ML18038A257
| ML18038A257 | |
| Person / Time | |
|---|---|
| Site: | Nine Mile Point  |
| Issue date: | 12/31/1986 |
| From: | William Allen, Carrigg J NEW YORK STATE ELECTRIC & GAS CORP. |
| To: | |
| Shared Package | |
| ML17054C162 | List: |
| References | |
| NUDOCS 8706100052 | |
| Download: ML18038A257 (70) | |
Text
NEW YORK STATE ELECTRIC 8 GAS CORPORATION
'f 986 ANNUAL REPORT P-~~(f'gy,, ()fj-NOTICE-THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL.THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY BRANCH 016.PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL.REMOVAL OF ANY PAGE(S)FROM DOCUMENT FOR REPRODUCTION MUST BE REFERRED TO FILE PERSONNEL.
DEADLINE RETURN DATE g7o C/uo~~~~~p~Q c~jl RECORDS FACILITY BRANCH Contents Highlights of the Year Letter to Stockholders Condensed Statement of Income General Review of the Year Earnings and Dividends Nine Mile Point II Rates Construction Expenditures Power Supply Financing Research and Development Dividend Reinvestment Plan Energy Marketing Customer Assistance Electric Operations Gas Operations Board of Directors 5 6 6 8 8 8 10 10 10 12 12 14 14 14..Balance Sheet Statement of Income Statement of Retained Earnings Statement of Changes in Financial Position Notes to Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations 16 17 17 18 19 31 PLA TSBURGH~~Financial and Operating Statistics Directors and Officers 35 40 BUFFALO LAKE ONTARIO LOCKPORT 0 R ESTER SYRACUSE 0 LANCASTER G N VA~AU RN MECHANICVILL ITHACA~0 HORNELL ELMIRA~PENA5YLVAMA ONEONTA~BINGHAMTON LIBERT Service Area BRE TER NYSEG's service territory is mainly composed of suburban and rural areas outside large cities.Over 40%of revenue is derived from residential customers.
The economy is supported by a diverse mix of light industry, agriculture, recreational facilities and institutions of higher learning.College and industry research facilities provide a good base for growth of'igh-technology firms.~ELECTRIC C3 GAS~ELECTRIC&GAS~DISTRICT OFFICES Highlights 1986 1985 Increase Percent Gross operating revenues (thousands)
Income before interest charges (thousands)
Earnings available for common stock (thousands)
Earnings per share of common stock$1,277,284$1,241,780$35,504 3$394,822$374,092$20,730 6$208,390$183,207$25,183 14$3.86$3.46$.40 12 Return on average common stock equity-percent Dividends paid per share of common stock Taxes per share of common stock.........15.3$2.60$4.46 14.3 1.0 7$2.50$.10 4$3.92$.54 14 Electricity sales to ultimate customers (million kwh).11,807 11,405 402 4 Electricity sales to other utilities (million kwh)Gas delivered (thousand dekatherms)
Cost of fuel for electric generation (thousands)
.Total utility plant investment (thousands)
.....Expenditures for construction (thousands)
Book value per share of common stock (average).Market value per share of common stock (year end)3,545 33,268 5,021 34,307$238,371$280,397$4,373,045$4,055,389 (1,476)(29)(1,039)(3)$(42,026)(15)$317,656 8$230,892$256,149$(25,257)(10)$25.24$24.17$1.07 4$31.38$28.63$2.75 10 This report is dedicated to the employees of New York State Electric&Gas Corporation whose hard work and conscientious efforts make possibfe our corporate theme,"Good Peopfe.Good Service.
, To the Stockholders:
rom an earnings standpoint, 1986 was a good year.Earnings of$3.86 a share were up 12/0 from last year, setting a record for the Company.Earnings quality also improved as the proportion of non-cash earnings declined from 670/o to 54%.Higher earnings allowed an increase in the dividend rate for the ninth consecutive year.Our 18/o participation in the Nine Mile Point II nuclear project continues to be of concern.As indicated elsewhere in this report, the plant's completion was delayed earlier this year because additional testing was required for key safety valves.We believe this delay will result in commercial operation in the fourth quarter of 1987.As with most nuclear plants built in this country since the 1979 incident at Three Mile Island, Nine Mile II has experienced cost increases far beyond those originally contemplated.
As a result, rate-setting commissions in many states have taken the position that a portion of plant costs was"imprudently" incurred.In our case, the New York State Public Service Commission has set a$4.16 billion limit on the costs that can be reflected in electric rates of the five utilities owning the$6 billion project.This means that roughly$2 billion, before tax offsets, will have to be absorbed by utility stockholders.
The utilities agreed to the disallowance to avoid a prudence proceeding which would be long, costly and prolong uncertainty over the project.In addition, it would occupy the services of technical personnel needed to complete the plant.The Company expects to record its share of the disallowed costs with a charge to expense later this year.We presently estimate this'charge to be$326 million, or$234 million after income tax effect.This equates to about$4.25 a share and would increase if the plant is further delayed.Because the write-off reduces common stock equity, it will have a continuing effect of reducing earnings by about 55 cents a share, based on a 130%%d return on equity.This will mean an end to our hard-earned nine-year record of dividend increases.
However, we believe that sales growth and reasonable regulatory treatment will enable us to resume modest dividend increases in a few years.With Nine Mile's adverse effect on the Company, we have intensified our program to reduce costs.Among other things, we improved the operating efficiency of our power plants, effected capital-cost reductions that added ten cents a share to earnings in 1986 and cut the cost of coal used in generating electricity.
At the end of 1986 we had fewer employees than in 1982,.despite the need to add more than 200 workers for Somerset Generating Station, which began operation in 1984, and hire employees to conduct state-mandated energy conservation and environmental activities.
In 1987, we anticipate further cost savings, including a reduction in coal cost of nearly$10 million.In addition to cutting costs, we have established an aggressive plan to selectively increase electric and gas sales, which helps keep rate increases to a minimum.There is particularly good potential for profit in selling electricity during off-peak hours.With the decline in prices of purchased natural gas and increased gas availability, we have undertaken an ambitious program to add new communities to our gas franchise areas.Despite our efforts to reduce costs and raise sales, we still must seek modest rate increases, primarily to recover the allowed costs of Nine Mile II.We have applied to the PSC for higher electric rates to be made effective over a three-year period beginning January 1, 1988.We estimate the increases will be about 3 to 4%a year.Our electric and gas rates for industrial customers will continue to be among the lowest in New York.This fact, together with the service area's proximity to urban markets and availability of skilled labor, augurs well for industrial expansion.
To assist communities in attracting new industry, we are planning the establishment of a subsidiary to acquire, develop and sell plant sites to industry.Application has been made for PSC approval of the subsidiary.
In December 1986, the Company and Corning Natural Gas Corporation announced a study of the feasibility of NYSEG acquiring Corning, which serves 12,000 gas customers in the Corning, N.Y.area.The studies are continuing.
As the cover indicates, this report is dedicated to the 4,423 employees whose work contributes importantly to the success of the Company.We are proud of them and wish to publicly express our sincere appreciation for their loyalty,.diligence and hard work.They are, indeed, good people, providing good service!For the Board of Directors, Chairman and Chief Executive Officer President and Chief Operating Officer March 2, 1987 James A.Corrigg (left J Wells P.Allen, Jr.
Consolidated Condensed Statement of Income 1986 1985 Increase REVENUES Sales of electricity Sales of gas Total (Thousands of Dollars)$1,098,089$1,051,579$46,510 179,195 190,201 (11,006)1,277,284 1,241,780 35,504 EXPENSES Wages and salaries of employees and contributions to retirement and insurance plans (exclusive of$55,936,000 in 1986 and$57,075,000 in 1985 charged to construction, etc.)Fuel used to produce electricity Electricity purchased.Gas purchased Other materials, services and research.Federal taxes State and local taxes Depreciation Total Income available to investors 126,307 238,371 29,302 111,147 114,742 126,315 114,424 100,796 118,711 280,397 35,984 129,809 94,138 101,408 106,286 98,085 7,596 (42,026)(6,682)(18,662)20,604 24,907 8,138 2,711 961,404 964,818 (3,414)315,880 276,962 38,918 AFDC AND OTHER NON-CASH RETURN..111,872 122,719 (10,847)INVESTORS'HARE Interest on bonds.Interest on notes payable and other Dividends on preferred stock Dividends on common stock Total RETAINED IN THE BUSINESS AFDC is allowance for funds used during construction 146,021 53,237 20,104 140,432 138,665 52,583 25,226 132,018 7,356 654 (5,122)8,414 359,794 348,492 11,302$67,958$51,189$16,769 Electric Peak Loads (Winter)Megawatts 2u8 2IN 2 le 78 79 Sl 81 52 83 Sl 8$86 81 Empfoyees work in snow and all kinds of weather to restore service after storms.
NYS.E'G~~~~>~~~~,~~~~~~~~~~~~~~~I~I'I I I'I l~'I'II~I~I I~I'I~I I I~t~I lo III~~I~I~~~~I II I I~I'~>I~~II I~I I'I I I I I~I I~I~~~~~~~~II I I~~~I I I'>~~I I I I I~II II'I'I I I~~I~I I I I I'~II I I'I I~>I~~~~~I I~I r'I r I I~I'I r'I I I I'I I'>'~I>~I I'~'~I I~I~I I>'I'I I'~I II I'I>I I I'I'r>'I~>I I'I I I I U 4$j f'.*Y'I~!:>'I A substation near Liberty is being expanded to permit greater transmission of electricity to downstate New York.Sections of pipe are joined to supply natural gas to homes near Elmira.Last year the Company gained 1,600 new gas customers a record for recent years.j', 7 IVAN JENSEN, control room operator at Greenidge Station, seeks maximum efficiency from the piant's generators.
NYSEG is modernizing and extending the useful life of Greenidge and other power plants that are 30 to 40 years old Construction Expenditures Total$333 Million Construction expenditures in 1986 were$333 million, including$102 million of AFDC and similar non-cash charges.The largest single outlay was$181 million for the Company's share of the Nine Mile II nuclear project.About$35 million was spent as part of a program for extending useful lives and improving operating efficiency of existing coal-fired generating facilities.
Another$35 million was for upgrading substation and transmission lines.The re-maining$82 million was spent on additions and improvements to electric and gas distribution sys-tems, including facilities to serve new customers.
This amount in-cludes$57 million for minor projects, each$50,000 or less.In the three years 1987-1989, construction expenditures are pro-jected to total$648 million, of which$104 million is for completion of Nine Mile II.About$140 million is allocated for improvement of existing generating facilities.
The remainder is for general system reinforcement.
Rates Recovery of Nine Mile Costs Proposed The Company is proposing to the PSC that allowed Nine Mile II costs be phased into electric rates over a three-year period beginning on January 1, 1988.The increases would raise electric rates about 3 to 4%a year and annual revenues about$30 to$45 million annu-ally.The first segment, an application for which was filed with the Com-mission on February 23, 1987, would raise annual revenues$42 million or 4%, based on a 13%return on equity.The Company's previous increase in electric rates was in April 1986 when a$65 million, or 7%, rise was approved.This increase primarily reflected the final segment of a three-year phase-in of capital costs related to Somerset Generating Station, which began operation in 1984.Construction Program Millions of Dollars Power Supply Plant Efficiency Rises A key measure of efficiency of steam-electric production systems is the amount of heat used to produce a kilowatt-hour (kwh), known as"heat rate".NYSEG's heat rate in 1986 was a low 9,959 Btu/kwh and a record for the Company.The Company's average power plant heat rate is among the lowest of major electric utilities in the nation.The Company's present power supply capability of 3,004,000 kilowatts is largely composed of coal-fired generating facilities and long-term purchases.
Most of the purchased power is low-cost hydroelectricity from the New York Power Authority's Niagara River project.There have been proposals to redistribute this power more broadly across the state but, at present, the Governor and several legislative leaders oppose the action.The Company's peak load of 2,290,000 kilowatts occurred in December 1985 and was not ex-ceeded in the 1986-87 winter, largely because of weather conditions.
I 84 18$l32 rr 73 79 80 BI 82 83 N 85 56 87 8$89
, P r'EE, 4 Underground electric services are installed to serve a large housing development north of Albany.State regu.lations require new.home builders to contribute to costs of underground facilities.
The Company encourages off-peak use of electricity.
An electric heating"mat" is checked here before the concrete foundation is poured for a new office building.Heat stored by the mat during off-peak hours can be re-leased during the day when the office is in use.
gMPtSR BRENDA PATTON, consumer repre-sentative at Monticello, counsels customers having difficulty paying utility bills.NYSEG's twelve consumer representatives are specially trained and familiar with assistance programs."ij~aersfKW+Finance Refundings Reduce Capital Costs Capital requirements in 1986 were$394 million, which includes$231 million of cash construction expenditures,$140 million for refinancing of high-rate securities and$23 million for sinking funds and reduction of unsecured debt.These needs were met with$277 million in sales of securities and internally-generated funds.Refundings included$110 million principal amount of high-rate first mortgage bonds and$30 million principal amount of 15'/s%preferred stock.In addition,$50 million of 15.83%notes due 1989 were replaced with adjustable-rate notes having an interest rate of 6.4%.These refinancings reduced capital costs and, as a result, contributed about ten cents a share to 1986 earnings.On January 1, 1987, a$30 million issue of 15%preferred stock was redeemed through sinking fund and early-redemption provisions.
This refunding will save the Company about$2 million a year.Electricity Sources 1986 Kilowatt-hours Coot 7lSS I tSdrO 2SS Nuckar 2ss-trrdro ASS~Generated 76%~Purchased 24tlt Research Expenditures Total$12 Million Research and development ex-penditures in 1986 amounted to$12 million with about half going to projects of national and state research organizations.
The re-mainder was spent on the Company's own research efforts.A major national research group, the Electric Power Research Institute (EPRI), is the research arm of the electric utility industry.Among its various projects, EPRI is building a$20 million High Sulfur Test Center at Somerset Generating Station, which will house a staff of 35 to 40 persons.The center, scheduled for operation in 1987, will seek better and less expensive ways to control sulfur dioxide emissions from the nation's coal-burning power plants.NYSEG will be contributing about$5 million in cash and services to the project over a five-year period.Successful research can pay dividends by holding down costs and improving environmental protec-tion.A new computer-assisted training program developed jointly with General Physics Corporation saved an estimated$150,000 at one generating station through im-proved plant efficiency and is being applied to others.The program was also sold by General Physics to other utilities, yielding the Company$41,000 in royalties.
Another research project showed that flyash, a by-product of burning coal at power plants, was useful in making concrete.Sales of flyash not only add to income, but re-duce costs by eliminating the need to dispose of ash in environmentally-certified landfills.
Diuidend Reinljesfmenf Plan Allows Sale of Shares The Dividend Reinvestment and Stock Purchase Plan was amended effective January 1, 1987 to permit participants to sell full shares credited to their plan accounts.This allows a holder with a small number of plan shares to sell them through the plan on the open market.Banks and brokers are often unwilling to handle small trans-actions.A fee is charged under the plan, but it is lower than a normal brokerage commission.
About a third of the Company's stockholders reinvest their dividends.
In 1986, over 900,000 shares were purchased on the open market with dividends and optional cash payments.Cash purchases are limited to$5,000 per quarter.Any stockholder of record is eligible to join the plan.If you would like further information, call the toll-free number listed in the back of this report.NYSEG devotes considerable effort to promoting industrial expansion.
Bottom lelt: Service area advantages for business are publicized across the nation and over-seas.New, expanding or merging companies include (clockwise from middle left): Finger Lakes Press, Auburn;Toshiba-Westinghouse Electronics near Elmira;Taylor-Pohlman near Buffalo;Huntington Analytical Services, east of Lockport, and IBM, north of New York City.10 i/I'IIV p//I I I I I i,4 r=1 I'v<~~"ks>I I 40 g}g$t JP J'pg 0[I,'i~ized'-="==-I+'i J':.fi'I)L,ql II I p I I/, r,/(g//~ed<State~~I/i I~'g~I g')I IA IIV'If I yy~e 4 i'-7<I+=if i ops[r)I~l I JJ<, tl 0 C$
gM~BURTON TESSITORE, chief lineman at Binghamton, works to maintain the distribution system and the flow of electricity to customers.
NYSEG's record for reliable electric service is among the best in the state.Coal Used for Generation Cost per blillion Btu SISS 55/7 Slhl Size Sero Slier Sl85 5l&Sl.07 77 78 79 80 81 87 83 85 85 88 Lnergy Marketing New Program Established The Company recently adopted a strategic marketing plan to selec-tively boost electric and gas sales.It combines special rates for in-dustrial and commercial customers with rebates for residential customers who install appliances that use energy efficiently or in off-peak hours.Appliance rebates are being offered to residential electric customers in various locations who buy energy-efficient air conditioners, water heaters or thermal storage space heating units for their homes.The water heater and thermal storage units are also being promoted to encourage off-peak usage.Other re-bates encourage residential cus-tomers to switch to gas for space and water heating.The Company has also initiated an incentive program to encourage employees, retirees, appliance dealers and contractors to participate in these marketing efforts.During the year, more than 17,000 home energy surveys were com-pleted.At customer request, the Company will conduct a free analysis of a home to determine where energy can be conserved.
Financing is also available for energy-related improvements.
NYSEG industrial electric and gas rates are among the lowest in the state.The Company has intro-duced special incentive rates to attract new businesses to its service area or encourage existing ones to expand.About 250 customers are currently benefiting from these rates.Customer Assistance Counseling, Energy Education Emphasized NYSEG has an extensive program for counseling needy customers and informing the public about energy and energy conservation matters.Consumer representatives in dis-trict offices use their backgrounds in social services and knowledge of human service agencies to help customers having financial diffi-culties.Energy conservation work-shops are sponsored for the general public and safety and energy educa-tion programs are presented to thousands of school children each year.In 1986, twenty-six service area school teachers received modest grants to develop innovative energy education projects.An award-winning newsletter with energy conservation tips and other useful information is sent regularly to 35,000 elderly customers.
Project SHARE, a joint program with the American Red Cross, pro-vides grants to needy elderly or dis-abled people to help them deal with energy emergencies.
In four years of operation the program has distributed
$772,300 to 3,704 needy families.In 1986, grants totaling$178,300 were issued to 853 people.Customers contribute to SHARE by adding$1,$2, or$5 to their NYSEG payments.Stockholders may contribute by sending checks, payable to Project SHARE-Red Cross, to American Red Cross, 786 Delaware Avenue, Buffalo, N.Y.14209.Donations are tax-deductible.
A new customer-tested electric and gas bill was introduced in December 1986.Among other things, it presents the bill calculation and shows a graph of the customer'energy use in the prior fourteen months.Customer reaction so far has been favorable.
The Company.reaches out to help customers.
A new mobile office (top and middle right)travels to rural locations outside Binghamton to bring services closer to customers.
Home energy surveys and conservation are promoted at state fairs and exhibits.Workshops (bottom right)deliver energy conservation tips to various public groups.12 I Ill ll Ia I NNI4NI, I IN/Ng I1 N-II I r II-N~Q~'+>~.LN~p NN Qe~<<'NNNfr ow York Slalo Eloctrlc 8 Gas Corpora'IINNNNI4~
g I
/titty(~CHRIS HEBDON, a forester in Geneva, pro!acts the environment and helps maintain service along transmission and distribution lines.NYSEG's 36,000-mile transmission and distribution system requires continuous monitoring to assure reliable service.I v v Residential Commercial Industrial Total Retail Other Utilities Total Kwh Sales 4 3-29-7 Revenues 14 17 17 15-44 The Revenue Dollar-1986 tVhere it came from: Inthutrht 18c 869tr Electricity
~l4 Gas I oo98 Conuemht 22c Other Electri Utituies 8c Street Lighting a Other 1 1 c Rcsidcntht CSC tvhere it vent: Fuel lre interest to Bond I toMers.ctc.1st OivMends-Common Stock tee Deprcchtion yc pividends-Preferred Stock ge Otherptaterhts and Scrviecs 8c Wages to Employees.
irgtuding Benefus 9c Cas tt Electricity Purchased tpe Tares 18c tectatncd in thc gustnmr Sc Llectric Operations Retail Sales Increase 4%Sales of electricity to retail cus-tomers rose nearly 4%from 1985.Corresponding revenues were up 15%, largely reflecting higher rates made effective in A'pril 1986.Sales to other utilities declined 29%, primarily as a result of lower fuel costs at their oil-fired generating facilities.
Total sales were down 7%, while revenues were 4%higher.Percent changes by major customer category were as follows: Operating expenses, excluding fuel, depreciation and taxes, in-creased about 5%.Fuel expense was down 15%on a 10/o decrease in kilowatt-hours generated.
On a per-unit basis, fuel cost was$1.67 per million Btu, a 1%reduction from 1985.More than 11,000 residential customers were added in 1986, a 2%increase, and the largest yearly rise since 1973.Gas Operations Total Sales Down 3%Sales of gas to residential customers increased 4%, while revenues were 3%higher.Sales to non-residential customers, including transpor-tation of customer-owned gas, were off 7%.Total sales were down 3%and revenues were 6%lower.Operating expenses, excluding.purchased gas, depreciation and taxes, increased 5%.The average cost of gas purchased was$3.75.a dekatherm, or 3o/o lower than the previous year.This is the third consecutive year that the unit cost of purchased gas has declined.The average number of gas customers served was 132,500, a 1%increase over 1985.The Company is seeking to expand its gas franchise area to include several towns in southeastern New York and in parts of counties located northwest of Elmira.If all the franchises were granted and received requisite PSC approvals, it could, over a period of years, increase the number of customers served by 15%.Board of Directors Ttvo New Directors Elected In January 1987, the Board of Directors elected two new members, Ben E.Lynch, 49, and William D.Turner, 54.The action brings the Board to 13 members and con-templates the retirement, later in 1987, of two directors under the Company's mandatory retirement provisions.
Mr.Lynch is president of Win-chester Optical Company, Elmira, N.Y.He is active in local civic affairs and has a bachelor's degree in engineering from Cornell Univer-sity and a master's degree in nuclear physics from California Institute of Technology.
Mr.Turner, as group vice president of The Singer Company, is respon-sible for its Training Systems Group.He joined Singer's Link Simulation System Division in Bing-hamton in 1958 and served in a number of management positions.
He has a bachelor's degree in economics from Colgate University.
Dr.Roy S.Arrandale, former senior vice president-research for Thatcher Glass Manufacturing Company,'lmira, retired from the Board after 18 years of distinguished service.14 The Company promotes safety and energy awareness in schools.Topr A NYSEG representative uses sign language to teach electric safety to hearing.impaired youngsters.
Be/owr The Company issued 26 mini-grants last year to teachers to support innovative energy projects in the classroom.
New York State Electric&Gas Corporation and Subsidiaries Consolidated Balance Sheet ASSETS UTILITY PLANT, at original cost (Note 1)Electric.Gas Common.$3,004,799 160,762 74,658$2,913,589 153,263 69,662 December 31 1986 1985 (Thousands of Dollars)Less accumulated depreciation
.Net utility plant in service.Construction work in progress (Notes 8 and 10)3,240,219 769,336 2,470,883 1,132,826 3,136,514 687,472 2,449,042 918,875 3,603,709 3,367,917 OTHER PROPERTY AND INVESTMENTS CURRENT ASSETS Cash Special deposits Accounts receivable Fuel, at average cost Materials and supplies, at average cost Prepayments DEFERRED CHARGES (Notes I, 9 and 10)Abandoned project costs Somerset Station phase in costs.Unamortized debt expense Accumulated deferred federal income tax Other 68,903 10,267 4,823 126,081 49,283 44,272 27,546 262,272 108,926 74,348 64,762 19,011 23,053 290,100 71,068 7,601 13,599 116,537 58,095 38,688 20,454 254,974 117,608 70,675 60,526 15,201 18,650 282,660 CAPITALIZATION AND LIABILITIES CAPITALIZATION (Notes 3-6)Capital stock and retained earnings Preferred stock redeemable solely at the option of the Company.Preferred stock subject to mandatory redemption requirements
.Common stock equity Common stock Capital in excess of par value Retained earnings.Total common stock equity Long-term debt Total$4,224,984$3,976,619 22,820 87,470 360,408 503,364 534,190 360,047 501,523 469,661 1,397,962 1,331,231 1,928,40?1,748,606 3,509,689 3,327,807$160,500$160,500 CURRENT LIABILITIES Current portion of long-term debt and preferred stock Commercial paper (Note 6)Accounts payable Dividends payable on preferred stock.Pensions accrued Taxes accrued Interest accrued.Other DEFERRED CREDITS Accumulated deferred investment tax credit (Note 2)Other ACCUMULATED DEFERRED FEDERAL INCOME TAX (Note 2)COMMITMENTS AND CONTINGENCIES (Notes 7-10).65,332 110,600 64,898 4,516=14,044 14,619 54,973 28,555 357,537 106,436 19,307 125,743 232,015 59,513 118,300 77,160 6,090 12,611 5,045 52,044 31,324 362,087 75,438 21,620 97,058 189,667 16$4,224,984$3,976,619 The accompanying notes shown on pages 19 through 29 are an integral part of the financial statements.
New York State Electric&Gas Corporation and Subsidiaries Consolidated Statement of Income OPERATING REVENUES Electric.Gas Total OPERATING EXPENSES Operation-fuel (Note I)-other Electricity purchased.Gas purchased Maintenance Depreciation Federal income tax (Note 2)Other taxes (Note 12).Total OPERATING INCOME OTHER INCOME AND DEDUCTIONS Allowance for other funds used during construction (Note 1)Non-cash return-utility plant in service (Note 1).............
-abandoned projects (Notes I, 9 and 10).......Abandoned project costs (Note 9).Federal income tax credit (Note 2).Income tax benefits from AFDC and non-cash return...........
Other-net INCOME BEFORE INTEREST CHARGES INTEREST CHARGES Interest on long-term debt Other interest.Allowance for borrowed funds used during construction (Note 1).Interest charges-net.NET INCOME PREFERRED STOCK DIVIDENDS EARNINGS AVAILABLE FOR COMMON STOCK$1,098,089 179,195 1,277,284$1,051,579 190,201 1,241,780$921,248 207,818 1,129,066 238,371 182,710 29,302 111,147 88,486 100,796 122,987 122,400 280,397 167,923 35,984 129,809 81,591 98,085 96,651 113,587 227,998 141,056 69,206 146,040 68,606 65,198 78,144 102,152 996,199 1,004,027 898,400 281,085 237,753'30,666 63,168 9,868 5,906 4,648 30,108 39 394,822 50,263 40,185 6,682 570 2,544 32,256 3,839 374,092 68,145 22,002 9,283 (11,026)3,435 29,814 8,307 360,626 187,238 12,020 (32,930)166,328 228,494 20,104 178,985 12,263 (25,589)165,659 208,433 25,226 164,435 11,650 (26,835)149,250 211,376 27,370 208,390$183,207$184,006 Years Ended December 31 1986 1985 1984 (Thousands of Dollars)EARNINGS PER SHARE AVERAGE NUMBER OF SHARES OUTSTANDING
$3.86 54,013,868
$3.46 53,013,086
$3.68 49,955,493 Consolidated Statement of Retained Earnings Balance, beginning of year Add net income Years Ended December 31 1986 1985 1984 (Thousands of Dollar s)$469,661$418,472$352,524 228,494 208,433 211,376 698,155 626,905 563,900 Deduct cash dividends Preferred stock (at serial rates)Redeemable solely at the option of the Company..Subject to mandatory redemption requirements
..Common stock ($2.60,$2.50, and$2.38 per share in 1986, 1985, and 1984, respectively)
Deduct premium paid on preferred stock redemption (Note 5)Balance, end of year.11,338 8,766 140,432 160,536 3,429$534,190 12,559 12,667 132,018 15?,244 13,172 14,198 118,058 145,428$469,661$418,472 The accompanying notes shown on pages 19 through 29 are an integral part of the financial statements.
New York State Electric&Gas Corporation and Subsidiaries Consolidated Statement of Changes in Financial Position SOURCE OF FUNDS OPERATIONS Net income AFDC and other non-cash return.Depreciation
.Amortization of deferred charges.Fuel and purchased gas costs deferred Interchange profits deferred-net
.Abandoned project costs.Federal income tax deferred-net Investment tax credit deferred-net Funds from operations
$228,494 (111,872)100,796 25,188 1,332 (7,412)38,538 30,998 306,062-$208,433 (122,719)98,085 23,773 2,820 (10,121)(570)59,820 1,727 261,248$211,376 (126,265)65,198 13,659 6,015 15,181 11,026 23,897 22,688 242,775 Years Ended December 31 1986 1985 1984 (Thousands of Dollars'INANCING ARRANGEMENTS First mortgage bonds Common stock Long-term notes payable Commercial paper.Obligations under capital leases.Funds from financing arrangements Total funds available APPLICATION OF FUNDS Construction expenditures
.Capitalization of equipment leases.Bonds and preferred stock reacquired Securities to be redeemed or due within one year Dividends on preferred stock Dividends on common stock Increase (decrease) in working capital*.Other (net).Total funds applied INCREASE (DECREASE)
IN iUORKING CAPITAL CURRENT ASSETS Cash.Special deposits.................................
Accounts receivable
.Fuel Materials and supplies Prepayments Total increase (decrease) in current assets..CURRENT LIABILITIES Current portion of long-term debt and preferred stock Accounts payable Dividends payable on preferred stock................
Pensions accrued Taxes accrued Interest accrued Other.~J~~~~~~~~Total increase (decrease) in current liabilities*
.Increase (decrease) in working capital'75,000 1,815 (6,200)(7,700)2 273 265,188$571,250$230,892 2 273 97,325 64,204 20,104 140,432 4,148 11,872$571,250$2,666 (8,776)9,544 (8,812)5,584 7,092 7,298 5,819 (12,262)(1,574)1,433 9,574 2,929 (2,769)3,150$4,148 175,000 45,494 228,350 58,200 9,169 516,213$777,461$256,149 9,169 214,769 58,010 25,226 132,018 64,211 17,909$777,461$3,273 (56,593)(86)(10,843)7,961 84 (56,204)(84,870)(30,548)(726)(128)(4,611)(1,469)1,937 (120,415)$64,211 200,000 65,086 174,850 (37,650)10,560 412,846$655,621$349,718 10,560 5,056 142,283 27,370 118,058 (4,499)7,075$655,621$(3,944)59,946 22,690 28,842 3,309 3,080 113,923 120,633 (28,820)64 522 3,604 18,430 3,989 118,422$(4,499)'Exclusive of changes in commercial paper The accompanying notes shown on pages 19 through 29 are an integral part of the financial statements.
18 Notes to Consolidated Financial Statements 1.Significant Accounting Policies a.Principles of consolidation The consolidated financial statements include the Company and its wholly-owned subsidiaries.
Somerset Railroad Corpo-ration (SRC), the only active subsidiary, owns rail facilities for transport of coal and other supplies to the Somerset Generating Station (Somerset).
All significant intercompany balances and transactions have been eliminated in consoli-dation.b.Accounting records The Company maintains its accounting records in conformity with the uniform system of accounts prescribed by the Fed-eral Energy Regulatory Commission (FERC)and the Public Service Commission of the State of New York (PSC).c.Utility plant Cost of current repairs and minor replacements is charged to appropriate operating expense and clearing accounts;cost of renewals and betterments, including indirect costs, is capitalized.
Original cost of utility plant retired or otherwise disposed of and the cost of removal less salvage are charged to accumulated depreciation.
In accordance with transition rules of Statement of Finan-cial Accounting Standards No.71, capital leases with incep-tion dates subsequent to 1982 have been capitalized while those executed prior to 1983 and outstanding at December 31, 1986, consisting of additional assets and obligations of approximately
$7 million, were not capitalized.
d.Allowance for funds used during construction (AFDC)and other non-cash return AFDC is a non-cash return which is shown in the Consoli-dated Statement of Income as allowance for other funds used during construction and allowance for borrowed funds used during construction.
AFDC rates are determined according to FERC regulations.
The Company used net-of-tax rates of 10%for 1984 and 9.6%for 1985, except during the last eight months of 1985 when a before tax rate of 12.3%was used for projects other than Nine Mile Point nuclear generating unit No.2 (Unit).In 1986, the AFDC rate was 9.4%(net-of-tax) for the Unit and 12.1%(before tax)for projects other than the Unit.Non-cash return was accrued on the portion of the Somer-set plant costs which were not included in rate base and is also accrued on certain unamortized abandoned project costs.(See Notes 1.h.and 9.)For AFDC and other non-cash return accrued at net-of-tax rates, the Company is allowed revenues equal to the federal income tax effect of the interest portion.e.Revenue Revenues from the sale of electricity and gas are recorded on the basis of meters read.f.Federal income taxes (See Note 2.)The Company files a consolidated federal income tax return with its wholly-owned subsidiary, SRC.Actuarial present value of accumulated plan benefits: Vested Nonvested Net assets available for benefits$141,400$140,700 21,000 19,300 363,500 296,000 Deferred income taxes are provided on timing differences between book and taxable income to the extent permitted for ratemaking purposes.Investment tax credit, which reduces federal income tax currently payable, is deferred and amortized over the lives of the applicable property.g.Deferred charges (See Note 9.)The Company defers certain fuel and purchased gas costs which are subsequently reflected in billings to customers through adjustment clauses in rates.Debt expense is deferred and amortized ratably over the lives of the related issues.Unamortized debt expense also includes premiums paid on reacquisitions of first mortgage bonds totaling approximately
$41 million which is amortized ratably over periods ranging from five to thirty years.h.Somerset Generating Station Somerset plant costs of approximately
$1 billion were phased into electric rates in three segments to moderate rate in-creases.The first segment of$365 million was included in electric rates effective April 1984.The second segment in-creased to$725 million the total plant costs included in electric rates effective in April 1985.The final segment was included in electric rates effective April 1986.When Somer-set began operating on August 17, 1984, a non-cash return similar to AFDC was recorded on the portion of costs not in-cluded in rate base.This non-cash return, which amounted to approximately
$10 million,$40 million and$22 million for 1986, 1985 and 1984, respectively, is being amortized over the remaining life of the plant and is included in other income in the Consolidated Statement of Income and in de-ferred charges on the Consolidated Balance Sheet.As of December 31, 1986 the unamortized balance of non-cash return was approximately
$70 million.i.Retirement benefits The Company has noncontributory retirement annuity plans which cover substantially all employees.
Pension costs are based on normal costs and the Company's policy is to fund the pension cost accrued each year to the extent deductible for federal income tax purposes.The provision for pension cost for 1986, 1985 and 1984 totaled$8.4 million,$12.6 million and$12.7 million, respectively.
A comparison of accumulated plan benefits and net assets is as follows: January 1 1986 1985 (Thousands ofDollars) 19 The assumed investment rate of return used in determining actuarial present values was changed from 6.5%to 7.5%, effective January 1, 1986.The effects of changes in actuarial assumptions and in plan provisions were to decrease the actuarial present value of accumulated plan benefits by ap-proximately
$18.3 million and to reduce 1986 provision for pension cost by approximately
$4.4 million, substantially all of which relates to the effects of changes in actuarial as-sumptions.
The required method for determining the actuarial present value of accumulated plan benefits is based on current data and, accordingly, fails to consider probable future events such as future wage and salary increases and future employee service.Such events have been taken into consideration by the Company in determining the costs and funding concept for the plans.The net assets available for benefits are based upon market value which will fluctuate depending on market conditions.
In December 1985 the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standards No.87, Employers'ccounting for Pensions, which will be effective for 1987.The adoption of the require-ments of this statement is not expected to have a material effect on the results of operations or financial position of the Company.In addition to providing pension benefits, the Company provides certain health care benefits for retired employees and their dependents.
Substantially all of the Company's em-ployees who retire under a Company pension plan may be-come eligible for those benefits at retirement.
Those and similar benefits for active employees are provided through'n insurance company whose premiums are based on the benefits paid during the year.The Company recognizes as expense the cost of insurance premiums which were approx-imately$8.0 million,$7.8 million and$7.6 million for 1986, 1985 and 1984, respectively.
The cost of providing those benefits for 1,456 retirees and their dependents is not separ-able from the cost of providing benefits for the 4,423 active employees.
j.Depreciation Depreciation expense is determined using straight-line rates, based on average service lives, applied to the original cost, by groups of depreciable property in service.Depreciation accruals were equivalent to 3.1%of average depreciable property for 1986, 1985 and 1984.2.Federal Income Taxes Federal income tax expense consists of: Charged to operations:
Current Deferred-net: Accelerated depreciation
.Cost of reacquired debt Income tax benefits from AFDC and non-cash return Miscellaneous Investment tax credits deferred Included in other income Total.Effective rate.42,896 493 30,108 (3,744)39,268 122,987 (4,648)$118,339 34.1%46,206 13,986 32,256 (289)3,310 96,651 (2,544)$94,107 33.1%32,029 (142)29,814 (5,857)23,017 78,144 (3,435)$74,709 26.1%1986 1985 1984 (Thousands of Dollars)$13,966$1,182$(717)The effective tax rates differed from the statutory tax rate of 46%due primarily to the tax effect of AFDC, which is not normalized.
For 1986, 1985 and 1984 the tax effect of AFDC was 10.1%, 12.9%and 14.6%, respectively.
The cumulative net amount of income tax timing dif-ferences for which deferred taxes have not been provided was approximately
$544 million at December 31, 1986.The'Ihx Reform Act of 1986 (TRA of 1986)was enacted on October 22, 1986.Among other things, the TRA of 1986 pro-vides for a reduction in the statutory corporate income tax rates, elimination of the investment tax credit as of January 1, 1986, reduction of investment tax credit carryforwards and changes in depreciation rates and lives.In a memo-randum dated November 5, 1986, the Staff of the PSC has recommended that the impact of the TRA of 1986 be deferred until the benefits can be passed on to ratepayers in the next rate proceeding.
The Company has approximately
$91 million of unused investment tax credits at December 31, 1986 which will ex-pire beginning in 1999 and which reflects a$20 million re-duction for 1987 as a result of the TRA of 1986.Unutilized carryfoiwards will be further reduced by$17 million in 1988.20 3.Long-term Debt At December 31, 1986 long-term debt was (Thousands of Dollars): First mortgage bonds Series Due Amount Series Due Amount 4/s/0 3 7/sold 17 s/sold 17 s/s%4 s/s%ll s/4%12 s/s%14 7/s%8 ls%%d*8 s/s%5 s/sold 6'/4/o 6'/2o/o 7/s%%d May 1, 1987 Feb.1, 1988 Mar.1, 1989 Mar.1, 1990 May 1, 1991 Apr.1, 1993 Jan.1, 1994 July 1, 1994 Aug.1, 1994 June 1, 1996 Jan.1, 1997 Sept.1, 1997 Sept.1, 1998 Nov.1, 2001$25,000 25,000 50,000 50,000 25,000 100,000 100,000 50,000 100,000 50,000 25,000 25,000 30,000 50,000 9.35o/o 9 s/sold 9 s/s%7'/4%%d 6~/s%8 s/s%18 o/o 16/s%13 s/s%16 12%" 12'/sold**10/s/o'i/4o%%d*July 1, 2003 Mar.1, 2005 Jan.1, 2006 June 1, 2006 Dec.1, 2006 Nov.1, 2007 Feb.1, 2012 Aug.1, 2012 Dec.1, 2012 July 1, 2014 July 1, 2015 Oct.1, 2015 Feb.1, 2016 Apr.1, 2016$43,700 75,000 56,986 12,000 25,750 60,000 3,503 1,800 100,000 1,173 100,000 75,000 125,000 50,000 Total first mortgage bonds Pollution control notes 1,434,912 Letter of Credit Expiration Date Interest Maturity Rate Date 6.S Pa 0 U Interest Rate Adjustment Date Dec.15, 1988 Mar.15, 1988 Mar.31, 1988 July 31, 1988 Oct.31, 1988 Dec.15, 1988 Less debt due within one year-included in current liabilities Total 12 May 1, 2014 60,000 12.30%July 1, 2014 40,000 3/s%***.Dec.1, 2014 Dec.1, 1987 74,000 7%***Mar.1, 2015**Mar.1, 1988 37,500 5.15%**'ar.
15, 2015*'ar.15, 1987 60,000 4 i/4%***July 15, 2015**July 15, 1987 63,500 4.05%***Oct.15, 2015**Oct.15, 1987 30,000 3 s/4%***Dec.1, 2015**Dec.1, 1987 42,000 Total pollution control notes 407,000 4375o/o notes payable due August 27, 1989 50,000 RC commercial paper due December 31, 1989 39,900 rticipations in mining company notes due April 5, 1989 7,775 bligations under capital leases (Note 1)22,002 namortized premium and discount on debt-net (2,500)1,959,089 30,682$1,928,407*Issued 1986'*Issued 1985*'*Adjustable Rate At December 31, 1986 long-term debt which will become due during the next five years is: 1987 1988 1989 1990 1991 (Thousands of Dollars)$30,682$33,914$159,603$57,883$32,348 The Company's mortgage provides for a sinking and im-provement fund.The provisions require the Company to make annual cash deposits with the Trustee equivalent to 1%of the principal amount of all bonds delivered and authenticated by the Trustee prior to January 1 of that year (excluding any bonds issued on the basis of the retirement of bonds).Pursuant to the terms of the mortgage, the Com-pany has satisfied these requirements by crediting"bondable value of property additions" against the amount of cash to be deposited.
Mandatory annual cash sinking fund requirements are$3,000,000 for the 9/s%series due 2006,$2,100,000 for the 9.35%series,$600,000 beginning June 1, 2001 for the 7i/4%series and$250,000 beginning December 1, 1992 for the 67/e%series.The amount increases to$500,000 and$750,000 on December 1, 1997 and December 1, 2002, respectively, for the 67/8%series.The mortgage indenture secures the first mortgage bonds which constitute a direct first mortgage lien on substantially all utility plant.Adjustable rate pollution control notes were issued to se-cure like amounts of tax-exempt adjustable rate pollution control revenue bonds (Revenue Bonds)issued by a govern-mental authority.
The Revenue Bonds will bear interest at the rate indicated through the date preceding the interest rate adjustment date.The pollution control notes will bear interest at the same rate as the Revenue Bonds.On the in-terest rate adjustment date and annually thereafter, the interest rate will be adjusted, not to exceed a rate of 15%, or at the option of the Company, subject to certain conditions, a fixed rate of interest, not to exceed 18%, may become ef-fective.Bondowners may elect, subject to certain conditions, to have their Revenue Bonds purchased by the Trustee.The Company has irrevocable letters of credit which expire on the letter of credit expiration dates and which may be ex-tended upon meeting certain conditions.
These letters of credit support certain payments required to be made on the Revenue Bonds.Payments made under the letters of credit in connection with purchases of Revenue Bonds by the Trustee are repaid with the proceeds from the remarketing of the Revenue Bonds.To the extent the proceeds are not sufficient, the Company is required to reimburse the bank that issued the letter of credit.SRC has a letter of credit backed commercial paper pro-gram which provides for borrowing up to$60 million through December 31, 1989.The weighted average inter-est rate for 1986, including fees for the letter of credit, amounted to 7%.Substantially all of the property of SRC, other than equipment, is subject to a lien of a mortgage and security agreement.
4.Common Stock and Capital in Excess of Par Value The following is a summary of changes in common stock and capital in excess of par value for 1986, 1985 and 1984: Balance at December 31, 1983 Public offering: 1984 1986 Dividend reinvestment and stock purchase plan: 1984 1985 Employee stock 48,501,706 1,0001000 32,100 2,415,307 1,901,714 16,102 12,678 25,150 32,118 Common Stock Capital in Excess$6.66 2/a Par Value of Par Value Shares Amount Amount (7housands of Dollars)$323,345$427,786 6,667 13,799 214 850 ownership plans: 1984 1985 1986 Reacquired capital stock 1986 Balance at December 31, 1986 160,385 27,862 22,123 54,061,197 1,069 186 147$360,408 2,171 499 574 417$503,364 70,000,000 Shares authorized at December 31, 1986 22 103.94 E 102.00 j 00 3/1/91 Thereafter 2/1/89 2/1/94 Thereafter 25 10/1/88 10/1/93 Thereafter 8.48o/o Adjustable Rate(2)5.Preferred Stock At December 31, 1986 serial cumulative preferred stock was: Par Value Redeemable Series Share Prior to Per Share Redeemable solely at the option of the Company: 3.759o$100"'104.00 4 i/2o/o (1949)100 103.75 4 15o%%d 100 101.00 4.40%100 102.00 4.15%%d (1954)100 102.00 6.48o%%d 100 102.00 8.80%1 Shares Authorized(1) and Outstanding 150,000 40,000 40,000 75,000 50,000 300,000 250,000 1,000,000 1,800,000 Amount (Thousands of Dollars)$15,000 4,000 4,000 7,500 5,000 30,000 25,000 25,000 45,000 Total Subject to mandatory redemption requirements:(7) 4.5096 100 (3)9.009o 100 10/1/87(4) 9.1096 25 7/1/87(5)15 25 1/1/92(6)105.25 200 104.00 184,500 25.33 360,000 27.50 1,200,000$160,500$20 18,450 9,000 30,000 Less sinking fund requirements at par value-included in current liabilities Total 57,470 34,650$22,820 At December 31, 1986 redeemable preferred stock sinking fund requirements and preferred stock redemptions during the next five years are: 1987 1988 1989 1990 1991 (Thousands of Dollars)$34,650$4,670$4,650$4,650$4,650 (1)At December 31, 1986 there were 1,550,000 shares of$100 par value preferred stock, 6,800,000 shares of$25 par value preferred stock and 1,000,000 shares of$100 par value preference stock authorized but unissued.(2)The Adjustable Rate Serial Preferred Stock, Series A was issued in September 1983.Dividends paid from the date of issuance through the January 1, 1987 payment varied from 7~/2%to 12.95%per annum.The payment for April 1, 1987 has been adjusted to a rate of 7~/2o/o per annum and subsequent payments can vary from 7~/2%to 13'/2%per annum, based upon a formula included in the Certificate of Incorporation.
(3)By March 31, 1988, the Company must redeem at$103.25 per share the 200 outstanding shares of the 4.50o/o Series.The Company reacquired 300 shares in 1985 and canceled the shares in 1986.(4)On October 1, in each year 1987 through 1995, the Company must redeem at par 16,500 shares of the 9.00%Series.Since 1984, 16,500 shares have been reacquired and canceled annually.The 9.0096 Series is redeemable at$104.00 per share prior to October 1, 1987.The$104.00 price per share will be reduced annually by$.50.As of October 1, 1994 and thereafter, the redemption price will be at par.By September 30, 1996, the Company must set aside the amount required to redeem at par all shares outstanding.
(5)By July 1, in each year 1987 through'1989, the Company must redeem at par 120,000 shares of the 9.10o%%d Series.The Company reacquired and canceled 120,000 shares in 1986 and 1985.(6)On January 1, 1987, the Company redeemed 1,104,000 shares of the 15o%%d Series at a price of$27.50 per share and 96,000 shares at par.(7)The Company redeemed 300,000 shares of the 153/oo%%d Series in 1986 at a price of$110.00 per share plus accrued dividends.
The premium paid on reacquisition is reported as a charge to retained earnings.23 6.Bank Loans and Other Borrowings The Company has a revolving credit agreement with banks which provides for borrowing up to$200 million to July 31, 1992.At the option of the Company, the interest rate on borrowings is related to the prime rate or the London Inter-bank Offered Rate or the interest rate applicable to certain certificates of deposit.The agreement also provides for the payment of a commitment fee on the unborrowed amount of one-quarter of a percent per annum.The revolving credit agreement does not require compen-sating balances.The Company did not have any outstanding loans under this agreement or prior agreements at December 31, 1986 or 1985.Interim financing in the form of short-term borrowings on commercial paper is utilized to finance construction ex-penditures.
Information relative to short-term borrowings is$61,000$12,800 Commercial Paper Notes Payable 1986 1985 1984"1985 1984 (Thousands of Dollars)Ending balance$110,600$118,300$60,100 Maximum amount outstanding
........$141,400$145,700$125,600$70,000 Average amount o'utstanding(l)
........$93,300,$84,400$57,800'13,600 Weighted average interest rate: On ending balance.......6.1%8.0%8.5%During the period(2)...............
7.3/0 8.5%10.7%.8.4%10.7%(1)Calculated as the average of the sum of daily borrowings.
~(2)Calculated by dividing total interest expense by the, average of the sum of daily borrowings.
7.Jointly Owned Generating Stations (See Note 8.)The Company has an undivided 50%interest in the output and costs of three generating units comprising the Homer City Generating Station.The station is owned with Pennsyl-vania Electric Company which also operates the facility.The Company's share of the rated capability is 946,000 kw and its net utility plant investment is$270 million, which includes$6 million of construction work in progress.The accumu-lated provision for depreciation as of December 31, 1986 was$100 million.The Company's share of operation and main-tenance expense of the station is reflected in the Consolidated Statement of Income.The Company entered into two contracts for the supply of coal to the Homer City Generating Station.By the terms of one contract dated January 2, 1985, the Company is obli-gated to pay termination costs under certain conditions for a period of 17 years.The obligation at January 2, 1987 of$11.5 million will be reduced periodically through 2001.8.Commitments and Contingencies (See Note 10.)The Company has an undivided 18%interest in the 1,084,000 kw Nine Mile Point nuclear generating unit No.2 (Unit)being constructed by Niagara Mohawk Power Corpor-ation (Niagara Mohawk)near Oswego, New York.Ownership of the Unit is shared with Niagara Mohawk 41%, Long Island Lighting Company (LILCO)18%, Rochester Gas and Electric Corporation 14%and Central Hudson Gas 6 Electric Cor-poration 9%.On October 31, 1986 Nia'gara Mohawk obtained from the Nuclear Regulatory Commission (NRC)a low power license and a schedule exemption to permit the loading of fuel.The fuel loading process has been completed.
Niagara Mohawk has informed the Company that it is awaiting approval by the NRC of certain engineering analysis related to repairs made to the Unit's eight main steam isolation valves (MSIV)that verify their continued suitability for operation and that this approval is conditioned.
upon the results to be obtained from the testing of a prototype valve which is currently in process.In January 1987 Niagara Mohawk advised the Company that as a result of the MSIV repairs and engineering analysis, coupled with the NRC review and a consequent change in the estimated commercial operation date to September 1987, it revised the estimated total Unit cost to$5.878 billion ($4.059 billion of construction costs and$1.819 billion of AFDC), excluding nuclear fuel costs.In November 1986, Niagara Mohawk had estimated that the total Unit cost would be$5.787 billion ($4.010 billion of construction costs and$1.777 billion of AFDC), excluding nuclear fuel costs.The Company's share of the new estimated cost is approximately
$1.114 billion, including AFDC but excluding nuclear fuel costs, plus$25 million for certain common facilities and other-costs for a total investment of approximately
$1.139 24 billion in the project, excluding the$52 million payment by Niagara Mohawk as described below.As of December 31, 1986, the Company's investment in the project was$1.035 billion, including AFDC but excluding nuclear fuel costs.The testing and start-up of all new nuclear plants is sub-ject to the risk of encountering unforeseen problems and, therefore, it must be recognized that commercial operation of:the Unit may be later than currently projected.
The Com-pany estimates that any delay in achieving commercial oper-ation beyond September 1, 1987 would add approximately
$12 million each month to its share of the cost of the Unit, the major portion of which is financing costs.Although no assurance can be provided as to the precise date on which commercial operation will be accomplished, the Company believes that the Unit will commence commer-cial operation in the fourth quarter of 1987.In connection with a 1982 PSC proceeding discussed fur-ther below, which concluded that completion of the Unit was warranted, the PSC stated that it would apply a strict standard of prudence for all costs incurred in completing the Unit.On July 3, 1985 the PSC issued an Order establishing a proceeding to investigate the prudence of costs relating to the construction of the Unit (Prudence Proceeding).
On Sep-tember 18, 1985 the cotenants and the PSC Staff submitted to the PSC an Offer of Settlement (Offer)to settle the Pru-dence Proceeding.
The Offer provided that a maximum of$4.45 billion of costs relating to construction of the Unit were to be included in rate base and disallowed costs would not be less than$900 million.The cotenants may petition the PSC to increase the maximum in response to an extraordinary event and the co-te'nants represented in the Offer that, at the time of the Offer, they were not aware of any facts that would warrant a claim.The Offer also provides, among other things, that (1)the allowed costs for the Unit would be phased into rate base over a reasonable period together with accumulated de-ferred carrying costs on the portion of the Unit's cost that has not yet been included in rate base, and that the phase-in of each cotenant's allocable share of allowed Unit costs will be resolved in the context of its rate proceeding; (2)certain tax benefits, based upon the accounting requirements arising out of the Offer, are to be reserved for the benefit of the stockholders; (3)the level of expenditures for the Unit that are disallowed under the Offer shall be allocated among the cotenants in proportion to their respective ownership inter-ests in the Unit and each cotenant waives any and all claims arising out of the design, engineering or construction of the Unit that it may have against any other cotenant or coten-ants;(4)the cotenants agree that they will not challenge the legal validity of the Incentive Plan or the July 1984 Order which are discussed below;and (5)the provisions in the Offer shall be in full satisfaction of any monetary penalty or in-centive provided for under the Incentive Plan or the July 1984 Order.On July 15, 1986 the cotenants, in response to a request by the PSC, notified the PSC that they would agree to modify the Offer to provide for a change in the allowable cost to$4.16 billion.In addition, in order to induce settlement among the cotenants, Niagara Mohawk entered into an agree-ment with the other cotenants (Cotenant Agreement) whereby it would make a payment to the cotenants, upon commercial operation of the Unit, for their shares of the$290 million incremental disallowance between the original proposed al-lowed cost of$4.45 billion and the revised proposed allowed cost of$4.16 billion.The Company's share of this payment would be$52 million.This payment will not cause a re-allocation of ownership interests in the Unit.On October 3, 1986 the PSC issued Opinion No.86-24 approving the Offer, as modified by the$4.16 billion cost allowance proposal, and terminating the Prudence Proceed-ing.On October 22, 1986 the Attorney General of the State of New York and the Consumer Protection Board of the State of New York (CPB)filed petitions with the PSC, requesting that the PSC reconsider the conclusions reached in Opinion No.86-24 and resume the Prudence Proceeding.
On Decem-ber 17, 1986 the PSC issued an order which denied the peti-tions for rehearing.
The Executive Director of the CPB and the Attorney General of the State of New York have publicly expressed their intent to appeal the PSC action to the courts.The Company cannot predict whether an appeal to the courts will be taken or, if taken, the results thereof.Based upon the terms of the Offer as approved by the PSC and based on Niagara Mohawk's revised cost estimate dis-cussed above, the Company's share of the disallowed amount (after reflecting the$52 million payment by Niagara Mohawk under the Cotenant Agreement) is expected to approximate
$326 million, reduced to approximately
$234 million after recognition of the federal income tax effect at a 46%rate.(See Note 10.)The disallowed amount to the Company will be increased by its share of t6e cost of any further delays in the commercial operation of the Unit beyond September 1, 1987 and might be further increased dependent on the ulti-mate PSC decision as to the costs covered by the Offer and by the implementation requirements that may ultimately be ordered by the PSC.25 In Niagara Mohawk's current rate case, the Staff of the PSC has raised generic issues with respect to the Offer which may affect each of the cotenants.
In their testimony, Staff contends that the disallowance should include costs for com-mon facilities and certain other costs which the cotenants consider to be outside the scope of the Offer.If all such costs were held to be within the scope of the Offer, the Company's share of the amount disallowed, net of any tax benefits, would increase by approximately
$16 million.Staff also proposed valuing the tax benefits associated with the disallowed cost at a 34%rate and on a present value basis.The Company believes those positions to be contrary to the Offer and, in the case of valuing tax benefits on a present value basis, contrary to generally accepted account-ing principles.
If Staff's positions were ultimately sustained and the tax benefits associated with the disallowed cost were valued at a 34%rate and on a present value basis, the reduc-tion in tax benefits would increase the Company's after-tax disallowance by$48 million.Niagara Mohawk has informed the Company that it expects a decision on its current rate case, including the implementation requirements for the Offer, in March 1987.The Company cannot predict whether the Staff's proposals will ultimately be adopted and sustained.
In April 1982 the PSC established an incentive rate of re-turn plan (Incentive Plan)for the ratemaking treatment of.the remaining construction costs of the Unit.In July 1984 the PSC issued an Order (July 1984 Order)that amended the Incentive Plan by imposing a$5.4 billion ceiling on the Unit's final allowable cost.Under the amended Incentive Plan, the cotenants'ommon stockholders would, with a certain limitation, be penalized by a 20~/o reduction in the rate of return on common equity associated with the capital costs for the Unit in excess of$4.6 billion, but less than$5.4 billion.Capital costs for the Unit in excess of$5.4 billion would be borne in total by the cotentants'ommon stock-holders.Since the PSC's approval of the Offer was in full satisfa'ction of any monetary penalty provided for under the Incentive Plan, as amended by the July 1984 Order, the In-centive Plan and the ceiling imposed by the July 1984 Order are not expected to be implemented.
The Company is unable to predict what further actions or proceedings, if any, may be instituted with respect to the Unit.In February 1984 LILCO discontinued making construc-tion payments for the Unit and stated it wanted to disengage itself from the Unit.Since that time, Niagara Mohawk and LILCO have entered into agreements which initially provided for funding up to$400 million of the LILCO construction cost requirements with respect to the Unit subsequent to February 1984.In December 1986 LILCO paid all amounts owing on its share of the Unit and resumed payments to cover current project expenditures.
In light of the foregoing and the substantial cost increases, construction delays and licensing problems that have arisen with respect to other nuclear generating stations, the Com-pany can predict neither the final cost of its share of the Unit nor the completion and licensing of the Unit consistent with the present schedule.If the Unit were to be abandoned, it is anticipated that, to the extent the Company's investment in the project ($1.035 billion at December 31, 1986 includ-ing AFDC but excluding nuclear fuel costs)is not recovered through rates and alternative regulatory relief is not granted, the Company would have to charge expense with the project costs, net of the federal income tax effect.(See Note 10.)9.Abandoned Projects-New Haven and Jamesport (See Note 10.)The Company filed petitions with the PSC relative to the New Haven and Jamesport Projects, two abandoned nuclear generating projects, requesting authorization to (1)continue to accrue AFDC on its share of costs until amortization of such costs commences to be recovered in rates, (2)amortize the investments through rates and (3)include in rates ap-propriate carrying charges on the unamortized balances.The projects were originally planned for completion on a joint venture basis with LILCO.On September 19, 1984 the PSC issued Opinion and Order No.84-25 which effectively authorized recovery of 70~%%d of the Company's investment in the New Haven Project.As a result of PSC Order No.84-25, the Company charged$8.7 million (net of federal income taxes)to expense in 1984 and the balance was included in Deferred Charges-Abandoned project costs in the Consolidated Balance Sheet.Through April 1985 the Company accrued a non-cash return, calcu-lated similarly to AFDC, on this deferred charge.Amortiza-tion of the deferred charge is being recorded ratably over five years beginning May 1985 coincident with recovery in rates.As of December 31, 1986 the unamortized balance was$29 million.On May 22, 1985 the Company filed a petition in the Supreme Court of the State of New York (Albany County)challenging the PSC's disallowance of a part of the Com-pany's investment in the New Haven Project.The proceeding was transferred to the Appellate Division (Third Department).
The Company and LILCO have agreed that should the PSC find that certain costs for predecessor projects included in the New Haven Project costs may not be recovered by LILCO through its rates, the Company would then refund to LILCO 26 its share of these costs.In Order No.84-25 the PSC stated that these costs should be allowed to be recovered in LILCO's rates;therefore, the Company believes that no amount is refundable to LILCO.In March 1982 the PSC authorized the Company to con-tinue accruing AFDC on its Jamesport investment until the PSC renders its decision with respect to the prudence and disposition of the project costs.These proceedings are con-tinuing.If the Company's request to amortize its investment is denied and alternative regulatory relief is not granted, the Company would have to charge expense with the disallowed costs, net of the federal income tax effect.The Company is unable to predict the portion of the Jamesport investment, if any, which will be allowed to be recovered in rates.In 1986 the Company recorded$5.9 million relating to non-cash return on its Jamesport investment which is in-cluded in other income in the Consolidated Statement of Income.As of December 31, 1986 the Company's Jamesport investment of$80 million, before the federal income tax ef-fect, is included in Deferred Charges-Abandoned project costs in the Consolidated Balance Sheet.10.Statement of Financial Accounting Standards No.90 Financial Accounting Standards currently applicable to regu-lated enterprises do not require, subject to certain excep-tions, the immediate charge to expense of costs relating to a newly completed plant which are disallowed for rate pur-poses.Current standards also do not require the immedi-ate recognition of a loss when the carrying amount of the abandoned project is greater than the present value of the probable future revenue for recovery of the abandoned project costs.Matters of this nature exist, or are expected to exist, in the Company's operations and are more fully discussed in Notes 8 and 9.The Company's consolidated financial state-ments as of December 31, 1986 were prepared in accordance with current financial accounting standards.
In December 1986 the FASH issued Statement of Financial Accounting Standards No.90, Regulated Enterprises-Ac-counting for Abandonments and Disallowances of Plant Costs (SFAS No.90).SFAS No.90 includes requirements that (1)when it becomes probable that part of the cost of a newly completed plant will be disallowed for ratemaking purposes and a reasonable estimate of the amount of the disallowance can be made, the estimated amount of the probable disallow-ance shall be immediately charged to expense, (2)AFDC be capitalized only if it is probable that it will be included as an allowable cost for ratemaking purposes and (3)if partial or no return on investment is likely to be provided on the al-lowed cost of the abandoned plant, then the loss on the abandoned plant shall be equal to the carrying amount of the abandoned plant less the present value of the probable future revenue for recovery of the abandoned plant costs.SFAS No.90 is effective for the Company's financial re-porting commencing with fiscal years beginning after De-cember 15, 1987 (Effective Date), with earlier application encouraged.
The provisions of SFAS No.90 also apply to the financial reporting of events occurring prior to the Effective Date.The Company has analyzed the effect that the provisions of SFAS No.90 have on the Company's investment in the abandoned New I.laven nuclear generating project and the disallowance of costs related to the Nine Mile Point nuclear generating unit No.2 (Unit).Based on that analysis, the Company has concluded that there would not have been a material adverse effect on the Company's consolidated finan-cial statements as a result of the abandoned New Haven nuclear generating project if SFAS No.90 had been in effect in prior years.However, if SFAS No.90 had been in effect in 1986 and 1985, the net-of-tax loss on the Unit would have been allocated to each of those years and reported 1986 and 1985 earnings available for common stock would have been, on a pro forma basis, approximately
$115 million and$65 million, respectively, and related pro forma earnings per share would have been$2.13 and$1.23, respectively.
In addi-tion, 1987 earnings available for common stock would be reduced by approximately
$22 million.(See Note 8.)The Company currently anticipates application of SFAS No.90 in 1987 and anticipates recording the disallowance as a cumu-lative effect of a change in accounting principle.
In order for the Company to be able to issue first mort-gage bonds or preferred stock, certain earnings requirements (subject to certain exceptions in the case of first mortgage bonds)under its Mortgage or Certificate of Incorporation have to be met for a twelve-month period.Tire impact of the Unit's disallowed cost, as discussed above, is expected to have a material adverse effect on such earnings and could result in the Company being unable to meet such requirements.
This adverse effect is expected to continue for as long as the Unit's disallowed cost is reflected in the determination of earnings for the applicable twelve-month period.If the Company were unable to meet such earnings requirements such inability is not expected to have a significant impact on the continuing operations of the Company.27 11.Industry Segment Information Certain information pertaining to the electric and gas operations of the Company is: 1985 1984 Electric Gas Electric Gas (Thousands of Dolla'rs)Electric Gas$1,051,579$190,201 825,719 178,308.225,860 11,893 94,163 3,922$179,195 159,728 19,467 3,992 247,759 3,623,481 5,912 105,463 Operating:
Revenues............
$1,098,089$921,248$207,818 Expenses............
836,471 708,383 190,017 Income.............
261,618 212,865 17,801 Depreciation*
..........
96,804-60,923 4,275 Construction expenditures
.........220,275 10,617 8,390 343,806 Identifiable assets**.....3,844,469 119,565'13,035 3,362,574'Included in operating expenses.**Corporate assets ($260,950,$240,103 and$265,109 at December 31, 1986, 1985 and 1984 respectively) consist primarily of cash, special deposits, accounts receivable, prepayments, unamortized debt expense and accumulated deferred income taxes.Amounts charged to accounts other than taxes Total other taxes 12.Supplementary Income Statement Information Charges for maintenance, repairs and depreciation, other than those set forth in the Consolidated Statement of Income, were not significant in amount.Taxes, other than federal income taxes, are: 1986 1985 1984~(Thousands of Dollars)Property.$62,245$55,987$48,598 Franchise and gross receipts 53,960 49,247 47,735 Payroll ,11,583 10,787 10,228 Miscellaneous 5,840 6,011 6,994 133,628 122,032 113,555 (11,228)(8,445)(11,403)$122,400$113,587$102,152 28 13.Quarterly Financial Information (Unaudited)
March 31 Quarter Ended June 30 Sept.30 (Thousands)
Dec.31 1986 Operating revenues.Operating income..Net income Earnings available for common stock Earnings per share (in dollars).......Dividends per share (in dollars)......Average shares outst'anding Common stock price (in dollars):*
High Low 1985 Operating revenues.Operating income Net income Earnings available for common stock.Earnings per share (in dollars).......Dividends per share (in dollars)......Average shares outstanding Common stock price (in dollars):*
High.Low$381,321$87,150$79,593$73,599$1.36$.64 54,007$32$27'/a$361,982$69,546$69,388$62,688$1.20$.61 52,288$23'/2$21'/4$305,177$70,230$55,269$50,240$.93$.64 54,007$331/8$28a/s$306,049$63,988$53,852$47,510$.90$.61 52,774$27'/z$23'/s$274,945$62,475$46,596$42,031$.78$.66 54,007$38'/z$30$270,992$51,381$42,288$36,194$.68$.64 53,233$29'/4$23'/4$315,841$61,230$47,036$42,520$.79$.66 54,040$34'/4$30'/4$302,757$52,838$42,905$36,815$.69$.64 53,739$28'/4$23'/e*The Company's common stock is listed on the New York Stock Exchange.The number of stockholders of record at January 21, 1987 was 71,935.Dividend Limitations:
After dividends on all outstanding preferred stock have been paid, or declared and funds set apart for their payment, the common stock is entitled to cash dividends as may be declared by the Board of Directors out of retained earnings accumulated since December 31, 1946.Such dividends are limited if Common Stock Equity (40%at December 31, 1986)falls below 25/0 of total capitalization.
Dividends on common stock cannot be paid unless sinking fund requirements of the preferred stock are met.The Company has not been restricted in the payment of dividends on common stock by these provisions.
29 Selected Financial Data Operating revenues.........Net income Earnings per share..........
Dividends paid per share.....Average shares outstanding
...Book value per share of common stock (year-end)
..Interest charges............
AI DC and other non-cash return..........
Depreciation Other taxes Construction expenditures Total assets Long-term obligations and redeemable preferred stock.1986$1,277,284$228,494$3.86$2.60 54,014 1985 1984 (Thousands
-except per$1,241,780$1,129,066 S 208,433 S 211,376$3.46$3.68$2.50$2.38 53,013 49,955 1983 share data)$993,589$156,680$3.06$2.26 43,530 1982 S 953,714 S 145,095$3.36$2.10 36,414$25.86$24.65$23.71$22.75$22.39$199,258$191,248$176,085$137,372$109,266$111,872$100,796$122,400$230,892$4,224,984$122,719$98,085$113,587$256,149$3,976,619$126,265$65,198$102,152$349,718$3,733,146$91,641$56,799$90,604$466,642$3,200,466$54,466$53,174$82,877$524,310$2,728,005$1,951,227$1,836,076$1,663,784$1,426,681$1,242,627 Coopers 8 Lybrand certifed public accountants To the Stockholders and Board of Directors New York State Electric 2 Gas Corporation and Subsidiaries Ithaca, New York We have examined the consolidated balance sheets of New York State Electric 6 Gas Corporation and Subsidiaries as of December 31, 1986 and 1985, and the related consolidated statements of income, retained earnings and changes in financial position for each of the three years in the period ended December 31, 1986.Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the financial statements referred to above present fairly the consolidated financial position of New York State Electric 6 Gas Corporation and Subsidiaries at December 31, 1986 and 1985, and the consolidated results of their operations and the changes in their financial position for each of the three years in the period ended December 31, 1986, in conformity with generally accepted accounting principles applied on a consistent basis.New York, New York January 30, 1987 30 Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Company has an undivided 180/0 interest in the 1,084,000 kw Nine Mile Point nuclear generating unit No.2 (Unit)being constructed by Niagara Mohawk Power Corporation near Oswego, New York.The Company's share of the esti-mated construction cost is approximately
$1.114 billion, in-cluding allowance for funds used during construction (AFDC)but'excluding nuclear fuel costs, plus$25 million for certain common facilities and other costs for a total investment of approximately
$1.139 billion in the project.As of December 31, 1986, the Company's investment in the project was$1.035 billion, including AFDC but excluding nuclear fuel costs.(See Note 8.)Construction expenditures, including AFDC, during the period from 1984-1986 totaled approximately
$1.1 billion.The Unit was the largest construction project during those three years, requiring approximately
$561 million.In ad-dition, approximately
$172 million was expended for the Somerset Generating Station (Somerset) which was placed in commercial operation in August 1984.Estimated construction expenditures for 1987 through 1989 are included in the table below.The 1987 estimate has increased over the estimate made previously largely because of increased costs related to the change in scheduled com-mercial operation of the Unit to September 1987.The Company's construction program is under continuing re-view and is revised from time to time.Construction expenditures other than for the Unit are planned to extend service to new customers, for improve-ments at existing generating stations and to improve oper-ating efficiency.
With the scheduled addition of generating capability from the Unit in 1987 and with the improvements currently underway at existing generating stations, the Company's generating capability will be sufficient and leaves room for growth without the need for major expenditures for new generating facilities.
The regulatory treatment of the allowed cost of the Unit has not yet been determined; however, the Company antici-pates that when the Unit is allowed in rate base, the entire agreed upon cost for rate purposes will be phased in over a period of years.Included in the Company's February 1987 rate filing is a request to phase-in the Unit's allowed costs over a three-year period.The non-cash return included in the table below relates to the deferral of financing costs during the phase-in period.The Company's need for outside capital results primarily from its construction program and its program to reduce the cost of capital by refinancing high-cost first mortgage bonds and preferred stock.External financings in 1986 included:~The sale of$125 million principal amount of First Mort-gage Bonds, 10s/s%Series, due February 1, 2016.~The sale of$50 million principal amount of First Mort-gage Bonds, 9I/4%Series, due April 1, 2016.~The sale of$100 million principal amount of First Mort-gage Bonds, 83/8%Series, due August 1, 1994.In addition, a continuous offering program for the sale of 1,500,000 shares of common stock commenced in December 1986 and is expected to conclude by the end of the first quarter of 1987.Proceeds from these external financings were used for the redemption of$110 million principal amount of high interest bonds originally issued in 1981 and 1979, and for the re-demption of the 300,000 outstanding shares of the Com-pany's 15'/8%Serial Preferred Stock (Cumulative,$100 Par Value)originally issued in 1981.The balance of the proceeds was used for the payment of short-term unsecured notes which were used for construction purposes.The Company uses interim financing in the form of short-term unsecured notes, usually commercial paper, to finance construction expenditures, thereby providing flexibility in the timing and amounts of long-term financings.
The Com-pany had$110.6 million of commercial paper outstanding at December 31, 1986.The amount of external flinancings in 1986 decreased over requirements in 1985 and 1984, primarily due to the com-pletion of Somerset in 1984 and due to declining costs asso-ciated with the Unit as.the Unit gets closer to its scheduled completion date of September 1987.External financings for the period from 1987 through 1989 are included in the table below.During 1986 the Company entered into a new revolving credit agreement with certain banks which provides for bor-rowing up to$200 million to July 31, 1992.At the option of the Company, the interest rate on borrowings is related to the prime rate or the London Interbank Offered Rate or the interest rate applicable to certain certificates of deposit.The agreement also provides for the payment of a commitment fee on the unborrowed amount of one-quarter of a percent per annum.The revolving credit agreement does not require compen-sating balances.The Company did not have any outstanding loans under this agreement at December 31, 1986.In December 1986 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.90, Regulated Enterprises-Accounting for Abandon-ments and Disallowances of Plant Costs (SFAS No.90)which is expected to have a material adverse effect on the Company's consolidated financial statements.(See Note 10.)The Com-pany has analyzed the effect that the provisions of SFAS No.90 have on the Company's investment in the abandoned New Haven nuclear generating project and the disallowance of costs related to the Unit.(See Notes 8 and 9.)Based on that analysis, the Company has concluded that there would not have been a material adverse effect on the Company's consolidated financial statements as a result of the aban-doned New Haven nuclear generating project if SFAS No.90 had been in effect in prior years.However, if SFAS No.90 had been in effect in 1986 and 1985, the net-of-tax loss on the Unit would have been allocated to each of those years and reported 1986 and 1985 earnings available for common stock would have been, on a pro forma basis, approximately
$115 million and$65 million, respectively, and related pro forma earnings per share would have been$2.13 and$1.23, respectively.
In addition, 1987 earnings available for common stock would be reduced by approximately
$22 million.(See Note 8.)In order for the Company to be able to issue first mortgage bonds or preferred stock, certain earnings requirements (subject to certain exceptions in the case of first mortgage Uses of Funds: Construction Nine Mile Point Unit No.2 Other Projects AFDC Total Construction Working Capital Nine Mile Point Unit No.2 Non-Cash Return Retirement of Securities and Sinking Fund Obligations Total$42,000 168,000 74,000 284,000 86,000 32,000 65,000$467,000 The following table sets forth certain data concerning the Company's estimated uses and sources of funds for the years 1987 through 1989.1987 35,000$280,000 150,000'385,000 250,000$1,132,000 bonds)under its Mortgage or Certificate of Incorporation have to be met for a twelve-month period.The impact of the Unit's disallowed cost (See Note 8.), is expected to have a material adverse effect on such earnings and could result in the Company being unable to meet such requirements.
This adverse effect is expected to continue for as long as the Unit's disallowed cost is reflected in the determination of earnings for the applicable twelve-month period.If the Company were unable to meet such earnings requirements such inability is not expected to have a significant impact on the continuing operations of the.Company.1988..1989 Total (Thousands of Dollars)s$-, S-S 42,000 176,000,~170,000 514,000 9,000" 9,000 92,000 185,000,-'-179,000 648,000 23,000-33,000 142,000 37,000",'3,000 92,000 Sources of Funds: Niagara Mohawk payment (See Note 8.)Long-Term Financing Increase (Decrease) in Short-Term Debt Internal Sources Total$=52,000'150,000 (12,000)277,000 S 100,000 (19,000)199,000$467,000$280,000$'40,000 31,000'" 214,000$385,000 S 52,000 390,000 690,000$1,132,000 Results of Operations Earnings Earnings available for common stock and earnings per share for 1986 increased 14%and 12%, respectively, as compared with 1985, primarily as a result of higher retail electric sales and greater amounts of AFDC capitalized.
In addition, earn-ings were higher due to the redemption of the 15~/8%pre-ferred stock.These increases were partially offset by higher maintenance and operation-other expenses.The number of average shares outstanding increased slightly during this period.Earnings available for common stock and earnings per share for 1985 decreased less than 1%and 6%, respectively, as compared with 1984, which resulted primarily from a re-duction in the.return on common equity from 16.2%to 15.5%allowed by the Public Service Commission of the State of New York (PSC)in the April 1985 rate decision.The decrease in earnings per share was also due to a greater number of average shares outstanding.
o s 32 e Operating Revenues Operating revenues increased 3o/o in 1986 compared with the prior year after increasing 10%in 1985.The increases were composed primarily of the following factors: Rate increase Fuel cost adjustment Electricity sales to other utilities Surcharge for (passback of)interchange profits Sales volume and other Total (75,366)63,864 18,393 55,770 (10,380)(31,862)27,663 (14,373)$46,510$(11,006)$130,331$(17,617)Increase (Decrease) from Prior Year 1986 over 1985 1985 over 1984 (Thousands of Dollars)Electric Gas Electric Gas$69,630$1,586$83,246$5,233 (21,917)(2,212)(12,580)(8,477)The PSC granted the following rate increases which became Electric April 15, 1986$64,590 August 29, 1985$3,120 April 15, 1985$78,458 April 24, 1984$84,500 The rate increases in April 1986, 1985 and 1984 reflect the three year phase-in of the Somerset plant costs of approxi-mately$1 billion.In connection with the 1986 rate increase, the Company agreed with the PSC to not file for further in-creases in electric or gas rates to become effective before January 1, 1988.During that time, any costs incurred re-sulting from commencement of commercial operation of the Unit will be deferred.The deferred accounting includes both Unit related revenues and expenses and provision for carry-ing charge allowances.
In February 1987 the Company filed with the PSC for an electric rate increase of approximately 4/o to become effec-tive in January 1988.The proposed increase assumes a 13o%%d return on common equity and a three-year phase-in of the allowed costs of the Unit.Prior to the April 1985 PSC rate decision, fuel cost adjust-ment revenues received by the Company-completely recov-ered fuel costs not included in the base rates charged to customers, and therefore, did not affect earnings.The April 1985 rate decision provided that ratepayers and stockholders share the effects of a variation in fuel costs from forecasted levels up to a$6.6 million, after tax, maximum gain or loss effective on the indicated dates:%Increase Gas (Thousands of Dollars)7.0%.3/o$509.2%9.1/o$2,172 1.0 lo 10.7/o$7,400 3.2 lo to stockholders.
In 1985 and 1986, the effect was to increase earnings by approximately
$.4 million and$1.2 million, re-spectively.
This provision in the April 1985 rate decision will be in effect until January 1988.In addition, the April 1984 and the April 1985 PSC rate decisions contained provisions for customers to share in the benefit or shortfall of profits from sales of electricity to other utilities.
The April 1984 rate decision provided that profits on electricity sales to other utilities exceeding$32.8 million during the twelve months ended April 15, 1985 be shared by ratepayers and stockholders on an 80/o/20%basis.The April 1985 rate decision modified this provision to allow ratepayers and stockholders to share on an 80%/20%%d basis in the bene-fit or shortfall of all profits from sales of electricity to other utilities above or below a monthly forecasted amount.As a result of these provisions,$31.9 million was passed back to customers in 1985.However, in 1986, primarily as a result of the decrease in electricity sales to other utilities,$18.4 million was charged to customers under this provision.
As a result of this sharing provision, 1985 earnings increased by approximately$
4million and 1986 earnings decreased by ap-proximately
$3 million.The provision in the April 1985 rate decision will be in effect until January 1988.Residential Commercial Industrial Total Retail Other Utilities-7%Electric sales and revenue changes by major customer category are as follows: Increase/Decrease from Prior Year 1986 1985 Sales Revenues Sales Revenues 4o/o 14%1/o 10%17 3 6 3 17-1 2 4%%d 15'Yo 1%7%%d-29%44%59%60%Total 4%14%14%33 In 1985 the Company's electricity sales to other utilities increased by 59/o primarily as a result of increased generat-ing capability at favorable rates due to the commercial oper-ation of Somerset beginning in August 1984.The 29%decline in sales to other utilities in 1986 is largely attributable to lower oil prices which enabled oil-fired plants of other utilities to produce electricity on a competitive basis with some of the Company's coal-fired units, thus reducing demand for the Company's generation.
Sales-3%-5-21-8%Gas sales and revenue changes by major customer category are as follows: Increase/Decrease from Prior Year 1986 1985 Sales Revenues Revenues Residential 4%3%-4%Commercial 1}-5 Industrial 35-23 Total-7%-6%-8%Industrial gas sales decreased in both 1986 and 1985 pri-marily as a result of certain large industrial customers pur-chasing gas directly from producers.
The Company received revenues from these customers for transporting gas to them from the producers.
Although this resulted in a decline in industrial gas revenues, there was a related decline in pur-chased gas costs and the effect on earnings after considering the transportation gas revenues was not significant.
In 1986 the decrease in unit sales to industrial customers was also affected by certain customers switching to oil.Operating Expenses Compared with the prior year, operating expenses declined 1%in 1986 after increasing 12%in 1985.The 1986 decline was due primarily to a decrease in energy costs, partially off-set by increases in taxes.Fuel expense decreased 15/o as a result of a decrease of 10%in electricity generated due primarily to lower sales to other utilities and more efficient generation coupled with lower purchase costs for coal, as the fuel cost to generate one kilowatt hour of electricity decreased 3%.In 1985 the 23%increase in fuel expense was due primarily to a 24%increase in electricity generated, partially offset by a 4%de-crease in fuel cost to generate one kilowatt hour of electricity.
Electricity and gas purchased was lower by 15%and 23%in 1986 and 1985, respectively, resulting from lower pur-chase costs per kilowatt-hour and per dekatherm, respec-tively, in addition to significant decreases in the quantity of gas purchased as discussed above.In addition, the 1985 decrease was also attributable to fewer kilowatt-hours pur-chased.Federal income and other taxes rose 17%in both 1986 and 1985.The increases primarily resulted from higher taxable income and higher property taxes as a result of significant property additions.
The Tax Reform Act of 1986 (TRA of 1986)was enacted on October 22, 1986.The impact of the TRA of 1986 will be deferred until the benefits can be passed on to ratepayers in the next rate proceeding.
As a result of this deferral, the Company does not expect the TRA of 1986 to have a material effect on its financial position or results of operation.(See Note 2.)Non-operating Income AFDC was 27%higher in 1986 after declining 20%in 1985.Greater levels of construction work in progress (CWIP)relating to the Unit were responsible for the 1986 increase, while CWIP levels were lower in 1985 due to Somerset being placed in service in August 1984.Non-cash return decreased 66%in 1986 after a 50%in-crease in 1985.A non-cash return was accrued on the Somerset plant costs not included in rate base and on cer-tain abandoned project costs.In total, AFDC and other non-cash return amounted to 54%, 67%and 69%of earnings in 1986, 1985 and 1984, respectively.
Interest charges before the reduction for AFDC-borrowed funds increased by 4%and 9%over the prior year in 1986 and 1985, respectively.
The increases primarily resulted from additional borrowings to finance construction expenditures, including pollution control facilities, and the redemption of certain high-cost first mortgage bonds and preferred stock, partially offset by a decrease in the cost of debt as a result of the Company's refinancing of certain high interest bonds during each of the past three years.The impact of inflation and changing prices on revenues and earnings available for common stock was not material during the period from 1984 through 1986.34 Financial and Operating Statistics SUMIiIARY OF EARNINGS OPERATING REVENUES Electric.Gas.Total OPERATING EXPENSES Operation-fuel-other.....Electricity purchased..Gas purchased........Maintenance
.........Depreciation
.........Federal income tax....Other taxes..........
Total OPERATING INCOME....1986 1985$1,051,579 190,201$1,098,089 179,195 1,277,284 1,241,780 1984 1983 1982 (Dollars in Thousands)
$921,248$785,723$768,717 207,818 207,866 184,99?1,129,066 993,589 953,714 238,371 182,710 29,302 111,147 88,486 100,796 122,987 122,400 280,39?167,923 35,984 129,809 81,591 98,085 96,651 113,587 227,998 141,056 69,206 146,040 68,606 65,198 78,144 102,152 237,753 230,666 281,085 187,148 128,986 66,575 160,415 61,234 56,799 67,891 90,604 819,652 173,937 200,895 125,044 68,781 132,300 60,541 53,174 53,606 82,877 777,218 176,496 996,199 1,004,027 898,400 1981 1976 177,592 108,294 72,591 112,176 51,616 49,448 43,844 72,935 688,496 144,605 72,621 60,132 49,569 47,944 29,757 32,589 7,751 44,296 344,659 79,498$674,740$346,760 158,361 77,397 833,101 424,157 OTHER INCOME AND DEDUCTIONS Allowance for other funds used during construction
....Non-cash return-utility plant in service-abandoned projects.......Abandoned project costs.......Federal income tax credit......
Income tax benefits from AFDC and non-cash return........Other-net.................
INCOME BEFORE INTEREST CHARGES 63,168 9,868 5,906 4,648 30,108 39 394,822 50,263 68,145 57,895 33,691 16,198 7,803 40,185 6,682 570 2,544 22,002 9,283 (11,026)3,435 8,927 3,417 9,256 (328)8,544 2,635 1,166 32,256 3,839 29,814 8,307 23,449 1,608 11,774 11,953 6,836 (234)(158)374,092 360,626 269,233 242,842 178,584 88,309 INTEREST CHARGES Interest on long-term debt..Other interest............
Allowance for borrowed funds used during.construction
...........
Interest charges-net..NET INCOME..............
PREFERRED STOCK DIVIDENDS..............
EARNINGS AVAILABLE FOR COMMON STOCK.........COMMON STOCK DIVIDENDS..............
RETAINED EARNINGS.......187,238 12,020 178,985 12,263 164,435 11,650 130,488 6,884 104,080 5,186 68,773 9,987 39,712 2,673 (32,930)(25,589)(26,835)166,328 228,494 165,659 149,250 208,433 211,376 (24,819)112,553 156,680 (11,519)(7,977)(5,961)97,747 70,783 36,424 145,095 107,801 51,885 20,104 25,226 2?,370 23,466 22,610 17,536 10,465 208,390 140,432 28,375$13,045 58,657$31,608 132,018 118,058 98,155 75,484$35,059$47,001$67,958$51,189$65,948 183,207 184,006 133,214 122,485 90,265 41,420 Average number of shares of common stock outstanding (thousands)
..............
Earnings per average share...Dividends paid per share 54,014$3.86$2.60 53,013 49,955 43,530 36,414 30,586 18,181$3.46$3.68$3.06$3.36$2.95$2.28$2.50$2.38$2.26$2.10$1.94$1.60 35 Financial Statistics INCOME STATISTICS:
Return on average common stock equity-percent...........
Mortgage bond interest-times earned......Interest charges and preferred dividends-times earned......Average common stock equity per share PROPERTY, PLANT AND EQUIPMENT:
Electric Gas.Common.............
Total.............
ACCUMULATED DEPRECIATION CAPITALIZATION:
Long-term debt.........Preferred stock.........Common stock equity....Total capitalization
..CAPITALIZATION RATIOS (percent):
Long-term debt.........Preferred stock.........Common stock equity....NUMBER OF STOCKI IOLDERS: Common stock.........Preferred stock.........PAYROLL (including pensions, etc): Charged to operations Charged to construction and other accounts....Total..............
1986 1985 1984 1983 1982 1981 (Dollars in Thousands) 1976 15.3 2.9 14.3 2.9 15.9 3.0 13.5 15.2 27'.27 13.4 2.8 11.4 2.4 1.8 1.9 1.8 1.9 1.9 1.8$25.24$24.17$23.21$4,129,838 164,426 78,781$3,828,220$3,526,364 154,675 147,120 72,494 60,775$22.62'22.14 r,'3,109,469
$2,616,720 142,0?2-: 137,788 49,115." 50,432$22.01$19.96$2,105,593$1,353,604 133,156 111,062 49,278 36,743$4,373,045$4,055,389$3,734,259$3,300,656$2,804,940$2,288,027$1,501,409$769,336$687,472$617,687$563,118$526,471$490,579$324,852$1,959,089 217,9?0 1,397,962$1,803,469$1,691,367$1,331,981$1,123,789$863,398$635,526 252,620 277,300 278,950 236,075 246,812 176,543 1,331,231 1,234,561 1,103,655 888,594 722,709 393,184$3,575,021$3,387,320$3,203,228$2,714,586$2,248,458$1,832,919$1,205,253 54.8 6.1 39.1 53.2 7,.5 39.3 52.8 8.7 38.5 49.1 10.3 40.6 50.0 10.5 39.5 47.1 13.5 39.4 52.7 14.6 32.7 71,935 6,060 79,013 6,364 81,258 6,380 82,982 6,607 76,073 6,669 71,464 5,932 45,146 6,591 55,936$182,243 57,075 56,573 53,422 51,015 44,504 34,419$175,786$165,280$154,657$145,234$127,548$85,594$126,307$118,711$108,707$101,235$94,219$83,044$51,175 Number of employees end of year........4,423 4,360 4,347 4,378 4,426 4,307 4,170 Electric Sales Statistics 1986 1985 1984 1983 1982 1981 1976 Kwh Sales (millions):
Residential Commercial Industrial Public authorities
.....Subtotal Other electric utilities..Total 4,791 2 772 2,899 1,345 11,807 3,545 15,352 4,615 2,678 2,811 1,301 4,575 2,611 2,832 1,269 4,398 2,536 2,691 1,231 4,412 2,492 2,621 1,201 4,429 2,516 2,845 1,218 4;093 2 322 2,369 1,112 11,405 11,287 10,856 10,726 11,008 9,896 5,021 3,158 1,429 1,827 1,602 886 16,426 14,445 12,285 12,553 12,610 10,782 Operating Revenues (thousands):
Residential Commercial Industrial Public authorities
...........
Subtotal Other electric utilities........Other operating revenues.....Total operating revenues..$457,132 235,246 187,372 109,181 988,931 95,707 13,451$1,098,089$401,345$365,331$335,284$325,124$271,335$151,790 201,654 190,891 169,537 163,755 142,643 79,857 160,089 156,680 133,007 128,633 121,618 58,095 93,180 86,400 75,490 72,357 64,113 35,808 856,268 799,302 713,318 689,869 599,709 325,550 171,073 107,209 58,239 64,780 65,863 16,304 24,238 14,737 14,166 14,068 9,168 4,906$1,051,579$921,248$785,723$768,717$674,740$346,760 Operating Revenues per kwh (cents): Residential Commercial Industrial
.Public authorities
...............
Subtotal Other electric utilities............
Average revenue per kwh.....9.54 8.49 6.46 8.12 8.38 2.70 7.15 8.70 7.99 7.53 7.31 5.70 5.53 7.16 6.81 7.62 7.37 6.69 6.5?4.94 4.91 6.13 6.02 6.13 3.71 5.67 3.44 4.27 2.45 5.26 3.22 7.51 7.08 6.57 6.43 5.45 3.29 3.41 3.39 4.08 3.55 4.11 1.84 6.40 6.38 6.40 6.12 5.35 3.22 Number of Customers (average for year): Residential Commercial Industrial Other.Total 635,536 64,563 1,393 10,503 711,995 624,751 616,051 608,886 603,904 599,117 564,502 63,368 62,115 60,710 59,482 58,164 54,808 1,389 1,362 1,333 1,340 1,348 1,279 10,388 10,138 9,978 9,916 9,687 8,633 699,896 689,666 680,907 674,642 668,316 629,222 Annual Average Use (kwh): Residential Commercial Industrial (thousands) 7,538 42,935 2,081 7,387 7,426 7,223 42,261 42,035 41,772 2,024 2,079 2,019 7,306 41,895 1,956 7,393 7,251 43,25?42,366 2,111 1,852 Annual Average Bill: Residential Commercial Industrial
$719 3.644 134,510$642$593$551$538$453$269 3,182 3,073 2,793 2,753 2,452 1,457 115,255 115,037 99,780 95,995 90,221 45,422 37 Electric Operating Statistics 1986 1985 1984 1983 1982 1981 1976 PRODUCTION DATA: System Capability (megawatts):
Net generating capability:
Coal fired Hydro Diesel Total.Purchased-Power Authority...-Other Total system capability
....Annual Load Factor (percent)Coal Burned (thousands of net tons).Coal Heat Value (Btu per lb.).....Btu per Kwh Generated (net).....Kwh Production
-net (millions):
Generated:
Coal fired Hydro Total generated..Purchased-Power Authority-Other...........
Total.2,366 68 7 2,441 563 3,004 66.3 5,334 12,335 9,959 13,196 338 13,534 2,590'464 16,588 2,366 64 7 2,437 621 3,058 64.4 2,376 1,733 1,731 60 56 38 7 10 ll 2,443 1,799 1,780 683 680 768 300 350 3,126 2,779 2,898 67.3 64.4 65.1 1,720 38 ll 1,769 764 242 2,775 6,051 5,126 4,666 4,803 12,309 12,202 12,033 11,937 10,093 10,562 10,552 10,670 4,867 11,600 10,701 14,769 242 15,011 2,315 491 17,817 11,850 10,641 246 213 10,748 10,552 197 210 12,096 10,854 2,980 2,023 650 714 10,945 10,762 2,104 2,061 663 904 15,726 13,591 13,712 13,727 1,377 38 14 1,429 848 200 2,477 61.0 3,395 11,123 11,112 6,797 249 7,046 4,076 869 11,991 Production Expenses (thousands):
Generated.Purchased.Total.$318,885$353,265 29,302 35,984$348,187$389,249$287,299$237,309$248,278$216,805 69,206 66,575 68,781 72,591$356,505$303,884$317,059$289,396$91,724 49,569$141,293 Costs per Kwh (mills): Generated.Purchased.Operating expense (excl.production)
Total.23.56 9.59 9.85 30.84 23.53 23.75 21.86 22.68 20.15 13.02 12.82 19.07 24.32 24.86 24.48 10.02 8.46 7.97 8.60 8.39 7.35 4.91 30.31 30.64 30.95 31.51 28.43 16.69 ELECTRIC OPERATION AND MAINTENANCE EXPENSES (thousands):
Production Transmission Distribution Customer accounting
.......Customer service.Administrative and general Total.$348,187 22,438 49,522 19,220 8,867 63,328$511,562$389,249 23,450 46,120 18,255 7,005 55,868$539,947$303,884 13,382 39,111 16,603 5,221 42,508$356,505 16,093 42,494 17,824 6,149 42,783$317,059 13,023 36,495 16,568 4,457 44,476$289,396 11,308 32,287 13,449 3,719 40,129$481,848$420,709$432,078$390,288$141,293 7,058 21,569 7,672 2,507 20,068$200,167 38 Gas Department Statistics 1986 1985 1984 1983 1982 1981 1976 Dekatherm (dth)Sales (thousands):
Residential Commercial Industrial
.Other Subtotal Transportation of customer-owned gas................
Total.14,139 7,343 5,126 3 373 29,981 3,287 33,268 13,652 7,392 7,790 3,547 14,120 7,761 9,817 3,691 32,381 35,389 1,926 34,307 35,389 13,857 7,514 9,296 3,718 34,385 34,385 15,688 8,123 9,804 4,314 37,929 37,929 16,412 8,044 11,509 3,991 39,956 39,956 19,958 9,484 9,243 3,808 42,493 42,493 Operating Revenues (thousands):
Residential Commercial Industrial Other Subtotal Transportation of customer-owned gas..............
Total operating revenues Operating Revenues per dth: Residential Commercial Industrial Other Average revenue per dth.........Number of Customers (average for year): Residential with house heating.......Residential without house heating Commercial with space heating.......Commercial without space heating....Industrial Other Total.$91,068 42,711 24,429 18,818 177,026 2,168$179,194 S 6A4 5.82 4.77 5.58$5.90 105,094 8,300 16,121 1,406 405 1,173 132,499$71,399 30,989 40,077 15,896 158,361 921$190,201$207,818$207,866$184,997$158,361 S 6.50 5.81 4.84 5.62$5.85 S 6.54 5.85 5.00 5.70$5.87$6.71 5.99 5.29 5.57 S 6.05$5.30 4.70 4.43 4.70$4.88$4.35 3.85 3.48 3.98 S 3.96 103,822 8,440 15,953 1,396 409 1,159 131,179 103,132 8,630 15,788 1,415 398 1,137 130,500 102,728 8,830 15,316 1,410 383 1,139 129,806 102,386 9,910 13,540 1,080 395 1,144 103,031 9,106 14,513 1,286 384 1,135 129,455 128,455$88,677$92,288$92,974$83,16?42,952 45,403 44,980 38,192 37,734 49,087 49,217 43,383 19,917 21,040 20,695 20,255 189,280 207,818 207,866 184,99?$40,387 16,850 13,668 6,492 77,397$77,397$2.02 1.78 1.48 1.70$1.82 97,496 12,812 12,985 1,266 384 1,142 126,085 Annual Average Use (dth): Residential Commercial Industrial Annual Average Bill: Residential
.Commercial Industrial Cost of Natural Gas Purchased:
Amount (thousands)
.........Per dth Gas Operation and Maintenance Expenses (thousands):
Production Transmission and distribution
.Customer accounting
........Customer service Administrative and general Total 125 419 12,657 122 426 19,046 126 451 24,666 124 449 24,272 140 514 25,531 146 550 29,137 181 665 24,070$111,538 11,013 4,085 2 227 9,589$138,452$130,269 10,224 3,977 1,779 9,508$155,757$160,928 8,908 3,783 1,328 8,703$132,724 9,010 3,947 1,141 8,661$112,410 8,249 2,975 871 7,476$146,401 9,651 4,043 1,580 9,383$171,058$183,650$155,483$131,981 S 48,210 5,939 1,705 321 3,681 S 59,856 S 803 S 790$826$833$742 S 636$366 2,437 2,476 2,639 2,689 2,417 2,120 1,182 60,319 92,259 123,334 128,504 112,977 101,461 35,594$111,147$129,809$146,040$160,415$132,300$112,176$47,944 3.75 3.87 4.09 4.52 3.49 2.82 1.11 39 Directors Officers Wells P.Allen, Jr.Chairman tk Chief Executive Officer of the Company James A.Carrigg President 6i Chief Operating Officer of the Company Alison P.Casarett Dean, The Graduate School Cornell University Ithaca, N.Y.Eileen D.Dickinson Free-lance Economic Researcher Brainard, N.Y.Everett A.Gilmour Chairman of the Board,'he National Bank and Trust Company of Norwich Norwich, N.Y.Alexander Horwitz Director of various corporations Binghamton, N.Y.Charles F.Kennedy Chairman of the Executive and Finance Committee of the Company Ben E.Lynch President tvinchester Optical Company Elmira, N.Y.Alton G.Marshall Chairman Ei Chief Executive Officer Lincoln Savings Bank Brooklyn, N.Y.David R.Newcomb Former President Buffalo Forge Company Buffalo, N.Y.Robert A.Plane Director New York State Agricultural Experiment Station Geneva, N.Y.C.William Stuart Chairman Ec Chief Executive Officer C.tV.Stuart Ec Co., Inc.Newark, N.Y.William D.Turner Group Vice President The Singer Company Stamford, Conn.Director Emeritus Edgar 1V.Couper Former Chancellor, New York State Board of Regents Binghamton, N.Y.Wells P.Allen, Jr.Chairman itt Chief Executive Officer James A.Carrigg President ill Chief Operating Officer Dolores R.Hix*Richard Kroboth Assistants to the Chairman Robert B.MacKenzie Executive Vice President Engineering and Operations E.Eugene Forrest Senior Vice President Administration Allen E.Kintigh Senior Vice President Generation James A.Ackerman Vice President Area Administration Francis X.Carney Vice President Research and Development Orlin W.Darrach Vice President Customer Services Richard W.Page Vice President Human Resources Raymond A.Perine Vice President Gas Operations Bernard M.Rider Vice President Electrical Engineering and Supply Vincent W.Rider Vice President Plant Operations and Engineering Jack H.Roskoz Vice President Public Affairs Michael J.Turkovic Vice President Purchasing John I.Fiala Assistant Vice President Plant Operations John V.Kutz Assistant Vice President Transmission and Distribution Operations Irene M.Stillings Assistant Vice President Consumer Affairs'Also Assistant Secretary Ithaca Executive Offices Route 13, Dryden Road, Ithaca, N.Y.14851 Tel.607/347-4131 Richard A.Jacobson Senior Vice President Corporate Matthew F.Felo, Jr.Vice President and Treasurer John D.Scott Vice President Economics Richard P.Fagan Comptroller Jaime S.Hecht Secretary Gary G.Chabot Assistant Vice President Economics Daniel W.Farley Assistant Secretary James M.Niefer Assistant Secretary Robert T.Pochily Assistant Treasurer Everett A.Robinson Assistant Comptroller Binghamton Executive Offices 4500 Vestal Parkway East, Binghamton, N.Y.13903 Tel.607/729-2551
.General Counsel: Huber Lawrence ti'bell 99 Park Avenue New York, N.Y.10016 Transfer Agent for Preferred Stock: Manufacturers Hanover Trust Company 450 tVest 33rd Street New York, N.Y.10001 Transfer Agent for Common Stock: Manufacturers Hanover Trust Company 450)Vest 33rd Street New York, N.Y.10001 Stockholder Inquiries:
Communications regarding stock transfer requests or lost certificates should be directed to the Transfer Agent.Stockholders with changes of address, dividend, dividend reinvest-ment and other inquiries may call toll-free between 8:00 a.m.and 4:30 p.m.: In New York State: 1-800-521-1NGE Outside New York State: 1-800-225-5NGE The Company files an annual report on Form 10-K with the Securities and Exchange Commission.
Stock-holders may obtain a free copy of this report from the Secretary, Ithaca Executive Office, upon request.Securities Listed on the New York Stock Exchange: Common Stock 3.75%Preferred Stock 8.80%Preferred Stock Adjustable Rate Preferred Stock 8.48%Preferred Stock ($25 Par Value)7Fs%First Mortgage Bonds due 2001 9ls%First Mortgage Bonds due 2005 9I's%First Mortgage Bonds due 2006 8s/s%First Mortgage Bonds due 2007 40 New utility bills are prepared for mailing.NYSEG was the first utility in the state to issue two-page bills that make it easier for customers to under-stand charges for electricity and gas.Meter readers will use portable, computerized devices soon to record meter readings, reducing errors and customer inquiries.
~.'THE ANNUAL NEETINC of stockholders will be held at the Corporation s General Office Building on Route 18 (Dryden Road)in the Town of Dryden, N.Y.on Nay 8 1987 at ll a.m.Formal notice of the meeting, a proxy statement and form of proxy will be sent to stock-holders in early April.
New York State Electric&Gas Corporation Box 287, Ithaca, New York 14851 BULK RATE U.S.POSTAGE PAID New York State Electric 8 Gas Corporation STATEMENT OF INCOME-(Thousands of Dollars)1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 10-Year%Ch~cCe Portion of Common Stock Dividends Nontaxable for Federal Income Tax Pu Operating Revenues Electric (1)Gas(2)..Total Operating Expenses Operation Maintenance.
Depreciation.
Operating Taxes Federal Income Tax Deferred Income Tax-Net Total$377,103$436,652 61 448 68 150 438 551 504 802$454,860 68 329 523 189$384,160$398,392$291,999$225,971$186,264$184,391$149,884 61 649 46 489 35 994 28 813 24 738 23 449 20 831$411,770 61 988 473 738 445 809 444 881 327 993 254 784 211 002 207 840 170 715 240,196 19,733 24,894 42,551 31,965 7489 316,553 14,884 24,249 41,675 20,781 17 301 235,252 11,132 15,220 24,481 (2,534)8 744 352,642 13,814 22,531 39,681 24,150 10 058 169,742 9,818 14,839 21,268 171 5 794 100,917 6,794 12,859 16,975 4,050 2 342 133,688 8,098 13,279 18,560 4,552 2 547 325,158 14,456 20,524 35,693 15,123 10 157 132,554 8,151 13,393 18,779 6,504 3,387 333,966 12,450 16,108 29,274 7,381 4,169 321,419 12,937 16,923 31,474 6,102 11,861 366 828 435 443 462 876 421 111 400 71 6 403 348 292 295 221 632 182 768 180 724 143 937 152 195 157 138 190 94 151 689 220 155~hee1eeee a None None None None None 7 90 None None None 10$2.96 2.90 2.75 2.60 2AS 2.33 2.18 1.99 1.94 1.60 1.72 1966 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 (a)As initially reported to shareholders; subject to acceptance by U.S.Treasury Department.
Operating Income.71,723 69 359 60 313 52 627 45 093 41 533 35 698 33 152 28 234 27 116 26 778 Other Income and Deductions Allowance for Equity Funds Used During Construction Federal Income Tax-Credit.....
Deferred Income Tax-Credit....
Other-Net Total Income before Interest Charges....21,594 18,644 (289)(18)6,979 6,588 371~604 15,709 11,105 (23)45 4,988 4,560 621~389 9,729 537 4,044 461 28 655 24 610 21 295 15 321 14 771 100 378 93 969 81 608 67,948 59 864 6,198 928 1,820~533 8 413 49,946 4,495 3,476 2,388 41 8 933 721 253 178 138~295~333~348 4,871 4 254 2 899 40 569 37.406 31 133 1,560 628 75~90 2 173 29 289 796 409 30~84 1 151 27 929 (171)542*259 Interest Charges Interest on Mortgage Bonds..........
Interest on Unsecured Long-term Debt..Interest on Short-term Debt...........
Other Interest Allowance for Borrowed Funds Used During Construction Amortization of Premium and Expense on Debt Total 37,226 6,105 1,637 37,200 3,220 325 931 33,664 670 1,372 627 29,674 365 2,116 570 24,918 374 3,399 636 21,043 1,815 4,296 652 15,017 3,778 4,763 305 11,306 5,195 3,422 262 10,750 762 1,673 272 10,627 805 1,075 793 10,469 1,467 704 308 179 241 95 311 56 73 35 494 34 297 30 471 27 712 24 535 20 267 16 671 15 712 10 873 11 542 12 002 (10,131)(7,788)(6,212)(5,324)(5,033)(7,718)(7,287)(4,536)(2,640)(1,831)(1,014)256 316 (100)431 (899)866 196 Net Income Dividends on Preferred Stock Income Available for Common Stock..Dividends on Common Stock Retained Earnings 64,884 59,672 51,137 40,236 35,329 29,679 23,898 21,694 20,260 17,747 15,927 5614 6184 6459 5783 4126 4126 4126 4126 4126 3626 2866 59,270 53,488 44,678 34,453 31,203 25,553 19,772 17,568 16,134 14,121 13,061 40 393 33 945 28 860 23 480 20 638 16 751 13 308 10 961 10 531 8 966 8 382$18 877$19 543$15 818$10 973$10 565$8 802$6 464$6 607$5 603$5 155$4 679 307 96 303 Common Stock: Average Shares Outstanding (000's).......Earnings Per Share-on Average Shares Outstanding
-Dollars.Dividends Declared Per Share-Dollars....Dividends Paid Per Share-Dollars........
Pay-out Ratio on Dividends Declared-Per Cent.Retained Earnings Per Share-on Average Shares Outstanding
-Dollars..........
(1)See footnote (a)on page.13.(2)See footnote (a)on page 14.13,207 4.49 2.96 2.96 11,458 4.67 2.93 2.90 62 1.71 10,087 4A3 2.78 2.75 1.57 8,745 3.94 2.63 2.60 67 1.25 7,979 3.91 2.51 2A8 1.32 6,867 3.72 2.39 2.33 1.28 5,851 3.38 2.20 2.18 1.10 5,373 3.27 2.04 1.99 62 1.23 5,310 3.04 1.96 1.94 1.06 4,873 2.90 1.84 1.80 1.06 4,873 2.68 1.72 1.72 171 68 72 72.96'hange of 1,000 per cent or more.
Notes 600 ELECTRIC AND GAS REVENUES TO TOTAL OPERATING REVENUES 500 V)lU 400 0 O 300 V)c 0 200 100 CI 0 I-j 1976 77 78 79 80 81 82 83 84 85 86~Electric Gas OPERATION AND MAINTENANCE EXPENDITURES TO TOTAL OPERATING REVENUES 600 Total Operating Revenues Operating and Maintenance Expenditures 500 tO=400 O O o 300 lO c~o 200 100 1976 77 78 79 80 81 82 83 84 85 86 1976 USE OF REVENUE DOLLAR (IN CENTS)19S6 Cost of Fuels 470 Fuel Used ln Elec.Gen.331 Purchased Gas 250 Fuel Used in Elec.Gen.Cost of Fuels 410 Purchased Gas Sg O CD K Q I-K I-cC I-Oepreciation SC Wages&Benefits 100 4g Other (net)1O 3g Reinvested Earnings Dividends Purchased 7g Elect.Interest on Bds&Nts 7C 7$Purchased Depreciation interest on Bds&Nts 100 Wages&Benefits 104 4p Reinvested Earnings Taxes 19l'0l'Oividends Electric Operating Revenues.$377 103$436 652$411 770 INCOME FROM OPERATIONS
-ELECTRIC AND GAS DEPARTMENTS
-(Thousands of Dollars)1986 1985 1984 1983 1982 1981$398 392 1980$291,999 1979$225,971 1978$1 86 264 1977$184 391$149,884 152 10-Year 1976%ChancCe Ratio of Corporate rat1 Revenues Electric~per Cnrr Gas~per Cenr Operating Expenses Production
-Operation.........
Maintenance.......
Transmission
-Operation.........
Maintenance.......
Distribution
-Operation.........
Maintenance.......
Customer-Accounts and Service......Sales.Administrative 8 General-Operation....
Maintenance
..Total Operation and Maintenance......
Depreciation Operating Taxes Federal Income Tax Deferred Income Tax-Net............
Total Operating Expenses...........
Operating Income.Gas Operating Revenues.Operating Expenses Production
-Operation.........
Maintenance.......
Transmission
-Operation.........
Maintenance.......
Distribution
-Operation.........
Maintenance.......
Customer-Accounts and Service......Sales..Administrative
&General-Operation....
Maintenance
..Total Operation and Maintenance......
Depreciation Operating Taxes Federal Income Tax.Deferred Income Tax-Net........:...
Total Operating Expenses...........
Operating Income..154,162 8,170 3,320 1,652 5,619 7,039 9,213 26,354 879 216,408 22,875 36,558 29,443 6 822 228,637 4,925 2,888 1,036 5,629 6,628 8,531 23,343 751 282,368 21,255 35,669 17,721 16 688 267,559 5,096 2,822 863 5,331 5,683 7,985 21,885 601 317,825 19,474 33,754 20,789 9 228 242,938 5,245'2,462 1,275 4,594 5,622 7,287 20,249 700 290,372 18,676 30,413 15,027 9 186 242,688 4,555 2,895 1,055 4,803 5,155 7,196 18,249 639 287,235 14,871 26,701 4,669 11 167 270,631 4,767 2,412 1,020 4,558 4,643 5,978 16,530 530 311,069 13,974 25,273 6,512 3,951 183,727 3,964 2,020 1,098 4,017 4,372 4,852 13,743 553 218,346 13,633 21,141 (2,328)8 428 128,509 3,159 1 773 1,340 3,527 3,673 4,213 11,304 602 158,100 13,305 18,394 (26)5 759 97,415 2,543 1,792 971 3,260 3,210 3,991 10,924 454 124,560 11,887 16,129 5,658 3 141 101,347 2,699 1,582 843 3,000 3,172 3,695 9,211 341 125,890 11,813 15,985 4,426 2,241 72,553 2,247 1,604 582 2,917 2,659 3,468 7,701 314 94,045 11,431 14,507 4,035 2 226 312 106 373 701 401 070 363 674 344 643 360 779$64 997$62 951$53,790$48 096$39 517$37 61 3 259 220$32 779 195 532$30 439 161 375$24 889 160 355 126 244$24 036$23 640$61 448$68 150$68 329$61 968$61 649$46 489$35 994$28813$24 738$23 449$20 831 33,555 54 465 167 1,932 1,658 1,587 94 3,895 114 40,484 41 386 145 1,882 1,268 1,552 93 3,128 90 40,222 40 450 273 1,697 1,192 1,491 95 3,106 65 41,211 48 447 288 1,666 1,214 1 372 91 2,841 64 39,616 46 378 245 1,663 1,181 1,334 54 2,543 61 28,690 68 370 296 1,427 1,078 1,052 87 2,231 48 22,602 52 324 241 1,256 795 761 39 1,911 57 16,763 73 311 214 1,148 687 629 1,565 70 11,771 50 280 192 1,074 681 587 1,460 50 11,783 54 284 224 987 722 521 1,278 43 9,809 36 240 197 866 710 557 1,202 49 43,521 2,019 5,993 2,522 667 49,069 2,994 6,006 3,060 613 48,631 3,057 5,927 3,361 830 49,242 1,848 5,280 96 971 47,121 2,052 4,773 1,433 694 35,347 2,134 4,001 869 218 28,038 1,587 3,340 (206)316 21,460 1,534 2,874 197 35 16,145 1,506 2,650 846 246 15,896 1,466 2,575 126 306 13,666 1,428 2,468 15 116 54 722 61 742 61 806 57 437 56 073 42 569 33 075 26 100 21 393 20 369 17 693 (Expressed in Per Cent),$6726$6408$6523$4531$5576$3920$2919$2713$3345$3080$3138 112 264 107 184 93 165 166 242 180 130 100 152 630 206 147 175 195 242 50 94 (15)123 134 185 224 133 218 41 143 475 209 114 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 86 86 87 87 86 90 89 89 88 89 88 14 14 13 13 14 10 11 11 12 11 12 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Ratio of Corporate eratin Income Electric~Per Cenr 91 91 89 91 88 91 92 92 88 89 88 Gas~riant 9 9 11 9 12 9 8 8 12 11 12 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 ratin Ratio Electric Gas 73.1 83.9 77.7 85.2 81.6 84.3 82.4 91.0 85.6 87.5 87.9 89.2 86.7 91.6 84.0 89.8 81.9 82.1 83.4 85.0 80.1 84.3 corlx3rate 74.6 78.7 81.9 83.6 85.9 88.1 87.2 84.6 81.9 83.5 80.6 (d)The Operating Ratio, expressed as a percentage, represents the relation of total operating expenses, excluding fedeal income taxes, to operating revenues.Ratio of Operating Income to Year-end Net Plant (a): Electric (includes allocation of common plant)...Gas (includes allocation of common plant)......
Corporate Total Maintenance and Depreciation as Per Cent of Total Revenue.19.32 14.25 18.70 10.18 19.24 14.64 18.69 7.75 16.90 15.56 16.74 6.95 15.29 10.64 14.74 6.70 6.42 12.78(c)12.33 13.37 9.75 12.85(c)12.03 10.71 7.38 10.33 9.87 7.23 9.56 10.21 10.29 8.95(b)8.57 8.95 8.20 8.95(b)8.52 8.60 8.53 8.59 11.51 g 7ry (,/0 0 47$2.~K (a)Net Plant excludes construction work in progress.(b)Net Plant for 1978 excludes the 10%interest in the Roseton Phnt purchased as of 12/31/78.9 (c)Net Phnt for 1982 excludes the 5%interest in the Roseton Plant purchased as of 12I31N2.Change of 1,000 per cent or more.
Notes UTlLITY PLANT 950 900 850 800 750 m 700 650 600 550 o soo 450 00 0 350 300 g 250 200 150 100 50 0 1976 77 78 79 80 81 82 83 84 85 86~Construction Work Net utility plant pluS COn-struction work in progress, increased 156o%%d during the~ffet Utility Plant last 10 years.The average annual growth rate during this period was 9.5%.Gross additions to ubkty phnt (including construction work in progress)in the last 5 years amount to about 39%of total 1986 phnt.The com-parable figure for the hst 10 years is 680%%d Net utility plant increased 24%during the ten.year per-iod 1976-1986 and the aver-age annual growth rate was 1.P%%d.CA I-K l-cC CQ Ch K cC O fL I-O UJ K O I-cC f?: 0-O O CL UJ O O K 1000 900~800 rg 7OO~600 0 o 5oo a 400 0'=300~200 r f Short Term~Oebt~Long Term~Oebt Prefened Stock~Common 0~Equity 100 1976 77 78 79 80 81 82 83 84 85 86 CAPITALlZATIQN AND SHORT TERM DEBT Capitalization increased 184%during the last 10 years while capitalization plus short-term debt in-creased 165%during the same period.The average annual rates of growth were 10.7%and 9.9%respec-tively.
SUMMARY
BALANCE SHEET AT DECEMBER 31-(Thousands of Dollars)ASSETS Utility Plant-(page12)Less Accumulated Depreciation Net Utility Plant Construction Work in Progress Other Property and Investments Current Assets Cash Temporary Cash Investments Special Deposits Accounts Receivable from Customers Receivable
-Nine Mile 2 Settlement Accrued Unbilled Utility Revenues.Federal Income Tax Carry-back
.Other Receivables
.Materials and Supplies.Prepayments
.1986$636,761 253,168 383,593 555,735 6,290 1,690 6,413 19,727 32,344 26,100 8,475 3,235 23,024 8 119 1985$611,905 240,878 371,027 441,863 3,602 1,653 14,350 53,473 43,448 8,963 2,105 25,975 6 524 1984$585,538 225,284 360,254 343,253 3,202 1,264 10,518 7,730 43,206 8,377 2,151 34,636 5 403 1983$567,160 210 025 357,135 253,630 2,183 1,576 2,929 43,324 7,910 2,231 31,204 5 106 1982$560,337 196,133 364,204 186,777 2,109 2,133 6,200 43,159 7,529 2,901 20,296 4 694 1981$524,517 179 268 345,249 160,249 1,840 2,958 252 39,151 7,535 1,148 26,879 4 259 1980$511,167 165 487 345,680 123,827 1,968 3,341 247 31,947 5,771 4,676 1,878 27,264 3 771 1979$498,282 152,407 345,875 98,019 1,797 3,267 165 21,428 5,547 3,085 840 24,334 3,163 1978$486,116 140 813 345,303 72,546 1,787 3,282 258 16,962 4,547 1,594 16,228 3 010 1977$445,235 127 049 318,186 49,337 3,590 191 14,824 4,769 1 223 14,623 2,646 1976$428,543 116 709 311,834 36,610 3,031 374 12,056 4,308 1,814 13,489 2 732 129,127 156491 113,285 94,280 86,912 82 182 78,895 61 829 41 866 37 804 Deferred Charges Unamortized Debt Expense.Unamortized Project Costs**Unamortized Investment in Sterling Project'*....Deferred Sterling Cancellation Charges Deferred Electric Fuel Costs.Deferred Gas Costs Deferred Environmental Costs.Deferred Roseton Litigation Settlement Deferred Finance Charges-Nine Mile 2 Project..Other'Total.LIABILITIES 5,674 3,042 15,083 990 519 1,579 735 7,371 22,119 3,227 3,648 17,698 6,404 2,761 1,874 1,664 9,213 3,259 7 229 4,289 3,312.13,795 6,504 1,766 2,207 870 8,292 9,200 8 011 9,973 2,731 9,063 1,012 580 894 599 6,449 41,971 9 681 8 429 65 541 58 246 56 977 82,953$1 157 698$1 038 524~$878 240~$764 205 3,305 3,965 21,127 1,143 4,814 1,362 2 773 7 561 46 050$686 052 2,493 4,449 6,410 1,000 3,422 3 824 21 598$611 118 2,190 411 10,351 623 3,099 3 661 20 335$570 705 6,711 517 3,982 1,756 513 2,573 16 052$523,572 2,550 834 3,603 1,555 616 1,591 10 749$476 266 2,029 539 2,576 1,642 771 1,637 9 194$41 9 420 3,294 401 1,615 1,472 927 1 373 9 082$396 181 Capitalization
-(page 17).Current Liabilities Long-term Debt Maturing within One Year..Sinking Fund Requirements
.Notes Payable to Banks Notes Payable (Commercial Paper).Accounts Payable.Accrued Taxes Accrued Interest.Accrued Vacation Customer Deposits.Dividends Declared Sterling Cancellation Charges Other$960 21 5 175 27,234 4,966 8,055 2,806 2,809 11,794 444 10,057 68,340$881 477 175 22,259 5,019 8,885 2,675 2,688 10,457 622 4 560 57,340$740 403 175 26,850 5,195 7 322 2,553 2,479 9,431 1,643 8,046 63,694$618 600 11,000 175 23,000 23,080 3,697 6,533 2,677 8,124 3,286 6,300 87 872$573 967 175 26,500 14,991 6,249 6,626 2733 6,562 5,887 69 723$498 968 6,000 175 16,500 26,669 6,073 5,855 2,840 5,654 5 190 74 956 18,000 175 18,000 25,808 7,183 4,022 2,677 4,696 5,775 86 336$404,482 12,000 175 45,000 18,411 5,767 3,148 2,744 3,933 5 262 96,440$405 352 175 23,000 12,519 5,988 2,523 2,698 3,664 3 647 54,214 8,000 175 17,000 10,609 4,414 2,689 2,543 3 322 2 678 51,430 4,200 175 20,000 9,725 2,985 2,720 2,414 2,812 2,777 47,808 10 Deferred Credits and Other Liabilities*
Deferred Finance Charges-Nine Mile 2 Project..Accumulated Deferred Income Taxes Total.'Rechssified for 1980 to conform to current presentation."Rechssified for 1 982 to conform to current presentation.
17,833 41,304 8,091 22,119 6,159 9,200 5,746 3,259$1,157,698$1,038,524$878,240$764,205 70 006 69 497 58 784 48 728 3,568 38 794$686 052 6,143 31 051$611 118 4,223 28 702$570,705 2,439 20211$523,572 2,105 14 595$476,266 1,937 11 347$419,420 962 8 875$396,181 Notes 250~200~150 O 0<100 0 NET FUNDS FROM OPERATIONS TO TOTAL SOURCE OF FUNDS From Internal Sources From External Sources VH 1976 77 78 79 80 81 82 83 84 85 86 140 120 ttl 100 O O 80 0 60 O.-'=40 20 INTERNAL CASH FLOVf AND CASH CONSTRUCTION CHARGES Cash Construction Charges Internal Cash Flow'NTERNAL CASH FLOW REPRESENTS"NET FUNDS FROM INTERNAL SOURCES" LESS DIVIDENDS" 1976 77 78 79 80 81 82 83 84 85 86 STATEMENT OF RETAINED EARNINGS-(Thousands of Dollars)1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Balance January1.Net Income$145,856 64 884 210 740$126,313 59 672 185 985$110,495 51 137 161 632$99,522 40 236 139 758$88,957 35 329 124 286$73,691 23 898$80,155 29,679 109,834 97 589$67,084 21 694$61,481 20 260 81 741$56,326 17 747 74 073$51,647 15 927 67 574 Dividends Declared-cash: On Cumulative Preferred Stock.On Common Stock Total.Balance December 31.5,614 40 393 46,007$164,733',184 33 945 40,129$145,856 6,459 28 860 35,319$126313 5,783 23 480 4,126 20 638 4,126 16 751 4,126 13 308 24764 20877 17434 29 263$110 495$99 522$88 957$80 155 4,126 10 961 15,087$73,691 4,126 10 531 14,657$67,084 3,626 8 966 12,592$61,481 2,866 8 382 11,248$56,326 Pursuant to the terms of the 4.85%promissory notes, due 1995,$156,319 is not restricted with respect to the declaration of dividends on common stock at December 31, 1986.STATEMENT OF CHANGES IN FINANCIAL POSITION-($000)SOURCE OF FUNDS 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Funds from Operations:
Net Income.Income Items not Requiring Current Outlays: Depreciation Accruals: Charged to Depreciation Expense.Charged to Other Income Accounts Amortization of Investment in Sterling Project Deferred Income Tax-Net Allowance for Funds Used During Construction
.Other-Net.Net Funds from Operations.
$64,884 18,873 781 6,021 510 (31,725)~10 359 69 703$59,672 19,182 765 5,067~10,713 (26,432)3 054 72 021$51,137 18,627 738 3,904 10,056 (21,921)4 616 67 157$40,236 17,095 767 3,429 9,935 (16,429)2 232 57,265$35,329$29,679$23,898 16,514 697 16,108 629 15,220 586 409 7,817 2,349 8,491 (13,916)1 973 (14,762)723 (11,782)1,314 46 727 36 822 37 727$21,694 14,839 530 5,616 (8,012)355$20,260 13,393 508 3,249 (5,028)577 32 959$17,747 13,279 265 2,472 (3,391)495 30 867$15,927 12,859 243 2,312 (1,810)248 Available from Outside Sources: Mortgage Bonds.Pollution Bond Funds Held by Trustee-Net...Term Loan Notes.Preferred Stock.Common Stock.Short-term Debt Total Funds from Outside Sources....
Total Sources of Funds 50,000 35,668 65,221 150,889$220 592 92,250 (46,005)75,893$147 914 45,000 28,424 27,889 101,313$168 470 3,449 20,000 25,927 49,376$106641 44,900.(5,730)19,835 10 000 69 005$115 732 30,000 50,000 15,619 19,175 45,619 69,175$82 441$1 06 902 20,000 22 000 42,000$77 022 10,340 6 000 51,340$84 299 4,500 15,000 19,500$50,367 17,000 17,000$46 779 APPLICATION OF FUNDS Construction and Plant Expenditures:
Gross Charges for Construction'.
Less Allowance for Funds Used During Construction
.Net construction expenditures Dividends.
$145,082 31,725 113 357 46,007$129,918 26,432 103 486 40,129$112,268 21,921 90 347 35,31 9$84,373 16 429 67 944 14 762 13 916 11 782 69 178 42 134 29 673 24 764 20 877 17,434$83,940$56,050$41,455$40,526 8 012 32514 15,087$64,513 5,028 59 485 14,657$32,343 3,391 28 952 12,592$25,693 1,810 23,883 11,248 Retirement of Securities and Short-term Debt: Mortgage Bonds.Convertible Debentures Long-term Promissory Notes.Short-term Debt Term Loan Notes.55,000 175 175 11,000 175 23,000 175 3,500 6,000 175 8,000 175 1,500 10 000 12,000 175 27,000 10 000 175 15 000 8,000 175 4,375 3,000 325 55 175 175 34 175 3 675 6 175 19 675 49 175 15 175 8 175 7 375 325 Net Increase (decrease) in Working Capital, other than Short-term Debt and Current Maturities of Long-term Debt and Pollution Control Notes.Changes in Deferred and Other Accounts-Net............
Total Application of Funds...*Exotudes S26,100 Nine Mile 2 Settlement eceivabt e from Niagara Mohawk.(2,696)8 749$220,592 3,555 569$147914 4,206 4 423$168 470 169 5 590$106,641 8,232 7,383 6,170 4 450$115 732$82 441$106,902 7,722 6 524 (769)2 751$84,299 1,240 208$50,367 9,796 1 527$46 779 l2, 7o g/g g Q X 2-QP Notes 180 160 GROSS CONSTRUCTION CHARGES z O I-M O 0 O z z z (0 LJI C9 z K O I-z IJl tif I-Cl K Electric Production Other Of total construction charges of$816,568,000 in the past 10 years,$52,800,000 represents the cost of the Company's 35c/o interest in the Roseton Electric Generating Plant,$465,729,000 represents the investment to date in the con-struction of the Nine Mile Point No.2 nuclear facility,$88,385,000 represents the cost of steam generating facili-ties at the Danskammer, Point Electnc Generating Plant and$14,104,000 represents costs related to the abandoned Ster-ling Nuclear Phnt Project.Net Utility Plant Total Operating Revenue 550 500 450 400 0 350 Cl v-300 0 250 t O 200 150 100 50 NET UTILITY PLANT TO TOTAL OPERATING REVENUE 1976 77 78 79 80 81 82 83 84 85 86 I 14O tu o 120 O v-100 0 80 60 0>4o.o E3 E3 E3 1976 77 78 79 80 81 82 83 84 85 86 C9 z z C5 z cC I-O I-z I-I-V)RATIO OF ACCUMULATED DEPRECIATION TO TOTAL DEPRECIABLE PLANT 100 90 80 70 t-60<~50 I CL 40 30 20 10 1976 77 78 79 80 81 82 83 84 85 86 The Company's annual pro-visions for depreciation are computed on the straightline methodusing rates based on the estimated useful lives and estimated net salvage of properties.
Total depreciable plant in-cludes total utility phnt in ser-vice, exclusive of nondepre.ciable items such as hnd, intangibles, etc.
1986 1985 1984 1983 DETAIL OF UTILITY PLANT AND ACCUMULATED DEPRECIATION
-(Thousands of Dollars)1982 1981 1980 1979 1978 1977 1976 10-Year~%Ghan e Utility Plant-December 31 Electric~Gas Common.Total Utility Plant.........
Construction Work in Progress..Total.Accumulated Depreciation
-December 31 Electric.Gas.Common..;.Total Net Utility-December 31 (b)Electric.Gas.Common Total$522,866 70,098 43 797 636,761 666 736 1 182486 212,601 26,807 13 760 263 168 310,265 43,291 30 037$383,593$506,204 65,868 39 833 611,905 441 663 1 063 768.202,685 25,636 12 667 240 878 303,519 40,232 27 276$371 027$487,188 61,886 36 464$472,340 60,152 34 668$470,889 58,322 31,126$441,945$433,640 55,642-53,551 26 630 23 876$425,811 50,520 21 061$416,355 49,335 20 426$377,753 48,726 18 766$363,948 46,756 17 838 567,160 263 630 585,538 343 263 828 781 820 780 560,337 186 777(a)747 114 486,116 72 646 498,282 88 018 511,167 4 23 827 524,517 4 60 249 428,543 36610 445,235 49 337 684 766 634 994 696 301 668 662 484 672 466 163 190,723 23,238 11,323 336 284 178,217 20,642 4 1 4 66 166,916 19,397 8 820 141,251 16,066 8 170 152,555 17,788 8 326 129,599 14,816 7 092 119,904 13,693 7216 107,185 12,647 7,217 98,673 11,680 6 366 21 0 036 4 96 4 33 179 288 166 487 162 407 140 813 127 048 116 700 296,465 38,648 26 141$360 264 294,123 39,510 23,502 303,973 38,925 21,306 289,390 37,854 18,005 292,389 37,485 15,806 296,212 35,704 13 368 296,&1 35,642 13,210 270,568 36,079 11 639 265,275 35,076 11 483$367 136$364 204$346 249$346 680$346 876$346 303$31 8,186$31 1 834 44 50 146 49 156 115 130 116 117 18 23 162 24 Ratio of Accumulated Depreciation to Total Depre-ciabte Plant December 31~Pet Call t 40.8 40.3 39.3 37.6 35.4 34.6 32.8 31.0 29.3 29.0 27.6 ruction Work 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Excluding Const Net Ut(T(ty Rant Per Doihr of Total Revenue~of~tars.87.73.69.75.82.78 1.05 1.36 1.50 1.53 1.83 in Progress.Gross Construction Charges of Dollars Gross Additions to Plant During Year (b)Electric Production..............
Other Electric.Gas.Common Total.Retirements During Year Electric Production...
Other Electric.Gas.Common.Total.$7,867 13,327 4,640 6 376 4,647 17,575 4,171 4 916 2,061 2,477 410 1,414 6 362 3,067 190 897 4 164 31 210 31 300$6,208 10,300 1,859 4 278$(3,808)(e) 7,638 (e)2,081 3 986 3 886$19,513(d)$4,51 6 12,270 9,208 3,228 2,276 6 177 3 628 40 188(d)19 628$816 8,755 3,143 2 833 16 647$3,850 7,800 1,352 2061 15,053$34,396(c)7,125 754 2 828 46>03(ci$3,275 12,976 2,235 1,130 2,243 10,415 1,379 828 19 616 14866 104 1,556 124 1 680 363 2,083 265 213 563 2,274 210 391 987 1,606 140 878 40 1,925 145 1 163 414 1,923 131 631 135 1,689 111 651 413 1,781 167 526 771 1,609 251 452 3373 3083 3611 3088 2686 2887 3273 2824 3438 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 10-Year Total Total 171,182 129,918 112,268 84,373 83,940(d)56,050 41,455 40,526 64,513(c)32,343 816,568 Electric Production 144,255 103,495 93,271 69,545(e)68,872(d)41,373 25,799 28,564 51,622(c)20,227 Other 26,927 26,423 18,997 14,828 15,068 14,677 15,656 11,962 12,891 12,116 647,023 169,545 Adjustments During Year Electric Production...
Other Electric.Gas Common.Total.Net Additions to Plant During Year (b)Electric Production............
Other Electric.Gas Common.Total.(137)8~88~884 1,443 17,575 3,981 3 368$26 367 5,806 10,855 4,230 3 866$24 866 4 (4)10 10 (253)7 (408)~103~757)(3,090)8 (54)~43~3,178 (608)(346)5~848 15 67 (1)~25~176 (2)2 (230)(37)2 265 (4,575)6,025 1,830 3 643 6,104 8,744 1,735 1 786 18,273 10,671 2,680 4 4 86 1,012 7,293 2,091 2 964 696 7,133 3,031 2 036 3,437 6,019 1,185 1 626 2,910 10,895 1,970 917 1,450 8,104 1,171 702 33,748 4,854 609 1 670$18,378$6,833$36,820$13,360$12,886$12 166$40,881 8 46 682$11 427 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 61.58 58.12 62.81 59.60 59.21 57.81 62.39 62.56 40.89 44.41 43.78 50.53 46.19 44.62 35.93 36.26 41.22 42.19 Ratios to Net Plant Percent lug-term Debt and Mortgage Preferred Stock Bondsl2 (a)Construction work in progress reflects transfer of$20,341 to extraordinary property losses for the abandoned Sterling Nuclear Plant.(b)Excluding Construction Work in Progress.(c)Gross additions include purchase of an additional 10%interest in the Roseton Plant at original book cost of$33,620.Gross construction charges, however, reflect original book cost less accumulated depreciation, in the amount of$3,799.(d)Gross additions include purchase of an additional 5%interest in the Roseton Plant at original book cost of$17,056.Gross construction charges, however, reflect original book cost less accumulated depreciation in the amount of$3,781.(e)Adjustments include Roseton litigation settlement.
" Change of 1,000 percent or more.g-7g g(oOO>Q-0+
Notes~300 Oo 250 0 200 M 0 150 g 100 ro g Pp rt 1976 77 78 79 80 81 82 83 84 85 86 TOTAL ELECTRIC OPERATING REVENUES (OWN TERRITORY) 400 350~Resldentlal
~Commercial
~Industrial
~Other 4500 TOTAL ELECTRIC SALES (OWN TERRITORY)
K O I C>4 4 4 K es: I-K I-O C 4~Resldentlal
~Commercial
~Industrial
~Other'o 4OOO 3500 3000 0 2500 2000 0 1500 c o 1000 500 1976 77 78 79 80 81 82 83 84 85 86 8000 7000 6000 5 5000 O K 4000 3000 hd 2000 1000 12.0 10.5 90 A 7.5 6.o~O 4.5 30 o 1.5~Average Revenue Average Use 1976 77 78 79 80 81 82 83 84 85 86 AVERAGE USAGE PER CUSTOMER AND AVERAGE REVENUE PER KifH (RESIDENTIAL)
ELECTRIC REVENUES, SALES, AND CUSTOMERS 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 10-Year~%0hah e Revenues-Thousands of Dollars Residential
.Commercial
.Industrial Street 8 Area Lighting.Other.Total-Own Territory (a)Other Utilities Total Revenues$139,416 103,468 102,485 3,863~1639$144,494 118,329 113,247 4,068 4 493$141,034 112,107 102,424 3,979 5 670 347,593 29510 384,631 52 021 365,214 89 646$377 103$436 652$454 860$126,332 100,671 89,483 3,802 3 333$116,294 92,536 82,265 3,799 3 353$110,135 87,092 83,892 3,843'2 101$90,265 70,109 63,187 3,473 1 564 323,621 88 149 298,247 85 913 287,063 111 329 228,598 63 401$411770$384160$398392$291999$72,359 54,122 50,545 3,007 1 672$65,368 47,339 41,561 2,767 1 749 181,705 44 266 158,784 27 480$225 971$1 86 264$65,225 46,023 38,571 2,802 1 745 154,366 30 025$184 391$57,134 39,680 30,429 2,610 1 708 131,561 18 323$149 884 144 161 237 48 (196)164 61 152 Sales-Millions of Kwh.Residential.
Commercial Industrial
..Street 8 Area Lighting.Other.Total-Own Territory Other Utilities Total Sales Customers-Average Residential
.Commercial Industrial Street 8 Area Lighting.Other (including other utilities)
.Total Customers.
1,311 1,185 1,631 30 2 4,159 795 4,954 201,977 26,381 723 2,856 5 231,942 1,237 1,185 1,444 30 1 3,897 1 104 5,001 197,687 25,391 640 2,849 6 226,573 1,238 1,118 1,292 31 1 3,680 1 780 5,460 193,764 24,616 693 2,828 8 221,909 1,181 1,062 1,211 32 1 3,487 1 795 5 282 190,326 24,365 706 2,872 8 218 277 1,155 1,032 1,170 34 1 3,392 1 636 1,164 1,023 1,206 35 1 3,429 2,093 1,169 1,006 1,149 35 1 3,360 1 390 5 028 5 522 4 750 188,050 24,003 716 2,899 10 183,238 23,380 736 3,061 8 185,623 23,744 726 2,948 10 215678 213051 210423 1,204 984 1,192 35 1 3,416 1 324 4,740 181,631 22,966 731 3,126 5 208,459 1,203 957 1,126 35 1 3 322 1 019 4,341 178,934 22,296 715 3,130 6 205,081 1,199 922 1,030 35 1 3,187 1 104 4,291 176,891 21,553 726 3,186 8 202,364 1,203 897 938 36 1 3,075 738 3,813 175,130 21,289 743 3,256 11 200,429 9 32 74 (17)100 35 8 30 15 24 (3)(12)(55)16 Residential Average Kwh.Per Customer Average Revenue Per Kwh..Average Annual Bill.Maximum Hourly Load-Kw.-Winter.Summer Annual Load Factor-on Annual Peak Revenues-Per Cent of Total Own Territory Residential
.Commercial Industrial Street 8 Area Lighting.Other Total-Own Territory 6,491 10.63$690.26 713,900 764,400 67 40 30 29 1 0 6,254 11.69$730.93 719,280 739,000 37 31 29 1 2 6,389 11.39$727.86 647,450 689,000 66 39 31 28 1 1 6,205 10.70$663.77 646,500 662,500 39 31 28 1 1 6,142 10.07$618.42 623,000 666,000 39 31 28 1 1 6,271 9.46$593.33 640,980 625,980 39 30 29 1 1 6,380 7.72$492.61 598,900 640,300 39 31 28 1 1 6,629 6.01$398.38 633,200 619,800 40 30 28 1 1 6,723 5A3$365.32 607,580 613,580 41 30 26 2 1 6,778 5A4$368.73 617,460 621,200 62 42 30 25 2 1 6,869 4.75$326.24 607,480 534,200 61 44 30 23 2 1 (6)124 112 18 43 (a)Revenues related to increased electric fuel costs billed pursuant to an electric fuel cost adjustment are."Electric fuel costs rolled in to the base rates resulting from Rate Case Proceedings were 1.5c per kwh effective November 3,1979 and 1.2c per kwh effective July18, 1981.Effective July 25, 1986.75c was rolled out of base rates.See section on"Rates" on page 3.$(36,654)e e$11,838$19,286$7,479$5,918$36,663**$16,390$28,792a e$20,322$24,729$8,055 Notes TOTAL FIRM GAS OPERATING REVENUES (OWN TERRITORY) 55 50 Residential without Heating 45 Ill~40 O 35 Cl~30 0 til 25 O 20 5 Q H oIiijP~~~~~1976 77 78 79 80 81 82 83 84 85 86 Residential Heating Commercial without Heating Commercial Heating M Industrial and Other Residential without C7 Heating 8000 7000 TOTAL FIRM GAS SALES (OWN TERRITORY)
Residential H Heating Commercial without C3 Heating Commercial C3 Heating Industrial and Other LL O 6000~5000 0 m 4000 C Pn 3000 O 2000 I-1000 U o H tj Q a 1976 77 U Cl Cl H a a E 78 79 80 81 82~~a 83 84 85 86 M Lsl O Vl Cl z M eL: Vl Vl LLJ K ul)O I-Lal Lsl AVERAGE USAGE PER CUSTOMER AND AVERAGE REVENUE PER MCF (RESIDENTIAI-)
180~160 LL-140~120 O~100 O~et 8O g 6o c+40 20 1976 77 78 79 80 81 82 83 84 85 86 9.00 O 8.00 7.00'a 6.00 5oo o C 4.oo g 3.00 O 2.00 U I O 1.00 Q R Average MCF Per Customer~Average Revenue Per MCF GAS REVENUES, SALES, AND CUSTOMERS Revenues-Thousands of Dollars Residential with Househeating Residential without Househeating Total Residential Commercial Industrial
.Interruptible and Seasonal.Other Total-Own Territory (a).Other Utilities Total Revenues Sales-Thousands of Mcf.(b)Residential with Househeating
.Residential without Househeating
.Total Residential
.Commercial
.Industrial Interruptible and Seasonal.-Other Total-Own Territory Other Utilities Total Sales Customers-Average Residential with Househeating
.Residential without Househeating Total Residential
..Commercial Industrial Interruptible and Seasonal.Other (including other utilities)
Total Customers.
Total Residential Average Mcf.Per Customer Average Revenue Per Mcf.Average Annual Bill.Househeating Saturation
-Per Cent.Maximum Daily Send-out-Mcf..Date.Revenue-Per Cent of Total-Own Territory Residential with Househeating Residential without Househeating Commercial
.Industrial
.Interruptible and Seasonal Other Total-Own Territory Degree Days as Percent of Normal (c)Degree days in billing cycle.Degree days in calendar year 1986$26,658 3 194 29,852 18,120 2,992 7 323 3 161 61,448$61 448 3,503 326 3,829 2,887 491 1,644 315 9,166 9 166 30,452 14,493 44,945 4,979 192 49 1 50 166 85.1-7.80 664.20 67.8 67,542 Jan.8 43 5 30 5 12 5 100 101 100 1985$25,618 3 388 29,M6 17,788 2,842 14,245 4 269 68,150$68 150 3,208 332 3,540 2,678 438 2,783 153 9,592 9 592 29,080 14,799 43,879 4,634 160 51 1 48 725 80.6 8.19 661.06 66.3 67,441 Dec.18 38 5 26 4 21 6 100 96 98 1984$25,620 3 456 29,076 17,170 2,744 16,421 2 918 68,329$68 329 3,385 359 3,744 2,724 450 3,163 116 10,197 10 197 27,978 15,123 43,101 4,445 141 49 1 47 737 86.9 7.77 674.60 64.9 65,341 Feb.1 38 5 25 4 24 4 100 102 100 1983$24,162 3 348 27,510 17,658 3,107 10,093 3 600 61,968$61 968 3,089 351 3,440 2,478 437 1,928 217 8,500 8,500 27,204 15,316 42,520 4,329 142 40 1 47 032 80.9 8.00 646.99 64.0 65,632 Dec.25 39 5 29 5 16 6 100 97 101 1982$23,824 3 519 27,343 15,596 3,263 12,755 2 692 61,649$61 649 3,319 393 3,712 2,561 538 2,766 260 9,837 9 837 26,311 15 637 41,948 4,131 134 36 1 46 250 88.5 7.37 651.83 62.7 62,122 Dec.13 39 6 25 5 21 4 100 104 100 1981$17,325 2 842 20,167 9,714 2,402 11,761 2 032 46,076 413$46 489 3,213 415 3,628 2,071 517 2,996 134 9,346 134 9 480 25,200 16 337 41,537 3,720 140 52 2 45 451 87.3 5.56 485.52 60.7 56,054 Jan.12 38 6 21 5 26 4 100 103 100 1980$14,090 2,408 16,498 7,318 1,719 9,001 1 094 35,630 364$35 994 3,002 392 3,394 1,776 424 2,914 102 8,610 142 8 752 23,620 16,933 40,553 3,515 140 51 2 44 261 83.7 4.86 406.83 58.2 53,719 Dec.25 39 7 21 5 25 3 100 100 105 1979$11,670 2 218 13,888 6,086 1,346 6,839 654 28,813$28 813 3,046 380 3,426 1,718 382 2,871 109 8,506 8 506 22,567 17,427 39,994 3,332 139 49 1 43515 85.7 4.05 347.25 56.4 55,301 Feb.11 40 8 21 5 24 2 100 96 96 1978$11,868 2 201 14,069 5,880 1,169 3,432 188 24,738$24 738 3,208 385 3,593 1,815 374 1 733 78 7,593 7 593 22,252 17,504 39,756 3,352 139 50 1 43 298 90.4 3.92 353.89 56.0 44,350 Dec.29 48 9 24 4 14 1 100 107 106 1977$11,271 2165 13,436 5,447 1,021 3,379 166 23,449$23 449 3,132 385 3,517 1,746 339 1,739 60 7,401 7 401 22,103 17,650 39,753 3,368 142 50 1 43 314 88.5 3.82 337.99 55.6 45,668 Jan.17 48 9 23 4 15 1 100 102 99 1976$9,885 1 945 11,830 4,770 947 3,134 150 20,831$20 831 3,243 394 3,637 1,838 388 2,152 76 8,091 8 091 21,919 17 930 39,849 3,411 155 50 1 43,466 91.3 3.25 296.87 55.0 47,532 Jan.22 47 9 23 5 15 1 100 99 103 10-Year%Ghw<Ge 170 64 152 280 216 134 195 195 8 (17)5 57 27 (24)314 13 13 39 (19)13 46 24 (2)0 15 P)140 124 23 42 (a)Revenues billed under the provisions of the gas cost adjustment clause are (b)The average heating va!ue of gas sold is not less than 1,000 Btu.per cu.ft.(c)Normal=Twenty-year Moving Average 14 10,422 12,147 10,363 15,514 13,159 7,872 2,500 8,708',257 8,355 5,704 Gas cost adjustment rolled in to the base rates resulting from Rate Case Proceedings was$1.50 per mcf.effective November 3, 1979.'Change of 1,000 percent or more.g~oc/ooo52=D7 4 COST OF PURCHASED GAS TO GAS REVENUES Notes 90 75 u)L rrr=60 O O 45 rn c 0 30 15 gaO IHI 1976 77 78 79 80 81 82 83 84 85 86 Gas Revenue Purchased Gas Cost (And Percenrese ol Gee Rwenue)rn O 5000 0 x<<4000 ro=3000 O 3d cn C O=1000 TOTAL ELECTRIC OUTPUT 1976 77 78 79 80 81 82 83 84 85 86 COST OF FUEL AND PURCHASED ELECTRICITY TO ELECTRIC REVENUE 480 440 400~360 O 320 O 280~Purchased~Generated O 240~200 s ao[]g P-, TII'l l 1976 77 78 Electric Revenue OI ImI 79 80 81 82 83 84 85 86 SYSTEM CAPABILITY AND LOAD AT PEAK (OWN TERRITORY) 1200 1100 1000 900 I-Q O'z V)42: Co D K LII)(13 C9 Purchased Electricity (And Percentese of Electric Revenue)M Fuel Used in Electric Generation (And Percentese ol Electric Revenue)rn 800 cr 500~400 300 200 100 0 19 76 77 78 79 80 81 82 83 84 85 86 Purchased Capacity at Time of Peak (Including Reserves)Generating Capacity at Time of Peak~Annual Peak ELECTRIC AND GAS PRODUCTION DATA 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 10-Year~%Chan e Electric Output-Millions of Kwh.Generated-Steam.Generated-Hydro.Generated-Gas Turbine.Total Generated Purchased-for Own Territory Purchased-for Resale to Other Utilities Total Purchased.
Pumped Storage (received from).Total Output Pumped Storage (delivered to).Company Use, Losses, etc Balance Sold.3,769 135 1~3905 1,388~1388 32 5,325 49 322~4954 3,748 89 2~3839 1,589~1589 133 5,561 198 362~5001 4,229 131 1~4361 1,41 0 72~1482 119 5,962 170 332~5460 4,315 132 2~4449 1,162~1162 8 5,619 11 326 5,282 3,624 116 3~3743 1,533 21 1,554 5,297 269~5028 3,810 65 5~3880 1,727 90~1817 5,697 175 5,522 3,351 105 4 3,460 1,555 6 1,561 38 5,059 50 259~4750 3,535 162 2 3,699 1,253~1253 16 4,968 21 207~4740 3,295 122 3 3,420 1,120 8~1128 6 4,554 8 205~4341 3,520 134 5 3,659 798 57 855 4,514 223~4291 3,261 156 5 3,422 492 117 609 4,031 218~3813 16 (13)(80)14 182 (100)128 32 48 30 Electric Peak and Capacity Annual Peak(Own Territory)
-Mw.Generating Capability at Time of Peak-Mw.Steam.Hydro Gas Turbine.Total.Purchased Capacity at Time of Peak Including Reserves-Mw.Generating Capability Plus Purchased Capacity as Per Cent of Annual Peak 764.4*897.0 42.6 43.0 982.6 64.0 137 739.0*894.0 42.6 43.0 979.6 63.0 141 689.0*894.0 42.6 43.0 979.6 110.6 662.5*892.5 42.6 38.0 973.1 8.3 666.0*841.6 44.6 38.0 924.2 168.3 641.0 839.2 45.6 48.0 932.8 172.4 172 839.2 44.6 38.0 921.8 839.2 45.6 48.0 932.8 255.6 124.8 167 640.3*633.2 613.6*722.9 44.6 38.0 805.5 296.8 180 621.2" 706.2 44.6 38.0 788.8 211.8 161 607.5 697.0 45.6 48.0 790.6 26 P)(10)24 108 Gas Send-out-Thousands of Mcf.Purchased Natural Gas Manufactured or Propane Gas.Total Company Use-Boiler Fuel.Other Company Use, Losses, etc..Balance-Sold 9,645 2 9,647 258 223~9166 14,627 5 14,632 4,240 800~9592 15,548 3 15,551 5,000 354~10 197 12,332 1 12 333 3,117 716 8,500 13,472 19 13,491 3,450 204 9,837 14,272 3 14,275 4,587 208 9,480 12,670 1 12,671 3,412 507 8,752 11,232 1 11,233 2,441 286~8506 7,965 3 7,968 375~7593 7,603 14 7,617 216~7401 8,420 2 8,422 331~8091 15 15 (33)13 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Thousands of Dolhrs 124,510 179,928 215,833 203,807 175,536 192,637 132,478 95,797 70,801 81,614 59,587 Steam Electric Production Cost a Thousands Cents of per Dollars Kwh.3.30 4.80 5.10 4.72 4.84 5.06 3.95 2.71 2.15 2.32 1.83 284.3 428.4 474.4 439.7 449.1 475.9 362.2 251.2 199.1 217.6 170.1 10,185 10,337 10,153 10,083 10,172 10,119 10,210 10,035 10,025 9,978 9,931 2,024 1,244 2264 2,094 1,624 894 1,388 1,886 1,060 1,240 980 1.50 1.40 1.73 1.59 1AO 1.38 1.32 1.16.87.93 Average Cost of Heat Rate Cents Fuel Burned for per (Cents per Generation Kith.~MMtatc Btu Gas Turbines Purchased c Thousands of Dollars 334 351 350 279 619 413 313 207 223 334 222 Cents Thousands Cents pef of per Kwh.Dollars Kwh.24.99 33,801 1653 50,538 34.21 52,540 20.82 40,428 20.63 67,094 8.26 76,162 7.83 52,345 10.35 32,845 7.43 26,991 6.68 18,962 4A4 11,509 2A4 3.18 3.56 3.50 4.38'.41 3.37 2.62 2.41 2.38 2.34 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Thousands of Dollars 33,386 40,300 40,063 41,068 39,345 28,579 22,525 16,693 11,691 11,697 9,698 Cents pef Mcf.356.4 391.5 379.8 445.7 392.6 295.1 243.3 189.9 146.8 153.8 115.2 Purchased Gas Cost e 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Electric Fuel 29 39 45 47 43 46 43 40 36 42 37 Fuel and Purchased Purchased fl~tl Etectlec0 9 12 12 10 18 20 18 15 14 11 9 38 51 57 57 61 66 61 55 50 53 46 Cost of Fuel and Purchased Electricity as Per Cent of Electric Revenue 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Purchased Gas 54 59 59 66 64 62 63 58 47 50 47 Fuel Cost of Purchased Gas and Fuel as Per Cent of Gas Revenue 54 59 59 66 64 62 63 58 47 50 47 15 (a)Includes cost of operation and maintenance.(b)Includes production costs related to sales to other utilities.(c)Excludes electricity purchased for resale to other utilities.(d)Fuel burned during 1979 through 1986 was a combination of fuel oil and natural gas Fuel burned during 1976 through 1978 was fuel oil.(Natural gas was used for ignition purposes only)(e)Excludes gas purchased for boiler fuel.Annual peak occurred in the summer." Change of1,000 percent or more.$7@k/cocle~-O~
Notes LABGIR EXPENSE (INCLUDING BENEFlTS}TG TGTAL GPERATING EXPENSE 500 450 N 400-350 0 d 3OO 0 250 Vl 0 200 150 100 1976 77 78 79 80 81 82 83 84 85 86 Total Operating Expenses Union wage negotiations in 1985 resulted in a two-year working agreement, which provided for a 5.1%general wage increase effective July 1, 1985, and 5.0%effective July 1, 1986 together with fringe benefit improvements.
cC I-Cl K O I-O CI O fL CL M cC C9 Ch K O I-~Labor Expenses Compensation of professional supervisory and executive personnel is geared to a salary program designed to assure the Company's ability to attract and hold highly qualified management personnel.
Benefits provided by the Company include pensions, group life insurance, hospitalization, major medical insur-ance, a dental plan, and a disability retirement plan.
LABOR DATA AND INDUSTRIAL REVENUES LABOR DATA 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 10-Year 1976%Ch~<Ce Employees-Year End Classified Supervisory and Professional Executives
.Total (a).924 927 926.924 391 397 379 385 12 10 12 11 1 327 1 334 1 317 1 320 952 384 10 1 346 968 364 13 1 345 964 337 13 1 314 976 313 9 1 298 983 303 10 1 296 995 294 9 1,298 1,039 290 9 1,338 (11)35 33 (1)Weekly Wages Paid-Year End Level Including Overtime.Excluding Overtime.$736$615$682$583$596$546$562$512$518$481$486$436$442$411$402$371$375$349$324$345$326$302 127 104 Employee Compensation
-Thousands Payroll Charged to Operation and Maintenance Electric Gas.Payroll Charged to Construction and Other.....
Roseton Payroll-Billed to Others (a).Total Payroll.29,726 5,148 11,985 3 890 50,749 26,441 4,433 9,578 3 483 27,756 4,643 11,107 3 555 47 061 43 935 26,060 4,322 7,905 3 026 41 313 23,522 4,033 8,083 2 950 38 588 21,043 3,596 7,703 2,591 34 933 18,916 3,041 7,202 2 289 31 448 17,420 2,730 6,666 2194 29 010 15,651 2,519 6,152 2 353 26 675 14,230 2,430 6,395 2 174 25,229 12,963 2,311 6,593 2 459 24.326 129 123 82 58 109 Annual Cost of Fringe Benefits Charged to Operation and Maintenance
-Thousands..
Ratios for Payroll Charged to Operation and Maintenance:
Payroll (Including Benefits)as Per Cent of Corporate Revenues Benefits as Per Cent of Payroll.INDUSTRIAL REVENUES-Thousands 7,016 9.6 20.1 6,865 7.8 21.2 6,629 7.2 21.5 6,399 7.8 21.1 5,564 7.4 20.2 4,894 6.6 19.9 3,986 7.9 18.2 3,565 9.3 17.7 3,434 10.2 18.9 2,930 9.4 17.6 2,250 10.3 14.7 212 P)37 Electric Customers Building Products.Chemicals&Petroleum.
Clothing.Food Processing
.Foundries.
Machine and Metal Products.Paper and Paper Products Printing and Publishing
.Rubber Products Textiles.Miscellaneous Total 13,034 1,361 209 945 434 78,167 2,574 2,134 1,183 639 1,805 102 485 14,584 1,687 369 1,191 311 75,218 3,293 1,500 2,029 1,353 889 15,512 1,534 308 1,045 428 85,669 2,969 1,897 1,225 671 1,989 113 247 102 424 13,829 1,476 131 716 2,814 60,034 3,101 1,240 1,331 1,149 3 662 89 483 13,311 1,262 116 885 2,355 53,650 2,753 1,873 1,107 1,649 3 304 82 265 16,616 1,229 152 1,013 2,604 51,183 2,712 1,909 1,130 2,194 3 150 83 892 13,726 1,007 145 830 1,977 36,593 2,121 1,551 891 1,649 2 697 63 187 13,363 796 139 605 1,624 26,840 1,734 1,185 785 1,309 2 165 50 545 10,613 735 136 612 1,292 21,421 1,550 1,001 692 1,472 2,037 41 561 10,103 722 126 635 1,367 19,737 1,353 948 688 1,413 1,479 38 571 6,629 612 115 566 1,298 16,157 1,123 779 565 1,109 1,476 30,429 FIVE LARGEST ELECTRIC CUSTOMERS IBM Independent Cement Lehigh Portland Cement Company VAW of America Tarkett, lnc.1986 Revenues (Thousands) 71,047 4,663 4,286 2,068 1,513 FIVE LARGEST GAS CUSTOMERS Powell&Minnock Brick Works, Inc.IBM Technical Tape Corp.Eastern Alloys, Inc.Vassar Brothers Hospital$1,786 1,750 794 495 316 16 (a)Includes the folkwiing number of employees at the Roseton Electric Generating Plant which the Company, Consolidated Edison Co.of New York, Inc.and Niagara Mohawk Power Corporation ovm as tenants in common: The Company had, initially, a 200%%d urwfcvided interest in the occvnership of the Plant.As of December 31, 1982, the Company has a 350%%d uncfcvided interest.The Company operates the Phnt as agent for the three ovmers.112 114 113 107 107 CAPITALIZATION RATIOS Notes 80 70 60 Q D 40 30 20 10 0 1976 77 78 79 H U 50 80 81 82 83 84 85 86 f-1 Common~Equity Preferred Stock~Other Long Term~Debt M Morlgage Bonds COVERAGE RATIOS (BEFORE INCOME TAX)O O ru 2 E I-0~1 O X 1976 77 78 79 80 81 82 83 84 85 86 MARKET AND BOOK VALUE OF COMMON STOCK 35 30 I-I Interest Charges~Including AFDC 1 1 Interest Charges~Excluding AFDC M Interest Charges and Preferred Stock Dividends 25 10 (tr 15 0 10 RATIO OF INCOME AVAILABLE FOR COMMON STOCK TO OPERATING REVENUE, TO AVERAGE EQUITY Cfl K O'al<<C tf'-C/3 CL K Cl K cC cC I-Cl IL O 133 1976 77 76 79 60 61 62 63 64 65 66 Closing Price at Dec.31 Book Value at Dec.31 High~Market Value Range for the Year Low 25 20 15 1 ru O 10 ru To Operating Revenue~To Average~Equity 1976 77 78 79 80 81 82 83 84 85 86 CAPITALIZATION AND FINANCIAL RATIOS 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 10-Year~%Chan e Book Value Per Share of Common Stock ear En Capitalization
-Thousands First Mortgage Bonds..............
Convertible Debentures.............
Long-term Promissory Notes.........
Term Loan Notes Unamortized Premium and Discount on Debt-Net...........
Total Long-term Debt (a)...........
Preferred Stock-Par Value..........
Common Stock.Retained Earnings Premium on Stock Capital Stock Expense..............
Total Common Equity.............
Total Capitalization...............
Current Maturities of Long-term Debt...Short-term Debt.Total Capitalization including Curent Maturities of Long-term Debt and Short-term Debt Capitalization Ratios-Per Cent Including Short-term Debt and Current Maturities of Long-term Debt: Long-term Debt Preferred Stock Common Equity Short-term Debt Selected Financial Indices: Pretax Coverage of Total Interest Charges (b): Including AFDC (c)...........
Excluding AFDC (c)..........
Pretax Coverage of Total Interest Charges and Preferred Stock Dividends (b)Percent of Construction Expenditures Financed from Internal Funds (d)............
AFDC as a Percentage of Income Available for Common Stock....Effective Tax Rate (e)...........
$327,400 112,325$332,400 112,500$312,400$267,400 40,425 7,200$278,400 7,375$233,500 7,550 608~679~50 821 81,030 81,030 81,030 81,030 61 030 61,030 279,685 164,733 67~4625 214,464 145,856 67~4,303 184,816 126,313 67~4,040 156,927 110,495 67~3840 131,000 99,522 67~2 677)111,165 88,957 67~2480 439 860 356 084 307 156 263,649 227,912 197,709 960,215 175 881,477 175 740,403 175 618,600 11,175 23 000 573,967 175 26 500 498,968 6,175 16 500$960 390$881 652$740 578$652 775$600 642$521 843 45.8 8.4 45.8 100.0 50.4 9.2 40.4 100.0 47.6 10.9 41.5 100.0 43.7 12.4 40.4 3.5 100.0 47.5 10.2 37.9 4.4 100.0 47.2 11.7 37.9 3.2 100.0 3.14 2A3 3.17 2.54 3.19 2.59 2.84 2.35 2.65 2.12 2.38 1.88 2.66 2.51 2.23 17%31%35%41%32%38%55%34%50%35%49%36%48%34%50%27%54%23%439325 444383 352217 273921 285025 240,229$209,500 7,725$159,500 8,000 7,900 20,000$151,500 8,000 8,075 35,000$151,500 8,000 8,250$147,000 16,000 8,425~253 216972 61 030 95,546 80,155 67~2326'73,442 451,444 18,175 470 501 195,568 203,045 168 251 171 957 61 030 61,030 61,030 46,030 76,371 67,084 67~2245 76,371 73,691 67~2245 147,884 141,277 405,352 175 23 000 404,482 12,175 45 000 66,031 61,481 67.~2,154 125 425 354,706 8,175 17 000 66,031 56,326 67~1,875 120 549 338,536 4,375 20 000 50.1 13.0 36.9 100.0 45.0 13.2 32.0 9.8 100.0 47.4 46.4 14.2 16.1 33.0 33.0 5.4 4.5 100.0 100.0 48.6 12.7 33.2 5.5 100.0 2.23 1.74 2.31 1.92 3.17 2.80 2.81 2.55 2.68 2.72 1.86 2.07 2.08 68%61%31%63%78%60%19%46%18%31%31%24%27%14%27%$469 619$461 657$428 527$379 881$362 911 123 (100)*(175)155 76 324 192 147 265 184 (96)(100)Value of Equity Number of (Thousands Shares~of Dollar Qho~osands 1986 439,860 14,106 1985 356,084 12,075 1984 307,156 11,007 1983 263,649 9,621 1982 227,912 8,509 1981 197,709 7,456 1980 173,442 6,544 1979 147,884 5,373 1978 141,277 5,373 1977 125,425 4,873 1976 120,549 4,873 Book Value Per Share~Dolhrs 31.18 29.49 27.91 27.40 26.78 26.52 26.51 27.52 26.29 25.74 24.74 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Market Value of Common Stock (Dollars)~s 397/a-26s/a 31'/4-23 25s/e-16'Ia 26'/a-21'/a 24s/4-17'/a 19-16 19r/a-15 2(P/4-18 22'Ia-19s/4 223/a-19~/a 2(P/4-17'/a Number of Shares Traded on New York Stock~Eaohan a 11,357,000 4,381,400 3,786,200 1,961,000 2,414,800 1,017,100 801,100 402,500 451,400 574,000 498,000 (I)Price range for the year on the New York Stock Exchange.Market Value Per Share of Common Stock and Shares Traded Ratio of Income Available for Common Stock-Per Cent To Operating Revenue...
To Year-end Equity......
To Average Equity.......
13.5 13.5 14.7 10.6 15.0 15.6 8.5 14.5'5.7 7.3 14.4 14.5 7.0 14.6 14.7 5.7 14.0 14.0 6.0 6.9 12.7 11.9 12.5 12.2 7.6 11.4 11.7 6.8 11.3 11.5 7.7 10.8 11.0 17 (a)Excludes current maturities of Iong-term debt.(b)For the purpose of computing these coverage ratios, earnings available for coverage consist of net income plus total interest charges plus all federal income tax amounts.Total interest charges exclude the allowance for borrowed funds used during construction.
Preferred stock dividends represent the preferred stock divi-dend requirementt determined on a"pre-income tax basis".(c)AFDC includes any Sterling carrying charge amounts.(d)Construction expenditures represent"Cash Construction Expenditures".
Internal funds are"Funds from Operations" less"Dividends" (see page 11).(e)The effective tax rate is computedby dividing the federal income tax as reported in the Statement of Income by the Taxable Incone.8 7o C/oo~2.~<'Change of 1,000 per cent or more.
Notes DEBT MATURITY SCHEDULE 75 70 65 (I)60 55 50 0 45~40 0 35 30 25 0 20 15 10 5 0 (F)(F-)(F)(A)(F)(B)U 1988 1990 1991 1992 1993 1994 1995 1999 2000 2002 2004 2005 2007 2009 2012 2014 2020 (A)INCLUDES$10 MILLION SINKING FUND REQUIREMENT ON FIRST MORTGAGE BONDS MATURING IN 1992.(B)INCLUDES UNSECURED NOTES-BALANCE OF$5.45 MILLION AFTER ANNUAL REQUIRED SINKING FUND PAYMENT.(C)PROMSSORY NOTES-WILL BE SUBJECT TO REPRICING AND INVESTOR TENDER ON EACH OCTOBER 1, COMMENCING OCTOBER 1~1989.THE COMPANY HAS A ONE-TIME OPTION TO CONVERT TO A LONG-TERM FIXED RATE AT ANY ANNUAL TENDER DATE.(D)PROMISSORY NOTES-WILL BE SUBJECT TO REPRICING AND INVESTOR TENDER ON A WEEKLY BASIS.THE COMPANY HAS A ONE-TIME OPTION TO CONVERT TO A LONG-TERM FIXED RATE.(E)INCLUDES SINKING FUND REQUIREMENTS ON RRST MORTGAGE BONDS MATURING IN 1994 ($5 IN 1992 AND$20 IN 1993).(F)INCLUDES SINKING FUND REQUIREMENTS ON RRST MORTGAGE BONDS MATURING IN 1995 ($4 IN 1991, 1992, 1993 AND 1994).COMPONENTS OF PERMANENT FINANCING CO O I-lL K cC z LL O K K Q I-h4 0-O 800 700 5 6oo tg O 500 D o 4oo tfl 0<300=200 100 p Ij Ij 5~1976 77 78 79 80 81 82 83 84 85 86 Mortgage Bonds Other Long Term Oebt Preferred Stock Common M Stock DETAIL OF LONG-TERM DEBT (Thousands where Dollars are Indicated) 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Date Issued Maturity Date Public Proceeds Redemption Offering to Price Price~Ccm an 12/31/86 First Mo 27/a%D 3.3%D 3.2%D 41/e%D 142/z%D 17'le%D 13%D 14/a%D 8'/e%D 11%D 7'la%D Ss/7s/4 9/4%10s/e%6'/4%1Ã/4%12/a%11'/4 Total F rtgage Bonds-December 31 ue 1980 ue 1982 ue 1984 ue 1988 ue 1990 ue 1991 (i).ue 1992 (c)ue 1994(m)................
ue 1994 ue 1995 ue 1999 Due 2000.Due 2002 Due 2004.Due 2005.Due 2007.Due 2009.Due 2010 (i).Due 2012 irst Mortgage Bonds........
$18,000 25,000 35,000 45,000 50,000 20,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000 9 900$18,000 25,000 30,000 35,000 45,000 20,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000 25,000 9 900$18,000 25,000 30,000 35,000 45,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000 25,000 9 900$18,000 25,000 30,000 35,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000 25,000 9 900$11,000 18,000 25,000 30,000 35,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000 25,000 99M$6,000$11,000 11,000 18,000 18,000 25,000 25,000 30,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000 25,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000 25,000$6,000 11,000 18,000 20,000 25,000 20,000 15,000 20,000 4,500 20,000$12,000 6,000 l1,000 18,000 20,000 25,000 20,000 15,000 20,000 4,500$12,000 6,000 11,000 18,000 20,000 25,000 20,000 15,000 20,000 4,500$12,000 6,000 11,000 18,000 20,000 25,000 20,000 15,000 20,000$327 400$332 400$312 400$267 400$278 400$233 500$209 500$159 500$151 500$151 500$147 000 Dec.1, 1950 Dec.1, 1952 Oct.1, 1954 May 15, 1958 Dec.2,1980 Aug.26, 1981 Nov.30, 1982 May 30, 1984 Sept.1, 1986 July 2, 1985 Jan.23, 1969 June 10,1970 Feb.17,1972 Apr.24, 1974 Nov.13,1975 June 9, 1977 Sept.27,1979 May 22, 1980 Sept.30,1982 Dec.1, 1S80 Dec.1, 1982 Oct.1, 1984 May 15, 1988 Nov.15, 1990 Aug.15, 1991 Dec.4, 1992 June 12,1994 Sept.1, 1994 July 2, 1995 Jan.15, 1999 June 1, 2000 Feb.1, 2002 Apr.15, 2004 Nov.1, 2005 June 1,2007 Sept.15,2009 May 15,2010 Sept.1,2012 (a)(a)(a)102.172 100.00 98.75 (a)(a)99.854 (a)100.00 100.50 101.763 101.500 101.595 100.00 99.556 100.00 100.00 101.12 100.00 100.00 101.39 99.25 98.00 100.00 100.00 99.204 100.00 99.18 99.625 100.931 100.407 100.515 100.00 98.636 99.125 100.00 100.22 (b)(d)(m)(n)(I)102.95 104A3 104.93 106.31 107.59 (e)107.82(i)Other Long-term Debt-December 31 Promissory Notes 4.85%Due1995(g)............
1984 Series A Due 2014(j)1984 Series B Due 2014(j)1985 Series A Due 2020(k)1985 Series B Due 2020(k)Total Promissory Notes..........
6,675 16,700 16,700 36,250 36 0M$6,850 16,700 16,700 36,250 36 000$112 325$112 500$7,025$7,200$7,375$7,550$7,725$7,900$8,075$8,250$8,425 Dec.16,700 Oct.16,700 Oct.Nov.Nov.$40 425$7 200$7 375$7 550$7 725$7 900$8 075$8 250$8 425 21, 1965 Dec.15, 1984 Oct.15, 1984 Oct.26, 1985 Nov.26, 1985 Nov.1, 1995 (a)1, 2014 100.00 1, 2014 100.00 1, 2020 100.00 1, 2020 100.00 100.00 100.00 100.00 100.00 100.00 101.08 O)0)(k)(k)Convertible Debentures 4s/e%Due 1981...............
5s/4%Due 1978...............
Term Loan Notes(a)(h)...........
Total Debentures and Other Notes$8,000$8,000$8,000$8,000 June 15, 1966 June 1, 1S81 101.375 100.50 8,000-Feb.25, 1971 Feb.1, 1978 100.00 99.00 20 000 35 000 Dec.29,1978$28 000$43 000$8 000$16 000 I 8 (a)Placed privately.(b)Not redeemable prior to November 15, 1987.(c)The13%first mortgage bonds have a sinking fund requirement of$10000 in 1991.(d)Not redeemable prior to December 4, 1989.(e)Not redeemable prior to June1, 1987.(f)Not redeemable prior to September1,1987.(g)The 4.85%promissory notes have an annual sinking fund requirement of$175.(h)In December1978 the Company issued term loan notes aggregating
$35 million to three banks.The Loan Agreement under which these notes were issued provided that the notes should be paid in three consecutive annual installments commencing December 31, 1979.The Company repaid$15 million on December 31, 1979,$10 million on December 31, 1980, and$10 million on August 31, 1981.The interest rate on such notes was the"prime" rate in effect at the Irving Trust Company.(i)The17V6%and 123//8%first mortgage bonds were redeemed on September 15,1986.(j)Promissory Notes issues In connection with the sale by New York State Energy Research and Development Authority of tax-exempt pollution control revenue bonds, series A and B, bear interest at 7V2%per annum trom the date of issuance up to and including September 30, 1989.The bonds will be subJect to repricing and investor tender on each October 1, commencing October 1, 1989.The Company has a one-time option to conver t to a long-term fixed rate at any annual tender date.(k)Promissory Notes issued in connection with the sale by New York State Energy Research and Development Authority of tax-exempt pollution control revenue bonds, series A and B, had an interest rate of 51/8%through January 31, 1986.At that date these bonds became variable rate obligations subject to weekly repricing and investor tender.The company has a one-time option for each series to convert to a long.term fixed rate.(I)The 11%tirst mortgage bonds have sinking tund requirements of$4,000 in each year 1991 through1994; not redeemable prior to July 2,1992.(m)The 145//8%first mortgage bonds have sinking tund requirements of$5,000 in 1992 and$20,000 In 1993.Not redeemable prior to June 12, 1991.(n)Not redeemable prior to maturity.I Notes Notes I-LQ Cl I-cb K O O L5 DETAIL OF PREFERRED STOCK AND COMMON STOCK (Thousands where Dollars are Indicated) 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 Date Issued Public Proceeds Redemption Maturity Offering to Price Date Price~Ccm an 12/31/86 Preferred Stock-December 31 ($100 Par Value)4'/a%Preferred Stock........4'/a%Preferred Stock.....-...4.75%Preferred Stock........4.35%Preferred Stock........4.96%Preferred Stock........7.72%Preferred Stock........7.44%Preferred Stock........8.40%Preferred Stock........Adjustable Rate Preferred Stock Total Preferred Stock$6,690 340 2,000 6,000 6,000 13,000 12,000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000 20 000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000 20 000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000 20 000$6,690 340 2,000 6,000 6,000 13,000 12,000 15,000 200M$81 030$81 030$81 030$81 030$61 030$61 030$61 030$61 030$61 030$61 030$46 030 Oct.1, 1936 Oct.1, 1936 Apr.1, 1949 Nov.1, 1954 June 21,1961 Feb.25, 1971 Jan.17, 1973 May 24, 1977 Mar.30, 1983 (a)102.50 107.50 105.00 103.75 100.55 (b)100.00 (b)100.00 100.00 98.55 101.22 100.323 100.00 98.80 100.00 97.50 107.00 107.00 106.75 102.00 101.00 101.00 104.94 105.60 100.00(c)Number of Registered Holders of Preferred Stock..........
2,801 3,007 3,129 3,238 3,356 3,454 3,704 3,761 3,853 3,943 3,918 (a)Exchanged for earlier 6%preferred stock and issued on an equal share basis plus$2.50 cash per share.(b)Placed privately.(c)The adjustable rate preferred stock is not redeemable at the option of the Company prior to April1, 1988.A sinking fund provides for the annual retirement of 8,000 shares, at$100 per share, plus accrued dividends, on each March 30, commencing March 30, 1993.The dividend to be paid is at a fixed rate of 11%per annum from the date of issuance to January 1, 1984 and adjusted each quarter thereafter to be1%per annum below the highest of three specific Treasury rates.The rate will never be less than 6%per annum or greater than125%per annum.Common Stock (No Par Value)Number of Shares (Thousands)
-December 31.New Shares Issued (Thousands)
Total Stated Value Shares Outstanding
-December 31..14,106 12,075 11,007 9,621 8,509 7,456 6,544 5,373 5,373 4,873 4,873 2,031 1,068 1,386 1,112 1,053 912 1171$279,685$214,464$184,816$156,927$131,000$111,165$95,546$76,371$76,371$66,031$66,031 Number of Registered Holders of Common Stock..........
31,212 32,234 32,651 31,514 27,923 25,296 24,709 24,347 24,990 23,545 23,738 O Q I-fjl K O O Cl K O Q I-Cil CI CL LL O I-cC O Notes 20 DIRECTORS ERNEST E.ALTHOUSE WfkxN Street, PA.Vice Chairman of ths Board and Vice Chairman of the Committee on Finance;Mernbe of Xecutive Comrninee and Committee an Campensat'cn and Succssscn RAYMOND T.BENEDICT" Stamford, CT.Lawyer, of Counsel.Cummings&~;Mcmbe of xecutivs Committee and Committee on Finance'AMES R.BREED, M.D.Poughkeepsie, N.Y.Surgeon;Member of Committees on Audit and on Compensat'cn and Succession MARJORIE S.BROWN Minbroak, N.Y.Homemaker.
active in civic and ph'nthropc work, formerly eccutlV8 Ifl f CtaTTing and promotional organizations:
Member of Committee on Compensation and Succession and Retirement Committee THEODORE J.CARLSON Poughkeepsie, NY Chairman of the Board;Chairman of Executive and Rctirencnt Committees; RICHARD H.EYMAN Norwa&.CT.Communications, Division of J.Walter Tfiampson Company;Chairman of Committee on Audit EDWARD F.X.GALLAGHER Newburgh, N.Y.President and Owner Gattagher Transportation Sevices: Member of Retiremenl Committee ROY C.KETCHAM FeshhN, N.Y.Chairman of the Board and Chief'xccut've Offccr, Kctcham Motors, lnc.;Chairman of the Board of The Fishkil National Bank;Chaieenaee of the Committee on Compensation and Succession; Member of Xxccut'vs Committee JOHN E.MACK III Poughkeepsie.N.Y.
President and Chief Executive Offcer, Menber of Executive and Retirement Committees.
and Comminees on Finance and on Compensation and Succession HOWARD C.ST.JOHN Glenford, N.Y.Chairman ol the Board and resident.Ulster Savings Bank;Lawyer, Howard C.SL John&Associates:
Chairman of Committee on Finance LEE C.WHITE Washington, D.C.Lawyer.White, Fine&VcrvRle;Member of Cammittee on Audit JOHN WILKIE Katonah, NY.'ice Charrnan of XxecufNe Comminee;Member af Retirement Committee and Committees on Finance and Audit Retired 12/31/86"Retired 41/86 OFFICERS OF THE BOARD THEODORE J.CARLSON Chairman ol the Board;Chairman of Executive and Retirement Committees JOHN WILKIE Vice Chairman of the xecutive Committee ERNEST E.ALTHOUSE'ice Chairman of the Board and of Cammfnee on Finance ROY C.KETCHAM Chairman of Committee on Compensation and Succession HOWARD C.ST.JOHN Chairman of Committee on Finance RICHARD H.EYMAN Chairman af Committee on AxQ OFFICERS JOHN E.MACK III ress'dent and Chief Xxcculis Offcer L WALLACE CROSS Saner Vice President-Finance, and Accaunbng PAUL J.GANCI Senior Vice President-Opeations WILLIAM E.VANWAGENEN Vice President.
Corporate Communications and Governmental Affairs GLADYS L.POWELL Secretary ERIC M.MARKELL Treasurer JOHN F DRAIN Ccntrotfe HERBERT M.ROUND Vice President.
Corporate Banning and Energy Control ALLAN R.PAGE Vce Presidcm.Xnginccring CARL E.MEYER Ass'stant Vce President.
Production JOSEPH J.DeVIRGILIO, JR.Vice ress'dent-Customer Servkm JAMES E.SMITH Vce President WALTER A.BOSSERT, JR.ecretary and Ssistant Treasurer CHARLES H.DENNY, JR.Treasurer and Ass'stant Sccetary TRANSFER AGENT®ISTRAR COMMON&PREFERRED STOCK Morgan Sharehoklsr Sevices Tiust~30 Broadway New Ybrk, N.Y.10015 GENERALCOUNSEL Gould&Witkie One Waft Street New ark, N.Y.10005 INDEPENDENT ACCOUNTANTS Price Waterhouse 153 East 53rd Street New+A, N.Y.10022 Ir VHN/(Mvk"~.IMtl<<crit Hfhflrfjnf~f~r
~sf sa'h adg/St{t INC O tth nl I F I, adgat crt<<d z'r ernh jd 1'~v 6 I nsfne Mldddburg wdr v csw I'L'ft~i Ln Prp Hl'tllosd af s se!Whore"s<<r>>vn.;.h"'gist{I
.';gr/1 I<<Nr Ineg We.nett fn<<wfr/.G (ACr, lsllsrsf I Wrofte5tof/
v 4 Conrail..p.11 If/Cnl lnnns'lo-.-n'Gprfntvoc Ix S Q R 1 Nrlf r I tynectcto CarLje n B<<aw~wf y il,.r Cr(vasnd*M!ford Ps.Ifs I!1 Q (SH s,err chtnr nsr IN 1'5'/(M" P~,ii~N.I wry<<HNM CI/G Gsvond<<t Htryl Ms<<IC XIVtrNIO\/{2,<<MM'Gens~c 4 t SN.Mcs KM,WStginfotd Hnc Mt n f OVGNN I!Vxnwdt'lv S,Kerr C/e 4nl I 1vr/Prsev/4 S Ic/Nest J Mrs/1 f OcNW f I'Vega W a.A NsHW.O R g, frfwsr{'x nese Htxrcfs'i~/HHlslt Htnvsrn Xe!lyC<<And!I Mofgorot-Vl!I Genrnes 1 Arpv Se///nrr>>/ie Drp tv~r~I'r par avl nte OOCPMIS,*Mrddf<<r (N~4 SLsrdel twin Prd 4 cess Tvrnecod ce.P(NMd sr Sla<<XIO Hscllcnd\Jac e a!rory PM d I Gsff vce!0!ln H ft i'!art sssfeos f loni ar<<vne W jc snnaevn g arne L Cllxtt Pl Mon Mode>>Halloo 6 Co<<Mr<<g I Hd Gl L Hd Cvrnv sit W,Crnltlclll
~nd 4 v hexingKn Crash;!Cs s en~Bd 4INS Wcd gd tan tas fsgo H 2 thMsn>>!1 atro Asshes'INa 4<<PtvponyM vL>>(OMHN I (Xlvlrls 4 Wood.cŽf C Mfa/cacvont'nl crrcfrfg rrrw R na 4 II (NW t Y/pgdftvi' One{inta" 41 I t Hereof AIN ff lf I a~crt adpd c'{3'se 4~g pnca etavigo Rcaswnd 4 n toaap fS l o psi r CV o hfm<<CC{It t(V2dg fes~N ll sNWNos Bcgpt tp 4/r it Nt~AMŽ/I 71/.I Acn<<NP'e jtoo I Gt Men<<l/ro(<<cp L Ceto d V 4 HudSOn mont/pg f(p ofsch H.kcaetM!P 6 t/css d Mn!thgna 1 Cfrw'Is f L~/'I"jc wcas HsrNn!4 eg 6 t ttnrlgl t 0 (hcrn I ('rrfnert Net t t PteMHN I Ns Mra<<O~(f1<<d tOol yn'giicn nowntv(M t/Qr)nflnppl
~~rd Ntl I Il (Mr facts N ign~u<<w h 4//t NN//An<<a<<G<<w, Not lola ff wts/Lcf 1C<<sN I tajjchv/y myi tsM V otto 2 ojns~6 I Md!pl(do a~o I Scca CRV n~c N 6/IMN W tl Mel/tll SWsr Glean I 51, tl G yfinttcd h~1~to S SH/tts nf/I v IN a f1 vines t~tnsrn t/vlngpcctt Msfxv r rrw,sa 44 4-,"I3 h k<<Gave Mnrw Kl gstpn t n Hert I I/{I, fifa m'fkr', G a Wdfsrv OC CM 2'1/do oef Cape(orn Con HWI Id 7 C tf a S WSMOO pres~.f/~nrdr<<<<tao{too<<I Rca f cco P<<rdvsa (Ma<<N(a Ma 1~on Msp'>>Bewfyjtt poop(a 5 Cvoosacw o tnCB cl 6 para 44'Creat<<a<<4 HN csvrwns O~vi<<le vsljsv t a W s s 1rtl Ussr Crsssc~, V eve<<t I~I (CXNIIC t<<fist(Oar I Wwt pe Sv!!4vr/Sist'le r~geest/4 telo s Xrnl s telo S tt~Ltst 2 Pcr<<r<<4 i 1 t Hlm glass saax ffy Shtfnf OM (rl erl Mfhr 11~I Pougbtteeps 4<~stt Bred e I~<<Os,n O<<4 r Csg lt r crees<<l Ice/jrosvna I 2!v(!~~I at rv<<fifa 2 gchfd<<Wares rn Nld I r rd W I>>Ho Mrol<<NI~~I grfr j d Hr t f 2/lr k:1!slo/Hvkfsdhn (Hlhti I VHrlv g'll vnl<<rr ln pens<<pcr pv e/I grfc'rn~nL'lrrnsy~refers o w/rd Rcs lrs Cr w<<r Neeodtn gttsnr 5I/cl ro I ftsll,rr Bwf 4>~W"V W rftn<<n L~4<<e Wrest/Rr forttlorg gx!I elf r L W Wf<<~, G,'IJ wslorglofl Wstenow P!BctvfM Watefbu G ff th/two weasnoa~~-4Wrg lg~paso<<nnt tlrgn<<fag k~gtetHl I frrn vr wvccr 2 W r ,ters 6,'Ms!Ird MsfdN Nope"9'tgvrps~vest New{I g)Mfi/ofd flo I II i altsla CHtrrcccna Irtfr r/e H*QW(cd 8!p f 5th rs D 1{BS~nt'yi(ttsrie{it
""-/t~5 II j t'dl V sr/e sa 6 Cwe<<en wc J M(wa Spsnnvr por (sacs Ml jomnf at*i'xjofd IOG(NLRAC GNAnlscn CG W HC'.~h'1 e l, 5 5 s<<c<<s cp Voce Calo~jy Mn a r'rv If 5<<.B Pt/Nw'!Or'I P'fknf IB,.Vl N.Ssl<<a L h n sod<<sf'e///I,.Cs Hcvslrs Danbupit c<acth',tf fyi RMC fa ts>>kgpgptp(tc bjs cf 5 nt I tarv<<THE REGION mf USER VE Central Hudson is an investor-owned utility serving more than 281,000 electric customers and 50,000 natural gas customers in the Mid-Hudson Valley and the eastern Catskill Mountains.
Its 2,600 square-mile service territory reaches from 25 miles north of New York City to 10 miles south of Albany and includes portions of eight counties.
I I I I I I I I I