<PAGE> SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
---------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended......................December 31, 1993
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from...............to..................
Commission file number.....................................1-3268
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
(Exact name of registrant as specified in its charter)
New York 14-0555980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
284 South Avenue, Poughkeepsie, New York 12601-4879
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 452-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $5.00 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Cumulative Preferred Stock:
4 1/2% Series
4.75% Series
7.72% Series
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 14, 1994 was
$493,231,275, based upon the lowest price at which Registrant's
Common Stock was traded on such date, as reported on the New York
Stock Exchange listing of composite transactions.
The number of shares outstanding of Registrant's Common
Stock, as of February 14, 1994, was 17,007,975.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference
in the respective Parts of this Form 10-K noted below:
1. Certain portions of Registrant's Annual Report to
Shareholders, for the fiscal year ended December
31, 1993, are contained in Exhibit 13 hereto and
are incorporated by reference in Parts I, II and
IV of this Report.
2. Registrant's definitive Proxy Statement, dated
February 25, 1994, used in connection with its
Annual Meeting of Shareholders to be held on April
5, 1994, is incorporated by reference in Part III
hereof.
<PAGE>
TABLE OF CONTENTS
Page
Table of Contents
PART I
Item 1 BUSINESS 1
Generally 1
Electric Sales to IBM 1
Construction Program and Financing 2
Rates 3
Generally 3
Rate Proceedings - Electric and Gas 3
Cost Adjustment Clauses 4
Take-or-Pay Gas Liability 4
Other Rate Matters 4
Fuel Supply and Cost 4
Residual Oil 5
Coal 6
Natural Gas 6
Nuclear 7
Research and Development 7
Environmental Quality 7
Air 7
Water 9
Toxic Substances and Hazardous Wastes 10
Other 11
Regulation 12
Generally 12
Energy Policy Act of 1992 12
Alternative Electric Power Generation 13
Least-Cost Generation Supply 13
Energy Efficiency Programs 14
(i)<PAGE>
TABLE OF CONTENTS (Cont'd)
Page
Item 1 BUSINESS (Cont'd) 14
Other Matters 14
Competition 14
Municipal Utilities 15
Economic Development Power 15
Marketing 16
Gas Service Incident 16
Labor Relations 16
EMF 16
Affiliates 17
Executive Officers of the Company 17
Item 2 PROPERTIES 20
Electric 20
General 20
Load and Capacity 22
Roseton Plant 24
Nine Mile 2 Plant 26
General 26
Operational Matters 26
NRC and INPO Monitoring 26
Radioactive Waste 27
Refueling Outage 27
Gas 28
General 28
Current Gas Supply 28
Sufficiency of Supply and
Future Gas Supply 28
Other 28
Other Matters 29
(ii)<PAGE>
TABLE OF CONTENTS (Cont'd)
Page
Item 3 LEGAL PROCEEDINGS 30
Asbestos Litigation 30
Environmental Litigation 31
IBM Litigation 32
Catskill Incident 33
Income Tax Assessments 35
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 35
PART II 35
Item 5 MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 35
Item 6 SELECTED FINANCIAL DATA 36
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 36
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 37
(a) Financial Statements 37
(b) Supplementary Financial Information 37
(c) Other Financial Statements and Schedules 37
Item 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE 37
PART III 37
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY 37
Item 11 EXECUTIVE COMPENSATION 38
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 38
Item 13 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 38
(iii)
<PAGE>
TABLE OF CONTENTS (Cont'd)
Page
PART IV 38
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 38
(a) Documents filed as part of this Report: 38
1. Financial Statements 38
2. Financial Statement Schedules 38
3. Exhibits 39
(b) Reports on Form 8-K 39
(c) Exhibits Required by Item 601 of
Regulation S-K 40
(d) Financial Statement Schedules required
by Regulation S-X which are excluded
from the Company's Annual Report to
Shareholders for the fiscal year ended
December 31, 1993 40
SIGNATURES 41-42
INDEX TO FINANCIAL STATEMENTS F-1
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES F-2
CONSENT OF INDEPENDENT ACCOUNTANTS F-2
FINANCIAL STATEMENT SCHEDULES FOR THE YEARS 1991, 1992 AND 1993:
Schedule V - Utility Plant F-3 - F-8
Schedule VI - Accumulated Depreciation and
Amortization of Utility Plant F-9 - F-14
Schedule VIII - Reserves F-15 - F-17
Schedule IX - Short-Term Borrowings F-18 - F-19
Schedule X - Supplementary Income
Statement Information F-20 - F-21
EXHIBIT INDEX E-1 - E-29
EXHIBITS
(iv)<PAGE>
PART I
Item 1 - BUSINESS
Generally
Registrant ("Company") is a gas and electric
corporation formed, on December 31, 1926, as a consolidation of
several operating utilities which had been accumulated under one
management during the previous 26 years. The Company generates,
purchases and distributes electricity and purchases and
distributes gas. The Company, in the opinion of its general
counsel, has, with minor exceptions, valid franchises, unlimited
in duration, to serve a territory extending about 85 miles along
the Hudson River and about 25 to 40 miles east and west from such
River. The southern end of the territory is about 25 miles north
of New York City, and the northern end is about 10 miles south of
the City of Albany. The territory, comprising approximately
2,600 square miles, has a population estimated at 639,000.
Electric service is available throughout the territory, and
natural gas service is provided in and about the cities of
Poughkeepsie, Beacon, Newburgh and Kingston and in certain
outlying and intervening territory. The number of Company
employees at December 31, 1993 was 1,370.
The Company's territory reflects a diversified economy,
including manufacturing industries, research firms, farms,
governmental agencies, public and private institutions, resorts,
and wholesale and retail trade operations.
Total revenues and operating income before income taxes
(expressed as percentages), derived from electric and gas
operations for each of the last three years, were as follows:
Percent of Percent of Operating
Total Revenues Income before Income Taxes
Electric Gas Electric Gas
1993 82% 18% 89% 11%
1992 82% 18% 87% 13%
1991 86% 14% 93% 7%
Electric Sales to IBM: The Company's largest customer
is International Business Machines Corporation ("IBM"), which
accounted for approximately 14% of the Company's total electric
revenues for the year ended December 31, 1993. Published reports
indicate that IBM reduced its employment by 45,000 worldwide to
256,000 in 1993 from 301,000 in 1992. Such reports also indicate
that IBM has reduced its employment in the Company's service
territory by up to 8,400 employees in 1993. IBM, in February
1994, announced a further reduction of approximately 1,500
employees in 1994 in the Company's service territory. Such
reductions would bring the total number employed in the Company's
service territory to approximately 11,600, as compared to the
peak level of IBM employment in excess of 30,000 in 1985. During
1993, IBM phased out its semiconductor manufacturing operations
at its East Fishkill, New York facility, which is in the
Company's service territory. This downsizing of IBM has resulted
in a decline of electric sales to IBM by 20% in 1993. The
Company cannot assess at this time the effect, if any, of such
IBM employment reductions on the Company's future results of
operations.
Additional information concerning revenues and
operating profits, and information concerning identifiable assets
for the electric and gas segments, which are the significant
industry segments of the Company, are set forth in Note 10 to the
Company's Consolidated Financial Statements for the fiscal year
ended December 31, 1993 (which Statements, including the Notes
thereto, are hereinafter called "Company's 1993 Financial
Statements"), appearing on pages 69 through 71 of the Company's
1993 Financial Statements (which Statements, together with
Registrant's "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are included as Exhibit 13
hereto and hereinafter called "Exhibit 13"), which Note 10 is
incorporated herein by reference.
Construction Program and Financing
The Company is engaged in a construction program which
is presently estimated to involve total cash expenditures during
the period 1994 through 1998 of approximately $364 million. The
Company's principal construction projects consist of those
designed to improve the reliability, efficiency and environmental
compatibility of the Company's generating facilities and those
required to expand, reinforce and replace the Company's
transmission, substation, distribution and common facilities.
For estimates of construction expenditures, internal
funds, mandatory redemption of long-term securities, and working
capital requirements for the five-year period 1994-1998, see the
subcaption "Construction Program" of "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
appearing on pages 6 through 8 of Exhibit 13 hereto, which
subcaption is incorporated herein by reference.
For a discussion of the Company's capital structure,
financing program, short-term borrowing arrangements and sale of
accounts receivable, see Notes 4 through 6 and Note 8 to the
Company's 1993 Financial Statements, and the subcaptions "Capital
Structure," "Financing Program" and "Short-term Debt and Sale of
Receivables," appearing in "Management's Discussion and Analysis
of Financial Condition and Results of Operations," appearing, in
the case of said Notes, on pages 52 through 56, and 61 of Exhibit
13 hereof and, in the case of said subcaptions, on pages 8 and 9
of Exhibit 13 hereof, which Notes and subcaptions are
incorporated herein by reference.
The Company's Certificate of Incorporation and its
various debt instruments do not contain any limitations upon the
issuance of authorized, but unissued, Preferred Stock and Common
Stock or of unsecured short-term debt.
The Company's various debt instruments include
limitations as to the amount of additional funded indebtedness
which the Company can issue. The Company believes such
limitations will not impair its ability to issue any or all of
the debt described under said caption "Financing Program"
incorporated herein by reference.
The Company has authority from the State of New York
Public Service Commission ("PSC") to issue, at any time through
December 31, 1997, unsecured short-term debt for capital purposes
in an aggregate principal amount not to exceed at any time $52
million.
Rates
Generally: The electric and gas rates of the Company
applicable to service supplied to retail customers within the
State of New York generally are regulated by the PSC.
Transmission rates and rates for electricity sold for resale in
interstate commerce are regulated by the Federal Energy
Regulatory Commission ("FERC").
During 1993, the average price per kWh paid by the
Company's residential electric customers was 11.2 cents,
representing an increase of approximately 1.8% over the 11 cents
average price during 1992. The rise in average price during 1993
was due primarily to the annualized effect of the increase in the
Company's base electric rates effective April 15, 1992.
Rate Proceedings - Electric and Gas: For information
with respect to the PSC's Opinion and Order Determining Revenue
Requirement and Rate Design, issued and effective February 11,
1994, incorporating the PSC's Order Adopting Revenue Requirement
and Rate Design, issued and effective December 16, 1993, which
authorizes the Company to increase its base rates for electric
service and denies the Company's request to increase rates for
base gas service, see subcaptions "Rate Proceeding - Electric"
and "Rate Proceeding - Gas," in "Management's Discussion and
Analysis of Financial Condition and Results of Operations," on
pages 9 and 10 of Exhibit 13 hereto, which subcaptions are
incorporated herein by reference.
Cost Adjustment Clauses: The Company's tariff for
retail electric service includes a fuel cost adjustment clause
pursuant to which electric rates are adjusted to reflect changes
in the costs of fuels used in electric generation and of certain
purchased power from the level of such costs included in the
Company's base rates for electricity. The Company's tariff for
gas service includes a gas cost adjustment clause pursuant to
which gas rates are adjusted to reflect changes in the price of
natural gas purchased from pipeline and/or third party suppliers
and certain costs of manufactured gas from the level of such
costs included in base rates for gas.
For more information with respect to such clauses, see
the discussions under the subcaptions "Deferred Electric Fuel
Costs" and "Deferred Gas Costs" in Note 1 to the Company's 1993
Financial Statements appearing on pages 44 and 45 of Exhibit 13
hereto, which subcaptions are incorporated herein by reference.
Take-or-Pay Gas Liability: For a discussion of the PSC
proceeding commenced in 1988 to determine, among other things,
whether recovery of some or all of take-or-pay costs should be
denied New York gas distribution companies, see the subcaption
"Take-or-Pay Gas Costs" in Note 9 to the Company's 1993 Financial
Statements appearing on page 65 of Exhibit 13 hereto, which
subcaption is incorporated herein by reference.
Other Rate Matters: From time to time legislation is
introduced in the New York State Legislature which, if enacted,
would affect the rate structures and ability to recover costs of
service of all electric and/or gas utilities operating in New
York State.
The PSC from time to time has initiated various
proceedings and taken action relating to the rate structures and
operations of electric and/or gas utilities which could or will
require Company action and the expenditure of funds.
Fuel Supply and Cost
The Company's two primary fossil fuel-fired electric
generating stations are the Roseton Plant (described in Item 2
below under the subcaptions "Electric - General" and "Electric -
Roseton Plant") and the Danskammer Plant (described in Item 2
below under the subcaption "Electric - General"). The Roseton
Plant is fully equipped to burn both residual oil and natural
gas. Units 1 and 2 of the Danskammer Plant are equipped to burn
residual oil or natural gas. Units 3 and 4 of the Danskammer
Plant are capable of burning coal, natural gas, or residual oil.
For the 12 months ended December 31, 1993, the sources
and related costs of electric generation for the Company were as
follows:
Aggregate Fuel
Sources of Percentage of Costs in 1993
Generation Energy Generated ($000)
Oil 17.8% $26,116
Coal 33.7 34,234
Gas 3.1 5,971
Hydroelectric 2.4 516
Nuclear 11.4 3,705
Purchased Power 31.6 49,809
100.0%
======
Fuel Handling Costs 1,514
Deferred Fuel Cost 385
$122,250
========
Residual Oil: The Company has available, through
ownership or contractual arrangements with Amerada Hess
Corporation ("Hess"), oil storage facilities having a capacity
for the Danskammer Plant of 190,714 barrels at December 31, 1993.
The Roseton Plant has available, through ownership or contractual
arrangements with Hess and the Company, oil storage facilities
having a capacity of 1,544,000 barrels, of which the Company's
share is 540,000 barrels. At December 31, 1993, there were
1,084,348 barrels of fuel oil in inventory for use in these
Plants, which amount represents an average daily supply of 43
days.
As a result of the minimal fuel oil required at the
Danskammer Plant, all of that Plant's fuel oil requirements are
supplied through spot market purchases. The price for Danskammer
Plant fuel oil is determined on the basis of published spot
market prices in effect on the day of delivery. For part of
1993, the Roseton Plant fuel oil requirements were supplied
equally under two contracts, the prices for which were determined
on the basis of published market indices in effect at the time of
delivery, and each such contract for the Roseton Plant permits
the Company to make certain spot purchases from others. The term
of one of the Roseton Plant supply contracts ended on September
30, 1993. The term of the other Roseton Plant supply contract,
which supplied 100% of the Roseton Plant's fuel oil requirements
for the remainder of 1993, ends on August 31, 1994 and thereafter
is automatically extended on a year to year basis, subject to
termination by either party.
Prior to 1987, the Company's primary fuel source was
residual fuel oil, the price of which can be volatile. However,
with the completion of the Danskammer Plant Units 3 and 4 coal
reconversion in 1987, the 1988 commencement of commercial
operation of the Nine Mile 2 Plant, and the completion in 1992 of
modifications to the Roseton Plant to burn natural gas as an
alternative fuel, the Company is less dependent on residual fuel
oil for its electric generation.
The Danskammer Plant and the Roseton Plant both burn
No. 6 residual fuel oil. The Danskammer Plant burns fuel oil
having a maximum sulfur content of 1%, while the Roseton Plant
burns fuel oil having a sulfur content not exceeding 1.5% maximum
and 1.3% weighted annual average, which may be modified under
certain circumstances. (See discussion below under the
subcaption "Environmental Quality - Air.")
Coal: In order to provide for its requirements for
coal to be burned at Units 3 and 4 of the Danskammer Plant, the
Company has entered into two long-term contracts for the purchase
of up to an aggregate of 720,000 tons per year of low sulfur
(0.7% maximum) coal. The unit cost of purchases under these
contracts are fixed for periods which end on December 31, 1994.
Thereafter, one contract is subject to renegotiation while the
other contract is subject to increases and decreases based on
prices tied to the price of coal purchased by the Company on the
spot market. The Company in 1993 entered into a contract
providing for the purchase of coal on the spot market.
The Company has entered into agreements with two
railroads for the transportation of such coal, the cost of which
is subject to escalation and de-escalation based on formulas tied
to published and recognized rail cost indices. One such
transportation agreement expires on March 31, 2000, subject to
earlier termination on certain dates by either party. The other
such agreement expires on December 31, 1996 and is thereafter
automatically renewed on a year to year basis, subject to
termination by either party.
Natural Gas: Natural gas is purchased for both the
Roseton Plant and the Danskammer Plant through the Company's
contracts with its firm natural gas pipeline suppliers (see the
subcaption in Item 2 below entitled "Gas - Current Gas Supply"),
for the Danskammer Plant through spot purchases and for the
Roseton Plant through the Iroquois Gas Transmission System. Due
to supply limitations and deliverability constraints on both
interstate gas pipelines and the Company's gas facilities,
natural gas is burned at the Danskammer Plant and at the Roseton
Plant, principally during the months of April through October.
The aggregate volume of natural gas so used as boiler fuel during
1993 was 4.0 billion cubic feet.
Nuclear: See the subcaption "Electric - Nine Mile 2
Plant - Outages" in Item 2 below for a discussion of fuel
reloading at the Nine Mile 2 Plant.
Research and Development
The Company is engaged in the conduct and support of
research activities affecting its business, both in its own
territory in New York State and nationally, which activities are
designed to improve existing energy technologies and to develop
new technologies related to the production, distribution and
conservation of energy. New York law requires electric and gas
utilities to contribute to research related to new energy
technologies to be undertaken by the New York State Energy
Research and Development Authority. The PSC has established a
guideline for electric utilities to spend about 1% of electric
revenues on electric research, development and demonstration
projects. In addition, the Company makes contributions in
support of gas research, development and demonstration projects.
The Company's expenditures for electric and gas
research and development projects amounted to $5.6 million in
1991, $5.0 million in 1992 and $4.6 million in 1993. The Company
estimates that its 1994 expenditures for research and development
will total approximately $4.1 million.
Environmental Quality
The Company is subject to regulation by federal, state
and, to some extent, local authorities with respect to the
environmental effects of its operations, including regulations
relating to air and water quality, aesthetics, levels of noise,
hazardous wastes, toxic substances, protection of vegetation and
wildlife and limitations on land use. In connection with such
regulation, certain permits are required with respect to the
Company's facilities, which permits have been obtained and/or are
in the renewal process. Generally, the principal environmental
areas and requirements to which the Company is subject are as
follows:
Air: State regulations affecting the Company's
existing electric generating plants govern the sulfur content of
fuel used therein, the emission of particulate matter and certain
other pollutants therefrom and the visibility of such emissions.
In addition, federal and state ambient air quality standards for
sulfur dioxide, nitrogen oxides and suspended particulates must
be complied with in the area surrounding the Company's generating
plants.
The Company operates an ambient air quality monitoring
system in the area surrounding the Roseton and Danskammer Plants,
which system is designed to provide measurements of sulfur
dioxide concentrations to indicate whether applicable air quality
standards are being met. Air monitoring results reveal that
certain applicable state and federal standards for ambient sulfur
dioxide concentrations and certain state air quality control laws
and regulations with respect to emissions of sulfur dioxide have
been occasionally exceeded. The opacity limitation also has been
occasionally exceeded. The Company believes that present air
quality standards for nitrogen oxides, sulfur dioxide and
particulates are satisfied in the area surrounding the Danskammer
and Roseton Plants.
The sulfur content of the oil burned at the Roseton
Plant is limited by stipulation, with among others the New York
State Department of Environmental Conservation ("NYSDEC"), to an
amount not exceeding 1.5% maximum and 1.3% weighted annual
average. Such sulfur content limitation at the Roseton Plant can
be modified by the NYSDEC in the event of technological changes
at such Plant, provided that the sulfur dioxide and nitrogen
oxides emissions are limited to that which would have been
generated by the use of oil with a sulfur content of 1.3% on a
weighted annual average.
The Clean Air Act Amendments of 1990 ("CAA
Amendments"), address among other things, attainment and
maintenance of national ambient air quality standards ("NAAQS")
in those areas ("non-attainment areas") in which NAAQS are not
currently being attained; adoption of a new, federally-
supervised, nationwide permit program for emissions to the
atmosphere from stationary sources; control of precursor
emissions, namely sulfur dioxide and nitrogen oxides, from
fossil-fueled electric power plants ("power plants") that affect
"acid rain"; regulation of hazardous air emissions; and increased
enforcement provisions, including new criminal sanctions.
The "acid rain" control program is intended to reduce
sulfur dioxide and nitrogen oxides emissions from power plants.
The sulfur dioxide and nitrogen oxides reduction requirements do
not affect the Company's generating plants until January 1, 2000.
The "acid rain" control program will require the Company to
install continuous emission monitors on its power plants by
January 1, 1995. The sulfur dioxide program provides for
emission allowances that will be allocated to power plants, which
can be transferred between power plants and utilities. If
emission allowances were exceeded in a year, reductions in future
emissions would be required and fines could be assessed.
Although subject to reevaluation as U.S. Environmental Protection
Agency ("EPA") regulations are issued, the Company currently
anticipates that it will have adequate allowances for the
operation of its facilities if sufficient gas is available for
consumption at the Roseton Plant. Under the provisions for
designated non-attainment areas in the CAA Amendments, states are
required to identify measures to be taken to meet schedules for
attaining established standards. In New York State, sources of
nitrogen oxides emissions will be required to install "Reasonably
Available Control Technology" ("RACT"), by May 31, 1995, to
assist in achieving attainment of the NAAQS for ozone. The
Company has determined that combustion controls will be required
to meet the RACT standards for its generating facilities. Such
controls, along with continuous emissions monitors which must be
installed and certified by January 1, 1995, are currently
projected to cost approximately $11 million to install.
Except as set forth above, the Company is unable to
predict the effect (including cost) of these programs on its
power plant operations since the details of the CAA Amendments
are yet to be completely established by implementing regulations
to be issued over a period of years by the EPA and the NYSDEC.
In addition, under the CAA Amendments, further actions may be
taken by the EPA or New York State authorities with respect to
the non-attainment area classification of the portion of New York
State in which the Company's Danskammer and Roseton Plants are
located, which could require the Company to expend a significant
amount of funds in altering its power plant operations and fuel
purchasing programs. In December 1990, the PSC commenced a
generic proceeding to examine the effects of the CAA Amendments,
and, by Order, issued and effective December 27, 1993, the PSC
ordered that New York utilities receiving revenues in connection
with emission allowance transactions defer the effects of such
transactions for ratemaking purposes. The Company is receiving
no such revenues at this time.
Water: The Company is required to comply with
applicable state and federal laws and regulations governing the
discharge of pollutants into receiving waters.
The discharge of any pollution into navigable waterways
is prohibited except in compliance with a permit issued by the
EPA under the National Pollutant Discharge Elimination System
established under the Clean Water Act ("NPDES"). Likewise, under
the New York Environmental Conservation Law industrial waste
cannot be discharged into state waters without a State Pollutant
Discharge Elimination System ("SPDES") permit issued by the
NYSDEC. Issuance of a SPDES permit satisfies the NPDES permit
requirement. The Company has received SPDES permits for both the
Roseton Plant and the Danskammer Plant, its Eltings Corners
maintenance and warehouse facility and its Rifton Recreation and
Training Center. The SPDES permits for the Roseton Plant and the
Danskammer Plant expired on October 1 and November 1, 1992,
respectively, and such permits are the subject of separate
renewal proceedings currently pending before the NYSDEC. In the
Roseton Plant proceeding, the subject of the restriction on use
of water for cooling purposes at that Plant (as referred to in
Item 3 below, under the caption "Environmental Litigation") is
also being discussed. The Company expects that such Permits will
be renewed in 1995, but can make no estimate as to the
conditions, if any, to which such Permits may be subject. It is
the Company's belief that the expired SPDES permits continue in
full force and effect pending issuance of the new SPDES permits.
Toxic Substances and Hazardous Wastes: The Company is
subject to state and federal laws and regulations relating to the
use, handling, storage, treatment, transportation and disposal of
industrial, hazardous and toxic wastes.
The NYSDEC in 1986 added to the New York State Registry
of Inactive Hazardous Waste Disposal Sites six locations at which
gas manufacturing plants owned or operated by the Company or by
predecessors to the Company were once located. Two other sites,
which formerly contained gas manufacturing plants, have been
identified by the Company. The Company studied these eight sites
to determine whether they contain any hazardous wastes which
could pose a threat to the environment or public health and, if
such wastes were located at such sites, to determine the remedial
actions which may be appropriate. All eight sites were studied
using the Phase I guidelines of the NYSDEC and four such sites
were studied using the more extensive Phase II guidelines of the
NYSDEC. As a result of these studies, the Company concluded that
no remedial actions were required at any of these sites. In
1991, the NYSDEC advised the Company that four of the six sites
had been deleted from such Registry. In 1992, the NYSDEC advised
the Company that the two remaining sites listed on such Registry
had been deleted from such Registry. The NYSDEC also indicated
that such deletions of the sites were subject to reconsideration
in the future, at which time new analytical tests may be required
to determine whether or not wastes on site are hazardous. If, as
a result of such potential new analytical tests, or otherwise,
remedial actions were ultimately required at these sites by the
NYSDEC, the cost thereof could have a material adverse effect
(the extent of which cannot be reasonably estimated) on the
financial condition of the Company if the Company could not
recover all, or a substantial portion thereof, through rates.
In 1992, the NYSDEC asserted that, after an
investigation, the Company and Consolidated Edison Company of New
York, Inc. ("Con Edison") were responsible for a petroleum spill
emanating from certain transformer facilities located at the
Pleasant Valley Substation owned by Con Edison. The Company has
an agreement with Con Edison under which the Company performs
ordinary maintenance with respect to these transformer
facilities. At the direction of NYSDEC, in 1992, the Company
undertook certain oil clean up with respect to such spill and
certain containment action with respect to further discharge of
oil at the site. The Company in 1992 also commenced an
investigation of potential contamination of related surface and
groundwaters. The preliminary results of such investigation
indicate the presence, above groundwater standards, of a
hazardous substance which appears to be unrelated to such oil
spill. The Company has informed Con Edison of Con Edison's
responsibility for any costs or damages that might result from
the spill and/or the existence of other hazardous substances and
the actions of the NYSDEC with respect thereto. In 1993, Con
Edison assumed responsibility for the conduct of further
assessments of the possible release of hazardous substances with
respect to such spill. The Company believes that, as owner of
the property, Con Edison will be responsible for any costs of
remediation, if required.
In August 1992, the NYSDEC notified the Company that
the NYSDEC suspected that the Company's offices at Little Britain
Road in New Windsor, Orange County, New York, may constitute an
inactive hazardous waste disposal site. NYSDEC stated that
unless the Company agreed to conduct an assessment of conditions
on the site, NYSDEC would perform such an assessment. The
Company is currently negotiating an Order on Consent with the
NYSDEC pursuant to which the Company would perform such a site
assessment. Assuming such Order on Consent were entered into,
the Company is unable to predict the results of such assessment,
whether remediation would be required, and, if so, the potential
costs of any such remediation.
In September 1993, J and T Recycling, Inc. ("J and T"),
requested the Company, as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response Compensation
Liability Act ("CERCLA"), to participate, in lieu of litigation,
in the cost of remediation of a landfill site in the Town of
Poughkeepsie, New York, known as the FICA Landfill. The State of
New York had commenced litigation against J and T, under CERCLA,
as the operator of the FICA Landfill to require remediation of
such Landfill. On October 8, 1993, the Company received a demand
for information from the NYSDEC and the New York State Department
of Law (Environmental Protection Bureau) relating to any waste
material sent by the Company to the FICA Landfill. As set forth
in the Company's response to such demand, the Company does not
believe it is a PRP for environmental conditions at the FICA
Landfill. However, if the Company were found to be a PRP, the
cost to the Company to participate in such remediation cannot be
estimated at the present time.
Other: The Company estimates that expenditures
attributable, in whole or in substantial part, to environmental
considerations totalled $10.5 million in 1993, of which about
$3.1 million related to capital projects and $7.4 million were
charged to expense. It is estimated that in 1994 the total of
such expenditures will be approximately $19.9 million.
The Company is not involved as a party defendant in any
court litigation with respect to environmental matters and, to
the best of its knowledge, no litigation against it is threatened
with respect thereto, except with respect to the litigation
described under Item 3 hereof under the caption "Environmental
Litigation" and described above under the subcaption
"Environmental Quality - Toxic Substances and Hazardous Wastes."
Regulation
Generally: The Company generally is subject to
regulation by the PSC with respect to, among other things,
service rendered (including the rates charged therefor), major
transmission facility siting, energy planning, accounting
procedures and issuance of securities.
Certain of the Company's activities, including
accounting and the acquisition and disposition of certain
property, are subject to regulation by the FERC, under the
Federal Power Act, by reason of the Company's transmission and
sale for resale of electric energy in interstate commerce.
The Company is not subject to the provisions of the
Natural Gas Act.
In the opinion of general counsel for the Company, the
Company's major hydroelectric facilities are not required to be
licensed under the Federal Power Act.
Energy Policy Act of 1992: In 1992, the Energy Policy
Act of 1992 ("Energy Act") became federal law, the purpose of
which is to provide a comprehensive national energy policy that
gradually and steadily increases United States energy security in
cost-effective and environmentally beneficial ways.
Title VII of the Energy Act amended the Public Utility
Holding Company Act of 1935 ("PUHCA") and the Federal Power Act
to promote additional competition in the wholesale electricity
power market in order to improve the efficiency of the electric
utility industry and secure the lowest possible costs for
consumers. PUHCA was amended to allow independent (wholesale)
power producers ("IPPs") to operate without coming under the
regulatory restrictions of PUHCA and to permit utilities subject
to PUHCA to invest in IPPs.
Under the Energy Act, FERC may order utilities to
provide wholesale transmission service ("wholesale wheeling") for
others if, among other things, the order meets certain
requirements as to cost recovery and fairness of rates. A
transmitting utility need not provide the transmission service if
FERC finds that the service requires the enlargement of
transmission capacity and the utility has failed, after making a
good faith effort, to obtain the necessary approvals or property
rights under applicable law. Although the Energy Act prohibits
FERC-ordered retail transmission service to a customer ("retail
wheeling"), the Energy Act does not affect the authority of state
or local governments with respect to retail wheeling. The
Company can make no prediction as to the effect on it of the
Energy Act, however, it believes that such Act could have an
extensive impact upon current competitive relationships in the
electric utility industry.
Alternative Electric Power Generation: Pursuant to the
provisions of the federal Public Utility Regulatory Policies Act
of 1978 ("PURPA"), and the New York Public Service Law, the
Company is required to enter into long-term contracts to purchase
electric power generated by small hydro, alternative energy and
cogeneration facilities which meet qualification standards
established by such statutes and the regulatory programs
promulgated thereunder. With respect to facilities qualified
under PURPA, the Company must pay its avoided cost (i.e., the
cost the Company would otherwise incur to generate the increment
of power purchased) for electric power purchased from qualified
facilities, which, under the New York Public Service Law, is "at
rates just and reasonable to electric...corporation ratepayers."
As of December 31, 1993, the Company's avoided cost at the 115 KV
transmission level was approximately 3.0 cents per kWh.
As of December 31, 1993, 19 MW of generation,
qualifying for avoided cost payments by the Company, was
interconnected with the Company's system, and the Company had
signed contracts for the purchase of electric power for an
additional 3 MW from such facilities. The opportunity under
PURPA and the New York Public Service Law to require the Company
to purchase power from qualifying facilities could serve as an
inducement to its industrial and commercial customers to install
their own qualifying on-site generation facilities to reduce
their purchases of electric power from the Company which would
result in losses of revenues from such customers. However, as of
December 31, 1993, no significant customer has indicated to the
Company the intention to pursue such alternative.
Least-Cost Generation Supply: The PSC has statutory
authority to require electric utilities to conduct competitive
bidding prior to (i) entering into electric capacity purchase
contracts, and (ii) making substantial investments for new
construction of generating capacity or extension of existing
generating capacity. And, prior to entering into any electric
capacity purchase contract, or prior to making any substantial
investment for new construction repowering or plant life
extension of electric generating facilities, in order to select
the source which best serves the public interest, a utility is
required to consider a number of factors, including reasonably
available supply and demand side sources, ratepayer impacts,
system reliability, environmental impacts, conservation of energy
resources, economic consequences, fuel efficiency, fuel
availability and diversity and public health and welfare.
In 1988, the PSC issued its Opinion and Order
Concerning Integrated Planning and Ratemaking Issues ("Integrated
Planning Order"). In the Integrated Planning Order, utilities
are required to adopt comprehensive long-range planning which
considers demand side management and conservation together with
construction of new generation and which integrates planning with
other aspects of the utility, including the rate, financial and
customer service functions. The Company considers its planning
procedures to conform substantially to the comprehensive long-
range planning which the Integrated Planning Order directs the
utilities to implement.
Energy Efficiency Programs: In response to the PSC's
directives, the Company filed with the PSC the Company's Energy
Efficiency Program for 1993 and 1994, which projects an aggregate
reduction in the Company's summer peak load demand of 8% between
the years 1989 and 2000. The PSC, by Order issued and effective
March 19, 1993, approved the Company's Energy Efficiency Program
for 1993. The Company in such Order was directed to increase its
energy reduction goals for 1994 and to file for PSC approval a
revised 1993-1994 Energy Efficiency Program. The Company in July
1993 filed its revised Energy Efficiency Program with the PSC and
such filing was approved by the PSC by Order issued and effective
January 14, 1994.
The Company has various other programs in effect to
promote energy efficiency by its customers. Beginning in 1978,
the Company implemented a program to comply with the state-
mandated Home Insulation and Energy Conservation Act pursuant to
which the Company is required, among other things, to conduct
residential home energy audits and either to loan money to its
residential customers to finance the installation of energy
efficiency measures or to arrange to have banks issue such loans
guaranteed, in certain instances, by the Company, with the
Company subsidizing the difference between the prevailing
interest rate and the rate authorized by the PSC. Pursuant to
such Act, the Company in 1982 also implemented an Apartment
Building Conservation Audit Plan which offers energy audits to
qualified multiple-dwelling owners. Such programs have been
successful in reducing energy use by many customers.
Other Matters
Competition: Although the Company is subject to
regulation by the PSC and by the FERC, as described under the
subcaption "Regulation" above, the Company is substantially free
from direct competition with other utilities, municipalities and
public agencies. However, the Company is subject to price
competition from oil, coal, wood, solar heating sources and self-
generation and from bottled gas vendors for water heating,
clothes drying, cooking, air conditioning and heating. The
Company is in competition with other investor-owned utilities and
the Power Authority of the State of New York ("PASNY") for sales
for resale to other utility companies, both within and outside of
New York State. PASNY also offers economic development power to
industrial consumers in New York State, in competition with sales
of electricity by the Company to such consumers in its service
territory (see subcaption below "Economic Development Power").
The Company is in competition with other New York investor-owned
utilities with respect to the expansion of the Company's gas
business to new areas. Furthermore, the Company is in
competition for the generation of electricity with qualified
cogeneration, alternative energy, and small hydro facilities
under federal and state laws from which the Company is required
to purchase power and with other independent power producers
(including other utility-owned subsidiaries) (see subcaptions
above entitled "Regulation - Energy Policy Act of 1992" and
"Regulation - Alternative Electric Power Generation"). However,
with the enactment of the Energy Policy Act of 1992 and with the
FERC's rules providing open-access to interstate pipelines (see
below subcaption "Gas - Other" of Item 2 - Properties), the
electric and gas industry may be subject to risks and
uncertainties due to the introduction of these new competition -
related regulatory and legislative requirements; eroding perhaps
the position of a utility as a franchised monopoly, free from
most forms of competition. The PSC has initiated separate
proceedings to consider aspects of competition as they may affect
the electric and gas industry. Among the subjects which may be
considered in such proceedings are proposals that utilities may
discount their rates to industrial customers, and that utility
shareholders absorb a portion of such discounts, and
consideration of retail electric wheeling. The Company can make
no prediction as to (i) whether the PSC will adopt new
regulations or policies implementing any of the concepts being
considered in such proceeding and (ii) if adopted, the effect, if
any, on the future operations of the Company.
Municipal Utilities: Article 14-A of the New York
General Municipal Law permits any municipality to construct,
lease, purchase, own, acquire, use and/or operate any utility
service for the benefit of its inhabitants, and, in furtherance
thereof, permits any municipality to acquire, through purchase or
condemnation, the public utility service of any public utility
company.
Economic Development Power: The New York State
Economic Development Power Allocation Board is authorized by law
to solicit applications for "economic development power" by
municipalities or municipal agencies on behalf of businesses
which normally use a minimum peak electric demand of 400 Kw for
purposes of economic development, particularly job creation.
"Economic development power" is electric power generated at the
Fitzpatrick Nuclear Generating Station of PASNY which is
available for such purpose. Should such power be allocated
within the Company's service territory, the Company would be
required to wheel such power to the user at a cost-based rate,
which must be approved by the PSC. As of March 1, 1994, the
Company is aware that only one of its electric customers, a
commercial printer, has applied for such economic development
power.
Marketing: The Company's marketing division promotes
the use of gas and electricity by encouraging the purchase of
energy efficient gas and electric appliances, particularly gas
heaters, electric heat pumps, electric water heaters and night
security lights. The Company believes that (i) certain targeted
marketing efforts will improve sales and revenues without
adversely affecting energy efficiency efforts and (ii) such
improved sales will favorably affect unit costs and,
consequently, reduce the magnitude of future rate increases.
Gas Service Incident: On February 12, 1994, a fire and
an explosion destroyed a residence in the Village of Wappingers
Falls, New York in the Company's service territory. A short time
later, a second explosion and fire destroyed a nearby commercial
facility. Subsequently, the Company discovered a crack in a
nearby eight-inch steel gas main. The Company interrupted
natural gas service to over 1,800 customers in order to repair
the cracked gas main. The cause of these incidents is under
investigation by the Company and, independently, by the PSC. The
Company can make no prediction as to its liability, if any, in
this matter and it is unaware of any reason to anticipate the
commencement of penalty proceedings by any governmental agency.
Labor Relations: The Company has agreements with the
International Brotherhood of Electrical Workers for its 946
unionized employees, representing production and maintenance
employees, customer relations representatives, service workers
and clerical employees, excluding persons in managerial,
professional or supervisory positions, which agreements were
renegotiated effective July 1, 1991 and continue through June 30,
1994. The agreements provide for a general wage increase of
4.5%, effective on each of July 1, 1991, 1992 and 1993, and
certain additional fringe benefits.
EMF: Recently there has been publicity surrounding
electromagnetic fields ("EMF") and harmful health effects
allegedly associated with exposure to EMF. A number of studies
have been conducted in recent years in an attempt to ascertain
what, if any, relationship exists between prolonged exposures to
varying levels of EMF and the development of certain illnesses,
particularly certain types of cancer. It is the Company's
understanding that the results of such studies are inconclusive,
and no causal link between exposure to EMF and adverse health
effects has been found. The Company supports EMF research
efforts through the Empire State Electric Energy Research
Corporation and the Electric Power Research Institute, two
utility industry research associations.
The publicity surrounding EMF has already produced
litigation against a number of utilities across the country
involving claims of personal injury and property damage.
Affiliates:
CH Resources, Inc.: CH Resources, Inc., a wholly-
owned subsidiary of the Company, held a participation interest in
a Gulf Coast gas exploration joint venture which interest was
disposed of in 1992. Currently, CH Resources, Inc. has no
interests in any properties.
Central Hudson Enterprises Corporation: Central
Hudson Enterprises Corporation, a wholly-owned subsidiary of the
Company, is engaged in the business of conducting energy audits
and providing services related to the design, financing,
installation and maintenance of energy conservation measures and
cogeneration systems for private businesses, institutional
organizations and governmental entities.
Central Hudson Cogeneration, Inc.: Central Hudson
Cogeneration, Inc., a wholly-owned subsidiary of the Company,
participates in cogeneration, small hydro and alternate energy
production projects, directly or through one or more of its
affiliates.
Phoenix Development Company, Inc. and Greene Point
Development Corporation: These corporations, each a wholly-owned
subsidiary of the Company, were established to hold real property
for the future use of the Company. Currently, such subsidiaries
either do not hold real property or hold property of little
market value.
Executive Officers of the Company
The names of the officers of the Board of Directors and
the executive officers of the Company during 1993, their
positions held and business experience during the past five (5)
years and ages at December 31, 1993 are as follows:
Principal Occupation or
Employment and Positions
Name of Officer and and Offices with the Company
Position Held during the past five (5) years Age
Officers of the Board
John E. Mack, III, Present positions; except 59
Chairman of the Board President and Chief Executive
and Chief Executive Officer of the Corporation prior
Officer; Chairman of to April 1989
the Executive and
Retirement Committees
Jack Effron, Present position since April 1993; 60
Chairman of Committee President of Efco Products, a
on Compensation and bakery ingredients corporation;
Succession member of the St. Francis Health
Care Foundation; Chairman of the
Chief Executive's Network for
Manufacturing of the Council of
Industry of Southeastern New York,
March 1991; President of the Council
of Industry of Southeastern New
York, 1989 - March 1991
Richard H. Eyman, Present position; retired January 1, 63
Chairman of Committee 1992 as Senior Vice President,
on Audit Brouillard Communications Division
of J. Walter Thompson Co., an
advertising agency
Howard C. St. John, Present positions; Chairman of the 70
Chairman of Committee Board of Ulster Savings Bank;
on Finance and Vice lawyer, member of the law firm of
Chairman of the Board Howard C. St. John & Associates -
both of Kingston, N.Y.; Chairman of
the Board of Stavo Industries, a
liquid filtration business in
Kingston, N.Y.
<PAGE>
Principal Occupation or
Employment and Positions
Name of Officer and and Offices with the Company
Position Held during the past five (5) years Age
Executive Officers of the Company
Paul J. Ganci, Present positions since April 1989; 55
President and Chief Senior Vice President - Operations,
Operating Officer prior to April 1989
John F. Drain, Present position since April 1993; 61
Vice President - Vice President - Controller and
Finance and Treasurer, May 1990 - April 1993;
Controller Treasurer, May 1988 - May 1990
Carl E. Meyer, Present position since November 46
Vice President - 1992; Vice President - Engineering
Customer Services and Production, May 1988 - November
1992
Allan R. Page, Present position since November 46
Vice President - 1992; Vice President - Customer
Corporate Services Services, May 1988 - November 1992
Joseph J. DeVirgilio, Present position since May 1990; 42
Jr., Vice President - Assistant Vice President - Human
Human Resources and Resources, May 1988 - May 1990
Administration
Ronald P. Brand, Present position since November 55
Vice President - 1992; Assistant Vice President -
Engineering and Engineering, January 1990 - November
Environmental Affairs 1992; Manager of Electric Engineering
Services, 1988 - January 1990
Gladys L. Cooper, Present position; leave of absence 42
Secretary for educational purposes since
August 1992
Steven V. Lant, Present positions since April 1993; 36
Treasurer and Assistant Treasurer and Assistant
Assistant Secretary Secretary, December 1991 - April
1993; Assistant Treasurer, November
1990 - November 1991; Manager, Costs,
Rates and Forecasts, 1988 - October
1990
Principal Occupation or
Employment and Positions
Name of Officer and and Offices with the Company
Position Held during the past five (5) years Age
Executive Officers of the Company - (Continued)
Herbert M. Round, Present position since April 1993; 59
Assistant Vice Assistant Vice President - Nuclear
President Operations and Energy Control,
April 1991 - April 1993; Assistant
Vice President - Nuclear Operations,
Energy Control and Operations
Services, May 1988 - April 1991
Benon Budziak, Present position since November 61
Assistant Vice 1992; Manager - Fossil Production,
President - Production May 1988 - November 1992
Ellen Ahearn, Present position since August 39
Assistant Secretary 1992; Internal Auditing Manager,
and Internal May 1989 - present; Financial Records
Auditing Manager Supervisor, June 1988 - May 1989
There are no family relationships existing among any of
the executive officers of the Company.
Each of the above executive officers is elected or
appointed annually by the Board of Directors.
Item 2 - PROPERTIES
Electric
General: The net capability of the Company's electric
generating plants as of December 31, 1993, the net output of each
plant for the year ended December 31, 1993, and the year each
plant was placed in service or rehabilitated are as set forth
below:<PAGE>
Electric Net Capability 1993 Unit
Generating Year Placed (MW)* Net Output
Plant Type of Fuel In Service Summer Winter (MWh)
Danskammer Residual Oil, Natural 1951-1967 496.5 507.0 1,990,979
Plant Gas and Coal
Roseton Plant Residual Oil 1974 422.1 426.0 1,072,734
(35% share) and Natural Gas
Neversink Water 1953 23.5 23.0 64,028
Hydro Station
Dashville Water 1920 3.0 3.9 11,880
Hydro Station
Sturgeon Pool Water 1924 14.6 15.3 53,863
Hydro Station
High Falls Water 1986 1.2 2.7 5,342
Hydro Station
Coxsackie Kerosene or 1969 20.0 24.0 5,609
Gas Turbine Natural Gas
So. Cairo Kerosene 1970 18.0 24.0 820
Gas Turbine
Nine Mile 2 Nuclear 1988 94.0 95.0 645,036
Plant (9% share)
------- ------ ---------
Total 1,092.9 1,120.9 3,850,291
* Reflects Company ownership of generation resources and, therefore, does not
include firm purchases or sales.
<PAGE>
The Company entered into a contract with New York State
Electric and Gas Corporation, with a term of May 24, 1993 through
April 29, 1995, for the purchase of energy and capacity of up to
300 MW. During 1993, the Company purchased 920,000 MWh of energy
under this contract.
The Company has a contract with PASNY which entitles
the Company to 49 MW net capability from the Blenheim-Gilboa
Pumped Storage Hydroelectric Plant through 2002.
Since 1975, the Company has purchased capacity in
relatively small amounts from the Fitzpatrick Nuclear Plant of
PASNY, pursuant to a contract which may be terminated by either
party on 12 months' notice. Under such contract, the maximum
capacity which can be purchased during specific periods is 6 MW.
See Item 1, subcaption "Regulation - Alternative
Electric Power Generation," with respect to alternative electric
power generation interconnected with the Company's system.
The Company owns 89 substations having an aggregate
transformer capacity of 4.3 million KVA. The transmission system
consists of 584 pole miles of line and the distribution system of
7,224 pole miles of overhead lines and 783 trench miles of
underground lines.
Load and Capacity: The Company's maximum one-hour
demand within its own territory, for the year ended December 31,
1993, occurred on July 15, 1993 and amounted to 860 MW. The
Company's maximum one-hour demand within its own territory, for
that part of the 1993-1994 winter capability period through March
15, 1994, occurred on January 26, 1994 and amounted to 845 MW.
Based on current projections of peak one-hour demands
for the three-year period comprising the 1994 summer capability
period through the winter capability period of 1996-1997, the
Company estimates that it will have capacity available to satisfy
its projected peak demands plus the estimated reserve generating
capacity requirements which it is required to maintain as a
member of the New York Power Pool ("NYPP"), described below. The
following table sets forth the amounts of any excess capacity by
summer and winter capability periods for such three-year period:
<PAGE>
Excess of Capacity over
Forecasted Peak + Available Peak Plus NYPP
Capability Peak Reserve Capacity Reserve Requirements
Period (MW) (MW)* (MW) (MW) Percent
1994 Summer 840 991 1,092.9 101.9 9.3
1994-95 Winter 760 991 1,152.9 161.9 14.0
1995 Summer 820 968 1,122.9 154.9 13.8
1995-96 Winter 765 968 1,182.9 214.9 18.2
1996 Summer 820 968 1,152.9 184.9 16.0
1996-97 Winter 770 968 1,212.9 251.9 20.8
* Summer period peak plus reserve requirements carry over to the following
winter period.
The foregoing table reflects the following:
(1) reduction in capacity requirements as a result of the Company's Energy
Efficiency Programs described above in Item 1 under the subcaption
"Regulation - Energy Efficiency Programs,"
(2) the decreases in IBM related electric sales and revenues (as described
above in Item 1 under the subcaption "Rates - Rate Proceedings -
Electric and Gas") and
(3) effective with the 1994-1995 Winter - Capability Period, the capacity
represented by the interests in the Roseton Plant proposed to be
purchased by the Company from Niagara Mohawk Power Corporation
("Niagara Mohawk") under the "Amendment" (as described below under
the subcaption "Roseton Plant").
<PAGE>
The Company is a member of the NYPP consisting of the
major investor-owned electric utility companies in the State and
PASNY. The members of the NYPP, by agreement, provide for
coordinated operation of their bulk power electric systems with a
view to the use of the most economical source of electricity, for
the maintenance of a reserve margin equal to at least 18% of each
member's forecasted peak load and for the sale and interchange of
electric generating capability and energy among such members.
The members of the NYPP also provide for the cooperative
development of long-range plans for the expansion on an
integrated basis of the bulk power supply system for New York
State, compatible with environmental standards, and appropriately
related to interstate and international capacity and reliability
considerations.
Roseton Plant: The Roseton Plant is located in the
Company's franchise area at Roseton, New York, and is owned by
the Company, Con Edison and Niagara Mohawk as tenants-in-common.
The Roseton Plant, placed in commercial operation in 1974, has a
generating capacity of 1,200 MW consisting of two 600 MW
generating units, both of which are capable of being fired either
by residual oil or natural gas (see subcaption below entitled
"Gas - Sufficiency of Supply and Future Gas Supply"). The
Company is acting as agent for the owners with respect to
operation of the Roseton Plant. Generally, the owners share the
costs and expenses of the operation of such Plant in accordance
with their respective ownership interests.
In March 1993, Unit No. 2 of the Roseton Plant went out
of service because of extensive damage to that Unit and related
facilities caused by fire. No injury to personnel was involved.
Some non-hazardous mineral oil spillage also occurred into a
tributary of the Hudson River. No customer service interruptions
occurred. Appropriate governmental agencies, including the PSC,
the U.S. Coast Guard and the NYSDEC were contacted. Unit No. 1
of the Roseton Plant was taken out of service due to less
extensive damage to that Unit. Unit No. 1 was returned to
service in May 1993 and Unit No. 2 was returned to service in
December 1993. Total restoration costs are approximately $32
million, most of which will be recovered through insurance.
Pursuant to an agreement among the cotenant owners of
the Roseton Plant, dated October 1, 1968, and thereafter amended
("Roseton Plant Agreement"), Con Edison owns 40% of such Plant,
Niagara Mohawk owns 25% of such Plant and the Company owns 35% of
such Plant, all as tenants-in-common. The Company, under the
Roseton Plant Agreement, has an option to purchase the interests
of Con Edison and Niagara Mohawk in the Roseton Plant in December
2004 at a purchase price based upon fair value within specified
limits of amortized costs. The exercise of such option by the
Company is subject to approval by the PSC and may be subject to
the statutory standards and/or competitive bidding requirements
described in Item 1 above under the caption "Regulation - Least-
Cost Generation Supply."
In order to satisfy then anticipated requirements for
additional generating capacity starting in the mid-1990s, in 1987
the Company and Niagara Mohawk entered into an agreement
("Amendment") which revises the option of the Company to purchase
the interest of Niagara Mohawk in the Roseton Plant under the
Roseton Plant Agreement. The Company's option to buy Con
Edison's interest in the Roseton Plant is not affected by the
Amendment. The Amendment is subject to PSC approval, and in the
event such approval is not obtained, the Amendment is cancelled
and the parties return to their same positions under the Roseton
Plant Agreement.
Pursuant to the Amendment, Niagara Mohawk will sell to
the Company a 2.5% interest in the Roseton Plant on December 31,
1994 and on each succeeding December 31, through and including
December 31, 2003, which will constitute all of Niagara Mohawk's
interest in the Roseton Plant. In exchange, Niagara Mohawk will
have the option to repurchase from the Company up to a 25%
interest in the Roseton Plant in December 2004. The prices for
the purchases will be based on the depreciated book cost of the
Roseton Plant assuming straight-line amortization to provide for
a fully amortized facility as of December 31, 2009. Pursuant to
the Amendment, the Company has the option to repurchase Niagara
Mohawk's remaining interest in the Roseton Plant when such Plant
reaches the end of its assumed physical life as agreed upon by
the parties to the Amendment.
In July 1988, the PSC established a proceeding to
consider a joint petition filed by the Company and Niagara Mohawk
requesting the PSC to approve the transfers of interests in the
Roseton Plant contemplated by the Amendment. In May 1989, the
Company and the PSC Staff reached a Stipulation Agreement
indicating that, giving consideration to expected demand-side
management activities, the proposed transfers of interest of the
Roseton Plant under the Amendment were one alternative which
would meet the Company's future needs for power. The PSC has not
yet acted on such petition. The Company continues to consider
other alternatives to the Amendment.
The 345 Kv transmission lines and related facilities to
connect the Roseton Plant with other points in the system of the
Company and with the systems of Con Edison and Niagara Mohawk to
the north and west of such Plant are 100%-owned by the Company.
The share of each of the parties in the output of the Roseton
Plant is transmitted over these lines pursuant to a certain
transmission agreement relating to such Plant, which provides,
among other things, for compensation to the Company for such use
by the other parties. In addition, the Company has contract
rights which entitle the Company to the lesser of 300 MW or one
quarter of the capacity in a 345 Kv transmission line owned by
PASNY which connects the Roseton Plant with a Con Edison
substation to the east of such Plant in East Fishkill, New York.
In exchange for these rights, the Company agreed to provide PASNY
capacity in the 345 Kv transmission lines the Company owns from
the Roseton Plant, to the extent it can do so after satisfying
its obligations to Con Edison and Niagara Mohawk.
Nine Mile 2 Plant:
General: Unit No. 2 of the Nine Mile Point Nuclear
Station ("Nine Mile 2 Plant" or "Plant") is located in Oswego
County, New York, and is operated by Niagara Mohawk. The Nine
Mile 2 Plant is owned as tenants-in-common by the Company (9%
interest), Niagara Mohawk (41% interest), New York State Electric
& Gas Corporation (18% interest), Long Island Lighting Company
(18% interest) and Rochester Gas and Electric Corporation (14%
interest). The output of the Nine Mile 2 Plant, which has a
nominally rated net capability of 1,080 MW, is shared, and the
operating expenses of and capital additions to the Plant are
allocated to the cotenants, in the same proportions as the
cotenants' respective ownership interests.
An Operating Agreement for the operation of the Plant
was entered into by the Nine Mile 2 Plant cotenants effective
January 1, 1993, and the PSC approved said Operating Agreement on
February 24, 1994. Under that Agreement, Niagara Mohawk operates
the Nine Mile 2 Plant, but all five owners shared certain policy,
budget and managerial oversight functions. The fixed term of
such Operating Agreement is 24 months from its effective date
and, unless terminated on the expiration of such 24 month period,
continues, subject to termination on six months' notice.
In August 1989, the non-operating cotenants of the Nine
Mile 2 Plant entered into an agreement for consulting services
with Management, Analytical & Technical Services, Inc. ("MATS")
concerning the monitoring and assessment of the operation of the
Plant, including the provision of technical advice, with the
objective of improving the operation of the Plant. Pursuant to
such agreement, MATS is acting as the on-site representative of
the non-operating cotenants.
Operational Matters:
NRC and INPO Monitoring: On September 28, 1993,
the Nuclear Regulatory Commission ("NRC") issued its latest
systematic assessment of licensee performance ("SALP") review of
the Nine Mile Point Nuclear Station for the period May 24, 1992
to August 14, 1993 ("1992/93 SALP Report"). The Nine Mile Point
Nuclear Station is comprised of Units No. 1 and No. 2, Unit No. 1
being located adjacent to the Nine Mile 2 Plant and owned and
operated solely by Niagara Mohawk and Unit No. 2 being the Nine
Mile 2 Plant. The 1992/93 SALP Report, conducted under the
revised SALP process that was implemented by the NRC on July 19,
1993, rates licensee performance in four functional areas:
Operations, Maintenance, Engineering and Plant Support.
Overall, the NRC indicated that it continues to see
improved performance at the Nine Mile Point Nuclear
Station. According to the NRC, Niagara Mohawk's
management demonstrated a proactive and proper safety
perspective and excellent oversight, control and
involvement in and support of activities at such
Station. Due to the change in the NRC's revised SALP
process, direct comparisons to previous SALP reports
are not available in all areas.
Operations was rated Category 2 ("good"), which was the
same rating as on the prior SALP Report (covering the
period April 1991 through May 23, 1992).
Maintenance was rated Category 2 ("good"), up from
Category 2 "with a declining trend" in said prior SALP
Report.
Engineering was rated Category 1 ("excellent"), up from
Category 2 in said prior SALP Report.
Plant Support was rated Category 2 ("good"). Plant
Support is a new functional area covering all
activities related to plant support functions,
including Radiological Controls, Emergency
Preparedness, Security, Chemistry, Fire Protection and
House Keeping Controls.
The Institute of Nuclear Power Operations ("INPO"), an
industry sponsored oversight group, conducted evaluations of the
Nine Mile Point Nuclear Station during the weeks of May 17 and
24, 1993. Niagara Mohawk informed the Company that the INPO
Report was generally favorable, however, there were some areas in
need of improvement. Niagara Mohawk reports that it has
responded to INPO with its intent to correct any problem areas.
INPO evaluations are conducted at twelve (12) to eighteen (18)
month intervals.
Radioactive Waste: For a discussion of the low-level
and high-level radioactive waste management programs at the Nine
Mile 2 Plant, see the caption "Radioactive Waste" in Note 2 to
the Company's 1993 Financial Statements appearing on pages 46 and
47 of Exhibit 13 hereto, which caption is incorporated herein by
reference.
Refueling Outage: A scheduled refueling outage for the
Nine Mile 2 Plant commenced on October 2, 1993. Such refueling
outage was completed on November 29, 1993 and full plant output
was achieved on December 3, 1993.
Gas
General: The Company's gas system consists of 156
miles of transmission pipelines and 923 miles of distribution
pipelines.
Current Gas Supply: During 1993, natural gas was
available to firm gas customers at a price competitive with that
of alternative fuels. As compared to 1992, in 1993, firm retail
gas sales, normalized for weather, increased by 1% and the
average number of firm gas customers increased by 1.9%. Sales to
interruptible customers decreased 37.4% in 1993 as compared to
1992.
For information on the Company's gas suppliers and gas
storage capability, see the caption "Natural Gas Supply" in Note
9 to the Company's 1993 Financial Statements appearing on pages
63 and 64 of Exhibit 13, which caption is incorporated herein by
reference.
For the year ended December 31, 1993, the total amount
of gas purchased from all sources was 18,293,178 Mcf., which
includes 1,940,214 Mcf. purchased directly for use as a boiler
fuel at the Roseton Plant.
The Company owns two propane-air mixing facilities for
emergency and peak shaving purposes located in Poughkeepsie and
in Newburgh, New York. Each facility is capable of supplying
8,000 Mcf. per day with propane storage capability adequate to
provide maximum facility sendout for up to three consecutive
days.
Sufficiency of Supply and Future Gas Supply: The peak
daily demand for natural gas by the Company's customers for the
year ended December 31, 1993 occurred on February 6, 1993, and
amounted to 100,774 Mcf. The Company's peak-day gas capability
in 1993 was 116,865 Mcf. The peak daily demand for natural gas
by the Company's customers for that part of the 1993-1994 heating
season through March 15, 1994, occurred on January 27, 1994 and
amounted to 113,033 Mcf.
Other: In late 1985, FERC instituted a rule which
permits non-discriminatory access to the pipeline facilities of
interstate gas pipeline transmission companies subject to the
jurisdiction of FERC under the Natural Gas Act. This rule allows
access to such pipelines by the pipeline transmission company's
customers enabling them to transport gas purchased directly from
third parties and spot sources through such pipelines. Such
access, moreover, also permits industrial customers of gas
distribution utilities to connect directly with the pipeline
transmission company and to contract directly with the pipeline
transmission companies to transport gas, thereby by-passing the
distribution utility. In 1985, the PSC issued its Opinion and
Order requiring New York State distribution gas utilities to
transport customer-owned gas through its facilities upon request
of a customer. Except in the Towns of Carmel, Pleasant Valley,
New Baltimore, Coxsackie, Athens, Milan, Clinton, LaGrange and
Unionvale, currently, no interstate pipeline transmission
companies are located in areas where the Company provides retail
gas service.
For a discussion of FERC Order 636, issued in 1992, and
thereafter amended, which requires pipeline gas suppliers to
unbundle natural gas sales service from transportation and
storage service, see the caption "Natural Gas Supply" in Note 9
to the Company's 1993 Financial Statements appearing on pages 63
and 64 of Exhibit 13 hereto, which caption is incorporated herein
by reference.
The Company is a member of the New York Gas Group
("NYGAS"), a voluntary association of utilities providing gas
service in New York State. The purpose of NYGAS is to achieve,
by cooperative action among gas distributors, greater efficiency
in meeting present demands for gas service in New York State and
to develop state-wide gas sufficiency to support future economic
growth throughout the State.
Other Matters
The Danskammer Plant and the Roseton Plant and all of
the other principal generating plants and important property
units of the Company are held by it in fee simple, except (1)
certain rights-of-way, and (2) a portion of the property used in
connection with the hydroelectric plants of the Company
consisting of flowage or other riparian rights. The Company's
present interests in the Roseton Plant and the Nine Mile 2 Plant
are owned as undivided interests as a tenant-in-common with the
other utility owners thereof. Certain of the properties of the
Company are subject to rights-of-way and easements which do not
interfere with the Company's operations. In the case of certain
distribution lines, the Company owns only a part interest in the
poles upon which its wires are installed, the remaining interest
being owned by telephone companies. Certain electric
transmission facilities owned by others are used by the Company
pursuant to long-term contractual arrangements.
All of the physical properties of the Company (other
than property, such as material and supplies, excluded in the
Company's Mortgage) and its franchises are subject to the lien of
the Company's Mortgage under which all of its Mortgage Bonds are
outstanding. Such properties are from time to time subject to
liens for current taxes and assessments which it is the Company's
practice to pay regularly as and when due.
The Company's properties have been well maintained and
are in good operating condition.
During the three-year period ended December 31, 1993,
the Company made gross property additions of $186.7 million and
property retirements and adjustments of $35.8 million, resulting
in a net increase (including Construction Work in Progress) in
utility plant of $150.9 million, or 12.5%
Item 3 - LEGAL PROCEEDINGS
Asbestos Litigation
The Company, as of March 1, 1994, is a defendant or
third-party defendant in 189 asbestos lawsuits commenced in New
York state and federal courts. Since 1987, and as of March 1,
1994, the Company, along with many other parties, has been a
defendant or third-party defendant in a total of 439 such
asbestos lawsuits (including the 189 cases which are currently
pending).
The plaintiffs in these lawsuits typically allege that
they were injured by exposure to airborne asbestos fibers while
working at a Company job site, either as an employee of an
independent contractor or as an employee of the Company, when
asbestos-containing products were being installed, maintained,
renovated or removed. Typically, each plaintiff seeks
$10,000,000 in compensatory damages, plus punitive damages, from
all defendants.
Of the 439 cases that have been brought against the
Company, only 189 remain pending against the Company, as of March
1, 1994, as a result of the following developments: (1) the
Company negotiated voluntary dismissals in 22 cases and won
summary judgment dismissals in 9 cases; (2) 114 third-party
claims were extinguished with respect to the Company when the
third-party plaintiff, Owens-Corning Fiberglass ("OCF") settled
the cases with the plaintiffs; and (3) the Company settled 105
cases for an amount that in the aggregate is not material to the
Company's financial condition.
Four of the pending cases were commenced against the
Company and numerous other defendants in the United States
District Court for the Southern District of New York by
complaints dated March 26, 1991, June 13, 1991 and February 19,
1992. All four federal court plaintiffs allege to have been
injured by exposure to asbestos fibers while working as an
employee of an independent contractor at a Company facility. In
two of the cases, the Company was joined as a third-party
defendant by OCF. The third-party complaint alleges that the
Company is responsible to OCF for the amount of any recovery
obtained by the plaintiffs against OCF in each lawsuit. The two
remaining federal court plaintiffs each seek $10,500,000 in
compensatory damages, plus punitive damages.
One hundred eighty-five (185) cases are pending against
the Company in New York State Supreme Court, County of New York.
These cases were commenced against the Company and numerous other
defendants by complaints dated March 6, 1990, August 12, 1991,
October 21, 1991, December 12, 1991, January 3, 1992, May 11,
1992, May 21, 1992, July 10, 1992, August 24, 1992, October 5,
1992, October 6, 1992, October 27, 1992, December 21, 1992,
December 22, 1992, January 3, 1993, February 23, 1993, March 5,
1993, May 28, 1993, July 1, 1993, August 2, 1993, November 1,
1993, November 26, 1993, December 1, 1993, January 6, 1994,
January 12, 1994, January 24, 1994 and January 25, 1994. All of
these cases involve persons who were allegedly exposed to
asbestos fibers while working as employees of independent
contractors at Company facilities. One hundred seventy-seven
(177) of these plaintiffs seek $10,000,000 in compensatory
damages, plus punitive damages. Seven (7) plaintiffs seek
$10,500,000 in compensatory damages, plus punitive damages. One
(1) plaintiff seeks $27,000,000 in compensatory damages, plus
punitive damages.
In summary, as of March 1, 1994, the Company is a
defendant or third-party defendant in 189 asbestos lawsuits.
Although the Company is presently unable to assess the validity
of these 189 lawsuits, based on information known to the Company
at this time, including its experience in settling asbestos cases
and in obtaining dismissals of asbestos cases, the Company
believes that the costs to be incurred in connection with these
lawsuits will not have a material adverse effect on the Company's
financial position. However, if the Company were ultimately held
liable under these lawsuits and insurance coverage were not
available, the cost thereof could have a material adverse effect
(a reasonable estimate of which cannot be made at this time) on
the financial condition of the Company if the Company could not
recover all or a substantial portion thereof through rates.
Environmental Litigation
In December 1980, several utilities, including the
Company, three environmental groups and the NYSDEC, among others,
entered into an agreement ("Settlement Agreement") which relates
to compliance with environmental matters concerning the
operations of certain electric generating stations located along
the Hudson River, including the Roseton Plant. The Settlement
Agreement expired on May 9, 1991. Effective May 9, 1991, such
utilities and the NYSDEC entered into an interim agreement which
relates to certain environmental aspects of the operation of such
plants, pending future developments.
In September, 1991, Natural Resources Defense Council,
Inc., the Hudson River Fisherman's Association and Scenic Hudson,
Inc. commenced an action in the Supreme Court of the State of New
York, County of Albany, against the NYSDEC, Con Edison, PASNY,
Orange and Rockland Utilities, Inc. and the Company. This
lawsuit challenged, as arbitrary and capricious, an abuse of
discretion and a violation of lawful procedure, the determination
of the NYSDEC to enter into said interim agreement, alleging,
among other things, that it would result in less stringent
regulatory standards than set forth in the SPDES permits
applicable to, among others, the Roseton Plant, without regard to
the applicable SPDES permit modification procedures. The lawsuit
also sought a declaratory judgment that the existing SPDES
permits (which expired October 1, 1992) include all covenants
contained in the expired Settlement Agreement which restrict
operations at said plants, including the Roseton Plant.
On March 23, 1992, the Court approved an agreed-upon
Consent Order which resolved this action. Such Consent Order
provides for certain operating restrictions at the Roseton Plant
relating to the use of river water for plant cooling purposes,
which have not imposed, and are not expected to impose, material
additional costs on the Company. Such Consent Order remains in
effect until September 1, 1994 (originally due to expire on
September 1, 1993, but extended for one year by agreement by the
parties thereto, as approved by the Court on August 5, 1993), or
until renewal SPDES permits for said plants, including the
Roseton Plant, are finally effective, whichever first occurs.
For a description of the pending NYSDEC proceeding involving
renewal of the SPDES permit for the Roseton Plant (which expired
on October 1, 1992), see Item 1 above under the subcaption
"Environmental Quality - Water."
IBM Litigation
By complaint, dated July 28, 1988, the International
Business Machines Corporation ("IBM") commenced a lawsuit in the
Supreme Court of the State of New York, County of Dutchess,
against the Company and other unnamed defendants. IBM is the
largest electric customer of the Company (see in Item 1 above,
subcaption entitled "Generally"). In such complaint IBM alleges
that negligence, gross negligence and breach of contract on the
part of the defendants resulted in a power outage and electrical
loss on August 2, 1985, whereby IBM sustained damages in the
amount of $470,740. The Company filed its answer, denying
liability and cross complaint on September 26, 1988. Currently,
discovery is underway. The Company denies liability in this
matter; if, however, it were held to be so liable, the amount of
such damages would not have a material adverse effect on the
financial condition of the Company.
Catskill Incident
In November 1992, an explosion in a dwelling in the
Company's gas service territory in Catskill, New York resulted in
personal injuries, including the death of an occupant, and
property damage. The National Transportation Safety Board
("NTSB"), the Office of Pipeline Safety ("OPS," a part of the
Research and Special Program Administration of the U.S.
Department of Transportation) and the PSC investigated this
incident.
On January 27, 1993, the Staff of the PSC issued a
report which attributed the cause of this incident to the
Company's alleged violations of the PSC's gas safety regulations
and the Company's operating procedures. Based upon such report,
the PSC approved the commencement of a penalty proceeding against
the Company. The PSC Staff, based on its interpretation of the
New York Public Service Law, sought a penalty of up to
approximately $8.25 million.
The Company and the staff of the PSC reached an
Agreement in connection with the PSC's threatened penalty
proceeding arising out of such explosion, which Agreement expires
on December 31, 1998. The Agreement provides that the Company
will not pay any penalties or fines in connection with the
Catskill incident.
Under the terms of such Agreement, which was approved
by the PSC, by Order issued and effective January 7, 1994, the
Company has established a Quality Control Program to assure the
safe and efficient operation of the Company's Gas System.
The Company also will establish, under the Agreement,
an expanded training program, create four training centers and
implement an expanded program to evaluate and replace cast iron
and steel pipeline facilities. Shareholders will contribute the
following amounts under the Agreement: an aggregate of $500,000
in 1994 toward the cost of the pipeline replacement program and
the cost of the creation of the training centers; in each of 1995
and 1996, $500,000 toward the cost of such pipeline replacement
program; and in 1997 from $0 to $500,000 toward the cost of such
pipeline replacement program, depending on the Company's
completion of certain tasks by specified dates.
As a result of an investigation of the Catskill
incident conducted by the OPS pursuant to the Natural Gas
Pipeline Safety Act, the OPS issued a Notice of Proposed
Violation and Proposed Civil Penalty in December 1992. By Final
Order, issued December 2, 1993, the OPS found that the Company
failed to submit a telephonic report of the Catskill incident to
the DOT at the earliest practicable moment following discovery of
such incident as required by applicable regulations. The Company
did notify the DOT of the Catskill incident by telephone
approximately nine hours and forty-five minutes after such
incident. The OPS assessed the Company a civil penalty of
$5,000, which the Company elected not to appeal.
The NTSB in its investigation of the Catskill incident,
by letter dated August 23, 1993, determined that the probable
cause of such incident was the Company's failure to follow its
procedures and the PSC's code for the immediate replacement of
exposed cast iron pipe. The NTSB also recommended that the
Company undertake a certain program to ensure continuity of
supervisory responsibility for the timely and effective
verification of the safety integrity of exposed cast iron pipe
and to identify and replace in a timely manner cast iron piping
systems that may threaten public safety. By letter, dated
October 22, 1993, the Company responded that it would undertake
such a program.
Two lawsuits have been commenced against the Company
alleging personal injuries and wrongful death arising out of such
incident as follows:
By complaint, dated February 2, 1994, Carl Fatzinger,
as executor of the estate of Mildred Fatzinger, and Virginia
Fatzinger commenced an action in the Supreme Court of the State
of New York, Greene County, against the Company and two other
defendants. The complaint alleges that Mildred and Virginia
Fatzinger were residents of the dwelling in which said explosion
occurred and that, as a result of said explosion, Mildred
Fatzinger was killed, Virginia Fatzinger received serious
personal injuries, and the Fatzingers suffered extensive damage
to their property. The complaint seeks an unspecified amount of
compensatory and punitive damages against the Company based on
theories of negligence, absolute liability and gross negligence.
By complaint, dated October 18, 1993 and filed in the
Supreme Court of the State of New York, Greene County, Frank
Reyes commenced an action against the Company for unspecified
personal injuries and property damage alleged to have been caused
by said explosion. Mr. Reyes was a nearby resident at the time
of said explosion. The complaint seeks $2,000,000 in
compensatory damages and $2,000,000 in punitive damages from the
Company, based on theories of negligence and gross negligence,
respectively.
The Company is investigating these claims and presently
has insufficient information on which to predict their outcome.
The Company believes that it has adequate insurance to cover any
compensatory damages that might be awarded. The Company's
insurance, however, does not extend to punitive damages. If
punitive damages were ultimately awarded in either or both of
these lawsuits, such award(s) could have a material adverse
effect on the financial condition of the Company if the Company
could not recover all or a substantial portion thereof through
rates. At this time the Company can make no prediction as to any
other litigation which may arise out of the Catskill incident.
Income Tax Assessments: Reference is made to the
subcaption "Tax Matters - Assessments" in Note 9 to the Company's
1993 Financial Statements, on page 67 of Exhibit 13, for a
discussion of the examination by the Internal Revenue Service
("IRS") of the Company's federal income tax returns for 1987 and
1988, which subcaption is incorporated herein by reference. On
or about March 7, 1994, the Company received letters from the
IRS, arising out of this examination, proposing net increases in
the Company's federal tax liability of approximately $16 million.
Such letters do not represent a notice of deficiency from the
IRS, and the Company has received no notice of deficiency regard-
ing these taxable years from the IRS. According to such letters,
the Company has the option of: (i) responding within 30 days from
the date of the letters to agree or disagree with the proposed
adjustments and request a conference with the Regional Office of
Appeals of the IRS, or (ii) seeking relief in the United States
Tax Court. The Company intends to respond (in either a 30-day
period or, pending the granting by the IRS of an extension, a 60-
day period) to these letters, challenge the proposed adjustments,
and request a conference with said Office of Appeals. The
Company can make no prediction at this time as to the ultimate
resolution of these proposed adjustments. However, the Company
believes that a significant portion of any final assessments
would be recovered in rates. And, the Company believes that the
amount of any final assessments, not recovered in rates, would
not have a material adverse effect on the financial condition of
the Company.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matter was submitted to a vote of security holders
during the fourth quarter of the Company's fiscal year covered by
this Report.
PART II
Item 5 - MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information set forth under the subcaption "Common
Stock Dividends and Price Ranges" in Management's Discussion and
Analysis of Financial Condition and Results of Operations, on
page 29 of Exhibit 13 hereto, is incorporated herein by
reference.
Pursuant to applicable statutes and its Certificate of
Incorporation, the Company may pay dividends on shares of
Preferred and Common Stock only out of surplus.
The Company has an Automatic Dividend Reinvestment and
Stock Purchase Plan which permits holders of the Company's Common
Stock who elect to participate in such Plan to reinvest dividends
and also permits participants to make additional cash investments
in the Company's Common Stock. Shares can be acquired directly
from the Company or on the open market at the election of the
Company. For a complete description of said Plan, reference is
made to the Prospectus, dated January 5, 1993, which is part of
the Company's Registration Statement on Form S-3 (Registration
No. 33-56760), relating to 3,550,000 shares of Common Stock
registered under the Securities Act of 1933 ("1933 Act") for
issuance under said Plan.
The Company's Customer Stock Purchase Plan provides the
Company's residential customers and members of their families
residing with them who are residents of New York State with a
method of purchasing shares of the Company's Common Stock
directly from the Company. Shares can be acquired directly from
the Company or on the open market at the election of the Company.
For a complete description of said Plan, reference is made to the
Prospectus, dated January 5, 1993, which is part of the Company's
Registration Statement on Form S-3 (Registration No. 33-55764),
relating to 780,000 shares of Common Stock registered under the
1933 Act for issuance under said Plan.
The Company also maintains for its employees an
Employee Stock Purchase Plan, which provides for the purchase of
the Company's Common Stock on the open market.
Item 6 - SELECTED FINANCIAL DATA
The information required hereunder is incorporated
herein by reference to the material on pages 4 and 5 of Exhibit
13 hereto.
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required hereunder is incorporated
herein by reference to the material appearing on pages 6 through
29 of Exhibit 13 hereto.
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
The Company's 1993 Financial Statements, together with
the report thereon of Price Waterhouse, dated January 28, 1994,
appearing on pages 30 through 72 of Exhibit 13 hereto, are
incorporated by reference in this Annual Report on Form 10-K.
The Financial Statement Schedules incorporated by reference as
part of this Annual Report on Form 10-K should be read in
conjunction with the Company's 1993 Financial Statements.
Financial Statement Schedules not included with this Form 10-K
Annual Report have been omitted because they are not applicable
or the required information is shown in the Company's 1993
Financial Statements.
The Company's 1993 Financial Statements include the
accounts of the Company and its subsidiaries. All intercompany
balances and transactions have been eliminated. The Company's
subsidiaries are wholly-owned landholding, cogeneration and
energy management companies. Due to immateriality, the net
income of the Company's subsidiaries is reflected in the
Company's Consolidated Statement of Income as Other Non-operating
Income - net; such Consolidated Statement of Income is contained
on pages 36 and 37 of Exhibit 13 hereto.
(b) Supplementary Financial Information
The supplementary financial information specified by
Item 302 of Regulation S-K is found under the caption "Selected
Quarterly Financial Data (Unaudited)," of the Company's 1993
Financial Statements on page 73 of Exhibit 13 hereto, which
caption is incorporated herein by reference pursuant to Item 8
(a) above.
(c) Other Financial Statements and Schedules
Other financial statements and schedules required under
Regulation S-X are filed pursuant to Item 14 of this Report.
Item 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY
The information with respect to the Directors of the
Company required hereunder is incorporated by reference to the
caption "Election of Directors" in the Company's definitive proxy
statement, dated February 25, 1994, to be used in connection with
its Annual Meeting of Shareholders to be held on April 5, 1994,
which proxy statement has previously been submitted to the
Securities and Exchange Commission pursuant to that Commission's
Regulation S-T.
The information with respect to the executive officers
of the Company required hereunder is incorporated by reference to
Item 1 of this Report, under the caption "Executive Officers of
the Company."
Item 11 - EXECUTIVE COMPENSATION
The information required hereunder is incorporated by
reference to the caption "Executive Compensation" in the
Company's definitive proxy statement, dated February 25, 1994, to
be used in connection with its Annual Meeting of Shareholders to
be held on April 5, 1994.
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required hereunder is incorporated by
reference to the caption "Security Ownership" in the Company's
definitive proxy statement, dated February 25, 1994, to be used
in connection with its Annual Meeting of Shareholders to be held
on April 5, 1994.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
There were no relationships or transactions of the type
required to be described by this Item.
PART IV
Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements
See subpart 1 of Index to Financial Statements on
page F-1 of this Report.
2. Financial Statement Schedules
See subpart 2 of Index to Financial Statements on
page F-1 of this Report.
3. Exhibits
Incorporated herein by reference to the Exhibit
Index beginning on page E-1 of this Report. Such Exhibits
include the following management contracts or compensatory plans
or arrangements required to be filed as an Exhibit pursuant to
Item 14(c) hereof:
Description in the Exhibit List and Exhibit Nos. for this Report
Directors' Deferred Compensation Plan, effective October 1,
1980. (Exhibit (10)(iii)(1))
Trust Agreement between Registrant and Dutchess Bank & Trust
Company, as trustee, dated as of January 1, 1984, pursuant
to Registrant's Savings Incentive Plan. (Exhibit
(10)(iii)(2))
First Amendment, dated December 31, 1990, to Trust Agreement
between Registrant and The Bank of New York, as successor
trustee, dated as of January 1, 1984, pursuant to
Registrant's Savings Incentive Plan. (Exhibit (10)(iii)(3))
Savings Incentive Plan of Registrant, as restated as of
January 1, 1987, together with Amendments thereto dated
September 23, 1988 and March 17, 1989, December 31, 1990,
January 14, 1991, October 25, 1991, December 11, 1992, July
23, 1993, September 24, 1993, December 17, 1993 and March 3,
1994. (Exhibits (10)(iii)(4, 5, 6, 7, 9, 12, 13, 14 and
16))
Executive Deferred Compensation Plan of the Company,
effective March 1, 1992 together with Amendment thereto
dated December 17, 1993. (Exhibits (10)(iii)(8 and 15))
Retirement Benefit Restoration Plan of the Company,
effective May 1, 1993, together with Amendment thereto dated
July 23, 1993. (Exhibits (10)(iii) (10 and 11))
Executive Incentive Compensation Plan of the Company,
effective January 1, 1993. (Exhibit (10)(iii)(17))
(b) Reports on Form 8-K
During the period October 1, 1993, to the date hereof,
the following Reports on Form 8-K were filed by the Company:
Report, dated October 8, 1993, reporting the issuance
on September 22, 1993, of the Recommended Decision of the PSC
Administrative Law Judge in the PSC proceeding relating to the
Company's request for increased gas and electric rates filed with
the PSC on November 12, 1992.
Report, dated January 5, 1994, reporting (i) the
issuance by the PSC, on December 16, 1993, of an Order
authorizing an increase in the Company's electric base rates and
denying the Company's request for increased base gas rates, all
with respect to the Company's request for increased gas and
electric rates filed with the PSC on November 12, 1992, and (ii)
the return to full service on December 20, 1993 of Unit No. 2 of
the Company's Roseton Electric Generating Station after repair of
damage to such Unit suffered on March 18, 1993.
Report, dated January 24, 1994, reporting (i) the
issuance of an Order of the PSC approving an agreement between
the Company and the Staff of the PSC relating to the PSC's
threatened penalty proceeding arising out of a November 1992
explosion in a dwelling in the Company's gas service territory in
Catskill, New York, (ii) the $5,000 fine assessed by the Office
of Pipeline Safety due to this explosion incident and (iii) the
Company's response to the recommendation of the National
Transportation Safety Board with respect to this explosion
incident.
(c) Exhibits Required by Item 601 of Regulation S-K
Incorporated herein by reference to subpart (a)-3 of
Item 14, above.
(d) Financial Statement Schedules required by Regulation S-X
which are excluded from the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1993
Incorporated herein by reference to subpart 2 of Index
to Financial Statements on page F-1 of this Report.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTRAL HUDSON GAS & ELECTRIC
CORPORATION
By
(John E. Mack, III,
Chairman of the Board
and Chief Executive Officer)
Dated: March 25, 1994
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the following
persons on behalf of the Company and in the capacities and on the
date indicated.
Signature Title Date
(a) Principal Executive
Officer or Officers:
(John E. Mack, III) Chairman of the Board
and Chief Executive
Officer March 25, 1994
(b) Principal Financial
Officer and Principal
Accounting Officer:
(John F. Drain) Vice President -
Finance and March 28, 1994
Controller
(c) Directors:
(L. Wallace Cross) Director March 25, 1994
<PAGE>
SIGNATURES - (Continued)
Signature Title Date
(Jack Effron) Director March 25, 1994
(Richard H. Eyman) Director March 25, 1994
(Frances D. Fergusson) Director March 25, 1994
(Heinz K. Fridrich) Director March 25, 1994
(Edward F. X. Gallagher) Director March 25, 1994
(Paul J. Ganci) Director March 25, 1994
(Charles LaForge) Director March 25, 1994
(John E. Mack, III) Director March 25, 1994
(Howard C. St. John) Director March 25, 1994
(Edward P. Swyer) Director March 25, 1994
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Page(s) in
Exhibit 13
of this Report*
1. Financial Statements
Report of Independent Accountants 30
Consolidated Statement of Retained 31
Earnings for the three years
ended December 31, 1993
Consolidated Balance Sheet at 32-35
December 31, 1993 and 1992
Consolidated Statement of Income for 36-37
the three years ended December 31, 1993
Consolidated Statement of Cash Flows for 38-39
the three years ended December 31, 1993
Notes to Consolidated Financial Statements 40-72
Selected Quarterly Financial Data (unaudited) 73
Page(s) in
Form 10-K
Report of Independent Accountants on F-2
Financial Statement Schedules
Consent of Independent Accountants F-2
2. The Financial Statement Schedules
for the Years 1991, 1992 and 1993
Schedule V - Utility Plant F-3 - F-8
Schedule VI - Accumulated Depreciation F-9 - F-14
and Amortization of
Utility Plant
Schedule VIII - Reserves F-15 - F-17
Schedule IX - Short-Term Borrowings F-18 - F-19
Schedule X - Supplementary Income F-20 - F-21
Statement Information
*Incorporated by reference to the indicated pages of Exhibit
13 to this Report.
F-1<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Central Hudson Gas & Electric Corporation
Our audits of the consolidated financial statements
referred to in our report dated January 28, 1994 appearing on
page 30 of Exhibit 13 of this Annual Report on Form 10-K, (which
report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedules listed on page F-1 of
this Annual Report on Form 10-K. In our opinion, these Financial
Statement Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICE WATERHOUSE
New York, New York
January 28, 1994
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in (i) the
Prospectus constituting part of the Registration Statement, on
Form S-3 (Registration No. 33-56760), relating to Central Hudson
Gas & Electric Corporation's Automatic Dividend Reinvestment and
Stock Purchase Plan, (ii) the Prospectus constituting part of the
Registration Statement, on Form S-3 (Registration No. 33-55764),
relating to Central Hudson Gas & Electric Corporation's Customer
Stock Purchase Plan and (iii) the Prospectus constituting part of
the Registration Statement on Form S-3 (Registration No. 33-
46624), relating to certain debt securities of Central Hudson Gas
& Electric Corporation, of our report dated January 28, 1994
appearing on page 30 of Exhibit 13 to this Annual Report on Form
10-K. We also consent to the incorporation by reference therein
of our report on the Financial Statement Schedules, which appears
above.
PRICE WATERHOUSE
New York, New York
March 25, 1994
F-2
</PAGE>
<PAGE><TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE V
UTILITY PLANT Sheet 1
YEAR ENDED DECEMBER 31, 1993
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Other Changes -
Beginning of Additions Debit Balance at Close
Classifications Period At Cost Retirements (Credit) of Period
<S> <C> <C> <C> <C> <C>
Electric Plant:
Intangible $ 45,519 $ - $ - $ - $ 45,519
Production:
Steam Production 356,614,304 11,923,550 4,651,841 (53,832) 363,832,181
Nuclear Production 295,810,553 2,563,305 70,628 (24,257) 298,278,973
Nuclear Fuel Assemblies 25,989,499 2,209,835 - - 28,199,334
Hydraulic Production 18,683,857 96,866 19,708 - 18,761,015
Other Production 3,752,375 19,747 - - 3,772,122
Transmission 101,063,759 2,450,315 629,063 (1,006) 102,884,005
Distribution 282,385,209 13,475,700 2,290,638 (24,388) 293,545,883
General 2,172,154 150,550 1,953 50,411 2,371,162
Total 1,086,517,229 32,889,868 7,663,831 (53,072) 1,111,690,194
Gas Plant:
Intangible 329,895 112,444 - - 442,339
Production 2,998,643 - - - 2,998,643
Storage - - - - -
Transmission 33,969,383 434,195 8,718 - 34,394,860
Distribution 83,722,761 6,967,776 428,830 (4,586) 90,257,121
General - - - - -
Total 121,020,682 7,514,415 437,548 (4,586) 128,092,963
Common Plant:
Intangible 106,950 - - - 106,950
General 77,762,872 5,821,637 3,264,755 57,658 80,377,412
Total 77,869,822 5,821,637 3,264,755 57,658 80,484,362
Construction Work in Progress 34,930,490 7,810,892 - - 42,741,382
Total Utility Plant $1,320,338,223 $54,036,812 $11,366,134 $ - $1,363,008,901
F-3
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE V
UTILITY PLANT Sheet 2
YEAR ENDED DECEMBER 31, 1993
(Continued)
<FN>
Column E represents transfers and reclassifications as follows: a reclassification of $26,230 from electric steam
production to electric general; a reclassification of $24,181 from electric nuclear production to electric general; a
reclassification of $76 from electric nuclear production to electric transmission; a reclassification of $1,082 from
electric transmission to electric distribution; a transfer to common of $53,072 due to plant previously dedicated to
electric; and a transfer to common of $4,586 due to plant previously dedicated to gas.
F-4
</TABLE>
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE V
UTILITY PLANT Sheet 3
YEAR ENDED DECEMBER 31, 1992
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Other Changes -
Beginning of Additions Debit Balance at Close
Classifications Period At Cost Retirements (Credit) of Period
<S> <C> <C> <C> <C> <C>
Electric Plant:
Intangible $ 45,519 $ - $ - $ - $ 45,519
Production:
Steam Production 347,125,820 11,729,688 2,240,948 (256) 356,614,304
Nuclear Production 296,085,908 1,102,427 1,377,782 - 295,810,553
Nuclear Fuel Assemblies 24,638,196 1,351,303 - - 25,989,499
Hydraulic Production 18,057,401 674,662 48,206 - 18,683,857
Other Production 3,546,645 205,730 - - 3,752,375
Transmission 91,474,798 9,712,223 123,891 629 101,063,759
Distribution 270,095,907 14,485,592 2,195,661 (629) 282,385,209
General 1,961,800 227,885 17,787 256 2,172,154
Total 1,053,031,994 39,489,510 6,004,275 - 1,086,517,229
Gas Plant:
Intangible 329,895 - - - 329,895
Production 2,998,643 - - - 2,998,643
Storage - - - - -
Transmission 19,472,090 14,500,466 5,144 1,971 33,969,383
Distribution 78,410,859 5,779,587 462,764 (4,921) 83,722,761
General - - - - -
Total 101,211,487 20,280,053 467,908 (2,950) 121,020,682
Common Plant:
Intangible 106,950 - - - 106,950
General 65,479,193 19,305,330 7,024,601 2,950 77,762,872
Total 65,586,143 19,305,330 7,024,601 2,950 77,869,822
Construction Work in Progress 52,284,023 (17,353,533) - - 34,930,490
Total Utility Plant $1,272,113,647 $61,721,360 $13,496,784 $ - $1,320,338,223
F-5<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE V
UTILITY PLANT Sheet 4
YEAR ENDED DECEMBER 31, 1992
(Continued)
<FN>
Column E represents transfers and reclassifications as follows: a reclassification of $256 from electric steam
production to electric general; a reclassification of $629 from electric distribution to electric transmission; and a
transfer to common of $2,950 due to reclassification of plant previously dedicated to gas.
F-6
</TABLE>
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE V
UTILITY PLANT Sheet 5
YEAR ENDED DECEMBER 31, 1991
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Other Changes -
Beginning of Additions Debit Balance at Close
Classifications Period At Cost Retirements (Credit) of Period
<S> <C> <C> <C> <C> <C>
Electric Plant:
Intangible $ 45,519 $ - $ - $ - $ 45,519
Production:
Steam Production 332,816,361 16,907,208 2,381,344 (216,405) 347,125,820
Nuclear Production 293,678,263 3,166,162 758,517 - 296,085,908
Nuclear Fuel Assemblies 21,260,117 3,378,079 - - 24,638,196
Hydraulic Production 18,037,207 25,809 5,615 - 18,057,401
Other Production 3,452,495 94,150 - - 3,546,645
Transmission 88,638,646 3,311,426 707,324 232,050 91,474,798
Distribution 258,035,560 14,641,631 2,343,676 (237,608) 270,095,907
General 1,773,379 207,390 18,969 - 1,961,800
Total 1,017,737,547 41,731,855 6,215,445 (221,963) 1,053,031,994
Gas Plant:
Intangible 329,895 - - - 329,895
Production 2,998,874 - 231 - 2,998,643
Storage - - - - -
Transmission 18,995,359 349,706 (4,707) 122,318 19,472,090
Distribution 73,386,614 5,412,986 388,164 (577) 78,410,859
General - - - - -
Total 95,710,742 5,762,692 383,688 121,741 101,211,487
Common Plant:
Intangible 106,950 - - - 106,950
General 60,346,339 9,352,689 4,320,057 100,222 65,479,193
Total 60,453,289 9,352,689 4,320,057 100,222 65,586,143
Construction Work in Progress 38,224,075 14,059,948 - - 52,284,023
Total Utility Plant $1,212,125,653 $70,907,184 $10,919,190 $ - $1,272,113,647
F-7<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE V
UTILITY PLANT Sheet 6
YEAR ENDED DECEMBER 31, 1991
(Continued)
<FN>
Column E represents transfers and reclassifications as follows: a transfer of $125,144 from electric plant to gas plant
for plant previously dedicated to electric production reclassified as gas transmission; a transfer of $91,261 from
electric plant to common plant due to a reclassification of transportation equipment to common plant; a transfer of
$233,473 from electric distribution to electric transmission due to a reclassification of the "CN" line; a transfer of
$8,961 related to gas services transferred from gas plant to common plant; and a transfer of $5,558 from electric plant
to gas plant for a substation site previously used for electric distribution which will be used as a new gas
distribution regulator station.
F-8
</TABLE>
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF UTILITY PLANT Sheet 1
YEAR ENDED DECEMBER 31, 1993
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Additions Balance at
beginning Charged to end of
Description of period income Other Retirements (f) period
<S> <C> <C> <C> <C> <C>
Accumulated depreciation
and amortization of
utility plant shown in
Schedule V:
Electric $341,337,491 $32,657,788 $3,443,774 (b) $10,633,858 $366,805,195 (a)
Nuclear Fuel Assemblies 17,872,495 3,170,416 (397,117)(c) - 20,645,794
Gas 38,436,269 3,614,070 (226,130)(d) 915,343 40,908,866
Common 18,119,070 3,410,165 1,660,736 (e) 3,400,022 19,789,949
$415,765,325 $42,852,439 $4,481,263 $14,949,223 $448,149,804
<FN>
Notes:
(a) Includes accumulated provision for the Nine Mile 2 Plant internal and external decommissioning funds of $969,300
and $3,666,560, respectively.
(b) Electric other of $3,443,774 includes the following:
1) A credit of $21,537 related to contributions in excess of construction costs.
2) A credit of $19,278 representing the transfer of a loss on the disposition of property to miscellaneous income.
3) A charge of $6,408 representing a plant transfer from electric to common.
4) A credit of $155,176 representing net earnings on Nine Mile 2 Plant Qualified External Decommissioning Fund.
5) A credit of $1,316,932 representing an insurance reimbursement - Pleasant Valley transformer.
6) A charge of $189,945 representing a settlement agreement adjustment - Nine Mile 2 Plant.
7) A credit of $2,127,204 representing Lunamar II litigation settlement.
F-9
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF UTILITY PLANT Sheet 2
YEAR ENDED DECEMBER 31, 1993
(Continued)
<FN>
(c) Nuclear fuel assemblies other of $(397,117) represents a reclassification to a regulatory asset.
(d) Gas other of $(226,130) includes the following:
1) A credit of $2,760 related to contributions in excess of construction costs.
2) A charge of $890 representing a plant transfer from gas to common.
3) A charge of $228,000 representing interruptible gas profit offset of deferred items.
(e) Common other of $1,660,736 includes the following:
1) Depreciation provisions on automobiles, trucks, etc., are charged to clearing accounts, together with other costs
of operation and maintenance thereof, and are subsequently distributed to various asset and expense accounts. The
amount of such depreciation provisions in 1993 was $1,653,438.
2) A credit of $7,298 representing a transfer to common of $6,408 from electric and $890 from gas.
(f) Retirement of utility plant at book value, plus cost of dismantling, less credit for salvage, together with net
change in retirement work in progress.
F-10
/TABLE
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF UTILITY PLANT Sheet 3
YEAR ENDED DECEMBER 31, 1992
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Additions Balance at
beginning Charged to end of
Description of period income Other Retirements (e) period
<S> <C> <C> <C> <C> <C>
Accumulated depreciation
and amortization of
utility plant shown in
Schedule V:
Electric $314,372,956 $33,638,242 $ 285,587 (b) $ 6,959,294 $341,337,491 (a)
Nuclear Fuel Assemblies 15,533,506 2,338,989 - - 17,872,495
Gas 35,888,382 3,157,754 (78)(c) 609,789 38,436,269
Common 20,922,222 2,799,953 1,695,121 (d) 7,298,226 18,119,070
$386,717,066 $41,934,938 $1,980,630 $14,867,309 $415,765,325
<FN>
Notes:
(a) Includes accumulated provision for the Nine Mile 2 Plant internal and external decommissioning funds of $757,300
and $2,724,384, respectively.
(b) Electric other of $285,587 includes the following:
1) A credit of $42,245 related to contributions in excess of construction costs.
2) A credit of $412 representing the transfer of a loss on the disposition of property to miscellaneous income.
3) A charge of $174,726 representing a settlement agreement adjustment - Nine Mile 2 Plant.
4) A credit of $129,929 representing net earnings on Nine Mile 2 Plant Qualified External Decommissioning Fund.
5) A credit of $287,727 representing an insurance reimbursement - Rock Tavern transformer.
(c) Gas other of $(78) includes the following:
1) A charge of $78 representing a plant transfer to gas from common.
F-11
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF UTILITY PLANT Sheet 4
YEAR ENDED DECEMBER 31, 1992
(Continued)
<FN>
(d) Common other of $1,695,121 includes the following:
1) Depreciation provisions on automobiles, trucks, etc., are charged to clearing accounts, together with other costs
of operation and maintenance thereof, and are subsequently distributed to various asset and expense accounts. The
amount of such depreciation provisions in 1992 was $1,680,529.
2) A credit of $78 representing a plant transfer to common from gas.
3) Correction of non-depreciable property of $14,514 charged in error to gas reserve.
(e) Retirement of utility plant at book value, plus cost of dismantling, less credit for salvage, together with net
change in retirement work in progress.
F-12
/TABLE
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF UTILITY PLANT Sheet 5
YEAR ENDED DECEMBER 31, 1991
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Additions Balance at
beginning Charged to end of
Description of period income Other Retirements (e) period
<S> <C> <C> <C> <C> <C>
Accumulated depreciation
and amortization of
utility plant shown in
Schedule V:
Electric $289,495,887 $32,398,411 $ (36,557)(b) $ 7,484,785 $314,372,956 (a)
Nuclear Fuel Assemblies 12,350,308 3,183,198 - - 15,533,506
Gas 34,045,872 2,344,295 150,254 (c) 652,039 35,888,382
Common 21,130,238 2,487,705 1,556,265 (d) 4,251,986 20,922,222
$357,022,305 $40,413,609 $1,669,962 $12,388,810 $386,717,066
<FN>
Notes:
(a) Includes accumulated provision for the Nine Mile 2 Plant internal and external decommissioning funds of $545,300
and $1,807,455, respectively.
(b) Electric other of $(36,557) includes the following:
1) A credit of $51,495 related to contributions in excess of construction costs.
2) A credit of $1,790 representing the transfer of a loss on the disposition of property to miscellaneous income.
3) A charge of $170,952 representing a plant transfer from electric of $148,841 to gas and $22,111 to common.
4) A credit of $81,110 representing net earnings on Nine Mile 2 Plant Qualified External Decommissioning Fund.
(c) Gas other of $150,254 includes the following:
1) A credit of $1,413 related to contributions in excess of construction costs.
2) A credit of $148,841 representing a plant transfer to gas from electric.
F-13
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF UTILITY PLANT Sheet 6
YEAR ENDED DECEMBER 31, 1991
(Continued)
<FN>
(d) Common other of $1,556,265 includes the following:
1) Depreciation provisions on automobiles, trucks, etc., are charged to clearing accounts, together with other costs
of operation and maintenance thereof, and are subsequently distributed to various asset and expense accounts. The
amount of such depreciation provisions in 1991 was $1,534,154.
2) A credit of $22,111 representing a plant transfer to common from electric.
(e) Retirement of utility plant at book value, plus cost of dismantling, less credit for salvage, together with net
change in retirement work in progress.
F-14
</TABLE>
</PAGE>
<PAGE>
<PAGE><TABLE> CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VIII
RESERVES Sheet 1
YEAR ENDED DECEMBER 31, 1993
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Charged to Payments Balance
Balance at Charged to other charged at end
beginning cost and accounts - to of
Description of period expenses describe reserves period
<S> <C> <C> <C> <C> <C>
Operating Reserves:
Reserve for injuries
and damages $1,817,886 $ 180,000 $ 20,000 (a) $ 78,735 $1,939,151
Workers compensation
deductible - - 970,962 (b) 91,905 879,057
Pensions and benefits
carrying charge reserve - 92,360 - - 92,360
Nine Mile 2 Plant
operation and maintenance
expense reserve - 2,148,253 724,178 (c) 3,436,980 (564,549)
Total Operating
Reserves $1,817,886 $2,420,613 $1,715,140 $3,607,620 $2,346,019
Reserve for Uncollectible
Accounts $1,500,000 $3,430,841 $ - $2,930,841 $2,000,000
<FN>
Notes:
(a) Charged to clearing account for costs of operation of automobiles, trucks, etc., and subsequently distributed,
together with other costs of operation and maintenance, to various asset and expense accounts.
(b) Charged to clearing account for workers compensation insurance and subsequently distributed, together with other
insurance premium costs, to various asset and expense accounts.
(c) Charged to regulatory asset account representing future recovery from ratepayers.
</TABLE> F-15 <PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VIII
RESERVES Sheet 2
YEAR ENDED DECEMBER 31, 1992
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Charged to Payments Balance
Balance at Charged to other charged at end
beginning cost and accounts - to of
Description of period expenses describe reserves period
<S> <C> <C> <C> <C> <C>
Operating Reserves:
Reserve for injuries
and damages $1,346,101 $ 757,500 $ 67,500 (a) $ 353,215 $1,817,886
Nine Mile 2 Plant
operation and maintenance
expense reserve 896,000 2,422,087 - 3,318,087 -
Total Operating
Reserves $2,242,101 $3,179,587 $ 67,500 $3,671,302 $1,187,886
Reserve for Uncollectible
Accounts $1,100,000 $3,824,404 $ - $3,424,404 $1,500,000
<FN>
Note:
(a) Charged to clearing account for costs of operation of automobiles, trucks, etc., and subsequently distributed,
together with other costs of operation and maintenance, to various asset and expense accounts.
F-16
/TABLE
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE VIII
RESERVES Sheet 3
YEAR ENDED DECEMBER 31, 1991
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Charged to Payments Balance
Balance at Charged to other charged at end
beginning cost and accounts - to of
Description of period expenses describe reserves period
<S> <C> <C> <C> <C> <C>
Operating Reserves:
Reserve for injuries
and damages $1,390,136 $ 96,000 $ 24,000 (a) $ 164,035 $1,346,101
Nine Mile 2 Plant
operation and maintenance
expense reserve - 896,000 - - 896,000
Total Operating
Reserves $1,390,136 $ 992,000 $ 24,000 $ 164,035 $2,242,101
Reserve for Uncollectible
Accounts $ 950,000 $3,535,712 $ - $3,385,712 $1,100,000
<FN>
Note:
(a) Charged to clearing account for costs of operation of automobiles, trucks, etc., and subsequently distributed,
together with other costs of operation and maintenance, to various asset and expense accounts.
F-17
</TABLE>
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE IX
SHORT-TERM BORROWINGS Sheet 1
FOR THE YEAR ENDED DECEMBER 31,
($000)
<CAPTION>
1993 1992 1991
Payable to Payable to Payable to
Holders of Holders of Holders of
Payable to Commercial Payable to Commercial Payable to Commercial
Banks (a) Paper (b) Banks (a) Paper (b) Banks (a) Paper (b)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31 $ - $ - $ - $15,000 $ - $19,000
Weighted Average Interest
Rate at 12/31 - - - 4.23% - 5.65%
Maximum Amount Outstanding
During Period $ - $15,000 $ - $29,500 $ - $35,000
Date Maximum Amount
Outstanding (e) 1/3/93 (e) 8/3/92 (e) 2/4/91
Average Daily Amount Out-
standing During Period (c) $ (e) $ 330 $ (e) $12,984 $ (e) $ 8,281
Weighted Average Interest
Rate During Period (d) - 3.94% - 4.48% - 7.12%
F-18
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE IX
SHORT-TERM BORROWINGS Sheet 2
(Continued)
<FN>
(a) Effective December 17, 1990 the Company entered into a revolving credit agreement with four commercial banks for
borrowing up to $50 million through December 14, 1997 (Agreement). The Agreement gives the Company the option of
borrowing at either the prime/federal funds rate, or three other money market rates if such rates are lower. The
Agreement also provides for the payment of an annual commitment fee of 1/16 of 1% per annum on the unborrowed
amount and a facility fee of 1/8 of 1% per annum on the total amount of the facility. Compensating balances are
not required under the Agreement. In addition, the Company continues to maintain confirmed lines of credit
totaling $2 million with three regional banks.
(b) Commercial paper is issued at various discount rates and usually matures within 10 to 45 days.
(c) The maximum aggregate short-term borrowings outstanding at any one month-end were $0 for 1993,
$21,000 at January 31, 1992 and $28,000 at January 31, 1991.
(d) Calculated using a daily average of borrowings outstanding & related interest charges for the year
ended December 31.
(e) During 1993, 1992, and 1991 there were no bank borrowings.
F-19
</TABLE>
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE X
SUPPLEMENT INCOME STATEMENT INFORMATION Sheet 1
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
Column A Column B
Charged to Costs and Expenses
Item 1993 1992 1991
(Thousands of Dollars)
1. Maintenance and Repairs (a) $34,486 $34,226 $31,504
2. Depreciation and Amortization:
Utility Plant (b) $42,852 $41,935 $40,413
Less:
Nuclear fuel amortization (c) 3,170 2,339 3,183
Total Depreciation and
Amortization per
Statement of Income $39,682 $39,596 $37,230
3. Taxes, other than Income Taxes:
Real property and special
franchise $32,079 $31,171 $30,785
State and local taxes on
gross revenue 27,375 27,807 25,247
Payroll 5,589 5,137 4,810
Petroleum business tax 4,689 6,831 3,903
Other 4,307 4,997 5,465
Total 74,039 75,943 70,210
Less - charges to construction
work in progress, clearing
accounts, etc. 8,369 9,514 9,546
Less - nonoperating real
estate taxes 106 90 110
Total Taxes, other than
Income Taxes, per
Statement of Income $65,564 $66,339 $60,554
4. Advertising Costs Not Material
F-20<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE X
SUPPLEMENT INCOME STATEMENT INFORMATION Sheet 2
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(Continued)
Notes:
(a) In addition to the amounts of maintenance and repairs
included in the Statement of Income, certain amounts (not
material in total) are charged to clearing accounts which
are subsequently distributed to various asset and expense
accounts.
(b) See Schedule VI.
(c) Charged to Fuel Used in Electric Generation.
F-21
</PAGE>
<PAGE>
EXHIBIT INDEX
-------------
Following is the list of Exhibits, as required by Item
601 of Regulation S-K, filed as a part of this Annual Report on
Form 10-K, including Exhibits incorporated herein by reference
(1):
Exhibit No.
(Regulation S-K
Item 601
Designation) Exhibits
- - ---------------- --------
(3) Articles of Incorporation and Bylaws:
(i) 1-- Restated Certificate of Incorporation of
the Registrant under Section 807 of the
Business Corporation Law, filed August
14, 1989. ((1); Exhibit (3)1)
(i) 2-- Certificate of Amendment to the
Certificate of Incorporation of the
Registrant under Section 805 of the
Business Corporation Law, filed April 5,
1990. ((1); Exhibit (3)2)
(i) 3-- Certificate of Amendment to the
Certificate of Incorporation of the
Registrant under Section 805 of the
Business Corporation Law, filed October
19, 1993 ((1); Exhibit (3)3)
(ii) 1-- Bylaws in effect on the date of this
Report.
(4) Instruments defining the rights of security holders,
including indentures (see also Exhibit (3) above):
__________________
(1) Exhibits which are incorporated by reference to
other filings are followed by information contained in
parentheses, as follows: The first reference in the parenthesis
is a numeral, corresponding to a numeral set forth in the Notes
which follow this Exhibit list, which identifies the prior filing
in which the Exhibit was physically filed; and the second
reference in the parenthesis is to the specific document in that
prior filing in which the Exhibit appears.
E-1<PAGE>
*(ii) 1-- Indenture dated January 1, 1927 between
the Registrant and American Exchange
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)1)
*(ii) 2-- Supplemental Indenture dated March 1,
1935 between the Registrant and Irving
Trust Company, as Trustee. ((2);
Exhibit (4)(ii)2)
*(ii) 3-- Second Supplemental Indenture dated June
1, 1937 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)3)
*(ii) 4-- Third Supplemental Indenture dated April
1, 1940 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)4)
*(ii) 5-- Fourth Supplemental Indenture dated
March 1, 1941 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)5)
*(ii) 6-- Fifth Supplemental Indenture dated
December 1, 1950 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)6)
*(ii) 7-- Sixth Supplemental Indenture dated
December 1, 1952 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)7)
*(ii) 8-- Seventh Supplemental Indenture dated
October 1, 1954 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)8)
*(ii) 9-- Eighth Supplemental Indenture dated May
15, 1958 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)9)
(ii) 10-- Ninth Supplemental Indenture dated
December 1, 1967 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)10)
E-2
<PAGE>
(ii) 11-- Tenth Supplemental Indenture dated as of
January 15, 1969 between the Registrant
and Irving Trust Company, as Trustee.
((3); Exhibit 2.12)
(ii) 12-- Eleventh Supplemental Indenture dated as
of June 1, 1970 between the Registrant
and Irving Trust Company, as Trustee.
((4); Exhibit 1.13)
(ii) 13-- Twelfth Supplemental Indenture dated as
of February 1, 1972 between the
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)13)
(ii) 14-- Thirteenth Supplemental Indenture dated
as of April 15, 1974 between the
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)14)
(ii) 15-- Fourteenth Supplemental Indenture dated
as of November 1, 1975 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)15)
(ii) 16-- Fifteenth Supplemental Indenture dated
as of June 1, 1977 between Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)16)
(ii) 17-- Sixteenth Supplemental Indenture dated
as of September 15, 1979 between
Registrant and Irving Trust Company, as
Trustee. ((4); Exhibit 1.18)
(ii) 18-- Seventeenth Supplemental Indenture dated
as of May 15, 1980 between Registrant
and Irving Trust Company, as Trustee.
((5); Exhibit (4)(a)18)
(ii) 19-- Eighteenth Supplemental Indenture dated
as of November 15, 1980 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)19)
(ii) 20-- Nineteenth Supplemental Indenture dated
as of August 15, 1981 between Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)20)
E-3
<PAGE>
(ii) 21-- Twentieth Supplemental Indenture dated
as of September 1, 1982 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)21)
(ii) 22-- Twenty-First Supplemental Indenture
dated as of November 22, 1982 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)22)
(ii) 23-- Twenty-Second Supplemental Indenture
dated as of May 24, 1984 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)23)
(ii) 24-- Twenty-Third Supplemental Indenture
dated as of June 15, 1985 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)24)
(ii) 25-- Twenty-Fourth Supplemental Indenture
dated as of September 1, 1986 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)25)
(ii) 26-- Twenty-Fifth Supplemental Indenture
dated as of December 1, 1988 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)26)
(ii) 27-- Twenty-Sixth Supplemental Indenture
dated as of May 1, 1991 between
Registrant and The Bank of New York, as
Trustee. ((2); Exhibit (4)(ii)27)
(ii) 28-- Twenty-Seventh Supplemental Indenture
dated as of May 15, 1992 between
Registrant and The Bank of New York, as
Trustee. ((2); Exhibit (4)(ii)28); and
Prospectus Supplement Dated May 28, 1992
(To Prospectus Dated April 13, 1992)
relating to $125,000,000 principal
amount of First Mortgage Bonds,
designated Secured Medium-Term Notes,
Series A, and the Prospectus Dated April
13, 1992, relating to $125,000,000
principal amount of Registrant's debt
securities attached thereto, as filed
pursuant to Rule 424(b) in connection
E-4<PAGE>
with Registration Statement No. 33-
46624. ((6)(a)), and, as applicable to
a tranche of such Secured Medium-Term
Notes, one of the following:
(a) Pricing Supplement No. 1, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(b))
(b) Pricing Supplement No. 2, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(c))
(c) Pricing Supplement No. 3, Dated
June 4, 1992 (To Prospectus Dated
April 13, 1992, as supplemented
by a Prospectus Supplement Dated
May 28, 1992) filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-
46624. ((6)(d))
(d) Pricing Supplement No. 4, Dated
August 20, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(e))
(e) Pricing Supplement No. 5, Dated
August 20, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(f))
E-5
<PAGE>
(f) Pricing Supplement No. 6, Dated
July 26, 1993 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(g))
(g) Pricing Supplement No. 7, Dated
July 26, 1993 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((6)(h))
(ii) 29-- Indenture, dated as of April 1, 1992,
between Registrant and Morgan Guaranty
Trust Company of New York, as Trustee.
((7); Exhibit (4)(ii)29); and
Prospectus Supplement Dated May 28, 1992
(To Prospectus Dated April 13, 1992)
relating to $125,000,000 principal
amount of Medium-Term Notes, Series A,
and the Prospectus Dated April 13, 1992,
relating to $125,000,000 principal
amount of Registrant's debt securities
attached thereto, as filed pursuant to
Rule 424(b) in connection with
Registration Statement No. 33-46624.
((8)(a)), and, as applicable to a
tranche of such Medium-Term Notes, one
of the following:
(a) Pricing Supplement No. 1, Dated
June 26, 1992 (To Prospectus
Dated April 13, 1992, as
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((8)(b))
(b) Pricing Supplement No. 2, Dated
October 6, 1993 (To Prospectus
Dated April 13, 1992, as
E-6<PAGE>
supplemented by a Prospectus
Supplement Dated May 28, 1992)
filed pursuant to Rule 424(b) in
connection with Registration
Statement No. 33-46624. ((8)(c))
(ii) 30-- Form of the Registrant's 4.85%
Promissory Notes. ((9); Exhibit 1.9)
(ii) 31-- Participation Agreement, dated as of
November 1, 1985, by and between New
York State Energy Research and
Development Authority and the
Registrant. ((2); Exhibit (4)(ii)31)
(ii) 32-- The Registrant has entered into certain
other instruments with respect to long-
term debt of the Registrant. No such
instrument relates to securities
authorized thereunder which exceed 10%
of the total assets of the Registrant
and its subsidiaries on a consolidated
basis. The Registrant agrees to provide
the Commission, upon request, copies of
any instruments defining the rights of
holders of long-term debt of the
Registrant and subsidiaries for which
consolidated or unconsolidated financial
statements are required to be filed with
the Commission.
(10) Material contracts:
(i) 1-- Agreement dated October 31, 1968 between
the Registrant and Consolidated Edison
Company of New York, Inc. and Niagara
Mohawk Power Corporation. ((3); Exhibit
5.1)
(i) 2-- Agreement dated September 22, 1969
between Registrant and Algonquin Gas
Transmission Company. ((10); Exhibit
5.5)
(i) 3-- Agreement dated as of April 4, 1977
between Registrant, Consolidated Edison
Company of New York, Inc., Long Island
Lighting Company, New York State
Electric & Gas Corporation, Niagara
E-7<PAGE>
Mohawk Power Corporation, Orange and
Rockland Utilities, Inc., Rochester Gas
and Electric Corporation and the Power
Authority of the State of New York.
((3); Exhibit 5.6)
(i) 4-- Agreement dated April 27, 1973 between
Registrant and the Power Authority of
the State of New York. ((11); Exhibit
5.19)
(i) 5-- Agreement dated July 28, 1975 between
Registrant and the Power Authority of
the State of New York. ((12); Exhibit
5.18)
(i) 6-- Agreement dated as of September 22, 1975
between Registrant, Niagara Mohawk Power
Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation, and Rochester Gas and
Electric Corporation. ((12); Exhibit
5.21)
(i) 7-- Agreement dated November 23, 1976
between Registrant and Consolidated
Edison Company of New York, Inc. ((13);
Exhibit 5.29)
(i) 8-- Agreement dated December 29, 1975
between Registrant and Niagara Mohawk
Power Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation, and Rochester Gas and
Electric Corporation. ((14); Exhibit
(10)(i)18)
(i) 9-- Assignment and Assumption dated as of
October 24, 1975 between Registrant and
New York State Electric & Gas
Corporation. ((12); Exhibit 5.25)
(i) 10-- Amendment to Assignment and Assumption
dated October 30, 1978 between
Registrant and New York State Electric &
Gas Corporation. ((3); Exhibit 5.34)
(i) 11-- Agreement dated as of May 12, 1977
between Registrant and Niagara Mohawk
Power Corporation. ((15); Exhibit 5.34)
E-8
<PAGE>
(i) 12-- Agreement, dated May 8, 1980, by and
between Registrant and Jersey Central
Power & Light Company. ((16); Exhibit
(10)(i)21)
(i) 13-- Purchase Agreement, dated as of June 1,
1980, by and between Registrant and
Consolidated Edison Company of New York,
Inc. ((16); Exhibit (10)(i)22)
(i) 14-- Purchase Agreement, dated as of June 16,
1980, by and between Registrant and
Philadelphia Electric Company. ((16);
Exhibit (10)(i)23)
(i) 15-- Purchase Agreement, dated as of June 18,
1980, by and between Registrant and
Public Service Electric and Gas Company.
((16); Exhibit (10)(i)24)
(i) 16-- Purchase Agreement, dated as of July 1,
1980, by and between Registrant and
Connecticut Light and Power Company.
((16); Exhibit (10)(i)25)
(i) 17-- Letter Amendment Agreement, dated
December 16, 1980, by and between
Registrant and Niagara Mohawk Power
Corporation. ((16); Exhibit (10)(i)26)
(i) 18-- Settlement Agreement, dated December 19,
1980, by and among the United States
Environmental Protection Agency, The
Department of Environmental Conservation
of the State of New York, The Attorney
General of the State of New York, Hudson
River Fisherman's Association, Inc.,
Scenic Hudson Preservation Conference,
Natural Resources Defense Council, Inc.,
Registrant, Consolidated Edison Company
of New York, Inc., Orange and Rockland
Utilities, Inc., Niagara Mohawk Power
Corporation and Power Authority of the
State of New York. ((16); Exhibit
(10)(i)27)
(i) 19-- Agreement dated April 2, 1980 by and
between Registrant and the Power
Authority of the State of New York.
((2); Exhibit (10)(i)24)
E-9
<PAGE>
(i) 20-- Purchase Agreement, dated April 19,
1983, between Registrant and New York
State Electric & Gas Corporation. ((2);
Exhibit (10)(i)29)
(i) 21-- Transmission Agreement, dated October
25, 1983, between Registrant and Niagara
Mohawk Power Corporation. ((2); Exhibit
(10)(i)30)
(i) 22-- Underground Storage Service Agreement,
dated June 30, 1982, between Registrant
and Penn-York Energy Corporation. ((2);
Exhibit (10)(i)32)
(i) 23-- Interruptible Transmission Service
Agreement, dated December 20, 1983,
between Registrant and Power Authority
of the State of New York. ((17);
Exhibit (10)(i)33)
(i) 24-- Agreement, dated December 7, 1983,
between Registrant and the Power
Authority of the State of New York.
((2); Exhibit (10)(i)34)
(i) 25-- Specification of Terms and Conditions of
Settlement in State of New York Public
Service Commission Proceeding - Case
29124, dated September 3, 1985. ((2);
Exhibit (10)(i)35)
(i) 26-- Reimbursement Agreement, dated as of
November 1, 1985, between Registrant and
the Bank named therein. ((2); Exhibit
(10)(i)36)
(i) 27-- General Joint Use Pole Agreement between
Registrant and the New York Telephone
Company effective January 1, 1986 (not
including the Administrative and
Operating Practices provisions thereof).
((2); Exhibit (10)(i)37)
(i) 28-- Agreement, dated June 3, 1985, between
Registrant, Consolidated Edison Company
of New York, Inc. and the Power
Authority of the State of New York
relating to Marcy South Real Estate -
East Fishkill, New York. ((2); Exhibit
(10)(i)38)
E-10<PAGE>
(i) 29-- Agreement, dated June 11, 1985, between
the Registrant and the Power Authority
of the State of New York relating to
Marcy South Substation - East Fishkill,
New York. ((2); Exhibit (10)(i)39)
(i) 30-- Agreement, dated as of April 9, 1986,
among Registrant, Consolidated Edison
Company of New York, Inc., Niagara
Mohawk Power Corporation and the Power
Authority of the State of New York
relating to Real Estate - Roseton/
Danskammer. ((2); Exhibit (10)(i)40)
(i) 31-- Agreement, dated as of April 9, 1986,
between Registrant, for itself and as
agent for itself, Niagara Mohawk Power
Corporation and Consolidated Edison
Company of New York, Inc., and the Power
Authority of the State of New York
relating to Supplemental Land Use -
Roseton/Danskammer. ((2); Exhibit
(10)(i)41)
(i) 32-- Letter of intent, dated February 17,
1987, between Registrant and Niagara
Mohawk Power Corporation, for the
purchase of interests in the Roseton
Steam Electric Generating Plant. ((14);
Exhibits (19)(10)(i)75)
(i) 33-- Roseton Amendment Agreement, dated as of
September 9, 1987, between Registrant
and Niagara Mohawk Power Corporation,
for the purchase of interests in the
Roseton Steam Electric Generating Plant
(subject to PSC approval). ((18);
Exhibit (19)(10)(i)76)
(i) 34-- Agreement dated as of November 20, 1987
between Registrant and Consolidated Rail
Corporation to transport coal to
Danskammer Generating Station. [Certain
portions of said Agreement setting forth
or relating to pricing provisions are
omitted and filed separately with the
Securities and Exchange Commission
pursuant to a request for confidential
treatment under the rules of said
Commission.] ((18); Exhibit
(19)(10)(i)83)
E-11<PAGE>
(i) 35-- Reimbursement Agreement, dated as of
July 1, 1987, between Registrant and the
Bank named therein. ((18); Exhibit
(19)(10)(i)90)
(i) 36-- First Amendment, dated as of September
1, 1987, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Registrant and the Bank named therein.
((18); Exhibit (19)(10)(i)93)
(i) 37-- Purchase and Administration Agreement,
dated as of November 25, 1987, between
Registrant and the finance corporation
named therein providing for the sale of
Registrant's accounts receivables.
((18); Exhibit (19)(10)(i)95)
(i) 38-- Contract dated October 5, 1987, between
Registrant and Norfolk and Western
Railway Company providing for
transportation of coal to the Danskammer
Plant. [Certain portions of said
Contract setting forth or relating to
pricing provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((18);
Exhibit (19)(10)(i)96)
(i) 39-- Memorandum of Understanding, dated as of
March 22, 1988, by and among Registrant,
Alberta Northeast Gas, Limited, the
Brooklyn Union Gas Company, New Jersey
Natural Gas Company and Connecticut
Natural Gas Corporation. ((18); Exhibit
(19)(10)(i)98)
(i) 40-- Agreement for the Sale and Purchase of
Coal, dated as of January 1, 1987, among
Registrant, Kentucky Carbon Corporation
and The Carbon Fuel Sales Company.
[Certain portions of said agreement
setting forth or relating to pricing
provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((19);
Exhibit (28)(10)(i)100)
E-12<PAGE>
(i) 41-- Restatement of Purchase and
Administration Agreement, dated as of
April 4, 1989, between Registrant and
CSW Credit, Inc., amending and restating
the Purchase and Administration
Agreement, dated as of November 25,
1987, between such parties providing for
the sale of Registrant's accounts
receivables. ((19); Exhibit (28)
(10)(i)101)
(i) 42-- Nine Mile Point Nuclear Station Unit 2
Interim Operating Agreement, effective
August 22, 1989, between and among
Registrant, Niagara Mohawk Power
Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation and Rochester Gas and
Electric Corporation. ((20); Exhibit
(28)(10)(i)102)
(i) 43-- Amendment of Nine Mile Point Nuclear
Station Unit 2 Interim Operating
Agreement, dated as of March 6, 1990,
among Registrant, Niagara Mohawk Power
Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation and Rochester Gas and
Electric Corporation. ((16); Exhibit
(19)(10)(i)99)
(i) 44-- Amendment No. 2: One-Year Extension of
Nine Mile Point Nuclear Station Unit 2
Interim Operating Agreement, dated as of
November 27, 1990, among Registrant,
Niagara Mohawk Power Corporation, Long
Island Lighting Company, New York State
Electric & Gas Corporation and Rochester
Gas and Electric Corporation. ((21);
Exhibit (19)(10)(i)71)
(i) 45-- Second Amendment, dated as of July 1,
1990, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Registrant and the Bank named therein.
((21); Exhibit (19)(10)(i)72)
(i) 46-- First Amendment, dated as of July 1,
1990, to the Reimbursement Agreement,
dated as of July 1, 1987, between
Registrant and the Bank named therein.
((21); Exhibit (19)(10)(i)73)
E-13<PAGE>
(i) 47-- Credit Agreement, dated as of December
17, 1990, among Registrant and the Banks
named therein. ((21); Exhibit
(19)(10)(i)74)
(i) 48-- Agreement, effective as of November 1,
1989, between Columbia Gas Transmission
Corporation and Registrant. ((21);
Exhibit (19)(10)(i)75)
(i) 49-- Agreement, dated as of November 1, 1989,
between Columbia Gas Transmission
Corporation and Registrant. ((21);
Exhibit (19)(10)(i)77)
(i) 50-- Agreement, dated as of November 1, 1989,
between Columbia Gas Transmission
Corporation and Registrant. ((21);
Exhibit (19)(10)(i)78)
(i) 51-- Agreement, dated as of November 1, 1989,
between Columbia Gulf Transmission
Company and Registrant. ((21); Exhibit
(19)(10)(i)79)
(i) 52-- Agreement, dated October 9, 1990,
between Texas Eastern Transmission
Corporation and Registrant. ((21);
Exhibit (19)(10)(i)80)
(i) 53-- Agreement, dated July 2, 1990, between
Texas Eastern Transmission Corporation
and Registrant. ((21); Exhibit
(19)(10)(i)81)
(i) 54-- Agreement, dated December 28, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((21);
Exhibit (19)(10)(i)82)
(i) 55-- Agreement, dated December 28, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((21);
Exhibit (19)(10)(i)83)
(i) 56-- Agreement, dated November 3, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((21);
Exhibit (19)(10)(i)84)
E-14
<PAGE>
(i) 57-- Gas Sales Contract, dated as of January
1, 1989, between Tennessee Gas Pipeline
Company and Registrant. ((21); Exhibit
(19)(10)(i)86)
(i) 58-- Agreement, effective December 15, 1989,
between Algonquin Gas Transmission
Company and Registrant. ((21); Exhibit
(19)(10)(i)87)
(i) 59-- Storage Service Agreement, dated July 1,
1989, between CNG Transmission
Corporation and Registrant. ((21);
Exhibit (19)(10)(i)91)
(i) 60-- Agreement dated as of February 7, 1991
between Registrant and Alberta Northeast
Gas, Limited for the purchase of
Canadian natural gas from ATCOR Ltd. to
be delivered on the Iroquois Gas
Transmission System. ((21); Exhibit
(19)(10)(i)92)
(i) 61-- Agreement dated as of February 7, 1991
between Registrant and Alberta Northeast
Gas, Limited for the purchase of
Canadian natural gas from AEC Oil and
Gas Company, a Division of Alberta
Energy Company, Ltd. to be delivered on
the Iroquois Gas Transmission System.
((21); Exhibit (19)(10)(i)93)
(i) 62-- Agreement dated as of February 7, 1991
between Registrant and Alberta Northeast
Gas, Limited for the purchase of
Canadian natural gas from ProGas Limited
to be delivered on the Iroquois Gas
Transmission System. ((21); Exhibit
(19)(10)(i)94)
(i) 63-- Agreement No. 2 dated as of February 7,
1991 between Registrant and Alberta
Northeast Gas, Limited for the purchase
of Canadian natural gas from TransCanada
Pipelines Limited under Precedent
Agreement No. 2 to be delivered on the
Iroquois Gas Transmission System.
((21); Exhibit (19)(10)(i)95)
E-15
<PAGE>
(i) 64-- Agreement No. 1 dated as of February 7,
1991 between Registrant and Alberta
Northeast Gas, Limited for the purchase
of Canadian natural gas from TransCanada
Pipelines Limited under Precedent
Agreement No. 1 to be delivered on the
Iroquois Gas Transmission System.
((21); Exhibit (19)(10)(i)96)
(i) 65-- Agreement dated as of February 7, 1991
between Registrant and Iroquois Gas
Transmission System to transport gas
imported by Alberta Northeast Gas,
Limited to Registrant. ((21); Exhibit
(19)(10)(i)97)
(i) 66-- Service Agreement, dated September 30,
1986, between Registrant and Algonquin
Gas Transmission Company, for firm
storage transportation under Rate
Schedule SS-III. ((22); Exhibit
(19)(10)(i)95)
(i) 67-- Service Agreement, dated March 12, 1991,
between Registrant and Algonquin Gas
Transmission Company, for firm
transportation of 5,056 dth. of Texas
Eastern Transmission Corporation
incremental volume. ((22); Exhibit
(19)(10)(i)99)
(i) 68-- Agreement, dated December 28, 1990 and
effective February 5, 1991, between
Registrant and National Fuel Gas Supply
Corporation for interruptible
transportation. ((22); Exhibit
(19)(10)(i)100)
(i) 69-- Utility Services Contract, effective
October 1, 1991, between Registrant and
the U.S. Department of the Army, for the
provision of natural gas service to the
U.S. Military Academy at West Point and
Stewart Army Subpost, together with an
Amendment thereto, effective October 10,
1991. ((22); Exhibit (19)(10)(i)101)
(i) 70-- Fuel Oil Supply Contract, effective
October 1, 1991, among Sun Oil Trading
Company and Registrant, Consolidated
E-16<PAGE>
Edison Company of New York, Inc. and
Niagara Mohawk Power Corporation, for
the supply of fuel oil to the Roseton
Plant. [Certain portions of said
contract setting forth or relating to
pricing provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((22);
Exhibit (19)(10)(i)102)
(i) 71-- Service Agreement, effective December 1,
1990, between Registrant and Texas
Eastern Transmission Corporation, for
firm transportation service under Rate
Schedule FT-1. ((22); Exhibit
(19)(10)(i)103)
(i) 72-- Service Agreement, dated February 25,
1991, between Registrant and Texas
Eastern Transmission Corporation, for
incremental 5,056 dth. under Rate
Schedule CD-1. ((22); Exhibit
(19)(10)(i)104)
(i) 73-- Agreement, dated November 6, 1991,
between Registrant and Mingo Logan Coal
Company, for the sale and purchase of
coal. ((22); Exhibit (19)(10)(i)105)
(i) 74-- Service Agreement, dated January 7,
1992, between Registrant and Texas
Eastern Transmission Corporation, for
the firm transportation of 6,000
dth./day under Rate Schedule FTS-5.
((22); Exhibit (19)(10)(i)106)
(i) 75-- Amendment Nos. 1-4, dated February 21,
1989, May 31, 1990, January 8, 1991 and
November 20, 1991, respectively, by and
between Registrant and Norfolk Southern
Railway, to Contract, dated October 5,
1987, between Registrant and Norfolk and
Western Railway Company, providing for
transportation of coal to the Danskammer
Plant. [Certain portions of said
amendment 4 setting forth or relating to
pricing provisions are omitted and filed
E-17<PAGE>
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((22);
Exhibit (19)(10)(i)107)
(i) 76-- Amendment Nos. 1-3, dated August 30,
1988, December 10, 1990 (effective
December 22, 1990) and January 31, 1992,
respectively, to Agreement, dated as of
November 20, 1987, between Registrant
and Consolidated Rail Corporation to
transport coal to Danskammer Generating
Station. [Certain portions of said
amendments setting forth or relating to
pricing provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((22);
Exhibit (19)(10)(i)108)
(i) 77-- First Amendment, dated as of November 1,
1991, to Agreement for the Sale and
Purchase of Coal, dated as of January 1,
1987, among Registrant, Kentucky Carbon
Corporation and The Carbon Fuel Sales
Company. [Certain portions of said
amendment setting forth or relating to
pricing provisions are omitted and filed
separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((22);
Exhibit (19)(10)(i)109)
(i) 78-- Agreement of Assignment, Assumption,
Consent and Release entered into as of
February 29, 1992 by and among Kentucky
Carbon Corporation, The Carbon Fuel
Sales Company, Massey Coal Sales Company
and Registrant. ((22); Exhibit
(19)(10)(i)111)
(i) 79-- Agreement dated as of July 1, 1992
between Registrant and Tennessee Gas
Pipeline Company for storage of natural
gas. ((23); Exhibit (10)(i)114)
E-18
<PAGE>
(i) 80-- Agreement dated as of July 1, 1992
between Registrant and Tennessee Gas
Pipeline Company for firm transportation
periods. ((23); Exhibit (10)(i)115)
(i) 81-- Fuel Oil Supply Agreement, effective as
of September 1, 1992 between Global
Petroleum Corporation and Registrant,
Consolidated Edison Company of New York,
Inc. and Niagara Mohawk Power
Corporation for the Roseton Electric
Generating Plant. [Certain portions of
said Agreement setting forth or relating
to pricing provisions are omitted and
filed separately with the Securities and
Exchange Commission pursuant to a
request for confidential treatment under
the rules of said Commission.] ((17);
Exhibit (19)(10)(i)99)
(i) 82-- Agreement, dated November 1, 1990,
between Tennessee Gas Pipeline and
Registrant for transportation of third-
party gas for injection into and
withdrawal from Penn York storage.
((17); Exhibit (19)(10)(i)100)
(i) 83-- Agreement, dated December 1, 1991,
between Registrant and Iroquois Gas
Transmission System for interruptible
gas transportation service. ((17);
Exhibit (19)(10)(i)101)
(i) 84-- Letter Agreement, dated August 24, 1992,
between Registrant and Iroquois Gas
Transmission System amending that
certain Agreement, dated December 1,
1991 between said parties for
interruptible gas transportation
service. ((17); Exhibit (19)(10)(i)102)
(i) 85-- Tennessee Gas Pipeline Purchase and
Sales Agreement, dated November 1, 1992
between Registrant and Tenngasco
Corporation. ((17); Exhibit
(19)(10)(i)103)
(i) 86-- Agreement, dated as of July 16, 1993,
between Registrant, Consolidated Edison
Company of New York, Inc., Long Island
E-19<PAGE>
Lighting Company, New York State
Electric & Gas Corporation, Niagara
Mohawk Power Corporation, Orange and
Rockland Utilities, Inc., Rochester Gas
and Electric Corporation and the Power
Authority of the State of New York.
((17); Exhibit (19)(10)(i)104)
(i) 87-- Nine Mile Point Nuclear Station Unit 2
Operating Agreement, effective January
1, 1993, between and among Registrant,
Niagara Mohawk Power Corporation, Long
Island Lighting Company, New York State
Electric & Gas Corporation and Rochester
Gas and Electric Corporation. ((17);
Exhibit (19)(10)(i)105)
(i) 88-- Third Amendment, dated as of July 29,
1992, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Registrant and the Bank named therein.
((2); Exhibit (19)(10)(i)106)
(i) 89-- Second Amendment, dated as of July 29,
1992, to the Reimbursement Agreement,
dated as of July 1, 1987, between
Registrant and the Bank named therein.
((2); Exhibit (19)(10)(i)107)
(i) 90-- Gas Transportation Agreement, dated as
of September 1, 1993, by and between
Tennessee Gas Pipeline Company and
Registrant. ((1); Exhibit
(19)(10)(i)108)
(i) 91-- First Amendment, dated as of October 1,
1993, to Fuel Oil Supply Contract,
effective as of September 1, 1992,
between Global Petroleum Corporation and
Registrant, Consolidated Edison Company
of New York, Inc. and Niagara Mohawk
Power Corporation for the Roseton
Electric Generating Station. ((1);
Exhibit (19)(10)(i)109)
(i) 92-- Second Amendment, dated as of November
1, 1993, to the Agreement for the Sale
and Purchase of Coal, dated as of
January 1, 1987, among Registrant,
Kentucky Carbon Corporation and The
E-20<PAGE>
Carbon Fuel Sales Company. [Certain
portions of said amendment setting forth
or relating to pricing provisions are
omitted and filed separately with the
Securities and Exchange Commission
pursuant to a request for confidential
treatment under the rules of said
Commission.]
(i) 93-- Agreement, dated as of May 20, 1993,
between Registrant and New York State
Electric & Gas Corporation.
(i) 94-- Nine Mile Point Nuclear Station Unit 2
Operating Agreement, effective January
1, 1993, among Registrant, Niagara
Mohawk Power Corporation, Long Island
Lighting Company, New York State
Electric & Gas Corporation and Rochester
Gas and Electric Corporation.
(i) 95-- Amendment No. 2 to Irrevocable Letter of
Credit No. S01880, dated August 12,
1993, relating to the Reimbursement
Agreement, dated as of July 1, 1987, as
amended, between Registrant and the Bank
named therein.
(i) 96-- Amendment No. 2 to Irrevocable Letter of
Credit No. S01881, dated August 12,
1993, relating to the Reimbursement
Agreement, dated as of July 1, 1987, as
amended, between Registrant and the Bank
named therein.
(i) 97-- Amendment No. 2 to Irrevocable Letter of
Credit No. A95056-S, dated August 17,
1993, relating to the Reimbursement
Agreement, dated as of November 1, 1985,
as amended, between Registrant and the
Bank named therein.
(i) 98-- Amendment No. 2 to Irrevocable Letter of
Credit No. A95057-S, dated August 17,
1993, relating to the Reimbursement
Agreement, dated as of November 1, 1985,
as amended, between Registrant and the
Bank named therein.
(iii) 1-- Directors' Deferred Compensation Plan,
effective October 1, 1980. ((16);
Exhibit (10)(iii)1)
E-21<PAGE>
(iii) 2-- Trust Agreement between Registrant and
Dutchess Bank & Trust Company, as
trustee, dated as of January 1, 1984,
pursuant to Registrant's Savings
Incentive Plan. ((2); Exhibit
(10)(iii)2)
(iii) 3-- First Amendment, dated December 31,
1990, to Trust Agreement between
Registrant and The Bank of New York, as
successor trustee, dated as of January
1, 1984, pursuant to Registrant's
Savings Incentive Plan. ((21); Exhibit
(19)(10)(i)99)
(iii) 4-- Savings Incentive Plan of Registrant, as
restated as of January 1, 1987, together
with Amendments thereto dated September
23, 1988 and March 17, 1989,
respectively. ((16); Exhibit
(19)(10)(iii)3)
(iii) 5-- Amendment, dated December 31, 1990, to
Savings Incentive Plan of Registrant, as
amended. ((21); Exhibit (19)(10)(i)98)
(iii) 6-- Amendment, dated January 14, 1991, to
Savings Incentive Plan of Registrant, as
amended. ((24); Exhibit (19)(10)(iii)4)
(iii) 7-- Amendment, dated October 25, 1991, to
Savings Incentive Plan of Registrant, as
amended. ((24); Exhibit (19)(10)(iii)5)
(iii) 8-- Executive Deferred Compensation Plan of
Registrant, effective March 1, 1992.
((22); Exhibit (19)(10)(iii)8)
(iii) 9-- Amendment, dated December 11, 1992, to
Savings Incentive Plan of Registrant, as
amended. ((2); Exhibit (19)(10)(iii)9)
(iii) 10-- Retirement Benefit Restoration Plan of
Registrant, effective May 1, 1993.
((25); Exhibit (10)(iii)10)
(iii) 11-- Amendment, dated July 23, 1993, to
Retirement Benefit Restoration Plan of
Registrant. ((25); Exhibit (10)(iii)11)
E-22<PAGE>
(iii) 12-- Amendment, dated July 23, 1993, to the
Savings Incentive Plan of Registrant.
((25); Exhibit (10)(iii)12)
(iii) 13-- Amendment, dated September 24, 1993, to
the Savings Incentive Plan of
Registrant, as amended.
(iii) 14-- Amendment, dated December 17, 1993, to
the Savings Incentive Plan of
Registrant, as amended.
(iii) 15-- First Amendment, dated December 17,
1993, to the Registrant's Executive
Deferred Compensation Plan.
(iii) 16-- Amendment, dated March 3, 1994, to the
Savings Incentive Plan of Registrant, as
amended.
(iii) 17-- Executive Incentive Compensation Plan of
Registrant, effective January 1, 1993.
(12) -- Statement showing the computation of the ratio of
earnings to fixed charges.
(13) (ii)-- Registrant's Consolidated Financial Statements for
the fiscal year ended December 31, 1993, and the
report thereon of Price Waterhouse, independent
accountant, including the Notes to Consolidated
Financial Statements, which form a part thereof
(pages 30 through 72); Management's Discussion and
Analysis of Financial Condition and Results of
Operations (pages 6 through 29); Five-Year Summary
of Consolidated Operations and Selected Financial
Data (pages 4 and 5); Selected Quarterly Financial
Data (Unaudited) (page 73); and Financial
Highlights (pages 1 through 3), included in
Registrant's annual report to shareholders for the
fiscal year ended December 31, 1993. [Note:
Except for those portions of such annual report
specified above, such annual report is not deemed
"filed" as part of the filing of this Report on
Form 10-K.]
E-23
<PAGE>
(21) -- Subsidiaries of the Registrant:
State or other Name under which
Jurisdiction of Subsidiary conducts
Name of Subsidiary Incorporation Business
Phoenix Development New York Phoenix Development
Company, Inc. Company, Inc.
Greene Point New York Greene Point
Development Corporation Development Corporation
Central Hudson New York Central Hudson
Enterprises Enterprises Corporation
Corporation (formerly
Cruger Development
Corporation)
CH Resources, Inc. New York CH Resources, Inc.
Central Hudson New York Central Hudson
Cogeneration, Inc. Cogeneration, Inc. or
Cencogen
(23) -- Consent of Experts:
The consents of Price Waterhouse appear on page F-2 of
this Annual Report on Form 10-K.
(99) -- Additional Exhibits:
(i) 1 -- Offer to Induce Settlement, dated July 15,
1986, among Niagara Mohawk Power Corporation,
Long Island Lighting Company, New York State
Electric & Gas Corporation, Rochester Gas and
Electric Corporation and Registrant. ((2);
Exhibit (28)(i)1)
(i) 2 -- Response by the Co-tenants to the Public
Service Commission's Inquiry As to
Modification of the Specification of Terms
and Conditions of Offer of Settlement to
Substitute an Allowed Cost of $4.16 Billion,
dated July 15, 1986. ((2); Exhibit (28)(i)2)
(i) 3 -- Stipulation and Order on Consent signed on
behalf of the Department of Environmental
Protection of the City of New York,
Environmental Defense Fund, Inc., Department
of Environmental Conservation of the State of
E-24<PAGE>
New York, Central Hudson Gas & Electric
Corporation and Consolidated Edison Company
of New York, Inc. ((26); Exhibit 28.1)
(i) 4 -- Settlement Agreement on Issues Related to
Nine Mile Two Nuclear Plant, dated June 6,
1990, among the Staff of the Department of
Public Service, the Consumer Protection
Board, the Attorney General of the State of
New York, Assemblyman Maurice Hinchey,
Multiple Intervenors, Registrant, Long Island
Lighting Company, New York State Electric &
Gas Corporation, Niagara Mohawk Power
Corporation and Rochester Gas and Electric
Corporation. ((21); Exhibit (19)(28)(i)4)
__________________
The following are notes to the Exhibits listed above:
(1) Incorporated herein by reference to
Registrant's Quarterly report on Form 10-Q
for fiscal quarter ended September 30, 1993
(File No. 1-3268).
(2) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K/A for
the fiscal year ended December 31, 1992 (File
No. 1-3268).
(3) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
65127.
(4) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
67537.
(5) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
69640
(6) (a) Incorporated herein by reference to
Prospectus Supplement Dated May 28, 1992 (To
Prospectus Dated April 13, 1992) relating to
$125,000,000 principal amount of First
Mortgage Bonds, designated Secured Medium-
Term Notes, Series A, and to the Prospectus
Dated April 13, 1992 relating to $125,000,000
principal amount of Registrant's debt
securities attached thereto, as filed with
E-25<PAGE>
the Securities and Exchange Commission
pursuant to Rule 424(b)(5) under the
Securities Act of 1933, in connection with
Registration Statement No. 33-46624.
(b) Incorporated herein by reference to Pricing
Supplement No. 1, Dated June 4, 1992 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(c) Incorporated herein by reference to Pricing
Supplement No. 2, Dated June 4, 1992 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(d) Incorporated herein by reference to Pricing
Supplement No. 3, Dated June 4, 1992 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(e) Incorporated herein by reference to Pricing
Supplement No. 4, Dated August 20, 1992 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(f) Incorporated herein by reference to Pricing
Supplement No. 5, Dated August 20, 1992 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
E-26<PAGE>
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(g) Incorporated herein by reference to Pricing
Supplement No. 6, Dated July 26, 1993 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(h) Incorporated herein by reference to Pricing
Supplement No. 7, Dated July 26, 1993 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(7) Incorporated herein by reference to
Registrant's Current Report on Form 8-K,
dated May 27, 1992 (File No. 1-3268).
(8) (a) Incorporated herein by reference to
Prospectus Supplement Dated May 28, 1992 (To
Prospectus Dated April 13, 1992) relating to
$125,000,000 principal amount of Medium-Term
Notes, Series A, and to the Prospectus Dated
April 13, 1992, relating to $125,000,000
principal amount of Registrant's debt
securities attached thereto, as filed with
the Securities and Exchange Commission
pursuant to Rule 424(b)(5) under the
Securities Act of 1933, in connection with
Registration Statement No. 33-46624.
(b) Incorporated herein by reference to Pricing
Supplement No. 1, Dated June 26, 1992 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
E-27<PAGE>
(c) Incorporated herein by reference to Pricing
Supplement No. 2, Dated October 6, 1993 (To
Prospectus Dated April 13, 1992, as
supplemented by a Prospectus Supplement Dated
May 28, 1992), as filed with the Securities
and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 in
connection with Registration Statement No.
33-46624.
(9) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
66511.
(10) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
36680.
(11) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
50276.
(12) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
54690.
(13) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
58500.
(14) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1986 (File
No. 1-3268).
(15) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
60496.
(16) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989 (File
No. 1-3268).
(17) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (File
No. 1-3268).
E-28
<PAGE>
(18) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987 (File
No. 1-3268).
(19) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1989
(File No. 1-3268).
(20) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1989 (File No. 1-3268).
(21) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (File
No. 1-3268).
(22) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991 (File
No. 1-3268).
(23) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1992 (File No. 1-3268).
(24) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1991 (File No. 1-3268).
(25) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1993
(File No. 1-3268).
(26) Incorporated herein by reference to
Registrant's Current Report on Form 8-K,
dated May 15, 1987 (File No. 1-3268).
* Exhibits preceded by an asterisk have heretofore been
classified as basic documents under previous Rule 24(b)
of the SEC Rules of Practice.
E-29
</PAGE>
<PAGE>
EXHIBIT NO. (3) (ii) 1
B Y - L A W S
OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
<PAGE>
B Y - L A W S
OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
___________________
ARTICLE I.
MEETINGS OF SHAREHOLDERS
SECTION 1. Place of Meeting. All meetings of the
shareholders shall be held at the principal office of the
Corporation in the City of Poughkeepsie, County of Dutchess,
State of New York, or at such other place or places in the
State of New York as may from time to time be fixed by the
Board of Directors.
SECTION 2. Annual Meeting. The Annual Meeting of the
shareholders, for the election of directors and the
transaction of such other business as may be brought before
the meeting, shall be held each year on the first Tuesday in
April (or if said day be a legal holiday, then on the next
succeeding business day), at such time of day as the directors
may determine.
SECTION 3. Special Meetings. Special meetings of the
shareholders may be called by the Board of Directors or by the
Chairman of the Board of Directors or by the President, or by
shareholders together holding at least one third of the
capital stock of the Corporation entitled to vote or act with
respect thereto upon the business to be brought before such
meeting.
SECTION 4. Notice of Meetings. Notice of any annual or
special meeting of the shareholders shall be in writing and
shall be signed by the Chairman of the Board of Directors or
the President or the Secretary or an Assistant Secretary.
Such notice shall state the purpose or purposes for which the
meeting is called and shall state the place, date and hour of
the meeting and, unless it is the annual meeting, indicate
that it is being issued by or at the direction of the person
or persons calling the meeting. A copy of the notice of any
meeting shall be given, personally or by first-class mail, not
fewer than ten nor more than fifty days before the date of the
meeting, provided, however, that a copy of such notice may be
given by third-class mail not fewer than twenty-four nor more
than fifty days before the date of the meeting, to each
shareholder entitled to vote at such meeting. If mailed, such
notice is given when deposited in the United States mail, with
postage thereon prepaid, directed to the shareholder at his
address as it appears on the record of shareholders, or, if he
shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other
address, then directed to him at such other address. An
affidavit of the Secretary of the Corporation or other person
giving the notice or of a transfer agent of the Corporation
that the notice required by this section has been given shall
be supplied at the meeting to which it relates.
SECTION 5. Quorum. Except as otherwise provided by
statute, the holders of a majority of the shares entitled to
vote thereat shall constitute a quorum at a meeting of
shareholders for the transaction of any business, provided
that when a specified item of business is required to be voted
on by a class or series, voting as a class, the holders of a
majority of the shares of such class or series shall
constitute a quorum for the transaction of such specified item
of business.
SECTION 6. Inspectors. The person presiding at a
shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint one or
more inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his
ability. The inspectors shall determine the number of shares
outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine questions arising in
connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such
acts as are proper to conduct the election or vote with
fairness to all shareholders. The inspectors shall make a
report in writing of any matter determined by them and execute
a certificate of any fact found by them.
SECTION 7. Adjournment of Meetings. Any meeting of
shareholders may be adjourned by a majority vote of the
shareholders present or represented by proxy despite the
absence of a quorum. When a meeting of shareholders is
adjourned to another time or place, it shall not be necessary
to give any notice of the adjourned meeting if the time and
place to which the meeting is adjourned are announced at the
meeting at which the adjournment is taken, and at the
adjourned meeting at which a quorum shall be present, any
business may be transacted, and any corporate action may be
taken, which might have been transacted or taken if the
meeting had been held as originally called.
SECTION 8. Voting. Every shareholder of record shall
be entitled at every meeting of the shareholders to one vote
for every share of stock standing in his name on the record of
shareholders of the Corporation unless otherwise provided in
the Certificate of Incorporation and amendments thereto and
except as provided in Section 9 of this Article I. Every
shareholder entitled to vote at a meeting of shareholders may
authorize another person or persons to act for him by proxy.
No proxy shall be valid after the expiration of eleven months
from the date thereof unless otherwise provided in the proxy.
A list of shareholders as of the record date certified by the
officer responsible for its preparation or by a transfer agent
shall be available at every meeting of shareholders and shall
be produced upon the request of any shareholder, and all
persons who appear from such list to be shareholders entitled
to vote thereat may vote at such meeting.
SECTION 9. Record Date. For the purpose of determining
the shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a
meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment
of any rights, or for the purpose of any other action, the
Board of Directors may fix, in advance, a date as the record
date for any such determination of shareholders. Such date
shall not be more than fifty nor less than ten days before the
day of such meeting, nor more than fifty days prior to any
other action.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 1. Number. The number of directors
constituting the entire Board shall be eleven. The number of
directors may be increased, or decreased to not less than
three, by amendment of the by-laws adopted by vote of a
majority of the entire Board of Directors.
SECTION 2. Election of Directors. Except as otherwise
required by law or by the Certificate of Incorporation as
amended, and except as hereinafter otherwise provided by
Sections 5 and 6 of this Article II, directors shall be
elected by a plurality of the votes cast at the annual meeting
of shareholders by the holders of shares entitled to vote at
the election and shall hold office until the next annual
meeting of shareholders.
SECTION 3. Term of Office. Each director shall, except
as hereinafter provided in Section 4 and in Section 6 of this
Article II, hold office until the expiration of the term for
which he is elected and until his successor has been elected
and qualified.
SECTION 4. Resignation and Removal. Any director may
resign at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Chairman
of the Board of Directors or the President or the Secretary.
The acceptance of a resignation shall not be necessary to make
it effective unless so specified therein. Any director may at
any time, with or without cause, be removed by vote of the
shareholders at a special meeting called for that purpose.
When, however, pursuant to the provisions of the Certificate
of Incorporation as amended, the holders of the shares of any
class or series, voting as a class, have the right to elect
one or more directors, such director or directors so elected
may be removed only by the applicable vote of the holders of
the shares of that class or series, voting as a class.
SECTION 5. Newly Created Directorships and Vacancies.
Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board for
any reason, except the removal of directors without cause, and
except as provided for in Section 6 of this Article II, may be
filled by vote of a majority of the directors then in office,
although less than a quorum exists. A vacancy occurring in
the Board by reason of the removal of a director without
cause, may be filled only by vote of the shareholders, subject
to the provisions of said Section 6. A director elected to
fill a vacancy shall be elected to hold office for the
unexpired term of his predecessor, and until his successor is
elected and qualified.
SECTION 6. Election of Directors by Holders of
Preferred Stock. Anything in the by-laws to the contrary
notwithstanding: In case dividends on any series of the
serial preferred stock of the Corporation at the rate or rates
prescribed for such series shall not have been paid in full
for periods aggregating one year or more, than, and until full
cumulative dividends thereon shall have been paid, the holders
of each such series shall have the right, together with
holders of all other serial preferred stock in respect to
which the same right shall be conferred, to elect a majority
of the members of the Board of Directors of the corporation.
Whenever the holders of any series of serial preferred stock
shall become so entitled, either separately or together with
the holders of other serial preferred stock as aforesaid, to
elect a majority of the members of the Board of Directors, and
upon the written request of the holders of record of at least
five percent of the total number of shares of serial preferred
stock then outstanding and entitled to such right of election,
addressed to the Secretary of the Corporation, a special
meeting of the holders of serial preferred stock entitled to
such right of election and the holders of Common Stock shall
be called for the purpose of electing directors. At such
meeting the holders of serial preferred stock and the holders
of Common Stock shall vote separately, and the holders of
serial preferred stock present in person or by proxy at such
meeting shall be entitled to elect, by a plurality of votes
cast by them, a majority of the members of a new Board of
Directors of the corporation, and the holders of Common Stock
present in person or by proxy shall be entitled to elect, by
a plurality of votes cast by them, the remainder of the new
Board of Directors. The persons so elected as directors shall
thereupon constitute the Board of Directors of the
Corporation, and the terms of office of the previous directors
of the Corporation shall thereupon terminate. The term "a
majority of the members of Board of Directors" as herein used
shall mean one more than one half of the total number of
directors provided for by the by-laws, regardless of the
number then in office, and in case one half of such number
shall not be a whole number, such one half shall be the next
smaller whole number. In the event of any vacancy in the
Board of Directors among the directors elected by the holders
of serial preferred stock, such vacancy may be filled by the
other directors elected by them, and if not so filled may be
filled by the holders of serial preferred stock entitled to
the right of election as aforesaid at a special meeting of the
holders of said stock called for that purpose, and such a
meeting shall be called upon the written request of at least
five percent of the total number of shares of serial preferred
stock then outstanding and entitled to such right of election.
If and when, however, full cumulative dividends upon any
series of the serial preferred stock shall at any subsequent
time be paid, then and thereupon such power of the holders of
such series of serial preferred stock to vote in the election
of a majority of the members of the Board of Directors shall
cease; subject, however, to being again revived at any
subsequent time if there shall again be default in payment of
dividends upon such series of serial preferred stock for
periods aggregating one year or more as aforesaid. Whenever
such power of the holders of all series of serial preferred
stock to vote shall cease, the proper officer of the
Corporation may and upon the written request of the holders of
record of five percent of the total number of shares of Common
Stock then outstanding shall call a special meeting of the
holders of Common Stock for the purpose of electing directors.
At any meeting so called, the holders of a majority of the
Common Stock then outstanding, present in person or by proxy,
shall be entitled to elect, by a plurality of votes, a new
Board of Directors of the Corporation. The persons so elected
as directors shall thereupon constitute the Board of Directors
of the Corporation, and the terms of office of the previous
directors of the Corporation shall thereupon terminate.
SECTION 7. Regular Meetings. The directors shall hold
a regular annual meeting for the election of officers as soon
as practicable after the adjournment of the Annual Meeting of
the shareholders, and, in addition, regular meetings of the
directors shall be held at such times as the Board of
Directors may by resolution determine. No notice of the
Annual Meeting shall be required if held immediately after the
Annual Meeting of the shareholders and if a quorum is present.
SECTION 8. Special Meetings. Special meetings of the
directors may be called by the Chairman of the Board of
Directors or by the President or by any two directors at any
time and must be called by the Secretary on the written
request of any two directors.
SECTION 9. Notice and Place of Meetings. Regular
meetings shall be held at such place or places either within
or without the State of New York as the Board of Directors may
from time to time determine. Special meetings shall be held
at such place or places either within or without the State of
New York as may be specified in the respective notices of the
meetings. Except as provided in Section 7 of this Article II,
notice of any regular or special meeting of the directors
shall be mailed to each director addressed to him at his
residence or usual place of business at least two days before
the day on which the meeting is to be held, or shall be sent
to him at such place by telegraph, or be delivered personally
or by telephone, not later than the day before the day on
which the meeting is to be held.
SECTION 10. Business Transacted at Meetings. Any
business may be transacted and any corporate action taken at
any regular or special meeting of the directors whether stated
in the notice of the meeting or not.
SECTION 11. Quorum and Manner of Acting. Any five of
the directors in office at the time of any meeting of the
Board shall constitute a quorum and, except as by law
otherwise provided, the act of a majority of the directors
present at any such meeting, at which a quorum is present,
shall be the act of the Board of Directors. In the event it
is necessary to obtain a quorum, and only in such event, at
the discretion of the presiding Board member, any one or more
members of the Board may be present and participate in a
meeting of the Board by means of a conference telephone or
similar communications equipment allowing all persons
participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence
in person at such meeting. In the absence of a quorum, the
directors present may adjourn the meeting from time to time
until a quorum be had. Notice of any adjourned meeting need
not be given other than by announcement at the meeting. The
directors shall act only as a Board and the individual
directors shall have no power as such.
SECTION 12. Compensation. As compensation for the
services of the directors, each director, other than an
employee of the Corporation, shall receive annually the amount
of $10,000 and, in addition, the sum of $600 for each regular
or special meeting of the Board which he attends.
SECTION 13. Indemnification of Officers and Directors.
Any person made, or threatened to be made a party to any
action or proceedings, whether civil or criminal, by reason of
the fact that he, his testator or intestate, is or was a
director or officer of the Board of Directors, or officer or
employee of the Corporation or serves or served any other
corporation in any capacity at the request of the Corporation,
shall be indemnified by the Corporation, and the Corporation
may advance his related expenses, to the full extent
authorized or permitted by law. The Corporation may enter
into indemnification agreements with such directors and
officers, as the Chairman of the Board and/or President shall
authorize, to the full extent authorized or permitted by law.
SECTION 14. Committees of the Board. The Board, by
resolution adopted by a majority of the entire Board, may
designate from among its members, in addition to the Executive
Committee provided for in Article III of these By-Laws,
committees of the Board, each consisting of three or more
directors, and each of which shall have the powers and duties
prescribed in the resolution designating such committees.
Anything in these By-Laws or in the resolution designating
such committees to the contrary notwithstanding, in the event
it is necessary to obtain a quorum, and only in such event, at
the discretion of the presiding committee member, any one or
more members of any committee of the Board of Directors may
participate in any meeting of such committee by means of a
conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each
other at the same time. Participation by such means shall
constitute presence in person at such meeting.
ARTICLE III.
EXECUTIVE COMMITTEE
SECTION 1. How Constituted and Powers. The Board of
Directors, by resolution adopted by a majority of the entire
Board, may designate two or more of the directors, together
with the Chairman of the Board of Directors, and the
President, to constitute an Executive Committee, to serve at
the pleasure of the Board, which Committee shall during the
intervals between meetings of the Board of Directors, unless
limited by the resolution appointing such Committee, have
authority to exercise all or any of the powers of the Board of
Directors in the management of the affairs of the Corporation,
insofar as such powers may lawfully be delegated. The Board
may designate one or more directors as alternate members of
such Committee, who may replace any absent member or members
at any meeting of such Committee.
SECTION 2. Removal and Resignation. Any member of the
Executive Committee, except a member ex officio, may be
removed at any time with or without cause, by resolution
adopted by a majority of the entire Board. Any member of the
Executive Committee may resign at any time. Such resignation
shall be in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of
its receipt by the Chairman of the Board of Directors or the
President or Secretary. The acceptance of a resignation shall
not be necessary to make it effective unless so specified
therein. Any person ceasing to be a director shall ipso facto
cease to be a member of the Executive Committee.
SECTION 3. Filling of Vacancies. Any vacancy among the
members of the Executive Committee occurring from any cause
whatsoever may be filled from among the directors by a
majority of the entire Board of Directors.
SECTION 4. Quorum. A majority of the members of the
Executive Committee shall constitute a quorum. The act of a
majority of the members of the Executive Committee present at
any meeting at which a quorum is present shall be the act of
the Executive Committee. The members of the Executive
Committee shall act only as a committee and the individual
members thereof shall have no powers as such.
SECTION 5. Record of Proceedings, etc. The Executive
Committee shall keep a record of its acts and proceedings and
shall report the same to the Board of Directors when and as
required.
SECTION 6. Organization, Meetings, etc. The Executive
Committee shall make such rules as it may deem expedient for
the regulation and carrying on of its meetings and
proceedings.
SECTION 7. Compensation of Members. The members of the
Executive Committee shall be entitled to such compensation as
may be allowed them by resolution of the Board of Directors.
ARTICLE IV.
OFFICERS
SECTION 1. Election. The Board of Directors, at its
regular annual meeting, shall elect or appoint from their
number a Chairman of the Board of Directors and the Chairmen
of Committees of the Board and may elect or appoint a vice
chairman of the Board of Directors and vice chairmen of
Committees of the Board, which officers shall be officers of
the Board; and it shall elect or appoint a President, one or
more Vice Presidents, a Secretary, a Treasurer, and a
Controller which officers shall be officers of the
Corporation. Each of said officers, subject to the provisions
of Sections 2 and 3 of this Article, shall hold office, if
elected, until the meeting of the Board following the next
Annual Meeting of shareholders and until his successor has
been elected and qualified, or, if appointed, for the term
specified in the resolution appointing him and until his
successor has been elected or appointed. Any two or more
offices may be held by the same person, except the offices of
President and Secretary. Should any of the officers of the
Board or the President cease to be a director, he shall ipso
facto cease to be such officer.
SECTION 2. Removal. Any officer may be removed
summarily with or without cause at any time by resolution of
the Board of Directors, or, except in the case of any officer
elected by the Board of Directors, by any committee or officer
upon whom such power of removal may be conferred by the Board
of Directors, without prejudice, however, to any rights which
any such person may have by contract.
SECTION 3. Resignation of Officers. Any officer may
resign at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, or, if no
time be specified, at the time of its receipt by another
officer of the Corporation. The acceptance of a
resignation shall not be necessary to make it effective unless
so specified therein.
SECTION 4. Filling of Vacancies. A vacancy in any
office, from whatever cause arising, shall be filled for the
unexpired portion of the term in the manner provided in these
by-laws for the regular election or appointment of such
officer.
SECTION 5. Compensation. The compensation of the
officers shall be fixed by the Board of Directors or by any
committee or superior officer upon whom power in that regard
may be conferred by the Board of Directors.
SECTION 6. Chairman of the Board of Directors and Chief
Executive Officer. The Chairman of the Board of Directors
shall, when present, preside at all meetings of the
shareholders and the Board of Directors. He shall be Chairman
of the Executive Committee. He shall be responsible for
direction of the policy of the Board of Directors and shall
have the power and perform the duties necessary to implement
such responsibility. He shall be the Chief Executive Officer
of the Corporation and shall have the power and perform the
duties usually appertaining to the chief executive of a
corporation.
SECTION 7. Vice Chairman of the Board of Directors. In
the absence of the Chairman of the Board of Directors, the
Vice Chairman shall, when present, preside at all meetings of
the shareholders and the Board of Directors. He shall have
such powers and perform such duties as the Chairman of the
Board of Directors shall delegate to him.
SECTION 8. President and Chief Operating Officer. The
President shall, subject to the authority of the Chairman of
the Board of Directors, have the power and perform the duties
usually appertaining to the president of a corporation, and
such power and duties as the Chairman of the Board of
Directors shall assign to him. He shall be a member of the
Board of Directors and of the Executive Committee. He shall
be the Chief Operating Officer of the Corporation and shall
have the power and perform the duties usually appertaining to
the chief operating officer of a corporation.
SECTION 9. The Vice Presidents. The Vice Presidents
shall have such duties as may from time to time be assigned to
them by the Board of Directors or the President, or by the
Chairman of the Board in the President's absence. When
performing the duties of the President, they shall have all
the powers of, and be subject to all the restrictions upon,
the President.
SECTION 10. The Treasurer. The Treasurer shall:
(a) Except as otherwise ordered by the Board, have
charge and custody of, and be responsible for all funds,
securities, receipts and disbursements of the Corporation and
shall deposit, or cause to be deposited, all money and other
valuable effects in its name in such banks, trust companies or
other depositaries as shall be selected in accordance with
these by-laws;
(b) Receive and give receipts for payments made to the
Corporation and take and preserve proper receipts for all
monies disbursed by it;
(c) In general, perform such duties as are incident to
the office of Treasurer, or as may be from time to time
assigned to him by the Board of Directors or the President, or
as may be prescribed by law or by these by-laws.
The Treasurer shall give to the Corporation a bond if,
and in such sum as, required by the Board of Directors,
conditioned for the faithful performance of the duties of his
office and the restoration to the Corporation at the
expiration of his term of office, or in case of his death,
resignation or removal from office, of all books, papers,
vouchers, money or other property of whatever kind, in his
possession belonging to the Corporation.
SECTION 11. Controller. The Controller shall:
(a) Keep at the office of the Corporation correct books
of account of all its business and transactions, subject to
the supervision and control of the President and Treasurer;
(b) Exhibit at all reasonable times his books of
accounts and records to any of the directors upon application
during business hours at the office of the Corporation where
such books and records are kept;
(c) Render a full statement of the financial condition
of the Corporation whenever requested so to do by the
President or by the Board of Directors; and
(d) In general, perform such duties as may be from time
to time assigned to him by the Board of Directors or the
President.
SECTION 12. The Secretary. The Secretary shall:
(a) Keep the minutes of the meetings of the
shareholders, Board of Directors and Executive Committee in
books provided for the purpose;
(b) See that all notices are duly given in accordance
with the provisions of these by-laws or as required by law;
(c) Be custodian of the seal of the Corporation and see
that it or a facsimile thereof is affixed to all stock
certificates prior to their issue, and that it is affixed to
all documents the execution of which under the seal of the
Corporation is duly authorized or which require that the seal
be affixed thereto;
(d) Have charge of the stock certificate books of the
Corporation and keep, or cause to be kept, at the office of
the Corporation or at the office of its transfer agent or
registrar, a record of shareholders of the Corporation,
containing the names and addresses of all shareholders, the
number and class of shares held by each and the dates when
they respectively became the owners of record thereof; and
(e) In general, perform such duties as are incident to
the office of Secretary, or as may be from time to time
assigned to him by the Board of Directors or the President, or
as are prescribed by law or by these by-laws.
SECTION 13. Other Officers. Other officers, including
one or more additional Vice Presidents, may from time to time
be appointed by the Board of Directors or by any officer or
committee upon whom a power of appointment may be conferred by
the Board of Directors, which other officers shall have such
powers and perform such duties as may be assigned to them by
the Board of Directors or the President and shall hold office
for such terms as may be designated by the Board of Directors
or the officer or committee appointing them.
ARTICLE V.
CONTRACTS, LOANS, BANK ACCOUNTS, ETC.
SECTION 1. Contracts, etc., How Executed. The Board of
Directors, except as in these by-laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter
into any contract or execute and deliver any instrument in the
name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances, and, unless
so authorized by the Board of Directors, no officer or agent
or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its
credits or to render it liable pecuniarily for any purpose or
to any amount.
SECTION 2. Loans. No loans shall be contracted on
behalf of the Corporation and no negotiable paper shall be
issued in its name, unless authorized by the vote of the Board
of Directors. When so authorized, any officer or agent of the
Corporation may effect loans and advances for the Corporation
from any bank, trust company or other institution, or from any
firm, corporation or individual and for such loans and
advances may make, execute and deliver promissory notes, bonds
or other evidences of indebtedness of the corporation. When
so authorized any officer or agent of the Corporation, as
security for the payment of any and all loans, advances,
indebtedness and liabilities of the Corporation, may pledge,
hypothecate or transfer any and all stocks, securities and
other personal property at any time held by the Corporation,
and to that end endorse, assign and deliver the same. Such
authority may be general or confined to specific instances.
The Board of Directors may authorize any mortgage or pledge
of, or the creation of a security interest in, all or any part
of the corporate property, or any interest therein, wherever
situated.
SECTION 3. Checks, Drafts, etc. All checks, drafts or
other orders for the payment of money, notes or other evidence
of indebtedness issued in the name of the Corporation shall be
signed by the Treasurer or such other officer or officers,
agent or agents of the Corporation and in such manner as shall
from time to time be determined by resolution of the Board of
Directors.
SECTION 4. Deposits. All funds of the Corporation
shall be deposited from time to time to its credit in such
banks, trust companies or other depositaries as the Board of
Directors may select, or as may be selected by an officer or
officers, agent or agents of the Corporation to whom such
power, from time to time, may be delegated by the Board of
Directors and, for the purpose of such deposit, checks, drafts
and other orders for the payment of money which are payable to
the order of the Corporation may be endorsed, assigned and
delivered by the President or a Vice President, or the
Treasurer or the Secretary, or by any officer, agent or
employee of the Corporation to whom any of said officers, or
the Board of Directors, by resolution, shall have delegated
such power.
SECTION 5. General and Special Bank Accounts. The
Board of Directors may from time to time authorize the opening
and keeping of general and special bank accounts with such
banks, trust companies or other depositaries as the Board may
select and may make such special rules and regulations with
respect thereto, as it may deem expedient.
ARTICLE VI.
SECTION 1. Issue of Certificates of Stock.
Certificates for shares of the capital stock of the
Corporation shall be in such form as shall be approved by the
Board of Directors. They shall be numbered, as nearly as may
be, in the order of their issue and shall be signed by the
Chairman of the Board of Directors or by the President or a
Vice President, and by the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer, and sealed with
the seal of the Corporation or a facsimile thereof. The
signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation
itself or its employee.
SECTION 2. Transfer of Stock. Shares of the capital
stock of the Corporation shall be transferable by the holder
thereof in person or by duly authorized attorney upon
surrender of the certificate or certificates for such shares
properly endorsed. Every certificate of stock exchanged or
returned to the Corporation shall be appropriately cancelled.
A person in whose name shares of stock stand on the books of
the Corporation shall be deemed the owner thereof as regards
the Corporation. The Board of Directors may make such other
and further rules and regulations as they may deem necessary
or proper concerning the issue, transfer and registration of
stock certificates.
SECTION 3. Lost, Destroyed and Mutilated Certificates.
The holder of any stock of the Corporation shall immediately
notify the corporation of any loss, destruction or mutilation
of the certificates therefor. The Corporation may issue a new
certificate of stock in the place of any certificate
theretofore issued by it alleged to have been lost or
destroyed, and the Board of Directors may, in its discretion,
require the owner of the lost or destroyed certificate or his
legal representatives to give the Corporation a bond in such
sum and with such surety or sureties, as they may require to
indemnify the Corporation, and any registrar or transfer agent
of its stock, against any claim that may be made against it by
reason of the issue of such new certificate and against all
other liability in the premises.
ARTICLE VII.
DIVIDENDS, SURPLUS, ETC.
SECTION 1. General Discretion of Directors. The Board
of Directors shall have the power from time to time to fix and
determine and to vary the amount of working capital of the
Corporation, to determine whether any and, if any, what
dividends shall be declared and paid to the shareholders, to
fix the date or dates for the payment of dividends, and to fix
a time, not exceeding 50 days preceding the date fixed for the
payment of any dividend, as a date for the determination of
shareholders entitled to receive payment of such dividend.
When any dividend is paid or any other distribution is made,
in whole or in part, from sources other than earned surplus,
it shall be accompanied by a written notice (1) disclosing the
amounts by which such dividend or distribution affects stated
capital, surplus and earned surplus, or (2) if such amounts
are not determinable at the time of such notice, disclosing
the approximate effect of such dividend or distribution as
aforesaid and stating that such amounts are not yet
determinable.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the
Corporation shall be the calendar year.
SECTION 2. Waiver of Notice. Notice of meeting need
not be given to any shareholder who submits a signed waiver of
notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at a meeting, in
person or by proxy, without protesting prior to the conclusion
of the meeting the lack of notice of such meeting, shall
constitute a waiver of notice by him. Notice of a meeting
need not be given to any director who submits a signed waiver
of notice whether before or after the meeting, or who attends
the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him. Whenever the
Corporation or the Board of Directors or any committee thereof
is authorized to take any action after notice to any person or
persons or after the lapse of a prescribed period of time,
such action may be taken without notice and without the lapse
of such period of time, if at any time before or after such
action is completed the person or persons entitled to such
notice or entitled to participate in the action to be taken
or, in the case of a shareholder, by his attorney-in-fact,
submit a signed waiver of notice of such requirements.
SECTION 3. Notices. Whenever by the by-laws any
written notice is required to be given to any shareholder,
director or officer, the same may be given, unless otherwise
required by law and except as hereinbefore otherwise expressly
provided, by delivering it personally to him or by
mailing or telegraphing it to him at his last known post
office address. Where a notice is mailed or telegraphed, it
shall be deemed to have been given at the time it is mailed or
telegraphed.
SECTION 4. Examination of Books. The Board of
Directors shall, subject to the laws of the State of New York
have power to determine from time to time, whether, to what
extent, and under what conditions and regulations the accounts
and books of the Corporation or any of them shall be open to
the inspection of the shareholders, and no shareholder shall
have any right to inspect any account book or document of the
Corporation except as conferred by the laws of the State of
New York unless and until authorized so to do by resolution of
the Board of Directors or shareholders of the Corporation.
SECTION 5. Gender. Words used in these by-laws
importing the male gender shall be construed to include the
female gender, wherever appropriate.
ARTICLE IX.
AMENDMENTS
SECTION 1. Amendment by Directors. The Board of
Directors shall have the power without the assent or vote of
the shareholders to adopt by-laws, and except as hereinafter
provided in Section 2 of this Article, and subject to such
limitations as may be imposed by law, to rescind, alter, amend
or repeal by a vote of a majority of the whole Board any of
the by-laws, whether adopted by the Board or by the
shareholders.
SECTION 2. Amendment by Shareholders. The shareholders
shall have power to rescind, alter, amend or repeal any by-
laws and to adopt by-laws which, if so expressed, may not be
rescinded, altered, amended or repealed by the Board of
Directors.
January 28, 1994
</PAGE>
<PAGE>
EXHIBIT (10) (i) 92
SECOND AMENDMENT TO THE
AGREEMENT FOR THE SALE AND PURCHASE OF COAL
THIS SECOND AMENDMENT ("AMENDMENT"), dated as of
November 1, 1993 TO THAT AGREEMENT ("AGREEMENT") FOR THE SALE AND
PURCHASE OF COAL made and entered into as of the 1st day of
January 1987 by and between CENTRAL HUDSON GAS & ELECTRIC
CORPORATION, (hereinafter referred to as "BUYER") and KENTUCKY
CARBON CORPORATION (hereinafter referred to as "SELLER" or
"PRODUCER") and THE CARBON FUEL SALES COMPANY (hereinafter
referred to as "SALES AGENT") and as later assigned by "SELLER"
and "PRODUCER" with the consent of "BUYER" to MASSEY COAL SALES
COMPANY ("ASSIGNEE").
WITNESSETH:
WHEREAS, Article I of the AGREEMENT provides that
beginning July 1, 1991, and six months prior to the end of each
contract year thereafter, BUYER, SALES AGENT and SELLER shall
commence good faith negotiations with respect to quantity,
quality and price of coal for the next Contract Year; and
WHEREAS, the ASSIGNEE assumed the contractual
responsibilities of SALES AGENT and SELLER pursuant to an AGREE-
MENT OF ASSIGNMENT, ASSUMPTION, CONSENT AND RELEASE dated
February 29, 1992, by and among BUYER, SALES AGENT and SELLER
(collectively referred to as "ASSIGNOR") and ASSIGNEE; and
WHEREAS, notice was duly given and BUYER and ASSIGNEE
entered into good faith negotiations; and
WHEREAS, after completion of good faith negotiations,
BUYER and ASSIGNEE desire to amend the AGREEMENT to provide for a
replacement pricing mechanism for coal sold and bought thereunder
and to revise certain other AGREEMENT provisions; and
WHEREAS, THIS SECOND AMENDMENT replaces the FIRST
AMENDMENT TO THE AGREEMENT FOR THE SALE AND PURCHASE OF COAL,
dated November 1, 1991 in its entirety, effective January 1,
1994;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants set forth herein, the parties hereto agree
as follows:
1. For only the Contract Year occurring during the
calendar year 1994, Article II (Deliveries), Article III
(Specifications and Quality and Weight), Article IV (Payment),
Article V (Base Price) and Article VII (Adjustment in Current
Base Price for Quality) of the AGREEMENT shall be respectively
amended in their entirety to read as follows:
ARTICLE II
DELIVERIES
Section 1. Quantities/Delivery Schedule: Except as
provided for below, the quantity of coal sold and purchased here
under shall be a firm tonnage of no less than 240,000 tons per
year ("Firm Tonnage"). In addition, there will be 120,000 tons
per year called incremental tonnage ("Incremental Tonnage") which
will be sold and purchased hereunder provided that the delivered
cost per million Btu's of oil, natural gas or spot coal usable at
BUYER's Danskammer Point Plant ("Danskammer Plant" or
"BUYER's Plant") exceeds the then-applicable delivered Current
Base Price of coal in delivered cost per million Btu's.
The ASSIGNEE will assume that three trains of approxi-
mately 10,000 tons each will be loaded for shipment each month.
Two of those trains will be Firm Tonnage and one will be
Incremental Tonnage. The BUYER must indicate to the ASSIGNEE not
later than the 22nd of the month preceding each proposed
Incremental Tonnage shipment if the then-current delivered price
of oil, natural gas or spot coal to the Danskammer Plant is below
the delivered Current Base Price of coal. If such written notice
is not received by the ASSIGNEE by the 22nd then three trains
will be shipped the next month at the then-Current Base Price.
In the event such a written notice is received, and the ASSIGNEE
wishes to match the then-current price of oil, natural gas or
spot coal as so delivered, the ASSIGNEE must notify the BUYER of
the same in writing not later than the last working day of that
month. In the event that such notification is given then, the
coal will be shipped as scheduled, with the Incremental Tonnage
at the matched price and the Firm Tonnage at the then-Current
Base Price. If the written notice to match the price is not
received by the BUYER by the last working day of the month, the
Incremental Tonnage train will not be shipped as scheduled. The
ASSIGNEE reserves the right to reoffer any unshipped Incremental
Tonnage to the BUYER at another time in the ensuing 12 months
(commencing with the month during which the unshipped Incremental
Tonnage would otherwise have been shipped) at the then-Current
Base Price. In each such instance, BUYER will then have the
option to accept that Incremental Tonnage or permanently cancel
that Incremental Tonnage. The delivered coal cost, the delivered
oil cost, the delivered natural gas cost and the delivered spot
coal cost shall be determined as shown on Exhibit No. 1.
Section 2. Limitations on Quantities: Notwith-
standing any of the above, BUYER will not be obligated to
purchase Firm and Incremental Tonnage coal from ASSIGNEE under
this AGREEMENT if BUYER is unable to utilize such coal because
the Danskammer Plant is not in "economic dispatch". If, because
of economic reasons, the Danskammer Plant does not then require
all coal contracted for under all then-existing contracts, BUYER
shall notify ASSIGNEE in writing and BUYER will reduce the
tonnage taken from all such contract suppliers on a proportional
basis. The tonnage taken from each such contract supplier will
be in proportion to the annual Firm Tonnage in each such
contract. In the event that contract shipments are so reduced,
BUYER will take no spot coal during the period of reduction.
Following said period of reduction, BUYER will elect either to
increase shipments or to extend the Initial Term of this
AGREEMENT until such deferred Firm and Incremental Tonnage has
been shipped in the total quantities provided for in this
AGREEMENT. The prices for the tonnage then shipped will be the
prices in effect at time of shipment. In the event the Initial
Term is so extended, the term of this AGREEMENT shall be extended
for the same number of days that the Initial Term was so extended
and the beginning and end of each Contract Year following such an
extension of the Initial Term shall be respectively set back for
the same number of days that the Initial Term was so extended and
the "Contract Year" shall be adjusted accordingly.
Section 3. Delivery Schedule Limitations: All Firm
Tonnage necessary to meet the 20,000 tons per month schedule will
be delivered before any Incremental Tonnage is delivered. Both
Firm Tonnage and Incremental Tonnage can be delivered during the
same month, but ASSIGNEE will not be obligated to deliver more
than four (4) 10,000 ton shipments of coal during any one month,
unless otherwise mutually agreed. There shall be a minimum of
seven (7) calendar days between shipment releases from the
Operations unless otherwise mutually agreed.
Section 4. Passage of Title: The coal sold and
delivered to BUYER hereunder is f.o.b. railway car at the Opera-
tions; and, title to and risk of loss of the coal supplied
hereunder shall pass to BUYER when ASSIGNEE completes loading
coal and tenders the loaded cars to the carrier for destination
to BUYER's Plant.
Section 5. Initial Quality Notification: The
parties recognize the need to know the quality of the coal prior
to receipt of the shipment at the Danskammer Plant. Therefore,
the coal shall be sampled as it is loaded into railway cars and
analyzed by an independent laboratory acceptable to BUYER and
ASSIGNEE within 48 hours after the coal is loaded, who shall
notify BUYER and ASSIGNEE by telephone, telegram, or facsimile of
the average "as received" analytical results of each shipment.
Section 6. Shipping Notice: For each shipment of
coal hereunder, ASSIGNEE shall promptly mail to BUYER's Plant and
to Financial Records Section, Central Hudson Gas & Electric
Corporation, 284 South Avenue, Poughkeepsie, New York 12601-4879,
a shipping notice showing weight, type of car and number of each
railway car contained in the shipment, shipping date and origin
mine.
Section 7. Railroad: Except as otherwise expressly
provided herein, ASSIGNEE shall deliver coal sold and purchased
hereunder in accordance with the contract between BUYER and
railroad and the applicable railroad tariff provisions all as
specified in Exhibit 2 - RAILROAD PROVISIONS, attached hereto and
made a part hereof. BUYER shall be responsible for providing any
applicable amendments or revisions to said railroad tariff
provisions to ASSIGNEE.
BUYER shall cooperate with ASSIGNEE in its scheduling
of work at its Operations, shall be responsible for arranging and
coordinating with the railroad (also referred to herein as
"carrier") the arrival of rail cars for loading. BUYER shall pay
carrier for all rail transportation charges for coal purchased
from ASSIGNEE under this AGREEMENT, except as provided for in the
remainder of this Section 7.
ASSIGNEE will pay all additional freight charges,
required by BUYER's rail transportation agreements or the
applicable railroad tariffs, on coal delivered hereunder that are
a result of ASSIGNEE's failure to deliver the quantity of coal as
scheduled by BUYER, in accordance with this AGREEMENT unless the
tonnage deficiency is excused by other provisions of this
AGREEMENT.
BUYER shall be responsible for payment of any and all
increased freight charges which result solely from or on account
of the coal being shipped to more than one destination.
ASSIGNEE shall pay all additional freight charges,
required by the applicable railroad tariffs or BUYER's rail
transportation agreements on coal delivered hereunder that are a
result of ASSIGNEE's failure to notify the railroad, in writing,
in accordance with the applicable railroad tariffs or BUYER's
rail transportation agreement, of ASSIGNEE's inability to make
shipment as scheduled.
ASSIGNEE shall pay all detention and switching charges
at ASSIGNEE's Operations resulting from ASSIGNEE's failure to
load and ship the coal in accordance with the applicable railroad
tariffs or BUYER's rail transportation agreement. ASSIGNEE shall
load coal so as to permit loading of 10,000-ton trains within a
24-hour period.
ASSIGNEE shall pay all charges resulting from
overloading or underloading cars in accordance with the
applicable tariffs or BUYER's rail transportation agreement.
ARTICLE III
SPECIFICATIONS & QUALITY & WEIGHT
Section 1. Origin: The coal shall be from the
Sidney Pond Creek Seam or other such seams as approved and
confirmed in writing by BUYER and which meets the specifications
herein. Deliveries shall originate from ASSIGNEE's Sidney Mine
unless other arrangements are made and confirmed in writing with
BUYER to deliver coal from another facility.
Section 2. Quality Specifications: The quality of
coal sold and purchased hereunder shall meet the following
specifications:
ASTM
Expected Minimum Maximum Method
As Received:
Moisture % 6.1 4 10 D3173
Volatiles % 34.9 30 36 D3175
Fixed Carbon % 51 47 60 D3172
Ash % 8.0 -- 10 D3174
Btu/LB. 13,000 12,500 -- D3286
Sulphur % 0.66 0.47 0.70 D3177/4239
SO2 (LBS./MMBTU) 1.0 -- 1.1 Calculated
Grind (HGI) 52 48 60 D409-85
Sidney Pond Creek Only 42 40 -- D409-85
Ash Fusion (I.D., F) 2,700 2,300 D1587
This coal shall be free of extraneous material and shall
have a maximum top size of two inches.
Section 3(a). BUYER's Remedies Related to Quality
Specifications: In lieu of any other remedies related to
ASSIGNEE's failure to meet the quality specifications provided
for herein, except for the price adjustments for quality provided
for in Article VII herein, BUYER shall have the rights and
remedies described in this Section 3 upon ASSIGNEE's failure to
deliver coal in accordance with the specifications set forth in
Sections 2 and 3 of this Article III.
(b). BUYER's Right to Reject Individual
Shipments: BUYER's ability to use the coal being dependent on
the coal meeting the specifications set forth above, it is agreed
that BUYER shall have the right to reject any and all shipments
which fail to meet any of the individual shipment rejection
limits shown below:
INDIVIDUAL SHIPMENT REJECTION LIMITS
Sulphur 0.7% Maximum
Volatiles 25% Minimum
Ash Fusion (I.D.) 2,300 F Minimum
Grind (HGI) 47 Minimum
Sidney Pond Creek Only 39 Minimum
Btu 12,500 Minimum
SO2 (LBS./MMBTU) 1.1 Maximum
ASSIGNEE shall pay all freight, diversion, demurrage,
testing and other expenses in connection with any such rejected
shipment, or shipment found by ASSIGNEE to be non-conforming,
unless such shipment is accepted by BUYER. Furthermore, ASSIGNEE
certifies that it will not make any shipment shown by sampling
and analyses (as provided in Article IX) to exceed the Maximum
allowable Sulphur levels or to be below the Minimum acceptable
Btu level.
(c). BUYER's Right to Suspend or Have Price
Adjustments For Moisture/Ash Limitations: In addition to the
limits for individual shipments shown in Section 3(b) above, the
delivered coal must meet the following weighted average specifi-
cations for each six (6) consecutive shipments (first through
sixth, seventh through twelfth, thirteenth through eighteenth,
and so on):
SIX CONSECUTIVE SHIPMENTS LIMITS
Ash 10% Maximum
Moisture 10% Maximum
If the weighted average ash or moisture quality of coal in a
series of six (6) consecutive shipments delivered hereunder, as
determined by sampling and analysis, does not meet the above Six
Consecutive Shipments Limits, BUYER shall have the right to
suspend further shipments under this AGREEMENT or to have the
Current Base Price for such coal adjusted all in accordance with
the following:
(i) BUYER's Right to Suspend: In the event six
consecutive shipments do not so meet said Six Consecutive
Shipments Limits, BUYER shall thereupon have the right to suspend
shipments under this AGREEMENT until ASSIGNEE has furnished
reasonable assurance to BUYER in writing that the deviation from
such limits or specifications can and will be corrected. If
ASSIGNEE fails to promptly furnish reasonable assurance that such
correction can and will be made within 60 days after BUYER's
suspension of shipments (or within such longer period as shall be
reasonably requested by ASSIGNEE and agreed to in writing by
BUYER), or if corrections are not made within such 60-day period
(or such longer period agreed to by BUYER), BUYER shall have the
right at any time thereafter to terminate this AGREEMENT by
giving written notice of such termination to ASSIGNEE, and
thereupon BUYER shall stand discharged of any and all further
obligations or liability under the terms of this AGREEMENT or as
a result of such termination without waiver of any rights that
BUYER may have under this AGREEMENT. If BUYER, after having
suspended shipments for a period of 180 days, has not elected to
terminate this AGREEMENT, then ASSIGNEE shall have the option of
terminating this AGREEMENT by giving BUYER written notice of such
termination within 60 days after the expiration of such 180-day
period;
(ii) BUYER's Right to Price Adjustment: In the
event six consecutive shipments do not meet the Six Consecutive
Shipments Limits, as an alternative to suspending shipments as
provided for above, BUYER may cause ASSIGNEE to adjust Current
Base Price for such coal (in addition to any adjustment for
quality as provided in Article VII) for such failure of the
delivered coal to meet the Six Consecutive Shipments Limits, as
follows:
(1) For each one percent the ash of such coal
exceeds the Six Consecutive Shipments Limits, the
Current Base Price, adjusted, to be paid ASSIGNEE by
BUYER for such shipment shall be reduced by one dollar
($1.00), fractions pro rata; and also
(2) For each one percent the moisture of such
coal exceeds the Six Consecutive Shipments Limits, the
Current Base Price, adjusted, to be paid ASSIGNEE by
BUYER for such shipments shall be reduced by one dollar
($1.00), fractions pro rata.
The analyses obtained in accordance with Article IX, with
respect to moisture and ash, shall be the analyses upon which
rejection of shipments, as provided in Section 3(b) above and
application of Current Base Price adjustments or suspension of
shipments, as provided in this Section 3(c), is based. Sampling
and analyses shall be in accordance with ASTM standards and
tolerances.
(iii) Effect of Termination: In the event that
BUYER exercises its right to terminate this AGREEMENT pursuant to
above Section 3(c)(i), or ASSIGNEE exercises its right to
terminate this AGREEMENT under said Section, neither party shall
have any further obligations or liabilities hereunder from and
after the effective date of such termination, provided, however,
that such termination shall not affect the rights or obligations
of the parties which accrued prior to the effective date of
termination.
(d). Grind Limitations: In addition to the limits
for individual shipments shown in Section 3(b) above and the
Limitations for Six Consecutive Shipments shown in Section 3(c)
above, the delivered coal must meet the following weighted
average specifications for each three consecutive shipments
(first through third, fourth through sixth, seventh through
ninth, and so on):
THREE CONSECUTIVE SHIPMENTS LIMITS
Grind (HGI) 48 Minimum
Sidney Pond Creek Only 40 Minimum
If the average grind of coal in a series of three (3)
consecutive shipments delivered hereunder, as determined by
sampling and analysis, does not meet the above Three Consecutive
Shipments Limits, BUYER shall have the right to reject any of the
immediately following three (3) consecutive shipments in the
event that such shipment does not meet said Minimum Grind (HGI)
limitation. The basis of any such rejection shall be the
averaged results of 3 different independent laboratories as
provided for in Article IX.
Section 4. ASSIGNEE's Duty of Care: ASSIGNEE shall, at
all times, exercise reasonable care and diligence in its efforts
to ship to BUYER coal which conforms to the specifications set
forth in above Section 2 and 3. Nothing in this Article III
shall be construed to relieve ASSIGNEE of its obligation to
conduct its mining and coal cleaning operations in a competent
manner, consistent with good industry practices, so as to produce
coal which will meet the specifications set forth above.
Section 5. Weight Measurement: The weight of coal sold
hereunder shall be determined on BUYER's scales at the Danskammer
Plant, which scales shall be maintained and certified in
accordance with the provisions of Exhibit No. 3. If such scales
are inoperative at the time of any coal delivery, the weight of
coal shall be the weight upon which BUYER bases its payment to
the railroad.
ARTICLE IV
PAYMENT
Section 1. Price: For coal delivered and accepted,
BUYER shall pay ASSIGNEE the Current Base Price herein provided
by cash or check in United States Funds for all coal delivered,
and accepted hereunder.
Section 2. Submission of Weight to ASSIGNEE: BUYER
shall submit to ASSIGNEE the certified weights within five (5)
working days after the certified weights become available.
Section 3: Invoice: Thereafter, an invoice for any
adjustments for quality as hereinafter defined, and all coal
shipped based on certified weights will be submitted by the
ASSIGNEE to the BUYER. The coal shipped will be invoiced at the
Current Base Price (hereinafter defined).
Section 4: Payment: BUYER shall make payment to
ASSIGNEE within fifteen (15) calendar days from shipment of the
coal from the Operations. There shall be no discounts.
Payment to ASSIGNEE shall be made by check, as follows:
Massey Coal Sales Company
P.O. Box 26765
Richmond, Virginia 23261
The above address may be changed by ASSIGNEE upon written notice
to BUYER.
ARTICLE V
CURRENT BASE PRICE
Section 1: The Current Base Price for Firm Tonnage and
Incremental Tonnage for the Contract Year 1994 shall be $xxxxx
(U.S. Dollars) per net ton, except as otherwise provided in THIS
SECOND AMENDMENT, f.o.b. railcar at ASSIGNEE's loading facility.
Section 2. The Current Base Price shall be subject to
adjustment for BTU Value and Ash Value as provided for herein.
ARTICLE VII
ADJUSTMENT IN CURRENT BASE PRICE FOR QUALITY
Section 1. BTU Value: The Current Base Price and
matching incremental price to be paid to ASSIGNEE by BUYER is
based upon coal with 13,000 BTU/LB heat content (BTU Value) for
each ton of coal in each shipment. The BTU Value of the coal
sold hereunder may vary, and the price for such coal shall be
adjusted to compensate for variations in BTU Value, as described
below.
Section 2. Adjustments for BTU Value: If the BTU Value
of the coal shipment is between 12,900 BTU/LB and 13,100 BTU/LB,
there will be no adjustment for BTU Value variation. If the BTU
Value is less than 12,900 BTU/LB or greater than 13,100 BTU/LB,
the price for a shipment shall be adjusted, based upon variations
from the 13,000 BTU/LB BTU Value, as follows:
(a) For a coal shipment with a BTU Value greater than
13,100 BTU/LB, a premium shall be paid by BUYER to ASSIGNEE at
the rate of xxxxxx BTU/LB, fractions pro rata; or
(b) For a coal shipment with a BTU Value less than 12,900
BTU/LB, a penalty shall be deducted from the Current Base Price
at the rate of xxxxxx BTU/LB, fractions pro rata.
Exhibit No. 5 illustrates adjustments for BTU Value to the
Current Base Price.
Section 3. Ash Value: The Current Base Price and
matching incremental price to be paid to ASSIGNEE by BUYER is
based upon coal with an ash content ("Ash Value") of eight
percent (8%) by weight of the "as received" analysis for the coal
in each shipment. The Ash Value of the coal sold hereunder may
vary and the price shall be adjusted to compensate for variations
as described below.
Section 4. Adjustment for Ash Value: If the Ash Value
of the coal shipment is between 7.5% and 8.5%, there will be no
adjustment for ash content. If the Ash Value is less than 7.5%
or greater than 8.5% the price for a shipment shall be adjusted,
based upon variations from 8% as follows:
(a) For a coal shipment with an Ash Value less than 7.5%, a
premium of $xxxxx per ton shall be paid to ASSIGNEE for each .1%
Ash Value variation below 8.0%.
(b) For a coal shipment with an Ash Value greater than
8.5%, a penalty of $xxxxx shall be deducted from the price for
each .1% Ash Value variation in excess of 8.0%.
2. Commencing on January 1, 1995 and continuing for the
remaining term of this AGREEMENT, Articles II, III, IV, V and VII
of the AGREEMENT shall respectively read as they are set forth in
the AGREEMENT and not how they are set forth in the SECOND
AMENDMENT unless otherwise agreed upon by the parties hereto.
3. For only the Contract Year occurring during the
calendar year 1994, Article VI (Base Price Adjustment) shall have
no force and effect and, for that Contract Year, be deemed
deleted in its entirety from the AGREEMENT. Commencing on
January 1, 1995 and continuing for the remaining term of the
AGREEMENT, Article VI of the AGREEMENT shall be in full force and
effect as it is set forth in the AGREEMENT unless otherwise
agreed upon by the parties hereto.
4. Except as may be amended herein, all terms and
conditions of the AGREEMENT shall remain in full force and effect
as of the date of this SECOND AMENDMENT. The addresses of the
parties hereto are as set forth in the AGREEMENT.
5. All terms defined in the AGREEMENT shall have the same
meaning in the SECOND AMENDMENT unless otherwise defined herein.
6. For only the Contract Year occurring during the
calendar year 1994, Exhibit 1 (Calculations of Delivered Fuel
Costs) and Exhibit 5 (Examples of Adjustments to Current Base
Prices for Quality) to the AGREEMENT shall be respectively
amended in their entirety to read in the form attached to the
SECOND AMENDMENT.
7. Commencing on January 1, 1995 and continuing for the
remaining term of this AGREEMENT, Exhibits 1 and 5 to the
AGREEMENT shall respectively read as they are set forth in the
Exhibits to the AGREEMENT and not as they are set forth in the
Exhibits to the SECOND AMENDMENT.
8. For only the contract year occurring during the
Calendar Year 1994, Exhibit 6, attached hereto, shall be an
Exhibit to the AGREEMENT. Commencing on January 1, 1995 Exhibit
6 shall be deemed to be of no further force and effect unless
otherwise agreed upon by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this
AGREEMENT to be executed in its behalf by its proper officer
thereunder duly authorized, all as of the day and year first
above written.
BUYER: CENTRAL HUDSON GAS & ELECTRIC CORPORATION
BY
PAUL J. GANCI
ITS President and Chief Operating Officer
ASSIGNEE: MASSEY COAL SALES COMPANY
BY: _____________________________________________
THOMAS A. MCQUADE
ITS: Senior Vice President
<PAGE>
EXHIBIT NO. 1
CALCULATIONS OF DELIVERED FUEL COSTS
"Delivered Current Coal Price" shall be the Current
Base Price + the combined Norfolk Southern and Conrail contract
freight charge expressed in cents per million Btu's based on a
13,000 Btu/Lb "as received" heat content.
"Delivered Current Oil Price" shall be the net price
(including discounts and allowances) to the BUYER under firm term
contract(s) for the supply of Number Six (6) Residual Fuel to the
Danskammer Generating Station of the maximum sulfur content of
fuel oil (currently 1.0%) permitted to be burned in Danskammer
Units 3 and 4 plus all applicable State, Federal or other taxes
and fees required to be paid by BUYER in connection with such
deliveries of number six Fuel Oil to Danskammer expressed in
cents per million Btu's based on 150,000 Btu per gallon as
received heat content.
"Delivered Current Gas Price" shall be the price to the
BUYER of natural gas dispatched to the Danskammer Generating
Station to be burned in Units 3 and 4 plus an efficiency loss of
5% expressed in cents per million Btu's.
"Delivered Current Spot Coal Price" shall be the price
to the BUYER for spot coal, having the same specifications as
provided in the Contract, delivered to the Danskammer Generating
Station to be burned in Units 3 and 4 expressed in cents per
million Btu's.
EXHIBIT NO. 1
Example IV
Delivered Current Coal Price
Assume the Current Base Price of Coal ($29.00 net per ton) +
freight charges
(Assume $23.00 net per ton for this example) divided by
13,000 Btu x 2,000 Lbs
(----------------------) = $52.00/ton/26 = 200 cents/Mmbtu.
1,000,000
Delivered Current Oil Price
Assume the net price of oil delivered ($12.90 per Bbl) + New York
State Gross Receipts Tax ($0.37 per Bbl) = $13.27 = per Bbl
150,000 Btu x 42 Gas
$13.27/(--------------------) = $13.27/6.3 = 210 cents/Mmbtu.
1,000,000
Delivered Current Gas Price
Assume the dispatch price of natural gas (220 cents per Mmbtu.) +
efficiency loss 5% = 220 x 1.05 = 231 cents per Mmbtu.
Delivered Current Spot Coal Price
Assume the spot price for coal is $28.00 net per ton and the
freight charge is $21.00 net per ton.
13,000 x 2,000 Lbs 49 per ton
$49.00/ton/ ------------------ = ----------- = 188 cents/Mmbtu.
1,000,000 26
Therefore the Delivered Current Spot Coal Price is the
Lowest delivered price of the three fuels. The Delivered Current
Coal Price would have to be reduced to equal the Delivered
Current Spot Coal Price of 188 cents per Mmbtu. in order to ship
the incremental tonnage train. The BUYER must indicate to the
ASSIGNEE not later than the 22nd of the month preceding each
proposed incremental tonnage shipment if the then-Delivered
Current Price of oil, natural gas or spot coal is below the
Delivered Current Price of Coal.
<PAGE>
EXHIBIT NO. 5
EXAMPLES OF ADJUSTMENTS TO CURRENT BASE PRICES FOR QUALITY
PREMIUMS - xxxxx Btu/Lb in excess of 13,000 Btu/Lb, fractions
pro rata, on a shipment.
1. Shipment Btu value is 13,050 Btu/Lb. Btu Value falls within
12,900 to 13,100 Btu/Lb range and, therefore, no premiums
are due to ASSIGNEE.
2. Shipment Btu Value is 13,150 Btu/Lb. Premium due is:
13,150 Btu/Lb - 13,000 Btu/Lb = 150 Btu/Lb x xxxxx Btu/Lb
= $xxxxx/Ton.
3. Shipment Btu Value is 13,250 Btu/Lb. Premium due is:
13,250 Btu/Lb - 13,000 Btu/Lb = 250 Btu/Lb x xxxxx Btu/Lb
= $xxxxx/Ton.
PENALTIES - xxxxx/100 Btu/Lb in deficit of 13,000 Btu/Lb,
fractions pro rata, on a shipment.
1. Shipment Btu Value is 12,950 Btu/Lb. Btu Value falls within
12,900 to 13,100 Btu/Lb range and, therefore, no penalties
are charged to ASSIGNEE.
2. Shipment Btu Value is 12,850 Btu/Lb. Penalty charged is:
13,000 Btu/Lb - 12,850 Btu/Lb = 150 Btu/Lb x xxxxx Btu/Lb
= $xxxxx/Ton.
3. Shipment Btu Value is 12,750 Btu/Lb. Penalty charged is:
13,000 Btu/Lb - 12,750 Btu/Lb = 250 Btu/Lb x xxxxx Btu/Lb
= $xxxxx/Ton.
<PAGE>
EXHIBIT NO. 6
EXAMPLES OF ADJUSTMENT TO BASE PRICE FOR ASH VALUE
1. If shipment ash value falls within 7.5% to 8.5% range no
premium or penalty is incurred.
2. If shipment ash value is 6.9% the premium due is 8.00%
- 6.9% = 11 (tenths) x $xxxxx (ash value per .1%) = $xxxxx.
Therefore, each ton of coal will receive a premium of
$xxxxx added to the base price.
3. If shipment ash value is 8.8% the penalty due is 8.8%
- 8% = 8 (tenths) x $xxxxx (ash value per .1%) = $xxxxx.
Therefore, each ton of coal will receive a penalty of
$xxxxx deducted from the base price.
</PAGE>
<PAGE>
EXIBIT (10) (i) 93
New York State Electric & Gas Corporation
FERC Rate Schedule No.
Docket No. ER93
New York State Electric & Gas Corporation
Agreement with
Central Hudson Gas & Electric Corporation
This agreement provides that New York State Electric & Gas
Corporation may sell Central Hudson Gas & Electric Corporation up
to 300 MW of electric generating capacity and associated energy
during the following period: May 22, 1993 through April 30,
1995.
<PAGE>
PURCHASE AGREEMENT
THIS AGREEMENT is made and dated as of May 20, 1993
between CENTRAL HUDSON GAS & ELECTRIC CORPORATION (hereinafter
called Central Hudson), with offices at 284 South Avenue,
Poughkeepsie, New York 12601-4879 and NEW YORK STATE ELECTRIC &
GAS CORPORATION (hereinafter called SELLER or NYSEG), with
offices at Corporate Drive-Kirkwood Industrial Park, Binghamton,
New York 13902 (hereinafter collectively called Parties).
WHEREAS, SELLER believes it will be beneficial to sell
electric generating capacity ("Capacity") and associated energy
("Energy"), and Central Hudson believes it will be beneficial to
purchase Capacity and Energy; and
WHEREAS, Seller and Central Hudson wish to specify
herein the terms relating to the purchase by Central Hudson of
Capacity and Energy, from SELLER (THE
"Purchase").
NOW, THEREFORE, in consideration of the mutual
obligations and undertakings set forth herein, IT IS AGREED as
follows:
1. TERM
The period during which this Agreement shall be in
effect shall commence on May 22, 1993 and shall continue through
April 30, 1995; provided however, that transactions hereunder
shall not commence prior to the day after NYSEG files this
Agreement with the Federal Energy Regulatory Commission (FERC),
an provided that in any scheduling agreement pursuant to this
Agreement, the Parties may mutually agree to allow for an
earlier termination. The applicable provisions of this Agreement
shall continue in effect after deliveries of power and to the
extent necessary to provide for final billing, payment and
adjustments.
2. POINT(S) OF DELIVERY AND TRANSMISSION
2A. The Point of Delivery for the first 50 MW of
Capacity and Energy purchased hereunder by Central Hudson from
SELLER shall be at SELLER's and Central Hudson's interconnection
at the West Woodbourne Substation or at such other points as
may be subsequently mutually agreed to and designated in writing
by the Parties. The Point of Delivery for all other Capacity and
Energy purchased hereunder by Central Hudson shall be SELLER's
interconnection with the New York Power Authority's transmission
system at the SELLER's Coopers Corners Substation or at such
other points as may be subsequently mutually agreed to by the
Parties.
2B. At its own expense, Central Hudson shall be
responsible for obtaining any necessary third party transmission
services to receive Capacity and Energy purchased hereunder from
the Points of Delivery to Central Hudson's system and such
transmission services shall be firm.
3. CAPACITY, ENERGY AND PRIORITY
3A. CAPACITY
Subject to Article 2A and the prior mutual written
agreement of the Parties, Central Hudson shall reserve at least
100 MW of Capacity and take the associated energy at mutually
agreed upon on-peak and off-peak capacity factors. On a weekly
basis, Central Hudson may reserve up to 300 MW of Capacity.
Subject to Article 2A and the prior, mutual, written agreement of
the Parties, SELLER shall deliver at the Points of Delivery up to
300 MW of Capacity and Energy for the term of the Agreement, or
such lesser amount of Energy as Central Hudson may schedule
pursuant to Section 4.
3B. ENERGY
Subject to Article 2A and the prior mutual written
agreement of the Parties, SELLER shall deliver and Central Hudson
shall take at the Points of Delivery up to 300 MW of Energy, or
such lesser Energy which Central Hudson may elect pursuant to
Section 4. Subject to Article 2A, the Parties shall also
mutually agree in writing as to any applicable minimum capacity
factor applicable to the transaction. All Energy purchased and
sold hereunder shall be three-phase, 60- hertz, alternating
current at 69 kV or higher.
3C. PRIORITY
NYSEG's obligation to provide Capacity and Energy from
its system of from its entitlements or purchases is subject to
System Constraints, its Primary Public Service Obligations, and
obligations pursuant to firm transmission and power agreements
dated prior to the date of this Agreement. "System Constraints"
are defined as conditions on NYSEG's system or the systems of the
New York Power Pool ("Pool") members which, consistent with sound
utility practice, require the interruption of firm power sales
pursuant to this Agreement in order to maintain the integrity of
the integrated system in a safe and reliable manner. "Primary
Public Service Obligations" are defined as NYSEG's obligations to
serve its own native load retail customers. For purposes of
NYSEG's obligation to provide Capacity and Energy hereunder, each
Capacity transaction hereunder shall have priority before
transactions pursuant to any (a) existing or future economy
energy agreements pursuant to which NYSEG sells energy on an
economy basis which is withdrawable instantaneously and (b) other
wholesale capacity and/or energy sales or transmission agreements
dated after this Agreement.
4. PURCHASE AND SCHEDULING
CAPACITY AND ENERGY
Capacity and Energy shall be scheduled pursuant to the
mutual written agreement of the Parties.
5. NOTIFICATION WITH RESPECT TO THE PURCHASE
Instructions as to the exact procedure to be followed
in giving all such notifications will be determined by mutual
agreement of the Parties, and a copy of such instructions shall
be sent to the Pool.
6. CHARGES
A. Capacity. Subject to the prior mutual written
agreement of the Parties as to rates and charges, Central Hudson
shall, in accordance with Section 7 of this Agreement, pay SELLER
a Monthly Capacity Charge. Monthly Capacity Charges will be
adjusted on a pro rata basis so that Central Hudson shall not
have to pay charges to the extent that NYSEG is unable to deliver
the reserved and scheduled amount of Capacity and Energy to the
Points of Delivery due to conditions on NYSEG's system.
B. Energy. Subject to the prior mutual written
agreement of the Parties as to rates and charges, Central Hudson
shall, in accordance with Section 7 of this Agreement, pay SELLER
a Monthly Energy Charge.
C. Minimum Energy Charges and Capacity Factors.
Aggregate Monthly Energy and Capacity Charges hereunder shall be
equal to or greater than NYSEG's incremental cost of energy
supplied hereunder but shall not exceed either the ceiling rates
described in Section 6D or the rates and charges pursuant to the
mutual written agreement of the Parties. Prior to a transaction
hereunder, the Parties shall mutually agree in writing as to the
minimum capacity factor ("CF") at which Central Hudson shall
purchase Energy each month or part of month during the
transaction. If Central Hudson does not schedule Energy in an
amount equal to or in excess of the minimum CF, then Central
Hudson shall pay SELLER an Energy Deficiency Charge calculated as
the product of (a) the amount of Energy by which Energy scheduled
hereunder (in MWH) was scheduled at less than the applicable
minimum CF and (b) the applicable hourly energy charge for Energy
scheduled hereunder. To the extent that SELLER was unable to
deliver Energy scheduled hereunder due to an emergency operating
condition on Seller's system, or a transmission constraint on
Pool members' systems or Central Hudson was unable to receive
firm Energy scheduled hereunder due to third party firm
transmission interruptions, the Energy Deficiency Charge shall
not apply.
D. Capacity and Energy Rate Ceilings. If the sum of
the Monthly Capacity Charge and the Monthly Energy Charge
exceeds the ceiling enumerated in Appendix A, then NYSEG shall
follow the procedures contained in Appendix B.
E. Taxes. Central Hudson shall reimburse SELLER for
all applicable taxes paid by Seller associated with Transactions
pursuant to this Agreement.
F. Changes in Rates, Terms, and Conditions. Except to
the extent explicitly stated to the contrary, the rate
provisions, charges, terms and conditions contained herein, are
not subject to change absent the mutual written agreement of the
Parties, except that NYSEG unilaterally may file at any time to
increase the ceiling on Monthly Capacity and Energy Charges
contained in Appendix A or to otherwise justify the rates for
transactions hereunder. In recognition of the mutual written
agreement required prior to any transactions hereunder, Central
Hudson waives all rights under the Federal Power Act to protest,
otherwise contest, or complain about the rates and other terms
enumerated herein or applicable to any transaction hereunder that
is in full accordance with such mutual agreement.
7. BILLING AND PAYMENT
The bill for each calendar month during the term of
this Agreement shall be rendered by SELLER to Central Hudson on
or before the 15th day of the next succeeding calendar month and
payment of the bill shall be due not later than 15 days after
receipt by Central Hudson. Payment to SELLER shall be made in the
form of immediately available funds by wire transfer to a bank
and account specified by Seller at the time of payment. Any
amount remaining unpaid after 15 days following receipt by
Central Hudson, shall be subject to interest from the date of the
invoice to the date of payment at an annual interest rate of 2%
higher than the prime commercial rate then currently in effect at
Morgan Guaranty Trust Company in New York City.
8. ACCESS TO RECORDS
Each party shall keep complete and accurate records,
meter readings and memoranda of its operations hereunder and
shall maintain such data as may be necessary for required
estimates. Each party shall have the right to examine and
inspect all said records, meter readings and memoranda, for the
purpose of ascertaining the reasonableness and accuracy of all
relevant data, estimates or statements of charges submitted to it
hereunder.
9. DELAYS OR FAILURE OF PERFORMANCE AND LIABILITY
The Parties will endeavor to perform their obligations
herein, but shall not be liable to the extent (and not beyond
this extent) they are prevented from performing because of
equipment failure, strikes, fire, injunctions, requirements of
governmental authorities, acts of God or public enemy,
negligence, or other causes beyond their control. Neither Party
shall be responsible to the other Party for any consequential,
punitive, special, or indirect damages whatsoever, arising out of
a default in the performance of any of its covenants or
obligations under this Agreement. Neither Party shall be liable
to the other Party for any damages whatsoever resulting from any
interruption or failure of service, or from any deficiencies in
the quality or quantity of service hereunder, whatever the cause.
Central Hudson's inability to make payment pursuant to any
transaction hereunder shall not be an event excusing performance.
The Party prevented from performing its obligations pursuant to
this Agreement for the reasons specified in this section, shall
exercise diligence to remove the cause of such inability to
perform, provided that neither Party shall be required to settle
a labor dispute against its own best judgement.
10. WAIVER
No delay or omission by either Party to exercise any
right or power accruing upon any noncompliance or failure of
performance by the other Party shall impair said right or power
or be construed to be a waiver thereof. A waiver by either Party
of any of the covenants, conditions or agreements hereof to be
performed by the other Party shall not be construed to be a
waiver of such subsequent breach thereof or of any other covenant
or condition contained in this Agreement.
11. GOVERNING LAW, REGULATIONS, ORDERS AND APPROVALS
11A. GOVERNING LAW
This agreement shall be governed by and construed in
accordance with the laws of the State of New York.
11B. REGULATIONS
B(i) This Agreement is made subject to present
and future local, state and federal laws and to present and
future regulations or orders of any local, state or federal
regulatory authority having jurisdiction over the matters set
forth herein, and performance hereunder is conditioned upon
securing and retaining such local, state or federal approvals,
grants or permits as may from time-to-time be necessary in order
to perform this Agreement in accordance with the intent of the
Parties. The Parties agree to use all reasonable efforts to
secure and retain all such approvals, grants or permits.
B(ii) NYSEG shall file this Agreement with
FERC. The Parties agree to cooperate in attempting to obtain
FERC acceptance or approval. In the event that FERC requires
modification, the Parties agree to negotiate in good faith to
reach a mutually acceptable modification. In no event, however,
are the Parties required to reach such an agreement. Absent FERC
acceptance or approval or if this Agreement is terminated
pursuant to this paragraph, this Agreement shall become void,
except to the extent necessary to effect payments for services
already rendered and except to the extent that provisions of this
Agreement explicitly survive termination of this Agreement. All
agreements entered into pursuant to this Agreement are
contemplated not to require separate filings with FERC, so long
as those agreements are consistent with the rate ceilings and
other provisions of this Agreement.
11C. SEVERABILITY
If any provisions, or portion thereof, of this
Agreement, or the application thereof to any persons or
circumstances shall to any extent be invalid or unenforceable the
remainder of this Agreement, or the application of said
provisions or portion thereof, to any person or circumstances,
shall, subject to this Section 11B, not be affected thereby, and
each provision of this agreement shall be valid and enforceable
to the fullest extent permitted by law.
12. UNDERSTANDING
This Agreement shall constitute the entire
understanding between the Parties and shall supersede any and all
previous understandings pertaining to the subject matter of this
Agreement.
13. NOT PARTNERS
Nothing contained in this Agreement shall be construed
to make the Parties partners or joint venturers or to render any
of the Parties liable for the debts or obligations of the others,
except as expressly provided in this Agreement.
14. MODIFICATIONS
No agreements shall be effective to add to, change,
modify, waive or discharge this Agreement, in whole or in part,
unless said agreement is in writing and signed by the Parties
hereto.
15. SUCCESSORS AND ASSIGNS
This Agreement shall bind and inure to the benefit of
the respective successors and assigns of the Parties hereto. The
written consent of a Party shall be required to effect an
assignment by the other Party of its rights or obligations under
this Agreement; such written consent, however, shall not be
unreasonably withheld. Any assignment of this Agreement shall be
by written agreement in form and substance reasonably acceptable
to the non-assigning Party.
16. NOTICES
Any notice, request, demand, approval or consent given
or required to be given under this Agreement shall, except as
otherwise specifically provided herein, be in writing and shall
be deemed as having been given when received (return receipt
requested), if mailed by United States registered or certified
mail postage prepaid, to the other party at the address stated
below or at the last changed address given by the other Party as
hereinafter specified:
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
284 South Avenue
Poughkeepsie, NY 12601-4879
ATTENTION: Mr. Allan R. Page
Vice President - Corporate Services
NEW YORK STATE ELECTRIC & GAS CORPORATION
Corporate Drive
Kirkwood Industrial Park
Binghamton, NY 13902-5225
Attention: Manager, Bulk Power Sales
Either Party may, at any time, change its address for
the above purpose by mailing, as aforesaid, a notice stating the
change and setting forth the new address.
17. HEADINGS
The section headings are for convenience and reference
only, and in no way define and limit the scope and content of
this Agreement or in any way affect its provisions. <PAGE>
18. COUNTERPARTS
This Agreement may be executed in several counterparts,
each of which shall be deemed an original and such counterparts
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their proper officers thereunto duly
authorized and attested as of the day and year first above
written.
CENTRAL HUDSON GAS &
ELECTRIC CORPORATION
WITNESS:
______________ By
ALLAN R. PAGE
Title Vice President, Corporate Services
NEW YORK STATE ELECTRIC & GAS
CORPORATION
WITNESS:
______________ By
DENIS E. WICKHAM
Title Vice President-
Electric Resource Planning
<PAGE>
Appendix A
CAPACITY AND ASSOCIATED ENERGY RATE CEILING
The ceiling for the Monthly Capacity Charge and the Monthly
Energy Charge in the aggregate shall be calculated on a monthly
basis and equal to the sum of the Energy Component and the
Capacity Component defined below.
ENERGY COMPONENT
The Energy Component shall equal the sum of the Hourly Total
Incremental Charges for energy supplied pursuant to this
Agreement each month. The Hourly Total Incremental Charge
shall equal one hundred and ten percent (110%) of NYSEG's
Incremental Cost. NYSEG's Incremental Cost shall equal
NYSEG's estimates of its fuel plus dispatch maintenance
costs of the energy used for transactions hereunder, plus
three percent (3%) for losses, plus any applicable taxes.
CAPACITY COMPONENT
The Capacity Component shall equal the product of (a)
$12,386 per MWM, (b) the amount of capacity up to which
NYSEG is obligated to make available and Central Hudson may
reserve hereunder (300 MW), and (c) the number of days in
the transaction during that month divided by the number of
days in that month.<PAGE>
APPENDIX B
If aggregate monthly charges for Capacity and Energy exceed
the ceiling enumerated in Appendix A, NYSEG shall not charge
Central Hudson any amounts in excess of the appropriate ceiling
and shall list the amounts in excess of such ceiling on the
respective bill. NYSEG shall unilaterally be permitted to make a
filing to increase the ceiling or otherwise to justify the rates
herein, and Central Hudson shall not oppose said filing. If the
increased ceiling(s) or other filing becomes effective, upon said
effectiveness, NYSEG shall be permitted to bill Central Hudson
and Central Hudson shall pay NYSEG retroactively for all such
amounts in excess of the previous ceiling(s) up to amounts
permitted by the increased ceiling(s) or other filing.
Prospective bills shall be based on the increased ceiling(s).
Notwithstanding any provisions in this Appendix, in no event
shall monthly charges for Capacity and Energy exceed the rates
provided for in Section 6 of the Agreement.
</PAGE>
<PAGE>
EXHIBIT (10) (i) 94
NINE MILE POINT NUCLEAR STATION UNIT 2
OPERATING AGREEMENT
<PAGE>
TABLE OF CONTENTS
STATEMENT OF INTENT
ARTICLE 1 - EFFECTIVE DATE OF AGREEMENT
1.1 Effective Date of Agreement
1.2 Operating Period; Deactivation; Purchase Option
1.3 Amending the Agreement
ARTICLE 2 - GENERAL ORGANIZATION
2.1 Commitment to Safe Operation
2.2 Unit Goals
2.3 Policies and Plans
2.4 Operational Control
2.3 Informational Responsibility
ARTICLE 3 - MANAGEMENT COMMITTEE
3.1 Establishment of Management Committee
3.2 Meetings, Agendas and Voting, Etc.
3.3 Responsibilities of the Management Committee
3.4 Annual Plan and Budget
3.5 Variances
3.6 Circumstances Requiring Immediate Action
3.7 Owners' Representative On-site
3.8 Representation on Unit Committees, Task Forces
and SRAB
3.9 Rights and Responsibilities of On-Site Representative
and Other Owner Personnel
ARTICLE 4 - SERVICES TO BE PROVIDED
4.1 List of Services
ARTICLE 5 - PAYMENTS
5.1 Operating Costs
5.2 Operating Account
5.3 Failure to Advance Funds
ARTICLE 6 - AUDITS
6.1 Audit Committee; Inspection of Records
6.2 Inspection Costs; Inspection Report
6.3 Adjustments or Corrective Action
<PAGE>
ARTICLE 7 - FUEL
7.1 Fuel Committee; Meetings, Agenda and Minutes
7.2 Fuel Supply
7.3 Fuel Pricing Accounts
7.4 Spent Fuel
7.5 Separate Activities for Units 1 and 2
ARTICLE 8 - FINANCE AND ACCOUNTING
ARTICLE 9 - INSURANCE AND INDEMNITY
9.1 Compensation Withholdings
9.2 Workers' Compensation and Employers'
Liability Insurance
9.3 Comprehensive General Liability Insurance Policy
9.4 Property Insurance
9.5 Employees' Fidelity Bond
9.6 Liability for Loss, Expense or Damage Not Covered
by Insurance
9.7 Amount of Coverage; Modifications
9.8 Insurance Premiums
9.9 Sharing of Regulatory Penalty and Breach of
This Agreement
9.10 Meaning of Section 6 in September 22, 1975
Operating Agreement Among the Parties
(the 1975 Operating Agreement)
ARTICLE 10 - MEASUREMENT
10.1 Output Measurement
10.2 Periodic Testing of Meters
ARTICLE 11 - GENERAL
11.1 Non-Waiver of Provisions
11.2 Procedure for Appeal of Management Committee Decision
11.3 Procedure for Resolution of Appeal
11.4 Conflict with Basic Agreement
11.5 Independence of Settlement Agreement
ARTICLE 12 - EFFECTIVE DATE, TERM AND TERMINATION
12.1 Effective Date
12.2 Term
12.3 Termination
ARTICLE 13 - OPERATING COMPANY FORMATION
13.1 Evaluation
<PAGE>
NINE MILE POINT NUCLEAR STATION UNIT 2
OPERATING AGREEMENT
Pursuant to Section 6.01 of the Basic Agreement, Niagara
Mohawk Power Corporation (Niagara Mohawk), Long Island Lighting
Company (LILCO), New York State Electric & Gas Corporation
(NYSEG), Rochester Gas and Electric Corporation (RG&E), and
Central Hudson Gas & Electric Corporation (Central Hudson) agree
as follows with respect to the operation and maintenance of the
Nine Mile Point Unit 2, and all activities and facilities
supporting or otherwise relating to the plant (sometimes
hereinafter collectively referred to as the "Unit" or the
"Plant").
The term "Parties" as used herein shall refer to all the
parties to this Agreement. The term "Non-Operating Owners" as
used herein shall refer to LILCO, NYSEG, RG&E and Central Hudson
collectively.
STATEMENT OF INTENT
It is the intent of the Parties to assure the safe,
efficient and reliable operation of the Unit consistent with the
goals and commitments specified in Sections 2.1 and 2.2 herein.
It is the intent hereof that Niagara Mohawk shall have exclusive
operational control of the operation and maintenance of the Unit.
It is the further intent of the Parties to establish a framework
for oversight by the Management Committee of the policy making,
planning, budgeting, and operational decisions of Niagara Mohawk
related to the Unit. In addition, as more fully explained in
Section 2.3 and Article 3, the Non-Operating Owners shall have
the right to approve or disapprove the annual budgets and annual
plans (which shall include annual operating goals and objectives
for the Unit) and any significant changes in either of them. To
the extent any ambiguity arises as to the roles and
responsibilities of Niagara Mohawk, the Non-Operating Owners, and
the Management Committee hereunder, the provisions of this
Agreement shall be construed consistent with the intent herein
expressed.
ARTICLE 1 - EFFECTIVE DATE OF AGREEMENT
1.1 Effective Date of Agreement
This Agreement shall be effective as of January 1, 1993
and shall insure to, bind, and be for the benefit of the Parties,
their successors, and assigns.
1.2 Operating Period; Deactivation; Purchase Option
The Parties agree to operate the Plant for the
applicable license period granted by the United States Nuclear
Regulatory Commission (the "NRC" or the "Commission") or any
successor agency having jurisdiction over the operation of
nuclear power plants. The Parties shall meet five years prior to
the expiration of an operating license, or sooner if required by
any inability to operate the Plant on a permanent basis, to agree
upon any further operating period, or upon a schedule for
deactivation and decommissioning of the Plant. Niagara Mohawk,
as agent for and on behalf of the Parties, shall maintain the
Plant to the date that the Plant has been fully decommissioned in
accordance with all applicable laws or regulations then in
effect.
The cost of deactivation, discontinuance, dismantling, and
continuing surveillance of the Plant shall be shared by the
Parties in accordance with their Respective Percentages and the
Parties each agree to establish appropriate reserves and/or take
such other action as may be necessary to provide for the cost of
such deactivation, discontinuance and dismantling. Prior to, or
upon completion of deactivation, discontinuance and dismantling
of the Plant, the Nuclear Plant Site may, at Niagara Mohawk's
election, be conveyed to Niagara Mohawk at a price to be
established by a recognized independent appraiser of land
selected by all the Parties.
Unless all the Parties, their successors and assigns,
determine to retain their Respective Percentages and to continue
to operate and maintain the Plant as is herein provided, Niagara
Mohawk shall have the option to purchase the Nuclear Plant Site
and the Plant at a price to be agreed to by the Parties, and if
they are unable to agree, at a price to be established by a
recognized independent firm of appraisers with substantial
experience in appraising the value of utility plants selected by
all the Parties.
The Parties contemplate that, in any disposition of the
Nuclear Plant Site and Plant, the operation and maintenance
thereof as is herein provided, subject to the provisions of
Section 1.3 hereof, may require the authority and consent of
governmental bodies then having jurisdiction. Accordingly, it
shall be a condition to the completion of any disposition or
continued operation and maintenance, agreed to by the Parties
hereto, that such authority and consent be first obtained.
Any conveyance of a Respective Percentage contemplated
by this Section 1.2 shall follow the relevant procedures for the
original conveyance set forth in Article II of the Basic
Agreement, and an appropriate release in form for recording from
any indenture of mortgage of the Party making the conveyance
which is a lien on the Nuclear Plant Site must be obtained and
delivered by that Party to the acquiring Party or Parties.
The costs of any appraisals accomplished under this
Section 1.2 shall be shared by the Parties in accordance with
their Respective Percentages.
1.3 Amending the Agreement
This Agreement shall be revised from time to time if
necessary so that it will not be in conflict with any rule,
regulation, or order of any regulatory or governmental body
having jurisdiction. Such amendment shall not be required during
the pendency of any legal action which any Party hereto has
commenced in good faith to contest the validity of any such rule,
regulation or order, provided that the operation of the Plant
will not be curtailed by such action.
ARTICLE 2 - GENERAL ORGANIZATION
2.1 Commitment to Safe Operation
Activities in relation to the Unit shall be conducted
in such a way as to assure safe operation in accordance with all
applicable nuclear safety requirements. To that end, the Unit
shall be operated in strict compliance with the technical
specifications and other terms and conditions of the operating
license issued by the NRC, the regulations of the Commission and
any applicable orders or directives issued by it. The parties
further recognize that the Party licensed by the NRC to operate
the Plant is responsible for safe operation of the Plant in
accordance with these requirements. Niagara Mohawk, as agent for
and on behalf of the Parties, shall operate the facility for the
mutual benefit of the Parties in full accordance with that
responsibility. Accordingly, the Parties agree and declare that
no other provision of this Operating Agreement may be interpreted
as contrary to, or in conflict with, this fundamental principle.
2.2 Unit Goals
Within the requirements specified in Section 2.1, Unit
operation and maintenance plans shall be designed to achieve
these basic goals:
(a) uniformly high standards of safety for the
protection of workers at the Unit as well as for
the welfare of the general public;
(b) consistently reliable performance with a superior
level of availability and minimal outage incidents
and duration;
(c) conformity with all applicable regulatory
requirements and industry standards; and
(d) consistent with goals (a), (b) and (c), a busbar
cost as low as reasonably possible through careful
control of operating and maintenance expenses and
restraint in the commitment of capital funds to
necessary projects with clearly positive
benefit/cost relationships.
2.3 Policies and Plans
Niagara Mohawk shall develop and, as necessary, update
its annual budgets and annual plans, which shall include unit
operating goals and objectives, to guide its management of the
Unit. All such plans and budgets shall be shared with the
Non-Operating Cotenants and subject to their critical review to
which Niagara Mohawk shall make reasonable response. Such plans
and budgets shall be subject to the approval of the Non-Operating
Cotenants, as set forth in Article 3.
2.4 Operational Control
Niagara Mohawk shall have exclusive control of the
operation and maintenance of the Unit. That control shall be
exercised in a manner consistent with the requirements, goals,
policies, plans and budgets it has developed as modified in light
of the critical review of the Non-Operating Cotenants and in the
interest of all the Parties.
2.5 Informational Responsibility
Through committees and other groups established under
Article 3, Niagara Mohawk shall keep the Parties regularly and
fully advised of the manner in which it discharges its
responsibilities under Section 2.4.
ARTICLE 3 - MANAGEMENT COMMITTEE
3.1 Establishment of Management Committee
a. Each Chief Executive Officer of a Party shall
designate a member and an alternate to serve on the Management
Committee at the pleasure of such Chief Executive Officer. Each
Chief Executive Officer shall notify the others of the names of
the individuals so appointed and of any change in appointments.
b. The Chief Executive Officers shall select a member
of the Management Committee as its Chair. The Chair shall be
rotated among the Non-Operating Parties annually unless the Chief
Executive Officers shall otherwise determine by unanimous vote.
c. Each non-operating party shall bear the salaries
and expenses of its member and alternate on the Management
Committee shall otherwise determine. Niagara Mohawk shall be
responsible for the salaries and expenses of its member or
alternate on the Management Committee except to the extent such
members or alternates are ordinarily dedicated to the operations
of the Unit. If the Management Committee determines that a
salary or an expense should be shared by the Parties in
proportion to their Respective Percentages, the Party incurring
such salary or expense in the first instance shall, at the end of
each calendar month in which such salary or expense is so
incurred, furnish to Niagara Mohawk a statement thereof in
reasonable detail. Any such amount shall be paid to the
appropriate Party as provided in Article 5.
3.2 Meetings, Agendas and Voting, Etc.
a. Meetings. The Management Committee shall meet
monthly, normally in person, according to a schedule established
by the Chair. Any member may call a meeting to convene sooner
than the next regularly scheduled meeting. Such a meeting may be
in person, by conference call or partly in person and partly by
conference call.
b. Notice. Notice of regularly scheduled meetings
shall be deemed given when circulation is made of minutes
containing the meeting schedule. For any other meeting, all
other members and alternates shall receive notice from the member
calling the meeting at least five business days prior to the
meeting, which notice the Management Committee may waive by
unanimous consent of its members.
c. Agendas. The agenda for a regularly scheduled
meeting of the Management Committee shall be prepared by the
Chair and received by members not fewer than five business days
before the meeting, unless waived by the unanimous consent of the
members of the Management Committee. The purpose of any other
meeting shall be made known with the notice of meeting; its
agenda shall be prepared by the member calling the meeting and
received as much in advance of the meeting as is practical.
d. Quorum. A quorum shall be deemed present when at
least four owners are represented, in person or by conference
call, either by a member or by an alternate, except no quorum
shall be deemed present in the absence of a member or alternate
from Niagara Mohawk. Niagara Mohawk shall use its best efforts
to attend any meeting of the Management Committee.
e. Voting. The Management Committee shall endeavor to
conduct its business upon unanimous consent, but the Committee
may take action if members representing Respective Percentages
totaling in excess of 50 percent concur.
f. Minutes. The Management Committee shall provide
for the preparation of minutes of its meetings and the retention
of any reports, reviews or evaluations prepared for it by any
team, subcommittee or task force.
3.3 Responsibilities of the Management Committee
a. Consistent with the commitment of the Parties in
Section 2.1 to safe operation, the goals stated in Section 2.2,
and Niagara Mohawk's operational control provided in Section 2.4,
Niagara Mohawk shall operate and maintain the Unit and shall
report the status thereof to the Management Committee.
b. The Management Committee shall critically review as
appropriate the annual budgets and plans, which shall include
annual operating goals and objectives for operation and
maintenance of the Unit, developed by Niagara Mohawk. Niagara
Mohawk will respond to any such critical review either with an
appropriate modification of any of the above or with a reasonable
explanation of why a modification is not appropriate. The
Management Committee shall review and, when satisfied, approve
the annual plans and the overall levels of the annual budgets for
the Unit. The Management Committee, if it reasonably believes
that the annual budgets or annual plans are not being met, may
require Niagara Mohawk's senior nuclear officer to develop and
implement appropriate corrective action.
c. Niagara Mohawk shall inform and consult with the
CEOs before appointing, relieving or declining to reappoint its
senior nuclear officer. Niagara Mohawk's senior nuclear officer
will be relieved by Niagara Mohawk if it is requested to do so in
writing by the CEOs of all four of the Non-Operating Cotenants.
d. When useful to the discharge of its
responsibilities under Article 3, the Management Committee may
review any developments of significance concerning cost,
operations, scheduling, performance objectives, work force
organization, regulatory concerns and other matters affecting or
affected by Unit operation and maintenance. These matters may
come to the Management Committee's attention from various sources
including, but not limited to, Niagara Mohawk or the Owners'
Representative On-site described in Section 3.7.
e. Niagara Mohawk shall keep the Management Committee
informed of regulatory proceedings regarding operation of the
Unit, especially those which may result in any penalty, fine or
assessment being imposed on the Unit or on any of the Parties.
With respect to State regulatory proceedings involving a
potential penalty, fine or assessment for imprudent management,
whether to defend against such imposition, the overall defense to
be mounted and any settlement thereof shall be decisions made by
the Management Committee. However, it is the intent of the
parties that Niagara Mohawk shall have the primary responsibility
for the conduct of all regulatory proceedings. Representation by
counsel of any Party in any regulatory proceeding involving the
Unit will not be used by any other Party as the basis to seek
disqualification of that counsel in any action brought by one
Party against another.
f. The Management Committee shall annually review the
performance of key executives (including salary levels), as
designated by Niagara Mohawk's senior nuclear officer, who are
responsible for the operation of the Unit. This review shall be
conducted in executive session before the principal executive
members of the Management Committee.
g. The Management Committee shall require the
preparation of a charter by each of the Audit, Fuel, and Finance
Committees specifying, among other things, the function,
responsibilities and reporting requirements of the Committee.
Said charters shall be reviewed and approved by the Management
Committee. The Management Committee may from time to time
require the amendment or modification of the committee charters
to address changing needs and requirements.
3.4 Annual Plan and Budget
a. Niagara Mohawk shall annually prepare, on or
before August 1,
i. a proposed plan, which shall include annual Unit
operating goals and objectives, as well as budgets
for the succeeding year (Year 1) and
ii. a preliminary plan and financial forecasts for the
two following years (Years 2 and 3).
Each annual budget or financial forecast, to the extent feasible,
shall comprehensively address all expenditures for the Unit in
the following categories: Fuel, Capital, Operations and
Maintenance and Other.
b. On or before September 15 of each year, the
Management Committee shall complete preliminary review of the
documents submitted to it under subsection (a) and provide
Niagara Mohawk with its comments.
c. Following timely revision by Niagara Mohawk
responsive to the comments of the Management Committee, the
Management Committee shall, on or before October 15 of each year,
i) approve plans, which shall include annual Unit
operating goals and annual objectives, and the
overall level of the budgets for the following
year and
ii) give preliminary approval to the preliminary plan
and financial forecasts for Years 2 and 3.
d. The Management Committee may from time to time
review the planning and budget process and Niagara Mohawk will
respond to any comments or criticisms of that process.
3.5 Variances
a. The approved plans, which shall include annual
operating goals and annual objectives, and budget shall form the
basis upon which Unit operation and maintenance are conducted
during the plan and budget year. The Management Committee may
from time to time approve revisions in the plan and budget,
whereupon Unit operation and maintenance shall conform to revised
plan and budget.
b. Niagara Mohawk shall report at each regularly
scheduled meeting of the Management Committee on the status of
current and projected spending in relation to the capital and
operating budgets. As part of this report (but sooner if
circumstances require), Niagara Mohawk shall identify:
i) significant expenditures it proposes to make not
within the approved budget,
ii) withholding of significant expenditures within the
approved budget it proposes to make, or
iii) if it has reason to believe that spending
associated with a budgeted amount is (or will be)
exceeding or underrunning the budget by a
significant amount.
c. Niagara Mohawk shall provide a detailed budget
variance and forecast report on a monthly basis including
explanation for each budget item exhibiting significant variance.
d. If the total level of expenditures for any budget
category (Fuel, Capital, Operation and Maintenance, and Other) is
expected to exceed the budget by more than $1.0 million, Niagara
Mohawk will inform the Management Committee and seek approval
from the Management Committee for such increase in the total
budgets; such approval shall not be unreasonably withheld.
e. Notwithstanding the preceding paragraph, the
Parties shall be liable to the extent of their Respective
Percentages
i) for any expenditure which Niagara Mohawk
reasonably believes is required for compliance
with the terms and conditions of the NRC Facility
Operating License, its Technical Specifications
and Environmental Protection Plan, the regulations
of the Commission and any applicable orders or
directives issued by it, and
ii) for any expenditure which, in Niagara Mohawk's
judgment, is essential for safe operation of the
Plant.
f. If the level of expenditure, or expenditures,
described in the preceding paragraph is expected to result in the
exceeding of an approved budget, Niagara Mohawk shall promptly so
inform the Management Committee. Time permitting, Niagara Mohawk
will review such expenditures with the Management Committee in
advance. In any event, Niagara Mohawk will make every reasonable
effort to offset such expenditures, and avoid increases in the
currently approved budget amounts, through reduction or
elimination of corresponding amounts of discretionary
expenditures.
3.6 Circumstances Requiring Immediate Action
a. Whenever circumstances require that action
normally subject to Management Committee review and approval be
taken before that Committee can be convened in person or
telephonically, Niagara Mohawk shall (1) make reasonable efforts
to so inform both the Owners' Representative On-site and
Management Committee members or their alternates and (2) take
such action as it deems appropriate having due regard for (a) the
safeguarding of personnel and equipment, (b) the maintaining of
the Unit in operable condition, (c) the ensuring of regulatory
compliance, and (d) the interests of all the Parties.
b. As soon as possible but not later than 24 hours
after so acting, Niagara Mohawk shall report and explain its
action to the Management Committee and shall recommend any
follow-up action it deems appropriate.
3.7 Owners' Representative On-site
a. Those members of the Management Committee
designated by Chief Executive Officers of Non-Operating Owners
may collectively retain a person or an organization (the Owners'
Representative On-site) to monitor activities related to the Unit
and to provide them with assessments thereof. The Owners'
Representative On-site shall report to the Chair of the
Management Committee or the Chair's designee.
b. The Owners' Representative On-site shall
coordinate the on-site activities of employees and agents of the
Non-Operating Owners and shall, should the Non-Operating Owner
members of the Management Committee so designate, represent the
interests of those owners to Niagara Mohawk management and to
those Niagara Mohawk managers exercising operational control
under Section 2.4. In addition, the Owners' Representative
On-Site shall inform in a timely fashion the Niagara Mohawk
officer who directs operational control of the operation and
maintenance of the Unit as to his observations and assessments
concerning the operation and maintenance of the Unit.
c. Niagara Mohawk may designate an individual for
assignment as part of the Owners' Representative On-site.
3.8 Representation on Unit Committees, Task Forces and SRAB
The Non-Operating Owners may have representation on all
operation and engineering committees as well as task forces which
are established from time to time by Niagara Mohawk to inquire
into various questions and/or problems relating to the Unit.
Niagara Mohawk shall make reasonable efforts to keep Owners'
Representative On-Site informed regarding dates and times for
regularly or periodically scheduled meetings of such committees
and task forces so as to facilitate the representation provided
for in this Section 3.8. The Non-Operating Owner members of the
Management Committee may collectively designate one individual to
be a member of the Safety Review and Audit Board and one
individual to be a member of the Capital Review Committee.
3.9 Rights and Responsibilities of On-site Representative
and Other Owner Personnel
a. The Owners' Representative On-site shall have
reasonable access to Niagara Mohawk corporate management and to
those Niagara Mohawk managers exercising operational control
under Section 2.4. The Owners' Representative On-site and all
other employees and agents of the Non-Operating Owners whose
activities on-site are coordinated by the Owners' Representative
On-site shall have reasonable access to all Unit-related
correspondence, records, reports, and other information within
the control of Niagara Mohawk wherever located, and shall have
access to the Unit at all times subject to security and safety
requirements comparable to those applied to Niagara Mohawk
personnel. Niagara Mohawk shall provide the organization of the
Owners' Representative On-site with suitable and sufficient
office space at the Plant Site, facilities, equipment and
supplies.
b. The On-site Representative will be responsible to
the Chair of the Management Committee for reporting on the
operation and maintenance of the Unit. Such reports will have
the purpose of providing oversight and assessment as determined
by the Management Committee and of helping Niagara Mohawk achieve
all of the goals for operation and maintenance of the Unit set
forth in Article 2. To that end, both the On-site Representative
and the appropriate Niagara Mohawk personnel responsible for
operation and maintenance of the Unit will seek to achieve a
cooperative working relationship, and will among other things,
inform each other at the earliest practical time of any perceived
deficiencies in the operation or maintenance of the Unit and of
any suggested solutions.
ARTICLE 4 - SERVICES TO BE PROVIDED
4.1 List of Services
Niagara Mohawk agrees, subject to the provisions of
Article 3, that it will:
a. Make decisions respecting the operation and
maintenance of the Unit and carry out improvements to the Unit;
b. Select, hire, control and (when it deems such
action appropriate) discharge personnel as required in the
performance of this Agreement, such personnel to be employees
solely of Niagara Mohawk and subject to the terms of any labor
agreements to which Niagara Mohawk is a party pertaining to such
employees and to such standards relating to compensation,
benefits and terms of employment specified for Niagara Mohawk
employees;
c. purchase operating and maintenance materials,
supplies, and services;
d. perform or contract for maintenance, renewals and
replacements required to protect the Unit and to keep it in safe
and efficient operating condition and prepare and submit to the
other Parties normal operating schedules for the Unit;
e. engage legal, engineering, auditing and other
consulting services related to the Unit;
f. perform such accounting as is required for the
Unit and furnish reports with respect thereto to the other
Parties which will enable each Party to meet its accounting and
statistical requirements, including the requirements of any
regulatory bodies having jurisdiction over such Party;
g. appoint, as Niagara Mohawk's member of the
Management Committee, one of its two most senior officers or an
officer who has authority, either in that officer's position or
delegated from another officer with such authority, to direct
both Unit operations and such engineering,licensing and other
services as are necessary to support those operations;
h. place all orders and contracts pertaining to
operation and maintenance of the Unit in the name of Niagara
Mohawk on behalf of the Parties hereto. The Parties hereto
authorize Niagara Mohawk to sign such orders and contracts on
their behalf. No party hereto will assume any liability under or
by reason of any such orders or contracts except to the extent of
its Respective Percentage;
i. prepare bills in reasonable detail to the Parties
for costs incurred hereunder;
j. assist the Parties in regulatory proceedings and
other contested matters (including, but not limited to, any
action by any shareholders of any of the Parties) relative to the
Unit, including the provision of witnesses and current and
accurate Unit data; and
k. support the timely preparation of Unit plans and
budgets, as described in Section 3.4, with sufficient
supervision, staffing and organization.
ARTICLE 5 - PAYMENTS
5.1 Operating Costs
Subject to the provisions of Article 3, it is agreed
that the Parties shall share in the costs of operation,
maintenance and replacements including Niagara Mohawk's overhead
(including services and expenses of regular personnel, executive
officers and supervisors, to the extent that such services
pertain to operations and maintenance of the Unit) applicable to
the performance of this Agreement, in their respective
Percentages.
5.2 Operating Account
Niagara Mohawk shall establish and maintain for
purposes of this Agreement a special bank account or accounts, in
a New York State bank designated by Niagara Mohawk, entitled
"Niagara Mohawk Power Corporation, as Agent - Nine Mile Point
Nuclear Station Unit 2 Nuclear Operating Account", with funds
supplied by the Parties in accordance with their Respective
Percentages. Each Party pursuant to written notice by Niagara
Mohawk and in accordance with its Respective Percentage will
deliver to Niagara Mohawk funds for the replenishment of the bank
account or accounts by the Parties. In determining the dates and
amounts of such replenishments, the Parties shall endeavor to
avoid carrying in the bank account or accounts funds ill excess
of a reasonable minimum balance for periods of time longer than
necessary to provide for the orderly payment of invoices and
payroll and other charges. Any income resulting from the
investment of excess funds and the cost of funds required to be
borrowed will accrue to the account of each co-tenant in their
respective ownership percentages. All invoices or charges in
connection with the performance of this Agreement shall be paid
by Niagara Mohawk from the aforesaid account or accounts.
5.3 Failure to Advance Funds
If at any time any party fails to advance funds owing
under this Agreement when Niagara Mohawk requests it to do so,
Niagara Mohawk may (unless it is clear that the failure will be
promptly remedied) require all Parties to advance funds in
proportion to their Respective Percentages to cover the shortfall
for as long as may be required, but not longer than three months.
A Party failing to advance funds whenever so required shall
remain fully liable therefore under the Basic Agreement and this
Operating Agreement and shall promptly tender the delinquent
funds together with interest at the prime rate or an equivalent
reference rate as may be established from time to time by The
Chase Manhattan Bank N.A., at New York, New York. Niagara Mohawk
shall accept and apply such tendered sums to eliminate or reduce
the next succeeding request or requests for funds from those
Parties covering the shortfall.
Promptly upon the occurrence of the event described in
the preceding paragraph, Niagara Mohawk shall notify all Parties
of it and a meeting shall be convened to decide as promptly as
possible on a longer-term course of action responsive to the
particular circumstances.
This Section shall not in any way restrict or limit the
right of the non-defaulting Party (Parties) against the
defaulting Party (Parties).
ARTICLE 6 - AUDITS
6.1 Audit Committee; Inspection of Records
The Audit Committee, consisting of a representative of
each of the Parties, has previously been organized by the Parties
and shall continue to exist. The members of such Committee shall
consist of one representative appointed by each of the Chief
Executive Officers of the Parties. The Chair of the Audit
Committee shall be appointed by the Chief Executive Officers
voting in accordance with their companies' Respective Shares. A
vote representing more than 50 percent of the ownership interest
in the Unit is required to appoint a Chair. The Audit Committee
shall:
a. report to the Chief Executive Officers collectively;
b. plan the amount of audit effort to be expended on the
Plant; the Audit Committee will also determine how the manpower
will be provided in order to meet its commitments;
c. determine specific areas for audit and develop the
scope and objectives for each audit;
d. perform the audits and discuss preliminary findings/
corrective actions with Niagara Mohawk Management;
e. review audit results and submit draft reports to the
Management Committee for comments and report final audit results
to the Chief Executive Officers; and
f. review the results of any Niagara Mohawk Internal Audit
Reports of Unit Two activities.
The scope of the Audit Committee shall be understood to
include all costs relating to the Plant. The costs of all audits
by the Audit Committee or by any independent certified public
accountants retained by it shall be borne by the Owners in accord
with their Respective Percentages.
The correspondence, records, vouchers and books of
account of Niagara Mohawk pertaining to all costs incurred for
the account of the Parties under this Agreement shall be examined
annually by a firm of independent certified public accountants in
connection with the annual examination of Niagara Mohawk's
accounts and records, and such firm will report to the Parties
with respect to operation under this Agreement. The costs of
such examination shall be borne by the Owners in accord with
their Respective Percentages.
The Parties or any individual Party shall have the
right, during the term of this Agreement and for a period of two
years after final payment, to inspect all correspondence,
records, vouchers and books of account of Niagara Mohawk
pertaining to work done or disbursements made for the account of
the Party or Parties under this Agreement. This review may be
performed by the Party's auditors, or a firm of independent
certified public accountants retained by any Party or Parties.
6.2 Inspection Costs; Inspection Report
If an inspection or review is requested or undertaken
by fewer than four of the Parties, the Party or Parties
requesting or undertaking such inspection or audit shall be
responsible for the cost thereof. The reports of inspection,
review or audits pursuant to this section shall be provided to
the Audit Committee. The Party or Parties undertaking the audit
shall report the results to the Chief Executive Officers of all
the Parties who shall in turn advise Niagara Mohawk within three
(3) months of receipt of such report, of any items that require
adjustment or corrective action.
6.3 Adjustments or Corrective Action
Niagara Mohawk shall permit such inspection, reviews or
audits and make appropriate adjustments or take corrective action
as may be required to reflect the results thereof.
ARTICLE 7 - FUEL
7.1 Fuel Committee; Meetings, Agenda and Minutes
A Fuel Committee has previously been organized and
shall continue to exist. Each member of the Management Committee
shall designate a representative to serve at the member's
pleasure. The Chair shall be appointed by the Management
Committee voting in accordance with their companies' Respective
Shares. A vote representing more than 5O percent of the
ownership interest in the Unit is required to appoint a Chair.
The Committee shall meet on a quarterly basis, or upon the
request of any Party. The Chair shall, at least ten (lO) days in
advance of each such regular meeting, provide each Party with a
written agenda of the pertinent items to be discussed at the
meeting relevant or material to nuclear fuel provisions for the
Unit. Minutes of such meetings shall be prepared by the Chair
and distributed to the Parties for correction or clarification.
Comments of the Parties at a meeting or with regard to the
minutes shall be considered and addressed by Niagara Mohawk.
7.2 Fuel Supply
Subject to approvals of the Management Committee as
provided in Article 3, Niagara Mohawk, as agent, shall continue
to manage the fuel supply and make decisions in connection
therewith, keeping the Parties informed of its actions. Each
Party may elect to provide its own share of uranium and/or
conversion services on the condition that such share will be made
available pursuant to an agreed upon schedule for reload and to
the extent that such commitments have not already been made by
Niagara Mohawk as agent. However, Niagara Mohawk, acting as an
individual Party, shall be limited to providing no more than
seventy-five percent of its individual share for any one reload.
The remaining amount required for Niagara Mohawk as an individual
Party shall be provided as part of its overall procurement
strategy acting as agent for all the Parties. (Niagara Mohawk
controlled sources shall not be eligible to bid these latter
procurements.)
7.3 Fuel Pricing Accounts.
Each Party will maintain its own separate nuclear fuel
pricing accounts, but all individual accounts shall be merged as
a composite for New York Power Pool (NYPP) dispatch purposes.
7.4 Spent Fuel
Subject to the approval of the Management Committee as
provided in Article 3, Niagara Mohawk will continue to operate
and manage all on-site and off-site spent fuel storage,
reprocessing or permanent disposal of recovered fuel and waste
products, as agent of the parties, with all costs, benefits and
liabilities distributed among the Parties in accordance with the
Respective Percentages.
7.5 Separate Activities for Units 1 and 2
It is agreed that Niagara Mohawk will maintain entirely
separate procurement, inventory accounting and disposal actions
for Units 1 and 2.
ARTICLE 8 - FINANCE AND ACCOUNTING
The Finance Committee, consisting of a representative
of each of the Parties, has been previously organized by the
Parties and shall continue to exist. Each member of the
Management Committee shall designate a representative to serve at
the member's pleasure. The Parties may designate additional
Finance Committee meeting attendees; however, only the designated
representative or a designated alternate shall vote on behalf of
the Party. The Chair of the Finance Committee shall be appointed
by the Management Committee voting in accordance with their
companies' Respective Shares. A vote representing more than 50
percent of the ownership interest in the unit is required to
appoint a Chair. The Committee shall meet at the request of any
Party for the purpose of addressing common financial issues
related to the operation of NMP2. In addition, the Finance
Committee shall oversee and direct the activities of the
Accounting Committee which has been previously formed to
establish and review accounting policy and procedures as they
relate to the Unit.
ARTICLE 9 - INSURANCE AND INDEMNITY
9.1 Compensation Withholdings
Niagara Mohawk shall have sole responsibility for
withholding from the compensation of its employees engaged in
performing the services under this Agreement any taxes or
contributions which are required by law to be withheld, and sole
responsibility for paying such withheld amount and taxes
applicable to the compensation of such employees imposed by law
upon Niagara Mohawk to the proper governmental authority, and
shall defend, indemnify and save harmless the Parties hereto from
and against any liability on account thereof.
9.2 Workers' Compensation and Employers' Liability
Insurance
Niagara Mohawk shall provide workers' compensation and
employers' liability insurance for its employees engaged in
performing the services under this Agreement in accordance with
the laws of the State of New York. The policy shall contain a
subrogation waiver to the effect that the insurance company shall
not proceed against any of the Parties hereto for recovery of any
loss or losses paid under the policy even though due to the
negligence of any Party or Parties. With respect to any claims
made or any suits brought by Niagara Mohawk employees engaged in
performing the services under this Agreement against LILCO,
NYSEG, RG&E, or Central Hudson or any of them, and such claims or
suits do not arise out of acts or omissions of LILCO, NYSEG,
RG&E, or Central Hudson, and are not covered by insurance
provided under Section 9.3 hereof, Niagara Mohawk agrees to
defend, indemnify, and hold harmless LILCO, NYSEG, RG&E, or
Central Hudson.
9.3 Comprehensive General Liability Insurance Policy
Through the life of this Agreement, Niagara Mohawk
shall maintain liability insurance for the account and in the
name of the Parties hereto by securing a standard Comprehensive
General Liability Insurance Policy on a primary coverage basis to
insure the Parties and their agents against liability except for
the nuclear risk, for bodily injury including personal injury to
or death of any one or more persons and damage to property
arising out of the operation of the Unit. Such insurance shall
include a waiver of the insurer's right of subrogation against
any of the Parties for such loss or damage even though due to the
negligence of any of the Parties.
Niagara Mohawk shall also maintain insurance in accord
with the requirements of the United States Nuclear Regulatory
Commission pursuant to the Commission's authority under 42 U.S.C.
Section 2210 et seq. and the license issued by the United States
Nuclear Regulatory Commission for the Unit. In the event the
requirements of 42 U.S.C. Section 2210 et seq. are revised or
terminated, Niagara Mohawk shall obtain and maintain such
insurance and indemnification as is available for the nuclear
risk on reasonable terms, subject to the consent of the Parties
hereto.
9.4 Property Insurance
Niagara Mohawk shall maintain for the account of the
Parties in the name and on behalf of the Parties, property
insurance as shall normally be provided by nuclear property
insurance underwriters. Such insurance shall include a waiver of
the insurer's right of subrogation against any of the Parties for
such loss or damage even though due to the negligence of any of
the Parties. Niagara Mohawk shall arrange with the insurers for
any inspections necessitated thereby and shall promptly report
any losses to each Party, and shall assist and cooperate in the
adjustment and settlement thereof.
9.5 Employees' Fidelity Bond
Niagara Mohawk shall maintain such employee's fidelity
bond coverage as it deems necessary.
9.6 Liability for Loss, Expense or Damage Not Covered by
Insurance
It is the intent of this Agreement that, insofar as
practicable, all liabilities or losses in favor of third parties
shall be covered by insurance; nonetheless, the Parties hereto
hereby agree to share (including deductibles and retainages under
policies of insurance as well as attorney's feed) in any loss,
liability, expenses, or damage (including personal injury, death
or damage to property) of any kind whatsoever arising out of or
connected with the design, construction, maintenance and
operation of the Nine Mile Point Nuclear Station Unit 2, in
accordance with their Respective Percentages (hereafter referred
to as "Shared Liability") and hereby agree to indemnify and hold
each other harmless with respect to any excess amount beyond the
share contributed by each in accordance with their Respective
Percentages, provided that no Party is required to participate in
Shared Liability for any claim, loss, expense, or damage that is
payable as a result of any settlement or compromise thereof
unless all the Parties hereto shall have consented to cash
settlement or compromise. Shared Liability as to third parties,
as set forth above, shall apply irrespective of the nature of the
allegations of wrongdoing on the part of the Party(ies) hereto
against whom recovery is being sought, whether pertaining to
non-feasance, misfeasance, malfeasance or violations of statute
or regulation, including, but not limited to (to the extent not
prohibited by law) all claims and judgments against any such
Party(ies). In no event shall any of the Parties be liable to
any other Party, except to the extent of its Shared Liability,
for consequential damages to third parties (including, but not
limited to, loss of profits or revenue, loss of use of equipment,
cost of capital, cost of substitute equipment, facilities, or
services, down-time costs, cost of replacement or purchased
power, or claims of customers) or punitive damages to third
parties resulting from uninsured losses occurring as aforesaid.
9.7 Amount of Coverage; Modifications
Any insurance arranged for or placed by Niagara Mohawk
hereunder shall be for such amounts and with such deductibles as
Niagara Mohawk, considering the nature of the risks and current
insurance practices, shall determine. Such coverage and
deductibles, however, shall satisfy the requirements of each
Party hereto. To the extent that Niagara Mohawk places or
arranges for insurance for the Parties as herein provided, the
Parties will not obtain or provide such insurance, except that
any Party may for its own account and at its own expense obtain
or provide separate or excess liability coverage.
During the life of this Agreement, from time to time,
Niagara Mohawk may modify insurance coverages both as to type and
amount and deductibles to conform to its own corporate practices
and practices generally accepted in the utility industry. All
Parties shall be notified of any change.
Copies of any insurance policies placed or arranged for
hereunder shall be furnished to all Parties.
Notwithstanding any provision of this Article 9,
Niagara Mohawk shall secure and maintain for the Unit an
insruance program affording liability and property damage
coverage which meets regulatory requirements.
9.8 Insurance Premiums
All premiums for insurance maintained by Niagara Mohawk
hereunder with respect to the Unit shall be included in the cost
of operations and maintenance.
9.9 Sharing of Regulatory Penalty and Breach of
This Agreement
a. Except as this Section otherwise provides, each
Party does hereby release each of the other Parties from all
liability, causes of action, claims and judgments (hereinafter
collectively referred to in this Section 9.9 as "Claims") in
excess of each Party's Respective Percentage for actions or
omissions occurring subsequent to the effective date of this
Agreement and arising out of operation, maintenance, modification
(including design thereof), or ownership of the Unit.
b. Unless otherwise directed by the regulatory agency,
the Parties shall share in accordance with their Respective
Percentages any penalty, fine or assessment (hereinafter
"Regulatory Penalty") imposed by a regulatory agency for actions
or omissions
i) arising from operation, maintenance, modification
(including design thereof), or ownership of the
Unit and
ii) occurring subsequent to the effective date of this
Agreement.
In such circumstances, no Party will advocate any sharing of a
Regulatory Penalty in any manner other than in accordance with
the Respective Percentages before any regulatory body or court in
which the manner of sharing of a Regulatory Penalty is at issue,
including in an appeal from a regulatory body or court. If the
Regulatory Penalty results directly from acts, omissions or
circumstances constituting a Party's breach of this Agreement,
that portion of the penalty that results directly from such acts,
omissions or circumstances shall be borne by the Party in breach
and the balance shall be allocated according to the Parties'
Respective Percentages. As used in this Section 9.9, the term
breach of this Agreement excludes circumstances described in (1)
through (4) of paragraph (e) below so long as conditions (i)
through (ii) therein are met.
c. A party shall not be entitled to the release
provided in paragraph (a) above for those Claims based upon acts,
omissions or circumstances for which it is responsible that both
(1) result directly in the Claims for which it seeks release and
(2) constitute a breach of this Agreement which breach is not
cured.
d. A Party in breach of this Agreement shall have a
continuing obligation to cure it. If a Claim for monetary
damages does not lie under paragraph (c) above, any other Party
may insist that the obligation be honored, may demand specific
performance and may seek to enjoin any act or omission
constituting the breach.
e. It is not the intent of this Agreement to hold any
Party responsible beyond its Respective Percentage for the
economic or financial consequences of the failures of performance
or achievement described in (1) through (4) below so long as
conditions (i) through (ii) below are met. A Party shall not be
deemed in breach of this Agreement by reason of
1) any failure of the Unit to perform to a generally
accepted industry standard,
2) any failure of the Unit to achieve (despite Unit's
plans being designed to attain them) specific goal
or objective outlined in this Agreement or in Unit
operation and maintenance plans and budgets,
3) any failure by the Party to achieve conformance
with the approved annual operating plan or
4) any failure to comply with the technical
specifications and other terms and conditions of
the operating license issued by the NRC, the
regulations of the Commission and any applicable
orders or directives issued by it so long as
i) such failure is not willful and
ii) the Party has acted in good faith in all respects,
including with respect to its obligations under
this Agreement.
9.10 Meaning of Section 6 in September 22, 1975
Operating Agreement Among the Parties
(the 1975 Operating Agreement)
The Parties agree that in any action before any court
or administrative agency, or any appeal thereof, in which the
meaning of Section 6 in the 1975 Operating Agreement is at issue
no Party will use or cite the language of Sections 9.9 and 9.6
herein in any explication of, or argument as to, the meaning of
Section 6 in the 1975 Operating Agreement, nor shall the current
Sections 9.6 and 9.9 be construed to have any bearing on the
meaning of Section 6 of the 1975 Operating Agreement.
ARTICLE 10 - MEASUREMENT
10.1 Output Measurement
Net output of the Unit shall be measured by suitable
meters located at the Unit. Hourly production for Niagara
Mohawk, LILCO, NYSEG, RG&E and Central Hudson shall be metered at
Scriba Station and allocated to the nearest MWH in accordance
with each Party's Respective Percentage or each Party's scheduled
requirement for that hour. The Scriba Station meter shall also
be used as the basis for cotenant energy accounting.
10.2 Periodic Testing of Meters
Niagara Mohawk shall test the meters at regular
intervals and at other times when any Party hereto has reason to
believe that any meter is not registering accurately, and will
notify LILCO, NYSEG, RG&E and Central Hudson when such tests are
to be made in order that they may have a representative present
during the test.
ARTICLE 11 - GENERAL
11.1 Non-Waiver of Provisions
The failure of the Parties to insist in any one or more
instances upon strict performance of any of the provisions of
this Agreement, or to take advantage of any rights hereunder,
shall not be construed as a waiver of any such provisions or the
relinquishment of any such rights, but the same shall continue
and remain in full force and effect.
11.2 Procedure for Appeal of Management Committee Decision
Any member may appeal a decisions of the Management
committee to the Chief Executive Officers collectively within 10
days of the meeting at which such decisions is made. The member
appealing shall describe the issue to be decided and submit a
short, objective statement of the facts and reasoning supporting
the member's positions and that of the Management Committee. Any
non-appealing member of the Management Committee may supplement
or respond to the statement within 10 days.
In the event a matter is referred to the Chief
Executive Officers after inability of the Management Committee to
resolve a questions under Section 3.2, the Chair of the
Management Committee shall describe the issue to be decided and
submit a short, objective statement supporting alternative
resolutions of that issue. Any other member of the Management
Committee may supplement that statement within 10 days.
11.3 Procedure for Resolution of Appeal
The Chief Executive Officers shall resolve any issue
appealed or referred from the Management Committee by a vote
representing greater than 50 percent of the interest in the Unit
within 60 days after receipt of the appeal and any responding or
supplementary statements.
11.4 Conflict with Basic Agreement
To the extent any provision of the Basic Agreement
conflicts with provisions of this Operating Agreement,
notwithstanding the provisions of Article XIV of the Basic
Agreement, the provisions of this Agreement shall control.
11.5 Independence of Settlement Agreement
This Agreement does not supersede paragraph 6 or any
other provision of the September 3, 1985 document entitled
"Specification of Terms and Conditions of Offer of Settlement" to
which representatives of Niagara Mohawk and Staff of the PSC
subscribed and to which the non-operating owners later consented.
ARTICLE 12 - EFFECTIVE DATE, TERM AND TERMINATION
12.1 Effective Date
This Agreement shall be effective on January 1, 1993,
upon the expiration of the most recent extension of the Interim
Operating Agreement, dated February 21, 1992. It being the
intention of the Parties that there be no lapse between the
expiration of the Interim Operating Agreement and the
effectiveness of this Agreement.
12.2 Term
The term of this Agreement shall be 24 months from its
effective date. Thereafter, this Agreement shall be extended and
remain in full force and effect until terminated pursuant to
Section 12.3.
12.3 Termination
Any Party may terminate this Agreement by providing to
all of the other Parties a written Notice of Termination at any
time after expiration of 18 months of the term set forth in
Section 12.2. Such Notice of Termination shall take effect 6
months after it has been received by all Parties.
ARTICLE 13 - OPERATING COMPANY FORMATION
13.1 Evaluation
The Parties have been evaluating the possibility of
creating a corporate entity ("Operating Company") to operate and
maintain the Unit. Although they have decided not to create an
Operating Company at this time, the Parties agree to vigorously
pursue and complete the evaluation during the term of this
Agreement.
The operating agreement among the parties dated
September 22, 1975, comprising Appendix B to the Basic Agreement
of the same date, is hereby amended in its entirety with, and
replaced by, this Nine Mile Point Nuclear Station Unit 2
Operating Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Operating Agreement by their duly authorized officers as of the
date written opposite their names.
NIAGARA MOHAWK POWER CORPORATION
BY: ____________________________ DATED: DECEMBER 22, 1992
JOHN M. ENDRIES
ITS: PRESIDENT
LONG ISLAND LIGHTING COMPANY
BY: ____________________________ DATED: DECEMBER 20, 1992
ANTHONY F. EARLY, JR.
ITS: PRESIDENT
<PAGE>
NEW YORK STATE ELECTRIC & GAS CORPORATION
BY: _____________________________ DATED: DECEMBER 22, 1992
JACK H. ROSKOZ
ITS: SR. VICE PRESIDENT ELECTRIC BUSINESS UNIT
ROCHESTER GAS AND ELECTRIC CORPORATION
BY: _____________________________ DATED: DECEMBER 28, 1992
ROGER W. KOBER
ITS: CHAIRMAN, PRESIDENT, CEO
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
BY: ____________________________ DATED: DECEMBER 21, 1992
PAUL J. GANCI
ITS: PRESIDENT
</PAGE>
<PAGE>
EXHIBIT (10)(i)95
Bankers Trust Company
LOAN DIVISION MAILING ADDRESS:
STANDBY LETTER OF CREDIT P.O. BOX 318 - CHURCH ST. STA.
NEW YORK, N.Y. 10008
14TH FLOOR
ONE BANKERS TRUST PLAZA
NEW YORK, NY 10006
AMENDMENT NO. 2 TO
IRREVOCABLE LETTER OF CREDIT NO. S01880
BANKERS TRUST COMPANY
ONE BANKERS TRUST PLAZA
NEW YORK, NEW YORK 10015
AUGUST 12, 1993
THE FIRST NATIONAL BANK OF BOSTON
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
ATTENTION: MANAGER, CORPORATE TRUST DIVISION
DEAR SIRS:
WITH REFERENCE TO THE IRREVOCABLE LETTER OF CREDIT NO.
S01880 (THE "LETTER OF CREDIT") OF BANKERS TRUST COMPANY, PLEASE
BE ADVISED THAT, EFFECTIVE ON DATE HEREOF, THE STATED EXPIRIATION
DATE OF THE LETTER OF CREDIT IS HEREBY EXTENDED FROM THE CLOSE OF
BUSINESS BY US ON SEPTEMBER 16, 1995 TO THE CLOSE OF BUSINESS BY
US ON SEPTEMBER 16, 1996. EXCEPT AS SO EXTENDED HEREBY, THE
TERMS AND CONDITIONS OF THE LETTER OF CREDIT ARE NOT MODIFIED,
AND SHALL CONTINUE IN FULL FORCE AND EFFECT IN ACCORDANCE WITH
THE PROVISIONS THEREOF, ON THE DATE HEREOF, DURING THE TERM OF
THE LETTER OF CREDIT AS EXTENDED HEREBY.
VERY TRULY YOURS,
BANKERS TRUST COMPANY
BY: CYNTHIA A. JAY
NAME: CYNTHIA A. JAY
TITLE: VICE PRESIDENT
COPY
</PAGE>
<PAGE>
EXHIBIT (10)(i)96
Bankers Trust Company
LOAN DIVISION MAILING ADDRESS:
STANDBY LETTER OF CREDIT P.O. BOX 318 - CHURCH ST. STA.
NEW YORK, N.Y. 10008
14TH FLOOR
ONE BANKERS TRUST PLAZA
NEW YORK, NY 10006
AMENDMENT NO. 2 TO
IRREVOCABLE LETTER OF CREDIT NO. S01881
BANKERS TRUST COMPANY
ONE BANKERS TRUST PLAZA
NEW YORK, NEW YORK 10015
AUGUST 12, 1993
THE FIRST NATIONAL BANK OF BOSTON
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
ATTENTION: MANAGER, CORPORATE TRUST DIVISION
DEAR SIRS:
WITH REFERENCE TO THE IRREVOCABLE LETTER OF CREDIT NO.
S01881 (THE "LETTER OF CREDIT") OF BANKERS TRUST COMPANY, PLEASE
BE ADVISED THAT, EFFECTIVE ON DATE HEREOF, THE STATED EXPIRIATION
DATE OF THE LETTER OF CREDIT IS HEREBY EXTENDED FROM THE CLOSE OF
BUSINESS BY US ON SEPTEMBER 16, 1995 TO THE CLOSE OF BUSINESS BY
US ON SEPTEMBER 16, 1996. EXCEPT AS SO EXTENDED HEREBY, THE
TERMS AND CONDITIONS OF THE LETTER OF CREDIT ARE NOT MODIFIED,
AND SHALL CONTINUE IN FULL FORCE AND EFFECT IN ACCORDANCE WITH
THE PROVISIONS THEREOF, ON THE DATE HEREOF, DURING THE TERM OF
THE LETTER OF CREDIT AS EXTENDED HEREBY.
VERY TRULY YOURS,
BANKERS TRUST COMPANY
BY: CYNTHIA A. JAY
NAME: CYNTHIA A. JAY
TITLE: VICE PRESIDENT
COPY
</PAGE>
<PAGE>
EXHIBIT (10)(i)97
Bankers Trust Company
LOAN DIVISION MAILING ADDRESS:
STANDBY LETTER OF CREDIT P.O. BOX 318 - CHURCH ST. STA.
NEW YORK, N.Y. 10008
14TH FLOOR
ONE BANKERS TRUST PLAZA
NEW YORK, NY 10006
AMENDMENT NO. 2
TO IRREVOCABLE LETTER OF CREDIT NO. A95056-S
BANKERS TRUST COMPANY
ONE BANKERS TRUST PLAZA
NEW YORK, NEW YORK 10015
AUGUST 17, 1993
THE FIRST NATIONAL BANK OF BOSTON
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
ATTENTION: MANAGER, CORPORATE TRUST DIVISION
DEAR SIRS:
WITH REFERENCE TO THE IRREVOCABLE LETTER OF CREDIT NO.
A95056-S (THE "LETTER OF CREDIT") OF BANKERS TRUST COMPANY,
PLEASE BE ADVISED THAT, EFFECTIVE ON DATE HEREOF, THE STATED
EXPIRIATION DATE OF THE LETTER OF CREDIT IS HEREBY EXTENDED FROM
THE CLOSE OF BUSINESS BY US ON NOVEMBER 16, 1995 TO THE CLOSE OF
BUSINESS BY US ON NOVEMBER 16, 1996. EXCEPT AS SO EXTENDED
HEREBY, THE TERMS AND CONDITIONS OF THE LETTER OF CREDIT ARE NOT
MODIFIED, AND SHALL CONTINUE IN FULL FORCE AND EFFECT IN
ACCORDANCE WITH THE PROVISIONS THEREOF, ON THE DATE HEREOF,
DURING THE TERM OF THE LETTER OF CREDIT AS EXTENDED HEREBY.
VERY TRULY YOURS,
BANKERS TRUST COMPANY
BY: CYNTHIA A. JAY
NAME: CYNTHIA A. JAY
TITLE: VICE PRESIDENT
CUSTOMER COPY
</PAGE>
EXHIBIT (10)(i)98
Bankers Trust Company
LOAN DIVISION MAILING ADDRESS:
STANDBY LETTER OF CREDIT P.O. BOX 318 - CHURCH ST. STA.
NEW YORK, N.Y. 10008
14TH FLOOR
ONE BANKERS TRUST PLAZA
NEW YORK, NY 10006
AMENDMENT NO. 2 TO
IRREVOCABLE LETTER OF CREDIT NO. A95057-S
BANKERS TRUST COMPANY
ONE BANKERS TRUST PLAZA
NEW YORK, NEW YORK 10015
AUGUST 17, 1993
THE FIRST NATIONAL BANK OF BOSTON
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
ATTENTION: MANAGER, CORPORATE TRUST DIVISION
DEAR SIRS:
WITH REFERENCE TO THE IRREVOCABLE LETTER OF CREDIT NO.
A95057-S (THE "LETTER OF CREDIT") OF BANKERS TRUST COMPANY,
PLEASE BE ADVISED THAT, EFFECTIVE ON DATE HEREOF, THE STATED
EXPIRIATION DATE OF THE LETTER OF CREDIT IS HEREBY EXTENDED FROM
THE CLOSE OF BUSINESS BY US ON NOVEMBER 16, 1995 TO THE CLOSE OF
BUSINESS BY US ON NOVEMBER 16, 1996. EXCEPT AS SO EXTENDED
HEREBY, THE TERMS AND CONDITIONS OF THE LETTER OF CREDIT ARE NOT
MODIFIED, AND SHALL CONTINUE IN FULL FORCE AND EFFECT IN
ACCORDANCE WITH THE PROVISIONS THEREOF, ON THE DATE HEREOF,
DURING THE TERM OF THE LETTER OF CREDIT AS EXTENDED HEREBY.
VERY TRULY YOURS,
BANKERS TRUST COMPANY
BY: CYNTHIA A. JAY
NAME: CYNTHIA A. JAY
TITLE: VICE PRESIDENT
CUSTOMER COPY
</PAGE>
<PAGE>
EXHIBIT (10) (iii) 13
AMENDMENT TO
SAVINGS INCENTIVE PLAN
OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
WHEREAS, Central Hudson Gas & Electric Corporation
("Corporation") has adopted, effective as of January 1, 1983, a
Savings Incentive Plan which has been amended from time to time,
and as last amended by instrument, dated January 14, 1991, said
Plan is hereinafter called the "Plan," and
WHEREAS, the Board of Directors of the Corporation
approved a resolution at their meeting on September 24, 1993
which authorized the further amendment of the Plan to comply with
certain changes in Rule 16 issued by the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
NOW THEREFORE, the Plan is hereby further amended,
effective September 1, 1993, as follows (all other terms and
provisions of the Plan being hereby ratified, confirmed and
approved):
1. Section 3.03(b) of the Plan, is amended by adding
new subclause (vii) thereto to read as follows:
"(vii) The provisions of subclauses (i) and (ii)
hereof shall not be amended more than once every six (6) months
other than to comply with changes in the Code, ERISA or the rules
thereunder."
2. Section 8.05 of the Plan is hereby amended to add
as a new last sentence thereof the following:
"8.05 No Member, who is an officer of the Corporation
subject to the provisions of Section 16(a) and (b) of the
Securities Exchange Act of 1934, shall dispose of any shares
distributed to such Member for a period of six (6) months from
the date of such distribution and the Committee shall make such
rules as it shall determine to administer such limitation."
IN WITNESS WHEREOF, the undersigned Chairman of the
Board and Chief Executive Officer of Central Hudson Gas &
Electric Corporation has signed this instrument this 24th day of
September, 1993 as duly authorized by resolution of the Board of
Directors.
John E. Mack III
Chairman of the Board and Chief
Executive Officer
</PAGE>
<PAGE>
EXHIBIT (10) (iii) 14
Amendment to the Savings Incentive Plan
of the Central Hudson Gas & Electric Corporation
WHEREAS, Central Hudson Gas & Electric Corporation
("Corporation") has adopted, effective as of January 1, 1984, a
Savings Incentive Plan which has been amended from time to time,
and as last amended by instrument, dated September 24, 1993, said
Plan is hereinafter called the "Plan," and
WHEREAS, the Board of Directors of the Corporation
approved a resolution at their meeting on December 17, 1993 which
authorized the further amendment of the Plan to comply with
certain changes in the Internal Revenue Code of 1986, as amended,
effective by the Omnibus Budget Reconciliation Act of 1993.
NOW, THEREFORE, the Plan is hereby further amended,
effective January 1, 1994 as follows (all other terms and
provisions of the Plan being hereby ratified, confirmed and
approved), except that such amendment shall not be effective for
Members of the Plan who are covered under a collective bargaining
agreement until June 30, 1994:
1. Section 1.12 of the Plan, is amended and as amended
is restated to read as follows:
"1.12 Compensation shall, except as provided for
in Section 3.03(b) (i) with respect to Additional Company
Contributions, mean the then current base rate of salary paid to
a Member by the Company, prior to any salary reduction pursuant
to Section 3.01 of this Plan and the Company's Flexible Benefit
Plan, except that Compensation shall not exceed $150,000, subject
to adjustment to take into account increases in the cost of
living in accordance with Code Section 401(a) (17) (B). In
determining the Compensation of an Employee for purposes of the
$150,000 limitation, the rules of Code Section 414(q) (6) shall
apply, except that in applying such rules, the term "family"
shall include only the spouse of the Employee and lineal
descendants of the Employee who have not attained age 19 before
the close of the calendar year."
IN WITNESS WHEREOF, the undersigned Chairman of the
Board and Chief Executive Officer of Central Hudson Gas &
Electric Corporation has signed this instrument this 17th day of
December, 1993 as duly authorized by resolution of the Board of
Directors.
______________________________
John E. Mack III
Chairman of the Board and
Chief Executive Officer
</PAGE>
<PAGE>
EXHIBIT (10) (iii) 15
FIRST AMENDMENT
TO
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
WHEREAS, Central Hudson Gas & Electric Corporation
("Company") established, effective March 1, 1992, its Executive
Deferred Compensation Plan for a select group of management
employees or highly compensated employees ("Plan"), and
WHEREAS, the Company proposes to vest, as of Decem-
ber 31, 1992, all Plan Participants, who are between the ages of
55 and 60, in their Benefits under the Plan to the extent not
theretofore vested,
NOW, THEREFORE, in furtherance thereof, the Company
hereby amends the Plan to add a new Section 2.04 thereto to read
as follows (all other terms and provisions being ratified,
confirmed and approved):
"2.04 Special Vesting. Notwithstanding anything
herein to the contrary, all Participants in the Plan who, on
December 31, 1993, have attained age 55 (but not age 60),
regardless of their years of service with the Company, shall
be vested in the benefits described in Section 2.01 (and,
thereupon, shall be eligible to receive such benefits on
retirement) as if they had reached age 60 and had 10 years
of service with the Company as of December 31, 1993."
Pursuant to authorization of the Board of Directors of
the Company granted on December 17, 1993, I have executed this
First Amendment this 17th day of December, 1993.
John E. Mack III
Chairman of the Board and
Chief Executive Officer
</PAGE>
<PAGE>
EXHIBIT (10) (iii) 16
Amendment to the Savings Incentive Plan
of the Central Hudson Gas & Electric Corporation
WHEREAS, Central Hudson Gas & Electric Corporation
("Corporation") has adopted, effective as of January 1, 1984, a
Savings Incentive Plan which has been amended from time to time,
and as last amended by instrument, dated December 17, 1993, said
Plan is hereinafter called the "Plan," and
WHEREAS, the Board of Directors of the Corporation
approved a resolution at their meeting on December 17, 1993 which
authorized the further amendment of the Plan to comply with
certain changes in Section 401(a)(17) of the Internal Revenue
Code of 1986, as amended, effective by the Omnibus Budget
Reconciliation Act of 1993; and
WHEREAS, by instrument, dated December 17, 1993, the
Plan was so amended; and
WHEREAS, the Internal Revenue Service by Rev.
Proc. 94-13, I.R.B. 1994-3, January 18, 1994, subsequently issued
a Model Amendment for compliance with such changes; and
WHEREAS, it is proposed to rescind the December 17,
1993 amendment to the Plan and adopt said Model Amendment;
NOW, THEREFORE, the Plan is hereby further amended,
effective January 1, 1994 as follows (all other terms and
provisions of the Plan being hereby ratified, confirmed and
approved), except that such amendment shall not be effective for
Members of the Plan who are covered under a collective bargaining
agreement until June 30, 1994:
1. The Plan Amendment, dated December 17, 1993, is
hereby rescinded, thereby restoring Plan Section 1.12 in its form
prior to January 1, 1994.
2. A new Article 15 is added to the Plan, effective
January 1, 1994, to read as follows:
"ARTICLE 15
Omnibus Budget Reconciliation Act of 1933 ("OBRA-93")
Amendment.
In addition to other applicable limitations set
forth in the Plan, and notwithstanding any other
provision of the Plan to the contrary, for Plan years
beginning on or after January 1, 1994, the annual
compensation of each employee taken into account under
the Plan shall not exceed the OBRA'93 annual
compensation limit. The OBRA'93 annual compensation
limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with
section 401(a)(17)(B) of the Internal Revenue Code.
The cost-of-living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months,
over which compensation is determined (determination
period) beginning in such calendar year. If a
determination period consists of fewer than 12 months,
the OBRA'93 annual compensation limit will be
multiplied by a fraction, the numerator of which is the
number of months in the determination period, and the
denominator of which is 12.
For Plan years beginning on or after January 1,
1994, any reference in this Plan to the limitation
under section 401(a)(17) of the Code shall mean the
OBRA'93 annual compensation limit set forth in this
provision.
If compensation for any prior determination period
is taken into account in determining an employee's
benefits accruing in the current Plan year, the
compensation for that prior determination period is
subject to the OBRA'93 annual compensation limit in
effect for that prior determination period. For this
purpose, for determination periods beginning before the
first day of the first Plan year beginning on or after
January 1, 1994, the OBRA'93 annual compensation limit
is $150,000."
IN WITNESS WHEREOF, the undersigned Chairman of the
Board and Chief Executive Officer of Central Hudson Gas &
Electric Corporation has signed this instrument this 3rd day of
March, 1994 as duly authorized by resolution of the Board of
Directors.
John E. Mack III
Chairman of the Board and
Chief Executive Officer
</PAGE>
<PAGE>
EXHIBIT (10) (iii) 17
ADOPTION OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
EXECUTIVE INCENTIVE COMPENSATION PLAN
WHEREAS, the Board of Directors of this Corporation at
its November 19, 1993 meeting, authorized the adoption of the
above-mentioned Plan, a form of which is attached hereto.
NOW, THEREFORE, the undersigned, as so authorized,
hereby adopts such Plan, effective January 1, 1993.
Dated: January 18, 1994 _________________________
John E. Mack III
Chairman of the Board and
Chief Executive Officer
<PAGE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
EXECUTIVE INCENTIVE COMPENSATION PLAN
WHEREAS, Central Hudson Gas & Electric Corporation
("Company") has determined the need for an incentive compensation
program for the Chairman of the Board and Chief Executive
Officer;
WHEREAS, the amount of the Chairman's base compensation
generally will be determined at the Annual Meeting of the Board
of Directors and will continue to be effective as of April 1 of
each year,
NOW, THEREFORE, in furtherance of the goal of the Board
of Directors to establish, effective January 1, 1993, an
Executive Incentive Compensation Plan to provide for a
supplemental amount of compensation:
Article I. Definitions
1.01 "Company" shall mean Central Hudson Gas &
Electric Corporation.
1.02 "Plan" shall mean the Central Hudson Gas &
Electric Corporation Executive Incentive Compensation Plan, as
from time to time amended.
1.03 "Participant" shall mean the Chairman of the
Board and Chief Executive Officer of the Central Hudson Gas &
Electric Corporation.
1.04 "Compensation" shall mean the annual base rate
of renumeration in effect for the Participant, including any
deferrals under any Company plan or arrangement with the Company
which defers recognition of income under the Internal Revenue
Code of 1986, as amended.
1.05 "Measurement period" shall mean each calendar
year.
1.06 "Incentive compensation" shall mean the amount
of renumeration earned by the Participant and shall be based on
the percentage earned in each category described in multiplied by
the Participant's Compensation in effect at the time of the
determination of the incentive compensation.
Article II. Benefits
2.01 Benefits to Participant. The Participant will be
entitled to earn up to an additional 10% of the Participant's
compensation, for each calendar year completed, provided that the
Company achieves certain results in the categories as specified
below:
a) Shareholder Value
The Participant shall earn up to 4% of compensation
if the Company's total shareholder return on its
Common Stock outperforms the Kidder Peabody Index
(or a comparable index if the Kidder Peabody Index
is not used), as shown in the Company's annual
Proxy Statement.
The following table sets forth the incentive
that can be earned by such outperformance, as a
percentage of compensation:
Minimum Amount By Which
Incentive Company Must Outperform
Earned Kidder Peabody Index
4% 10.0%
3% 7.5%
2% 5.0%
1% 2.5%
b) Customer Electric and Gas Prices
The Participant shall earn up to 3% of
compensation as follows:
1) Up to 2.7% of compensation shall be earned if
the Company's residential electric price per
killowatt hour ("kwh"), including fuel and taxes,
is lower than the average of the price per kwh of
the six other New York State electric and gas
utilities as of the first day of the year subject
to the measurement period.
2) .3% of compensation shall be earned if the
Company's typical residential gas prices as of the
first day of the year subsequent to the
measurement period are lower than the average of
Regional No. 2 fuel oil prices during the
measurement period.
The following table sets forth the amount of incentive
that can be earned with regard to residential electric
prices, as a percentage of compensation:
Level of the Company's
Typical Residential Electric
Prices Below New York
Amount of Incentive State Average
2.7% 7.5%
1.8% 5.0%
0.9% 2.5%
c) Employee Safety
The Participant shall earn 2% of compensation if
the Company has achieved a severity rate during
the measurement period which is less than the
Company's average of such rates during the
previous five years. The severity rate is an
index of employee lost-time days for work-related
employee injuries and illnesses.
d) Community Involvement
The Participant shall earn 1% of compensation if,
based solely upon the judgment of the outside
members of the Board of Directors, the Company has
performed satisfactorily, during the measurement
period, its leadership role in the community
through a dedication to community activities.
The Company's involvement in such community
activities during the measurement period will be
described in a report by the Chairman of the Board
and Chief Executive Officer.
2.05 Determination of Incentive Award. A
determination as to whether the Participant has earned an
incentive compensation award will be made by the outside members
of the Board of Directors within 90 days after the completion of
the measurement period.
2.06 Payment of Incentive Award. Payment of such
incentive award, in the form of a lump sum cash payment, will be
made within 30 days of the determination of the award.
</PAGE>
<PAGE><TABLE>
EXHIBIT 12
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Year Ended December 31,
1993 1992* 1991* 1990* 1989*
<S> <C> <C> <C> <C> <C>
Earnings:
Net Income $ 50,390 $ 47,688 $ 42,941 $ 41,035 $ 39,117
Fixed Charges 33,820 34,888 37,737 42,906 43,523
Federal Income Tax 14,502 5,467 10,514 15,110 10,253
Deferred Income Tax 14,101 19,644 12,099 7,346 9,575
Federal Income Tax-Credit (2,937) 7,789 (2,454) (4,198) (3,646)
Deferred Income Tax 1,492 (8,537) 1,202 2,116 2,736
Total Earnings $111,368 $106,939 $102,039 $104,315 $101,558
Fixed Charges:
Interest on Mortgage Bonds $ 22,390 $ 23,207 $ 25,236 $ 29,726 $ 30,055
Interest on Other Long-term Debt 6,487 6,286 7,482 9,276 10,187
Interest on Short-term Debt 13 582 590 184 5
Other Interest 1,191 1,372 1,979 1,767 1,345
Amortization of Premium and
Expense on Debt 2,247 2,085 1,584 1,097 1,059
Portion of Rents Representative
of the Interest Factor 1,492 1,356 866 856 872
Total Fixed Charges $ 33,820 $ 34,888 $ 37,737 $ 42,906 $ 43,523
Ratio of Earnings to Fixed Charges 3.29 3.07 2.70 2.43 2.33
<FN>
* Restated to conform to current year (1993) reporting which includes the interest portion of rent expense as a component
of interest charges.
</TABLE>
</PAGE>
<PAGE> EXHIBIT 13
FINANCIAL HIGHLIGHTS
Earnings Per Share: (Page 11)
Earnings per share of common stock were $2.68 in 1993, an
increase of 3 cents, or 1% from 1992.
Dividends Per Share: (Page 29)
The quarterly dividend rate was increased to $.515 per
share, effective August 1, 1993. This represented an increase of
3% over the previous quarterly rate of $.50 per share. Dividends
paid to shareholders in 1993 were $2.03 per share as compared to
$1.96 per share in 1992. No portion of the 1993 dividend
constitutes a return of capital.
Economy:
While the Company continued to feel the effects of the
reduction in employment by IBM in early 1993, the local economy
has begun to rebound. The local unemployment rates are now below
the New York State average and approximately equal to the
National average. The Company's economic development efforts
coupled with the State and local efforts helped to attract some
new manufacturing companies throughout the region. It is hoped
that this trend will continue through 1994.
Electric Sales: (Page 16)
Sales of electricity within the Company's service territory
decreased 3% in 1993. Sales of electricity to residential
customers increased 3% due to the combined effect of a 2%
increase in usage per customer and a 1% increase in the number of
customers. Commercial sales increased 4% resulting from the
combined effect of a 2% increase in usage per customer and a 2%
increase in the number of customers. Electric sales to
industrial customers decreased 13% due primarily to a 20% decline
in usage by IBM.
Gas Sales: (Page 16)
Firm sales of natural gas increased 2% in 1993. Sales of
gas to residential customers increased 1% due to the net effect
of a 2% increase in the number of customers and a 1% decrease in
usage per customer. Sales to commercial customers increased 3%
resulting from the net effect of a 4% increase in the number of
customers and a 1% decrease in usage per customer. Firm gas
sales to industrial customers remained stable compared to 1992.
-1-
Rate Proceeding - Electric: (Page 9)
By Order Adopting Revenue Requirement and Rate Design
(Order), issued and effective December 16, 1993, the Public
Service Commission of the State of New York (PSC) permitted the
Company to increase its electric base rates by $5.133 million (or
approximately 1.3% on an annual basis), based on a 10.6% return
on common equity, an 8.5% return on total invested capital, a
resultant cash coverage of total interest charges during the Rate
Year of 3.17 times, a recognized revenue requirement deficiency
of $14.330 million and the use of $6 million (after-tax) of
Mirror CWIP as a rate moderator, which reduced such deficiency to
the $5.133 million authorized increase. The Order also directed
that such rates be designed to produce such revenues for the
period November 22, 1993 through November 21, 1994.
Rate Proceeding - Gas: (Page 10)
By said Order, the PSC authorized no increase in the
Company's base gas rates. The Order in effect recognized a
$1.237 million revenue requirement deficiency, but eliminates it
by applying $537,000 of previously retained profits from sales of
gas to interruptible customers as a rate moderator, and by
imputing an increase of $700,000 net revenues from interruptible
gas sales of the Company. The Order also bases such revenue
requirement on a 10.6% return on common equity.
Common Stock: (Note 5)
Issuances under a 700,000 share stock offering, the Dividend
Reinvestment Plan and Customer Stock Purchase Plan increased the
number of common shares outstanding to 16,953,147. At
December 31, 1993 a share of common stock was selling at $30.375
while the book value per share was $24.65. At December 31, 1993
the Company's shares were held approximately 38% by individuals
registered with the Registrar and Transfer Agent, 10% by
institutional investors and 52% in "street name."
Financing Program: (Notes 5 & 6)
In 1993, the Company optionally redeemed two series of First
Mortgage Bonds, totaling $40 million and two series of preferred
stock totaling $34.2 million. These securities were refunded
with similar securities of similar maturity bearing lower
interest rates or dividend rates. In March 1993, the Company
issued 700,000 additional shares of common stock, through a
public offering, and issued 224,578 shares of common stock in
1993 through the Company's Automatic Dividend Reinvestment and
Customer Stock Purchase Plans realizing net proceeds of $30.1
million to fund working capital requirements and reduce
outstanding short-term debt.
-2-
Taxes: (Page 23)
In 1993, the Company incurred $94.2 million for operating
taxes levied by federal, state and local governments.
-3-
<PAGE>
<TABLE>
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA*
(Thousands of Dollars)
<CAPTION> 1993 1992 1991 1990 1989
<S> <C> <C> <C>
Operating Revenues
Electric.............................. $ 422,925 $ 427,436 $ 424,121 $ 433,859 $ 403,235
Gas................................... 94,448 96,121 70,615 69,749 66,767
Total............................... 517,373 523,557 494,736 503,608 470,002
Operating Expenses
Operations............................ 274,477 283,787 267,339 279,602 263,104
Maintenance........................... 34,486 34,226 31,504 30,364 23,939
Depreciation and amortization......... 39,682 39,596 37,230 36,134 35,344
Operating taxes....................... 65,564 66,339 60,554 57,234 51,240
Federal and deferred income tax....... 28,603 25,111 22,613 22,456 19,828
Total............................... 442,812 449,059 419,240 425,790 393,455
Operating Income........................ 74,561 74,498 75,496 77,818 76,547
Other Income and Deductions
Allowance for equity funds
used during construction............. 934 596 921 785 463
Federal and deferred income tax....... 1,445 748 1,252 2,082 910
Other - net........................... 5,167 4,427 854 1,505 3,419
Total............................... 7,546 5,771 3,027 4,372 4,792
Income before Interest Charges.......... 82,107 80,269 78,523 82,190 81,339
Interest Charges........................ 31,717 32,581 35,582 41,155 42,222
Net Income.............................. 50,390 47,688 42,941 41,035 39,117
Dividends on Preferred Stock............ 5,562 5,544 5,659 5,681 5,698
Income Available for Common Stock....... 44,828 42,144 37,282 35,354 33,419
Dividends Declared on Common Stock...... 34,497 31,545 29,800 27,067 25,825
Amount Retained in the Business......... 10,331 10,599 7,482 8,287 7,594
Retained Earnings - beginning of year... 58,692 48,093 40,611 32,324 24,730
Retained Earnings - end of year......... $ 69,023 $ 58,692 $ 48,093 $ 40,611 $ 32,324
-4-
/TABLE
<PAGE>
<TABLE>
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA* (CON'T)
(Thousands of Dollars)
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C>
Common Stock
Average shares outstanding (000s)...... 16,725 15,901 15,530 14,850 14,657
Earnings per share on
average shares outstanding............ $2.68 $2.65 $2.40 $2.38 $2.28
Dividends declared per share........... $2.045 $1.98 $1.90 $1.82 $1.76
Book value per share (at year-end)..... $24.65 $23.60 $22.84 $22.31 $21.76
Total Assets............................. $1,328,235 $1,211,276 $1,184,548 $1,134,503 $1,113,430
Long-term Debt........................... 391,810 441,096 416,030 407,638 447,440
Cumulative Preferred Stock............... 81,030 81,030 81,030 81,030 81,030
Common Equity............................ 417,846 378,214 360,203 333,587 320,709
* This summary should be read in conjunction with the consolidated financial statements and notes
thereto included in the "Financial Section" of this Annual Report.
-5-
</TABLE>
/PAGE
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
CONSTRUCTION PROGRAM
As shown in the Consolidated Statement of Cash Flows, the
cash expenditures related to the Company's construction program
amounted to $53.1 million in 1993, an $8.0 million decrease from
the $61.1 million expended in 1992. As shown in the table below,
cash construction expenditures for 1994 are estimated to be $82.1
million, an increase of $29.0 million over 1993 expenditures.
Internal sources funded 100% of the 1993 cash construction
expenditures and are presently estimated to fund approximately
71% of the forecasted expenditures for 1994.
-6-
<PAGE>
<TABLE>
Estimates of construction expenditures, internal funds, mandatory redemption of long-term securities, and working
capital requirements for the five-year period 1994-1998 are set forth by year in the following table:
<CAPTION> Total
1994 1995 1996 1997 1998 1994-1998
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Construction Expenditures *:
Electric............................ $48,900 $40,100 $38,400 $45,300 $43,600 $216,300
Gas................................. 11,400 8,500 8,600 8,400 8,500 45,400
Common.............................. 11,600 10,200 10,600 10,700 11,100 54,200
Roseton buy-back **................. 7,300 7,100 7,000 6,800 6,600 34,800
Nuclear fuel........................ 2,900 100 5,000 3,700 1,300 13,000
Total........................... 82,100 66,000 69,600 74,900 71,100 363,700
Internal Funds Available:
Depreciation accruals............... 41,400 43,200 44,600 46,000 47,600 222,800
Deferred income tax - net........... 10,600 11,300 11,200 2,700 2,300 38,100
Other............................... 5,900 5,600 6,000 7,500 7,200 32,200
Total........................... 57,900 60,100 61,800 56,200 57,100 293,100
Excess of Construction
Expenditures over Internal Funds..... 24,200 5,900 7,800 18,700 14,000 70,600
Mandatory Redemption of Long-term
Securities:
Long-term debt....................... 50,100 2,600 - 100 100 52,900
Working Capital Requirements.......... 14,600 10,000 10,000 10,000 10,000 54,600
Total Cash Requirements............... $88,900 $18,500 $17,800 $28,800 $24,100 $178,100
* Excluding the equity portion of Allowance for Funds used During Construction (AFDC), a noncash item.
** Described in Note 9 of the Notes to Consolidated Financial Statements (Notes), under the subcaption "Roseton Plant."
-7-
/TABLE
<PAGE>
Estimates of construction expenditures are subject to
continuous review and adjustment, and actual expenditures may
vary from such estimates. The depreciation accrual for the Nine
Mile 2 Plant (as described in Note 2 of the Notes), is based on
the remaining life method. The assumed amortization rate for the
Danskammer Plant coal reconversion investment is 5%. The
deferred income tax projections are based on current federal
income tax law.
Included in the construction expenditures are expenditures
which are required to comply with the Clean Air Act Amendments of
1990. The Company estimates such required expenditures will cost
approximately $14 million. A discussion of the Clean Air Act
Amendments is included in Note 9 of the Notes.
As shown in the table above, it is presently estimated that
funds available from internal sources will finance 81% of the
Company's cash construction expenditures for the five-year period
1994-1998. During this same five-year period, total external
financing requirements are projected to amount to $178.1 million,
of which $52.9 million is related to the redemption of long-term
securities.
CAPITAL STRUCTURE
In an effort to increase its common equity ratio and improve
its bond rating, the Company issued, through a public sale,
600,000 additional shares of common stock in 1991. In March
1993, the Company accelerated the rate of increase in its common
equity ratio through the public sale of 700,000 additional shares
of common stock. One result of these recent increases in its
common equity ratio has been a significant improvement in its
interest coverage ratios, which have also been improved by the
refinancing of debt at lower interest rates. As a result of the
improving trend in the Company's financial indices, the Company
received credit rating upgrades in 1991 and 1992 by Standard &
Poor's Corporation, Moody's Investor Service and Duff & Phelps
Inc., to the "A-" level, or equivalent, and by Fitch Investors
Service to the "A" level, and thereby moved closer to its longer-
term goal of attaining an "A" credit rating.
Year-end Capital Structure
1991 1992 1993
Long-term debt .......... 47.8% 48.3% 47.0%
Short-term debt ......... 2.2 1.6 -
Preferred stock ......... 9.2 8.8 8.6
Common equity ........... 40.8 41.3 44.4
100.0% 100.0% 100.0%
-8-
<PAGE>
FINANCING PROGRAM
In 1993, the Company optionally redeemed two series of First
Mortgage Bonds totaling $40 million and two series of preferred
stock totaling $34.2 million. These securities were refunded
with similar securities of similar maturity bearing lower
interest rates or dividend rates. In March 1993, the Company
issued 700,000 additional shares of common stock, through a
public offering, and issued 224,578 shares of common stock in
1993 through its Automatic Dividend Reinvestment and Customer
Stock Purchase Plans. These funds were used to reduce short-term
debt outstanding and to fund working capital requirements.
In 1994, the Company intends to refinance $50 million of
maturing First Mortgage Bonds, and fund any external funding
requirements related to its construction program and working
capital requirements through its Automatic Dividend Reinvestment
and Customer Stock Purchase Plans and by issuing a small amount
of new debt securities. The Company continues to monitor the
market for opportunities to refinance debt or preferred stock at
lower cost.
SHORT-TERM DEBT AND SALE OF RECEIVABLES
As more fully discussed in Note 4 of the Notes, the Company
has a revolving credit agreement with four commercial banks for
borrowing up to $50 million through December 14, 1997. In
addition, the Company continues to maintain confirmed lines of
credit totaling $2 million with three regional banks.
As discussed in Note 8 of the Notes, the Company also has
the ability to accelerate its cash flow by selling its accounts
receivable from retail sales, when deemed desirable.
RATE PROCEEDING - ELECTRIC
On November 12, 1992, the Company filed a request with the
Public Service Commission of the State of New York (PSC) to
increase its base rates for electric service to produce
additional annual net revenues of $15.728 million based on
projected operations during the rate year comprised of the period
November 1, 1993 - October 31, 1994 (Rate Year).
In its filing, the Company requested an 11.75% return on
common equity and a 9.15% return on total invested capital.
By Order Adopting Revenue Requirement and Rate Design
(Order), issued and effective December 16, 1993, the PSC
permitted the Company to increase its electric base rates by
$5.133 million (or approximately 1.3% on an annual basis), based
on a 10.6% return on common equity, an 8.5% return on total
invested capital, a resultant cash coverage of total interest
charges during the Rate Year of 3.17 times, a recognized revenue
requirement deficiency of $14.330 million and the use of $6
-9-
<PAGE>
million (after-tax) of Mirror CWIP as a rate moderator, which
reduced such deficiency to the $5.133 million authorized
increase. The Order also directed that such rates be designed to
produce such revenues for the period November 22, 1993 through
November 21, 1994.
As a result of the application of Mirror CWIP under the
Order, the balance of Mirror CWIP (available for utilization) on
the Company's Consolidated Balance Sheet was reduced resulting
from the application of: (1) $6.0 million of Mirror CWIP as a
rate moderator, (2) $5.2 million of additional Mirror CWIP to
offset deferred balance sheet items, and (3) $300,000 of Mirror
CWIP to offset the revenues the Company would otherwise be
entitled to collect for the period November 22, 1993 through
December 20, 1993.
In addition, the PSC directed the refund (through the
Company's electric fuel cost adjustment clause) to ratepayers of
$3.542 million during the 12 months beginning December 21, 1993.
This refund represents the ratepayers' portion of the net
proceeds received from litigation with respect to the
construction of the Nine Mile 2 Plant.
RATE PROCEEDING - GAS
On November 12, 1992, the Company filed a request with the
PSC to increase its base rates for firm natural gas service to
produce additional annual net revenues of $1.838 million based on
projected operations during the Rate Year. This represented an
overall increase in firm gas revenues of 2.52%.
In its filing, the Company requested an 11.75% return on
common equity and a 9.15% return on total invested capital.
By the Order, the PSC authorized no increase in the
Company's base gas rates. The Order in effect recognized a
$1.237 million revenue requirement deficiency, but eliminated it
by applying $537,000 of previously retained profits from sales of
gas to interruptible customers as a rate moderator, and by
imputing an increase of $700,000 net revenues from interruptible
gas sales of the Company. The Order also based such revenue
requirement on a 10.6% return on common equity.
OTHER DEVELOPMENTS
Electric Sales to IBM: The Company's largest customer is
International Business Machines Corporation (IBM), which
accounted for approximately 14% of the Company's total electric
revenues for the year ended December 31, 1993. Published reports
indicate that IBM reduced its employment by 45,000 worldwide to
256,000 in 1993 from 301,000 in 1992. Such reports indicate that
IBM has reduced its employment in the Company's service territory
by up to 8,400 employees in 1993. Such reductions would bring
the total number employed in the Company's service territory to
-10-
<PAGE>
approximately 13,100, as compared to the peak level of IBM
employment in excess of 30,000 in 1985. During 1993, IBM phased
out its semiconductor manufacturing operations at its East
Fishkill, New York facility, which is in the Company's service
territory. This downsizing of IBM has resulted in a decline of
electric sales to IBM by 20% in 1993. The Company cannot assess
at this time the effect, if any, of such IBM employment
reductions on the Company's future results of operations.
New Accounting Standards: The Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than
Pensions" (SFAS 106), in the first quarter of 1993. As discussed
in Note 7 of the Notes, this new accounting standard did not have
a material impact on the Company's results of operations.
The Company adopted SFAS No. 109, "Accounting for Income
Taxes" (SFAS 109), in the first quarter of 1993. As discussed in
Note 3 of the Notes, this new accounting standard did not have a
material impact on the Company's results of operations.
In November 1992, the Financial Accounting Standards Board
(FASB) issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS 112), which the Company will adopt
in the first quarter of 1994. As discussed in Note 7 of the
Notes, the adoption of SFAS 112 will not have a material impact
on the Company's results of operations.
In May 1993, the FASB issued SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115),
which the Company will adopt in the first quarter of 1994. As
discussed in Note 11 of the Notes, the adoption of SFAS 115 will
not have a material impact on the Company's results of
operations.
Environmental Issues: On an ongoing basis, the Company
assesses environmental issues which could impact the Company and
its ratepayers. Notes 2 and 9 of the Notes discuss current
environmental issues affecting the Company, including the Clean
Air Act Amendments of 1990, which require control of emissions
from fossil-fueled electric generating units.
RESULTS OF OPERATIONS
The following discussion and analysis includes an
explanation of significant changes in revenues and expenses
during the years 1991, 1992 and 1993. Additional information
relating to changes between these years is provided in the Notes
on pages 40 through 72 of this Report.
EARNINGS
Earnings per share of common stock are shown after provision
for dividends on preferred stock and are computed on the basis of
the average number of common shares outstanding during the year.
-11-
<PAGE>
The number of common shares, the earnings per share, the
percentage change and the rate of return earned on average common
equity are as follows:
1991 1992 1993
Average shares outstanding (000s).. 15,530 15,901 16,725
Earnings per share................. $ 2.40 $ 2.65 $ 2.68
% increase over prior year......... 1% 10% 1%
Return earned on common equity
per books*........................ 10.6% 11.4% 11.1%
* Return on equity for regulatory purposes differs from these
figures.
The 1% increase in the 1991 earnings per share reflects the
following favorable results: reduced interest charges resulting
from the refinancing of high interest rate debt, increased
electric base rates which became effective May 24, 1990 and
favorably impacted the first half of 1991, and increased gas base
rates which became effective July 8, 1991 and favorably impacted
the second half of 1991. Also contributing to the increase were
a reduction in the amount of fuel cost increases absorbed by the
Company, an increase in the incentive provided to the Company for
successful participation in its energy efficiency program and a
marked improvement in the relationship between the actual cost of
operating the Nine Mile 2 Plant and the amount provided for in
the rate-making process. While actual costs exceeded those
provided for in rates by $4.8 million in 1990, actual costs for
1991 were $520,000 less than those provided for in rates.
These favorable variations were partially offset, however,
by decreased gas sales, a slowdown in the rate of growth in
electric sales, higher expenses related to tree-trimming work,
increased payroll and related fringe benefits and higher property
taxes.
The 25-cent per share increase in the 1992 earnings versus
1991 earnings resulted primarily from increased firm gas sales,
increased electric base rates which became effective April 15,
1992, and increased firm gas base rates which became effective
July 8, 1991. In addition, lower interest charges resulting from
the refinancing of high interest rate debt in 1992 and an
increase in the amortization to income of Mirror CWIP as a rate
moderator favorably impacted earnings in 1992. The one-time
inclusion in income of 50% of the Nine Mile 2 Plant net
litigation proceeds of $2.3 million, as more fully discussed in
Note 2 of the Notes, accounted for 10-cents of the increase in
the 1992 per share earnings.
These favorable variations were partially offset, however,
by increased maintenance on the Company's fossil-fueled electric
generating plant, increased payroll costs, an increase in
operating reserve provisions, and higher depreciation expense.
-12-
<PAGE>
The 3-cent per share increase in 1993 earnings versus 1992
earnings includes the effect of one-time items on earnings per
share in both 1992 and 1993. The effect of the one-time
inclusion of the Nine Mile 2 Plant net litigation proceeds (which
increased 1992 earnings by $.10 per share) was partially offset
by the effect of a one-time gain from the sale of long-term
investments (which increased 1993 earnings per share by $.03).
Thus, excluding these two one-time items, income from operations
increased $.10 per share in 1993 as compared to 1992. The
increase in earnings from operations of $.10 per share is due
primarily to higher electric base rates, an increase in the
amortization to income of Mirror CWIP as a rate moderator, and
lower interest charges on the Company's outstanding debt
resulting from the additional refinancing of high interest rate
debt in 1993.
These increases were partially offset, however, by a
decrease in industrial electric sales (primarily attributable to
the operational cutbacks by IBM described above) and higher
federal income taxes.
-13-
<PAGE>
<TABLE>
OPERATING REVENUES
Total operating revenues decreased $8.9 million (2%) in 1991, increased $28.8 million
(6%) in 1992 and decreased $6.2 million (1%) in 1993. As shown in the table below, the
1991 decrease in revenues was due primarily to decreased revenues collected pursuant to
the electric fuel cost adjustment clause and decreased sales of electricity to other
utilities, which were partially offset by higher electric base rates. The 1992 increase
in revenues was due primarily to increased sales of natural gas, higher electric and gas
base rates, and higher gas costs included in revenues, which were partially offset by
decreased revenues from sales of electricity to other utilities. The 1993 decrease in
revenues was due to a decrease in sales of natural gas, and a decrease in industrial
electric sales which was partially offset by increases in electric residential and
commercial sales. Also contributing to the overall decrease in operating revenues in 1993
were a decrease in sales to other utilities, the net effect of an increase in electric
fuel cost adjustments refunded to customers and an increase in amounts collected from
customers through the gas cost adjustment clause. Operating revenues were also affected
in 1993 by higher electric base rates.
Details of the revenue changes are as follows:
<CAPTION>
Increase or (Decrease) from Prior Year
1991 1992 1993
Electric Gas Electric Gas Electric Gas
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Customer sales............... $ 2,503 $(2,812) $(1,515) $16,957 $(5,818) $(5,146)
Sales to other utilities..... (4,413) - (5,353) - (2,407) -
Increase in base rates....... 5,811 1,157 11,455 3,618 7,605 -
Fuel cost changes
reflected in base rates..... - 2,499 - 6,850 - -
Fuel cost adjustment......... (11,123) (2,015) (2,774) (2,518) (4,202) 2,806
Deferred revenues............ (2,927) 2,293 770 (2,255) 322 1,628
Miscellaneous................ 411 (256) 732 2,854 (11) (961)
Total................. $(9,738) $ 866 $ 3,315 $25,506 $(4,511) $(1,673)
-14-
/TABLE
<PAGE>
The Company's electric fuel cost adjustment clause provides
for a partial sharing of fuel cost variations, pursuant to an
incentive/penalty formula. The PSC requires a sharing between
the customers and the Company of variations in actual fuel costs
from the forecasted amounts which have been approved by the PSC
for a specific twelve-month period, whereby the Company bears 20%
of the first $10 million of variation and 10% of the second $10
million of variation. Any variations in excess of $20 million
are credited or charged, as appropriate, in total to the
customers. See subcaption "Deferred Electric Fuel Costs" of Note
1 of the Notes. The following table sets forth the variation in
actual electric fuel costs from the targeted amounts approved by
the PSC, the amount charged or credited to retail customers
through the electric fuel cost adjustment clause, and the amount
retained by the Company and recognized in the results of
operations:
1991 1992 1993
(Thousands of Dollars)
Variation in actual electric
fuel costs from targeted
amounts.................... $852 $(1,067) $1,345
Customer (charge) credit.... 682 (854) 1,076
Income (expense) recognized
by the Company............. $170 $ (213) $ 269
The Company's base rates for electricity include an imputed
amount of net revenue (gross revenues less incremental costs,
principally fuel) from sales of electricity to other utilities.
The PSC requires an 80%/20% sharing between customers and the
Company, respectively, of any variations from the imputed amount,
either higher or lower. The Company reflects any credits or
charges to its customers resulting from these provisions through
the electric fuel cost adjustment clause.
The following table sets forth the variation in actual net
revenue realized from the amounts imputed, the amount charged or
credited to retail customers through the electric fuel cost
adjustment clause, and the amount of such net revenues retained
by the Company and recognized in the results of operations:
1991 1992 1993
(Thousands of Dollars)
Variation in actual net
revenue from imputed
amounts.................... $(785) $(3,118) $889
Customer (charge) credit.... (628) (2,494) 711
Income (expense) recognized
by the Company............. $(157) $ (624) $178
Prior to November 22, 1993, the treatment established by the
PSC regarding net revenues from interruptible gas sales was to
-15-
<PAGE>
impute in gas base rates an annual level of $1.2 million. Firm
gas customers were to receive 100% of any net revenues between
$1.2 million and $1.8 million, and any net revenues in excess of
$1.8 million were to be shared 80%/20% between the Company's firm
gas customers and the Company, respectively.
Pursuant to the Order, the PSC changed said treatment
regarding net revenues from interruptible gas sales. First, the
PSC assumed that prior interruptible customers would convert to
firm transportation service. Second, the PSC increased the level
of such net revenues imputed in gas base rates from $1.2 million
to $1.9 million. Finally, the incentive sharing mechanism was
changed from 80%/20% between the Company's gas customers and the
Company to 90%/10%. This mechanism will apply to all net
revenues above $1.9 million received between November 22, 1993
and November 21, 1994 from the Company's ten largest firm
transportation customers, and all net revenues received between
November 22, 1993 and November 21, 1994 from all other
interruptible sales and transportation customers,
interdepartmental sales, and other firm transportation customers.
The following table sets forth the actual net revenue from
interruptible gas sales, the amount credited to firm gas
customers, and the amount of such net revenues retained by the
Company and recognized in the results of operations:
1991 1992 1993
(Thousands of Dollars)
Actual net revenue from
interruptible gas sales.... $3,028 $4,515 $3,278
Customer credit............. 1,550 2,771 1,725
Income recognized by the
Company.................... $1,478 $1,744 $1,553
SALES
Sales of electricity within the Company's service territory
increased .7% in 1991, decreased 2.0% in 1992, and decreased 2.8%
in 1993. The decline in the growth rate in 1991 and the decrease
in sales in 1992 primarily reflected the effect of a general
slowdown in the region's economy. The decrease in 1993 largely
reflected a decline in usage by IBM. Firm sales of natural gas,
excluding sales to the Company's electric department, decreased
2.3% in 1991, increased 11.3% in 1992 and increased 1.9% in 1993.
The 1991 decrease resulted primarily from the unusually warm
weather which occurred in the winter periods and the transfer of
a large industrial customer from firm service to interruptible
service. The increase in 1992 was due primarily to the much
colder weather experienced in 1992 as heating degree days
increased 14%. The 1993 increase was largely attributable to an
increase in the number of residential and commercial customers.
-16-
<PAGE>
Heating degree days increased 1% in 1993. Changes in sales by
major customer classification are set forth below (parentheses
denote decrease):
Electric%
1991 1992 1993
Residential......................... - - 3
Commercial.......................... 1 - 4
Industrial.......................... 1 (6) (13)
Gas%
1991 1992 1993
Residential......................... (4) 14 1
Commercial.......................... 2 14 3
Industrial.......................... (10) (19) -
Residential electric sales: Residential electric sales are
primarily affected by the growth in the number of customers and
the change in kwh. usage per customer. Customer usage is also
sensitive to weather. Changes in these components are set forth
in the table below (parentheses denote decrease):
Residential Sales %
1991 1992 1993
Growth in number of customers............... 1 1 1
Change in average usage
per customer............................... - (1) 2
The usage per customer remained stable in 1991, as warmer
weather experienced during the winter heating season was offset
by the hotter weather experienced during the summer air
conditioning months. In 1992, usage per customer decreased due
to cooler weather experienced during the summer air conditioning
months. Residential cooling degree days decreased 77% in 1992.
In 1993, the increased usage per customer was largely
attributable to hotter summer weather as cooling degree days
increased 280%.
Commercial electric sales: Commercial electric sales
increased 1% in 1991. In 1992, commercial sales remained stable
and in 1993 commercial sales increased 4%. The components of
these changes are set forth in the table below (parentheses
denote decrease):
Commercial Sales %
1991 1992 1993
Growth in number of customers............... 2 2 2
Change in average usage
per customer............................... (1) (2) 2
-17-
<PAGE>
Industrial electric sales: The increase in industrial
electric sales of 1% in 1991 was due primarily to increased usage
by existing customers. In 1992, industrial electric sales
decreased 6% due to decreased usage by existing customers,
including IBM. In 1993, industrial electric sales decreased by
13%, due primarily to a 20% decline in usage by IBM.
Gas sales - firm: The following tables set forth customer
growth, changes in customer usage and heating degree days for the
residential and commercial classifications. Although the changes
in residential gas sales are primarily weather related, the
growth in the number of customers has remained a positive factor.
Commercial gas sales are also weather sensitive.
Residential Sales %
1991 1992 1993
Growth in number of customers.... 1 1 2
Change in average usage per
customer........................ (5) 13 (1)
Change in heating degree days:
Bimonthly billing cycle......... (6) 14 1
Calendar year................... 3 14 -
Commercial Sales %
1991 1992 1993
Growth in number of customers.... 5 3 4
Change in average usage per
customer........................ (3) 11 (1)
Change in heating degree days:
Bimonthly billing cycle......... (6) 14 1
Calendar year................... 3 14 -
Firm gas sales to industrial customers decreased 10% in 1991
and 19% in 1992 primarily from decreased sales to existing
customers and the shift of a container manufacturing company
located within the Company's service territory to interruptible
and transportation gas service. Firm gas sales to industrial
customers remained stable in 1993.
Gas sales - interruptible: Interruptible gas sales
decreased 20% in 1991, increased 192% in 1992 and decreased 37%
in 1993. The 1991 decrease in interruptible gas sales is
attributable primarily to a decrease in customer usage and a
shift of several customers from interruptible sales service to
interruptible transportation service. Transportation service
permits large volume users of natural gas to purchase gas
directly from producers and wholesalers, and transport the gas
through the Company's distribution system. Net revenues from
transportation service are approximately equal to those net
revenues from the customers who shifted from interruptible
-18-
<PAGE>
service. The 1992 increase was due primarily to the sale of
natural gas to the other cotenants of the Roseton Electric
Generating Station (Roseton Plant) for use as a boiler fuel as
well as the shift of several customers to interruptible sales
service from interruptible transportation service. The 1993
decrease was due to a reduction in the amount of natural gas sold
to the other cotenants for use as a boiler fuel at the Roseton
Plant which was a result of lower costs of alternate fuels. In
addition, Unit 2 of the Roseton Plant was severely damaged by a
fire in March 1993 and was not returned to service until December
1993.
NUCLEAR OPERATIONS
Since 1990, there has been improvement in the relationship
between the actual cost of operating the Nine Mile 2 Plant and
the amount provided for in the rate-making process. In 1993, the
relationship between the actual cost of operation and the amount
provided for in the rate-making process continued to show
improvement, providing a positive impact on 1993 earnings.
The Company has continued to participate actively on the
management, operations and accounting committees for the Nine
Mile 2 Plant and also the finance committee dealing with
regulatory and budgeting issues in an effort to produce better
forecasts and control costs.
-19-
<PAGE>
<TABLE>
OPERATING EXPENSES
Changes in operating expenses from the prior year are set forth below:
<CAPTION>
Increase or (Decrease) from Prior Year
1991 1992 1993
Amount % Amount % Amount %
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Operating Expenses:
Fuel and purchased
electricity................. $(15,511) (9.9) $(7,683) (5.5) $(10,555) (7.9)
Purchased natural gas........ 979 2.5 15,199 38.1 (1,166) (2.1)
Other expenses of operation.. 4,852 6.6 6,347 8.1 1,794 2.1
Maintenance.................. 2,138 8.1 2,916 10.2 6 -
Nine Mile 2 Plant operation
and maintenance............. (3,581) (23.7) 2,391 20.8 871 6.3
Depreciation and amortization 1,096 3.0 2,366 6.4 86 0.2
Taxes, other than income tax. 3,320 5.8 5,785 9.6 (775) (1.2)
Federal income tax........... 157 0.7 2,498 11.0 3,492 13.9
Total................... $ (6,550) (1.5) $29,819 7.1 $ (6,247) (1.4)
-20-
/TABLE
<PAGE>
The most significant elements of cost are fuel and purchased
electricity in the Company's electric department and purchased
natural gas in the Company's gas department. Approximately 33%
in 1991, 31% in 1992 and 29% in 1993 of every revenue dollar
billed in the Company's electric department was expended for the
combined cost of fuel used in electric generation and purchased
electricity. The corresponding figures in the Company's gas
department for the cost of purchased gas were 56%, 57% and 57%,
respectively. As discussed in Note 9 of the Notes, contracts
that the Company has in place for a majority of its gas supply
will expire in 1994 and will be replaced with competively bid
contracts with third-party gas suppliers.
In 1991, the combined cost of fuel used in electric
generation and purchased electricity decreased $15.5 million
(10%), resulting primarily from lower fuel prices. In 1992 and
1993, the combined cost of fuel used in electric generation and
purchased electricity decreased $7.7 million (6%) and $10.6
million (8%), respectively, resulting primarily from decreased
sales of electricity.
The following table shows the average fuel cost per kWh. for
the Company's three major generating plants during the last five
years:
Average Cost (/kWh.)
Nine Mile
Danskammer Plant Roseton Plant 2 Plant
1989 2.27 2.56 1.17
1990 2.36 2.94 1.21
1991 2.25 2.43 .64 *
1992 2.01 2.64 .60
1993 1.95 2.67 .57
* The 1991 decrease in the average cost per kWh. for the Nine
Mile 2 Plant was primarily a result of the 1991 revaluation of
the Plant's remaining MBTUs in the initial load, as well as
lower costs associated with the Plant's first reload which
occurred in January 1991.
In an effort to keep the cost of electricity at the lowest
reasonable level, the Company purchases energy from other member
companies of the New York Power Pool, whenever such energy can be
purchased at a unit cost lower than the incremental cost of
generating the energy in the Company's plants.
The amount of natural gas purchased, excluding gas burned as
boiler fuel at the Danskammer Plant and the Company's share of
gas burned as a boiler fuel at the Roseton Plant, and the cost
per Mcf. during the last five years are set forth in the
following table:
-21-
<PAGE>
Amount of Gas
Year Purchased - Mcf. $/Mcf.
1989 12,402,848 3.22
1990 11,813,255 3.37
1991 11,640,289 3.50
1992 16,831,406 3.59
1993 14,968,805 3.79
The large increase in gas purchased in 1992 was due
primarily to the increased sales of natural gas to residential
and commercial customers and the sale of natural gas to the other
cotenant owners of the Roseton Plant for use as a boiler fuel
beginning in February 1992. The decrease in gas purchased in
1993 was due primarily to a reduction in gas sold to the other
cotenant owners for use as a boiler fuel at the Roseton Plant.
Under FERC Order 636, local distribution companies, such as
the Company, are permitted to offer unused firm transportation
service to others for a fee; this is known as capacity brokering.
This new option gives the Company an opportunity to defray some
or all of the monthly fixed charges when firm transportation is
not fully utilized. The primary benefit of this program is a
reduction of costs billed to the Company's firm gas customers.
In an effort to keep the cost of purchased gas at the lowest
reasonable level, the Company brokered excess capacity outside of
its service territory during November and December 1993.
The Company has filed with the PSC a capacity brokering
program for its service territory, which is expected to be
approved in early 1994.
The $4.9 million (7%) increase in other expenses of
operation in 1991 was due primarily to higher employee wages and
related fringe benefits, an increase in major storm costs, an
increase in gas department legal expenses and increased operating
expenses related to the New York Power Pool. The $6.3 million
(8%) increase in other expenses of operation in 1992 was due
primarily to higher employee wages, increased costs associated
with the Company's energy efficiency programs, increased electric
and gas facilities charges, and an increase in the reserve
provisions for injuries and damages and uncollectible customer
accounts. The 1993 increase of $1.8 million (2%) in other
expenses of operation was a result of increased costs associated
with the Company's energy efficiency programs and higher employee
wages.
Maintenance expenses increased $2.1 million (8%) in 1991 due
primarily to increases in steam production maintenance expenses
and tree-trimming costs. The increase in steam production
maintenance expense of $900,000 was due primarily to increased
costs for routine maintenance of the Danskammer Plant generating
units and the costs for a major overhaul of Unit 1 of the
Danskammer Plant. The 1991 increase was also attributable to a
major overhaul of Unit 2 of the Roseton Plant which began in
October 1991. The increased tree-trimming expenses of $1.3
-22-
<PAGE>
million resulted from the intensified program instituted by the
Company in the Spring of 1990 whereby the trimming cycle for all
electric distribution lines was reduced from four years to three
years. Maintenance expenses increased $2.9 million (10%) in 1992
due primarily to increased costs for a major overhaul of Unit 2
at the Danskammer Plant which began in January 1992. Increased
maintenance costs related to Unit 4 at the Danskammer Plant in
1992 were offset by a reduction in maintenance costs related to
Unit 1 at the Danskammer Plant. Maintenance costs for 1993
remained flat compared to 1992 maintenance costs.
The Company's portion of operating expenses, taxes and
depreciation pertaining to the operation of the Nine Mile 2 Plant
are included in the Company's financial results. In 1991, 1992
and 1993, the amounts provided for in rates exceeded operation
and maintenance expenses for the Nine Mile 2 Plant by $520,000,
$19,000 and $124,000, respectively.
The Company's total provision for depreciation amounted to
3.23% in 1991, 3.29% in 1992 and 3.17% in 1993 of the original
cost of average depreciable property. The ratio of the amount of
accumulated depreciation to the cost of depreciable property at
December 31 was 30.9% in 1991, 31.4% in 1992 and 32.8% in 1993.
State and local taxes levied on gross revenues increased in
1991 and 1992 by $1.4 million and $4.9 million, respectively, and
decreased $1.8 million in 1993. In 1991, the revenue taxes were
impacted by an increase in the New York State Gross Receipt Tax
Rate from 3.0% to 3.5%. In 1992, the revenue taxes increase was
due to the increase in the New York State Gross Receipt Tax Rate
as well as the increase in revenues in 1992. The 1993 decrease
was due primarily to the inclusion in 1992 cost of a retroactive
New York State Gross Receipt Tax, which increased 1992 costs by
$1.2 million.
Property taxes, including school taxes, increased $1.4
million, $405,000 and $891,000 in 1991, 1992 and 1993,
respectively. Commercial operations of the Nine Mile 2 Plant
accounted for $396,000, $259,000 and $90,000, respectively, of
such increases. These two categories of taxes accounted for a
substantial portion of the total changes in operating taxes.
With the enactment in August 1993 of the Omnibus Budget
Reconciliation Act of 1993 (OBRA), the corporate federal income
tax rate increased from 34% to 35%, effective January 1, 1993.
The PSC authorized deferral of the resultant increase in the
corporate federal income tax rate until such costs are collected
from customers through rates.
See Note 3 of the Notes for an additional analysis and
reconciliation of the federal income tax.
-23-<PAGE>
OTHER INCOME AND INTEREST CHARGES
Details of the AFDC are set forth below:
1991 1992 1993
(Thousands of Dollars)
Nine Mile 2 Plant............. $ 707 $ 597 $ 738
Iroquois Gas Pipeline
interconnection.............. 272 201 -
Other......................... 1,231 749 807
Total.................... $2,210 $1,547 $1,545
AFDC rate..................... 9.00% 6.75% 8.75%
The higher AFDC rate in 1993 was due to construction
expenditures being funded primarily by the higher cost of
permanent capital as compared to lower cost short-term borrowings
in 1992.
See Note 1 of the Notes for additional information on this
subject.
Total interest charges (excluding AFDC) decreased $5.2
million (12%) in 1991, $3.3 million (9%) in 1992 and $1.2 million
(4%) in 1993. The following table sets forth some of the
pertinent data on the Company's outstanding debt:
1991 1992 1993
(Thousands of Dollars)
Long-term debt:
New debt issued............. $100,000 $ 76,000 $ 40,000
Debt retired................ 89,000 56,000 40,000
Outstanding at year-end:*
Amount (including current
portion).................. 423,785* 443,618* 443,897*
Effective rate............ 7.70% 7.05% 6.75%
Short-term debt:
Average daily amount
outstanding ............... $ 8,281 $ 12,984 $ 330
Weighted average
interest rate ............ 7.12% 4.48% 3.94%
*Including debt of subsidiaries of $4.527 million in 1991, $4.442
million in 1992 and $4.803 million in 1993.
See Notes 4 and 6 of the Notes for additional information on this
subject.
In an effort to reduce its cost of debt, the Company
refinanced a large portion of its high interest rate debt with
lower interest rate debt during the period from December 1990 to
November 1993.
-24-<PAGE>
<TABLE>
Details of the 1991, 1992 and 1993 long-term debt redemptions and issuances and
sales (excluding issuances and sales under the Company's Medium Term Note Program)
are shown below:
<CAPTION>
Redemptions:
Applicable
Redemption Price
Series of Principal Amount (% of Redemption
First Mortgage Bonds Redeemed Principal Amount) Date
<S> <C> <C> <C>
14 5/8% Series due 1994 $45,000,000 103.250% June 12, 1991
10 5/8% Series due 2005 20,000,000 105.900% July 1, 1991
10 3/4% Series due 2009 20,000,000 106.400% July 1, 1991
11% Series due 1995 4,000,000* 100.000% July 2, 1991
11% Series due 1995 4,000,000* 100.000% July 2, 1992
11% Series due 1995 12,000,000 102.445% July 2, 1992
9 3/8% Series due 2000 25,000,000 102.390% August 1, 1992
9 1/4% Series due 2004 15,000,000 104.080% August 1, 1992
7 3/4% Series due 2002 20,000,000 102.630% September 1, 1993
7 1/8% Series due 1999 20,000,000 101.230% November 15, 1993
Issuance and Sale:
Series of Proceeds Issuance and
First Mortgage Bonds Principal Amount to Company Sale Date
9 1/4% Series due 2021 $70,000,000 98.028% May 14, 1991
8 3/4% Series due 2001 30,000,000 97.836% May 14, 1991
* Sinking fund payment.
-25-
/TABLE
<PAGE>
<TABLE>
Details of the issuances and sales in 1992 and 1993 under the Company's Medium Term
Note Program under which First Mortgage Bonds and/or unsecured debt can be issued are
shown below:
<CAPTION>
Tranches of Proceeds Issuance and
Medium Term Notes Principal Amount to company Sale Date
<S> <C> <C> <C>
7.70% Series due 2000* $25,000,000 99.400% June 11, 1992
7.97% Series due 2003* 8,000,000 99.375% June 11, 1992
7.97% Series due 2003* 8,000,000 99.375% June 11, 1992
7.85% Series due 2004** 15,000,000 99.375% July 2, 1992
8.12% Series due 2022* 10,000,000 99.250% August 31, 1992
8.14% Series due 2022* 10,000,000 99.250% August 31, 1992
6.10% Series due 2000* 10,000,000 99.400% August 9, 1993
6.46% Series due 2003* 10,000,000 99.375% August 9, 1993
5.38% Series due 1999** 20,000,000 99.500% October 14, 1993
* First Mortgage Bonds.
** Promissory Note.
Under the Company's Medium Term Note Program, the Company has authorization from the
PSC by an amended Order effective September 29, 1993 to issue and sell up to $125 million
principal amount of Medium Term Notes through December 31, 1994, of which the Company has
issued and sold $116 million through December 31, 1993 as detailed above.
-26-
</TABLE>
<PAGE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
-27-
</PAGE>
<PAGE>
<TABLE>
FINANCIAL INDICES
Selected financial indices for the last five years are set forth in the following
table:
<CAPTION>
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Pretax coverage of
total interest charges:
Including AFDC*.................................... 2.33x 2.43x 2.70x 3.07x 3.29x
Excluding AFDC*.................................... 2.25x 2.36x 2.62x 2.95x 3.15x
Pretax coverage of total interest
charges and preferred stock dividends*................. 1.96x 2.04x 2.22x 2.49x 2.65x
Percent of construction expenditures
financed from internal funds........................... 100% 100% 88% 100% 100%
AFDC and Mirror CWIP as a percentage
of income available for common stock................... 11% 9% 8% 10% 11%
Effective tax rate...................................... 33% 33% 33% 34% 35%
*Prior year amounts have been restated to conform to current year reporting which
includes the interest portion of rent expense as a component of interest charges.
-28-
/TABLE
<PAGE>
<TABLE>
COMMON STOCK DIVIDENDS AND PRICE RANGES
The Company and its principal predecessors have paid dividends on its common stock in
each year commencing 1903, and the common stock of the Company has been listed on the New
York Stock Exchange since 1945. The price ranges and the dividends paid for each
quarterly period during the Company's last two fiscal years are as follows:
<CAPTION>
1992 1993
High Low Dividend High Low Dividend
<S> <C> <C> <C> <C> <C> <C>
First Quarter........... $28 7/8 $25 7/8 $.48 $34 1/4 $30 5/8 $.50
Second Quarter.......... 29 1/2 26 .48 34 1/2 30 5/8 .50
Third Quarter........... 30 1/4 28 1/4 .50 35 5/8 34 .515
Fourth Quarter.......... 31 1/4 28 7/8 .50 34 3/8 28 3/8 .515
On June 28, 1991 the quarterly dividend rate was increased to $.48 per share and on
June 26, 1992 the Company further increased the quarterly dividend to $.50 per share. On
June 25, 1993 the Company increased the quarterly dividends to $.515 per share. While the
Board of Directors of the Company intends to continue the practice of paying dividends
quarterly, the amounts and dates of such dividends as may be declared will be based on all
of the facts and circumstances known at the time of consideration of such declaration.
The number of registered holders of common stock as of December 31, 1993 was 26,761.
Of these, 26,458 were accounts in the names of individuals with total holdings of
6,485,132 shares, or an average of 245 shares per account. The 303 other accounts, in the
names of institutional or other non-individual holders, for the most part, hold shares for
the benefit of individuals.
The Company's 4.85% Promissory Notes due December 1, 1995 contain limitations upon
the right of the Company to declare or pay any dividend or make any other distribution on
(other than dividends or distributions payable in common stock), or acquire, for a
consideration, any shares of its common stock unless the aggregate of all such dividends,
distributions and considerations since December 31, 1964 does not exceed an amount
determined by a formula. At December 31, 1993, the amount of retained earnings available
for dividends on the Company's common stock under the provisions of said 4.85% Promissory
Notes was $60.609 million.
-29-
</TABLE>
/PAGE
<PAGE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of Central Hudson Gas
& Electric Corporation
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of income, of retained
earnings and of cash flows present fairly, in all material
respects, the financial position of Central Hudson Gas & Electric
Corporation and its subsidiaries at December 31, 1993 and 1992,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
As discussed in the Notes to the Consolidated Financial
Statements, in 1993 the Company changed its methods of accounting
for federal income taxes (Note 3) and postretirement benefits
other than pensions (Note 7) to conform with Statements of
Financial Accounting Standards No. 109 and No. 106, respectively.
PRICE WATERHOUSE
New York, New York
January 28, 1994
-30-
<PAGE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Thousands of Dollars)
Year ended December 31,
1993 1992 1991
Balance at beginning of year.... $ 58,692 $48,093 $40,611
Net Income ..................... 50,390 47,688 42,941
109,082 95,781 83,552
Dividends declared:
On cumulative preferred
stock........................ 5,562 5,544 5,659
On common stock
($2.045 per share 1993;
$1.98 per share 1992;
$1.90 per share 1991)....... 34,497 31,545 29,800
40,059 37,089 35,459
Balance at end of year.......... $ 69,023* $58,692 $48,093
* Pursuant to the terms of the 4.85% promissory notes, due 1995,
$60,609 is available for payment of dividends on common stock.
The Notes to Consolidated Financial Statements are an
integral part hereof.
-31-<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET DECEMBER 31, 1993 AND 1992
(Thousands of Dollars)
<CAPTION>
ASSETS 1993 1992
<S> <C> <C>
Utility Plant
Electric..................................................... $1,083,491 $1,060,528
Gas.......................................................... 128,093 121,021
Common....................................................... 80,485 77,870
Nuclear fuel................................................. 28,199 25,989
1,320,268 1,285,408
Less: Accumulated depreciation............................... 427,504 397,893
Nuclear fuel amortization.............................. 20,646 17,872
872,118 869,643
Construction work in progress................................ 42,741 34,930
914,859 904,573
Other Property and Investments................................. 8,465 9,078
The Notes to Consolidated Financial Statements are an integral part hereof.
-32-
/TABLE
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T) DECEMBER 31, 1993 AND 1992
(Thousands of Dollars)
<CAPTION>
ASSETS 1993 1992
<S> <C> <C>
Current Assets
Cash......................................................... 6,609 6,787
Temporary cash investments................................... 20,563 4,471
Special deposits............................................. 458 1,209
Accounts receivable from customers - net (Note 8)............ 46,452 46,603
Accrued unbilled utility revenues (Notes 1 and 8)............ 16,931 15,485
Other receivables............................................ 2,255 3,280
Materials and supplies, at average cost:
Fuel....................................................... 20,800 23,791
Construction and operating................................. 14,617 14,249
Prepaid taxes and other prepayments.......................... 10,910 10,603
139,595 126,478
Deferred Charges
Income taxes recoverable (Note 3)............................ 71,121 -
Deferred finance charges approved for amortization (Note 1).. 37,868 25,631
Deferred finance charges-Nine Mile 2 Plant (Note 1).......... 35,181 48,208
Unamortized debt expense..................................... 12,707 13,524
Deferred energy efficiency costs (Note 1).................... 10,316 9,220
Deferred vacation (Note 1)................................... 3,643 3,441
Other........................................................ 30,485 26,971
201,321 126,995
Accumulated Deferred Income Tax (Note 3)....................... 63,995 44,152
$1,328,235 $1,211,276
The Notes to Consolidated Financial Statements are an integral part hereof.
-33-
/TABLE
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T) DECEMBER 31, 1993 AND 1992
(Thousands of Dollars)
<CAPTION>
LIABILITIES 1993 1992
<S> <C> <C>
Capitalization
Common Stock Equity
Common stock, $5 par value (Note 5)......................... $ 84,766 $ 80,143
Paid-in capital (Note 5).................................... 270,848 245,349
Retained earnings........................................... 69,023 58,692
Capital stock expense....................................... (6,791) (5,970)
417,846 378,214
Cumulative Preferred Stock (Note 5)
Not Subject to Mandatory Redemption......................... 46,030 61,030
Subject to Mandatory Redemption............................. 35,000 19,200
81,030 80,230
Long-term Debt (Note 6)....................................... 391,810 441,096
890,686 899,540
Current Liabilities
Current maturities of long-term debt and preferred stock...... 51,019 2,243
Notes payable................................................. - 15,000
Accounts payable.............................................. 28,554 27,886
Accrued taxes................................................. 249 3,949
Accrued interest.............................................. 6,361 7,222
Accrued vacation (Note 1)..................................... 3,836 3,634
Customer deposits............................................. 3,452 3,191
Dividends payable............................................. 9,906 9,374
Other......................................................... 4,716 5,172
108,093 77,671
The Notes to Consolidated Financial Statements are an integral part hereof.
-34-
/TABLE
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T) DECEMBER 31, 1993 AND 1992
(Thousands of Dollars)
<CAPTION>
LIABILITIES 1993 1992
<S> <C> <C>
Deferred Credits and Other Liabilities
Income taxes refundable (Note 3).............................. 28,935 -
Deferred finance charges - Nine Mile 2 Plant (Note 1)......... 35,181 48,208
Deferred finance charges approved for amortization (Note 1)... 5,250 1,000
Deferred unbilled gas revenues (Note 1)....................... 5,814 4,870
Deferred Nine Mile 2 Plant litigation proceeds (Note 2)....... 3,695 3,350
Accrued pension costs (Note 7)................................ 11,733 14,295
Operating reserves............................................ 2,346 1,818
Other......................................................... 4,723 3,807
97,677 77,348
Accumulated Deferred Income Tax (Note 3)........................ 231,779 156,717
Commitments and Contingencies (Notes 2 and 9)................... - -
$1,328,235 $1,211,276
The Notes to Consolidated Financial Statements are an integral part hereof.
-35-
/TABLE
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(Thousands of Dollars)
<CAPTION>
Year ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Operating Revenues
Electric.............................. $411,339 $413,443 $404,775
Gas................................... 94,448 96,121 70,615
Total - own territory............... 505,787 509,564 475,390
Revenues from electric sales to other
utilities............................ 11,586 13,993 19,346
517,373 523,557 494,736
Operating Expenses
Operation:
Fuel used in electric generation.... 72,291 106,970 121,587
Purchased electricity............... 49,959 25,835 18,901
Purchased natural gas............... 53,900 55,066 39,867
Other expenses of operation......... 98,327 95,916 86,984
Maintenance........................... 34,486 34,226 31,504
Depreciation and amortization (Note 1) 39,682 39,596 37,230
Taxes, other than income tax.......... 65,564 66,339 60,554
Federal income tax (Note 3)........... 14,502 5,467 10,514
Deferred income tax (Note 3).......... 14,101 19,644 12,099
442,812 449,059 419,240
Operating Income........................ 74,561 74,498 75,496
Other Income and Deductions
Allowance for equity funds used during
construction (Note 1)................ 934 596 921
Federal income tax (Note 3)........... 2,937 (7,789) 2,454
Deferred income tax (Note 3).......... (1,492) 8,537 (1,202)
Other - net........................... 5,167 4,427 854
7,546 5,771 3,027
Income before Interest Charges.......... 82,107 80,269 78,523
The Notes to Consolidated Financial Statements are an integral part hereof.
-36-
/TABLE
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (CON'T)
(Thousands of Dollars)
<CAPTION>
Year ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Interest Charges
Interest on mortgage bonds.............. 22,390 23,207 25,236
Interest on other long-term debt........ 6,487 6,286 7,482
Other interest.......................... 1,204 1,954 2,569
Allowance for borrowed funds used
during construction (Note 1)........... (611) (951) (1,289)
Amortization of premium and expense
on debt................................ 2,247 2,085 1,584
31,717 32,581 35,582
Net Income................................ 50,390 47,688 42,941
Dividends on Preferred Stock.............. 5,562 5,544 5,659
Income Available for Common Stock......... $44,828 $42,144 $37,282
Common Stock:
Average shares outstanding (000s)....... 16,725 15,901 15,530
Earnings per share on
average shares outstanding............. $2.68 $2.65 $2.40
The Notes to Consolidated Financial Statements are an integral part hereof.
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/TABLE
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Year ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Operating Activities
Net Income.......................................... $50,390 $ 47,688 $ 42,941
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and nuclear fuel
amortization.................................... 43,887 42,999 41,367
Deferred income taxes, net....................... 15,593 11,107 13,301
Allowance for equity funds used during
construction.................................... (934) (596) (921)
Nine Mile 2 Plant deferred finance charges, net.. (7,987) (9,951) 95
Provisions for uncollectibles.................... 3,431 3,824 3,536
Accrued pension costs............................ (2,562) 8,774 2,432
Nine Mile 2 Plant net litigation proceeds........ 16 (2,328) -
Gain on sale of long-term investments............ (670) - -
Other - net...................................... (2,285) 2,009 (3,861)
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled utility
revenues..................................... (3,701) (10,670) (4,597)
Materials and supplies........................ 2,623 (598) 3,140
Special deposits, prepaid taxes,
and other prepayments........................ 444 (949) (949)
Accounts payable.............................. 668 (6,725) 9
Accrued taxes and interest.................... (4,561) 1,535 (4,318)
Other current liabilities..................... 7 (1,788) 98
Net cash provided by operating activities........... 94,359 84,331 92,273
The Notes to Consolidated Financial Statements are an integral part hereof.
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/TABLE
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (CON'T)
(Thousands of Dollars)
<CAPTION> 1993 1992 1991
<S> <C> <C> <C>
Investing Activities
Additions to Plant.................................. (54,037) (61,721) (70,907)
Allowance for equity funds
used during construction........................... 934 596 921
Net cash expenditures............................... (53,103) (61,125) (69,986)
Investment activity of subsidiaries................. (69) (204) (1,751)
Plant retirements, costs of
removal and other.................................. (146) (467) (753)
Nine Mile 2 Plant decommissioning trust fund........ (942) (917) (868)
Proceeds from sale of long-term investments......... 2,212 - -
Net cash used in investing activities............... (52,048) (62,713) (73,358)
Financing Activities
Proceeds from issuance of:
Long-term debt.................................... 41,722 77,630 101,131
Common stock...................................... 30,122 7,453 19,326
Preferred stock................................... 35,000 - -
Net repayments of short-term debt................... (15,000) (4,000) (9,000)
Retirement and redemption of long-term debt......... (41,443) (57,797) (90,874)
Retirement and redemption of preferred stock........ (35,000) - -
Dividends paid on preferred and common stock........ (39,527) (36,691) (34,801)
Issuance and redemption costs....................... (2,271) (2,869) (7,257)
Net cash used in financing activities............... (26,397) (16,274) (21,475)
Net Change in Cash and Cash Equivalents............... 15,914 5,344 (2,560)
Cash and Cash Equivalents at Beginning of Year........ 11,258 5,914 8,474
Cash and Cash Equivalents at End of Year.............. $ 27,172 $ 11,258 $ 5,914
Supplemental Disclosure of Cash Flow Information
Interest paid (net of amounts capitalized)........ $ 30,287 $ 30,413 $ 34,499
Federal income taxes paid......................... 13,000 11,298 10,500
The Notes to Consolidated Financial Statements are an integral part hereof.
-39-
/TABLE></PAGE
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General:
The Company is subject to regulation by the Public Service
Commission of the State of New York (PSC) and the Federal Energy
Regulatory Commission (FERC) with respect to its rates for
service and the maintenance of its accounting records. The
Company's accounting policies conform to generally accepted
accounting principles as applied to regulated public utilities
and are in accordance with the accounting requirements and rate-
making practices of the regulatory authorities having
jurisdiction.
For purposes of the Consolidated Statement of Cash Flows, the
Company considers temporary cash investments with an original
maturity of three months or less to be cash equivalents.
Certain amounts from prior years have been reclassified on the
consolidated financial statements to conform with the 1993
presentation.
Principles of Consolidation:
The consolidated financial statements include the accounts of
the Company and its subsidiaries. All intercompany balances and
transactions have been eliminated.
The Company's subsidiaries are wholly owned landholding,
cogeneration and energy management companies. Due to
immateriality, the net income of the Company's subsidiaries is
reflected in the Consolidated Statement of Income as other
nonoperating income - net.
Summarized financial data for the Company's subsidiaries,
included in the consolidated financial statements, is as follows:
1993 1992 1991
(Thousands of Dollars)
Total Assets (year-end) $20,097 $17,651 $14,378
Net Assets (year-end) 10,240 9,274 6,140
Revenues 7,368 4,753 5,758
Net Income 966 634 195
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<PAGE>
Utility Plant:
The costs of additions to utility plant and replacements of
retirement units of property are capitalized at original cost.
The costs of Unit No. 2 of the Nine Mile Point Nuclear Station
(Nine Mile 2 Plant) are capitalized at original cost, less the
disallowed investment of $169.3 million which was recorded in
1987. Costs include labor, materials and supplies, indirect
charges for such items as transportation, certain taxes, pension
and other employee benefits and an allowance for the cost of
funds used during construction. Replacement of minor items of
property is included in maintenance expenses.
The original cost of property, together with removal cost,
less salvage, is charged to accumulated depreciation at such time
as the property is retired and removed from service.
The Company has a 9% or 97.2 MW interest in the 1,080 MW
Nine Mile 2 Plant and a 35% or 420 MW interest in the 1,200 MW
Roseton Steam Electric Generating Plant (Roseton Plant). See
Note 9 for further discussion of the Roseton Plant.
The Company's shares of the investment in the Nine Mile 2
Plant and the Roseton Plant, as included in its Consolidated
Balance Sheet at December 31, 1993 and 1992, were:
1993 1992
(Thousands of Dollars)
Nine Mile 2 Plant
Plant in service $304,354 $301,722
Construction work in progress 7,933 6,299
Accumulated depreciation (41,148) (33,272)
Roseton Plant
Plant in service $122,753 $124,085
Construction work in progress 1,014 373
Accumulated depreciation (62,623) (62,340)
Allowance For Funds Used During Construction:
The Company includes in plant costs an allowance for funds
used during construction (AFDC) approximately equivalent to the
cost of funds used to finance construction expenditures. The
concurrent credit for the amount so capitalized is reported in
the Consolidated Statement of Income as follows: the portion
applicable to borrowed funds is reported as a reduction of
interest charges while the portion applicable to other funds (the
equity component, a noncash item) is reported as other income.
The amount shown on the Consolidated Statement of Cash Flows for
investing activities "Net cash expenditures" excludes the equity
component of the AFDC.
During the construction of the Nine Mile 2 Plant, the PSC
authorized the inclusion in rate base of increasing amounts of
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<PAGE>
the Company's investment in that Plant. The Company did not
accrue AFDC on any of the Nine Mile 2 Plant construction work in
progress (CWIP) which was included in rate base and for which a
cash return was being allowed; however, the PSC ordered,
effective January 1, 1983 that amounts be accumulated in deferred
debit and credit accounts equal to the amount of AFDC which was
not being accrued on the CWIP included in rate base (Mirror
CWIP). The balance in the deferred credit account is available
to reduce future revenue requirements by amortizing portions of
the deferred credit to other income or by the elimination through
writing off other deferred balances as directed by the PSC.
Based on the history of cost escalation in the electric utility
industry and the history of the Company's rate increases, the
Company expects such application of the deferred credit will
occur over a period substantially shorter than the life of the
Nine Mile 2 Plant. When amounts of such deferred credit are
applied in order to reduce revenue requirements, amortization is
started for a corresponding amount of the deferred debit, which
amortization continues on a level basis over the remaining life
of the Nine Mile 2 Plant resulting in recovery of such
corresponding amount through rates. Deferred debit and deferred
credit amounts approved for amortization are identified on the
Consolidated Balance Sheet as "Deferred finance charges approved
for amortization." Deferred debit and deferred credit amounts
not yet approved for amortization are identified on the
Consolidated Balance Sheet as "Deferred finance charges - Nine
Mile 2 Plant." Both the deferred debit and the deferred credit
are expected to be exhausted by the end of the useful life of the
Nine Mile 2 Plant either through the amortization or write-off
procedures described above or through the write-off of the
remaining debit and credit as directed by the PSC. The net
effect of this procedure is that at the end of the amortization
period for the deferred credit, the accounting and rate-making
treatment will be the same as if the Nine Mile 2 Plant CWIP had
not been included in rate base during the construction period.
Pursuant to the PSC Order and Opinion issued April 9, 1992
regarding the Company's electric rate case, the Company was
authorized to offset $8.5 million of the deferred credit against
other deferred balances and to amortize $3.0 million to other
income over 12 months beginning in May 1992. Pursuant to the PSC
Order Adopting Revenue Requirement and Rate Design issued on
December 16, 1993 (1993 Rate Order) regarding the Company's 1993
Electric Rate Case, the Company was authorized to offset $5.5
million of the deferred credit against other deferred balances
and to amortize $6.0 million to other income over 12 months
beginning in December 1993. In 1993 and 1992, the Company
amortized $3.3 million and $2.1 million, respectively, of this
deferred credit.
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<PAGE>
Depreciation and Amortization:
For financial statement purposes, the Company's depreciation
provisions are computed on the straight-line method using rates
based on studies of the estimated useful lives and estimated net
salvage of properties, with the exception of the Nine Mile 2
Plant which is depreciated on a remaining life amortization
method. Reference is made to the caption "Operating Expenses" in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for the ratio of the total provision for
depreciation to average depreciable property for 1993, 1992 and
1991. The Company performs depreciation studies on a continuing
basis and upon approval by the PSC, periodically adjusts the
rates of its various classes of depreciable property. The
Company estimates the useful life of the Nine Mile 2 Plant will
end in the year 2026. The provision for depreciation of
transportation equipment is charged indirectly to various asset
and expense accounts.
For federal income tax purposes, the Company uses an
accelerated method of depreciation and generally uses the
shortest life permitted for each class of assets.
Amortization of Nuclear Fuel:
The cost of the Nine Mile 2 Plant nuclear fuel assemblies
and components is amortized to operating expenses based on the
quantity of heat produced for the generation of electric energy.
Niagara Mohawk Power Corporation (Niagara Mohawk), on behalf of
the Nine Mile 2 Plant cotenants, has entered into an agreement
with the U.S. Department of Energy (DOE) for the ultimate
disposal and storage of spent nuclear fuel. The cotenants are
assessed a fee for such disposal based upon the kilowatt-hours
sold which are generated by the Nine Mile 2 Plant. These costs
are charged to operating expense and recovered from customers
through base rates or through the electric fuel cost adjustment
clause described below. The Company cannot now determine whether
such arrangements with the DOE will ultimately provide for the
satisfactory permanent disposal of such waste products.
Rates and Revenues:
Electric and gas retail rates applicable to intrastate
service (other than contractually established rates for service
to municipalities and governmental bodies) are regulated by the
PSC. Transmission rates, facilities charges and rates for
electricity sold for resale in interstate commerce are regulated
by the FERC.
Revenues are recognized on the basis of cycle billings
rendered monthly or bimonthly. Estimated revenues are accrued
-43-
<PAGE>
for those customers billed bimonthly whose meters are not read in
the current month. Moreover, as a result of a gas rate Order of
the PSC issued in July 1991, an additional amount of unbilled
revenues for gas customers is recorded in a deferred credit
account. This additional amount of unbilled revenue is available
to reduce future revenue requirements. In such Order, the PSC
authorized $1.2 million of this additional revenue to be
amortized over a 36-month period. During 1993, 1992 and the six-
month period July through December 1991, the Company amortized
$361,000, $394,000 and $197,000, respectively, of such revenue.
Pursuant to the 1993 Rate Order, regarding the Company's 1993 Gas
Rate Case, the Company discontinued such amortization as of
November 30, 1993.
The Company's tariff for retail electric service includes a
fuel cost adjustment clause pursuant to which electric rates are
adjusted to reflect changes in the average cost of fuels used for
electric generation and in certain purchased power costs, from
the average of such costs included in base rates. The Company's
tariff for gas service contains a comparable clause to adjust gas
rates for changes in the price of purchased natural gas and in
certain costs of manufactured gas.
Reference is made to the captions "Rate Proceeding -
Electric" and "Rate Proceeding - Gas" in "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
for details of the Company's 1993 Electric Rate Case and 1993 Gas
Rate Case.
Deferred Electric Fuel Costs:
The provisions of the electric fuel cost adjustment clause
are such that changes in fuel costs incurred in the current month
are not billed or credited to customers until subsequent months.
Therefore, in order to match costs and revenues, the Company
defers that portion of such costs incurred in the current month
which will result in a cost adjustment in subsequent months.
Pursuant to a 1985 Order of the PSC, the Company's electric
fuel cost adjustment clause provides for a partial sharing of
variations in fuel costs from the levels of fuel costs projected
in rate proceedings. The Company bears 20% of the first $10
million of variation and 10% of the second $10 million of
variation. The partial sharing applies to variations in actual
fuel costs either above or below the projected levels;
accordingly, the Company's maximum annual exposure, or benefit,
is $3 million, before taxes.
As a result of the adoption of the partial sharing electric
fuel adjustment clause, the PSC adopted a symmetrical sharing
arrangement for net revenues from sales to other utilities.
Shortfalls below the imputed amount, as well as amounts above the
imputed amount, will be shared 80% by the customers and 20% by
the Company.
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<PAGE>
Reference is made to "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for results of
both sharing arrangements mentioned above.
Deferred Gas Costs:
In accordance with requirements of the PSC applicable to all
New York State regulated gas utilities, the Company defers each
month any difference between the amount of gas costs incurred
which is recoverable through the gas cost adjustment clause (GAC)
and GAC revenues. The net deferral remaining at August 31 of
each year is amortized over a subsequent twelve-month period for
both billing and accounting purposes. See Note 9 - Commitments
and Contingencies - "Natural Gas Supply" and "Take-or-Pay Gas
Costs" as to deferral of certain contract take-or-pay costs
charged by pipeline suppliers.
Energy Efficiency Programs:
The PSC has required utilities to adopt comprehensive long-
range planning which includes demand side management and energy
conservation (Energy Efficiency Program). The Company's 1993 and
1994 Energy Efficiency Program was approved by the PSC during
1993. The Energy Efficiency Program costs are deferred and
amortized over either five or ten years, as directed by the PSC.
In addition to the deferral of Energy Efficiency Program
costs, the Company recovers lost net revenues that result from
the Program. Incentive earnings related to the achievement of
energy efficiency goals are recovered through the electric fuel
adjustment clause.
Accrued Vacation:
The Company's employees begin accruing vacation in July of
each year for use in the following year; the monthly accrual of
days is based on the number of years of service for each
employee. However, for rate-making purposes, vacation pay is
recognized as an allowable expense only when paid. The Company
accrued $3.8 million and $3.6 million as of December 31, 1993 and
1992, respectively, as a current liability for an estimate of
earned vacation pay, and consistent with its rate-making
treatment, recorded a deferred charge representing the future
recoverability of this cost.
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<PAGE>
NOTE 2 - NINE MILE 2 PLANT
General:
The Nine Mile 2 Plant is located in Oswego County, New York,
and is operated by Niagara Mohawk. The Nine Mile 2 Plant is
owned as tenants in common by the Company (9% interest), Niagara
Mohawk (41% interest), New York State Electric & Gas Corporation
(18% interest), Long Island Lighting Company (18% interest) and
Rochester Gas and Electric Corporation (14% interest). The
output of the Nine Mile 2 Plant, which has a rated net capability
of 1,080 MW, is shared and the operating expenses of the Plant
are allocated to the cotenants in the same proportions as the
cotenants' respective ownership interests. The Company's share
of direct operating expense for the Nine Mile 2 Plant is included
in the appropriate expense classifications in the accompanying
Consolidated Statement of Income.
An Operating Agreement for the operation of the Plant was
entered into by the cotenants on January 1, 1993 and was
submitted for approval to the PSC. Under that Agreement, Niagara
Mohawk will continue as operator of the Nine Mile 2 Plant, but
all five cotenant owners share certain policy, budget and
managerial oversight functions. The fixed term of such Operating
Agreement is two years from its effective date and, unless
terminated on the expiration of such two-year period, continues
subject to termination on six months' notice.
Plant Litigation and Settlements:
In 1992, the Company recognized $2.328 million in other
income representing the shareholders' portion of the net proceeds
from various settlement agreements regarding disputes and
litigations that arose in connection with the construction of the
Nine Mile 2 Plant. Pursuant to the 1993 Rate Order, the
ratepayers' share of the net proceeds of $3.542 million will be
refunded by the Company to its customers during the twelve months
beginning December 21, 1993 as discussed in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" under the caption "Rate Proceeding - Electric."
Radioactive Waste:
Niagara Mohawk has informed the Company that a low-level
radioactive waste management program and contingency plan has
been developed and provides assurance that the Nine Mile 2 Plant
is properly prepared to handle interim storage of low-level
radioactive waste for at least a 10-year period, if required.
Niagara Mohawk has contracted with the DOE for disposal of high-
level radioactive waste (spent fuel) from the Nine Mile 2 Plant
-46-
<PAGE>
(see Note 1 - Summary of Significant Accounting Policies -
"Amortization of Nuclear Fuel"). The DOE announced in early 1990
that the schedule for start of operations of its high-level
radioactive waste repository had slipped from 2003 to no sooner
than 2010. The Company has been advised by Niagara Mohawk that
the Nine Mile 2 Plant Spent Fuel Storage Pool has a capacity for
spent fuel that is adequate until 2014. If further DOE schedule
slippage should occur, facilities that extend the on-site storage
capability for spent fuel at the Nine Mile 2 Plant beyond 2014
would need to be acquired.
Refueling Outage:
A scheduled refueling outage for the Nine Mile 2 Plant
commenced on October 2, 1993. The refueling outage was completed
and the Plant was placed back in service on November 29, 1993.
Nuclear Plant Decommissioning Costs:
The Company's 9% share of costs to decommission the Nine
Mile 2 Plant, which is expected to begin in the year 2027, is
estimated to be approximately $118.5 million ($23.9 million in
1993 dollars; $4.4 million non-radioactive, $19.5 million
radioactive), based on a 1989 cost estimate included in the
decommissioning plan filed with the Nuclear Regulatory Commission
(NRC) on July 18, 1990. Niagara Mohawk has informed the Company
that the decommissioning study is expected to be updated in 1994.
Certain estimated decommissioning costs for the Nine Mile 2 Plant
are currently being recovered in rates through an annual
allowance and are charged to operations through depreciation
charges. The annual decommissioning allowance reflected in rate-
making is based upon the 1989 estimate which includes amounts for
radioactive and non-radioactive dismantlement costs. The annual
allowance for recovery during the period August 1, 1988 through
May 31, 1990 was $324,000. Effective June 1, 1990 the PSC
authorized recovery, on an annual basis, of $212,000 for internal
decommissioning funding (i.e., funds held by the Company) and
$787,000 for external decommissioning funding (i.e., funds held
in trust). Total recoveries authorized by the PSC for the
internal decommissioning fund from August 1988 through December
31, 1993 amounted to $969,000. The external decommissioning
trust fund at December 31, 1993 amounted to $3.608 million,
including net earnings through December 31, 1993 of $388,000, and
is reflected in the Company's Consolidated Balance Sheet in
"Other Property and Investments." The amount of accumulated
decommissioning costs recovered through rates and the net
earnings of the external decommissioning trust fund are reflected
in accumulated depreciation on the Consolidated Balance Sheet and
amount to $4.6 million and $3.5 million at December 31, 1993 and
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<PAGE>
1992, respectively. NRC regulations require the direct funding
of eventual decommissioning costs of nuclear facilities. The
Company, effective as of March 1, 1990, established a master
trust in order to comply with these NRC requirements. The trust
includes a fund qualified, under the applicable provisions of the
federal tax law, to take advantage of certain federal income tax
benefits. Guidelines have been established by the NRC for
determining minimum amounts that must be available in the trust
for specified decommissioning activities at the time of
decommissioning. Applying the NRC guidelines established in May
1993, the Company has estimated that its share of the minimum
requirements will be approximately $38.4 million in 1993 dollars.
The Company will seek an increase in its rate allowance in its
next rate case to reflect the latest NRC minimum requirements or
the results of the 1994 study.
The Company cannot now determine whether the decommissioning
costs allowed in rates by the PSC or the estimated costs
discussed above will ultimately be adequate to decommission the
Nine Mile 2 Plant in accordance with then existing law,
regulation, technology and/or costs. The Company believes that
decommissioning costs, if higher than currently estimated, will
ultimately be recovered in the rate-making process, although no
such assurance can be given.
Decontamination and Decommissioning Fund:
The Energy Policy Act of 1992, signed into law in October
1992, established a Uranium Enrichment Decontamination and
Decommissioning Fund (Fund) for the decommissioning of the DOE's
enrichment facilities. Special annual assessments to utilities
with nuclear power plants, which began in 1993 and continue until
2006, and government appropriations will be deposited into the
Fund. The Energy Policy Act of 1992 also provides that such
assessments shall be considered a cost of fuel and shall be
recoverable in rates.
The unamortized portion of the Company's share of this
assessment at December 31, 1993 of approximately $724,000 and a
corresponding regulatory asset are reflected on the Consolidated
Balance Sheet.
NOTE 3 - FEDERAL INCOME TAX
The Company's policy with respect to accounting for federal
income taxes is to reflect in income the estimated amount of
income tax currently payable and to provide for deferred taxes in
accordance with generally accepted accounting principles.
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109) prospectively. The adoption of SFAS 109
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<PAGE>
changes the Company's method of accounting for income taxes from
the deferred method (in accordance with Accounting Principles
Board No. 11 [APB 11]) to an asset and liability approach.
Previously, the Company deferred the tax effects of certain
timing differences between financial reporting and taxable
income. The asset and liability approach requires the
recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between
the carrying amounts for financial reporting purposes and the tax
bases of assets and liabilities. The Company's adoption of SFAS
109 was in accordance with provisions of a Statement of Interim
Policy on Accounting and Rate-making Procedures to Implement SFAS
109 issued by the PSC and had no impact on the Consolidated
Statement of Income. As set forth below, the adoption of SFAS
109 affected the Consolidated Balance Sheet only.
Components of Federal Income Tax:
The following is a summary of the components of federal
income tax as reported in the Consolidated Statement of Income:
1993 1992 1991
(Thousands of Dollars)
Charged to operating expense:
Federal income tax.......... $14,502 $ 5,467 $10,514
Deferred income tax......... 14,101 19,644 12,099
Income tax charged to
operating expense....... 28,603 25,111 22,613
Charged (credited) to other
income and deductions:
Federal income tax.......... (2,937) 7,789 (2,454)
Deferred income tax......... 1,492 (8,537) 1,202
Income tax charged
(credited) to other
income and deductions... (1,445) (748) (1,252)
Total federal income tax... $27,158 $24,363 $21,361
Reconciliation:
The following is a reconciliation between the amount of
federal income tax computed on income before taxes at the
statutory rate and the amount reported in the Consolidated
Statement of Income:
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<PAGE>
1993 1992 1991
(Thousands of Dollars)
Net income.................... $ 50,390 $ 47,688 $42,941
Federal income tax............ 11,565 13,256 8,060
Deferred income tax........... 15,593 11,107 13,301
Income before taxes......... $ 77,548 $ 72,051 $64,302
Computed tax @
statutory rate (35% in 1993,
34% in 1992 and 1991)........ $ 27,142 $ 24,497 $21,863
Increase (decrease) to computed
tax due to:
Tax depreciation............ (10,796) (11,833) (12,171)
Cost of removal............. (994) (1,040) (1,229)
Deferred electric fuel costs 135 562 1,221
Deferred gas costs.......... (844) (1,315) 58
Deferred energy efficiency
costs...................... (1,106) (2,386) (2,789)
Deferred OPEB expense....... (1,617) - -
Pension expense............. (893) 3,257 1,128
Alternative minimum tax..... (59) 1,971 3,493
Unbilled revenues........... 155 752 (1,510)
Other....................... 442 (1,209) (2,004)
Federal income tax............ 11,565 13,256 8,060
Deferred income tax........... 15,593 11,107 13,301
Total federal income tax.... $ 27,158 $ 24,363 $21,361
Effective tax rate............ 35% 34% 33%
Deferred income tax:
The following is a summary of the components of deferred income
tax included in the Consolidated Statement of Income (presented
in accordance with APB 11, effective through 1992):
1992 1991
(Thousands of Dollars)
Tax depreciation.............. $ 14,605 $15,290
Investment tax credit......... (1,396) (1,381)
Deferred electric fuel costs.. (562) (1,221)
Deferred gas costs............ 1,315 (58)
Deferred energy efficiency
costs........................ 2,386 2,789
Pension expense............... (3,257) (1,128)
Alternative minimum tax....... (1,971) (3,493)
Unbilled revenues............. (752) 1,510
Other......................... 739 993
Deferred income tax......... $ 11,107 $13,301
The adoption of SFAS 109 resulted in the recording of a
deferred tax liability of approximately $69.2 million
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representing the cumulative amount of federal income tax benefits
on temporary differences which were previously flowed-through to
ratepayers and in the recording of approximately $22.9 million in
deferred tax assets representing the cumulative amount of federal
income taxes on temporary differences which were previously
flowed-through to ratepayers. The Company recorded a
corresponding regulatory asset and liability on the Consolidated
Balance Sheet.
In addition, the adoption of SFAS 109 resulted in the
recording of a payable to ratepayers of approximately $8.6
million, representing excess deferred federal income tax
resulting from the reduction of the corporate federal income tax
rate from 46% to 34%. The excess deferred federal income tax
amount was adjusted by approximately $2.9 million in 1993 due to
the August 1993 enactment of the Omnibus Budget Reconciliation
Act of 1993 which increased the corporate federal income tax rate
from 34% to 35%, effective January 1, 1993. The resulting net
excess deferred federal income tax will be refunded to ratepayers
over the life of the related depreciable assets.
With the adoption of SFAS 109, the Company discontinued, for
reporting purposes, its practice of reducing the deferred tax
liabilities balance by the amount of deferred tax assets. Thus,
the Consolidated Balance Sheet reflects a reclassification of
prior year amounts which resulted in an increase in total assets
and total liabilities at December 31, 1992 of approximately $44.2
million.
The deferred tax liabilities and assets initially recorded
are adjusted quarterly to reflect the current account balances.
The regulatory asset and regulatory liability related to SFAS 109
amount to $71.1 million and $28.9 million, respectively, at
December 31, 1993.
The following is a summary of the components of the current
and non-current deferred income taxes at December 31, 1993, as
reported in the Consolidated Balance Sheet:
Deferred Tax Deferred Tax
Assets Liabilities
(Thousands of Dollars)
Tax depreciation................ $ 152,395
Accumulated deferred investment
tax credit..................... 32,250
Future revenues - recovery of
plant basis differences........ 24,933
Future tax benefits on
investment tax credit basis
difference..................... $ 17,365
Alternative minimum tax......... 14,533
Tax depreciation - Nine Mile 2
Plant disallowed investment.... 9,232
Unbilled revenues............... 5,952
Nondeductible pension expense... 3,804
Other........................... 13,109 22,201
Total Deferred Taxes $ 63,995 $ 231,779
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NOTE 4 - SHORT-TERM BORROWING ARRANGEMENTS
The Company has in effect a revolving credit agreement with
four commercial banks which allows it to borrow up to $50 million
through December 14, 1997 (Agreement). The Agreement gives the
Company the option of borrowing at either the prime/federal funds
rate, or three other money market rates if such rates are lower.
The Agreement also provides for the payment of an annual
commitment fee of 1/16 of 1% per annum on the unborrowed amount
and a facility fee of 1/8 of 1% per annum on the total amount of
the facility. Compensating balances are not required under the
Agreement. There were no outstanding loans under this Agreement
at December 31, 1993 or 1992. In addition, the Company continues
to maintain confirmed lines of credit totaling $2 million with
three regional banks.
There was no outstanding short-term debt at December 31,
1993. The amount of outstanding short-term debt at December 31,
1992 was $15 million, consisting of commercial paper. All
commercial paper obligations are supported by the Agreement.
NOTE 5 - CAPITALIZATION CAPITAL STOCK
Common Stock, $5 par value; 30,000,000 shares authorized:
Paid-In Capital:
Common Stock Paid-In
Shares Amount Capital
Outstanding ($000) ($000)
January 1, 1991 14,950,956 $ 74,755 $223,957
Issued through public
offering.................. 600,000 3,000 10,788
Issued under dividend
reinvestment plan......... 181,073 905 3,701
Issued under customer stock
purchase plan............. 35,628 178 754
December 31, 1991 15,767,657 78,838 239,200
Issued under dividend
reinvestment plan......... 205,950 1,030 4,847
Issued under customer stock
purchase plan............. 54,962 275 1,302
December 31, 1992 16,028,569 80,143 245,349
Issued through public
offering.................. 700,000 3,500 19,299
Issued under dividend
reinvestment plan......... 185,101 926 5,124
Issued under customer stock
purchase plan............. 39,477 197 1,076
December 31, 1993 16,953,147 $ 84,766 $270,848
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Cumulative Preferred Stock, $100 par value; 1,200,000 shares
authorized:
Redemption Shares Outstanding
Price December 31,
Series 12/31/93 1993 1992
Not Subject
to Mandatory
Redemption:
4.50% $107.00 70,300 70,300
4.75% 106.75 20,000 20,000
4.35% 102.00 60,000 60,000
4.96% 101.00 60,000 60,000
7.72% 101.00 130,000 130,000
7.44% 101.22 120,000 120,000
8.40% - - 150,000
460,300 610,300
Subject to
Mandatory
Redemption:
Final
Redemption
Date
A - - - 200,000
6.20% 10/1/08 (a) 200,000 -
6.80% 10/1/27 (a) 150,000 -
350,000 200,000
Total.......................... 810,300 810,300
(a) Cannot be redeemed prior to October 1, 2003.
Reference is made to the caption "Financing Program" in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for details on issuances and redemptions
of capital stock.
The Cumulative Preferred Stock not subject to mandatory
redemption is redeemable only at the option of the Company. Upon
redemption, the sum payable per share is the then current
redemption price plus accrued dividends thereon. In the event of
an involuntary liquidation of the Company, the redemption price
is $100 per share plus accrued dividends.
Expenses incurred on issuance of capital stock are
accumulated and reported as a reduction in common stock equity.
Such expenses are not being amortized, with the following
exceptions:
1) As directed by the PSC, the redemption costs and the
unamortized expenses associated with the Adjustable Rate
Cumulative Preferred Stock, Series A, and the expenses associated
with the 6.20% Redeemable Cumulative Preferred Stock are being
amortized over the remaining life of the redeemed Adjustable Rate
Cumulative Preferred Stock, Series A (i.e. 178 months).
2) As directed by the PSC, the issuance and redemption
costs of the redeemed 8.40% Cumulative Preferred Stock and the
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expenses associated with the 6.80% Redeemable Cumulative
Preferred Stock are being amortized over the life of the 6.80%
Redeemable Cumulative Preferred Stock (i.e. 406 months).
NOTE 6 - CAPITALIZATION - LONG-TERM DEBT
Details of long-term debt are shown below:
December 31,
1993 1992
(Thousands of Dollars)
Series Maturity Date
First Mortgage Bonds:
8 1/8% September 1, 1994 $ (a) $ 50,000
7 1/8% January 15, 1999 - 20,000
6.10% (b) April 28, 2000 10,000 -
7.70% (b) June 12, 2000 25,000 25,000
8.75% May 1, 2001 30,000 30,000
7.75% February 1, 2002 - 20,000
7.97% (b) June 11, 2003 8,000 8,000
7.97% (b) June 13, 2003 8,000 8,000
6.46% (b) August 11, 2003 10,000 -
6.25% June 1, 2007 4,500 4,500
9.25% May 1, 2021 70,000 70,000
8.12% (b) August 29, 2022 10,000 10,000
8.14% (b) August 29, 2022 10,000 10,000
8.375% December 1, 2028 16,700 16,700
202,200 272,200
Promissory Notes issued in connection with the sale by the New
York State Energy Research and Development Authority (NYSERDA) of
tax-exempt pollution control revenue bonds:
1984 Series A (7.375%) Oct. 1, 2014 16,700 16,700
1984 Series B (7.375%) Oct. 1, 2014 16,700 16,700
1985 Series A (Var. rate) Nov. 1, 2020 36,250 36,250
1985 Series B (Var. rate) Nov. 1, 2020 36,000 36,000
1987 Series A (Var. rate) June 1, 2027 33,700 33,700
1987 Series B (Var. rate) June 1, 2027 9,900 9,900
149,250 149,250
Promissory Notes (net of sinking fund requirements):
4.85% December 1, 1995 2,562 2,644
5.38% (b) January 15, 1999 20,000 -
7.85% (b) July 2, 2004 15,000 15,000
37,562 17,644
Secured Notes Payable of Subsidiary 3,866 3,081
Unamortized Premium (Discount)
on Debt - Net (1,068) (1,079)
Total long-term debt $391,810 $441,096
(a) Principal amount at December 31, 1993 was reclassified to
"Current Maturities of Long-term Debt."
(b) Issued under the Company's Medium Term Note Program.
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In 1993, the Company redeemed two series of First Mortgage
Bonds, totaling $40 million. The funds to redeem these bonds
were obtained from the sale of an aggregate of $40 million of
Medium Term Notes, issued in several tranches.
Under the Company's Medium Term Note Program, the Company
has authorization from the PSC, by an amended order effective
September 29, 1993, to issue and sell up to $125 million
principal amount of Medium Term Notes through December 31, 1994,
of which the Company has issued and sold $116 million of such
Notes through December 31, 1993.
Reference is made to "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for details of
the Company's Medium Term Note Program and for information
regarding the amounts of long-term debt maturing within the next
five years.
The NYSERDA Pollution Control Revenue Bonds, Series A and B,
issued in 1985 and 1987 are variable rate obligations subject to
weekly repricing and investor tender. The Company has the right,
exercisable independently in respect of each series of the 1985
and 1987 NYSERDA Pollution Control Revenue Bonds, to convert the
Bonds of each such series to a fixed rate for the remainder of
their term.
The Company has irrevocable letters of credit which expire
on various dates and which the Company anticipates being able to
extend if the interest rate on the related series of NYSERDA
Pollution Control Revenue Bonds is not converted to a fixed
interest rate. Those letters of credit support certain payments
required to be made on such Bonds. If the Company were unable to
extend the letter of credit that is related to a particular
series of NYSERDA Pollution Control Revenue Bonds, that series
would have to be redeemed unless a fixed rate of interest becomes
effective. Payments made under the letters of credit in
connection with purchases of tendered NYSERDA Pollution Control
Revenue Bonds are repaid with the proceeds from the remarketing
of such Bonds. To the extent the proceeds are not sufficient,
the Company would be required to reimburse the bank that issued
the letter of credit for the amount of any resulting draw under
the letter of credit by the expiration date of the letter of
credit. The letter of credit expiration date for the letters of
credit supporting the 1985 NYSERDA Bonds is November 16, 1996,
and the letter of credit expiration date for the letters of
credit supporting the 1987 NYSERDA Bonds is September 16, 1996.
In its rate orders, the PSC has provided for full recovery
of the interest costs on the Company's 1985 and 1987 Series A and
B Promissory Notes which were issued in connection with the sale
of the NYSERDA Pollution Control Revenue Bonds. Such Bonds bear
interest at variable rates set weekly. Deferred accounting has
been granted by the PSC for any variation (above or below)
between actual interest rates and those interest rates allowed
for rate-making purposes. Such deferred balances are to be
disposed of in future rate cases.
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Expenses incurred on debt issues and any discount or premium
on debt are deferred and amortized over the lives of the related
issues. Expenses incurred on debt redemptions prior to maturity
have been deferred and are generally being amortized over the
remaining lives of the related extinguished issues as directed by
the PSC.
Certain debt agreements require the maintenance by the
Company of certain financial ratios and contain other restrictive
covenants.
Secured notes payable of a subsidiary of the Company consist
of term loans to finance the installation of energy conservation
equipment at various host facilities, located primarily in the
Northeastern United States. The majority of such loans accrue
interest at the prime lending rate plus 3/4 of 1% and interest
and principal are amortized over the term of each respective
contract. Such loans are secured principally by certain power
purchase agreements and project assets.
NOTE 7 - POSTEMPLOYMENT BENEFITS
Retirement Income Plan:
The Company has a noncontributory retirement income plan
(Plan) covering substantially all of its employees. The Plan
provides pension benefits that are based on the employee's
compensation and years of service. It has been the Company's
practice to provide periodic updates to the benefit formula
stated in the Plan.
The Company's funding policy is to make annual contributions
equal to the amount of net periodic pension cost, but not in
excess of the maximum allowable tax-deductible contribution under
the federal income tax law nor less than the minimum requirement
under the Employee Retirement Income Security Act of 1974.
Charges to expense were 71%, 71% and 72% of the net periodic
pension costs for the years 1993, 1992 and 1991, respectively.
The allocation of net periodic pension costs between capital and
expense follows the payroll distribution.
Net periodic pension (income) costs for 1993, 1992 and 1991
include the following components:
1993 1992 1991
(Thousands of Dollars)
Service cost - benefits earned
during the period........... $ 4,518 $ 4,002 $ 3,780
Interest cost on projected
benefit obligation.......... 13,148 12,801 12,140
Actual return on Plan assets. (34,022) (21,941) (43,296)
Net amortization and deferral 13,794 6,411 29,808
Net periodic pension
(income) cost............ $ (2,562) $ 1,273 $ 2,432
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The following table sets forth the Plan's funded status at
October 1, 1993 and 1992 and amounts recognized in the Company's
Consolidated Balance Sheet at December 31, 1993 and 1992:
1993 1992
(Thousands of Dollars)
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits
of $171,389 and $140,156............. $173,924 $142,020
Projected benefit obligation for
service rendered to date.............. $211,583 $169,858
Plan assets at market value............ 227,638 211,435
Excess of Plan assets over projected
benefit obligation.................... 16,055 41,577
Unrecognized net gain.................. (23,703) (43,748)
Prior service cost not yet recognized
in net periodic pension cost.......... 1,157 1,254
Unrecognized net asset being amortized
over 15 years......................... (5,242) (5,877)
Contributions withdrawn from the Plan
(Note 9).............................. - (7,501)
Pension liability recognized in the
Balance Sheet......................... $(11,733) $(14,295)
Plan assets consist primarily of equities and fixed income
securities. The Plan is deemed to be fully funded for federal
income tax purposes, therefore, the Company did not make any
contributions to the Plan during 1993 or 1992.
The actuarial present value of projected benefit obligations
for October 1, 1993 and 1992 was determined using a weighted
average discount rate of 6.25% and 7.75%, respectively, and an
assumed rate of increase in compensation of 5.5% and 6.5%,
respectively. The expected long-term rate of return on Plan
assets was 9.5% for 1993 and 1992. The assumptions used in
determining the funded status at October 1 are used in
determining the following year's net periodic pension costs.
Prior to 1993, the cumulative unrecognized net gains or
losses in excess of 10% of the greater of the market-related
value of Plan assets and the projected benefit obligation were
amortized over the average remaining service period of active
participants. Pursuant to the PSC Statement of Policy and Order
Concerning the Accounting and Rate-making Treatment for Pensions
and Postretirement Benefits Other than Pensions (OPEB), issued
September 7, 1993 (OPEB Order), effective January 1, 1993 the
Company changed its accounting to a method of amortizing each
year's experience gain or loss over 10 years. Such change had
the effect of reducing 1993 net periodic pension costs by
approximately $4.4 million.
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The Company also has an Executive Deferred Compensation Plan
(EDC Plan) and a Retirement Benefit Restoration Plan (RBR Plan)
which were established for key executives, under which periodic
payments will be made to such employees upon retirement. The net
periodic costs of the EDC Plan, which was established in 1992,
amounted to approximately $203,000 and $142,000 for 1993 and
1992, respectively. In order to recover the costs of the EDC
Plan, the Company has obtained life insurance policies on the
participants in such Plan, with the Company as beneficiary. The
net periodic pension costs of the RBR Plan, which was established
in 1993, amounted to approximately $44,000 in 1993.
Pursuant to the OPEB Order, deferred accounting has been
granted by the PSC for any variation (above or below) between
actual costs of the Company's pension plans and those costs
allowed for rate-making purposes.
Other Postretirement Benefits:
The Company provides certain health care and life insurance
benefits for retired employees. Substantially all of the
Company's employees may become eligible for these benefits if
they reach retirement age while working for the Company. These
and similar benefits for active employees are provided through
insurance companies whose premiums are based on the benefits paid
during the year. The cost of providing these benefits for active
and retired employees was $7.9 million and $8.2 million for
calendar year 1992 and 1991, respectively. Prior to 1992, the
cost of providing retirees with these benefits was not separable
from the cost of providing those benefits for the active
employees. Beginning in 1992, such costs were separated, and for
the period of April through December 1992, the cost of such
benefits for retirees amounted to $1.4 million, which is included
in the 1992 amount above.
Effective January 1, 1993, the Company adopted SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other
than Pensions" (SFAS 106). This Statement requires that an
employer's obligation for postretirement benefits expected to be
provided to or for an employee be fully accrued by the date that
the employee attains full eligibility for all benefits expected
to be received by that employee, any beneficiaries and covered
dependents, even if the employee is expected to render additional
service beyond that date. Prior to adoption of SFAS 106, the
Company recorded the costs of providing such benefits when paid.
As allowed by SFAS 106, the Company intends to recognize the
unfunded accumulated postretirement benefit obligation
(Transition Obligation) at January 1, 1993 over a 20-year period.
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Net periodic postretirement benefit cost for 1993 includes
the following components:
1993
(Thousands
of Dollars)
Service cost - benefits
attributed to the period.......... $ 1,754
Interest cost on accumulated
postretirement benefit
obligation........................ 4,731
Actual return on postretirement
benefit plan (Plan) assets........ -
Amortization of Transition
Obligation........................ 3,114
Net periodic postretirement
benefit cost...................... $ 9,599
The Plan's funded status reconciled with the Company's
Consolidated Balance Sheet is as follows:
December 31, 1993
(Thousands of Dollars)
Accumulated postretirement
benefit obligation:
Retirees......................... $(34,642)
Fully eligible employees......... (6,705)
Other employees.................. (41,249)
(82,596)
Plan assets at fair value.......... 7,710
Excess of accumulated post-
retirement benefit obligation
over Plan assets.................. (74,886)
Unrecognized net loss.............. 15,776
Prior service cost not yet
recognized in net periodic
postretirement benefit cost....... -
Unrecognized Transition
Obligation........................ 59,149
Prepaid postretirement benefit
recognized in the Consolidated
Balance Sheet..................... $ 39
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The weighted average discount rate used in determining the
accumulated postretirement benefit obligation under the Plan was
6.25%, and the rate of increase in future compensation levels
utilized was 5.5%.
The assumed health care cost trend is 13% in the early years
and trends down to an ultimate rate of 5.5% by the year 2009. A
1% increase in health care cost trend rate assumptions would
produce an increase in the accumulated postretirement benefit
obligation at December 31, 1993 of $10.820 million and an
increase in the aggregate service and interest cost of the net
periodic postretirement benefit cost of $960,000.
The Company has established tax-effective funding vehicles
for such retirement benefits for collective bargaining and
management employees in the form of qualified Voluntary Employee
Beneficiary Association (VEBA) trusts. The Company funded the
VEBA trusts in 1993 with tax-deductible contributions totaling
$7.7 million.
In the OPEB Order, deferred accounting has been granted by
the PSC for any variation (above or below) between actual OPEB
costs and those allowed for rate-making purposes. Pursuant to
the 1993 Rate Order, $4.613 million of deferred electric OPEB
costs and $832,000 of deferred gas OPEB costs were offset against
Mirror CWIP and other deferred gas balances, respectively.
Pursuant to the 1993 Rate Order, an estimated annual level of
OPEB costs is included in the Company's electric and gas rates,
effective November 22, 1993.
Other Postemployment Benefits:
The Company provides certain illness and disability-related
benefits to former or inactive employees, beneficiaries and
covered dependents. The cost of providing these benefits was
$164,000, $216,000 and $245,000 in 1993, 1992 and 1991,
respectively. In November 1992, the Financial Accounting
Standards Board (FASB) issued SFAS No. 112, "Employers'
Accounting for Postemployment Benefits" (SFAS 112), which
establishes accounting and reporting requirements for employers
who provide benefits to former or inactive employees after
employment but before retirement. The Company will adopt SFAS
112 in the first quarter of 1994. The Company estimates that
unfunded accumulated postemployment benefit obligations upon
adoption will be approximately $850,000. The Company expects the
PSC to allow the recording of a regulatory asset related to the
adoption of SFAS 112. Accordingly, the Company believes that the
adoption of SFAS 112 will not have a material impact on the
Company's results of operations.
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NOTE 8 - SALE OF RECEIVABLES AND RESERVE FOR UNCOLLECTIBLE
ACCOUNTS
The Company has a program to sell on a daily basis, without
recourse, its accounts receivable from retail customers. Such
program provides the Company with the ability to receive cash
immediately for such receivables and thereby reduce its working
capital requirements. There were no outstanding receivables sold
as of December 31, 1993 or December 31, 1992.
The average daily amount of accounts receivable sold was
$700,000 in 1993, $4.3 million in 1992 and $8.3 million in 1991.
The costs associated with the sale of receivables are charged to
operating expense and amounted to $55,000 in 1993, $200,000 in
1992 and $600,000 in 1991.
The Company had a reserve balance for uncollectible accounts
receivable of $2.0 million at December 31, 1993 and $1.5 million
at December 31, 1992.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Construction Program:
Reference is made to "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for information
regarding the Company's construction program for the five-year
period 1994-1998.
Roseton Plant:
The Company currently has a 35% undivided interest in the
ownership and output of the 1,200 MW Roseton Plant. The Company
is acting as agent for the cotenant owners with respect to
operation of the Roseton Plant. Generally, the owners share the
costs and expenses of the operation of the Roseton Plant in
accordance with their respective ownership interests. The
Company's share of direct operating expense for the Roseton Plant
is included in the appropriate expense classification in the
accompanying Consolidated Statement of Income.
The Company, under a 1968 Agreement (Basic Agreement), has
the option to purchase the interests of Niagara Mohawk (25%) and
of Consolidated Edison Company of New York, Inc. (Con Edison)
(40%) in the Roseton Plant in December 2004, exercise of which
option is subject to the approval of the PSC. However, in 1987,
in order to make provision for anticipated requirements for
additional generating capacity commencing in the mid-1990s, the
Company and Niagara Mohawk entered into an agreement (Amendment)
revising the Basic Agreement option which the Company has to buy
Niagara Mohawk's interest in the Roseton Plant. The Company's
option to buy Con Edison's interest in the Roseton Plant is not
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affected by the Amendment. The Amendment is subject to the
approval of the PSC, and in the event such approval is not
obtained, the Amendment is cancelled and the parties return to
their same positions under the Basic Agreement.
Pursuant to the Amendment, Niagara Mohawk will sell to the
Company a 2.5% interest in the Roseton Plant on December 31, 1994
and on each succeeding December 31, through and including
December 31, 2003, which will be all of Niagara Mohawk's interest
in the Roseton Plant. In exchange, Niagara Mohawk will have the
option to repurchase from the Company up to a 25% interest in the
Roseton Plant in December 2004. The prices for the purchases
will be based on the depreciated book cost of the Roseton Plant,
assuming straight-line depreciation to provide for a fully
depreciated facility as of December 31, 2009. Pursuant to the
Amendment, the Company also was granted the option to repurchase
Niagara Mohawk's interest in that Plant when that Plant reaches
the end of its assumed physical life as agreed upon by the
parties.
By joint petition filed with the PSC in February 1988, the
Company and Niagara Mohawk requested the PSC to approve the
transfers of interests in the Roseton Plant contemplated by the
Amendment. In July 1988, the PSC issued an order establishing a
proceeding to consider such joint petition. Among the issues
identified by the PSC for consideration in such proceeding are:
(1) the relationship to such transfers of the process for bidding
for additional capacity, set forth in a June 1988 PSC order
applicable to the major New York State electric utilities, (2)
the potential for demand side management as an alternative to the
transfers contemplated by the Amendment, and (3) certain
technical, accounting and forecasting issues regarding the
information and studies submitted by the Company and Niagara
Mohawk in support of the joint petition.
In May 1989, the Company and the PSC Staff reached a
Stipulation Agreement indicating that, giving consideration to
expected demand side management activities, the proposed
transfers of interest in the Roseton Plant were one alternative
which would meet the Company's future needs for power. The
Company issued a Request for Proposals (RFP) for alternative
power supply arrangements approximating the capacity reflected in
the proposed transfers of interest in the Roseton Plant, so as to
test the reasonableness of such proposed transfers from Niagara
Mohawk. In September 1992, the Company concluded that it was
neither in its interest nor in its customers' interest for it to
accept any of the third party bids for additional long-term
generating capacity submitted under such RFP. The Company
continues to evaluate its current and expected future needs for
the Amendment and, if warranted by these studies, the Company
intends to test the commercial reasonableness of the Amendment
through a new RFP solicitation. The Company cannot predict what
action the PSC may ultimately take in connection with the joint
petition for the approval of such transfers under the Amendment.
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Nuclear Liability and Insurance:
The Price-Anderson Act is a federal law which limits the
public liability which can be imposed with respect to a nuclear
incident at a licensed nuclear electric generating facility.
Such Act also provides for assessment of owners of all licensed
nuclear units in the United States for losses in excess of
certain limits due to a nuclear incident at any such licensed
unit. Under the provisions of the Price-Anderson Act, the
Company's potential assessment (based on its 9% ownership
interest in the Nine Mile 2 Plant and assuming that the other
Nine Mile 2 Plant cotenants were to contribute their
proportionate shares of the potential assessments) would be $5.67
million (subject to adjustment for inflation) and the Company
could be assessed $283,500 (subject to adjustment for inflation)
in respect to an additional surcharge, but would be limited to a
maximum assessment of $900,000 in any year with respect to any
nuclear incident. The public liability insurance coverage of
$200 million required under the Price-Anderson Act for the Nine
Mile 2 Plant is provided through Niagara Mohawk.
The Company also carries insurance to cover the additional
costs of replacement power (under a Business Interruption and/or
Extra Expense Insurance Policy) incurred by the Company in the
event of a prolonged accidental outage of the Nine Mile 2 Plant.
This insurance arrangement provides for payments of up to
$233,000 per week if the Nine Mile 2 Plant experiences a
continuous accidental outage which extends beyond 21 weeks. Such
payments will continue for 52 weeks after expiration of the 21-
week deductible period, and thereafter the insurer shall pay 67%
of the weekly indemnity for a second 52-week period and 67% for a
third 52-week period. Subject to certain limitations, the
Company may request prepayment, in a lump sum amount, of the
insurance payments which would otherwise be paid to it in respect
of said third 52-week period, calculated on a net present value
basis.
The Company is insured as to its respective interest in the
Nine Mile 2 Plant under property damage insurance provided
through Niagara Mohawk. The insurance coverage provides $500
million of primary property damage coverage for Units 1 and 2 of
the Nine Mile Point Nuclear Station and $2.125 billion of excess
property damage coverage for the Nine Mile 2 Plant. Such
insurance covers decontamination costs, debris removal and repair
and/or replacement of property.
The Company intends to maintain, or cause to be maintained,
insurance against nuclear risks at the Nine Mile 2 Plant,
provided such coverage can be obtained at an acceptable cost.
Natural Gas Supply:
The Company presently has in place five firm contracts
(Contracts) for the supply of an aggregate of 10,222,342 Mcf. of
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natural gas, all of which are with third-party gas suppliers
(Suppliers). Under the Contracts, the Suppliers deliver the gas
to interstate pipeline companies (Pipelines) and the Pipelines
deliver the gas to the Company's gas transmission system under
separate firm transportation contracts which the Company has in
place with such Pipelines. In addition, the Company has
interruptible transportation agreements with the Pipelines. With
the exception of 19,940 Mcf. per day of gas purchased from
Canadian sources under contracts which expire in January 2012, or
approximately 20% of total gas purchases, all of the above gas
supply contracts will terminate in 1994 after the 1993-1994
winter heating season. All such expiring gas supply contracts
will be replaced before the next winter heating season with
competitively bid contracts with third-party gas suppliers.
The Company has in aggregate, gas storage capability of
39,604 Mcf. per day, under long-term contracts. The Company also
has a contract for the supply of liquefied natural gas which will
remain in effect through September 30, 1995 and will continue
from year-to-year thereafter. All pipeline transportation and
storage contracts and associated tariffs are approved by FERC.
In addition to the above gas supply, transportation, storage
and liquefied natural gas supply contracts, the Company has in
place an interim contract for the supply of up to 100,000 Mcf.
per day of gas during April through October of each year for use
as boiler gas at the Roseton Plant. This interim contract
expires on April 30, 1994. The Company expects to replace the
interim contract with a long-term contract which will expire in
October 2006.
In April 1992, FERC issued its final rule (Order 636)
regarding the unbundling of natural gas supply services from
transportation and storage services. These changes enable the
Company to arrange for its gas supply directly with producers,
gas marketers or pipelines, at its discretion, as well as arrange
for transportation and gas storage services. In Order 636, FERC
stated that all prudently-incurred transition costs may be
recovered by the pipelines from customers. There are four
elements of these transition costs: (1) unrecovered deferred
purchase gas costs, (2) gas supply realignment costs, (3)
stranded facilities costs, and (4) new facilities costs.
The Company has been billed $560,000 of transition costs
through December 31, 1993 by the pipelines. Transition costs are
being recovered through the Gas Cost Adjustment Clause at a level
equal to an annual amount of $1.4 million. The aggregate amount
that the Company will be billed will depend on the outcome of
many FERC proceedings, the outcome of which the Company is not
able to predict. Depending on the outcome of such proceedings,
the aggregate amount of such transition costs could range between
$3 million and $5 million over the next several years. The
Company expects to recover all such costs through the Gas Cost
Adjustment Clause.
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Take-or-Pay Gas Costs:
In prior years, many interstate gas pipeline companies had
entered into contracts with gas producers which required the
pipeline companies to pay for a minimum amount of gas whether or
not the gas is actually taken from the producer (take-or-pay
costs). Pursuant to the FERC authorization, the Company's gas
suppliers have included certain amounts of their take-or-pay
costs in the rates charged to the Company.
The PSC in October 1988 commenced a proceeding to determine,
among other things, the recoverability and allocation in gas
rates of New York State distribution companies of contract take-
or-pay costs charged them by pipeline suppliers. In connection
with such proceeding, the PSC has issued several orders which
have directed, among other things, that 65% of take-or-pay costs
being incurred by the Company may be recovered through current
rates, subject to refund. Charges not subject to such
conditional recovery are deferred with interest for subsequent
consideration by the PSC. The amounts of the deferred charges
not subject to conditional recovery at December 31, 1993 and 1992
were $2.483 million and $2.208 million, respectively.
In the PSC proceeding, the Company has contended that there
is no basis on which the responsibility for its pipeline
suppliers' take-or-pay liability can be attributed to it. In
addition, it is the Company's position that the PSC lacks any
authority to deny it recovery of costs included in the FERC
approved gas rates and would intend to oppose any attempt by the
PSC to require it to absorb any take-or-pay or contract
reformation costs which are included in its pipeline suppliers'
FERC approved rates. The Company is unable at this time to
estimate the amount of take-or-pay costs which may ultimately be
included in its pipeline suppliers' charges to it or to predict
what action the PSC might take to require the Company to absorb
any portion of such costs. The final amount of such costs will
depend on the FERC proceedings, the PSC proceeding and certain
court litigation, the outcome of which the Company is not able to
predict. Depending on the outcome of such proceedings and
litigation, the final amount of such take-or-pay costs could be
up to $6 million, which would have a material adverse effect on
the Company's future earnings if the PSC were to require the
Company to absorb a substantial portion thereof.
Under similar circumstances, the PSC has recently approved
certain take-or-pay cost settlements with other utilities which
granted total recovery of the amounts reflected on their balance
sheet. If the cost settlements achieved by other utilities were
applied to the Company, this matter would not have a material
adverse effect on the Company's financial position. The Company
is currently discussing a settlement with the parties to the PSC
proceeding.
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Environmental Matters:
General: On an ongoing basis, the Company assesses
environmental issues which could impact the Company and its
ratepayers.
The Company is a party to several administrative proceedings
(which are in their early stages) involving the effect on the
environment of the operation and maintenance of facilities for
the generation, transmission and distribution of electricity and
the manufacture, transmission and distribution of natural gas.
These proceedings include, but are not limited to, administrative
proceedings before the New York State Department of Environmental
Conservation related to the processing of permit application
proceedings for the Company's generating stations under the State
Pollution Discharge Elimination System and proceedings involving
evaluation of whether properties owned by the Company, or
formerly owned by the Company, may contain wastes representing a
threat to the environment. At this stage of such proceedings,
the Company can make no determination as to the outcome of such
proceedings or the impact, if any, on the Company's financial
position.
Clean Air Act Amendments: The Clean Air Act Amendments of
1990 (CAA Amendments) added several new programs which address
attainment and maintenance of national ambient air quality
standards. This includes control of emissions from fossil-fueled
electric power plants that affect "acid rain" and ozone.
The "acid rain" emissions reduction requirements do not
affect the Company's generating plants until January 1, 2000;
however, the Company must comply with the monitoring provisions
program as of January 1, 1995 and install continuous emission
monitors. The Company's emissions of nitrogen oxides are subject
to additional controls by May 31, 1995 under Title I of the CAA
Amendments.
The Company estimates that the installation of continuous
emissions monitors and nitrogen oxides emissions controls will
cost approximately $14 million. The Company expects that it will
have adequate financial resources to comply with the requirements
of the CAA Amendments.
Asbestos Litigation:
Since 1987, the Company, along with many other parties, has
been joined as a defendant or third-party defendant in
approximately 400 asbestos lawsuits commenced in New York State
and federal courts. The plaintiffs in these lawsuits have each
sought millions of dollars in compensatory and punitive damages
from all defendants. The cases were brought by or on behalf of
individuals who have allegedly suffered injury from exposure to
asbestos, including exposure which allegedly occurred at Company
facilities.
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The Company has given notice of the cases to its insurance
carriers, but such carriers have neither denied nor conceded
coverage of these claims.
Approximately 150 of these cases have been dismissed with
respect to the Company, and the Company has agreed to settle
approximately 100 of the cases for amounts which are not material
in relation to the consolidated financial statements.
Consequently, on January 1, 1994, the Company was a defendant in
approximately 150 asbestos cases. Although the Company is
presently unable to assess the validity of the remaining asbestos
lawsuits, and accordingly cannot determine the ultimate liability
relating to these cases, based on information known to the
Company at this time, including its experience in settling
asbestos cases and in obtaining dismissals of asbestos cases, the
Company believes that the cost to be incurred in connection with
the remaining lawsuits will not have a material adverse effect on
the Company's financial position.
Tax Matters:
Assessments: The IRS has closed all of the Company's
federal income tax returns through 1986 and has completed the
field work for the examination of the Company's federal income
tax returns for 1987 and 1988. The IRS has proposed adjustments
which have the potential to increase the Company's tax liability
for 1987 and 1988 by approximately $16 million plus interest.
Included in the proposed adjustments are significant issues
related to Nine Mile 2 Plant, primarily its tax in-service date.
The Company will defend its position on Nine Mile 2 Plant and
other significant issues raised by the IRS. To the extent the
IRS is able to sustain their positions on Nine Mile 2 Plant, the
Company will be required to absorb a portion of the resulting tax
liability. Although the Company is unable to assess its ultimate
liability in this matter, the Company believes it would be able
to recover a significant portion of any additional liability
through rates. Accordingly, the Company expects that the
ultimate resolution of this matter will not have a material
adverse effect on the Company's financial position.
Settlement with IRS under Actuarial Resolutions Program: In
1990, the IRS challenged the deductibility of an aggregate of
$7.501 million of contributions made to the Company's Retirement
Income Plan (Plan) during the years 1986 through and including
1989. In November 1992, the Company settled this matter under
the IRS's Actuarial Resolutions Program. Such Settlement
disallowed $7.501 million of the Company's claimed deductions for
taxable years 1986 through 1989 and waived all related
"penalties." In accordance with such Settlement, the Company
withdrew the $7.501 million of contributions in question from the
Plan in December 1992. The resultant increased tax due to the
loss of such deductions was $1.903 million and interest on such
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amount was $1.160 million. The Company requested authorization
from the PSC for deferral accounting on such interest. Pursuant
to the 1993 Rate Order, the Company was authorized to offset the
deferred interest at November 30, 1993 against Mirror CWIP and
other deferred balances. In addition, the withdrawn
contribution, net of tax effects, will benefit the Company's
customers pursuant to such Order as follows: (1) $6.526 million
will be refunded to the Company's electric customers over 36
months beginning in December 1993, and (2) $975,000 was offset
against other deferred gas balances in December 1993.
Rental Expenses and Lease Commitments:
The Company has lease commitments expiring at various dates,
principally for real property and data processing equipment.
None of these leases involves any major facilities or any
material noncancelable rental commitments. Although certain
items meet the criteria for recording as capital leases, such
recognition would have no significant effect on the consolidated
financial statements. Therefore, all items are treated as
operating leases.
Other Matters:
The Company is involved in various other legal and
administrative proceedings incidental to its business which are
in various stages. While these matters collectively involve
substantial amounts, it is the opinion of management that their
ultimate resolution will not have a material adverse effect on
the Company's financial position.
Included in such proceedings is a PSC investigation of a
November 1992 explosion in a dwelling in Catskill, New York
involving personal injuries, including the death of an occupant,
and property damage. The PSC, by Order issued and effective
January 7, 1994, approved an Agreement which provides for a
program for evaluating and replacing cast iron and unprotected
steel pipeline facilities, and for an investment in four
permanent employee training centers. The Company's shareholders
will contribute $500,000 in 1994 toward the costs of such
training centers and replacement program and $500,000 annually in
1995 and 1996 toward the costs of such replacement program. In
1997, the Company's shareholders will contribute up to $500,000
toward the cost of such replacement program depending on the
Company's completion of certain tasks by specified dates.
The National Transportation Safety Board conducted an
investigation of the Catskill incident and recommended that the
Company amend its procedure to ensure continuity of supervisory
responsibility for the timely and effective verification of the
safety integrity of exposed cast iron pipe and to implement a
program to identify and replace in a timely manner cast iron
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piping systems that may threaten public safety. By letter dated
October 22, 1993, the Company indicated that it had implemented
these recommendations.
Although the Company is unable to assess its ultimate
liability in this matter, the Company believes it has adequate
insurance coverage and, therefore, the final outcome of this
matter is not expected to have a material adverse impact on the
Company's financial position.
NOTE 10 - DEPARTMENTAL INFORMATION
The Company is engaged in the electric and natural gas
utility businesses and serves the Mid-Hudson Valley region of New
York State. Total revenues and operating income before income
taxes (expressed as percentages), derived from electric and gas
operations for each of the last three years, were as follows:
Percent of Percent of Operating
Total Revenues Income Before Income Taxes
Electric Gas Electric Gas
1993 82% 18% 89% 11%
1992 82% 18% 87% 13%
1991 86% 14% 93% 7%
For the year ended December 31, 1993, the Company served an
average of 259,650 electric and 59,218 gas customers. Of the
Company's total electric revenues during that period,
approximately 42% was derived from residential customers, 30%
from commercial customers, 22% from industrial customers and 6%
from other utilities and miscellaneous sources. Of the Company's
total gas revenues during that period, approximately 45% was
derived from residential customers, 30% from commercial
customers, 4% from industrial customers, 14% from interruptible
customers and 7% from miscellaneous sources (including revenues
from transportation of customer-owned gas).
The Company's largest customer is International Business
Machines Corporation (IBM), which accounted for approximately 14%
of the Company's total electric revenues and approximately 8% of
its total gas revenues for the year ended December 31, 1993.
Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for further
information regarding IBM.
Certain additional information regarding these segments is
set forth in the following table. General corporate expenses,
property common to both segments and depreciation of such common
property have been allocated to the segments in accordance with
practice established for regulatory purposes.
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Electric
1993 1992 1991
(Thousands of Dollars)
Operating Revenues................ $422,925 $427,436 $424,121
Operating Expenses:
Fuel and purchased electricity... 122,250 132,805 140,488
Depreciation and amortization.... 35,625 36,074 34,563
Other, excluding income tax...... 173,167 172,301 157,883
Total......................... 331,042 341,180 332,934
Operating Income before Income Tax 91,883 86,256 91,187
Federal income tax, including
deferred income tax - net........ 25,642 21,368 20,886
Operating Income.................. $ 66,241 $ 64,888 $ 70,301
Construction Expenditures......... $ 43,097 $ 50,159 $ 52,819
Identifiable Assets at December 31*
Net utility plant................ $777,044 $779,291 $761,984
Construction work in progress.... 35,424 30,282 36,408
Total utility plant............ 812,468 809,573 798,392
Materials and supplies........... 28,063 31,496 30,992
Total.......................... $840,531 $841,069 $829,384
Gas
1993 1992 1991
(Thousands of Dollars)
Operating Revenues................ $ 94,448 $ 96,121 $ 70,615
Operating Expenses:
Purchased natural gas............ 53,900 55,066 39,867
Depreciation and amortization.... 4,057 3,522 2,667
Other, excluding income tax...... 25,210 24,180 21,159
Total......................... 83,167 82,768 63,693
Operating Income before Income Tax 11,281 13,353 6,922
Federal income tax, including
deferred income tax - net........ 2,961 3,743 1,727
Operating Income.................. $ 8,320 $ 9,610 $ 5,195
Construction Expenditures......... $ 10,940 $ 11,562 $ 18,088
Identifiable Assets at December 31*
Net utility plant................ $ 95,074 $ 90,352 $ 71,129
Construction work in progress.... 7,317 4,648 15,876
Total utility plant............ 102,391 95,000 87,005
Materials and supplies........... 7,354 6,544 6,450
Total.......................... $109,745 $101,544 $ 93,455
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*Identifiable assets not included herein are considered to be
corporate assets and have not been allocated between the
electric and gas segments.
NOTE 11 - FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which
it is practicable to estimate that value:
Cash, Temporary Cash Investments and Special Deposits:
The carrying amount approximates fair value because of the
short maturity of those instruments.
Cumulative Preferred Stock Subject to Mandatory Redemption:
The fair value is estimated based on the quoted market price
of similar instruments.
Long-Term Debt:
The fair value is estimated based on the quoted market
prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities
and quality.
Notes Payable:
The carrying amount approximates fair value because of the
short maturity of those instruments.
The estimated fair values of the Company's financial instruments
are as follows:
December 31, 1993
Carrying Fair
Amount Value
(Thousands of Dollars)
Cash, temporary cash investments
and special deposits................ $ 27,630 $ 27,630
Cumulative preferred stock subject
to mandatory redemption (including
current maturities)................. (35,000) (35,575)
Long-term debt (including
current maturities)................. (442,829) (485,360)
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December 31, 1992
Carrying Fair
Amount Value
(Thousands of Dollars)
Cash, temporary cash investments
and special deposits................ $ 12,467 $ 12,467
Cumulative preferred stock subject
to mandatory redemption (including
current maturities)................. (20,000) (20,200)
Long-term debt (including
current maturities)................. (442,539) (465,368)
Notes payable......................... (15,000) (15,000)
In May 1993, the FASB issued SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115),
which establishes accounting and reporting requirements for
investments in equity securities that have readily determinable
fair values and for all investments in debt securities. Under
SFAS 115, which the Company will adopt in the first quarter of
1994, an investment that the Company maintains in an insurance
company would be classified as "available-for-sale" and
accordingly, an unrealized net holding gain or loss would be
recorded as an adjustment to common stock equity. Under SFAS
115, common stock equity would be adjusted to reflect periodic
changes in the market value of this investment. Realized gains
or losses would be recorded upon sale or other disposition of
this investment. At December 31, 1993, the market value of this
investment exceeded its carrying amount by approximately $1.5
million. The Company believes that the adoption of SFAS 115 will
not have a material impact on the Company's results of
operations.
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<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial data for each quarterly period within 1992 and 1993 are presented
below:
<CAPTION>
Earnings Per
Income Average
Available Share of
for Common
Operating Operating Common Stock
Revenues Income Stock Outstanding
(Thousands of Dollars) (Dollars)
<S> <C> <C> <C> <C>
Quarter Ended:
March 31, 1992...... $146,587 $23,540 $14,601 $ .92
June 30, 1992....... 126,171 17,058 8,699 .55
September 30, 1992.. 118,715 17,046 10,087 .63
December 31, 1992... 132,084 16,854 8,756 .55
March 31, 1993...... $153,372 $26,711 $18,715 $1.15
June 30, 1993....... 117,744 17,254 9,885 .59
September 30, 1993.. 120,076 17,068 9,264 .55
December 31, 1993... 126,182 13,528 6,965 .41
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