<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, 1994
or
[ ] 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, 1995 was
$464,848,759, 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, 1995, was 17,296,698.
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, 1994, 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 24, 1995, used in connection with its
Annual Meeting of Shareholders to be held on April
4, 1995, 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 2
Construction Program and Financing 3
Rates 4
Generally 4
Rate Proceedings - Electric and Gas 4
Cost Adjustment Clauses 4
Take-or-Pay Gas Liability 5
Fuel Supply and Cost 5
Residual Oil 6
Coal 6
Natural Gas 6
Nuclear 7
Research and Development 7
Environmental Quality 7
Air 8
Water 10
Toxic Substances and Hazardous Wastes 10
Other 12
Regulation 12
Generally 12
Energy Policy Act of 1992 13
Alternative Electric Power Generation 13
Energy Efficiency Programs 14
(i)
<PAGE>
TABLE OF CONTENTS (Cont'd)
Page
Item 1 BUSINESS (Cont'd) 15
Other Matters 15
Competition 15
Municipal Utilities 15
PASNY Economic
Development Power 15
Company Electric Economic
Development Rate 16
Marketing 17
Labor Relations 17
EMF 17
Affiliates 18
Executive Officers of the Company 19
Item 2 PROPERTIES 21
Electric 21
General 21
Load and Capacity 23
Roseton Plant 25
Nine Mile 2 Plant 26
General 26
Operational Matters 26
Nuclear Plant
Decommissioning Costs 26
Radioactive Waste 27
Refueling Outage 27
Gas 27
General 27
Current Gas Supply 27
Sufficiency of Supply and
Future Gas Supply 27
Other 28
Other Matters 28
(ii)
<PAGE>
TABLE OF CONTENTS (Cont'd)
Page
Item 3 LEGAL PROCEEDINGS 30
Asbestos Litigation 30
Environmental Litigation 31
Environmental Claims - Newburgh
Manufactured Gas Site 32
IBM Litigation 35
Catskill Incident 35
Wappingers Falls Incident 37
Income Tax Assessments 39
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 40
PART II
Item 5 MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 40
Item 6 SELECTED FINANCIAL DATA 41
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 41
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 41
(a) Financial Statements 41
(b) Supplementary Financial Information 42
(c) Other Financial Statements and Schedules 42
Item 9 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 42
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY 42
Item 11 EXECUTIVE COMPENSATION 43
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 43
Item 13 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 43
(iii)
<PAGE>
TABLE OF CONTENTS (Cont'd)
Page
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 43
(a) Documents filed as part of this Report: 43
1. Financial Statements 43
2. Financial Statement Schedule 44
3. Exhibits 44
(b) Reports on Form 8-K 45
(c) Exhibits Required by Item 601 of
Regulation S-K 45
(d) Financial Statement Schedule required
by Regulation S-X which is excluded
from the Company's Annual Report to
Shareholders for the fiscal year ended
December 31, 1994 45
SIGNATURES 46
INDEX TO FINANCIAL STATEMENTS F-1
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE F-2
CONSENT OF INDEPENDENT ACCOUNTANTS F-2
FINANCIAL STATEMENT SCHEDULE FOR THE YEARS 1994, 1993 AND 1992:
SCHEDULE II - RESERVES F-3 - F-5
EXHIBIT INDEX E-1 - E-32
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 651,000.
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, 1994 was 1,327.
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
1994 80% 20% 89% 11%
1993 82% 18% 89% 11%
1992 82% 18% 87% 13%
Consumption of electricity in New York State has
stabilized and, with an increase in supply, there is an excess of
electric generating capacity in the State. And, as the utility
industry moves toward competition, large customers may have
increased opportunities to purchase electricity and natural gas
from sources other than the local utility. In some instances,
- 1 -
<PAGE>
smaller customers may have the same options as larger customers.
(See below subcaption "Other Matters - Competition").
Recent declines in the prices of electric utility
common stock, including that of the Company, have been attributed
to the increase in interest rates during 1994 and the financial
community's concern about the effects of increasing competitive
pressures on the electric utility industry. In addition, the
common stock prices of electric utilities in New York State,
including the Company's, have been affected by the financial
community's concern about the regulatory environment in New York
State due to the adverse testimony filed in 1994 by the Staff of
the New York State Public Service Commission ("PSC") in a number
of pending rate cases of other New York utilities.
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 9 to the
Company's Consolidated Financial Statements for the fiscal year
ended December 31, 1994 (which Statements, including the Notes
thereto, are hereinafter called "Company's 1994 Financial
Statements"), appearing on pages 76 through 78 of the Company's
1994 Financial Statements (the Company's 1994 Financial
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 9 is incorporated herein by reference.
Electric Sales to IBM: The Company's largest customer
is International Business Machines Corporation ("IBM"), which
accounted for approximately 12% of the Company's total electric
revenues for the year ended December 31, 1994. The well-
publicized downsizing of IBM has resulted in a reduction of IBM
employment and the closing of certain IBM facilities in the
Company's franchise territory. The total number employed by IBM
in the Company's franchise territory at December 31, 1994 was
approximately 10,500, as compared to the peak level of IBM
employment in excess of 30,000 in 1985. Published reports in
January 1995, however, indicate that IBM believes that the "bulk
of layoffs is behind them." This downsizing of IBM resulted in a
decline of electric sales to IBM by 20% in 1993 and a further 16%
decline in 1994. The Company cannot assess at this time whether
sales to IBM will continue to decline, or the effect of further
IBM downsizing, if any, on the Company's future results of
operations.
- 2 -
<PAGE>
Construction Program and Financing
The Company is engaged in a construction program which
is presently estimated to involve total cash expenditures during
the period 1995 through 1999 of approximately $296 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 available, mandatory and optional redemption of long-term
securities, and working capital requirements for the five-year
period 1995-1999, 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 and short-term borrowing arrangements, see
Notes 4 through 6 to the Company's 1994 Financial Statements, and
the subcaptions "Capital Structure," "Financing Program" and
"Short-term Debt," appearing in "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
appearing, in the case of said Notes, on pages 55 through 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 subcaption "Financing Program"
incorporated herein by reference.
The Company has authority from the 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.
- 3 -
<PAGE>
Rates
Generally: The electric and gas rates of the Company
applicable to service supplied to retail customers within the
State of New York 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 1994, the average price of electricity was 8.46
cents per kWh which, despite an overall electric rate increase of
1.2% effective December 21, 1993, is unchanged from 1993's
average price per kWh.
Rate Proceedings - Electric and Gas: For information
with respect to the Company's increase in 1993 in its base rates
for electric service, see subcaption "Rate Proceedings" in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," on pages 9 and 10 of Exhibit 13 hereto,
which subcaption is 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. The PSC Staff in two
pending electric rate cases of other New York utilities has
proposed to eliminate their electric fuel cost adjustment
clauses. While the Company can make no prediction as to whether
the PSC would eventually eliminate the electric fuel cost
adjustment clause of the Company or any other electric utility,
elimination of such clause could adversely affect the Company by
increasing the risk that fuel cost expenditures made to provide
electric service would not be recovered in rates.
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 1994
Financial Statements appearing on page 47 of Exhibit 13 hereto,
which subcaptions are incorporated herein by reference.
- 4 -
<PAGE>
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 8 to the Company's 1994 Financial
Statements appearing on pages 70 and 71 of Exhibit 13 hereto,
which subcaption is incorporated herein by reference.
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 (referred to in Item 2
below under the subcaption "Electric - General"). The Roseton
Plant is fully equipped to burn both residual oil and natural
gas, the two units of which have been operated on an alternating
basis for six months at a time since August 1, 1994. During
1994, Units 1 and 2 of the Danskammer Plant, which are equipped
to burn residual oil or natural gas, were placed in reserved
status and will not be operated unless the demand for power is
high or purchasing power is uneconomical. 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, 1994, the sources
and related costs of electric generation for the Company were as
follows:
Aggregate
Sources of Percentage of Costs in 1994
Generation Energy Generated ($000)
Oil 10.4% $14,687
Coal 36.0 37,108
Gas 7.7 10,307
Hydroelectric 2.3 184
Nuclear 13.7 3,941
Purchased Power 29.9 43,951
100.0%
======
Fuel Handling Costs 1,860
Deferred Fuel Cost (54)
$111,984
========
- 5 -
<PAGE>
Residual Oil: The Company has available, through
ownership or contractual arrangements with Amerada Hess
Corporation ("Hess"), oil storage facilities for the Danskammer
Plant having a capacity of 172,957 barrels at December 31, 1994.
The Roseton Plant has available, through ownership or contractual
arrangements between 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, 1994, there were
826,026 barrels of fuel oil in inventory for use in these Plants,
which amount represents an average daily supply of 40 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. During 1994, the Roseton
Plant fuel oil requirements were supplied under a single
contract, the price of which was determined on the basis of
published market indices in effect at the time of delivery, and
such contract for the Roseton Plant permits the Company to make
certain spot purchases from others. The term of such contract
expires on August 31, 1995 and thereafter is automatically
extended on a year to year basis, subject to termination by
either party.
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 costs of purchases under these
contracts are fixed for periods which end on December 31, 1995.
Thereafter, one contract is subject to renegotiation while the
other contract is subject to increases based on a fixed escalator
factor. The Company also purchases a portion of its coal supply
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: The Company has in place an interim
contract for the supply of 100,000 Mcf. per day of natural gas
during April through October of each year for use as boiler gas
at the Roseton Plant. Natural gas for the Danskammer Plant is
- 6 -
<PAGE>
purchased on the spot market. 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 1994 was 11.4 billion cubic
feet.
Nuclear: See the subcaption "Electric - Nine Mile 2
Plant - Operational Matters - Refueling Outage" 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, 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, net of revenues from
royalties, for electric and gas research and development projects
amounted to $5.0 million in 1992, $4.6 million in 1993 and $3.5
million in 1994. The Company estimates that its 1995
expenditures for research and development will total
approximately $3.9 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:
- 7 -
<PAGE>
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. 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 Danskammer Plant burns fuel oil having a maximum
sulfur content of 1%. 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
in which NAAQS are not currently being attained ("non-attainment
areas"); 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 required the Company to install
- 8 -
<PAGE>
continuous emission monitors on its power plants by January 1,
1995. The Company has complied with this requirement by
installing continuous emission monitoring equipment at a cost of
approximately $1.4 million. The "acid rain" control 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 at an estimated cost
of approximately $8.7 million.
On September 27, 1994, the 12 states (which include the
Northeastern states) and the District of Columbia comprising the
"Ozone Transport Commission" ("OTC")(an entity created pursuant
to the provisions of the CAA Amendments that recommends to the
EPA strategies for air pollution control within the region
covered by the OTC) signed a memorandum of agreement ("MOA")
concerning future, additional nitrogen oxide reductions which the
OTC believes are necessary to achieve the NAAQS for ozone in the
Northeastern United States for nonattainment areas in which the
Company's facilities are located. The MOA-specified reductions
of nitrogen oxide emissions are equivalent to 65% of the
emissions from a 1990 baseline, beginning in 1999. In 2003,
reductions equivalent to 75% of the 1990 baseline may be
required, subject to the assessment of the results of further
research. The establishment of an allowance trading program for
nitrogen oxide, similar to that provided for sulfur dioxide, is
also contemplated in the MOA. The Company's current assessment
of the MOA indicates that the Roseton Plant will be able to meet
the 1999 emissions limits through allowance trading, gas-firing
and operation of its nitrogen oxide RACT controls. Additional
controls may be required at the Danskammer Plant, especially if a
competitive market for the trading of nitrogen oxide allowances
- 9 -
<PAGE>
fails to materialize. Such controls may require the use of
selective, non-catalytic reduction, the cost of which is
estimated to be $5 million.
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.
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
("NPDES") established under the Clean Water Act. 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 SPDES
permits will be renewed in 1996, but can make no estimate as to
the conditions, if any, to which such SPDES 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 (the "Registry") six
locations at which gas manufacturing plants owned or operated by
- 10 -
<PAGE>
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 five 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 the Registry had been deleted from the 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. For environmental litigation
threatened against the Company with respect to one of such sites
located in Newburgh, New York, see the caption "Environmental
Claims - Newburgh Manufactured Gas Site" in Item 3 below.
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. The Company and NYSDEC
executed in February 1995 a Consent Order providing that the
Company will perform a site assessment following a work plan
included in the Consent Order and that the Company will report
its findings to NYSDEC. The cost of such assessment is estimated
to be approximately $105,000 and is expected to be completed by
March 1, 1996. The Company is presently unable, pending
completion of such site assessment, to predict whether hazardous
wastes are present, whether any further action to remediate the
site will be required, or the costs of any remediation that may
be required.
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
- 11 -
<PAGE>
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. A Consent Agreement was entered into by numerous
parties to settle such action. As part of such Consent
Agreement, the Company agreed to provide coal fly ash to be used
in implementing the Approved Remedial Action Plan contained in
the Consent Agreement which sets forth the methodology for the
remediation of the FICA Landfill, and in return has been given a
full discharge and release by New York State from all past,
present and future claims and penalties relating to the FICA
Landfill site. The Consent Agreement was approved by the United
States District Court for the Southern District of New York on
June 23, 1994.
Other: The Company estimates that expenditures
attributable, in whole or in substantial part, to environmental
considerations totaled $16.6 million in 1994, of which about $9.4
million related to capital projects and $7.2 million were charged
to expense. It is estimated that in 1995 the total of such
expenditures will be approximately $11.7 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 below under Item 3 hereof under the caption
"Environmental Litigation" and except as described above under
the subcaption "Environmental Quality - Toxic Substances and
Hazardous Wastes."
Regulation
Generally: The Company is subject to regulation by the
PSC with respect to, among other things, service rendered
(including the rates charged), 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.
- 12 -
<PAGE>
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 facilities used for the
generation and sale of wholesale electricity to operate without
coming under the regulatory restrictions of PUHCA and to permit
utilities subject to PUHCA to invest in such facilities.
Under the Energy Act, FERC may order electric 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 any 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
- 13 -
<PAGE>
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, 1994, the Company's avoided cost at the 115 KV
transmission level was approximately 3 cents per kWh.
As of December 31, 1994, 19 MW of generation,
qualifying for avoided cost payments by the Company, was
interconnected with the Company's system. 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 the Company's 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, 1994, no significant customer has indicated to
the Company the intention to pursue such alternative.
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 filed with the PSC, on April 11,
1994, its 1994-1996 Energy Efficiency Program which concluded
that the budget and goals of the Company's 1994 Energy Efficiency
Program (previously approved by the PSC in January 1994) were
unsupported and requested a substantial reduction in its demand
side management programs, including those previously approved for
1994.
By Order, issued and effective July 12, 1994, the PSC
rejected the Company's filing, including its downward
modifications of its demand side management plan for 1994, and
ordered the Company to comply with the 1993-94 Energy Efficiency
Program, as approved in January 1994. In such Order, the PSC
instructed the PSC Staff to work with the Office of the PSC
Counsel to develop possible penalty actions against the Company
- 14 -
<PAGE>
or cost disallowances which the PSC may wish to pursue. In
December 1994, the Company and the PSC Staff reached an agreement
concerning the Company's compliance with the PSC's July 12, 1994
Order, which agreement calls for the Company to increase
substantially the energy savings goals of its 1995 Energy
Efficiency Program and further provides that the PSC Staff will
not recommend any cost disallowance or penalty against the
Company as a result of the PSC's July 12, 1994 Order. The
Company's 1995 Energy Efficiency Program was filed with the PSC
in December 1994 and the PSC approved said agreement and such
Program on January 12, 1995. The PSC has not yet issued its
Order in regard to this matter.
The Company has various other programs in effect to
promote energy efficiency by its customers. Such programs have
been successful in reducing energy use by many customers.
Other Matters
Competition: For a discussion with respect to
competition as it generally affects the Company, and with respect
to electric and natural gas service, and the Company's response
to such competition, see caption "Competition" in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," on pages 12 through 14 of Exhibit 13 hereto, which
caption is incorporated herein by reference.
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.
Although the threat of municipalization is not new to
either the Company or to other utilities across the country, the
current and projected excess supply of electricity in the
Northeastern United States and in Canada has significantly
depressed wholesale prices, and could cause such municipalization
efforts to intensify. The Company is not aware of any
municipalization efforts in its franchise area.
PASNY 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
- 15 -
<PAGE>
which normally use a minimum peak electric demand of 400 kW for
purposes of economic development, particularly job creation.
"Economic Development Power" ("EDP") is electric power generated
at the Fitzpatrick Nuclear Generating Station of the Power
Authority of the State of New York ("PASNY") which is available
for such purpose. Should such power be allocated to a customer
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 15, 1995, the Company is not aware of any
of its electric customers having applied for such EDP.
Company Electric Economic Development Rate: During
June, 1994, the Company submitted two proposed tariff amendments
to the PSC as part of the Company's efforts to stimulate economic
growth in its franchise area.
The first such filing was approved by the PSC,
effective October 1, 1994, and provides an economic development
electric rate discount for large industrial customers (which
exhibit new annual electric load of 500 kW or more) taking
substation or transmission service which locate or expand their
business operations within the Company's service territory.
Certain energy efficiency guidelines must also be met by eligible
customers. Qualifying customers would pay lower electric prices
for the increased load, with savings on current rates for ten
years. Discounts of 25% are applicable during the first six
years, followed by a 5% annual reduction in the discount in each
remaining year. This rate is intended to encourage business
expansion or relocation in the Company's service territory.
Customers must apply for the discount by October 1, 1999.
The second such filing was intended to enable the
Company to sell the EDP generated by PASNY to customers in the
Company's service territory who have received an allocation from
the New York State Economic Development Power Allocation Board.
Under the terms of this filing, the Company proposed to purchase
the EDP directly from PASNY and deliver the electricity to EDP
customers. In addition to PASNY's charge of approximately 4
cents per kWh for EDP, the Company proposed to charge 3.5 cents
per kWh to cover the Company's applicable operating expenses. On
November 7, 1994, the Company filed a request to cancel the
proposed EDP tariff, which cancellation was approved by the PSC
on December 13, 1994.
- 16 -
<PAGE>
On June 8, 1994, PASNY announced that the New York
State Economic Development Power Allocation Board had recommended
that 15,300 kW of EDP be allocated for 10 years for the joint
venture composed of Cirrus Logic, Inc. ("Cirrus Logic") and IBM
known as MiCRUS, located at the Hudson Valley Research Park in
the Company's franchise territory. The announcement indicated
that such allocation was an enticement for Cirrus Logic to
undertake a $215 million expansion to produce semi-conductor
wafers at such plant. Cirrus Logic is a California-based company
that provides software and integrated circuits for
communications, graphics, mass storage and multimedia
applications. As a result of the Company's economic development
electric discount rate approved by the PSC, effective October 1,
1994, as described above, MiCRUS elected to take electric service
from the Company under such rate instead of such EDP from PASNY.
MiCRUS began its semi-conductor manufacturing operations on
January 1, 1995.
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, ground source 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.
Labor Relations: The Company has agreements with the
International Brotherhood of Electrical Workers for its 925
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, 1994 and continue through June 30,
1998. The agreements provide for an average general wage
increase of 3.2% in each of the first three years of such
agreements and a 3.5% increase in the fourth year of such
agreements, and certain additional fringe benefits.
EMF: Recently there have been ongoing public
discussions surrounding electromagnetic fields ("EMF") and
harmful health effects allegedly associated with exposure to EMF.
A number of studies have been conducted and are ongoing in an
attempt to ascertain what, if any, relationship exists between
exposures to varying levels of EMF and the development of certain
illnesses, particularly certain types of cancer. It is the
- 17 -
<PAGE>
Company's understanding that the general consensus is that
results of such studies have been inconclusive, and that a causal
link between exposure to EMF and adverse health effects has not
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.
- 18 -
<PAGE>
Executive Officers of the Company
The names of the current officers of the Board of
Directors and the executive officers of the Company, their
positions held and business experience during the past five (5)
years and ages (at December 31, 1994) 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 since April 1990 60
Chairman of the Board
and Chief Executive
Officer; Chairman of
the Executive and
Retirement Committees
Jack Effron, Present position since April 1994; 61
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, 1990 - March 1991
Richard H. Eyman, Present position; retired January 1, 64
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 71
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.
- 19 -
<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 1990 56
President and Chief
Operating Officer
John F. Drain, Present positions since April 1993; 62
Vice President - Vice President - Controller and
Finance and Treasurer, May 1990 - April 1993;
Controller Treasurer, April 1990 - May 1990
Carl E. Meyer, Present position since November 47
Vice President - 1992; Vice President - Engineering
Customer Services and Production, April 1990 -
November 1992
Allan R. Page, Present position since November 47
Vice President - 1992; Vice President - Customer
Corporate Services Services, April 1990 - November
1992
Joseph J. DeVirgilio, Present position since May 1990; 43
Jr., Vice President - Assistant Vice President - Human
Human Resources and Resources, April 1990 - May 1990
Administration
Ronald P. Brand, Present position since November 56
Vice President - 1992; Assistant Vice President -
Engineering and Engineering, April 1990 - November
Environmental Affairs 1992
Benon Budziak, Present position since February 62
Vice President - 1994; Assistant Vice President -
Fossil Production Fossil Production, November 1992 -
February 1994; Manager - Fossil
Production, April 1990 - November
1992
Ellen Ahearn, Present position since April 1994; 40
Secretary Assistant Secretary and Internal
Auditing Manager, August 1992 -
April 1994; Internal Auditing Manager
April 1990 - August 1992
- 20 -
<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 - (Continued)
Steven V. Lant, Present positions since April 1993; 37
Treasurer and Assistant Treasurer and Assistant
Assistant Secretary Secretary, December 1991 - April
1993; Assistant Treasurer, November
1990 - November 1991; Manager, Costs,
Rates and Forecasts, April 1990 -
October 1990
Arthur R. Upright, Present position since February 51
Assistant Vice 1994; Manager Cost and Rate
President - Cost and Financial Planning, June 1990 -
and Rate and February 1994; Manager of Purchasing
Financial Planning and Fuels, April 1990 - June 1990;
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, 1994, the net output of each
plant for the year ended December 31, 1994, and the year each
plant was placed in service or rehabilitated are as set forth
below:
- 21 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Electric Net Capability 1994 Unit
Generating Year Placed (MW)* Net Output
Plant Type of Fuel In Service Summer Winter (MWh)
Danskammer Residual Oil, Natural 1951-1967 480.4 497.8 2,060,604
Plant** Gas and Coal
Roseton Plant Residual Oil 1974 420.3 425.3 876,191
(35% share)** and Natural Gas
Neversink Water 1953 23.0 23.0 45,689
Hydro Station
Dashville Water 1920 3.8 3.8 12,122
Hydro Station
Sturgeon Pool Water 1924 14.8 14.8 59,931
Hydro Station
High Falls Water 1986 3.0 2.7 6,037
Hydro Station
Coxsackie Kerosene or 1969 21.6 24.0 1,540
Gas Turbine Natural Gas
So. Cairo Kerosene 1970 19.8 24.0 427
Gas Turbine
Nine Mile 2 Nuclear 1988 93.0 95.0 749,318
Plant (9% share) ------- ------- ---------
Total 1,079.7 1,110.4 3,881,859
* Reflects Company ownership of generation resources and, therefore, does not include
firm purchases or sales.
** Units 1 and 2 of the Danskammer Plant were placed in reserve status on January 1, 1994
and were operated for 395 hours and produced 13,845 MWh during 1994. Since August 1,
1994 the Roseton Plant units have been scheduled to operate alternately on a six-month
cycle.
</TABLE> - 22 -
<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. The Company exercised an option to cancel the contract
effective April 30, 1994. During 1994, the Company purchased
345,650 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 8 MW.
The Company has elected to terminate this contract effective
April 30, 1995.
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 86 substations having an aggregate
transformer capacity of 4.3 million KVA. The transmission system
consists of 583 pole miles of line and the distribution system of
7,241 pole miles of overhead lines and 795 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,
1994, occurred on July 7, 1994 and amounted to 892 MW. The
Company's maximum one-hour demand within its own territory, for
that part of the 1994-1995 winter capability period through
February 7, 1995, occurred on February 6, 1995 and amounted to
800 MW.
Based on current projections of peak one-hour demands
for the three-year period comprising the 1995 summer capability
period through the winter capability period of 1997-1998, the
Company estimates that it will have capacity available to satisfy
its projected peak demands plus the estimated installed 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:
- 23 -
<PAGE>
<TABLE>
Peak + Excess of Capacity over
Forecasted Installed Available Peak Plus NYPP Installed
Capability Peak Reserve of Capacity Reserve Requirements
Period (MW) 18% (MW)* (MW) (MW) Percent
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1995 Summer 865 1020.7 1159 138.3 13.5
1995-96 Winter 795 1020.7 1183 162.3 15.9
1996 Summer 865 1020.7 1159 138.3 13.5
1996-97 Winter 790 1020.7 1183 162.3 15.9
1997 Summer 870 1026.6 1159 132.4 12.9
1997-98 Winter 800 1026.6 1183 156.4 15.2
* 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" and
(2) the decreases in IBM related electric sales (as described above in Item 1 under
the subcaption "Generally - Electric Sales to IBM").
</TABLE>
- 24 -
<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.
For more information with respect to the Roseton Plant,
see the subcaption "Roseton Plant" in Note 8 to the Company's
1994 Financial Statements appearing on pages 66 through 68 of
Exhibit 13 hereto, which subcaption is incorporated herein by
reference.
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.
- 25 -
<PAGE>
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, 1994, 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 share 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:
Nuclear Plant Decommissioning Costs: For a
discussion of the costs to decommission the Nine Mile 2 Plant,
see the caption "Nuclear Plant Decommissioning Costs" in Note 2
to the Company's 1994 Financial Statements appearing on pages 50
and 51 of Exhibit 13 hereto, which caption is incorporated herein
by reference.
- 26 -
<PAGE>
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 1994 Financial Statements appearing on page 49
of Exhibit 13 hereto, which caption is incorporated herein by
reference.
Refueling Outage: A scheduled refueling outage
for the Nine Mile 2 Plant was completed in November, 1993. The
next refueling outage is scheduled to commence in April 1995,
with a targeted 60-day duration.
Gas
General: The Company's gas system consists of 159
miles of transmission pipelines and 939 miles of distribution
pipelines.
Current Gas Supply: During 1994, natural gas was
available to firm gas customers at a price competitive with that
of alternative fuels. As compared to 1993, in 1994, firm retail
gas sales, normalized for weather, increased by 3.8% and the
average number of firm gas customers increased by 0.4%. Sales to
interruptible customers increased 33.1% in 1994 as compared to
1993.
For information on the Company's gas suppliers and gas
storage capability, see the caption "Natural Gas Supply" in Note
8 to the Company's 1994 Financial Statements appearing on pages
69 and 70 of Exhibit 13, which caption is incorporated herein by
reference.
For the year ended December 31, 1994, the total amount
of gas purchased from all sources was 25,280,306 Mcf., which
includes 6,473,745 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, 1994 occurred on January 26, 1994, and
- 27 -
<PAGE>
amounted to 113,366 Mcf. The Company's peak-day gas capability
in 1994 was 116,865 Mcf. The peak daily demand for natural gas
by the Company's customers for that part of the 1994-1995 heating
season through February 27, 1995, occurred on February 6, 1995
and amounted to 107,803 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 8
to the Company's 1994 Financial Statements appearing on pages 69
and 70 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)
- 28 -
<PAGE>
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, 1994,
the Company made gross property additions of $179.8 million
(which includes $6 million in property additions related to the
Roseton Plant restoration due to fire damage, which amount was
reimbursed by insurance) and property retirements and adjustments
of $35.1 million, resulting in a net increase (including
Construction Work in Progress) in utility plant of $144.7
million, or 11.4%.
- 29 -
<PAGE>
Item 3 - LEGAL PROCEEDINGS
Asbestos Litigation
Since 1987, the Company, along with many other parties,
has been a defendant or third-party defendant in 607 asbestos
lawsuits commenced in New York state and federal courts.
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 607 cases that have been brought against the
Company, only 351 remain pending against the Company, as of March
15, 1995, as a result of the following developments: (1) the
Company negotiated voluntary dismissals in 26 cases and won
summary judgment dismissals in 9 cases; (2) 116 third-party
claims were extinguished with respect to the Company when the
third-party plaintiff, Owens-Corning Fiberglas ("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.
Two 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 June 13, 1991 and February 19, 1992. Both
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. These two federal court
plaintiffs each seek $10,500,000 in compensatory damages, plus
punitive damages.
Three hundred and fifty-one (351) 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,
- 30 -
<PAGE>
1994, January 12, 1994, January 24, 1994, January 25, 1994,
February 7, 1994, February 28, 1994, April 20, 1994, April 21,
1994, April 24, 1994, May 26, 1994, May 31, 1994, June 7, 1994,
July 14, 1994, August 31, 1994, October 17, 1994, November 21,
1994, December 27, 1994, January 30, 1995, February 14, 1995 and
February 28, 1995. Three hundred and thirty-nine (339) 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.
One (1) plaintiff seeks $70,000,000 in compensatory damages, plus
punitive damages. In one (1) case, in which the Company was
joined as a third-party defendant by OCF, the complaint alleges
that the Company is responsible to OCF for the amount of any
recovery obtained by plaintiff against OCF in the lawsuit.
In summary, as of March 15, 1995, the Company is a
defendant or third-party defendant in 351 asbestos lawsuits.
Although the Company is presently unable to assess the validity
of these 351 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 in rates. The
Company's insurance does not extend to punitive damages.
The Company is insured under successive comprehensive
general liability policies issued by a number of insurers, and
the Company has put such insurers on notice of the asbestos
lawsuits. The Company has not been able to reach an agreement
with such insurers, however, as to the proportionate share of the
Company's defense and indemnity costs that each insurer should
bear.
Environmental Litigation
In December 1980, several utilities, including the
Company, three environmental groups and NYSDEC, among others,
entered into an agreement ("Settlement Agreement") which relates
to compliance with environmental matters concerning the
- 31 -
<PAGE>
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 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 NYSDEC to enter into said interim agreement, alleging, among
other things, that it would result in less stringent regulatory
standards than those 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. The Consent Order was twice
extended by agreement of the parties until September 1, 1995 and
will be submitted for Court approval. 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."
Environmental Claims - Newburgh Manufactured Gas Site
By letter, dated September 15, 1994, the City Manager
of the City of Newburgh, New York ("City"), notified the Company
that the City, while excavating in connection with improvements
to its wastewater treatment plant, had encountered contamination
(a tar-like substance) at its site. The City Manager stated that
the contamination may have migrated from a nearby site owned by
the Company and formerly used as a coal gas manufacturing plant.
- 32 -
<PAGE>
Preliminary tests reveal that samples of the substance taken from
the City's site and from the Company's property are chemically
similar.
By letter, dated September 23, 1994, the Company
notified NYSDEC that there had been a potential release from the
Company's site of a tar-like substance. The Company has since
submitted a proposed plan to NYSDEC for further investigation of
the site.
On November 28, 1994, the Company received a letter
from counsel to the City, which letter purports to be a notice
pursuant to the "Citizens' Suit" provisions of the federal
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
Section 6972, that the City intends to file a citizens' suit
against the Company. On January 10, 1995, the Company received a
second letter from counsel to the City, which letter purports to
be a notice pursuant to said "Citizens' Suit" provisions of RCRA
and the "Citizens' Suit" provisions of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA")
(42 U.S.C. Section 9659) and the Emergency Planning and Community
Right to Know Act ("EPCRA") (42 U.S.C. Section 11046) that the
City intends to file a second Citizens' Suit against the Company.
The letter received November 28, 1994 asserts that an
"imminent and substantial endangerment to health and the
environment" exists by virtue of the claimed release of the tar-
like substance from the Company's site. The letter received
January 10, 1995 alleges that (i) the City's tests at the City's
site revealed that such substances are known or believed to
constitute a "hazardous waste," "hazardous substance," "extremely
hazardous substance," "hazardous chemical" and/or "toxic
chemical" as defined under RCRA, CERCLA and EPCRA, and (ii) the
Company has used, stored, disposed of and/or released such
substances, and operated underground storage tanks, in violation
of permit, treatment, storage disposal, monitoring, reporting and
notification requirements under RCRA, CERCLA and EPCRA. Any such
action, if successful, could require the Company to take remedial
action, potentially including removal of any solid or hazardous
waste which is determined to present "imminent and substantial
endangerment to health or the environment." RCRA, CERCLA and
EPCRA authorize the award of the costs of litigation, including
reasonable attorney and expert witness fees, if found to be
appropriate by the Court.
Under RCRA, the City had a 90-day waiting period, which
expired on or about February 27, 1995 for the letter received
- 33 -
<PAGE>
November 28, 1994, before which it could commence any action
under RCRA. Under CERCLA and EPCRA, the City had a 60-day
waiting period, which expired on or about March 11, 1995 for the
letter received January 10, 1995, before it could commence any
action under those statutes. With respect to the RCRA claim set
forth in the letter received January 10, 1995, the City has a 90-
day waiting period, which expires on or about April 10, 1995,
before it can commence any action under RCRA. If, however, prior
to the commencement of any such action by the City, certain
governmental entities were to commence a civil action against the
Company or engage in investigative or removal actions with
respect to this matter, any "Citizens' Suit" action by the City
would be precluded. At this time no such actions have been taken
by any governmental entity with respect to this matter. The
Company cannot predict whether any action commenced by the City
would also include claims alleging damages, in addition to those
under RCRA, CERCLA and EPCRA. The Company can make no reasonable
estimate of the cost to it if it were held liable to the City in
this matter.
The City has suspended construction of the wastewater
treatment plant improvements until more information becomes
available about the nature of the contamination of the site. The
City has orally informed the Company that it is incurring damages
as the result of the interruption of the work at its facility and
that it intends to hold the Company responsible for such damages,
together with the costs incurred in cleaning up the City's site.
The Company has offered to work with the City to develop measures
that can allow construction of such improvements to proceed.
Based on the Company's experience, the Company believes that
implementation of such measures would not have a material impact
on the cost or schedule of such improvements.
The Company's study of this matter is continuing and
the Company has not reached any conclusions as to whether it was
the generator of the tar-like substance in question.
The Company has put its liability insurers on notice of
this situation, and intends to seek reimbursement from its
insurance carriers for the cost of any liability, but cannot
predict the extent of such reimbursement at this time.
The Company is unable to predict the outcome of this
matter and the ultimate financial impact, if any, on the Company.
- 34 -
<PAGE>
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 Item 1 above,
subcaption entitled "Generally - Electric Sales to IBM"). In
such complaint, IBM alleged 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.
By agreement dated as of September 12, 1994, IBM and
the Company agreed to discontinue such action, without admission
by either party of liability or wrongdoing. The Company paid
$150,000 to IBM under the terms of such agreement. A stipulation
discontinuing such action was filed in the Dutchess County
Clerk's Office on September 30, 1994.
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, 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 Progam
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.
- 35 -
<PAGE>
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:
- 36 -
<PAGE>
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. The complaint alleges that 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.
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. At this time,
the Company can make no prediction as to any other litigation
which may arise out of this incident.
Wappingers Falls 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 cracked weld in a nearby
eight-inch steel gas main. The Company interrupted natural gas
service to approximately 1,800 customers in order to repair the
cracked gas main.
- 37 -
<PAGE>
By Report, dated October 25, 1994, of the Energy and
Water Division, Safety and Reliability, of the PSC ("PSC Staff"),
the PSC Staff, among other things, concluded that the probable
cause of the incident was an ignition of natural gas that
accumulated in each of the structures after migrating through the
ground from a leak in the Company's gas main in the immediate
area of the two destroyed buildings.
The Company continues to investigate this incident, but
disagrees that the facts known to date support the conclusions in
the Report of the PSC Staff as to the probable cause of the
incident. An investigation that the Company has undertaken has
not yet determined what caused the first explosion, which
destroyed a residence, but a reconstruction of the sequence of
events indicates that the explosion in the residence was not
caused by natural gas. The Company's investigation also
indicates that the force of the initial explosion, in combination
with deep frost conditions, caused a weld in a natural gas
pipeline of the Company to crack. In this regard, the PSC Staff
Report states as follows: "The metallurgists' report, to which
staff does not take exception, has concluded that a defect in a
weld, present in the pipe since its fabrication in 1929, failed
suddenly as a result of increased stress due to the unusual depth
of frost penetration last winter. A sudden impact stress could
also have contributed to the failure, but can only be speculated
upon."
Two lawsuits have been commenced against the Company
alleging personal injuries and/or property damage arising out of
such incident, as follows:
On August 31, 1994, the Company was served with a
summons and complaint in an action brought by John DeLorenzo
against the Company and the Village of Wappingers Falls in the
Supreme Court of the State of New York, County of Dutchess. The
plaintiff alleges that because of the negligence of defendants in
causing and/or permitting natural gas to leak into plaintiff's
home, an explosion resulted, which destroyed plaintiff's
residence and its contents at 14 Franklin Street in the Village
of Wappingers Falls, and which caused bodily injuries to the
plaintiff. Plaintiff seeks damages for these losses and
injuries, which damages are unspecified in the complaint.
On October 13, 1994, the Company was served with a
summons and complaint in an action brought by Edward Baecher
d/b/a NTC Auto Body against the Company, the Town of Wappingers
Falls, the Village of Wappingers Falls, and the Wappingers Falls
- 38 -
<PAGE>
Fire Department in the Supreme Court of the State of New York,
County of Dutchess. Four causes of action are recited in the
complaint, one of which relates to the Company. This cause of
action alleges that because of the Company's negligence in the
construction, maintenance and improvements of its facilities near
the plaintiff's commercial establishment at 33 Market Street in
Wappingers Falls, an explosion resulted that destroyed the
building and its contents. Plaintiff, who owns the business
only, but not the building, at 33 Market Street, seeks recovery
from the Company of compensatory and punitive damages in the sum
of $1,000,000, plus interest, costs and disbursements.
On March 9, 1995, the Company was served with a summons
and complaint in an action brought by Cengiz Ceng, individually
and as executor under the last will and testament of Nizamettin
Ceng, and Tarkan Thomas Ceng against the Company and the Village
of Wappingers Falls in the Supreme Court of the State of New
York, County of Dutchess. The complaint alleges that the
plaintiff were the owners of premises at 33 Market Street in the
Village of Wappingers Falls, and that as a result of the
Company's alleged negligence, the plaintiffs' premises at 33
Market Street was destroyed. Plaintiffs seek recovery of
$250,000 from the Company, plus costs and disbursements.
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 any of these
lawsuits, such award(s) could have a material adverse effect on
the financial condition of the Company. At this time, the
Company can make no prediction as to any other litigation which
may arise out of this incident.
Income Tax Assessments
Reference is made to the subcaption "Tax Matters -
Assessments" in Note 8 to the Company's 1994 Financial
Statements, on pages 73 and 74 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, plus
interest. Such letters do not represent a notice of deficiency
- 39 -
<PAGE>
from the IRS, and the Company has received no notice of
deficiency from the IRS regarding these taxable years. 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. On May 3, 1994, the Company filed a
protest with the IRS to said proposed adjustments. 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
recoverable in rates.
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 30 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.
- 40 -
<PAGE>
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
28 of Exhibit 13 hereto.
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
The Company's 1994 Financial Statements, together with
the report thereon of Price Waterhouse LLP, dated January 27,
1995, appearing on pages 31 through 80 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 1994 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 1994
Financial Statements.
- 41 -
<PAGE>
The Company's 1994 Financial Statements include the
accounts of the Company and its subsidiaries. All intercompany
balances and transactions have been eliminated. The Company's
subsidiaries are each wholly-owned and consist of landholding,
cogeneration or energy management companies. The net income of
the Company's subsidiaries is reflected in the Company's
Consolidated Statement of Income as Other Income and Deductions -
Other-net; such Consolidated Statement of Income is contained on
pages 38 and 39 of Exhibit 13 hereto.
The following information is being furnished in
accordance with Regulation S-X, Section 210.5-02:
Weighted average December 31,
interest rate on 1994 1993 1992
the Company's
short-term debt 6.60% - 4.23%
outstanding
(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 1994
Financial Statements on page 81 of Exhibit 13 hereto, which
caption is incorporated herein by reference pursuant to Item 8
(a) above.
(c) Other Financial Statements and Schedule
Other financial statements and schedule required under
Regulation S-X are filed pursuant to Item 14 of this Annual
Report on Form 10-K.
Item 9 - CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS 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
- 42 -
<PAGE>
caption "Election of Directors" in the Company's definitive proxy
statement, dated February 24, 1995, to be used in connection with
its Annual Meeting of Shareholders to be held on April 4, 1995,
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 Annual Report on Form 10-K, 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 24, 1995, to
be used in connection with its Annual Meeting of Shareholders to
be held on April 4, 1995.
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 24, 1995, to be used
in connection with its Annual Meeting of Shareholders to be held
on April 4, 1995.
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.
- 43 -
<PAGE>
2. Financial Statement Schedule
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)
Agreement, made March 14, 1994 by and between Registrant and
Mellon Bank, N.A., amending and restating, effective April
1, 1994, Registrant's Savings Incentive Plan and related
Trust Agreement with The Bank of New York, together with
amendments dated July 22, 1994 and December 16, 1994.
(Exhibits (10)(iii)18, 19 and 20)
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)
- 44 -
<PAGE>
(b) Reports on Form 8-K
During the period October 1, 1994, to the date hereof,
the following Reports on Form 8-K were filed by the Company:
Report, dated November 23, 1994, reporting the issuance
of a Report by PSC Staff regarding the probable cause
of the gas service incident that occurred on February
12, 1994 in the Village of Wappingers Falls, in the
Company's service territory.
Report, dated December 19, 1994, reporting (i) the
receipt by the Company of a letter from counsel to the
City of Newburgh, New York purporting to be a Notice of
a Citizens' Suit to be brought by the City against the
Company pursuant to the federal Resource Conservation
and Recovery Act, arising out of an alleged release of
hazardous coal-tar material from a former gas manu-
facturing plant site owned by the Company, and (ii) the
addition of ten (10) new asbestos litigation plain-
tiffs, and a summary of pending asbestos litigation.
(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 Schedule required by Regulation S-X
which is excluded from the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1994
Incorporated herein by reference to subpart 2 of Index
to Financial Statements on page F-1 of this Report.
- 45 -
<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 __, 1995
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 __, 1995
(b) Principal Financial
Officer and Principal
Accounting Officer:
(John F. Drain) Vice President -
Finance and March __, 1995
Controller
(c) Directors:
(L. Wallace Cross) Director March __, 1995
- 46 -
<PAGE>
SIGNATURES - (Continued)
Signature Title Date
(Jack Effron) Director March __, 1995
(Richard H. Eyman) Director March __, 1995
(Frances D. Fergusson) Director March __, 1995
(Heinz K. Fridrich) Director March __, 1995
(Edward F. X. Gallagher) Director March __, 1995
(Paul J. Ganci) Director March __, 1995
(Charles LaForge) Director March __, 1995
(John E. Mack, III) Director March __, 1995
(Howard C. St. John) Director March __, 1995
(Edward P. Swyer) Director March __, 1995
- 47 -
<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 31
Consolidated Balance Sheet at 34-37
December 31, 1994 and 1993
Consolidated Statement of Income for 38-39
the three years ended December 31, 1994
Consolidated Statement of Retained 40
Earnings for the three years
ended December 31, 1994
Consolidated Statement of Cash Flows for 41-42
the three years ended December 31, 1994
Notes to Consolidated Financial Statements 43-80
Selected Quarterly Financial Data (Unaudited) 81
Page(s) in
Form 10-K
Report of Independent Accountants on F-2
Financial Statement Schedule
Consent of Independent Accountants F-2
2. The Financial Statement Schedule
for the Years 1994, 1993 and 1992
Schedule II - Reserves F-3 - F-5
*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 27, 1995 appearing on page 31 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 Schedule presented on pages F-3 through F-5
of this Annual Report on Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
New York, New York
January 27, 1995
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 and (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, of our report dated January 27,
1995 appearing on page 31 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 Schedule, which
appears above.
PRICE WATERHOUSE LLP
New York, New York
March 28, 1995
F-2
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 1
YEAR ENDED DECEMBER 31, 1994
<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 $1,939,151 $ 615,010 $ 32,190 (a) $ 816,225 $1,770,126
Workers compensation
deductible 879,057 - 379,038 (b) 180,704 1,077,391
Pensions and benefits
carrying charge reserve 92,360 372,978 - - 465,338
Storm reserve - 500,000 - - 500,000
Nine Mile 2 Plant
operation and maintenance
expense reserve (564,549) 2,476,805 46,762 (c) 108,466 1,850,552
Total Operating
Reserves $2,346,019 $3,964,793 $ 457,990 $1,105,395 $5,663,407
Reserve for Uncollectible
Accounts $2,000,000 $3,305,977 $ - $3,305,977 $2,000,000
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.
(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.
F-3
</TABLE>
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 2
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
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.
F-4
</TABLE>
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 3
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 $1,817,886
Reserve for Uncollectible
Accounts $1,100,000 $3,824,404 $ - $3,424,404 $1,500,000
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-5
</TABLE>
</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. ((28); Exhibit (3)(iii))
(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
with Registration Statement No. 33-
E-4
<PAGE>
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
E-6
<PAGE>
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)(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
E-7
<PAGE>
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.
((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 -
E-10
<PAGE>
East Fishkill, New York. ((2); Exhibit
(10)(i)38)
(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
E-11
<PAGE>
pursuant to a request for confidential
treatment under the rules of said
Commission.] ((18); Exhibit
(19)(10)(i)83)
(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
E-12
<PAGE>
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)
(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,
E-13
<PAGE>
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)
(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)
E-14
<PAGE>
(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)
(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)
E-15
<PAGE>
(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)
(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
E-16
<PAGE>
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
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
E-17
<PAGE>
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
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
E-18
<PAGE>
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)
(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)
E-19
<PAGE>
(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
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
E-20
<PAGE>
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
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.] ((27); Exhibit (10)(i)92)
(i) 93-- Agreement, dated as of May 20, 1993,
between Registrant and New York State
Electric & Gas Corporation. ((27);
Exhibit (10)(i)93)
(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. ((27);
Exhibit (10)(i)94)
(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. ((27); Exhibit (10)(i)95)
(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. ((27); Exhibit (10)(i)96)
(i) 97-- Amendment No. 2 to Irrevocable Letter of
Credit No. A95056-S, dated August 17,
1993, relating to the Reimbursement
E-21
<PAGE>
Agreement, dated as of November 1, 1985,
as amended, between Registrant and the
Bank named therein. ((27); Exhibit
(10)(i)97)
(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. ((27); Exhibit
(10)(i)98)
(i) 99-- Second Amendment, effective as of
September 1, 1994, 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.
((29); Exhibit (10)(i)99)
(i) 100-- Third Amendment, dated as of November 1,
1994, to the 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 (Exhbit (10)(i)(40) to
Registrant's 10-K Report), as amended.
[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.] ((30);
Exhibit (10)(i)100)
(i) 101-- Agreement of Assignment, Assumption,
Consent and Release, entered into as of
July 1, 1994 by and among Global
Petroleum Corporation, Montello Oil
Corporation, and Registrant for itself
and as Agent for Consolidated Edison
Company of New York, Inc., and Niagara
Mohawk Power Corporation for the Roseton
Electric Generating Station, relating to
a Fuel Supply Contract, effective
E-22
<PAGE>
September 1, 1992 (Exhibit (10)(i)81),
as amended. ((30); Exhibit (10)(i)101)
(i) 102-- Amendment No. 4, dated November 28,
1994, to Agreement, dated as of November
20, 1987, between Registrant and
Consolidated Rail Corporation to
transport coal to Danskammer Generating
Station, as amended. [Certain portions
of the 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.]
(iii) 1-- Directors' Deferred Compensation Plan,
effective October 1, 1980. ((16);
Exhibit (10)(iii)1)
(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)
E-23
<PAGE>
(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)
(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. ((27); Exhibit
(10)(iii)13)
(iii) 14-- Amendment, dated December 17, 1993, to
the Savings Incentive Plan of
Registrant, as amended. ((27); Exhibit
(10)(iii)14)
(iii) 15-- First Amendment, dated December 17,
1993, to the Registrant's Executive
Deferred Compensation Plan. ((27);
Exhibit (10)(iii)15)
(iii) 16-- Amendment, dated March 3, 1994, to the
Savings Incentive Plan of Registrant, as
amended. ((27); Exhibit (10)(iii)16)
(iii) 17-- Executive Incentive Compensation Plan of
Registrant, effective January 1, 1993.
((27); Exhibit (10)(iii)17)
E-24
<PAGE>
(iii) 18-- Agreement, made March 14, 1994, by and
between Registrant and Mellon Bank,
N.A., amending and restating, effective
April 1, 1994, Registrant's Savings
Incentive Plan and related Trust
Agreement with The Bank of New York.
((29); Exhibit (10)(iii)18)
(iii) 19-- Amendment 1, dated July 22, 1994
(effective April 1, 1994) to the Amended
and Restated Savings Incentive Plan of
Registrant.
(iii) 20-- Amendment 2, dated December 16, 1994
(effective January 1, 1995) to the
Amended and Restated Savings Incentive
Plan of Registrant, as amended.
(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, 1994, and the
report thereon of Price Waterhouse, independent
accountant, including the Notes to Consolidated
Financial Statements, which form a part thereof
(pages __ through __); Management's Discussion and
Analysis of Financial Condition and Results of
Operations (pages __ through __); Five-Year
Summary of Consolidated Operations and Selected
Financial Data (pages __ and __); Selected
Quarterly Financial Data (Unaudited) (page __);
and Financial Highlights (pages __ through __),
included in Registrant's annual report to
shareholders for the fiscal year ended December
31, 1994. [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-25
<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.
(27) -- Financial Data Schedule
(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)
E-26
<PAGE>
(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
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
E-27
<PAGE>
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
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.
E-28
<PAGE>
(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
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
E-29
<PAGE>
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 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).
E-30
<PAGE>
(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).
(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).
E-31
<PAGE>
(27) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993 (File
No. 1-3268).
(28) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1994
(File No. 1-3268).
(29) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1994
(File No. 1-3268).
(30) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1994 (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-32
</PAGE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $931,073
<OTHER-PROPERTY-AND-INVEST> $10,948
<TOTAL-CURRENT-ASSETS> $116,210
<TOTAL-DEFERRED-CHARGES> $192,550
<OTHER-ASSETS> $58,629
<TOTAL-ASSETS> $1,309,410
<COMMON> $86,192
<CAPITAL-SURPLUS-PAID-IN> $270,432
<RETAINED-EARNINGS> $80,107
<TOTAL-COMMON-STOCKHOLDERS-EQ> $436,731
$35,000
$46,030
<LONG-TERM-DEBT-NET> $389,364
<SHORT-TERM-NOTES> $3,000
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $3,525
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $395,760
<TOT-CAPITALIZATION-AND-LIAB> $1,309,410
<GROSS-OPERATING-REVENUE> $515,668
<INCOME-TAX-EXPENSE> $28,043
<OTHER-OPERATING-EXPENSES> $414,492
<TOTAL-OPERATING-EXPENSES> $442,535
<OPERATING-INCOME-LOSS> $73,133
<OTHER-INCOME-NET> $8,399
<INCOME-BEFORE-INTEREST-EXPEN> $81,532
<TOTAL-INTEREST-EXPENSE> $30,603
<NET-INCOME> $50,929
$5,127
<EARNINGS-AVAILABLE-FOR-COMM> $45,802
<COMMON-STOCK-DIVIDENDS> $35,541
<TOTAL-INTEREST-ON-BONDS> $19,624
<CASH-FLOW-OPERATIONS> $115,522
<EPS-PRIMARY> $2.68
<EPS-DILUTED> $0
</TABLE>
<TABLE>
EXHIBIT 12
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED DIVIDENDS
<CAPTION>
Year Ended December 31,
<S> 1994 1993 1992 1991 1990
Earnings: <C> <C> <C> <C> <C>
A. Net Income $ 50,929 $ 50,390 $ 47,688 $ 42,941 $ 41,035
B. Federal Income Tax 26,806 27,158 24,363 21,361 20,374
C. Earnings before Income Taxes $ 77,735 $ 77,548 $ 72,051 $ 64,302 $ 61,409
D. Total Fixed Charges <FN> 32,679 33,820 34,888 37,737 42,906
E. Total Earnings $110,414 $111,368 $106,939 $102,039 $104,315
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 5,127 $ 5,562 $ 5,544 $ 5,659 $ 5,681
G. Less Allowable Dividend Deduction 528 528 544 544 544
H. Net Subject to Gross-up 4,599 5,034 5,000 5,115 5,137
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.526 1.539 1.511 1.497 1.497
J. Pref. Dividend (Pre-tax) (HxI) 7,018 7,747 7,555 7,657 7,690
K. Plus Allowable Dividend Deduction 528 528 544 544 544
L. Preferred Dividend Factor 7,546 8,275 8,099 8,201 8,234
M. Fixed Charges (D) 32,679 33,820 34,888 37,737 42,906
N. Total Fixed Charges
and Preferred Dividends $ 40,225 $ 42,095 $ 42,987 $ 45,938 $ 51,140
O. Ratio of Earnings to Fixed
Charges (E/D) 3.38 3.29 3.07 2.70 2.43
P. Ratio of Earnings to Fixed Charges
and Preferred Dividends (E/N) 2.74 2.65 2.49 2.22 2.04
<FN> Includes a portion of rent expense deemed to be representative of the interest factor.
</TABLE>
<PAGE>
EXHIBIT 13
FINANCIAL HIGHLIGHTS
Earnings Per Share: (Page 14)
Earnings per share of common stock in 1994 remained
unchanged from 1993 at $2.68. Earnings from operations, however,
increased $.03 per share in 1994 when compared to 1993 earnings
from operations. The inclusion of the gain on the sale of long-
term investments in 1993, a non-recurring item, equalized the two
years.
Dividends Per Share: (Page 30)
The quarterly dividend rate was increased to $.52 per share,
effective June 24, 1994. This represented an increase of 1% over
the previous quarterly rate of $.515 per share. Dividends paid
to shareholders in 1994 were $2.07 per share as compared to $2.03
per share in 1993. No portion of the 1994 dividend constitutes a
return of capital.
Economy:
While the Company continued to feel the effects of the
reduction in employment by IBM in 1994, the local economy has
continued to recover. The Company's economic development efforts
coupled with the State and local government efforts helped to
attract over 1,200 value-added jobs throughout the region.
Notably, a semi-conductor manufacturing company began operation
in the Company's service territory in 1994, adding 400 jobs.
Electric Sales: (Page 18)
Sales of electricity within the Company's service territory
decreased 3% in 1994. Sales of electricity to residential
customers increased 1% due to the increase in usage per customer.
Commercial sales increased 3% resulting from the combined effect
of a 2% increase in usage per customer and a 1% increase in the
number of customers. Electric sales to industrial customers
decreased 13% due primarily to a 16% decline in usage by IBM.
Gas Sales: (Page 18)
Firm sales of natural gas increased 4% in 1994. Sales of
gas to residential customers increased 3% due to an increase in
usage per customer. Sales to commercial customers increased
7% resulting from the combined effect of a 5% increase in usage
per customer and a 2% increase in the number of customers. Firm
- 1 -
<PAGE>
gas sales to industrial customers decreased 4% primarily due to
the shift of two large industrial customers from firm service to
gas transportation service.
Rate Proceeding - Electric: (Page 9)
The Company has no pending electric rate case filed with the
Public Service Commission and cannot predict with certainty the
date of the next filing.
The last rate increase was effective November 22, 1993 which
increased 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, and a resultant cash
coverage of total interest charges during the Rate Year of 3.17
times.
Rate Proceeding - Gas: (Page 9)
The Company has no pending gas rate case filed with the
Public Service Commission and cannot predict with certainty the
date of the next filing.
In the last filing, 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 based its decision on a
10.6% return on common equity.
Common Stock: (Note 5)
Issuances under the Automatic Dividend Reinvestment and
Stock Purchase Plan and Customer Stock Purchase Plan increased
the number of common shares outstanding to 17,238,464. At
December 31, 1994 a share of common stock was selling at $26.50
while the book value per share was $25.34. At December 31, 1994
the Company's shares were held approximately 29% by individuals
registered with the Registrar and Transfer Agent, 10% by
institutional investors and 61% in "street name."
Financing Program: (Notes 5 & 6)
On September 1, 1994, the Company retired at maturity its
$50 million principle amount, 8 1/8% Series First Mortgage Bonds.
The associated cash requirements were financed from internal
funds and from net proceeds of $7.8 million realized from the
issuance of 285,317 shares of common stock in 1994 through the
Company's Automatic Dividend Reinvestment and Stock Purchase Plan
and its Customer Stock Purchase Plan.
- 2 -
<PAGE>
Taxes: (Page 24)
In 1994, the Company incurred $94.9 million for operating
taxes levied by federal, state and local governments,
representing 18 cents of every dollar of revenues.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA* <FN>
(Thousands of Dollars)
<S> 1994 1993 1992 1991 1990
Operating Revenues <C> <C> <C> <C> <C>
Electric.............................. $ 411,082 $ 422,925 $ 427,436 $ 424,121 $ 433,859
Gas................................... 104,586 94,448 96,121 70,615 69,749
Total............................... 515,668 517,373 523,557 494,736 503,608
Operating Expenses
Operations............................ 274,497 274,477 283,787 267,339 279,602
Maintenance........................... 32,716 34,486 34,226 31,504 30,364
Depreciation and amortization......... 40,380 39,682 39,596 37,230 36,134
Taxes, other than income tax.......... 66,899 65,564 66,339 60,554 57,234
Federal income tax.................... 28,043 28,603 25,111 22,613 22,456
Total............................... 442,535 442,812 449,059 419,240 425,790
Operating Income........................ 73,133 74,561 74,498 75,496 77,818
Other Income and Deductions
Allowance for equity funds
used during construction............. 866 934 596 921 785
Federal income tax.................... 1,237 1,445 748 1,252 2,082
Other - net........................... 6,296 5,167 4,427 854 1,505
Total............................... 8,399 7,546 5,771 3,027 4,372
Income before Interest Charges.......... 81,532 82,107 80,269 78,523 82,190
Interest Charges........................ 30,603 31,717 32,581 35,582 41,155
Net Income.............................. 50,929 50,390 47,688 42,941 41,035
Dividends Declared on
Cumulative Preferred Stock............. 5,127 5,562 5,544 5,659 5,681
Income Available for Common Stock....... 45,802 44,828 42,144 37,282 35,354
Dividends Declared on Common Stock...... 35,541 34,497 31,545 29,800 27,067
Amount Retained in the Business......... 10,261 10,331 10,599 7,482 8,287
Retained Earnings - beginning of year... 69,023 58,692 48,093 40,611 32,324
Retained Earnings - end of year......... $ 79,284 $ 69,023 $ 58,692 $ 48,093 $ 40,611
</TABLE>
- 4 -
<PAGE>
<TABLE>
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA* (CON'T)
(Thousands of Dollars)
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Common Stock
Average shares outstanding (000s)...... 17,102 16,725 15,901 15,530 14,850
Earnings per share on
average shares outstanding............ $2.68 $2.68 $2.65 $2.40 $2.38
Dividends declared per share........... $2.075 $2.045 $1.98 $1.90 $1.82
Book value per share (at year-end)..... $25.34 $24.65 $23.60 $22.84 $22.31
Total Assets............................. $1,309,410 $1,328,235 $1,211,276 $1,184,548 $1,134,503
Long-term Debt........................... 389,364 391,810 441,096 416,030 407,638
Cumulative Preferred Stock............... 81,030 81,030 81,030 81,030 81,030
Common Equity............................ 436,731 417,846 378,214 360,203 333,587
<FN>
* This summary should be read in conjunction with the Consolidated Financial Statements and Notes
thereto included in the "Financial Section" of this Annual Report.
</TABLE>
- 5 -
<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 $57.2 million in 1994, a $4.1 million increase from
the $53.1 million expended in 1993. As shown in the table below,
cash construction expenditures for 1995 are estimated to be $56.6
million, a decrease of $600,000 compared to 1994 expenditures.
Internal sources funded 100% of the 1994 cash construction
expenditures and are presently estimated to fund 100% of the
forecasted cash construction expenditures for 1995.
- 6 -
<PAGE>
<TABLE>
Estimates of construction expenditures, internal funds available, mandatory and optional redemption of long-term
securities, and working capital requirements for the five-year period 1995-1999 are set forth by year in the following
table:
Total
1995 1996 1997 1998 1999 1995-1999
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Construction Expenditures*:<FN>
Electric............................ $38,800 $37,100 $36,900 $41,300 $39,900 $194,000
Gas................................. 8,200 8,700 8,700 8,900 8,200 42,700
Common.............................. 8,600 8,900 9,500 10,000 10,700 47,700
Nuclear fuel........................ 1,000 5,300 - 5,700 - 12,000
Total........................... 56,600 60,000 55,100 65,900 58,800 296,400
Internal Funds Available:
Depreciation accruals............... 41,200 43,000 44,400 45,700 47,600 221,900
Deferred income tax - net........... 14,700 14,000 1,900 1,300 1,400 33,300
Other............................... 7,100 8,700 9,000 9,600 10,700 45,100
Total........................... 63,000 65,700 55,300 56,600 59,700 300,300
Excess of Construction
Expenditures over Internal Funds..... (6,400) (5,700) (200) 9,300 (900) (3,900)
Mandatory Redemption of Long-term
Securities:
Long-term debt....................... 2,600 - 100 100 20,100 22,900
Optional Redemption of Long-term
Securities:
Long-term debt....................... - 30,000 - - - 30,000
Working Capital Requirements.......... 29,000 15,000 10,000 10,000 10,000 74,000
Total Cash Requirements............... $25,200 $39,300 $ 9,900 $19,400 $29,200 $123,000
<FN>
* Excluding the equity portion of Allowance for Funds Used During Construction (AFDC), a noncash item.
</TABLE>
- 7 -
<PAGE>
Estimates of construction expenditures are subject to
continuous review and adjustment, and actual expenditures may
vary from such estimates. The depreciation accrual includes
depreciation on the Nine Mile 2 Plant [as described in Note 2 of
the Notes to Consolidated Financial Statements (Notes)],
calculated on the remaining life amortization method, and the
Company's Danskammer Point Steam Electric Generating Station
(Danskammer Plant) coal reconversion investment, calculated on an
assumed amortization rate of 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 $10.4 million. A discussion of the Clean Air Act
Amendments is included in Note 8 of the Notes.
As shown in the table above, it is presently estimated that
funds available from internal sources will finance 100% of the
Company's cash construction expenditures for the five-year period
1995-1999. During this same five-year period, total external
financing requirements are projected to amount to $123.0 million,
of which $22.9 million is related to the mandatory redemption of
long-term securities and $30.0 million is related to the optional
redemption of long-term securities.
CAPITAL STRUCTURE
Over the past few years, the Company has substantially
increased its common equity ratio through retention of a portion
of its earnings, offerings of its common stock to the public, and
issuances of its common stock under its Automatic Dividend
Reinvestment and Stock Purchase Plan and its Customer Stock
Purchase Plan. One result of these recent increases in its
common equity ratio has been a significant improvement in its
interest coverage ratios (as shown under "Financial Indices" on
page 30 of this report) which have also been improved by the
refinancing of its debt at lower interest rates. Despite a
tightening of bond rating criteria applied to the electric
utility industry, the Company has maintained its bond ratings.
The Company's bond ratings, which were recently affirmed, are
"A-" or equivalent by Standard & Poor's Corporation, Moody's
Investors Service, Inc. and Duff & Phelps Credit Rating Co., and
"A" by Fitch Investors Service. The Company's long-term goal is
to achieve and maintain bond ratings at the "A" level.
Set forth below is certain information with respect to the
Company's capital structure at the end of 1994, 1993 and 1992:
Year-end Capital Structure
1994 1993 1992
Long-term debt .......... 43.0% 47.0% 48.3%
Short-term debt ......... .3 - 1.6
Preferred stock ......... 8.9 8.6 8.8
Common equity ........... 47.8 44.4 41.3
100.0% 100.0% 100.0%
- 8 -
<PAGE>
FINANCING PROGRAM
On September 1, 1994, the Company retired at maturity its
8 1/8% Series First Mortgage Bonds, of which $50 million
principal amount was issued and outstanding. The associated cash
requirements were financed from internal funds and from the
issuance of 285,317 additional shares of common stock during 1994
through the Company's Automatic Dividend Reinvestment and Stock
Purchase Plan and its Customer Stock Purchase Plan.
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 bearing lower interest or dividend rates.
In March 1993, the Company issued 700,000 additional shares of
common stock through a public offering. These funds were used to
reduce short-term debt outstanding and to fund working capital
requirements.
In 1995, the Company expects to fund any external funding
requirements related to its construction program and working
capital requirements through issuances of common stock pursuant
to its Automatic Dividend Reinvestment and Stock Purchase Plan
and its Customer Stock Purchase Plan and by issuing additional
debt securities. The Company continues to monitor financial
markets for opportunities to refinance debt or preferred stock at
lower cost.
SHORT-TERM DEBT
As more fully discussed in Note 4 of the Notes, which is
hereby incorporated herein by reference, the Company has a
revolving credit agreement with four commercial banks for
borrowing up to $50.0 million through December 14, 1997. In
addition, the Company continues to maintain confirmed lines of
credit totaling $2.0 million with three regional banks. Also,
during 1994, the Company negotiated short-term credit agreements
with four commercial banks totaling $130.0 million in aggregate.
Authorization from the Public Service Commission of the State of
New York (PSC) limits the amount the Company may have outstanding
at any time under all of its short-term borrowing arrangements to
$52.0 million in the aggregate.
RATE PROCEEDINGS
The Company has no pending rate cases filed with the PSC and
cannot predict with certainty the dates of its next filings. The
status of the Company's most recent rate case orders is discussed
in the subcaptions below.
- 9 -
<PAGE>
ELECTRIC: On November 12, 1992, the Company filed a
request with the 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 through October 31, 1994
(Rate Year).
By Order Determining Revenue Requirement and Rate Design
(Order), issued and effective February 11, 1994, 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
million (after-tax) of Mirror CWIP (as described in Note 1 of the
Notes under the section entitled Allowance for Funds Used During
Construction) 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.
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%.
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.
- 10 -
<PAGE>
OTHER DEVELOPMENTS
Electric Sales to IBM: The Company's largest customer is
International Business Machines Corporation (IBM), which
accounted for approximately 12% and 14% of the Company's total
electric revenues for the years ended December 31, 1994 and 1993,
respectively. Published reports indicate that IBM reduced its
employment worldwide by 37,000 (14%) in 1994 and 45,000 (15%) in
1993 from a total of 301,000 in 1992. Such reports indicate that
IBM has reduced its employment in the Company's service territory
by approximately 2,600 employees in 1994 and 8,400 employees in
1993 to remain competitive in a challenging marketplace. These
reductions bring the total number employed in the Company's
service territory to 10,500, as compared to the peak level of IBM
employment in excess of 30,000 in 1985. In 1994, published
reports indicated that IBM would close its mainframe facility in
Kingston, New York by the end of 1995 and relocate 1,500 of its
workers to a similar plant in Poughkeepsie, New York. Both
facilities are in the Company's service territory. 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 is the main
contributor to a decline of 17% in industrial and commercial
electric sales and a decline of 17% in gas sales to IBM in 1994.
This is in addition to the 1993 decline in electric sales to IBM
of 20%. 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. 112,
"Employers' Accounting for Postemployment Benefits," effective
January 1, 1994. As discussed in Note 7 of the Notes, this new
accounting standard did not have an impact on the Company's
results of operations.
The Company adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective
January 1, 1994. As discussed in Note 10 of the Notes, the
adoption of this standard resulted in the recognition of a
holding gain adjustment to common stock equity of $823,000 (net
of tax) at December 31, 1994.
Environmental Issues: On an ongoing basis, the Company
assesses environmental issues which could impact the Company and
its ratepayers. Notes 2 and 8 of the Notes, which are hereby
incorporated herein by reference, discuss current environmental
issues affecting the Company, including the Clean Water Act and
Clean Air Act Amendments of 1990, which require control of
emissions from fossil-fueled electric generating units, asbestos
litigation cases, and two "Citizens Suits" intended to be filed
against the Company by the City of Newburgh, New York after the
City discovered allegedly hazardous coal-tar material on its
- 11 -
<PAGE>
property allegedly migrating from a former manufactured gas plant
facility of the Company located in Newburgh, New York.
Competition:
General: Although the Company is subject to regulation
by the PSC and by the Federal Energy Regulatory Commission
(FERC), the Company is substantially free from direct competition
at the retail level, at this time. 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. In regards to sales for resale to other utility
companies, both within and outside of New York State, the Company
is in competition with other investor-owned utilities and the New
York Power Authority (NYPA). NYPA 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. 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), to which the Company currently has
limited exposure. The enactment of the Energy Policy Act of 1992
and the FERC's rules providing open-access to interstate
pipelines will expose the electric and gas industry to additional
risks and uncertainties due to the introduction of increased
competition and related regulatory and legislative requirements,
eroding perhaps the position of a utility as a franchised
monopoly, which is free from most forms of competition.
New York - Electric: In March of 1993, the PSC
initiated a proceeding to address numerous issues related to
competition in the energy markets in New York State. Two phases
of this proceeding have been established to address the issues to
be considered in the proceeding. The Company has been actively
involved in both phases.
Phase I of such proceeding, which was completed in the
summer of 1994, resulted in the approval by the PSC of "flexible
rates" that would allow electric utility companies to negotiate
individual contracts with certain large industrial and commercial
customers to provide electricity at prices lower than currently
offered. Flexible rates could help utilities retain large
customers in an increasingly competitive environment. Under the
flexible rate guidelines, residential and small customers and
utility shareholders would share the burden of revenue losses
which result from discounts to larger customers. To date, the
Company has not offered such flexible rates to any of its
customers.
- 12 -
<PAGE>
Phase II of such proceeding, which is now underway, has an
overall objective of identifying regulatory and rate-making
practices that will assist in the transition to a more competi-
tive electric industry designed to increase efficiency in the
provision of electricity while maintaining safety, environmental,
affordability and service priority goals. To achieve this
objective, Phase II will establish general principles to form the
basis for the development of a framework toward a more
competitive electric marketplace. Phase II will also examine
issues relating to the establishment of a fully efficient
wholesale electric market, including whether divestiture of
generating assets by the provider of transmission and distribu-
tion services would enhance the transition to a competitive
wholesale market. Issues relating to retail competition also
will be examined. By Opinion and Order issued and effective
December 22, 1994, the PSC, as the first step of Phase II, issued
proposed principles to guide the transition in New York to
competition for electric service. Among such proposed principles
are the following: (1) the current industry structure, in which
most power plants are vertically integrated with natural monopoly
transmission and distribution, is incompatible with effective
wholesale or retail competition, and (2) utilities should have a
reasonable opportunity to recover prudent and verifiable
expenditures and commitments made pursuant to their legal
obligations, "as long as they are cooperating in furthering all
of these principles." The Company can make no prediction as to
the outcome of Phase II of this proceeding or when Phase II will
be concluded.
New York - Natural Gas: In October 1993, the PSC
initiated a proceeding to address issues associated with the
restructuring of the emerging competitive natural gas market, a
process which had been set in motion by Order 636 of the Federal
Energy Regulatory Commission, which requires pipeline gas
suppliers to separate natural gas sales service from
transportation and storage service, and which allows Local
Distribution Companies (LDCs), such as the Company and other end
users, open access to the interstate pipeline system for the
purpose of transporting their gas from gas producing areas to the
customer. This PSC proceeding examined such issues to determine
how best to implement changes in the services provided by the
LDCs' segment of the gas industry, so that the benefits of the
increased competition fostered by federal actions are fully
realized by customers. By Opinion and Order, issued and
effective December 20, 1994, the PSC set forth the policy
framework to guide the transition of New York's gas distribution
industry in the post-FERC Order 636 environment. Such PSC Order
essentially extends a number of the FERC "unbundling" concepts,
found in said Order 636 to the retail gas business. This Order
is not believed to have a material impact on the Company. As an
- 13 -
<PAGE>
outgrowth of this restructuring proceeding and Order, a new
state-wide proceeding has been established by the PSC to address
gas purchasing practices, gas cost recovery and gas
affordability. The Company can make no prediction as to the
outcome of this new state-wide proceeding or when such proceeding
will be concluded.
Company's Response: In response to the competitive
forces and potential regulatory changes which it has faced, the
Company has from time to time considered, and expects to continue
to consider, various strategies designed to enhance its
competitive position and to increase its ability to adapt to any
anticipated changes in its business. The Company's goal is to be
"the energy supplier of competitive choice to its customers," and
it has satisfied or intends to satisfy such goal by implementing
appropriate cost-reduction measures, such as: the cancellation of
an agreement with Niagara Mohawk Power Corporation (Niagara
Mohawk) to purchase the interest of Niagara Mohawk in the Roseton
Electric Generating Station (Roseton Plant) operated by the
Company and in which the Company is a cotenant; the satisfaction
of a portion of its power requirements with purchases of lower-
cost electricity from energy providers outside the Company's
service territory; the operation of certain of its generating
units on alternating six-month intervals and/or the placement of
certain of its generating units on "ready-reserve;" reduction of
contractor costs through redeployment of its workforce; and
reduction of its workforce through attrition.
RESULTS OF OPERATIONS
The following discussion and analysis includes an
explanation of the significant changes in revenues and expenses
when comparing 1994 to 1993 and 1993 to 1992. Additional
information relating to changes between these years is provided
in the Notes on pages 36 through 52 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.
The number of common shares, the earnings per share and the rate
of return earned on average common equity are as follows:
1994 1993 1992
Average shares outstanding (000s).. 17,102 16,725 15,901
Earnings per share................. $ 2.68 $ 2.68 $ 2.65
Return earned on common equity
per books*........................ 10.7% 11.1% 11.4%
* Return on equity for regulatory purposes differs from these
figures.
- 14 -
<PAGE>
Earnings per share in 1994 remained unchanged from 1993.
Although earnings from normal operations increased $.03 per share
in 1994, such increase was offset by the absence of the $.03 per
share gain realized in 1993 from the sale of long-term
investments. The $.03 per share increase in earnings from
operations was due primarily to lower interest charges on the
Company's outstanding debt, resulting in large part from the
payment at maturity in 1994 of $50 million principal amount of
8 1/8% Series First Mortgage Bonds and the refinancing of high
interest rate debt and preferred stock in 1993, and increased gas
net operating revenues.
These increases were partially offset, however, by reduced
earnings from PSC incentive programs related to fuel costs and
energy efficiency programs, decreased electric net operating
revenues attributable primarily to decreased sales to large
industrial customers, especially IBM, an increase in the number
of shares of common stock outstanding, and decreased earnings of
non-regulated subsidiary companies.
The $.03 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 was 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.
- 15 -
<PAGE>
<TABLE>
OPERATING REVENUES
Total operating revenues decreased $1.7 million (.3%) in 1994, as compared to 1993,
and $6.2 million (1.2%) in 1993, as compared to 1992.
See the table below for details of the variations:
<CAPTION>
Increase or (Decrease) from Prior Year
1994 1993
Electric Gas Total Electric Gas Total
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Customer sales............ $ (6,105) $ 4,555 $(1,550) $(6,155) $(5,646) $(11,801)
Sales to other utilities.. (831) - (831) (2,407) - (2,407)
Increase in base rates.... 4,704 - 4,704 7,605 - 7,605
Fuel cost adjustment...... (7,534) 6,234 (1,300) (4,202) 2,806 (1,396)
Deferred revenues......... (3,405) (881) (4,286) 322 1,628 1,950
Miscellaneous............. 1,328 230 1,558 326 (461) (135)
Total.............. $(11,843) $10,138 $(1,705) $(4,511) $(1,673) $ (6,184)
</TABLE>
- 16 -
<PAGE>
SHARING ARRANGEMENTS
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:
1994 1993 1992
(Thousands of Dollars)
Variation in actual electric
fuel costs from targeted
amounts.................... $(1,666) $1,345 $(1,067)
Customer (charge) credit.... (1,333) 1,076 (854)
Income (expense) recognized
by the Company............. $ (333) $ 269 $ (213)
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:
1994 1993 1992
(Thousands of Dollars)
Variation in actual net
revenue from imputed
amounts.................... $ 1,123 $ 889 $(3,118)
Customer (charge) credit.... 898 711 (2,494)
Income (expense) recognized
by the Company............. $ 225 $ 178 $ (624)
- 17 -
<PAGE>
Prior to November 22, 1993, the treatment established by the
PSC regarding net revenues from interruptible gas sales was to
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.
Effective November 22, 1993, the PSC changed said treatment
regarding net revenues from interruptible gas sales. The PSC
increased the level of such net revenues imputed in gas base
rates from $1.2 million to $1.9 million. Also, the incentive
sharing mechanism was changed from 80%/20% between the Company's
gas customers and the Company to 90%/10%. This mechanism applied
to all net revenues above $1.9 million from the Company's ten
largest firm transportation customers and all net revenues from
all other interruptible sales and transportation customers. The
described mechanism will remain in effect unless otherwise
directed by the PSC.
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:
1994 1993 1992
(Thousands of Dollars)
Actual net revenue from
interruptible gas sales.... $3,716 $3,278 $4,515
Customer credit............. 1,550 1,725 2,771
Income recognized by the
Company (includes imputed
amounts).................. $2,166 $1,553 $1,744
SALES
Sales of electricity within the Company's service territory
decreased 3% in each of 1994 and 1993, largely reflecting a
decline in usage by IBM, as described under the above caption
entitled "Other Developments."
Firm sales of natural gas increased 4% and 2% in 1994 and
1993, respectively. The increase in 1994 was largely
attributable to an increase in the usage by residential and
commercial customers. The 1993 increase was primarily from an
increase in the number of residential and commercial customers.
- 18 -
<PAGE>
Changes in sales by major customer classification are set forth
below:
% Increase (Decrease)
from Prior Year
Electric
1994 1993
Residential......................... 1 3
Commercial.......................... 3 4
Industrial.......................... (13) (13)
Gas
1994 1993
Residential......................... 3 1
Commercial.......................... 7 3
Industrial.......................... (4) -
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:
% Increase
from Prior Year
1994 1993
Growth in number of customers............ - 1
Change in average usage
per customer............................ 1 2
In both 1994 and 1993, the increased usage per customer was
largely attributable to hotter summer weather as cooling degree
days increased 10% over 1993 and 280% over 1992.
Commercial electric sales: The components of the changes
in commercial electric sales are set forth in the table below:
% Increase
from Prior Year
1994 1993
Growth in number of customers.............. 1 2
Change in average usage
per customer.............................. 2 2
- 19 -
<PAGE>
Industrial electric sales: In both 1994, as compared to
1993, and 1993, as compared to 1992, industrial electric sales
decreased 13%, due primarily to a decline in usage by IBM of 16%
in 1994 and 20% in 1993.
Gas sales - firm: The following tables set forth customer
growth, changes in customer usage and heating degree days for the
residential and commercial classifications. Changes in
residential and commercial gas sales are affected by weather
conditions.
% Increase (Decrease)
from Prior Year
Residential Sales
1994 1993
Growth in number of customers........... - 2
Change in average usage per
customer............................... 3 (1)
Commercial Sales
1994 1993
Growth in number of customers........... 2 4
Change in average usage per
customer............................... 5 (1)
Degree Days
1994 1993
Bimonthly billing cycle................. (1) 1
Calendar year........................... (3) -
Firm gas sales to industrial customers decreased 4% in 1994
primarily due to the shift of two large industrial customers from
firm service to gas transportation service. Firm gas sales to
industrial customers in 1993 remained unchanged from the 1992
level.
Gas sales - interruptible: Interruptible gas sales
increased 33% in 1994 as compared to 1993, and decreased 37% in
1993 as compared to 1992. The 1994 increase was due primarily to
the sale of natural gas to the other cotenant owners of the
Roseton Plant for use as a boiler fuel. 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,
- 20 -
<PAGE>
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
The operations of the Nine Mile 2 Plant, of which the
Company owns a 9% interest, have continued to improve. The
actual capacity factor for 1994 exceeded the targeted capacity
factor included in the Company's electric fuel adjustment clause;
and the actual cost of operation for 1994 and 1993 has
approximated the amount provided for in the rate-making process.
Both of these factors contributed to a positive impact on
earnings.
The Company has continued to participate actively on the
management, operations and accounting committees for the Nine
Mile 2 Plant and, also, on the finance committee, which deals
with regulatory and budgeting issues in an effort to produce
better forecasts and control costs.
The Plant is scheduled to commence its fourth refueling
outage in April 1995, with a targeted 60-day duration.
As more fully discussed in Note 2 of the Notes, the Company
continues to base its decommissioning cost estimates on the 1989
decommissioning study which is filed with the Nuclear Regulatory
Commission (NRC) and which estimates are included in the
Company's rates. Niagara Mohawk has advised the Company that it
intends to complete a new decommissioning study, on behalf of the
Nine Mile 2 Plant cotenant owners, during 1995. The Company
believes that decommissioning costs are likely to be much higher
than the 1989 estimates of such costs but is unable to predict
the costs at this time. The Company also 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. When this study is completed and
filed with the NRC, the Company will update its decommissioning
cost estimates.
- 21 -
<PAGE>
OPERATING EXPENSES
Changes in operating expenses from the prior year are set forth
below:
Increase or (Decrease)
from Prior Year
1994 1993
Amount % Amount %
(Dollars in Thousands)
Operating Expenses:
Fuel and purchased
electricity............... $(10,266) (8) $(10,555) (8)
Purchased natural gas...... 6,688 12 (1,166) (2)
Other expenses of
operation................. 3,436 4 1,794 2
Maintenance................ (2,381) (8) 6 -
Nine Mile 2 Plant operation
and maintenance........... 773 5 871 6
Depreciation and
amortization.............. 698 2 86 -
Taxes, other than
income tax................ 1,335 2 (775) (1)
Federal income tax......... (560) (2) 3,492 14
Total................. $ (277) - $ (6,247) (1)
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 27%
in 1994 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 58% and 57%, respectively.
In 1994 and 1993, the combined cost of fuel used in electric
generation and purchased electricity decreased $10.3 million (8%)
and $10.6 million (8%), respectively, resulting primarily from
lower per unit costs and decreased sales of electricity.
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.
- 22 -
<PAGE>
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.)
Danskammer Roseton Nine Mile
Plant Plant 2 Plant*
1994 1.98 2.62 .53
1993 1.95 2.67 .57
1992 2.01 2.64 .60
1991 2.25 2.43 .64
1990 2.36 2.94 1.21
* The post-1990 decrease in the average cost per kWh. for the
Nine Mile 2 Plant was primarily a result of the 1991
revaluation of that Plant's remaining MBTUs in the initial
load, as well as lower costs associated with that Plant's first
reload which occurred in January 1991.
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:
Amount of Gas
Year Purchased - Mcf. $/Mcf.
1994 16,215,092 3.63
1993 14,968,805 3.79
1992 16,831,406 3.59
1991 11,640,289 3.50
1990 11,813,255 3.37
The 1994 increase in gas purchased was due primarily to
increased sales of natural gas to the other cotenant owners for
use as a boiler fuel at the Roseton Plant and increased sales of
natural gas to residential and commercial customers. 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. 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. As
discussed in Note 8 of the Notes, competitively bid contracts
that the Company has in place for a majority of its gas supply
will expire in 1995 after the 1994-1995 winter heating season and
are expected to be replaced with competitively bid contracts with
third-party gas suppliers.
- 23 -
<PAGE>
Under FERC Order 636, LDCs, such as the Company, are
permitted to offer their unutilized firm transportation service
to others for a fee; this is known as capacity brokering. The
Company filed with the PSC a capacity brokering program for its
service territory, which was approved in May 1994. This program
gives the Company an opportunity to defray some or all of the
monthly fixed charges when its firm transportation capacity is
not fully utilized and, as a result, reduces the costs billed to
the Company's firm gas customers. The Company brokered such
excess capacity at various times during 1994.
Other expenses of operation increased $3.4 million (4%) in
1994 primarily due to higher employee wages and associated fringe
benefits. 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 decreased $2.4 million (8%) in 1994 due
primarily to $4.1 million of higher costs incurred in 1993 for
the scheduled major overhauls of Units 3 and 4 at the Danskammer
Plant with no comparable overhauls in 1994. These costs were
partially offset by a $1.9 million increase in maintenance costs
related to the Company's gas transmission and distribution system
in 1994. Maintenance costs for 1993 were stable when 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 1994 and
1993, the amounts provided in rates were approximately equal to
the actual operation and maintenance expenses for the Nine Mile 2
Plant.
The Company's composite rate for depreciation amounted to
3.15% in 1994, 3.17% in 1993 and 3.29% in 1992 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 34.5% in 1994, 32.8% in 1993 and 31.4% in 1992.
Property taxes, including school taxes, increased $1.5
million and $891,000 in 1994 and 1993, respectively. Nine Mile 2
Plant property taxes accounted for $208,000 and $90,000,
respectively, of such increases.
State and local taxes levied on gross revenues decreased
$406,000 and $1.8 million in 1994 and 1993, respectively. In
1994, the revenue taxes decreased due to the reduced rate of the
New York State Surcharge Tax for utility service from 15% to
12.5% effective June 1, 1994. The 1993 decrease was due
primarily to the inclusion in 1992 cost of a retroactive New York
State Gross Receipts Tax, which increased 1992 costs by $1.2
million. 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
- 24 -
<PAGE>
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 its disposition is
determined in the next rate case.
See Note 3 of the Notes for an additional analysis and
reconciliation of the federal income tax.
OTHER INCOME AND INTEREST CHARGES
Details of the AFDC are set forth below:
1994 1993 1992
(Thousands of Dollars)
Nine Mile 2 Plant......... $ 441 $ 738 $ 597
Iroquois Gas Pipeline
interconnection.......... - - 201
Other..................... 940 807 749
Total................ $1,381 $1,545 $1,547
AFDC rate................. 8.50% 8.75% 6.75%
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 caption "Allowance for Funds Used During
Construction" in Note 1 of the Notes for additional information.
Total interest charges (excluding AFDC) decreased $1.2
million (4%) in 1994 and $1.2 million (4%) in 1993. The
following table sets forth some of the pertinent data on the
Company's outstanding debt:
December 31,
1994 1993 1992
(Thousands of Dollars)
Long-term debt:
New debt issued............. $ - $ 40,000 $ 76,000
Debt retired................ 50,000 40,000 56,000
Outstanding at year-end:*
Amount (including current
portion).................. 393,853* 443,897* 443,618*
Effective rate............ 6.71% 6.75% 7.05%
Short-term debt:
Average daily amount
outstanding ............... $ 16 $ 330 $ 12,984
Weighted average
interest rate ............ 6.69% 3.94% 4.48%
*Including debt of subsidiaries of $4.8 million in 1994 and 1993
and $4.4 million in 1992.
- 25 -
<PAGE>
See Notes 4 and 6 of the Notes for additional information.
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.
- 26 -
<PAGE>
<TABLE>
Details of the 1992, 1993 and 1994 long-term debt redemptions and payments are shown
below:
<CAPTION>
Redemptions and Payments: Applicable
Redemption/Payment
Series of Principal Amount Price (% of Redemption/Payment
First Mortgage Bonds Redeemed/Paid Principal Amount) Date
<S> <C> <C> <C>
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
8 1/8% Series due 1994 50,000,000** 100.000% September 1, 1994
* Mandatory sinking fund payment.
** Payment at maturity.
Issuance and Sale:
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 could be issued are
shown below (no issuances or sales occurred in 1994):
Tranches of Proceeds Issuance and
Medium Term Notes Principal Amount to Company Sale Date
7.70% due 2000* $25,000,000 99.400% June 11, 1992
7.97% due 2003* 8,000,000 99.375% June 11, 1992
7.97% due 2003* 8,000,000 99.375% June 11, 1992
7.85% due 2004** 15,000,000 99.375% July 2, 1992
8.12% due 2022* 10,000,000 99.250% August 31, 1992
8.14% due 2022* 10,000,000 99.250% August 31, 1992
6.10% due 2000* 10,000,000 99.400% August 9, 1993
6.46% due 2003* 10,000,000 99.375% August 9, 1993
5.38% due 1999** 20,000,000 99.500% October 14, 1993
* First Mortgage Bonds.
** Promissory Note.
</TABLE> - 27 -
<PAGE>
The $116 million principal amount of Medium Term Notes,
detailed above and in Note 6 of the Notes, was issued and sold
pursuant to PSC authorization under an Order which expired as of
December 31, 1994. By an Order issued and effective October 17,
1994, the PSC granted the Company authorization to issue and
sell, through December 31, 1996, up to an additional $80 million
of securities. This $80 million can be composed of Medium Term
Notes solely or a combination of Medium Term Notes and up to $40
million worth of Common Stock.
- 28 -
<PAGE>
<TABLE>
FINANCIAL INDICES
Selected financial indices for the last five years are set forth in the following
table:
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Pretax coverage of
total interest charges:
Including AFDC..................................... 3.38x 3.29x 3.07x 2.70x 2.43x
Excluding AFDC..................................... 3.15x 3.15x 2.95x 2.62x 2.36x
Pretax coverage of total interest
charges and preferred stock dividends.................. 2.74x 2.65x 2.49x 2.22x 2.04x
Percent of construction expenditures
financed from internal funds........................... 100% 100% 100% 88% 100%
AFDC and Mirror CWIP as a percentage
of income available for common stock................... 16% 11% 10% 8% 9%
Effective tax rate...................................... 35% 35% 34% 33% 33%
</TABLE>
- 29 -
<PAGE>
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:
1994 1993
High Low Dividend High Low Dividend
1st Quarter $30 1/8 $27 7/8 $.515 $34 1/4 $30 5/8 $.50
2nd Quarter 29 3/4 25 3/4 .515 34 1/2 30 5/8 .50
3rd Quarter 27 5/8 23 .52 35 5/8 34 .515
4th Quarter 26 1/2 22 7/8 .52 34 3/8 28 3/8 .515
On June 26, 1992 the Company increased the quarterly
dividend rate to $.50 per share and on June 25, 1993 increased
the quarterly dividend rate to $.515 per share. On June 24, 1994
the quarterly dividend rate was further increased to $.52 per
share. The 1994 increase in the dividend was smaller than in
recent years in order to enhance the Company's competitive
position in the electric utility industry. The Company presently
intends to increase future dividends by a modest amount, if and
to the extent supported by sustained earnings growth, while at
the same time gradually reducing the Company's payout ratio;
however, any determination of future dividend declaration, and
the amounts and dates of such dividends, will depend on the
circumstances known at the time of consideration of such
declaration.
The number of registered holders of common stock as of
December 31, 1994 was 26,373. Of these, 26,107 were accounts in
the names of individuals with total holdings of 5,042,379
shares, or an average of 193 shares per account. The 266 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, 1994, the amount of retained earnings
available for dividends on the Company's common stock under the
provisions of said 4.85% Promissory Notes was $70.9 million.
- 30 -
<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, 1994 and 1993,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, 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 Note 7 to the Consolidated Financial Statements,
in 1993 the Company changed its method of accounting for post-
retirement benefits other than pensions to conform with Statement
of Financial Accounting Standards No. 106.
PRICE WATERHOUSE LLP
New York, New York
January 27, 1995
- 31 -
<PAGE>
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
Management is responsible for the preparation, integrity and
objectivity of the consolidated financial statements of Central
Hudson Gas & Electric Corporation and its subsidiaries
(collectively, the Company) as well as all other information
contained in this Annual Report. The consolidated financial
statements have been prepared in conformity with generally
accepted accounting principles and, in some cases, reflect
amounts based on the best estimates and judgements of the
Company's Management, giving due consideration to materiality.
The Company maintains an adequate system of internal controls to
provide reasonable assurance that among other things,
transactions are executed in accordance with Management's
authorization, that the consolidated financial statements are
prepared in accordance with generally accepted accounting
principles and that the assets of the Company are properly
safeguarded. The system of internal controls is documented,
evaluated and tested by the Company's internal auditors on a
continuing basis. Due to the inherent limitations of the
effectiveness of internal controls, no internal control system
can provide absolute assurance that errors will not occur.
Management believes that the Company has maintained an effective
system of internal control over the preparation of its financial
information including the consolidated financial statements of
the Company as of December 31, 1994.
Independent accountants were engaged to audit the consolidated
financial statements of the Company and issue their reports
thereon. The Report of Independent Accountants, which is
presented above, does not limit the responsibility of Management
for information contained in the consolidated financial
statements and elsewhere in the Annual Report.
- 32 -
<PAGE>
The Company's Board of Directors maintains a Committee on Audit
which is composed of Directors who are not employees of the
Company. The Committee on Audit meets with Management, its
Internal Auditing Manager, and its independent accountants
several times a year to discuss internal controls and accounting
matters, the Company's consolidated financial statements, the
scope and results of the audits performed by the independent
accountants and the Company's Internal Auditing Department. The
independent accountants and the Company's Internal Auditing
Manager have direct access to the Committee on Audit.
_________________________ ______________________
JOHN E. MACK, III JOHN F. DRAIN
Chairman of the Board and Vice President-Finance
Chief Executive Officer and Controller
January 27, 1995
- 33 -
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<CAPTION> December 31,
ASSETS 1994 1993
<S> <C> <C>
Utility Plant
Electric..................................................... $1,114,574 $1,083,491
Gas.......................................................... 131,830 128,093
Common....................................................... 80,652 80,485
Nuclear fuel................................................. 31,525 28,199
1,358,581 1,320,268
Less: Accumulated depreciation............................... 462,105 427,504
Nuclear fuel amortization.............................. 23,655 20,646
872,821 872,118
Construction work in progress................................ 58,252 42,741
931,073 914,859
Other Property and Investments................................. 10,948 8,465
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE>
- 34 -
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars)
<CAPTION> December 31,
ASSETS 1994 1993
<S> <C> <C>
Current Assets
Cash........................................................... 5,335 6,609
Temporary cash investments..................................... 457 20,563
Accounts receivable from customers - net of allowance for
doubtful accounts; $2.0 million in 1994 and 1993............. 43,908 46,452
Accrued unbilled utility revenues.............................. 15,076 16,931
Other receivables.............................................. 5,953 2,255
Materials and supplies, at average cost:
Fuel......................................................... 19,293 20,800
Construction and operating................................... 14,096 14,617
Special deposits and prepayments............................... 12,092 11,368
116,210 139,595
Deferred Charges
Deferred finance charges-Nine Mile 2 Plant (Note 1)........... 71,904 73,049
Income taxes recoverable (Note 3)............................. 69,331 71,121
Unamortized debt expense...................................... 11,072 12,707
Deferred energy efficiency costs (Note 1)..................... 9,583 10,316
Deferred gas costs (Note 1)................................... 6,983 10,239
Deferred vacation (Note 1).................................... 3,888 3,643
Other......................................................... 19,789 20,246
192,550 201,321
Accumulated Deferred Income Tax (Note 3)........................ 58,629 63,995
$1,309,410 $1,328,235
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE>
- 35 -
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars) December 31,
<CAPTION>
LIABILITIES 1994 1993
Capitalization
<S> <C> <C>
Common Stock Equity
Common stock, $5 par value (Note 5)......................... $ 86,192 $ 84 ,766
Paid-in capital (Note 5).................................... 277,205 270,848
Retained earnings........................................... 79,284 69,023
Capital stock expense....................................... (6,773) (6,791)
Unrealized gain on investment (Note 10)..................... 823 -
436,731 417,846
Cumulative Preferred Stock (Note 5)
Not subject to mandatory redemption......................... 46,030 46,030
Subject to mandatory redemption............................. 35,000 35,000
81,030 81,030
Long-term Debt (Note 6)....................................... 389,364 391,810
907,125 890,686
Current Liabilities
Current maturities of long-term debt.......................... 3,525 51,019
Notes payable................................................. 3,000 -
Accounts payable.............................................. 29,441 28,554
Accrued taxes and interest.................................... 6,829 6,610
Accrued vacation (Note 1)..................................... 4,081 3,836
Customer deposits............................................. 3,763 3,452
Dividends payable............................................. 10,246 9,906
Other......................................................... 5,556 4,716
66,441 108,093
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE>
- 36 -
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars) December 31,
<CAPTION>
LIABILITIES 1994 1993
<S> <C> <C>
Deferred Credits and Other Liabilities
Deferred finance charges - Nine Mile 2 Plant (Note 1)......... 34,431 40,431
Income taxes refundable (Note 3).............................. 28,383 28,935
Accrued pension costs (Note 7)................................ 9,705 11,733
Operating reserves............................................ 5,663 2,346
Deferred unbilled gas revenues................................ 3,754 5,814
Deferred gas refunds.......................................... 3,431 815
Deferred Nine Mile 2 Plant litigation proceeds (Note 2)....... 626 3,695
Other......................................................... 11,267 3,908
97,260 97,677
Accumulated Deferred Income Tax (Note 3)........................ 238,584 231,779
Commitments and Contingencies (Notes 2 and 8)...................
$1,309,410 $1,328,235
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE>
- 37 -
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(Thousands of Dollars)
<CAPTION> Year ended December 31,
<S> 1994 1993 1992
Operating Revenues <C> <C> <C>
Electric.............................. $400,327 $411,339 $413,443
Gas................................... 104,586 94,448 96,121
Total - own territory............... 504,913 505,787 509,564
Revenues from electric sales to other
utilities............................ 10,755 11,586 13,993
515,668 517,373 523,557
Operating Expenses
Operation:
Fuel used in electric generation.... 67,899 72,291 106,970
Purchased electricity............... 44,085 49,959 25,835
Purchased natural gas............... 60,588 53,900 55,066
Other expenses of operation......... 101,925 98,327 95,916
Maintenance........................... 32,716 34,486 34,226
Depreciation and amortization (Note 1) 40,380 39,682 39,596
Taxes, other than income tax.......... 66,899 65,564 66,339
Federal income tax (Note 3)........... 28,043 28,603 25,111
442,535 442,812 449,059
Operating Income........................ 73,133 74,561 74,498
Other Income and Deductions
Allowance for equity funds used during
construction (Note 1)................ 866 934 596
Federal income tax (Note 3)........... 1,237 1,445 748
Other - net........................... 6,296 5,167 4,427
8,399 7,546 5,771
Income before Interest Charges.......... 81,532 82,107 80,269
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE>
- 38 -
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (CON'T)
(Thousands of Dollars)
<CAPTION> Year ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Interest Charges
Interest on mortgage bonds.............. 19,624 22,390 23,207
Interest on other long-term debt........ 7,917 6,487 6,286
Other interest.......................... 1,784 1,204 1,954
Allowance for borrowed funds used
during construction (Note 1)........... (515) (611) (951)
Amortization of (premium) and expense
on debt-net............................ 1,793 2,247 2,085
30,603 31,717 32,581
Net Income................................ 50,929 50,390 47,688
Dividends Declared on Cumulative
Preferred Stock.......................... 5,127 5,562 5,544
Income Available for Common Stock......... $ 45,802 $ 44,828 $42,144
Common Stock:
Average shares outstanding (000s)....... 17,102 16,725 15,901
Earnings per share on
average shares outstanding............. $2.68 $2.68 $2.65
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE>
- 39 -
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION> Year ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year.............. $ 69,023 $ 58,692 $48,093
Net Income ............................... 50,929 50,390 47,688
119,952 109,082 95,781
Dividends declared:
On cumulative preferred stock........... 5,127 5,562 5,544
On common stock ($2.075 per share 1994;.
$2.045 per share 1993; $1.98 per share
1992).................................. 35,541 34,497 31,545
40,668 40,059 37,089
Balance at end of year.................... $ 79,284* $ 69,023 $58,692
* Pursuant to the terms of the 4.85% promissory notes, due 1995, $70,870 is available for
payment of dividends on common stock.
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE>
- 40 -
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
<CAPTION> Year ended December 31,
<S> 1994 1993 1992
Operating Activities <C> <C> <C>
Net Income.......................................... $ 50,929 $ 50,390 $ 47,688
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization including nuclear
fuel amortization............................... 44,616 43,887 42,999
Deferred income taxes, net....................... 12,970 15,593 11,107
Allowance for equity funds used during
construction.................................... (866) (934) (596)
Nine Mile 2 Plant deferred finance charges, net.. (4,855) (7,987) (9,951)
Provisions for uncollectibles.................... 3,306 3,431 3,824
Accrued pension costs............................ (2,028) (2,562) 8,774
Gain on sale of long-term investment............. - (670) -
Deferred gas costs............................... 3,256 (2,974) (4,103)
Deferred gas refunds............................. 2,616 416 (127)
Other - net...................................... 4,376 3,807 3,911
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled utility
revenues..................................... (2,604) (3,701) (10,670)
Materials and supplies........................ 2,028 2,623 (598)
Special deposits and prepayments.............. (724) 444 (949)
Accounts payable.............................. 887 668 (6,725)
Accrued taxes and interest.................... 219 (4,561) 1,535
Other current liabilities..................... 1,396 7 (1,788)
Net cash provided by operating activities........... 115,522 97,877 84,331
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE>
- 41 -
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (CON'T)
(Thousands of Dollars)
<CAPTION> <S> 1994 1993 1992
Investing Activities <C> <C> <C>
Additions to plant................................. (58,045) (54,037) (61,721)
Allowance for equity funds used during construction 866 934 596
Net additions to plant............................. (57,179) (53,103) (61,125)
Roseton Plant restoration costs related to fire
damage............................................ (853) (9,454) -
Insurance recoveries related to
Roseton Plant restoration......................... 4,371 5,936 -
Nine Mile 2 Plant decommissioning trust fund....... (895) (942) (917)
Proceeds from sale of long-term investments........ - 2,212 -
Other - net........................................ (2,648) (215) (671)
Net cash used in investing activities.............. (57,204) (55,566) (62,713)
Financing Activities
Proceeds from issuance of:
Long-term debt................................... 230 41,722 77,630
Common stock..................................... 7,783 30,122 7,453
Cumulative preferred stock....................... - 35,000 -
Net borrowings (repayments) of short-term debt..... 3,000 (15,000) (4,000)
Retirement and redemption of long-term debt........ (50,273) (41,443) (57,797)
Retirement and redemption of cumulative preferred
stock............................................. - (35,000) -
Dividends paid on cumulative preferred and common
stock............................................. (40,328) (39,527) (36,691)
Issuance and redemption costs...................... (110) (2,271) (2,869)
Net cash used in financing activities.............. (79,698) (26,397) (16,274)
Net Change in Cash and Cash Equivalents.............. (21,380) 15,914 5,344
Cash and Cash Equivalents at Beginning of Year....... 27,172 11,258 5,914
Cash and Cash Equivalents at End of Year............. $ 5,792 $ 27,172 $ 11,258
Supplemental Disclosure of Cash Flow Information
Interest paid (net of amounts capitalized)....... $ 28,681 $ 30,287 $ 30,413
Federal income taxes paid........................ 12,100 13,000 11,298
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE> - 42 -
<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.
Certain amounts from prior years have been reclassified on the
consolidated financial statements to conform with the 1994
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 each wholly owned, and consist
of landholding, cogeneration or energy management companies. The
net income of the Company's subsidiaries is reflected in the
Consolidated Statement of Income as other non-operating income.
Summarized financial data for the Company's subsidiaries,
included in the consolidated financial statements, is as follows:
1994 1993 1992
(Thousands of Dollars)
Total Assets (year-end) $20,749 $20,097 $17,651
Net Assets (year-end) 10,465 10,240 9,274
Revenues 2,417 7,368 4,753
Net Income 225 966 634
Utility Plant:
The costs of additions to utility plant and replacements of
retirement units of property are capitalized at original cost.
The Company's pro rata share of 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
- 43 -
<PAGE>
construction (AFDC). 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.
Jointly Owned Facilities:
The Company has a 9%, or 97.2 MW, undivided interest in the
1,080 MW Nine Mile 2 Plant (see Note 2) and a 35%, or 420 MW,
undivided interest in the 1,200 MW Roseton Steam Electric
Generating Plant (Roseton Plant) (see Note 8 caption "Roseton
Plant").
The Company's pro rata share of the investment in the Nine
Mile 2 Plant and the Roseton Plant, as included in its
Consolidated Balance Sheet at December 31, 1994 and 1993, were:
1994 1993
(Thousands of Dollars)
Nine Mile 2 Plant
Plant in service $309,893 $304,354
Construction work in progress 3,941 7,933
Accumulated depreciation (48,248) (41,148)
Roseton Plant
Plant in service $130,310 $122,753
Construction work in progress 3,740 1,014
Accumulated depreciation (70,525) (62,623)
Allowance For Funds Used During Construction:
The Company includes in plant costs 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 AFDC rate was 8.50% in 1994, 8.75% in 1993
and 6.75% in 1992.
During the construction of the Nine Mile 2 Plant, the PSC
authorized the inclusion in rate base of increasing amounts of
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
- 44 -
<PAGE>
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 of Mirror CWIP are identified
on the Consolidated Balance Sheet as "Deferred finance charges-
Nine Mile 2 Plant." Mirror CWIP is 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 and effective
April 9, 1992 regarding the Company's 1990 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 annually to other income beginning in May 1992.
Pursuant to the PSC's Opinion and Order Determining Revenue
Requirement and Rate Design, issued and effective February 11,
1994 (1993 Rate Order) the Company was authorized to offset $5.5
million of the deferred credit against other deferred balances
and to amortize $6.0 million annually beginning in December 1993.
In 1994, 1993 and 1992, the Company amortized $6.0 million, $3.3
million and $2.1 million, respectively, of this deferred credit.
The $6.0 million amortization of the deferred credit will be
continued until changed in a future PSC rate order. The level of
the deferred debit amortization is based on the level of deferred
credits that have been utilized in setting revenue requirements
for a rate year. Any amounts of deferred credits that are
utilized in the period between the end of the rate year and the
setting of new rates are included in the amortization level for
the deferred debit over the then remaining life of the Nine Mile
2 Plant. The deferred debit amortization level is currently set
at $1.145 million per year.
Depreciation and Amortization:
For financial statement purposes, the Company's depreciation
provisions are computed on the straight-line method using rates
- 45 -
<PAGE>
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. The year 2026, which is the year in which the Nine Mile
2 Plant operating license expires, is used as the end date in the
development of the remaining life amortization. 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 the original cost of average depreciable property. 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 most recent study
was performed in 1993. 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
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, including fuel and gas cost
adjustment clauses, 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
for those customers billed bimonthly whose meters are not read in
the current month.
- 46 -
<PAGE>
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
certain costs of manufactured gas.
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 targeted amount, as well as amounts above
the targeted amount, will be shared 80% by the customers and 20%
by the Company.
Reference is made to the caption "Sharing Arrangements" in
"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 8 captions
"Natural Gas Supply" and "Take-or-Pay Gas Costs" as to deferral
of certain contract take-or-pay costs charged by pipeline
suppliers.
- 47 -
<PAGE>
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 revised
1994 Energy Efficiency Program was approved by the PSC. 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
cost adjustment clause.
Deferred and 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. Accordingly,
the Company records a current liability for earned vacation pay
and an equivalent deferred charge representing the future
recoverability of the difference between costs incurred and costs
recovered in the rate-making process.
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.
Cash and Cash Equivalents:
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.
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
- 48 -
<PAGE>
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.
Under the Operating Agreement for the operation of the Plant
entered into by the cotenants, Niagara Mohawk acts as operator of
the Nine Mile 2 Plant, and all five cotenants share certain
policy, budget and managerial oversight functions. Such
Operating Agreement remains in effect subject to termination on
six months' notice.
Plant Litigation 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. The ratepayers' share of the net proceeds of
$3.542 million was refunded by the Company to its ratepayers over
approximately twelve months beginning December 21, 1993.
Radioactive Waste:
An agreement for interim storage of the Nine Mile 2 Plant
low-level radioactive waste has been agreed to between Niagara
Mohawk and the cotenants that will provide for the storage of the
Nine Mile 2 Plant low-level radioactive waste at Unit No. 1 of
the Nine Mile Point Nuclear Station (Nine Mile 1 Plant) until
June 30, 2010. It is expected that all low-level radioactive
waste stored at Nine Mile 1 Plant (owned 100% by Niagara Mohawk)
will have been transferred to a low-level radioactive waste
operating facility within New York State by this date. Niagara
Mohawk has contracted with the DOE for disposal of high-level
radioactive waste (spent fuel) from the Nine Mile 2 Plant (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.
- 49 -
<PAGE>
Nuclear Plant Decommissioning Costs:
The Company's 9% share of costs to decommission the Nine
Mile 2 Plant, is estimated to be approximately $118.5 million
($25.1 million in 1994 dollars). This is based on a 1989 cost
estimate included in the decommissioning plan filed with the
Nuclear Regulatory Commission (NRC) in 1990 and assumed that
decommissioning will begin in the year 2027.
The Company believes that decommissioning costs are likely
to be much higher than the above estimate but is unable to
predict the costs at this time. Niagara Mohawk intends to
complete a new decommissioning study, on behalf of all Nine Mile
2 Plant cotenants, for the Nine Mile 2 Plant during 1995. Until
such time as the new decommissioning study is completed and filed
with the NRC, the Company will continue to base its
decommissioning cost estimates on the 1989 study.
The annual decommissioning allowance reflected in rate-
making is based upon the 1989 estimate, which includes amounts
for radioactive and non-radioactive dismantlement costs and is
charged to operations through depreciation charges. 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, 1994 amounted to $1.2 million. The external decommissioning
trust fund at December 31, 1994 and 1993 amounted to $4.503
million and $3.608 million, respectively. The net earnings from
inception through December 31, 1994 amounted to $496,000. The
external decommissioning trust fund 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 in the
Consolidated Balance Sheet and amount to $5.7 million and $4.6
million at December 31, 1994 and 1993, respectively. NRC
regulations require the direct funding of eventual
decommissioning costs of nuclear facilities. The Company, in
1990, established a master trust in order to comply with these
NRC requirements. Applying the NRC minimum funding guidelines
established in May 1993, the Company has estimated that its share
of the minimum funding requirements will be approximately $39.7
million in 1994 dollars.
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
- 50 -
<PAGE>
ultimately be recovered in the rate-making process, although no
such assurance can be given.
In response to concerns raised by the Securities and
Exchange Commission, the Financial Accounting Standards Board has
agreed to review the accounting for decommissioning to determine
when a liability for nuclear decommissioning should be
recognized, how any such liability should be measured, and
whether a corresponding asset is created. If current electric
utility industry accounting practices for such decommissioning
are changed: annual provisions could increase, the estimated
cost for decommissioning could be recorded as a liability rather
than as accumulated depreciation, a regulatory asset for the
difference between the amount accrued to date and the total
decommissioning liability could be established, and trust fund
income from the external decommissioning trusts could be reported
as investment income rather than as a reduction to
decommissioning expense. The Company does not believe that such
changes, if required, would have an adverse effect on results of
operations due to the belief that decommissioning costs will
continue to be recovered in rates.
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 for such purpose 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, 1994 and 1993 of approximately
$664,000 and $724,000, respectively and a corresponding
regulatory asset are reflected in the Consolidated Balance Sheet.
Payments to the Fund are made to Niagara Mohawk by the cotenants
of Nine Mile 2 Plant.
- 51 -
<PAGE>
NOTE 3 - FEDERAL INCOME TAX
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:
1994 1993 1992
(Thousands of Dollars)
Charged to operating expense:
Federal income tax.......... $18,190 $14,502 $ 5,467
Deferred income tax......... 9,853 14,101 19,644
Income tax charged to
operating expense....... 28,043 28,603 25,111
Charged (credited) to other
income and deductions:
Federal income tax.......... (4,354) (2,937) 7,789
Deferred income tax......... 3,117 1,492 (8,537)
Income tax charged
(credited) to other
income and deductions... (1,237) (1,445) (748)
Total federal income tax... $26,806 $27,158 $24,363
- 52 -
<PAGE>
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:
1994 1993 1992
(Thousands of Dollars)
Net income.................... $50,929 $50,390 $47,688
Federal income tax............ 13,836 11,565 13,256
Deferred income tax........... 12,970 15,593 11,107
Income before taxes......... $77,735 $77,548 $72,051
Computed tax @
statutory rate (35% in 1994
and 1993, 34% in 1992)....... $27,207 $27,142 $24,497
Increase (decrease) to computed
tax due to:
Tax depreciation............ (9,597) (10,796) (11,833)
Deferred finance charges -
Nine Mile 2 Plant.......... (1,700) (862) -
Deferred gas costs.......... 1,149 (844) (1,315)
Deferred energy efficiency
costs...................... 923 (1,106) (2,386)
Deferred OPEB expense....... 713 (1,617) -
Pension expense............. (1,471) (893) 3,257
Alternative minimum tax..... (1,544) (59) 1,971
Other....................... (1,844) 600 (935)
Federal income tax............ 13,836 11,565 13,256
Deferred income tax........... 12,970 15,593 11,107
Total federal income tax.... $26,806 $27,158 $24,363
Effective tax rate........... 34.5% 35.0% 33.8%
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
(Thousands of Dollars)
Tax depreciation.................. $14,605
Investment tax credit............. (1,396)
Deferred electric fuel costs...... (562)
Deferred gas costs................ 1,315
Deferred energy efficiency costs.. 2,386
Pension expense................... (3,257)
Alternative minimum tax........... (1,971)
Unbilled revenues................. (752)
Other............................. 739
Deferred income tax............. $11,107
- 53 -
<PAGE>
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109) was adopted by the
Company on January 1, 1993 in accordance with provisions of a
Statement of Interim Policy on Accounting and Rate-making
Procedures to Implement SFAS 109 issued by the PSC. Such
adoption had no impact on either the 1994 or 1993 Consolidated
Statement of Income. As set forth below, the adoption of SFAS
109 affected the Consolidated Balance Sheet only.
The adoption of SFAS 109 resulted in the recording of a
deferred tax liability of approximately $69.2 million
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. The regulatory asset and regulatory liability
related to SFAS 109 are adjusted quarterly and amount to $69.3
million and $28.4 million, respectively, at December 31, 1994 and
$71.1 million and $28.9 million, respectively, at December 31,
1993.
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%. This excess deferred federal income tax
amount was adjusted downward 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.
- 54 -
<PAGE>
The following is a summary of the components of accumulated
deferred income taxes at December 31, 1994 and 1993, as reported
in the Consolidated Balance Sheet:
1994 1993
(Thousands of Dollars)
Accumulated Deferred Income
Tax Assets:
Future tax benefits on
investment tax credit basis
difference..................... $ 16,829 $ 17,365
Alternative minimum tax.......... 12,989 14,533
Tax depreciation - Nine Mile 2
Plant disallowed investment.... 6,155 9,232
Unbilled revenues................ 5,045 5,952
Nondeductible pension expense.... 2,274 3,804
Other............................ 15,337 13,109
Accumulated Deferred Income Tax
Assets........................... $ 58,629 $ 63,995
Accumulated Deferred Income
Tax Liabilities:
Tax depreciation................. $162,734 $152,395
Accumulated deferred investment
tax credit..................... 31,254 32,250
Future revenues - recovery of
plant basis differences........ 24,269 24,933
Other............................ 20,327 22,201
Accumulated Deferred Income Tax
Liabilities...................... $238,584 $231,779
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 $50.0
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 $2.0
million with three regional banks. There were no outstanding
loans under these Agreements at December 31, 1994 or 1993. In
order to diversify its sources of short-term financing, during
1994 the Company entered into short-term credit facilities with
four commercial banks totaling $130.0 million in the aggregate.
- 55 -
<PAGE>
There was $3.0 million outstanding at December 31, 1994 related
to these credit facilities.
Authorization from the PSC limits the amount the Company may
have outstanding, at any time, under all of its short-term
borrowing arrangements to $52.0 million in the aggregate.
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, 1992 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
Issued under dividend
reinvestment plan......... 227,772 1,139 5,104
Issued under customer stock
purchase plan............. 57,545 287 1,253
December 31, 1994 17,238,464 $ 86,192 $277,205
- 56 -
<PAGE>
Cumulative Preferred Stock, $100 par value; 1,200,000 shares
authorized:
Final Redemption Shares Outstanding
Redemption Price December 31,
Series Date 12/31/94 1994 1993
Not Subject
to Mandatory
Redemption:
4 1/2% $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
460,300 460,300
Subject to
Mandatory
Redemption:
6.20% 10/1/08 (a) 200,000 200,000
6.80% 10/1/27 (a) 150,000 150,000
350,000 350,000
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.
These expenses are not being amortized except that as directed by
the PSC, issuance and redemption costs and unamortized expenses
associated with preferred stock redemptions have been deferred
and are being amortized over the remaining lives of the issues
subject to mandatory redemptions.
The PSC has authorized the issuance and sale of certain debt
and equity securities of the Company. Accordingly, on November
7, 1994, the Company filed a Registration Statement with the
Securities and Exchange Commission for the purposes of
registering (i) Debt Securities and Common Stock, $5.00 par
value, but not in excess of $80.0 million in aggregate, and not
in excess of $40.0 million initial offering price of such Common
Stock and (ii) Cumulative Preferred Stock, not in excess of $25.0
- 57 -
<PAGE>
million, par value $100 per share, which may be issued as
Depositary Preferred Shares, each representing 1/4 of a share of
such Cumulative Preferred Stock, each evidenced by Depositary
Receipts. As of December 31, 1994, such Registration Statement
had not become effective.
- 58 -
<PAGE>
NOTE 6 - CAPITALIZATION - LONG-TERM DEBT
Details of long-term debt are shown below:
December 31,
1994 1993
(Thousands of Dollars)
Series Maturity Date
First Mortgage Bonds:
6.10% (a) April 28, 2000 $ 10,000 $ 10,000
7.70% (a) June 12, 2000 25,000 25,000
8 3/4% May 1, 2001 30,000 30,000
7.97% (a) June 11, 2003 8,000 8,000
7.97% (a) June 13, 2003 8,000 8,000
6.46% (a) August 11, 2003 10,000 10,000
6 1/4% June 1, 2007 4,500 4,500
9 1/4% May 1, 2021 70,000 70,000
8.12% (a) August 29, 2022 10,000 10,000
8.14% (a) August 29, 2022 10,000 10,000
8.375% December 1, 2028 16,700 16,700
202,200 202,200
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 3/8%) Oct. 1, 2014 16,700 16,700
1984 Series B (7 3/8%) 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 (b) 2,562
5.38% (a) January 15, 1999 20,000 20,000
7.85% (a) July 2, 2004 15,000 15,000
35,000 37,562
Secured Notes Payable of Subsidiary 3,878 3,866
Unamortized Premium (Discount)
on Debt - Net (964) (1,068)
Total long-term debt $389,364 $391,810
(a) Issued under the Company's Medium Term Note Program.
(b) Principal amount was reclassified to "Current Maturities of
Long-term Debt."
- 59 -
<PAGE>
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.
In 1994, the Company paid at maturity one series of First
Mortgage Bonds totaling $50.0 million. The funds to pay these
bonds were generated from internal sources.
In 1993, the Company redeemed two series of First Mortgage
Bonds, totaling $40.0 million. The funds to redeem these bonds
were obtained from the sale of an aggregate of $40.0 million of
Medium Term Notes, issued in several tranches.
Authorization by the PSC to issue Medium Term Notes under
the Company's Medium Term Note Program expired on December 31,
1994. Of the $125.0 million of Medium Term Notes authorized
under such program, $116.0 million were issued. By Order
effective October 17, 1994, the PSC authorized the Company to
issue and sell new debt securities and common stock totaling not
more than $80.0 million in the aggregate. Such Order also
authorized the issuance of up to $115.0 million of tax exempt
NYSERDA Pollution Control Revenue Bonds for the purpose of
refinancing, if economical, a like amount of such bonds.
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 with respect to 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, 1997,
and the letter of credit expiration date for the letters of
credit supporting the 1987 NYSERDA Bonds is September 16, 1997.
- 60 -
<PAGE>
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 between actual interest
rates and those interest rates allowed for rate-making purposes.
Such deferred balances, which are liabilities of $488,000 and
$1.176 million at December 31, 1994 and December 31, 1993,
respectively, are to be disposed of in future rate cases.
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
shorter of the remaining lives of the related extinguished issues
or the new 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. 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
(Retirement Plan) covering substantially all of its employees.
The Retirement 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 Retirement 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 73%, 71% and 71% of the net periodic
pension costs for the years 1994, 1993 and 1992, respectively,
with remaining costs allocated to capital projects. The
allocation of net periodic pension costs between capital and
expense follows the payroll distribution.
- 61 -
<PAGE>
Net periodic pension (income) costs for 1994, 1993 and 1992
include the following components:
1994 1993 1992
(Thousands of Dollars)
Service cost - benefits earned
during the period........... $ 5,876 $ 4,518 $ 4,002
Interest cost on projected
benefit obligation.......... 13,256 13,148 12,801
Actual return on Retirement
Plan assets................. (6,947) (34,022) (21,941)
Net amortization and deferral (14,213) 13,794 6,411
Net periodic pension
(income) cost............ $ (2,028) $ (2,562) $ 1,273
The following table sets forth the Retirement Plan's funded
status at October 1, 1994 and 1993 and amounts recognized in the
Company's Consolidated Balance Sheet at December 31, 1994 and
1993:
1994 1993
(Thousands of Dollars)
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits
of $146,779 and $171,389............. $148,854 $173,924
Projected benefit obligation for
service rendered to date.............. $171,713 $211,583
Retirement Plan assets at market value. 223,376 227,638
Excess of Retirement Plan assets over
projected benefit obligation.......... 51,663 16,055
Unrecognized net gain.................. (60,551) (23,703)
Prior service cost not yet recognized
in net periodic pension cost.......... 3,789 1,157
Unrecognized net asset being amortized
over 15 years......................... (4,606) (5,242)
Pension liability recognized in the
Consolidated Balance Sheet............ $ (9,705) $(11,733)
Retirement Plan assets consist primarily of equities and
fixed income securities. The Retirement Plan is deemed to be
fully funded for federal income tax purposes, therefore, the
Company did not make any contributions to the Retirement Plan
during 1994 or 1993.
The actuarial present value of projected benefit obligations
for October 1, 1994 and 1993 was determined using a weighted
average discount rate of 8.50% and 6.25%, respectively, and an
assumed rate of increase in compensation of 5.5% in both years.
- 62 -
<PAGE>
The assumptions used in determining the funded status at October
1 are used in determining the following year's net periodic
pension costs. The expected long-term rate of return on
Retirement Plan assets used in determining the net periodic
pension (income) costs was 8.5% for 1994 and 9.5% for 1993 and
1992.
Prior to 1993, the cumulative unrecognized net gains or
losses in excess of 10% of the greater of the market-related
value of Retirement 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 (Pension and OPEB
Order), effective January 1, 1993 the Company changed its
accounting to a method of amortizing each year's experience gain
or loss over ten years. Such change had the effect of reducing
1993 net periodic pension costs by approximately $4.4 million.
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 pension costs of the EDC Plan, which was established in
1992, amounted to approximately $304,000, $203,000 and $142,000
for 1994, 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 $189,000
and $44,000 in 1994 and 1993, respectively.
Pursuant to the Pension and 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 for calendar year 1992.
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,
- 63 -
<PAGE>
which is included in the amount above. In order to recover a
portion of the costs of these benefits, the Company requires
employees who retire on or after October 1, 1994 to contribute
toward the cost of such benefits.
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 is amortizing the
unfunded accumulated postretirement benefit obligation
(Transition Obligation) at January 1, 1993 over a 20-year period.
Net periodic postretirement benefit cost for 1994 and 1993
includes the following components:
1994 1993
(Thousands of Dollars)
Service cost - benefits
attributed to the period....... $ 2,392 $ 1,754
Interest cost on accumulated
postretirement benefit
obligation..................... 4,654 4,731
Actual return on postretirement
benefit plan (Benefit Plan)
assets......................... (426) -
Amortization of Transition
Obligation..................... 3,114 3,114
Net amortization and deferral... 928 -
Net periodic postretirement
benefit cost................... $ 10,662 $ 9,599
- 64 -
<PAGE>
The Benefit Plan's funded status reconciled with the
Company's Consolidated Balance Sheet is as follows:
December 31,
1994 1993
(Thousands of Dollars)
Accumulated postretirement
benefit obligation:
Retirees...................... $(27,526) $(34,642)
Fully eligible employees...... (4,537) (6,705)
Other employees............... (25,532) (41,249)
(57,595) (82,596)
Benefit Plan assets at fair
value.......................... 14,051 7,710
Excess of accumulated post-
retirement benefit obligation
over Benefit Plan assets....... (43,544) (74,886)
Unrecognized net (gain) loss.... (14,489) 15,776
Prior service cost not yet
recognized in net periodic
postretirement benefit cost.... - -
Unrecognized Transition
Obligation..................... 56,035 59,149
Postretirement benefit (liability)
asset recognized in the
Consolidated Balance Sheet..... $ (1,998) $ 39
The accumulated postretirement benefit obligation under the
Benefit Plan at December 31, 1994 and 1993 was determined using a
weighted average discount rate of 8.50% and 6.25%, respectively
and a rate of increase in future compensation levels of 5.5% for
both periods. The expected long-term rate of return of Benefit
Plan assets used in determining the net periodic postretirement
benefit cost was 6.6% for 1994. There was no expected long-term
rate of return on Benefit Plan assets for 1993 as funding was not
expected until the end of 1993.
The assumed health care cost trend is 12% in the early years
and trends down to an ultimate rate of 5.5% by the year 2010. A
1% increase in health care cost trend rate assumptions would
produce an increase in the accumulated postretirement benefit
obligation at December 31, 1994 of $7.545 million and an increase
in the aggregate service and interest cost of the net periodic
postretirement benefit cost of $1.076 million.
The Company has established a qualified funding vehicle
for such retirement benefits for collective bargaining employees
and a similar vehicle for management employees in the form of
- 65 -
<PAGE>
qualified Voluntary Employee Beneficiary Association (VEBA)
trusts. The Company funded the VEBA trusts in 1994 and 1993 with
tax-deductible contributions totaling $8.3 million and $7.7
million, respectively.
In the Pension and 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 during 1993. 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
$146,000, $197,000 and $260,000 in 1994, 1993 and 1992,
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 adoption of SFAS 112 on
January 1, 1994 resulted in the recording of an unfunded
postemployment benefit obligation of $639,000. The unfunded
postemployment benefit obligation at December 31, 1994 amounted
to $514,000. In accordance with the 1993 Rate Order, the Company
recorded a corresponding regulatory asset representing the future
recoverability of this cost. Accordingly, the adoption of SFAS
112 did not affect the Company's financial results.
NOTE 8 - 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 1995-1999.
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
- 66 -
<PAGE>
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. The exercise of
this option is subject to PSC approval. 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 Company's option in the Basic Agreement to buy
Niagara Mohawk's interest in the Roseton Plant.
By Agreement, made as of March 30, 1994, Niagara Mohawk and
the Company terminated and cancelled the Amendment. A motion to
close the proceeding pending before the PSC to approve the
Amendment was filed by Niagara Mohawk and the Company and
approved by the PSC on August 18, 1994.
On March 30, 1994, Niagara Mohawk and the Company also
entered into a Letter of Understanding which, among other things,
provides for:
(1) consideration by the Company, Niagara Mohawk and Con
Edison for staggering the operation of the two units of the
Roseton Plant in order to take advantage of current market costs
for energy and capacity; and
(2) the purchase by the Company of up to 100 MW of energy
and capacity during peak periods from Niagara Mohawk during the
time frame May 1, 1994 through April 30, 1995. During the period
May 1995 through April 2004, the Company may from time to time
issue requests for proposals to purchase energy and capacity on
the open market. Niagara Mohawk, among others, will be requested
by the Company to bid on these future purchases.
(3) Subject to regulatory approval, Niagara Mohawk and the
Company intend to enter into agreements, which would cover (i)
the purchase by the Company of the following electric capacity
and associated energy from Niagara Mohawk if needed: 15 MW each
year, subject to a reservation charge, commencing in 1998 through
2004, up to a total of 75 MW, and up to an additional 150 MW in
the period 2001 through 2004 not subject to a reservation charge;
(ii) the option of Niagara Mohawk to better competitively bid
prices for the Company's long-term purchases of capacity and
energy during the period May 1995 through April 2004 as indicated
in Item (2) and (iii) a revision in the Company's 1968 option to
purchase Niagara Mohawk's 25% interest in the Roseton Plant in
2004 which would give Niagara Mohawk an option to retain said 25%
interest.
The Company expects that the cancellation of the Amendment
and the entering into of the agreements contemplated by the
- 67 -
<PAGE>
Letter of Understanding will result in capital and operating and
maintenance cost savings. The Company's option to buy Con
Edison's interest in the Roseton Plant is not affected by the
Amendment or the agreements contemplated by the Letter of
Understanding.
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
$284,000 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 80%
of the weekly indemnity for a second 52-week period and 80% 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 with
respect to 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 $2.25 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.
- 68 -
<PAGE>
The Company intends to maintain, or cause to be maintained,
insurance against such 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 10,241,383 Mcf. of
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 20,000 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 1995 after the 1994-1995
winter heating season. All such expiring gas supply contracts
are competitively bid contracts which 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
year-to-year thereafter unless either party provides written
notice of cancellation. 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 March 31, 1995. 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. These changes will
require the Company to pay a share of certain transition costs
incurred by the Pipelines as a result of Order 636. 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)
- 69 -
<PAGE>
stranded facilities costs, and (4) new facilities costs.
The Company has been billed $1.950 million of transition
costs through December 31, 1994 by the Pipelines. Transition
costs are currently being recovered through the gas cost
adjustment clause. The aggregate amount that the Company will
ultimately 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 Company's gas cost
adjustment clause.
The Company received $4.535 million in gas supplier refunds
during 1994, resulting from settlements approved by FERC. Gas
supplier refunds are distributed to firm gas customers through
the Company's gas cost adjustment clause over a subsequent
twelve-month period as authorized by the PSC.
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. The remaining 35% of take-or-pay costs
are deferred with interest for subsequent consideration by the
PSC and amounted to $2.680 million and $2.483 million, at
December 31, 1994 and 1993, respectively. During 1994, the
Company received and deferred $1.514 million in gas supplier
refunds related to take-or-pay costs incurred. The Company has
proposed to the PSC to apply these refunds to the deferred take-
or-pay costs, as noted above, but the PSC has not acted on this
matter.
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 the Company recovery of costs included in the
FERC approved gas rates. The Company intends to oppose any
attempt by the PSC to require the Company to absorb any take-or-
- 70 -
<PAGE>
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 conditional
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.
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.
Environmental Matters:
General: On an ongoing basis, the Company assesses
environmental issues which could impact the Company and its
ratepayers.
Clean Water Act Compliance: The Company is a party to a
proceeding before the New York State Department of Environmental
Conservation related to the processing of permit renewal
applications for the Company's generating stations under the
State Pollution Discharge Elimination System. At this stage of
the proceeding, the Company can make no determination as to the
outcome of the proceeding 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. These include 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 did comply with the monitoring provisions
program as of January 1, 1995 by installing and certifying
continuous emission monitors. The Company's emissions of
nitrogen oxides are subject to additional controls effective May
31, 1995 under Title I of the CAA Amendments.
- 71 -
<PAGE>
The Company estimates that the installation of continuous
emissions monitors and nitrogen oxides emissions controls will
cost approximately $6.2 million for the Danskammer Plant and $4.2
million for the Company's share of the Roseton Plant. The
Northeast Ozone Transport Commission (OTC), of which New York
State is a member, has agreed that additional reductions of
nitrogen oxides emission will be required in 1999 and, possibly,
in the year 2003. Because regulations have not yet been
promulgated by New York State to implement this agreement, the
specific reduction required at the Company's facilities has not
been determined. The Company expects that it will have adequate
financial resources to comply with the requirements of the CAA
Amendments.
Former Manufactured Gas Plant Facilities: On September 15,
1994, the Company was advised by letter from the City Manager of
the City of Newburgh, New York that contaminants (a tar-like
substance), alleged to have originated from a former coal gas
manufacturing facility operated by the Company and its
predecessors, had been found during the construction of an
expansion of the City's sewage treatment plant. On November 28,
1994, the Company received a letter from counsel to the City,
which letter purports to be a notice pursuant to the "Citizens'
Suit" provisions of the federal Resource Conservation and
Recovery Act (RCRA), that the City intends to file a citizens'
suit against the Company. The letter asserts that an "imminent
and substantial endangerment to health and the environment"
exists by virtue of the release of allegedly hazardous coal-tar
material from the former Water Street gas manufacturing plant
site owned by the Company.
On January 10, 1995, the Company received a second letter
from counsel to the City, which letter purports to be notice
pursuant to said "Citizens' Suit" provisions of RCRA and the
"Citizens' Suit" provisions of the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA) and the
Emergency Planning and Community Right to Know Act (EPCRA) that
the City intends to file a second Citizens' Suit against the
Company.
The letter received January 10, 1995 alleges that (i) the
City's tests at the site revealed that such substances are known
to constitute a "hazardous waste," "hazardous substance,"
"extremely hazardous substance," "hazardous chemical" and/or
"toxic chemical" as defined under RCRA, CERCLA and EPCRA, and
(ii) the Company has used, stored, disposed of and/or released
such substances, and operated underground storage tanks, in
violation of permit, treatment, storage, disposal, monitoring,
reporting and notification requirements under RCRA, CERCLA and
EPCRA.
- 72 -
<PAGE>
Under RCRA, the City has a 90-day waiting period from the
date of receipt of such letters, before which it can commence any
such action, and has a 60-day waiting period under CERCLA and
EPCRA.
The Company is conducting a study of this matter and the
Company has not yet been able to determine whether it was the
generator of the tar-like substance in question.
At this time, the Company can make no prediction as to the
outcome of this matter, however, any action by the City, if
successful, could require remedial action by the Company. The
Company can make no reasonable estimate of the cost if it were
liable to the City in this matter. However, the Company has put
its insurance carriers on notice and intends to pursue
reimbursement from them for the cost of any liability, but it
cannot predict the extent of such reimbursement at this time.
Asbestos Litigation:
Since 1987, the Company, along with many other parties, has
been joined as a defendant or third-party defendant in
approximately 530 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.
Approximately 150 of these cases have been dismissed with
respect to the Company, and the Company has agreed to settle 105
of the cases for amounts which are not material in relation to
the consolidated financial statements. Consequently, on January
1, 1995, the Company was a defendant in approximately 275
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.
The Company is insured under successive comprehensive
general liability policies issued by a number of insurers, has
put such insurers on notice of the asbestos lawsuits and has
demanded reimbursement for its defense costs and liability.
Tax Matters:
Assessments: The Internal Revenue Service (IRS) has
completed its examination of the Company's federal income tax
- 73 -
<PAGE>
returns for 1987 and 1988. The IRS Agent's Report proposes
adjustments which have the potential to increase the Company's
tax liability by approximately $16.0 million plus interest.
Included in the proposed adjustments are significant issues
related to the tax in-service date of Nine Mile 2 Plant. In May
1994, the Company, in defending its position regarding Nine Mile
2 Plant and other tax matters, filed a Protest with the Appeals
Office of the IRS. To the extent the IRS is able to sustain its
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 including
interest 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
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
ratepayers pursuant to such Order as follows: (1) the effect of
the amortization of a $6.526 million credit over a 36-month
period was incorporated into electric base rates arising from
such Order, 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
- 74 -
<PAGE>
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 was 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
contributed $500,000 in 1994 toward the costs of such training
centers and replacement program and will contribute $500,000
annually in 1995 and 1996 toward the costs of such replacement
program. In 1997, the Company's shareholders would contribute up
to $500,000 toward the cost of such replacement program depending
on the Company's completion of certain tasks by specified dates.
Two lawsuits against the Company have arisen from the November
1992 explosion in Catskill, New York. One of the lawsuits seeks
recovery from the Company of compensatory and punitive damages in
the sum of $4.0 million. The other lawsuit seeks an unspecified
amount of compensatory and punitive damages.
In addition to the above, 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. The cause of these incidents was
investigated by the Company and, independently, by the PSC. By
Report, dated October 25, 1994, the PSC concluded that the
probable cause of the incident was an ignition of gas that
accumulated in each of the structures after migrating through the
ground from a leak in the Company's gas main in the immediate
area of the two destroyed buildings. The Company continues to
investigate the Wappingers Falls incident and has not yet
determined what caused the first explosion which destroyed the
residence. The Company's investigation has produced a
reconstruction of events which indicates that the first explosion
was not caused by natural gas and that the force of this initial
explosion, in conjunction with deep frost conditions, caused a
weld in the Company's natural gas pipeline to crack. Two
lawsuits have arisen from the Wappingers Falls incident. One of
- 75 -
<PAGE>
the lawsuits seeks recovery from the Company of compensatory and
punitive damages in the sum of $1.0 million. The other lawsuit
seeks an unspecified amount of damages against the Company.
The Company is investigating the above 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 which, if
awarded, could have a material adverse effect on the Company's
financial position. At this time, the Company can make no
prediction as to any other litigation which may arise out of
these incidents.
On June 22, 1994, an unregulated subsidiary of the Company
sold its interest in two limited partnerships. In conjunction
with these sales transactions, such subsidiary agreed to
guarantee a third-party loan in the amount of $1.1 million which
was made to the purchaser of the limited partnership interests.
NOTE 9 - 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
1994 80% 20% 89% 11%
1993 82% 18% 89% 11%
1992 82% 18% 87% 13%
For the year ended December 31, 1994, the Company served an
average of 259,765 electric and 59,475 gas customers. Of the
Company's total electric revenues during that period,
approximately 43% was derived from residential customers, 31%
from commercial customers, 19% from industrial customers and 7%
from other utilities and miscellaneous sources. Of the Company's
total gas revenues during that period, approximately 44% was
derived from residential customers, 31% from commercial
customers, 4% from industrial customers, 16% from interruptible
customers and 5% 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 12%
of the Company's total electric revenues and approximately 6% of
its total gas revenues for the year ended December 31, 1994.
- 76 -
<PAGE>
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.
- 77 -
<PAGE>
Electric
1994 1993 1992
(Thousands of Dollars)
Operating Revenues................ $411,082 $422,925 $427,436
Operating Expenses:
Fuel and purchased electricity... 111,984 122,250 132,805
Depreciation and amortization.... 36,597 35,625 36,074
Other, excluding income tax...... 172,057 173,167 172,301
Total......................... 320,638 331,042 341,180
Operating Income before Income Tax 90,444 91,883 86,256
Federal income tax, including
deferred income tax - net........ 25,334 25,642 21,368
Operating Income.................. $ 65,110 $ 66,241 $ 64,888
Construction Expenditures......... $ 49,316 $ 43,097 $ 50,159
Identifiable Assets at December 31*
Net utility plant................ $776,169 $777,044 $779,291
Construction work in progress.... 46,879 35,424 30,282
Total utility plant............ 823,048 812,468 809,573
Materials and supplies........... 27,080 28,063 31,496
Total.......................... $850,128 $840,531 $841,069
Gas
1994 1993 1992
(Thousands of Dollars)
Operating Revenues................ $104,586 $94,448 $96,121
Operating Expenses:
Purchased natural gas............ 60,588 53,900 55,066
Depreciation and amortization.... 3,783 4,057 3,522
Other, excluding income tax...... 29,483 25,210 24,180
Total......................... 93,854 83,167 82,768
Operating Income before Income Tax 10,732 11,281 13,353
Federal income tax, including
deferred income tax - net........ 2,709 2,961 3,743
Operating Income.................. $ 8,023 $ 8,320 $ 9,610
Construction Expenditures......... $ 8,729 $10,940 $11,562
Identifiable Assets at December 31*
Net utility plant................ $ 96,652 $95,074 $90,352
Construction work in progress.... 11,373 7,317 4,648
Total utility plant............ 108,025 102,391 95,000
Materials and supplies........... 6,309 7,354 6,544
Total.......................... $114,334 $109,745 $101,544
*Identifiable assets not included herein are considered to be
corporate assets and have not been allocated between the
electric and gas segments.
- 78 -
<PAGE>
NOTE 10 - 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 and Temporary Cash Investments:
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.
- 79 -
<PAGE>
The estimated fair values of the Company's financial
instruments are as follows:
December 31, 1994
Carrying Fair
Amount Value
(Thousands of Dollars)
Cash and temporary cash investments... $ 5,792 $ 5,792
Cumulative preferred stock subject
to mandatory redemption............. (35,000) (29,500)
Long-term debt (including
current maturities)................. (392,889) (389,957)
Notes payable......................... (3,000) (3,000)
December 31, 1993
Carrying Fair
Amount Value
(Thousands of Dollars)
Cash and temporary cash investments... $ 27,172 $ 27,172
Cumulative preferred stock subject
to mandatory redemption............. (35,000) (35,575)
Long-term debt (including
current maturities)................. (442,829) (485,360)
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115) issued by the FASB. The adoption of SFAS
115 resulted in the recording of an unrealized net holding gain
as an adjustment to common stock equity. This unrealized net
holding gain represents the amount by which the market value of
an investment that the Company maintains in an insurance company
exceeds its cost, net of tax effects. The investment, which is
classified as "available-for-sale" under SFAS 115, had a cost and
market value at December 31, 1994 of $775,000 and $2.041 million,
respectively, and a resulting unrealized net holding gain of
$823,000. Common stock equity will be adjusted to reflect
periodic changes in the market value of this investment. A
realized gain or loss would be recorded in the Consolidated
Statement of Income upon sale or other disposition of this
investment.
Additionally, in accordance with SFAS 115, investments in
debt and equity securities held in the Nine Mile 2 Plant
Decommissioning Trust Fund (Fund) are reported at fair value.
Pursuant to PSC accounting requirements, gains or losses on Fund
investments are included in nuclear decommissioning trust assets
and added to the accumulated decommissioning component of
accumulated depreciation included in the Consolidated Balance
Sheet.
- 80 -
<PAGE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
Selected financial data for each quarterly period within 1994 and 1993 are presented
below:
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:
1994
March 31............ $162,836 $28,175 $20,785 $1.22
June 30............. 117,214 14,500 7,646 .45
September 30........ 116,091 17,540 11,152 .65
December 31......... 119,527 12,918 6,219 .36
1993
March 31............ $153,372 $26,711 $18,715 $1.15
June 30............. 117,744 17,254 9,885 .59
September 30........ 120,076 17,068 9,264 .55
December 31......... 126,182 13,528 6,965 .41
</TABLE>
- 81 -
</PAGE>
<PAGE>
EXHIBIT (10) (iii) 19
AMENDMENT 1
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
SAVINGS INCENTIVE PLAN
Effective April 1, 1994, CENTRAL HUDSON GAS & ELECTRIC
CORPORATION SAVINGS INCENTIVE PLAN is hereby amended as follows:
The following paragraph will be added as item 2.14 to Article 2
entitled "Top Heavy And Administration" on Page 32 of the Plan:
2.14 Indemnification - In connection with any action or
determination, the Administrator shall be entitled to rely upon
information furnished by the Employer. To the extent permitted
by law and to the extent not covered by insurance provided by the
Employer, the Employer shall indemnify the members of the Board
of Directors of the Employer, the Administrator and any other
employees of the Employer who have fiduciary responsibility with
respect to the Plan from and against any and all liability, loss,
cost and/or expense sustained by reason of any act or failure to
act in connection with the performance of their duties,
responsibilities and obligations under the Plan, ERISA and other
applicable law. Such indemnification shall include attorney's
fees and other costs and expenses reasonably incurred in defense
of any action brought by reason of any such act or failure to
act.
CENTRAL HUDSON GAS & ELECTRIC
CORPORATION
Date: July 22, 1994
By:
ELLEN AHEARN
Title Corporate Secretary
</PAGE>
<PAGE>
EXHIBIT (10) (iii) 20
AMENDMENT 2
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SAVINGS
INCENTIVE PLAN
Effective January 1, 1995, CENTRAL HUDSON GAS & ELECTRIC
CORPORATION SAVINGS INCENTIVE PLAN is hereby amended as follows:
The following change will be made to item 4.1(b), last sentence,
in Article 4 entitled "Contribution And Allocation" on page 35 of
the Plan:
"Except, however, in applying the matching percentage specified
above, only salary reductions up to 6% of Compensation for
Participants subject to a collective bargaining agreement and 8%
of Compensation for all other Participants, shall be considered."
CENTRAL HUDSON GAS &
ELECTRIC CORPORATION
Date: December 16, 1994
By:
JOHN E. MACK III
Title Chairman of the Board and
Chief Executive Officer
</PAGE>
<PAGE>
EXHIBIT (10) (i) 102
The provisions published herein will, if effective, not result in
an effect on the quality of the human environment.
AMENDMENT 04
TO
ICC CR-C-4042
CONSOLIDATED RAIL CORPORATION
AMENDED CONTRACT SUMMARY
ISSUED DECEMBER 9, 1994 EFFECTIVE DECEMBER 16, 1994
THE ONLY CHANGE IS TO THE CONFIDENTIAL MATTER OF THE CONTRACT.
ISSUED BY:
A. J. MCGEE, JR.
MANAGER - TARIFF PUB
P. O. BOX 41423
PHILADELPHIA, PA. 19101-1423
FILED WITH ICC
(C-3832-2-BJP) (18) (PRINTED IN USA)
AMENDMENT 4 TO
TRANSPORTATION CONTRACT
ICC-CR-C-4042
This Contract Amendment 4 made and entered into this 28th of
November, 1994, by and between CONSOLIDATED RAIL CORPORATION
(hereinafter called "CR") and CENTRAL HUDSON GAS & ELECTRIC
CORPORATION (hereinafter called "CH").
WITNESSETH, THAT
WHEREAS, the parties entered into a transportation contract
designated ICC-CR-C-4042, dated November 20, 1987 (Contract); and
WHEREAS, the parties desire to amend the Contract pursuant
to 49 U.S.C. Section 10713.
NOW, THEREFORE, it is agreed as follows:
In Article 2 - TRANSPORTATION RATES: CR agrees to
transport coal from the origins named via CR direct routing to
CH's Danskammer Station at Roseton, NY at the following rates:
ORIGINS RATES IN DOLLARS/NT
BASE CURRENT
xxxxxxxx xxxxx, xx $xx.xx $xx.xx (x)
xxxxxx, xx $xx.xx $xx.xx (x)
xxxxxxxxx xxxxxxxx, xx $xx.xx $xx.xx (xx)
xxxxxxx xxxxxxxx xxxxx, xx $xx.xx $xx.xx (x)
xxxxxxxx, xx (xxxx xxxxxxxxxxx) $xx.xx $xx.xx
xxxxxxxxxx, xx (xx xxxxxxxxxxx) $ x.xx $ x.xx
xxxxxxx, xx (xx xxxxxxxxxxx) $ x.xx $ x.xx
xxxxxx, xx (xxxx xxxxxxxxxxx) $ x.xx $ x.xx
Notes:
(6) CR will absorb charges of the Union Railroad for
transferring coal from barge to rail car and switching of
rail cars to CR at Thomson, PA.
(x) xxxxxxxxxx xx xxxxxxx x-x xx xxxxxxx xxxxxxx xxxxxx xxx xx
xxxx-xxxxxx (xxxxxxxxx xxxxxxxxxxx xx xxxxxxxxxx xx
xxxxxxxxxxx xxxxxx xx xxx xxxxxx).
(x) xxxx xxxxxxxx xxxxxxxx xx xxxx xxxx xxxxx xx xxxx xxx xx
xxxxxx, xx.
(xx) xxxx xxxxxxxx xxxxxxxx xx xxxx xxxx xxxxx xxxxxxxx xx xxxx
xxx xx xxxxxxxxx, xx xxx xxxxxxx xx xxxx xxxx xx xxx xxxxx
xxxxxx xxxxxxxx xxxxxxx (xxxx) xx xx xxxxxxxxxxx xx
xxxxxxxxx, xx. xxx xxxx xxxx xxx xxxxxxx xxxxxxxx xx
xxxxxxxxxxxx xxxx xx xxx xxxx xxxxxx xxxxxxx xx xxxxxx
xxxxxxx xxxxxxx. xxxx xxxx xxx xx xxxxxxxxx xx xx xx
xxxxxxxxxx xxxxxxx xx xxx xxxxxxxxx xxxxxxxxxxxxxx xxxxxx xx
xxxx xxx xxxxxxxxxx.
The parties agree that once this Contract Amendment 4 is
approved by the ICC, the rates, terms and conditions contained
herein shall apply to shipments made pursuant to this Contract
Amendment 4 as of July 1, 1994. If this Contract Amendment 4 is
not approved by the ICC, the parties agree that the applicable
Contract rates absent this Contract Amendment 4 shall apply to
shipments.
IN WITNESS WHEREOF, the parties hereto have caused this
Contract Amendment 4 to be executed by their duly authorized
representatives as of the day and year first above written.
CENTRAL HUDSON GAS AND ELECTRIC CORPORATION
BY:
PAUL J. GANCI
TITLE: PRESIDENT AND CHIEF OPERATING OFFICER
CONSOLIDATED RAIL CORPORATION
BY:
DOUGLAS A. EVANS
TITLE: MANAGER COAL MARKETING
</PAGE>
