefromSteamOperations(000's).$(78)$148$700$5$1,273$347SteamOperatingRatio%SteamSales-lbs.(000's)Commercial.Industrial.MunicipalTotalsteamsales86.386.080.788.876.381.6898,904933,6091,041,415980,3241,160,1221,268,9171,718+651,682,0331,738,3911,839,4022,127,8372,13G,794346,031334,645367,553325,727334,463318,3232,963/002,950,2873,147,3593,145,4533,622,4223,724,034SteamCustomersatDecember31Commercial.Industrial.MunicipalTotalsteamcustomers238703133925474323602717732380281773138929278314013027830410SteamProduced-lbs.(000's)Producedbysteamdepartment.........By-productsteamfromelectricdepartment.1,353,0531,194,1321,408,0291,387,3631,987,6382,133,8532,193,2832,344,6931,532,2461,442,4722,588,1202,613,321Totalsteamproduced3,340,G913,327,9853,601,3123,732,0564,'I20,3664,055,793SteamDepartmentFuelTotalBTU(million)CentspermillionBTU5,705,943226.215,548,2906,022,3606,230,767G,807,5006,849,830232.60203.35203.08196.3189.80RateIncreasesGrantedClassofServiceFffccliveDaleofIncreaseAmountofRateofRaleofIncreaseRelurnonRelurnon(AnnualBasis)PercentRateBaseEquity(000's)IncreaseAulhorizedAulhorizcdClassofServiceDaleofFilingPendingRequestsAmount(000's)PercentElectricGasSteamOctober25,1972October23,1974April20,1976November11,1977February18,1978April28,1972October23,1974April20,197GNovember11,1977February2,1978May11,1972November12,1973April15,1975$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 DirectorsKeithW.Amish*ExecutiveVicePresident,RochesterCasandElectricCorporationPaulW.Briggs*President,RochesterCasandElectricCorporationJohnD.Cockcroft*FormerChairmanoltheBoard,TheR.T.FrenchCompanyWilmotR.Craig/FormerChairmanoltheBoard,LincolnFirstBanksInc.E.KentDamontfVicePresidentandSecretary,XeroxCorporationFrancisE.Drake,Jr.*ChairmanolthcBoardandChiefExecutiveOflicer,RochesterCasandElectricCorporation'MemberoftheExecutiveandfinancecommitteeoftheBoardofDirectorsJ.WallaceEly*tChairmanoltheBoard,SecurityNewYorkStateCorporationWalterA.FallonChairmanoltheBoardandChiefExecutiveOfficer,EastmanKodakCompanyErnestJ.Howe*tgChairmanoltheExecutiveandFinanceCommittee,RochesterCasandElectricCorporationtMemberoftheAuditCommitteeoftheBoardofDirectors Ii/OfficersFrancisE.Drake,Jr.ChairmanolthcBoardandChiefExecutiveOfficerAgc63,YearsofService,41PaulW.BriggsPresidentAgc56,YearsolService,33KeithW.AmishExecutiveVicePresidentAgc55,YearsofServicc,31JosephJ.HartmanVicePresident,CasandTransportationAge54,YearsofScrvicc,32JohnL.KennedyVicePresident,RatcSandCovcrnmcntalAffairsAge60,YearsofService,38JohnE.MaierVicePresident,EmployeeRelationsAgc51,Yearsol5ervice,31RichardJ.RudmanVicePresident,ElectricTransmissionandDistributionAge51,YearsolService,33HarryG.SaddockVicePrcsidenr,ElectricSystemPlanningandOperationAge49,YearsolService,28MarioSilvestroneVicePresident,ConsumerServices,CorporateCommunicationsandPurchasingAgc55,Yearsofservice,28leonD.White,Jr.VicePresident,ElectricandStcamProdcctfonAge59,YearsolService,41DeanW.CapleSecretaryandTreasurerAge55,Yearsofservice,30FrancisA.Sullivan,Jr.ControllerAge55,YearsofService,28RobertW.BallAssistantTreasurerAge62,Yearsolservice,40DavidC.HeiligmanAssistantSecretaryAge38,Yearsolservice,15RobertC.HendersonAssistantConrrollerAge38,YearsofService,1SStephenKowbaAssistantControllerAge59,Yearsofservice,28JohnM.KuebelAuditorAge43,Yearsofservice,14DanielG.Kennedy*Partner,Nixon,Hargrave,DcvansttDoyleA.J.McMullenChairmanoltheExecutiveComminee,CarlockInc.,andDirectoroltheparentcompany,ColtIndustries,Inc.PaulA.MillerFormerPresident,RochesterInstituteolTechnologyEdwardJ.NelsonFormerPresident,RochesterCasandElectricCorporarionWilliamS.Vaughn*tgFormerChairmanoltheBoard,EastmanKodakCompanyWilliamG.vonBergtChairmanoltheBoardandChiclExecutiveOificer,SybronCorporationtMemberoftheSalaryReviewCommitteeoftheBoardofDirectors RochesterGasandElectricCorporation89fastAvenueRochester,NewYork14649-MOTICE-THEATTACHEDFILESAREOFFICIALRECORDSOFTHEDIVISIONOFDOCUMENTCONTROL.THEYHAVEBEENCHARGEDTOYOUFORALIMITEDTIMEPERIODANDMUSTBERETURNEDTOTHERECORDSFACILITY,BRANCH016.PLEASEDONOTSENDDOCUMENTSCHARGEDOUTTHROUGHTHEMAIL.REMOVALOFANYPAGE(S)FROMDOCUMENTFORREPRODUCTIONMUSTBEREFERREDTOFILEPERSONNEL.RECORDSFACILITYBRANCH ContentsHighlights1LettertoShareholders2RGGEPeople4ElectricandGasOperations10ManagementChanges13FinancialStatements14Management'sDiscussionandAnalysis27FinancialandStatisticalInformation28Directorsand05cers33AbouttheCoverDuring1980RGGErananadvertisingcampaigntoinformcustomersandthecommunityaboutsomeoftheworkthatgoesonandaboutthepeoplewhodotheworkSixemployeesrepresentingacross.sectionofRGGEoperationsandserviceswerechosenassubjectsforthetelevisionspotannouncementsandtheprintadvertise.ments,Hoonewrotewordsforthemtosay.Thewordsaretheirown,andtheyarepresentedinthisreport.RG&EServiceArea/BusinessTheCompanysupplieselectric,gasandsteamservicewhollywithintheStateofHewYork,andisengagedintheproduction,transmission,distributionandsaleoftheseseniicesinaninecountyareacenteringaroundtheCityofRochester.TheCompany'stemtory,whichhasapopulationofapproximately880,000,iswelldiversifiedamongresidential,commercialandindustrialconsumers.InadditiontotheCityofRochester,whichisthethirdlargestcityandamajorindustrialcenterintheState,itincludesalargeandprosperousfarmingarea.

RG&EPeople.YourNeighbors'Ioothejob.-MOTICE-THEATTACHEDFILESAREOFFICIALRECORDSOFTHEDIVISIONOFDOCUMENTCONTROL.THEYHAVEBEENCHARGEDTOYOUFORALltp1ITEDTIMEPERIODANDMUSTBERETURNEDTOTHERECORDSFACILITYBRANCH016.PLEASEDONOTSENDDOCUMENTSCHARGEDOUTTHROUGHTHEMAIL.REMOVALOFANY~PAGE(sjFROMDOCUMENTFORREPRODUCTIONMUSTBEREFERREDTOFILEPERSONNEL.60R4Docket~C0el>+8ja<>>>>'>DEADLINERETURNDATEDate~a)-)afDocument.fifUUUTDRYifffifRifmllUITRIt00KH':il.[<DIDlgefuD+fIDr"7A,uttut)~RECORDSFACILITYBRANCH8>04~30313 ToShareholders:~~OnOctober1,1980,FrancisE.Drake,Jr.retiredatthenormalretirementageof65aftera43yearcareerwithRGGE,thelast13yearsofwhichheservedaschiefexecutiveofficer.PaulW.BriggswaselectedtosucceedMr.Drakeaschairmanoftheboardandchiefexecutiveofficer.KeithW.Amish,formerexecutivevice.president,waselectedtoreplaceMr.Biiggsaspresident,andbecamechiefoperatingofficer.LeonD.White,Jr.succeededMr.Amishasexecutivevice-presidentwithresponsibilityforoperations.Inbringingaboutwhatweconsidertobeaninnovativemanagementstructure,weestablishedtwoseniorvice.presidentpositionstocompleteafivemember,seniormanagementteamtoaddressthecomplexdecisionsthathavetobemadeintheutilitybusinesstoday.HarryG.Saddockwaselectedseniorvice.president,financeandrates,andMarioSilvestronewaselectedseniorvice.president,generalservices.ConsolidationofthesetwoareasofRGGE'soperationsunderseniorvie+presidentsisintendedtoallowforbroadermanagementinfluenceandparticipationinthepolicydecisionmakingprocessesandtoreinforcemanagementcommunicationchannelsintheCompany.SeveralpromotionsandreassignmentshavebeenmadeamongotherofficersoftheCompany,andtheyaredetailedonpage13ofthisreportThesechangesweremadeprimarilytoofferadvancedcross-trainingincriticalexecutivepositions.Weviewourredesignofseniormanagementstructureasatimelystepaswemoveintothisdecade.Commonstockearningsin1980increased$1.8million,orfivepercentover1979.Earningspershareofcommonstockroseamodestonepercent,goingfrom~2.08to$2.10.The1980per.shareearningsreflecttheadditionofsome657,000weightedaveragesharesofcommonstockTotalcustomerrevenuesfor1980,excludingelectricsalestootherutilities,showedasignificant18percentincreaseoverthepreviousyear.However,revenuegrowthresultingfromincreasedunitsa!esofelectricityandgaswassmalLWhenadjustedfortheinfluencesofrateincreases,fueladjustmentsandweather,"real"growthincustomerrevenueswaslessthanonepercentover1979.However,revenuesfromelectricsalestootherutilitiesthroughtheNewYorkPowerPoolincreased40percentover1979.Shareholdersandcustomersalikebenefitfromthesesaleswhicharemademainlyfromourcoal.firedgeneratingunits.Thereisastrongdemandforcoal-firedgenerationasdownstateutilitiesreducegenerationfromtheirmoreexpensiveoil.firedunits.Expensesincreasedin1980andinflationcontinuestobeamajorcontributingfactor.Operatingexpensesrose21percentover1979.Thecostoffuelsagainrosedramaticallyandnowcon.sumesalmosthalfofeachRGGErevenuedollar.Thecostoffossilfuelsalonewentup45percentin1980.Thetremendousupsurgeininterestcostsmadetheheavyfinancingrequirementsinourhighlycapital.intensivebusinessevenmoreburdensome.Totalinterestcharges,excludingallowanceforborrowedfundsusedduringconstruc-tion,rose17percentwhilepreferredstockdividendswentup34percent.Thesecosts,liketaxes,areexpensesoverwhichwehavelittlecontrol.Wherewecanexertsomedegreeofcontrolovercosts,weeconomize.But,despitetheproblemswithcosts,wethinkwehavebeenabletoachieveatemporaryworkablebalanceamongthefinancialpressures,customerrequirementsandthereasonableexpectationsofshare.holders.TheminimalgrowthinRGGE's1980energysalesreflectedtheseverityoftherecessionseeninthefirsthalfoftheyear,thingslookedalittlebetterduringthesecondhalf.Withregardtogrowth,weremainconfidentabouttheoveralleconomicclimateinourserviceterritory.MonroeCounty,wheremostofourcustomersarelocated,isconsideredoneofthestrongestcentersofeconomicgrowthinNewYorkState.Whilethatgrowthdoesn'tcomparewiththehealthyadvancesseeninthe60's,itisstillverygoodasmeasuredagainstotherpartsoftheStateandtheNortheastingeneral.EastmanKodakCompanyhasannouncedplansforasizeableexpan-sionintheRochesterarea.Someotherindustriesandbusinesseshaveexpressedintentionstoexpand,andseverallargerenovationandconstructionprojectsareunderwayinmetropo!itanRochester.In1980,Rochesterareacompaniesaddednearly6,000newjobs-twiceasmanyastheyearbefore.Morethan$537millionwasspentinplantexpansion,$213millionmorethanwasspentbybusinessandindustryin1979.Theeconomicstabi!ityinourserviceareapresentsstrongresistancetothetypeoferosionthatisbeingfeltinotherpartsoftheStateandweremainoptimisticabouttheeconomicfutureofourlocale.InAugust1980wepetitionedtheNewYorkStatePublicSeniiceCommission(PSC)forelectric,gasandsteamrateincreases.Therequestfollowedcloselyontheheelsof$48millioninrateincreasesgrantedamonthearlierinJuly.Unrelentinginflation,coupledwiththelengthy11monthratehearingprocess,makerateincreaserequestsvirtuallyanannualrequirement.ItisalsoessentialforustophaserateincreaserequestswiththePSCpolicyofbasingthemsolelyonforecastdataforaone-yeartestperiod.TheJuly1980rateincreases,forexample,werebasedonforecastsfora12.monthperiodrunningthroughJuly1981.TherateincreaseswearenowseekingwillbedecidedfortheperiodfromAugust1981throughJuly1982.Inthecurrentratecase,weareseekingnewratesthatwouldproduceanaddi.tional%1.9millioninannualelectricrevenues,$7.8millioningasrevenuesandS3.6millioninsteamrevenues.InJanuary1981werequestedatemporaryincreaseinelectricandgasratespendingtheJuly1981decision.Wealsoaskedthatthesteamrateincreasebeputintoeffectimmediately.Themovewasnecessitatedbysoaringinterestrates,highercostsandaneedtoprotecttheCompany'ssecurityratings.ThesteamrateswereapprovedandmadeeffectiveFebruary18.Thedecisiononthetemporaryelectricandgasrateswaspendingatthetimethisreportwenttopress.

AnnualReport1980fortheYearEndedDecember31Highlights19801979XChangeGseof1980RevenueDollart)nCents)y4IIIIIIIIIElectricitytocustomersKilowatt-hours.RevenueElectricitytootherutilitiesKilowatt.hours.RevenueGasTherms.RevenueSteamPounds.Revenue5,186,423$245,0051,620,929$52,786434,492$181,0462,413,879$23,5895,163,520$219,3731,526,925$37,804426,743$140,5272,792,170$19,988Sales,RevenuesandEarnings(Thousands,ExceptPerShareAmounts),12640229(14)18Totaloperatingrevenues..Totaloperatingexpenses..$502,426$417,69220$442,894$365,57021OperatingincomeNetincomeEarningsapplicabletocommonstock.Weightedaveragenumberofcommonstocksharesoutstanding..Earningspercommonshare.........Cashdividendspercommonshare,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$32,9201410EarningsandDividendsPerCommonSharethDo)hts)DEarningsporCommonShore(AdjuttedforStockOhtdenrb)DCoshDMdencbperCommonShore(AdjustedforStockDMdencb)2,11Capitalexpenditures,lessallowanceforfundsusedduringconstruction..NetutilityplantatDecember31.......NumberofCustomersatDecember31ElectricGasSteamNumberofCommonStockShareholdersatDecember31..$87,742$111,427$950,474$893,531(21)650,41648,5434285,470282,0991213,157209,6422271318(15)NumberofEmployeesatDecember31.2,6912,6611Note:The22ndannualstockdividendwaspaidFebruary25,1981attherateofthreepercent.1976197719781979191640r/'le~Qoo95./>REIitlllNBRIIIIOCKETFILECQPII8X04330313 RG&EPeople1]1Pr,cIj8mi-<<-az608mLucyWhiteTelephoneSetvlceRepresentativeRGGE'sTelephoneServiceCenteranswersnearlyahalf.millioncallsayear.LucyWhitegetsallkindsofcalls:servicetransfers,newcustomerconnections,poweroutages,gasleaks,complaintsandrequestsforinformation."EverytimeIsay'goodmorning'havetobereadytohelpsomebodywithwhatever'sontheirmind."It'sLucy'sjobtohelpthecustomerpersonallywhereshecanortogetthecallertotherightpartyforassistanceorananswer.LucyandothertelephoneservicerepresentativesareindirectcontactwithRGGE'scomputersystemthroughdisplayconsoles.AccountinformationonanyofRGGEshalf-millioncustomersisavailableinseconds.Still,onbusydays,callsI'r1~=]stackupasthe34servicerepresen.tativestrytogivethecalleracompleteanswer."Everydayweansweralotofphonecalls.Wetrytopickupeachonewithinsixrings,butsometimeswefallbehind."Lucysaysthatthehardestcallsshegetsarethehighbillcomplaints.Shetriestohelpthecustomerunderstandhowtherisingcostofenergyforcesthebillsupevenwhenpeopleconserve."AttheendofthedayI'mtired.ButIlovepeopleandIlovehelpingthem."

~~Aspartoftheratecase,wearetryingtorecoverexpensesconnectedwiththeSterlingnuclearpowerplantproposal.WehadtoterminatethatprojectinJanuary1980aftertheStatereverseditsearliercertificationforconstructionofthe1,150megawattfacility.WeareaskingthePSCforpermissiontoamortizetheexpendituresoverafive.yearperiod.InJanuary1981thePSCissueditsordercoveringthefirstphaseoftheSterlinghearings.ItruledthatcostsincurredthroughJanuaiy1978wereprudent.CompletedetailsofthecasemaybefoundinthisreportunderNotestoFinancialStatements.OneofourmainconcernstodayisthedelayintheconstructionofNiagaraMohawkPowerCorporation'sNineMilePoint~2nuclearpowerplantatOswego,NewYorkPreviouslyscheduledforoperationin1984,constructionofthe1,084megawattplanthasbeensetbackduetoanumberoffactors,includingtechnicalreassessments,regulatorymattersandadeclineinelectricloadgrowth.TheestimatedtotalcostoftheplanthasrisensubstantiallyasaresultofthedelaysandthecumulativeadversePaulW.Bnggs,lett,KeithW.Amisheffectsofinflation.Althoughourshareofthatplantisonly14percent,thecostincreaseswillcontinuetoexertpressureonourcapitalrequirementsforseveralyears.Nowscheduledforlate1986operation,theNineMileplantwilladd152,000kilowattsofbaseloadcapacity'noursystem.InApril1980weaskedthePSCforpermissiontoacquirePavilionNaturalGasCompany.Thatapprovalwasgrantedearlyin1981andtheacquisitiontookeffectFebruary28thisyear.Thepurchasehasadded10,000gascustomersinthesouthwestportionofoursystemandisexpectedtoproduceadditionalannualgasrevenuesof410million.Innotingthecomplexitiesoftheutilitybusiness,wecommendFrancisEDrake,Jr.forhisimmensecontributionstoRGGEandtheindustryoverhis43-yearcareerwiththeCompany.Mr.Drakebecamechiefexecutiveofficein1967.Inflationhadnotyetbegunitsupwardspiral;weplanned,licensedandbuiltanuclearpowerplantwithoutharassment,delayorunnecessaryhighcosts;theOilEmbargowasstillsixyearsoff;wehadnothadagasrateincreasesince1949oranelectricincreasesince1958,andregulatorybodieswerereasonableintheirrequirementsandsupportiveintheirrulings.Thatwastheyear1967.Alltoofamiliararetheburdensomeproblemsofthefollowingyears:doubledigitinflation,skyrocketingfuelcosts,asuccessionofnecessaryrateincreases,avirtualstand.stillinthecrucialnuclearpoweroption,publicskepticism,mountingregulationandacropofanti-utilitypressuregroupsclaimingtoworkinthepublicinterest.FrankDrakemetthechallengesandissueshearnand,inourjudgment,broughtRGGEthroughanextremelydifficultperiod,maintainingourfinancialintegrityandtraditionallyhighlevelsofservicetothecustomersandcommunity.Hisresponsibilitieswereheavyanddemandedthesuperiorleadershipabilityhepossesses.TheturbulentperiodforRGGEandtheutilityindustryisfarfromover.Wehaveeveryconfidence,though,thatourteamofRGGEpeopleisuptothechallengesandgearedtomeetthefuture.Weexpecttomaintainasolid,progressiveoperation.And,inregardtoemployees,thethemeofthisannualreportfocusesonthethoughtsofarepresentativesampleofourRGGEpeople.Sixemployeeswerefeaturedinatelevisionandprintmediaadvertisingcampaigntoshowourcustomersandthecommunitythecaliberofpeoplewehaveandwhatthosepeoplethinkoftheirjobs.Thewordsoftheseemployeesaretheirown.Wehopeyou'ltakethetimetosharetheirthoughtsinthefollowingpages.PaulW.BtiggsChairmanoftheBoardandChiefExecutiveOAicerKeithW.AmishPresidentandChiefOperatingOfficerMarch18,1981

'%8ha5mRoaaeCxxiag')C))Q~QiQ.)iQg+QO]j'QQ~Rz90RDennisRoseCustomerServiceRepresentative0"Whenacustomercomesin,Imaynothavealltheanswersallthetime,butIalwaysgivehimanhonestanswer."DennisRoseseesortalkstomorethan20customersaday.Someconversationstakeaslittleas20minutes,othersmayrunseveralhours."Everypersonisaspecialindividualwithaspecialproblem,andyoutreatthemaccordingly."Withinflationtakingawayfromevery-one'sincome,alotofcustomerscometoDennistoworkoutspecialbill.payingarrangements.Othersmaywantinformationonhowtouseenergymoreelflcientlyandcutdownontheirbills.Dennisandtheothercustomerservicerepresentativesbendoverbackwardstohelpwheretheycan.It'stheirjobtolistenandtohelp."Ireallyfeelgoodbeingabletosay'We'lbeabletoworksomethingout.'henacustomerissincerelytryingtopaythebillbutishavingahardtime,weknockourselvesouttomakeiteasierforhimorhertoworkoutspecialplans,toprovidewhateverhelpisneeded."Highenergybillsdon'tmakeanyonehappy,notevenRGGEemployees,likeDennis,whopaythefullpriceontheirownbills."It'snicetoseethemgoout-nothappyallthetime-butunder-standing."

%47GiEDKE0MHlcK65KKGfgQNzeRarnQog@Cn54ooO:mBdPEdFlaniganGasConstructionandMaintenanceForeman"It'sourresponsibilitytomakesurethegaskeepsflowingandthatserviceforcustomersisnotinterrupted."WhenEdandhiscrewareworkingonagaslinethegasisstillflowing.Maintainingagassystemisatough,critical,oftenhazardousjob.Butthat'swhatEdFlaniganhasbeendoingfor33years."EverydayRGGEmakesroutinesurveysthroughoutourservicearea.We'eabletodetectevensmallamountsofgasescapingintotheair."RGGEgasmaintenancepeoplemonitorthegasdistributionsystemonacontinuousbasis.Anyproblemsthatarefoundaretakencareofimmediately."Ifacustomersmellsgaswegettherefasttomakesurethere'snophysicaldanger.Safetyisournumberoneconcern."RGGEtellsitscustomersnottotakeanychances.They'etoldthatiftheythinktheysmellgastheyshouldgetoutofthehouseandcallRGB'Partofmyjobistorepairleaksorreplaceoldpipewithplasticorwrappedsteel.InthecaseofaGradeOne[highpriorityjsituation,mymenandIwillworkallnightifwehaveto,togetthejobdoneright."Q/itIwII

'%%reMsCKEigQMGilBSGOKlGKCPJackDavisPowerController"ThePowerControlCenteristheheartofRGGE'selectricalsystem.Themapandcomputershelpmonitorthestatusofpowerplants,transmissionlines,everymajorfacilityintheRochesterarea."Ifsomethinggoeswrong-sayapowerplantgoesoutofservice-ourjobistopreventbrownoutsandserviceinterruptionseitherbycallingformorepowerfromRGGEplantsorbringingitinfromelsewhere."'-c-el"We'elinkedwiththeNewYorkPowerPool.Everyfiveminuteswegetacompleteupdateonhowmuchpowerisbeingproduced,howmuchisavailabletous,andwhatitwouldcost.It'sthepowercontroller'sjobtodecidewhentobringinelectricityfromthePowerPoolreserve."RightnowthePowerPoolhasenoughreserveelectricitytoprotectourcustomersagainstbrownoutsandmajorserviceinterruptionsifwehaveaprobleminourownsystem."Thequestionbeingdebatediswhethertherewillbeenoughelectricitythroughthe1980's.The~+treserveisshrinkingandNewYorkStateofficialshavemadethedecisiontobuildfewernewpowerplantsthanutilitiesthroughouttheStatefeeltheyneed."Ihavetowonderaboutwhat'sgoingtohappenfiveortenyearsfromnow.Istheregoingtobeenoughelectricityforpeakdemandperiods?IstheStatetakingtoomuchofarisk?I'mconcerned.Ithinkit'ssome.thingeveryoneshouldthinkabout."

%0rj:KLIEGGis~~RDM~.~~coaiQxzzEsfRIhFWaltRogalskiTroubleinanFirstChss"It'smyjobtorestorepowerasquickly,safelyanddependablyasIpossiblycan.Iknowhowmuchdependsonit"E!ectiicityisasvitaltomodemlifeaswater.RGGEtroublemen,thefirst-lineemergencyteam,makesurethatwhateverhappenstointerruptelectricalserviceisdealtwithimmediately.They'especialistsinsolvingthetoughones."Ialwaystakethatextrafewminutestotest,check,andrecheckIhavetoomuchrespectforelectricitytotiytotakeshortcuts.""Igetalotofsatisfactiongettingpowerrestoredasfastaspossible.Ithinkpeopleknowthejobwedoiscritical.It'sgotitshazards,andtheyappreciateourefforts.Thatgivesusagoodfeeling."WorkingconditionsforRGBEtroublemenaregenerallyharshandoftenhazardous.Theyworkintraffic,highonapoleorunderthestreet,insubzeroweatherorsuddenstorms,andtheyworkwithhigh.voltageelectricenergy."Weworkunderabuddysystem.Wealldependoneachotherandknowhowcriticalitistodothejobright.Itmakesmeproudtobepartofateamlikethis."

'%Sxi6ElhsQhsltQmc0mQn(Qqpx5cm~QB7(XP(Xi'b+WesBackusOperationsSupervisor,GinnaNuclearPowerPlant"Ithinksomepeoplehavewrongideasaboutnuclearpower.It'satoughsubjecttounderstand,butIreallybelievethemoretheyknowaboutit,themorecomfortablethey'feel."Thenuclearindustryhasthebestsafetyrecordofanyindus+.OneofWesBackus'obsistohelpmakesureeverysinglesafetyprocedureisstrictlyfollowedatalltimes."Inaverypracticalsensetherejustaren'talotofalternativestonuclearpoweravailabletousrightnow.Idon'tliketheideaofushavingtodependonforeigncountriesforourenergy.""NuclearpowerplantssuchasGinnacontainmanysafeguardsthatmakethepossibilityofradiationleakageextremelyremote.Attheslightestindicationofdanger,wehavetheabilitytoshutdowntheplantimmediately."IunderstandnuclearpowerandIfeelit'ssafe.InfactImovedmyfamilyfromBergentoabouttwomilesfromGinnatobeclosertomywork,andI'mstillgladIdid."

1980OperationsElectricOperationsSalesTotalkilowatt.hoursalesofelec.tricitytocustomerswereuponlyafrac-tionofapercentfrom1979dueprimarilytotherecessionandcustomerconserva.tionmeasures.Industrialkilowatt.hourelectricsaleswereoffninetenthsofonepercentreflectingthesloweconomyandreversingatrendseenoverthelastseveralyearswhenindustrialsalesledallclassesofelectriccustomersingrowth.Kilowatt.hourelectricsalestoresidentialcustomerswereup1.2percentfrom1979,andcommercialkilowatthourelectricsalesrose1.4percent.Verymoderateelectricloadgrowthisprojectedfor1981.Onenotablebrightareainelectricsalesfor1980wasthesharp40percentincreaseinrevenuesfromelectricsalestootherutilities-thesaleofexcesspowertoothercompaniesthroughtheNewYorkPowerPool.Thesesalesaremadepossiblemainlythroughtheexcel.lentavailabilityofourGinnanuclearpowerplantwhichcanproducemorethanhalfofthetotalelectricenergyrequirementsofoursystem.Wereservethefulleconomyoftherelativelyinex-pensivenuclear.generatedpowerforourowncustomerswhilemakingexcesspowerfromourcoal-andoilfiredgener.atingunitsavailableforsaletootherutilities.Revenuesfromtheseoutsidesalesbenefitbothshareholdersandcustomers.Oswego¹6NiagaraMohawkPowerCorporation'sOswego¹6oil-firedpowerplantwentintocommercialoperationinJuly1980.Underajoint.ownershipagreementRGGEowns24percentoftheplant'scapacity,or204,000kilowatts.ConstructionbeganontheOswego<<6plantpriortothe1973ArabOilEmbargothatspurredthedramaticriseinoilprices.ThisplantisahighlyeHicientoil.firedunitandtheavailabilityofitspowerisimportanttoRGGE,particularlyasreplacementpowerwhentheGinnanuclearpowerplantisoutofserviceforannualrefueling,maintenanceandinspectionperiods.Atothertimeswesellourshareoftheenergytootherutilities,producingadditionalrevenuesfortheCompanyandasavingforourowncustomers.GinnaNuclearPowerTheGinnanuclearpowerplantcontinuestoproveitselfasoneofthefinestoperatingplantsinthenation.During1980,despitetwoplannedoutages,the470,000.kilowattplantachievedanotable76percentavailabilityanddidnotexperienceasingleforcedoutage.In1980theplant'seHicientoperationsavedcustomers432.4millioninfuelcostswhencom-paredwithanequivalentamountofcoal.firedenergy.Whencomparedwithwhatitwouldhavecosttoproducetheenergywithoilasafuel,theplantsaved$84.4millionin1980.TheGndergroundConnectionDeliver-ing34,500voltsofelectricityisnotaparticularlybigjobforapowercompanylikeRGGE;butwhenthatpowerisneeded1000feetbelowtheearth'ssur.facetheprojecttakesonadifferentcomplexion.InternationalSaltCompanywantedtoupgradeelectricserviceinitssaltminenearRetsof,NewYork,30milessouth.westofRochester.Withalmost17squaremilesofexcavation1000feetbelowground,the85.yearoldsaltmineisthelargestinthefreeworld.Electricityprovidespowerfortheminingoperations,andpropervoltagewasneededtoworktherichsaltveinthatgeologistssayextendsasfarwestasMichigan.Thecomplicatedprojecttookthreeyearstocomplete,andRGGE'speopleplayedabigpart.Aboreholewassunk1000feetdown.Followingelaboratepreparationsbelowground,asix.ton,34,500voltpowercablewasfeddowntheholetoconnectthesurfaceswitch-gearwiththeminesubstation.It'srarethatyouhearofacompanydrill.ingforelectricity,but,withRGGEsassistance,thisfirstundergroundcon.nectionofitskindinAmericawasmade,andRGGEisprovidingthepower.GasOperationsSalesSalesofnaturalgasinthermsincreasedonly1.8percentin1980.Althoughtherewasanadditionof6,427residentialgasspaceheatingcustomersduringtheyear,residentialgassalesinThesix.tonpowerableasitentersthemine.10 ThisgiganticwheelwaspartofaliftonanearlyshaftataninternationalSaltCompanyminethatwasworkedfrom1906untilthe30's.Therelicwasbroughtbackintoservicetohelpthreada34,500voltelectriccabledowntoaminesubstation1,000feetbelowtheground.Electriciansinstallanelectricalgroundinggridsurroundingtheminelevelportionoftheundergroundsubstation.Left:Thisburstoflightfromatime.exposedphotoofafiberopticcableshowslightasthetransmissionmedium.Right:ThefiberoptictelemeteringconsoleisadjustedbyanRGGEtechnician.thermsdeclinedby2.7percentfromthepreviousyear.Itisapparentthatthecosteffectivenessofenergy.efficientmea.suresthatRGGEhastraditionallypromotedcontinuestohithometotheconsumer.Efficiencyandconservationmeasuresundertakenbycustomershavebeenoffsettinganysignificantgrowthingassalesthatmightotherwisebeanticipated.Infact,since1972,theaveragegasconsumptionbyresidentialspaceheatingcustomershasdroppedby24percent.However,gassalesinthermstoindustrialcustomersrose14.9percentover1979andareexpectedtocontinuetoriseatahealthypaceascompaniesshiftoilloadstonaturalgas.Commercialcustomergassaleswentup2.5percent,mainlyduetotheadditionofcommercialspaceheatingloads.In1981itisestimatedthat5,500residentialgasspaceheatingcustomerswillbeaddedtothesystem,withgasmaintainingitsdecisivecostadvantagesoverheatingoil.TenthousandgascustomershavebeenaddedtotheRGGEsystemthroughtheacquisitionofPavilionNaturalGasCompanyinFebruary1981.RGBEsgassupplyisadequatetomeetallprojectedrequirements.ALightApproachFiberoptics-themethodfortransmittingsignalsanddatawithouttheuseofmetalcables-iscomingintoitsownasanadvancedtechnology;andRGGEisalreadyinvolved.Theinitialapplicationwillinvolvelight-wavecommunicationforthetelemeter-ingofnaturalgasdeliveriesfromRGGEssupplierwherevolumesrunmorethan40billioncubicfeetayear.Thefiberoptictelemeteringunitisvirtuallyimmunefrominterferencecommoninexistingmetalliccables.GastelemeteringisonlythefirstofseveralapplicationsforfiberopticsenvisionedbyRGB'uturepossibleapplicationsforfiberoptictechnologyincludepowertransmissiontelemetry,powersystemcontrolandaudiotonecommunicationsthatpresentlyrelyonconventionalwire.cabletransmission.11 ResearchandDevelopmentIn1980,RGGEspent~5.6milliononresearchanddevelopment.Ofthatamount,$1.8millionwentintoRGGEsownresearchanddevelopmentpro.gramswheretwoinparticularpaidhand-somedividendsin1980attheGinnanuclearpowerplant.Oneoftheearlynuclearpowerplantsinthiscountry,completedin1969,GinnaStationcontinuestoperformremarkablywelLTherehas,however,beensomeconcernwithindicationsofcorrosioninthesteamgeneratorsofsuchplants-thetwounitsthattransfertheheatfromtheprimaiynuclearfissionloopandproducethesteamtodrivethe470.megawattturbinegenerator.Continuingunabated,corrosiveactioncouldulti-matelyresultinacostlyshutdownandequipmentreplacement.RGGEhadbeenstudyingtheproblemforyears,andintheregularspringshut-downforrefuelingin1980anRGGE-developedprocessforflushingthesteamgeneratorsofcorrosivematerialswasused.EncouragingresultswerenotedwhentheplantwasinspectedinNovember.Itappearsthatthedegreeofcorrosionhasbeensignificantlyreduced.Onlythreegeneratortubesshoweddamage,whereas31hadtobepluggedinearly1980.ThisRGGEprocesswillbeusedduringeachrefuelingshutdown,possiblyeliminatinganexpensiverepairprojectintheyearstocome.Complementingthebreakthroughinsteamgeneratorcleaning,RGGEisexperimentingwithaprocessthatisexpectedtoallowrepairofdamagedtubesinthesteamgeneratorwithoutthepermanentlossofthetube'sfunctionthatnowresultsfromplugging.Thenewsleevingprocessinsertsabimetallictubesleeveupintoandabovethedamagedportionofatube.Thisisexpectedtomaintainsteamgeneratorintegrityandresultinyearsofcontinuedservice.ThusRGGEsownresearchanddevel-opmentprogramwillbepayingbigdivi.dendsforshareholdersandcustomers,justasitdidafewyearsagowhenRGGEdevelopedthemulti.frequencyeddycurrenttestingsystemthatstreamlinedsteamgeneratortubetesting.12AnRGGEemployeetrainsintheCompany'ssteamgeneratormock.upforthejobofplacingmetalsleevesonworngeneratortubes.

StatementofIncomeRRSandElcctrioOorporrrtion(ThousandsofDollars)OperatingRevenues(Note1)Electric.Gas.....................SteamElectricsalestootherutilitiesTotalOperatingRevenuesOperatingExpenses(Note1)OperationElectricandsteamfuelsPurchasedelectricity.Deferredfuel-electricandsteamPurchasednaturalgas.Other.NaintenanceDepreciationTaxes-local,stateandotherFederalincometax-current(Note2)-deferred(Note2)TotalOperatingExpensesOperatingIncomeOtherIncomeandDeductionsAllowanceforotherfundsusedduringconstruction(Note1)Other,net.TotalOtherIncomeandDeductionsIncomebeforeInterestCharges.Year'EndedDecember311980S245,005181,04623,589449,64052,786502,42686,62223,796(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,netAllowanceforborrowedfundsusedduringconstruction(Note1)..TotalInterestChargesNetIncomeDividendsonPreferredandPreferenceStock,atrequiredratesEarningsApplicabletoCommonStockWeightedaveragenumberofsharesoutstandingineachperiod,adjustedforstockdividends(000's).EarningsperCommonShare(NoteI).CashDividendsperCommonShare,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$2.32StatementofRetainedEarnings(ITtousandsofDollars)YearEndedDecember31198019791978BalanceatbeginningofperiodAdd'etincome80,15543,65239,56539,586$77,338470,819TotalDeductDividendsoncapitalstockCumulativepreferredstock,atrequiredrates(Notes5and6)..Preferencestock(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.HeiligmanRobertC,HendersoJohnE.MaierDavklK.LaniakLeonD.White.Jr.JohnE.ArthurManagementChanges(EffectiveOctober1,1980)LeonD.White,Jr.,formerlyvice.president,electricandsteamproduction,waselectedexecutivevice.presidentoftheCompany,withresponsibilityforoperations.Mr.WhitejoinedRGGEin1937andhasservedinanumberofelectricandsteammanagementposi~tionsoverhis43-yearcareer.HarryG.Saddockwaselectedtothepositionofseniorvicepresident,financeandrates.Previouslyhewasvice.president,electnicsystemplanningandoperation.Mr.Saddock,alicensedpro-fessionalengineer,joinedtheCompanyin1950andprogressedthroughanum.berofmanagementpositionsintheelectricandelectricsystemplanningdepartments.MaiioSilvestronewaselectedseniorvicepresident,generalservices.Inaddi-tiontohispreviousresponsibilitiesasvicepresident,consumerservices,publicaffairsandpurchasing,heisadminister-ingemployeerelationsandinformationsystems.Mr.SilvestronehadservedinvariousmanagementpositionsinthemarketingandsalesdepartmentssincejoiningtheCompanyin1950.HeisalicensedprofessionalengineerandholdsanMBA.fromtheUniveisityofRochester.JohnEArthurwasnamedvice.presi-dent,engineeringandchiefengineer.Mr.Arthur,whoseformerpositionwaschiefengineer,hasbeenwithRGGEsince1955andisalicensedprofessionalengineer.DavidK.Laniakbecamevice-president,electricsystemplanningandoperation,wherehewaspreviouslysuperintendent.Mr.LaniakcametotheCompanyin1954andheldanumberofpositionsintheelectricmeterdepartmentbeforemovingtosystemplanning.JohnE.Maier,formervice.president,employeerelations,waselectedvice.president,electricandsteamproduction.Mr.Maierjoin~RGGEin1947andhasanM.BA.fromtheUniversityofRochester.DavidC.Heiligmanwaselectedtreasurerwhileretaininghisformerpositionofassistantsecretary.HejoinedtheCompanyasanaccountantin1963andhasanM.BA.fromtheUniversityofRochester.RobertC.Henderson,formerassistantcontroller,waselectedvice-president,rates,effectiveDecember1,1980,replacingJohnLKennedywhoretiredafter40yearsofservice.Mr.HendersonjoinedtheCompanyin1963asanaccountant.HehasanM.BA.fromtheUniversityofRochester.DirectorChangesInJanuary1981,theboardofdirectorselectedConstanceM.Mitchell,ComeliusJ.MurphyandLeonD.White,Jr.asdirectorsoftheCompany.Mrs.MitchellhasbeenactiveintheRochestersocial,civicandpoliticalcommunityformorethan25years.SheiscommunityrelationscoordinatorfortheProgramtoInterestStudentsinScienceandMathsponsoredbytheIndustrialManagementCouncilofRochester,NewYork,Inc.Mr.Murphyisagroupvice.presidentofEastmanKodakCompanyandgeneralmanageroftheInternationalPhoto.graphicDivision.Mr.WhiteisRGGE'sexecutivevice-president.Mrs.Mitchell,Messrs.MurphyandWhitereplacedretiringboardmembersErnestJ.HoweandEdwardJ.Nelson,formerpresidentsofRochesterGasandElectricCorporation,andWilliamS.Vaughn,formerchairmanoftheboardofEastmanKodakCompany.}constanceM.MitchetlComehusJ.MurphyLeonD.White,Jr.13 StatementofChangesinFinancialPositionRESandElectricCorporation(ihousandsofDollars)YearEndedDecember31198019791978SourcesofFundsOperationsNetincome.Principalnoncashcharges(credits)toincomeDepreciationAmoritzationofnuclearfuelDeferredfuelcostDeferredincometaxes,netAllowanceforfundsusedduringconstructionOther,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,TotalfromOperationsFinancingSaleoflongtermdebtSaleofcommonstockSaleofpreferredstock~sfromshorttermdebt,netTotalfromFinancingTotalSourcesofFunds...GsesofFundsGtilityplantPlantadditions.Nuclearfueladditions.Less:Allowanceforfundsusedduringconstruction.NetAdditionstoGtilityPhnt.DividendsonpreferredstockDividendsonpreferencestockDividendsoncommonstockReductionofshorttermdebt,net.RetirementoflongtermdebtCapitalstockexpenseDiscountandexpenseofissuinglongtermdebt.Other,net.increase(decrease)inworkingcapital(excludingshorttermdebt)TotalGsesofFundsChangesinComponentsofWorkingCapitalIncrease(decrease)incurrentassetsCashAccountsreceivable,net.MaterialsandsuppliesFossilfuelConstructionandothersuppliesPrepaymentsTotal.Increase(decrease)incurrentliabilities(excludingshorttermdebt)AccountspayableTaxesAccruedinterestandpayroll.LongtermdebtduewithinoneyearOther,netTotal.Increase(decrease)inworkingcapital(excludingshorttermdebt)..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(ThousandsofDollars)ASSETSUtilityPlant,atoriginalcost(Note1)ElectricGasSteam.Less:AccumulateddepreciationandamortizationConstructionworkinprogressNetUtilityPlantAtDecember311980849,946193,86318,1901,061,999337,215724,784225,690950.4741979S728,686182,04618,064928,796295,328633,468260,063893,531InvestmentinSubsidiary,atequity.CurrentAssetsCashAccountsreceivable,netofallowancefordoubtfulaccounts:1980-$1,387;1979-$1,247.Materialsandsupplies,ataveragecostFossilfuelConstructionandothersuppliesPrepaymentsTotalCurrentAssetsDeferredDebitsUnamortizeddebtexpense..Deferredfuelcost(Note1)OtherTotalDeferredDebitsTotalAssets.CAPITAUZATIONANDLIABILITIESCapitalizationLongtermdebt(Note4).PreferredstockredeemableatoptionofCompany(Note5)Preferredstocksubjecttomandatoryredemption(Note6).Preferencestocksubjecttomandatoryredemption(Note6)Commonshareholders'quityCommonstock(Note5)RetainedearningsTotalCommonShareholders'quity.TotalCapitalization.CurrentLiabi!itiesShorttermdebt(Note7).LongtermdebtduewithinoneyearAccountspayableTaxesaccrued,includingincometaxes.interestaccrued.Payrollaccrued.OtherTotalCurrentLiabilitiesDeferredCreditsandOtherUabilitiesAccumulateddeferredincometaxes(Notes1and2)OtherTotalDeferredCreditsandOtherLiabilitiesCommitmentsandOtherMatters(Note9)TotalCapitalizationandLiabilities..1,9684,22555,65918,89112,2301,30992,3144,51114,69711,41630,624S1,075,380437,12467,00050,00028,000291,34683,970375,316957,44025,30032,97710.1999,9592,9914,08485,51028,0704,36032,430S1,075,3802,0622,92537,68512,61710,7601,25065,2373,91710,0928,01122,020$82,850'382,16267,00025,00028,000260,43280,155340,587842,74950,00012,00032,2288,4548,4272,9491,233115,29120,5024,30824,810$982,85015

'NotestoFinancialStatementsNote1.SummaryofAccountingPoliciesGeneral.TheCompanyissubjecttoregulationbythePublicServiceCommissionoftheStateofNewYork(PSC)underNewYorkstatutesandbytheFederalEnergyRegulatoryCommission(FERC)asalicenseeandpublicutilityundertheFederalPowerAct.IheCompany'saccountingpoliciesconformtogenerallyacceptedaccountingprinciplesasappliedtoNewYorkStatepublicutilitiesgivingeffecttotherate-maMngandaccountingpracticesandpoliciesofthePSC.AdescriptionoftheCompany'sprincipalaccountingpoliciesfollows.GtilityPlantandDepreciation.Thecostofadditionstoutilityplantandrephcementofretirementunitsofpropertyiscapitalized.Costindudeslabor,material,andsimihritemsaswellasindirectchargesforengineering,supervision,etc.TheCompanycapitalizesanallowanceforfundsusedduringconstructionapproximatelyequivalenttothecostofcapitaldevotedtophntunderconstruction.Replacementofminoritemsofpropertyisincludedinmaintenanceexpenses.Costsofdepreciableunitsofplantretiredareeliminatedfromutilityplantaccounts,andsuchcosts,plusremovalexpenses,lesssalvage,arechargedtoaccumuhteddepreciationandamortization.Depreciationinthefinancialstatementsisprovidedonastraightlinebasisatratesbasedontheestimatedusefullivesofproperty,whichhaveresultedinprovisionsof3.1Xperannumofaveragedepreciablepropertyin1980,1979and1978.NuclearFuelandDecommissioningCosts.'Ihecostofnuclearfuelandestimatedpermanentstoragecostsofspentnuclearfuelarechargedtooperatingexpenseonthebasisofthethermaloutputofthereactor.Thesecostsarechargedtocustomersthroughbaseratesandthefuelcostadjustmentclause.DuetoaFederalgovernmentpolicyadoptedin1977,theCompanychangeditsnuclearfuelcostcomputationtoreflectthecostsofpermanentstorageofspentnuclearfuel.Prioryears'uclearfuelcostcomputationshadanticipatedthatspentnuclearfuelwouldbereprocessed.Cumulativeprioryears'uelexpenseswouldhavebeenincreasedbyapproximatelySI5.9millioniftheyhadbeendeterminedonthebasisofcurrentcostestimatesforpermanentstorageofspentnuclearfuel,ratherthanonanestimatedamountforreprocessing.IntheCompany'smostrecentlyconcludedelectricratefiling,thePSCpermittedtheamortizationandrecoveryofapproximately$12millionofsuchadditionalcoststhroughratesovera10yearperiod,commencinginAugust1980.Decommissioningcosts(coststotaketheplantoutofserviceinthefuture)fortheCompany'sGinnanuclearpowerplantareestimatedbytheCompanytobe$37millionin1979dollarswithdecommissioningexpectedtocommenceintheyear2006.InAugust1980,theCompanybeganaccruingthesecostsovertheremaininglifeofthefacilityataninitialrateof$3.1millionperyear.TheseaccrualsareincludedinbaseratespursuanttothePSCorderreferredtopreviously.AllowanceforFundsGsedDuringConstruction.TheCompanycapitalizesanAllowanceforFundsGsedDuringConstruction(AFDC)baseduponthenetcostofborrowedfundsforconstructionpurposesandareasonablerateupontheCompany'sotherfundswhensoused.Theratesusedforthispurposewere10.5X,9.5Xand8.75Xin1980,1979and1978,respectively.AsofJanuary1981,therateis113X.InaccordancewithanorderissuedbytheFERC,AFDCissegregatedintotwocomponentsandclassifiedintheStatementofIncomeasAllowanceforBorrowedFundsGsedDuringConstruction,anoffsettoInterestCharges,andAllowanceforOtherFundsGsedDuringConstruction,apartofOtherIncome.SinceDecember1977,theCompanyhascomputedAFDConitsshareoftheNiagaraMohawkPowerCorporationNneNilePointNuclearGnit<<2andOswegoFossilGnit."6,untilitsJuly1980in.servicedate,atanaveragereducedratewhichisnetoftheincometaxeffectoftheinterestportionofAFDC.SnceMay1979,thistreatmenthasalsobeenappliedtotheCompany'sinvestmentinitsSterlingnuclearunit.Theratesfor1980,1979and1978were8.0X,7.51Xand6.85X,respectively.RatesandRevenue.Revenueisrecordedonthebasisofmetersreadduringthecalendaryear.Tariffsforelectricandsteamserviceincludefuelcostadjustmentclauses,whichservetoadjustelectricandsteamratesmonthlytoreflectchangesintheaveragecostoffuelsusedinelectricandsteamgenerationfromtheaveragecostofsuchfuelsduringthebaseperiod.Tariffsforgasservicecontainacomparablechusetoadjustgasratesforchangesinthepriceofpurchasednaturalgas.DeferredFuelCosts.Fuelcostswhicharerecoverableundertheelectric,gasandsteamcostadjustmentchusesincludedinthetariffschedulesoftheCompanyaredeferreduntiltheyarebilledtocustomers.AreconciliationofrecoverablegascostswithbilledgasrevenuesisdoneannuallyasofAugust31,andtheexcessordeficiencyisrefundedtoorrecoveredfromthecustomersduringasubsequenttwelvemonthperiod.FederalIncomeTax.Forincometaxpurposes,depreciationiscomputedusingthemostliberalmethodspermitted.Inaddition,certaincostscapitalizedforfinancialreportingpurposesaredeductedcurrentlyforincometaxpurposes.Theresultingtaxreductionsareoffsetbyprovisionsfordeferredincometaxesonlytotheextentorderedorpermittedbyregulatoryauthorities.TheIOXinvestmenttaxcreditrate,whichhadbeenscheduledtoreturnto4Xin1981,hasbeenmadepermanentbytheRevenueActof1978.Thepriorrateof4Xisappliedtoreducethecurrenttaxprovisionwhile,asrecommendedbythePSC,normalizedtaxaccountingisfollowedintheapplicationoftheremaining6X.TheCompanyusestheseparateperiodapproachincalculatingtheinterimquarterlytaxprovision.PensionPlan.TheCompany'sretirementplanisnoncontributoryandcoversallregularemployees.ExpendituresmadebytheCompanytotheretirementphnfortheyears1980,1979and1978were$11.4million,~10.6millionandS.9million,respectively,whichincludesamortizationfor:pastservicecostsover40years,changesintheplanover30years,andexperiencegainsorlossesover15years.Theactuarialmethodsandtheaccountingpolicy17 Actuarialpresentvalueofaccumuhtedphnbenefits:VestedNonvestedS107,486S99gZO8,8851,677SI16,371SI00,897Marketvalueofassetsavailableforbenefits..S94,499S80,082(a)MostrearitavaihbledataIheactuariallyassumedrateofreturnontheplaninvestments,usedindeterminingtheactuarialpresentvalueofaccumulatedplanbenefits,was6Xforallyearsshown.Theincreasein1980ofusedtodetermineCompanyexpenditureswerethesameeachyear.Acomparisonofaccumulatedplanbenefitsandplannetassetsispresentedbelow.(Thousands)January119791980(a)thepresentvalueofplanbenefitsreflectsanincreaseinbenefitstoretiredparticipantsandachangeinactuarialassumptionsregardingtheprovisionforanciihrybenefitsandtheapplicationoftheERISAmaximumtoallbenefits.EarningsandDividendsPerShare.Earningsapplicabletoeachshareofcommonstockarebasedontheweightedaveragenumberofsharesoutstandingduringtherespectiveyears,adjustedforstockdividends.Assumingthe1,500,000sharesofcommonstockissuedonNovember19,1980wereoutstandingatthebeginningof1980andtheproceedswereappliedtoreducetheshorttermdebt,theearningspersharefor1980wouldhavebeen~2.02,comparedwiththereportedamountof0.10.Cashdividendspershare,asshownonpage14,arebasedonthesharesoutstandingatthetimedividendsarepaid,adjustedforstockdividends.Cashdividendspershareattheratesdeclaredineachperiodwere$1.49for1980,~1.46for1979and41.42for1978.Note2.FederalIncomeTaxes(ThousandsofDollars)'TheprovisionforFederalincometaxesisdistributedbetweenoperatingexpenseandotherincomebaseduponthetreatmentofthevariouscomponentsoftheprovisionintheratemakingprocess.Atrightisasummaryofincometaxexpenseforthethreemostrecentyears.ThefollowingisarecondliationofthedifferencebetweentheamountofFederalincometaxexpensereportedintheStatementofIncomeandtheamountcomputedbymu!Iiplyingtheincomebeforetaxbythestatutorytaxrate.ChargedtooperatingexpenseCurrentDeferred.................Total.............Creditedtootherincome:CurrentDeferred.............Total..198019791978393S(36)S5,166123436,7825,8751?8366,74611,041(393)(321)(2&1)(5,516)(4,186)(?714)(5,909)(4,507)(5,215)TotaIFederalincometaxexpense..S6,927S2~9S5926198019791978%of%ofPretaxPretaxAmountincomeAmountIncome%ofPretaxAmountIncomeNetincomeAdd:Federalincometaxexpense.~43,6526,927S39,5652,239$39,5865,826incomebeforeFederalincometax.ComputedtaxexpenseIncreases(decreases)intaxresultingfrom:ExcessoftaxdepredationlessamountdeferredExpensescapitalizedforIinanchlreportingpurposes,indudinginterest,payrollandusetax,etc.InvestmenttaxcreditpropertytaxesonbasisofdateoftaxablestatusRevenuetaxes(deductedwhenpaid).Miscellaneousitems,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)InvestmenttaxcreditClasslifedepredationFuelcosts...............Nuclearfuelstoragecosts.SterlingabandonmentOther.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$21.6millionofinvestmenttaxcreditsforbothfinancialreportingandtaxpurposesthatareavailabletobecamedforward.Suchcredits,ifnotutilizedbeforehand,willexpireasfollows:1985-$938,000;1986-S12,490,000;and1987-S8,142,000.Fortaxpurposes,theCompanyhasanetoperatinglosscarryforwardof$11,966,000avaihb!ethrough1987,arisingprimarilyfromtheabandonmentoftheSterlingnuclearplant.18 Note3.OepartrnentalFinancialInformation(ThousandsofDollars)IheCompany'srecordsaremaintainedbyoperatingdepartments,inaccordancewithPSCaccountingpolicies,givingefFecttotherate-maMngprocess.ThefollowingistheoperatingdataforeachoftheCompany'sdepartmentsandnointerdepartmentaladjustmentsarerequiredtoarriveattheoperatingdataincludedintheStatementofIncome.ElectricGasSteamTotalOperatinginformation-1980Operatingrevenues.Operatingexpenses,exdudingprovisionforincometaxesS297,791237,142S181,046170,546S23,589S502,42622370430,058Pretaxoperatingincome.ProvisionforincometaxesNetoperatingincome.Otherincome.net.Interestcharges.Netincomeperstatementofincome.60,64910,500131972,36811,169131035712,836s49,480S9,190S86259,53216,4823236243,652OtherinformationDepredation.Nuclearfuelamortization.Capitalexpenditures.Investmentinformation-December31,1980Identifiableassets.AssetsutilizedforoverallCompanyoperations(a).TotalassetsperbalancesheetS21,859S20,789S75,080s5837s>>,966S870,603S176335604S27,80020,789696S87,742S16,439S1,063/7712,003S1,075,380Operatinginformation-1979Operatingrevenues.Operatingexpenses,exdudingprovisionforincometaxes.Pretaxoperatingincome.ProvisionforincometaxesNetoperatingincome..Otherincome,net.interestcharges.Netincomeperstatementofincome.~257,177>140,527SI9,988S417,692209~129,64519,896358,82447,89410,8829258,8685,6001314(168)6,746~42294>9~S26052,1221531327,770s39,565OtherinformationDepredation.Nuclearfuelamortization.Capitalexpenditures.........................Investmentinformation-December31,1979klentifiableassets.AssetsutilizedforoverallCompanyoperations(a).TotalassetsperbalancesheetS18,224S17,126S97,5774g$8SI3Sl34S789432$166,274591416sI6,41523,70317,126>>1,427S972,52110,329S982850Operatinginformation-1978Operatingrevenues.Operatingexpenses,exdudingprovisionforincometaxes.S231307S>>8,531S19,>>0S368,948181,428107,87319357308,658Pretaxoperatingincome.Povtsionforincometaxes49@799,24410,6581,966(247)60390(169)11,041NetoperatingincomeOtherincome,net.Interestcharges.Netincomeperstatementofincome.S40,635S8,692S(78)49,24913,12322,786s39,586OtherinformationDepreciation.Nudearfuelamoization.Capita!expenditures.investmentinformation-December31,1978IdentTableassets.AssetsutilizedforoverallCompanyoperations(a)Totalassetsperbalancesheet(a)Consistsprimarilyofcash,prepaymentsandunamortizeddebtexpense.sle,984S15,746Sioo,i94S711,917S>>,903sI46&9581455S15,716s22,206S15,746S112,552S873,93219,454S893~

Note4.LongTermDebtFirstMortgageBondsSenesDue(Thousands)PrincipalAmountDecember31198019792Y4M3YsH3Ys04~8R5S4'/zT4Ye(15.3V6'/iW6.7X8Y9YeZ10NAA9i/4.BB8%CC9'/zDD6'hEE10.95FFAug.15,1980...June1,1982....Mar.1,1985....July1,1987.....Oct.15,1989...Nov.15,1991...Sept.15,1994...May1,1996.....Sept.15,1997...July1,1998.....Aug.15,1999...Sept.1,2000....Aug.1,1983....June15,2006...Sept.15,2007...Dec.1~2003....Aug.1,2009....Feb.15.2005...S6,O0O10,00015,00012,00015,00016,00018,00020,00030,00030,00030,00029,66750,00050,00040,00010,00055.000S12,0006,00010,00015,00012,00015,00016,00018,00020,00030,00030,00030,00029,66750,00050,00040,00010,000436,667393,667Add:Bondpremium,netofdiscount..Less:Duewithinoneyear...........45749512,000TotalLongTermDebt...S437,124S382,162TheMortgageprovidessecurityforthebondsthroughafirstlienonsubstantiallyallthepropertyownedbytheCompany(exceptcashandaccountsreceivable).SinkingandimprovementfundrequirementsaggregateS333,540perannum.SuchrequirementsmaybemetbycertificationofadditionalpropertyorbydepositingcashwiththeTrustee.The1980and1979requirementsweremetbycertificationofadditionalproperty.TheSeriesEEFirstMortgageBondsequaltheprincipalamountofandprovideforallpaymentsofprincipal,premiumandinterestcorrespondingtothePollutionControlRevenueBonds,SeriesA(RochesterGasandElectricCorporationProjects)issuedbytheNewYorkStateEnergyResearchandDevelopmentAuthoritythroughaparticipationagreementwiththeCompany.TheSeriesEEbondsaresubjecttoamandatorysinkingfundbeginningAugust1,2000andeachAugust1thereafter.Nineannualdepositsaggregating~3.2millionwillbemadetothesinkingfund,withthebalanceofR.8millionprincipalamountofthebondsbecomingdueAugust1,2009.TheSeriesFFbondsaresubjecttoamandatorysinkingfundof~2.8millionannuallybeginningFebruary15,1986andeachFebruary15thereafter,withthenoncumulativeoptiontodoublethepaymentinanyyearuptoamaximumof5years.TheCompany'smaturitiesforthenextfiveyearsare8millionin1982forSeriesN,$29.7millionin1983forSeriesAAand410millionin1985forSeriesO.Note5.CapitalStockType,byOrderofSenioriParSharesSharesValueAuthorizedOutstandinPreferredStock(cumuhtive)...........41002,000,0001,170,000(a)PreferredStock(cumuhtive)...........25PreferenceStock1CommonStock..........5(a)SeeNote6formandatoryredemption.(b)RedeemableattheoptionoftheCompanyon30daysminimumnotice,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$67,000S67,000105Atanytime101Atanytime101Atanytime102.5Atanytime102Atanytime101Atanytime106Before6/1/82PreferredStock,notsubjecttomandatoryredemption:(Thousands)SharesDecember31RedemptionSeriesOutstandin19801979(rshare)(b)CommonStock:PerShareShares(Thousands)AmountOutstanding,January1,1978.3XStockDividendSaledStockAutomaticDividendReinvestmentPhn.CapitalStockExpenseOutstanding,December31,1978.3%StockDividendAutomaticDividendReinvestmentPhn.~p'apitalStockExpenseOutstanding,December31,1979.3%StockDividendSaleofStockAutomaticDMdendReinvestmentPhnCapitalStockExpenseOutstanding,December31~1980.'TaxReductionActStockOwnershipPlanS2L0018.7517.19-19.2518.001481-172515.8615.0013.251350-14.251?889,631386,6891g50,000206,42714,732,747441,983309,74770/8415,554381466,6461,500,000388,03817,909,5458,12023,4383,749(902)246,9387,9554,9671,116(544)260,4327,00019,8755~2(1,343)S291~6AtDecember31,1980therewere318,012sharesofcommonstockreservedandunissuedundertheAutomaticDividendReinvestmentPlan.Noothersharesofcommon,preferredor20preferencestockarereservedforoHicersoremployees,orforoptions,warrants,conversions,orotherrights.

Note6.PreferredandPreferenceStockSubjecttoMandatoryRedemptionTheCompanyisobligatedtoredeemsharesofpreferredstockasfollows:(Thousands)SharesDecember31RedemptionSeriesOutstandin19801979(rshare)RedemptionSeriesValue1985(Thousands)1984TheCompany'smaximumredemptionrequirementsthrough1985areasfollows:PreferredStockP250,000S25,000~25,000108.60Before9/1/84(a)1084Q25000025,000110.84Before9/1/85(a)PreferredPreferredPreferencePS10008,125Q1008,125A10028,000S8,125500,000450,000$25,000PreferenceStock7.6A280,000$28,000~28,000(b)(a)CommencingonSeptember1,1984forSeriesPandonSeptember1,1985forSeriesQandoneachSeptember1,thereafter,theCompanymustredeem8,125sharesat4100persharebymeansofasinkingfundprovisionwiththenoncumulativeoptiontoredeemnotmorethan8,125additionalsharesonthesameterms.IntheeventtheCompanyshouldbe~44350S8,125inarrearsinthesinkingfundrequirement,theCompanymaynotredeemorpaydividendsonanystocksubordinatetothepmferiedstock(b)DuringJanuary1985,theCompanymustoffertopurchaseonOctober1,1985ailoftheoutstanding7.6%SeriesAPreferenceStockatapriceofSI00pershare.Thesharesremainingoutstandingaftersuchofferarecaihbleat$100pershareattheoptionoftheCompanyatanytimeafterDecember20,1987.Note7.ShortTermDebtAtDecember31,1980and1979,theCompanyhadshorttermnotesoutstandingof$10millionand$25million,respectively,andcommercialpaperoutstandingof4153millionand$25million,respectively.Theweightedaverageinterestratesfor1980were14.53Xforshorttermnotesand12.24Xforcommercialpaper,andfor1979were13.75Xforshorttermnotesand11.50Xforcommercialpaper.TheCompanyhadestablishedbanklinesofcredittotaling~80millionattheendoftheyear.SinceJanuary1,1979,theCompanyhasmaintaineditslinesofcreditbypaymentofcommit.mentfeesbasedonapercentageoffloatingprimerates.Priortothatdate,thelinesofcreditweremaintainedthroughtheuseofcompensatingbalancearrangements.Commitmentfeespaidin1980and1979were4552/96and$280178,respectively.Note8.jointly&wnedFacilitiesThefo!lowingtablesetsforththejointlyawnedelectricgeneratingprojectsinwhichtheCompanyispartidpating.EachparticipantmustprovideitsownfinancingfortheNneMilePointunitintheprocessofconstructionandforanyadditionstotheOswegounit.OswegoHineivtileFossilPointNuclearGnit<<6Gnit<<2(I)(2)(3)(1)(3)TheCompany'sshareofdirectexpensesassociatedwiththeOswegounitisincludedintheappropriateoperatingexpensesintheStatementofIncome.Netmegawattcapacity......RGGEsshare-megawatts...-percent.....Yearofcompletion..........Totalestimatedprojectcosts...........RGGEsshare.RGGEsactualconstructioncosts-1979-1980ExpendedbyRGGEinprioryears......Accumulateddepredation(Commencedin1980)..S10.06.045.5S61.5(4)4113.0s(1.2)8501,084204152241419801986(MillionsofDollars)s24162(5)3523S23.718.870.5(1)ConstructedandoperatedbyYiagaraivtohavA<PowerCorpomtion.(2)inaccordancewithanorderissuedbythePSC,theCompanydeferredailincomeandexpensesassociatedwiththisunituntiltheplantwasaddedtoratebaseinJuly1980formtemakingpurposes.(3)Constructioncostsexcludeallowanceforfundsusedduringconstructionandcertainoverheadcoststobecapitalized.(4)itisanticipatedthatmodificationswillbemadetotheexistingplanttoincreaseopemtingeHidencyorreliability.Costsassociatedwiththesemodificationsarenotincluded.(5)lhepresentcostestimateexcludescommonfacilities,butincludes$116.2millionforinitialnuclearfuelloading.

Note9.CommitmentsandOtherMattersTheCompany'scapitalexpendituresprograminvolvesanestimatedexpenditureof4131.1millionin1981,notincludingallowanceforfundsusedduringconstruction,andtheCompanyhasentemlintocertaincommitmentsforpurchaseofmaterialsandequipmentinconnectionwithsuchprogram.OperationsoftheCompany'sgeneratingstationsaresubjecttovariousFederal,stateandlocalenvironmentalstandards.UndertheCleanWaterAct,theCompanyhasobtainedpermitstodischargepollutantsintothewaterbodiesadjoiningitsfacilities.TheUnitedStatesEnvironmentalProtectionAgency(EPA)issuedNationalPollutantDischargeEliminationSystempermitsforalltheCompany'smajorgeneratingfacilities,butanumberofconditionsrelatingtothermalandchemicaldischargelimitationswerecontestedbytheCompanyinadjudicatoryhearingrequestssubmittedtoEPA.TheCompany,theNewYorkStateDepartmentofEnvironmentalConservation"NYSDEC'whichbecameapartytotheadjudicatoryhearings)andEPAhavesettledthehearingrequestsasdescribedbe!ow.TheCompanyhasreachedagreementwiththeregulatoryagenciesonnonthermaleNuentlimitationsandfinalpermitscontainingtheseagreedlimitationshavebeenissuedandarenowcontinuingineffect,pendingfinalactionbyNYSDEConapplica-tionstorenewthesepermits.ConstructionoftreatmentfacilitiesrequiredforCompanycompliancewithpermitlimitationsattwooftheCompany'sgeneratingstationswascompletedin1980.ConstructioncostsofthesetwofacilitiestotaledS11.9million.TheCompanyhaspursuedresolutionofthecontestedthermallimitationsbysubmittingdemonstrationsinanefforttojustifylessstringentlimitationsforthreegeneratingstations.Thethermalconditionsofthepermitsremainstayedpendingresolutionofthethermalissueseitherthroughregulatoryagencies'pprovalofthedemonstrationsandlessstringentthermallimitationsor,intheabsenceofsuchapproval,throughtheresumptionoftheadjudicatoryhearingprocess.Ifthedemonstrationsandlessstringentthermallimitationsarenotapprovedforanyofthethreefacilities,theCompanycouldberequiredtoinstallcoolingtowerswhichwouldinvolvecapitalexpendituresestimatedatR7millionplussignificantoperatingandmaintenanceexpenses.TheNationalPollutantDischargeEliminationSystempermitsissuedin1978expiredonMarch30,1980.TheCompanyappliedtoNYSDECforrenewalofthesepermits.NYSDEChasextendedtheCompany'sedstingpermitsuntilfinalactionistakenonthependingrenewalapplications.TheCompanybelievesthatadditionalexpendituresandcostsmadenecessarybyenvironmentalregulationswillbefullyallowableforratemakingpurposes.Inthemid1970's,theCompanyandthreeotherNewYorkStateutilitiesagreedtoshareinthecostofaproposednuclear.poweredelectricgeneratingplantwhichtheCompanywouldlicense,build,andoperateforthegroupatSterling,CayugaCounty,NewYorkOutputoftheplantwastohavebeensharedinthesameproportions;theCompany'ssharewas28KAlthoughstateandfederalauthorizationsforconstructionwereobtained,theStatesitingagencyultimatelyrevokeditsauthorizationandthefederalconstructionpermitwasalsowithdrawn.Theparticipatingutilitieselectednottoappealthosedecisions,buttoterminatetheprojectAtDecember31,1980,theCompany'snetinvestmentintheplantissummarizedasfollows(inthousandsofdollars):ConstructioncostsLess:Estimatedtaxeffectofabandonment............$37,300.11,800$m,mTheCompany'sshareoftheestimatedcontractterminationcostswouldbeS7million,priortotaxsavings.TheCompanyandthethreeotherutilitiesparticipatingintheSterlingprojecthavepetitionedthePSCforpermissiontoamortizetheirinvestmentintheplantasacostofserviceoveraperiodoftimetobedeterminedineachparticipant'scurrentlypendingratecase.ProceedingswerecommencedbythePSCin1980toexaminethecostsincurredbythepetitioners,todeterminetheirprudenceandtodecidetherequestforamortizationoftheextraordinarypropertylossinrates.Theproceedingwasinitiallydividedintotwophases:PhaseItoresolvecertaingeneralprinciplesandphaseIItoconductamoredetailedexaminationofindividualcostitems.APhaseI-AwaslateraddedbytheCommis.siontoconsideraproposalthattheparticipantsnotrecoverthroughratesthecarryingchargesontheunamortizedinvestmentandtoconsider"anyotherissueofultimateresponsibilityforSterlingcosts".PhaseIwasconcludedwithanOpinionandOrderdatedJanuary6,1981,whichprovided,inpart,thatthecategoriesofexpendituresincurredfortheprojectuptoJanuary11,1978wereprudentinprinciple.Asaresult,PhaseIIoftheproceedingshasbeenexpandedtoconductanexaminationoftheprudenceofcategoriesofexpenditureafterJanuary11,1978,alongwithamoredetailedexaminationofindividualcostitems.TheOpinion,however,didstatethatwithregardtotheprudenceofcategoriesofexpendituresbetweenJanuaiy11andMay4,1978,thePSCStaffandintervenorswillhavetheburdenofgoingforwardinshowinganycategorytobeimprudent.TheCompanybelievesthatalloftheexpendituresincurredontheSterlingprojecthavebeenreasonableandprudent,andthereforewillultimatelyberecoveredthroughrates.'TheCompanyalsobelievesthatdecisionsofthePSCsupporttheCompany'srequestforanappropriatecanyingchargeontheunamortizedinvestment.TheutilitiesparticipatingintheSterlingprojectreceivedanorderdatedFebruary19,1980fromthePSC,inwhichitwasordered"(T)hatthepetitionersbeallowedtocontinue,untilsuchtimeasamortizationcommencestoberecoveredinrates,toaccrueandaccumulateanallowanceforfundsusedduringconstructionwithrespecttoprojectcosts."Theinvestmentof$373million mentionedaboveincludesS2.5millioninAFDCaccruedduring1980pursuanttothisorder.WithrespecttoasimilarcontinuationofAFDCundertheaccountingproceduresprescribedbytheFERC,authorizationbytheFERCisnecessary.SuchactionwasrequestedonMarch7,1980.I1ieFERChasnotactedonthematter.IftheFERCdoesnotauthorizecontinuationofaccrualandaccumuhtionofAFDContheSterlingprojectandifalternativeregulatoryreliefequivalenttheretoisnotgrantedbytheFERC,thentheparticipantswillnotbepermittedtoincludeinfinancialreports,basedontheFERCSystemofAccounts,theAFDCaccruedontheirinvestmentsubsequenttotheeffectivedateofthediscontinuanceoftheproject.However,onthebasisofthePSCorderofFebruary19,1980,theparticipantswouldcontinuetoaccrueandaccumulatesuchAFDCforPSCreguhtoiypurposesandforpurposesoffinancialreportsbasedonPSCaccounting.LegalactionshavebeeninstitutedagainsttheCompanyseeking$34.5millionincompensatoryandWmillioninpunitivedamagesforallegedpersonalinjuriesasaresultofexposuretoradiationattheCompany'sGinnanuclearpowerplantin1974.TheCompanyhasnotcompleteditsinvestigationoftheplaintiffs'llegationsanditcannotnowpredicttheoutcomeoftheseactions,norcanitpredictwhetheranyadditionalsimilaractionsmightbecorn.menced.Based,however,onitsinvestigationtodate,theCompanydoesnotbelievethephintiffswillprevailonthemerits,anditintendstocontesttheseclaimsvigorously.TheCompanyisfullyinsuredforthetotalcompensatorydamagesthataresoughtintheseactions,anditsinsurerhasadvisedtheCompanythatitwillfullydefendallclaims.However,theinsurerhasdischimedanyobligationforthepaymentofanypunitivedamageswhichmaybeassessedagainsttheCompany.ThereisprecedentinNewYorkStatethatitiscontrarytopublicpolicyforaninsurancecarriertopaypunitivedamagesassessedagainstitsinsured,butitisunclearwhetherthatprecedentwouldapplytothenuclearliabilityinsuranceinvolvedintheseactions.TheCompanyintendstocontestthedisclaimerofcoverageforpunitivedamages.Anadditionallegalactionhasbeenbroughtbytheplaintiffsinthoseactions.T1iisactionseekstorecover~10millionincompensatorydamagesandS13millioninpunitivedamagesforvariousallegedwrongsarisingoutofaCompanyinterofficememorandumadvisingitsfacilitysupervisorsthatnoneoftheplaintiffsshouldbepermittedontheCompany'sproperty.Theseclaimsarenotcoveredbyinsurance,andtheCompanywilldefendthemvigorously.OnJanuary19,1981,thePSCapprovedthemergeroftheCompanyandPavilionNaturalGasCompany(Pavilion).ItisexpectedthatthemergerwilltakeplaceonFebruary28,1981,atwhichtimetheCompanywillissueupto98,006additionalsharesofcommonstockinexchangeforthecommonstockofPavilion.Themergerwillbeaccountedforasapoolingofinterests.Hadthemergeroccurredin1980,theeffectsonreportedoperatingrevenues,netincomeandearningspersharewouldhavebeenimmaterial.ReportofIndependentAccountantsTotheShareholdersandBoardofDirectorsofRochesterGasandElectricCorporationInouropinion,theaccompanyingbahncesheetsandtherelatedstatementsofincome,retainedearnings,andofchangesinfinancialpositionappearingonpages14through16presentfairlythefiinancial'positionofRochesterGasandHectricCorporationatDecember31,1980and1979,andtheresultsofitsoperationsandthechangesinitsfinancialpositionforeachofthethreeyearsintheperiodendedDecember31,1980,inconformitywithgenerallyacceptedaccountingprinciplesconsistentlyapplied.Ourexaminationsofthesestatementsweremadeinaccordancewithgenerallyacceptedauditingstandardsandaccordinglyincludedsuchtestsoftheaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.1900LincolnFirstTowerRochester,NewYork14604January30,1981 SupplementalInformationConcerningtheEffectsofInflationTheestimatesoftheeffectofinflationontheoperationsoftheCompany,assetforthbelow,werepreparedonbasesprescribedbytheFinancialAccountingStandardsBoard(FASB)StatementNo.33,"FinancialReportingandChangingPrices."Thisstatementrequiresadjustmentstohistoricalcoststoestimatetheeffectsthatgeneralinflation(ConstantDollar)andchangesinspecificprices(CurrentCost)havehadontheCompany'sresultsofoperations.Thesedataarenotintendedassubstitutesforearningsreportedonahistoricalcostbasis.Theyoffersomeperspectiveoftheapproximateeffectsofinflationratherthanaprecisemeasurementoftheseeffects.UtilityPlant.Estimatedutilityplant,primarilyconsistingofplantinserviceandconstructionworkinprogress,wasdeterminedforconstantdollarsbyapplyingtheConsumerPriceIndexforAllUrbanConsumers(CPI.U)tothehistoricalcostofutilityplant.IhecurrentcostestimatesweremeasuredbyapplyingtheHandy.WhitmanIndexofPublicUtilityConstructionCoststothehistoricalcostofutilityplant.Currentcostisanestimateofthecostofcurrentlyreplacingexistingplant.TheresultingadjusteddataforplantundereitheroftheabovemethodsisnotnecessarilyindicativeoftheCompany'sfuturecapitalrequirementsbecausetheactualreplacementofexistingplantwilltakeplaceovermanyyearsandisnotlikelytobeareproductionofpresentlyexistingplant.Ihedifferencebetweencurrentcostandtheconstantdollardataresultsfromspecificpricesofplantincreasingataratedifferentfromtherateofgeneralinflation.AccumulatedDepreciation.Iheaccumulatedprovisionfordepreciationforconstantdollarsandcurrentcostwasdevelopedbyapplying,foreachclassofplant,thesamepercentagerelationshipthatexistedbetweengrossplantandaccumulatedprovisionfordepreciationonahistoricalbasistotherespectiveadjustedplantdata.DepreciationExpense.DepreciationexpenseforbothmethodswasdeterminedbyapplyingtheCompany'sdepreciationratestotherespectiveindexedplantamounts.ReductionofUtilityPlanttoNetRecoverableCost.1heregulatoryprocesslimitstheCompanytotherecoveryofthehistoricalcostofserviceinitsrates.'Iherefore,anyexcessofthevalueofutiTityplantunderconstantdollarsorcurrentcostmustbereducedtothenetrecoverablecost,whichishistoricalcost.Iheamountofthisexcessthataccruedasaresultofinflationinthecurrentyearmustbereducedtonetrecoverablecost.GainFromtheDeclineofPurchasingPowerofNetAmountsOwed.TheCompany,byholdingassetssuchasreceivables,prepay.ments,andinventory,suffersalossofpurchasingpowerduringperiodsofinflationbecausetheamountofcashreceivedinthefuturefortheseitemswillpurchaseless.Conversely,byholdingmonetaryliabilities,primarilylongtermdebt,theCompanybenefitsbecausethepaymentinthefuturewillbemadewithnominaldollarshavinglesspurchasingpower.TheCompanyhassignificantamountsoflongtermdebtoutstandingwhichwillbepaidbackindollarshavinglesspurchasingpowerand,therefore,forpurposesofthesecalculations,hasanetgainfromholdingmonetaryliabilitiesinexcessofmonetaryassets.IncreaseinprovisionfordepreciationIncreaseingeneralpricelevellessincreaseinspecificprices.......Reductionofutilityplanttonetrecoverablecost............Gainfromthedeclineinpurchasingpowerofnetamountsowed.....Totalerosionofshareholders'quityduetoinflation......430,192'41,63578,18139,62427,114(66,725)(66,725)>41,&$8~41,648OtherItems.AsallowedbyFASBStatementNo.33,itemsintheincomestatement,otherthandepreciationexpense,werenotadjusted.Thecostoffuelusedinelectriproductionandthecostofgassoldwerenotadjustedbecausetheeffectonearningswasnotmaterialduetotherelativelyshortturnoverperiodbetweentheincurrenceofthesecostsandtheirrecoverythroughthefueladjustmentclause.IheregulatoiyprocesslimitstheamountofdepreciationexpenseindudedintheCompany'srevenueallowanceandlimitsutilityplantinratebasetooriginalcostSuchamountsproducecashflowswhichareinadequatetoreplacesuchpropertyinthefutureorpreservethepurchasingpowerofcommonequitycapitalpreviouslyinvested.Whilethiseffectispartiallymitigatedbythebenefitderivedformhavinglongtermdebt,theCompanyhasanetpurchasingpowerlosswhichisexperiencedbythecommonstockshareholderandcanonlybeovercomeasaresultofadequateraterelief.However,theCompanyexpectsthatitwillbeabletoestablishrateswhichwillcovertheincreasedcostsofnewplantwhensuchcostsareincurred.Federalincometaxpolicyignorestheeffectsofinflationinmeasuringtaxableincome.Higherdepreciationexpenseunderconstantdollarandcurrentcostaccountingisnottaxdeductible.Therefore,theCompany'seffectiveFederalincometaxrate,whenadjustedforinflation,is48.8percentunderconstantdollarand86.4percentundercurrentcostfor1980,eachofwhichexceedsitsreportedeffectivetaxrateof22.7percent.Theerosionofshareholders'quityduetochangingpricesissummarizedintermsofgeneralinflationandintermsofchangesinspecificprices,asfollows:lnTermsofInTermsofGeneralChangesinInThousandsofAverage1980DollarsInflationSpecificPrices StatementofIncomefromContinuingOperationsAdjustedforChangingPricesFortheYearEndedDecember31,1980(ThousandsofDollars)OperatingrevenuesConstantDolhrCurrentCostHistoricalAverageAverageCost1980Dolhis1980Dollars~502,426~502,4264502,426OperatingexpenseMaintenanceexpenseDepreciationexpenseTaxexpense-local,stateandother.Incometaxexpense.InterestexpenseOtherincomeanddeductions-net.313,22632,04827,80056,98412,83639,182(23,302)313,22632,04857,99256,98412,83639,182(23,302)313,22632,04869,43556,98412,83639,182(23,302)NetincomeDividendsonpreferredandpreferencestockEarnings(loss)applicabletocommonstockChangeinnetassetsduring1980duetoincreaseinspecificpricesLess:Increaseingeneralpricelevel..Netchangeduring1980.ReductionofutilityplanttonetrecoverablecostGainfromdeclineinpurchasingpowerofnetamountsowed458,774488,966500,40943,65213,4602,0178,9278,9278,927~34,725~4,533"~(6,910)~193,984"233,608(39,624)~(78,181)(27,114)S66,725$66,725'EarningsapplicabletocommonstockonaconstantdolhrbasiswouldhavebeenalossofS73,648ifthereductionofutilityphnttonetrecoverablecosthadbeeninctudei"AtDecember31,1980,currentcostofutilitypropertynetofaccumulateddepredationwasS2,10?868,whilerehtedhistoricalcostornetrecoverablecostwasS950,474.Five.YearComparisonofSelectedFinancialDataAdjustedforChangingPrices(InThousandsofAverage1980Doihis)YearEndedDecember3119801979197819771976OperatingrevenuesAsreported.Inaverage1980dollars.HistoricalcostinformationadjustedforgeneralinflationEarningsapplicabletocommonstock'arningspercommonshare,adjustedforstockdividends'etassetsatyearendatnetrecoverablecostCurrentcostinformationLossapplicabletocommonstock'.Losspercommonshare,adjustedforstockdividends'..........ExcessofincreaseingeneralpriceleveloverincreaseinspeciTicpricesafterreductiontonetrecoverablecostNetassetsatyearcndatnetrecoverablecostGeneralinformationGainfromdeclineinpurchasingpowerofnetamountsowed.....Cashdividendspercommonshare,adjustedforstockdividendsAsreported.Inaverage1980dollarsMarketpricepercommonshareatyearwndAsreported.InDecember1980dollars.AverageconsumerpriceindexDecemberconsumerpriceindex'Excludesthereductionofutilityphnttonetrecoverablecost.4,533$.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$19.8829.46170.5174.3 InterimFinancialData$KSandBectrtoCorporationIntheopinionoftheCompany,thefollowingquarterlyinformationincludesalladjustments,consistingofnormalrecumngadjust.ments,necessaryforafairstatementoftheresultsofoperationsforsuchperiods.ThevariationsinoperationsreportedonaquarterlybasisarearesultoftheseasonalnatureoftheCompany'sbusinessandtheavailabilityoftheCompany'sGinnanuclearplant.Earningspercommonsharehavebeenadjustedforstockdividends.OperatingRevenues(Thousands)EaminPerOperatingNetEamingsOnCommonFhareIncomeIncomeCommonStock(indollars)December31,1980September30,1980June30.1980.March31,1980.December31,1979September30,1979June30,1979March31,1979.December31,1978September30,1978June30,1978March31,1978.$141,344102,130105,395153,557108,24383,010105,766120,6739231273,66586,942116,029812,77414,26812,23320,25711,2798,24414,26518,3348,4669,52712,00919,247S8,1599,3359,14117,0177,1945,21110,93916,2207,0886,5969,90915,993s5,5256,9567,18415,0605,2373,3629,52014,8015,6695,1758,49014,574S.32.42.44.9332.21.603635.591.03CommonStockandDividends198019791978Earningsperweightedaverageshare...........Numberofshares(000's)WeightedaverageProformaweightedaverageafterstockdividendpaidinfollowingyear(Seebelow)...ActualnumberatDecember31..............Numberofshareholders.Pricerange(SalesonHewYorkStockExchange).1stquarter2ndquarter.3rdquarter.4thquarter.Cashdividendspaid1stquarter2ndquarter.3rdquarter.4thquarter..Stockdividendpaid(Seebelow)...............2.1016,47216,96617,91050,416HighLow15>/411'/415'/411%14s/413s/4.13r/s11'hS.37.37.37.383%$2.0815,815$23214,613$363637373%.3536363X16,28915,05115,55514,73348,54348,148HighLowHighLow18%1P/421r/t17'/e17'5%18/s17s/s171619/e181614r/t18M16thThe22ndannualstockdividendwaspaidbytheCompanyonFebruary25,1981attherateof3%.TheforegoingCommonStockpriceshavenotbeenadjustedforsubsequent3%stockdividendspaidinFebruary1978,1979,1980and1981.TheCompanyhaspaidcashdividendsquarterlyonitsCommonStockwithoutinterruptionsinceitbecamepubliclyheldin1949.TheCompanyintendstocontinuethepracticeofpayingcashdiVidendsquarterlyandwillconsiderthepaymentofastockdiVidendannually,althoughtherecanbenoassuranceastothedeclarationoffuturedividendssincetheynecessarilywillbedependentupontheCompany'sfutureearnings,itsfinancialrequirementsandotherfactors.IntheeventtheCompanyshouldbeinarrearsintheredemptionofitsSeriesPorSeriesQPreferredStockpursuanttothesinkingfundprovisionofsuchseries,theCompan'ymaynotpurchaseorotherwiseacquireforvalue,orpaydividendson,anysharesofitsCommonStockFortheyears1978and1979cashdiVidendspaidwere100KtaxableforFederalincometaxpurposes.TheCompanyestimatesthatcashdividendspaidduring1980willbe100Xnontaxable.26 Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperationsDuringthethreeyears1978through1980,theCompanyhasexperiencedtheeffectsofhighinflation,recordsettinginterestrates,andimperfectionsinherentintheregulatoryratemakingprocess.Theirimpactisevidentthroughoutthestatementsofincomeandbalancesheetsshownonpages14and15.Theeffectsofinflationarefurthersetforthinthesupplementalinformationonpages24and25.AlthoughtheCompanyisnotconvincedthesetrendsarepermanent,therehasbeenagradualerosionofthelongtermfundamentalfinancialstrengthoftheCompanywhichhistori.callyhasprovidedacertaindegreeofflexibilityinlongtermplan.ning.Ihislossofflexibilitybecomesapparentthroughthereductionincashflowasaresultoftheincreasesinsuchworkingcapitalitemsasaccountsreceivableandfuelinventories.lheCompany'sfinancialflexibilityhasalsobeenconstrainedbythenecessitytocommittomajorconstructionprojectstomeettheanticipatedenergyneedsofourcustomers.Plannedincreasesinelectricgeneratingcapacityrequirelongtermcapitalcommit.ments,suchasNineMilePointGnit2,anuclearunitbeingbuiltbyNiagaraMohawkPowerCorporationinwhichtheCompanyhasa14Xinterest,nowscheduledforcommercialoperationinlate1986.Also,asignificantportionoftheCompany'scapitalexpendi.tureprogramiscomprisedofgovernmentmandatedmodificationsandadditionstoexistingplantandequipment.Atpresent,theCompanyanticipatesthat30Xto40Koftheaddi.tionalfundsitrequireswillbegeneratedinternally.Thebalancewillhavetobeobtainedthroughthesaleofsecuritiesandshorttermborrowing.TheCompany'sabilitytoobtainfinancingdependsonreceivingregulatoryapprovalsforrateincreasesadequatetomaintaintheCompany'sfinancialsoundness.RegulatorypoliciesregardingbothcashflowitemsandratesofearningshaverestrictedtheCompany'sabilitytointernallygenerateappropriateamountsofcashtofinanceitsgrowingconstructionprogramandhaverestricteditsabilitytosecurefinancingatadvantageousrates.Thesepolicies,togetherwiththeeffectsofinflationandthehighcostsofborrowing,haverequiredtheCompanytobecomemoreaggressiveinseekingapprovalsforrateincreases.I)tisisevidencedbytheshortperiodoftimebetweentheJuly18,1980PSCdecisioninthelastproceedingandtheAugust27,1980filingoftheCompany'scurrentproceeding.lnJanuaiy1981itbecameclearthattheCompanyhadunder.estimatedthedurationandmagnitudeofthecurrentdownturninthebusinesscycleasreflectedinitsprojectionofrateyearfinancingcostsinthecurrentrateproceeding.Thus,theCompanyamendeditsinitialpermanentrequesttoreflectanincreaseintherequestedrateofreturnonratebasefrom10.95%to11.35%.Also,theCompanyappliedfortemporaiyelectricandgasrateincreases,tobeeffectiveonoraboutMarch1,1981,ofapproximately$30millionand$5million,respectively,basedonforecastedsalesvolumesforthetwelvemonthsendedJuly31,1982.TheCompanyhaspresentedevidenceintheproceedingthat,ifthetemporaryrateincreasesarenotpermitted,theCompanywillfaceaseriousriskofhavingtheratingofitsiirstmortgagebondsloweredwhenitnextsellssuchbonds.TheCompany'srequestforan18Kincreaseinsteamrates($3.6millionperyear)wasapprovedbythePSCandtheratesbecameeffectiveFebruary18,1981.IheCompanyisunabletopredicttheamountofthependingincreases,ifany,thatwillbeallowedbythePSC.Ihefollowingfinancialreviewidentiflesthecausesofsignificantchangesintheamountsofrevenuesandexpenses,comparing1980to1979and1979to1978.TheNotestoFinancialStatementsonpages17to23ofthisreportcontainadditionalrelatedinformation.ChangesInOperatingRevenuesIncreaseor(Decrease)fromPriorYear(IhousandsofDollars)ElectricDepartment19801979GasDepartment19801979SteamDepart'ment19801979CustomerRevenues(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.TotalChangeinOperatingRevenues.25,63216,74240,51921,9963,60187814,9829,128$40,614$25,870$40,519$21,996$3,601$878RevenuesfromelectricsalestootherutiTitiesincreasedinboth1980and1979.Fluctuationsinelectricsalestootherutilities,andinpurchasedelectricitydiscussedbelow,generallyarerelatedtotheavaihbilityofelectricgenerationfromtheGinnanuclearplant.ElectricandSteamFuels..PurchasedBectricity.....PurchasedNaturalGas...OtherOperation.Mantenance$18,640(8,141)37,9559,6961,919$2,93112,60018,6956,5793,883TotalChangeInOperationandMaintenanceExpense.......$60,069$44,688Ihe1980increaseinelectricandsteamfuelsexpensewasmainlyduetoanincreaseinelectricitygeneratedin1980andanincreasedfuelcostperkilowatt.hourgenerated.ChangesInOperationandMaintenanceExpensesIncreaseor(Decrease)fromPriorYear(ThousandsofDollars)19801979Purchasedelectricityexpensedecreasedin1980duemainlytothehigh76%availabilityoftheGinnanuclearpowerplantandanincreaseinsystemnetgeneratingcapacityoccasionedbythestartupofOswegoGnit6.Purchasedelectricityincreasedin1979duetobothhighercostsandhigherkilowatt.hourpurchases.Purchasednaturalgasexpenseincreasedin1980and1979asaresultofhigherpipelineratesandin1980alsoincreasedduetoamodestincreaseinconsumptioninthenonresidentialsector.Otheroperationexpenseincreasedin1980andin1979largelyasaresultofhigherwagesandemployeebenefitcosts.Taxes-local,stateandotherincreasedin1980andin1979principallyduetotheincreasedgrossincometaxrateandincreasedrevenues.The1980increasealsoreflectstaxesonOswegoGnit6whichwerecapitalizedduringitsconstructionandarenowbeingexpensed.ChangesinFederalincometaxesareexplainedinNote2totheNotestoFinancialStatements.27 The1980increaseinallowanceforfundsusedduringconstructionof$13millionwasduetotheincreasedratesappliedduringtheperiod,theeffectofwhichwasreducedbylowerutilityplantexpendituresandbythetransferoftheCompany'sshareoftheOswegoUnit6oil-firedgeneratingp!antfromconstructionworkinprogresstoutiTityplant.The1979increaseof~3.7millioninallowanceforfundsusedduringconstructionwasduetoincreasedratesappliedduringtheperiodandtoincreasedutilityplantexpenditures.Interestonlongtermdebtincreasedin1980andin1979asaresultofadditionalbondsissuedinFebruaryandMay1980,August1979andDecember1978.Shortterminterestratesandborrowinglevelsfor1980and1979wereapproximatelyequal.'TheS2.4millionincreaseinthe1979interestonshorttermdebtresultedfromhigherinterestratesandanincreaseof$14.6millionintheaverageamountofshorttermdebtoutstanding.DMdendsonpreferredandpreferencestockincreased~2.3millionin1980and~1.0millionin1979becauseofadditionalpreferredstockissuedinAugust1980andJuly1979.SelectedFinancialDataSummaiyofOperations(ThousandsofDollars)YearEndedDeceinber31198019791978197719761975OperatingRevenuesElectric.GasSteamS245,005$219@73$202,631$179,940$170,558181,046140,527118,531105,797101,02723,58919,98819,11019,00418&3$146,62982,47817/37Electricsalestootherutilities..449,64052,786379,88837,804340,27228,676304,74126,403289,96818,259246,44425,496TotalOperatingRevenues502,426417,692368,948331,144308,227271,940OperatingExpensesOperationElectricandsteamfuels......Purchasedeiectricity.........Purchasednaturalgas.......Other.MaintenanceDepreciationTaxes-local,stateandother....Federalincometax-current....-deferred...79,71123,796127,75981,96032,04827,80056,98439312,44361,07131,93789,80472,26430,12923,70349,916(36)6,78258,14019/3771,10965,68526/4622/0645,9355,1665,87556,99313,63562,08662,4942237221,05343,8769612,8974636118,19556,19257,67720/0618,62140,502(291)5,65646,2681231242,24750,62919,70017,41436,1574,1621,133TotalOperatingExpensesOperatingIncomeOtherIncomeandDeductionsAllowanceforotherfundsusedduringconstruction.Other,net.442,89459,53211,7104,772365,570319,699286f67263,119229,92252,12249,24944,77745,10842,01811,4398,7056,4734,67823103,7744,41813101,128537TotalOtherIncomeandDeductions....16,48215,21313,1237,7835,8062,847IncomebeforeInterestCharges...76,0146733562/725256050,91444,865InterestChargesLongtermdebtShorttermdebt.Other,net.Allowanceforborrowedfundsusedduringconstruction.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..32,36227,77022,78619,51117,82518,494NetIncome43,652DividendsonPreferredandPreferenceStock,atrequiredrates.8,92739,56539,58633,04933,08926,3716,6455,6786,5126,2454,054EarningsApplicabletoCommonStock......S34,725$32,920$33,908426,537426,844S22,317Weightedaveragenumberofsharesoutstandingineachperiod,adjustedforstockdividends(000's).EarningsperCommonShare...............16,472$2.1015,81514,61313,23412,71311,656S2.08>2.32~2.00~2.11~1.91CashDividendsperCommonShare.adjustedforstockdividends.s1.48SI.41SI.22$1.08 SelectedFinancialData(Continued)CondensedBalanceSheet(ThousandsofDo!lars)AtDecember31198019791978f9771976f975ASSETSGtilityPlant,atoriginalcost............Less-Accumulateddepreciationandamortization.Constructionworkinprogress...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.InvestmentinSubsidiary,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.CAPITALIZATIONANDLIABILITIESCapitalizationLongtermdebtPreferredstocksubjecttomandatoryredemptionPreferredstockredeemableatoptionofCompanyPreferencestocksubjecttomandatoryredemptionCommonshareholders'quityCommonstock.RetainedearningsTotalcommonshareholders'quity...437,124$382,162$384f03$361,022S311f95$267,31450,00067,00028,000291,34683,97025,00067,00028,000260,43280,15592,00089,00067,00028,000246,93877/3867,00028,000212,53370,819181/01173,58667,81260,502375,316340,587324,276283/52249,113234,088S1,075,380$982,850$893~6$798,374$720,763$650,447TotalCapitalization...........CurrentUabilitiesDeferredCreditsandOtherLiabilities..957,44085,51032,430842,749803,579739@74652,508590,402115,29168/6242,81354,65251,71224,81021,44516,18713,6038,333TotalCapitalizationandLiabilities...$1,075,380$982,850$893,386$798,374$720,763S650,447FinancialDataAtDecember311980f97919781977f976f975CapitalizationRatios(percent)LongtermdebtPreferredandpreferencestock..Commonshareholders'quity...TotalBookValueperCommonShareAdjustedforStockDividends-YearEnd...............RateofReturnOnAverageCommonEquity-YearEnd(percent)EffectiveFederalIncomeTaxRate(percent)...DepreciationRate-Electric................-Gas...................InterestCoveragesBeforefederalincometaxes(incld.AFDC)...(excld.AFDC)...Afterfederalincometaxes(incklAFDC).....(excld.AFDC)....45.715.139.2100.0S20.969.8613.73.092.862.331.862.111.649.8511.2210.0211.16'0.185.412.86.2I0.614.43.103.093.002.902.792.792.792.672.632.602.251.732.181.672.652.162.431.942.451.982.361.892.792.432.602.242.562.382.332.1545.447.848.847.745.314.211.812.914.115.140.440.438338.239.6100.0100.0100.0100.0100.0$21.26$20.75$20.12$19.47$18.5629 ElectricDepartmentElectricRevenue(000's)Residential.Commercial.industrialOther.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..OtherelectricutilitiesTotalelectricrevenueElectricExpense(000's)Fuelusedinelectricgeneration..Purchasedelectricity.Otheroperation.MaintenanceDepreciation.Taxes-local,stateandother....Hectricrevenuedeductions.OperatingIncomebeforeFederalIncomeTax.....Federalincometaxincludinulatoallowance0eratfnIncomefromElectric0erations(000's)ElectricOperatingRatio%.ElectricSales-KWH(000's)Residential.CommercialIndustrial.OtherHectricsalestoourcustomersOtherelectricutilitiesTotalelectricsales.ElectricCustomersatDecember31Residential.Commercialindustrial.OtherTotalelectriccustomersElectricityGeneratedandPurchased-KWH(000's)Fossil.Nuclear.Hydro.PumpedstorageLessenergyforpumping.OtherTotalgenerated-NetPurchased,.TotalelectricenerElectricGenerationCosts(000's)Fossil.NuclearOther.245,00552,786297,79163,43023,79664,13924,40421,85939,514237,14260,64911,169S49,48059.01,730,2131,424,2831,564,952466,9755,186.4231,620.9296,807,352257,22724,5241,3882,331285,4702,301,288',081,572179,335122,809(191,044)9,3895,503,3491,758,6087,261,957S62,55439,7131,355518219,37337,804257,17746,99931,93754,27722,67518,22335,172209,28347,8945,60004?29460.61,710,0901,404,9311,579,364469,1355,163,5201,526,9256,690,445254,09724,2341,3942,37428?0991,956,5992,945,721210,353151,911(217,758)"17,2575,064,0832,051,5687,115,651S42,11629,9431,233813202,63128,676231.30745,09319,33747,60219,30516,98333,108181.42849,8799,244~40,6351,701,9381,417,6241,517,988465,3735,102,9231,445,3916,548,314251,64524,1371,3482,423279,5532,025,6453,206,313192,278133,287(189,453)1,0865,369,1561,579,8636,949,019$38,99525,5611,22957179,94026,403206,34344,01013,63545,01116,33915,33331,530165,85840,4854,041>36,44457.71,660,4251,392,0231,431,855454,0594,938,3621,453,5906,391,952250,12124,0231,3532,328277,8252,272,1823,018,30522?391193,340(283,573)8505,423,4951,400,5056,824,000$40,55722,3301,13244170,55818,259188,81734,24718,19540,93014,79613,86528,543150,57638,2413,102435,13957.31,618,3141,366,0941,384,235437,0974,805,7401,187,9425,993,682249,17723,9831,3712,271276,8022,060,1862,040,746277,010118,716(180,317)2,7974,319,1382,106,9046,426,042S36,90113,485973118146,62925,496172,12533,44212,21235,66214,28212,73125,369133,69838,4275,069433,35855.51,530,4211,294,8161,284,940411.1224,521,2991,864,0506,385.349246,61323,8741,3802,305274,1721,731,7233,026,894265,40198,743(148,180)2,1984,976,7791,888,0916,864,870$33,12014,1911,03063HectricDepartmentFuelFossil-TotalBTG(million).-CentspermillionBTG..Nuclear-TotalBTG(million).....-CentsrmillionBTG..24,610,400205.31..33,878,80461.3620,874,198152.1831,897,51353.8121,139,146144.2735,812,17143.9723,862,599136.9237,822,20938.0421,822,976137.4223,837,62025.6918@88,874142.1833,128,47122.91SystemNetCapability-KWatDecember31Fossil.NuclearOther.PurchasedTotalsternnetcabili637,000470,00047,00029,000357,0001,540,000443,000470,00047,00029,000359,0001,348,000443,000470,00047,00029,000339,0001,328,000443,000470,00047,00029,000338,0001,327,000452,000470,00047,00029,000342,0001,340,00045?000470,00047,00029,000356,0001,354,000NetPeakLoad-KW.1,003,000AnnualLoadFactor-Net%...................64.0'Exdudes79,274,000IOVHoftestperiodgenerationatOswegoGnit6.950,00067.1983,00063.9987,00062.0934,00063.8925,00061.730

'GasDepartmentRL~~iiandHect'orpomthnGasRevenue(000's)Residential.Residentialspaceheating.CommercialIndustrial.MunicipalandotherTotalgasrevenueYearEndedDecember31]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)PurchasednaturalgasOtheroperation.Maintenance.......DepreciationTaxes-local,stateandother..GasrevenuedeductionsOperatingIncomebeforeFederalIncomeTax...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]04,5004,1378,71572,9099,569914OperatingIncomefromGasOperations(000's)S9,1909,5688,6928,1859,2698,655GasOperatingRatio%GasSales-Therms(000's)Residential.ResidentialspaceheatingCommercial.IndustrialMunicipal.Totalgassales.GasCustomersatDecember31Residential..........ResidentialspaceheatingCommercial.IndustrialMunicipal.TotalgascustomersGas-Therms(000's)Purchasedforreformingandmixing..PurchasedforresaleOther.Totalgasavailable.Costofgaspertherm.TotalDailyCapacity-ThermsatDecember31MixedgasStraightnaturalgas.Totaldailycapacity83.213,257240,27385,29175,82919,842434,49232,479165,55613,281846995213,157458,69718,392477,08926.34C3,660,0003,660,000'0.113,149247/8983,24865,99516,962426,74335,258159,91612,60082]1,047209,642436,95616,388453~20.63C4,164,0004,164,00078.213,465255,95182,45163,70917,748433,32438,013154/6612,0927591,084206/14449,90413,178463,08215.26C4,164,0004,164,00077.713,833252,92377,75159,95615,975420,43839,977152,85611,268746989205,836428,81110,123438,934]4.43C4,164,0004,164,00074.914,404275,58286,40072,84718,598467,83140,892153,58311,475757936207,6439,830478,9357,911496,67611.37C4,164,0004,164,00072.814,328249,22478,21765,76016,705424,23441,437153,84811,390756957208~823,160421,2527,019451,43110.19C269,0003,895,0004,164,000Maximumdailysendout-Therms...............3,274,740DegreeDays(CustomerBilling)Fortheperiod.......................6,833Percent(warmer)colderthannormal...........1.43,380,6706,981433,183,6787,0214.53,578,4683,497,8616,7266,905(0.1)].63,041,0706,211(72)'Hewmethodfordeterminingdailycapacity,basedoncurrentnetworkanalysis,reflectsthemaximumdemandwhichthetransmissionsystemcanacceptwithoutaddiciency.31 SteamDepartmentYearEndedDecember31198019791978197719761975SteamRevenue(000's)Commerciallndustrial.MunicipalandotherTotalsteamrevenueS6,9151,4,2222,45223,589$5,873S6,087S6f52S6,401S5,66811,83310,73210,4559,7999,8622,2822,2912,1972,1831,80719,98819,11019,00418,38317,337SteamExpense(000's)Fuelusedinsteamgeneration..Otheroperation.MaintenanceDepreciation.Taxes-local,stateandother...16,2811,2751,3356032,87614,0721,4681,2085912/5713,04712,98312,11412,8262,2732,4111,8261,6571,17395590091858158056254623822,2572,2302,073Steamrevenuedeductions.OperatingIncomebeforeFederalIncomeTax..Federalincometax22,3701,21935719,89619/5619,18617,63218,02092(246)(182)751(683)(168)(168)(330)51(688)OperatingIncomefromSteamOperations(000's)..S862260S(78)S148S700S5SteamOperatingRatio%.SteamSales-Lbs.(000's)CommercialIndustrialMunicipalTotalsteamsales80.1678,2251,487,176248,4782,413,87983.886386.080.7789/64898,904933,6091,041,415980,3241,682,7801,718,5651,682,0331,738,3911,839,402320,026346,031334,645367,553325,7272,792,1702,963,5002,950,2873,147,3593,145,453SteamCustomersatDecember31CommercialIndustrial.Municipal.Totalsteamcustomers.186612427122170273182387031339254743236027177323802817731SteamProduced-Lbs.(000's)Producedbysteamdepartment...........By.productsteamfromelectricdepartment.Totalsteamproduced.SteamDepartmentFuelTotalBTG(million)CentspermillionBTG.1,376,1531,395,9952,772,1484,658,641357.431,3913451353,0531,194,1321,408,0291P87W31,736,7441,987,6382,133,8532,193,2832~4,6933,127,9893,340,6913,327,9853,601,3123,732,0565378,4545,705,9435,548,2906,022,3606,230,767271.28226.21232.60203.35203.08RateIncreasesGrantedClassofSaviceAmountofIncreaseAuthorizedEffective(AnnualBasis)PercentDateofIncrease(0(Xys)IncreaseRateBaseulPendingRequestsClassofSeNiceDateofFilingAmount(Ops)PercentElectricGasSteamApril20,1976Hovember11,1977february18,1978lvtay2,1979July26,1980April20,1976Hovember11,1977February2,1978hhy2,1979July26,1980April15,1975December15,1979February18,1981Sl1,002IO,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'ugust27,1980S61,900I9.1%Gas"August27,19807/$03.0'OnJanuary16,1981,theCompanyfiledarequestforpermissiontoadopttemporaryrateincreasesforelectricandgasservice.ThisrequestwouldIncrease1981electricrevenuesbyapproximatelySI2millionand1981gasrevenuesbyapproximatelyS1.7million.32 DirectorsTheodoreJ.AltierJ'hairmanoftheBoardandTreasurer,AMer6SonsShoes,Inc.KeithW.Amish'residentandChiefOperatingOfficer,RochesterGasandElectricCorporationPaulW.Brigg'v'hairmanoftheBoardandChiefExecutiveOfficer,RochesterGasandElectricCorporationWilmotRCiaigfFormerairmanoftheBoard,LIncolnFirstBanksInc.E.KentDamon'trav'icePresidentandSecretary,XeroxCorporationFrancisE.Drake,Jr.'t4ChairmanoftheExecutiveandFinanceCommittee,RochesterGasandElectricCorporationJ.WallaceEIy*tChairmanoftheBoard,SecurityNewYorkStateCorporationWalterA.Fallon/ChairmanoftheBoardandChiefExecutiveOfficer,EastmanKodakCompanyDanielG.Kennedy'etiredPartner,Nixon,Margrave,Devans6DoyleTheodoreLLevinsonfPresidentandChiefExecutiveOfficer,StarSupamarkets,Inc.PaulA.MicrPmfessor,RochesterInstituteofTechnologyConstance¹MitchellCommunityRelationsCoordinator,Industria!ManagementCouncilofRochester,NewYork,Inc.ComeliusJ.MurphyGroupVicePresidentandGeneralManager,EastmanKodakCompanyWilliamG.vonBerg'trav'hairmanoftheBoardandChiefExecutiveOfficer,SybronCorporationLeonD.White,Jr.ExecutiveVicePresident,RochesterGasandElectricCorporation'MemberoftheExecutiveandFinanceCommitteeoftheBoardofDirectorsmemberoftheAuditCommitteeoftheBoardofDirectorsmemberoftheSahryReviewCommitteeoftheBoardofDirectorsv'MemberoftheNominatingCommitteeoftheBoardofDirectorsOfficersPaulW.BriggsChairmanoftheBoardandChiefExecutiveOIficerAge58,YearsofService,35KelthW.AmishPresidentandChiefOperatingOfficerAge57,YearsofSavice,33LeonD.White,Jr.ExecutiveVicepresidentAge61,YearsofService,43HanyG.SaddockSeniorVicePresident,FinanceandRatesAge51,YearsofService,30MarloSilvestroneSeniorVicePresident,GeneralServicesAge57,YearsofService,30JohnEArthurVicePresidentandChiefEngineerAge51,YearsofSavice,25JosephJ.HartmanVice.President,GasandTransportationAge56,YearsofService,34RobertCHendersonVicePresident,RatesAge40,YearsofSavice,17DavidK.LaniakVicePresident,EiectricSystemPhnningandOperationAge45,YearsofSavice,26JohnEMaierVicepresident,EhctricandSteamProductionAge53,YearsofService,33RichardJ.RudmanVicePresident,ElectricTransmissionandDistributionAge53,YearsofSavlce,35DeanW.CapleSecretaryAge57,YearsofSavice,32DavidC.HeiligmanTreasurerandAssistantSeaetaryAge40,YearsofSavice,17FrancisA.Sullivan,Jr.ControllerAge57,YearsofSavice,30RobertW.BallAssistantTreasurerAge64,YearsofSavlce,42StephenKowbaAssistantControllerAge61,YearsofSavioe,30John¹KuebelAuditorAge45,YearsofService,16ShareholderInquiriesCommunicationsregardingstocktransferrequirements,lostcertificatesordividendpaymentsmaybedirectedtoLincolnFirstBank,NA.OtherinquiriesshouldbedirectedtoD.W.Caple,SecretaryattheCompany.TheCompanywillprovide,withoutcharge,acopyoftheAnnualReportonForm10.KfiledwiththeSecuritiesandExchangeCommissionwithrespecttofiscalyear1980,uponwrittenrequestofanyshareholderaddressedtotheSecretary.PrincipalOrrce89EastAvenueRochester,NevYork14649(716)546-2700FinancialContactManyG.SaddockSeniorVicePresident,FinanceandRatesAnnualMeetingMay20,1981AtRochester,NewYorkNewYorkStockExchangeSymbolRochesterGasandElectricCorporationCommonStock-RGSTransferandDividendDisbursingAgentLIncolnFirstBank,NA,StockTransferDepartmentPostOfficeBox1250Rochester,NevYork14603RegistrarSecurityTiustCompanyofRochesterOneEastAvenueRochester,NewYork14638Co-transferAgentMorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015CoregistrarTheChaseManhattanBank,NAOneChaseManhattanPhzaNewYork,NewYork10015AgentforAutomaticDividendReinvestmentPlanLincolnFirstBank,NA.AutomaticDividendReinvestmentSavicePostOfficeBox1507Rochester,NewYork14603BondTrusteeandPayingAgentBankersTrustCompanyPostOfficeBox318ChurchStreetStationNevYok,NewYork1001533 RochesterGasandHectricCorporationP=-=89EastAvenueRochester,NewYork14649:US-'NUCLEARREGULATORYCOltTS.")i{f9'IRECTOR".OF~k'ICEOk'NUCLEARREACTORREGS.kD18'1'~,-.SERVICESBRANC)i,DDC>ADhl'ViASHZkiGiOP,DCZ'OPS5BulkRaYeUSPostagePaidgRochester,NY~PermitNo.709